Details of the issue revealed that the unit is engaged in trading of oil and its products. The unit's business is duly registered with Revenue Department as wholesaler and it has been allotted NTN and STRN. The unit is filing its sales tax returns regularly in accordance with the provisions of Sales Tax Act, 1990. The grievance of the unit is that its Sales Tax Registration Number was suspended without notice, without any show cause and without passing a speaking order under Section 21(2) of the Sales Tax Act, 1990. The case of the unit is that the department should have issued a notice to the unit providing reasons for suspension. The unit submitted that the entire action of tax department is contrary to Section 21 of the Sales Tax Act read with the Sales Tax Rules 2006 (Rules) and the Sales Tax General Order No 3 of 2004 (STGO).
On behalf of the tax department, learned counsel submits that information was received regarding the issuance of fake invoices by one Rehman Enterprises. The unit was investigated again in connection with the fake invoices. The notice was issued to the unit for production of record to investigate the issue of fake invoices. First notice was issued on February 22, 2012, then again on April 3, 2012 which warned of initiating proceedings for blacklisting. The notice was received by the unit on April 9, 2012 when he appeared before the department and informed him that he was being investigated by the Directorate of Intelligence, hence the audit proceedings under Section 38 should be postponed. Thereafter, on June 4, 2012, intimation of audit observations was issued to the unit. Since the unit did not respond or appear before the Assistant Commissioner, the order in original was passed on August 17, 2012. Thereafter, on September 20, 2012, sales tax registration was suspended under Section 21 (2) of the Sales Tax Act read with Rule 12 of the Rules and clause N of the STGO 03/2004.
LHC observed that the controversy at hand pertains to whether notice was issued to the unit prior to the suspension of the sales tax registration on 20.09.2012. Having received the notice of February 22, 2012 the unit cannot argue that he had no notice of the suspension order of September 20, 2012. The unit on April 9, 2012 merely placed a request for postponement before the department. It stands to reason that after placing such a request the unit was required to maintain contact with the Assistant Commissioner to inquire about the fate of its request for postponement. Under the circumstances, the unit cannot deny having received notice of the audit proceedings under Sections 25 and 38 of the Sales Tax Act. The notice of February 20, 2012 clearly provides that the unit is being investigated in the involvement of fake invoices and that the record is being audited in terms thereof. Since the unit did not bother to respond to notice dated April 3, 2012 or provide the required information/ documents, the order of August 17, 2012 was issued.
Upon being satisfied that the unit had issued fake invoices the Commissioner suspended the sales tax registration on September 20, as such there was no violation of Section 21(2) of the Sales Tax Act. Furthermore, the unit was given sufficient notice and time to participate in the audit/investigation. If they choose to stay away from the proceedings they cannot claim that the suspension was ordered without notice to them in this regard, the department has also pointed out that the unit promptly appeared against the order of April 17, 2012, meaning that they were fully aware of the order and the risk of a suspension order. Therefore, in view of the above, there is no illegality with the order of April 20, 2012. Suspension has been ordered in accordance with the law. Petition is dismissed, LHC added.