LAHORE: The Lahore High Court allowed an appeal of Millat Tractors Limited and held that SRO 563 does not apply to the refund claims of the appellant which must be processed and disbursed expeditiously under SRO 363.

The appellant Millat Tractor had claimed the benefit of refund for the months of July, September, November, December 2021 and February 2022 which accumulates to Rs 3,806,855,796.

The court also declared null and of no effect the impugned show-cause notice as well as the impugned order of the deputy commissioner (Inland Revenue) and said the appellant applied for the refund claims timely and these claims should have been allowed within the mandate of SRO 363.

The court observed the case of the appellant was that the department has always reneged on the terms of SRO 363 and did not sanction the refund of input tax within the time stipulated in Rule 3.

The court, therefore, observed that the appellant had filed its refund claims prior to the enactment of SRO 563, since the commissioner inland revenue sat on the refund claims of the appellant and did not sanction them; this was used as a lever by FBR to delay the sanction of refund claims and thereafter proceeded to issue a notification to stunt the claim entirely, the court added.

The court observed Section 50 of the Sales Tax Act 1990 does not confer power upon FBR power to make retrospective application of an amendment made in the Sales Tax Rules, 2006.

Moreover, it does not possess the power in any case to upend rights which have come to vest in a registered person such as the appellant who was entitled to excess input tax and for its refund on the basis of SRO 363, the court added.

The court said the appalling act of delay cannot be attributed to the appellant.

It would be a devious machination on FBR’s part to firstly delay the refund, and thereafter stonewalling it on the premise of SRO 563. Even if the word - “existing” - was allowed to stand in SRO 563, it would have no application in the case of appellant, the court added.

The court said it cannot permit the appellant to go through the rigors of long drawn litigation process for the refund claim to be made over to the appellant. The entire exercise in the issuance of SRO 563 and for it to apply retrospectively was a mala fide act on the part of FBR and clearly meant to deprive the appellant of its due refund claim, the court concluded.

Copyright Business Recorder, 2023