Input tax adjustment: invoice need not be in registered person's name: Tribunal

There is no mention in the sales tax law that the invoice/bill of entry should be in the name of the registered person claiming the input tax adjustment, which prompted the Customs, Excise and Sales Tax Tribunal, Islamabad to reject Order-in-Original passed by adjudication authority.
A recent judgement of Customs, Excise and Sales Tax Tribunal, Islamabad has accepted an appeal filed by Sony Pakistan (Private) Limited, Lahore, for claiming adjustment keeping in view the sales tax law.
According to the judgement, it is clear from section 7 of the Sales Tax Act that holding of tax invoice/bill of entry, whatever is applicable is mandatory for claiming input tax and there is nowhere in the law that for the claim of input tax the invoice/bill of entry should be in the name of the registered person claiming the input tax.
The Sales Tax Act does not specifically restrict a registered person to claim input tax on the basis of invoices/bill of entries, which include address of any other office of the registered person other than the address of the registered office of the registered person. The audit of the unit detected short payment of sales tax during the tax period March, April and May 2000 by claiming input credit amounting to Rs 3,449,918 in the sales tax return of March 2000 without any legal justification which was recoverable along with additional tax. The unit did not claim some of bill of entries/sales tax invoices as specified under section 7of the Act during the relevant tax period. Therefore, an amount of Rs 2159352 was recoverable along with additional tax. It was alleged by the detecting staff that the unit had violated various provisions of Sales Tax Act, 1990.
After receiving reply of the unit, the adjudicating officer passed Order-in-Original directing the unit to pay sales tax along with additional tax. The unit filed an appeal with the tribunal to set aside the order of the adjudication authorities.
Tribunal ruled that it has been firmly established that it is "persons' who are required to register and not the business or businesses which they carry on. Two consequences follow from this principle. First, any one person is entitled to any one registration unless the legislation allows otherwise.
Thus, if the Collectorate erroneously grant different registrations to the same persons, they have a right to cancel all but one of the registrations when the situation comes to their notice. Separate registrations are allowed where a body corporate is organised in divisions. Secondly, a person's registration covers all his business activities however diverse they may be.
Thus, taxable activities from all the businesses carried on are taken into account in determining whether a person in liable to registration. In determining whether more than one business is covered by a single registration, the tests to be applied are:
Whether the businesses are sufficiently at arm's length and. Whether the businesses have normal commercial relationship." Reviewing the case, the tribunal said that the company was incorporated in Pakistan as private limited company on July 20, 1998.
The principal activity of the company was toll manufacturing of Sony Brand Television sets under an agreement with PEL Daewoo and onward sale of television sets and other products. This contract as disclosed expired on May 26, 2002 was not renewed and operation related to import and sale of various products were also suspended.
During audit for the period 1999-2000, the audit team observed that Sony Pakistan has claimed input tax credit which period is in fact from April 2000 to June 2000 on the strength of sales tax invoices issued by PEL Daewoo Electronics, Hattar in the name of Sony Pakistan (Private) Limited, which was de-registered from March 31 2000.
It is clear from the language of Section 7(2) that holding of tax invoice/bill of entry, whatever is applicable is mandatory for claiming input tax and there is nowhere in law that for the claim of input tax the invoice/bill of entry should be in the name of registered person claiming the input tax.