OMV (PAKISTAN) EXPLORATION G.M.B.H. ISLAMABAD vs COMMISSIONER INLAND REVENUE (LEGAL), ISLAMABAD Ss

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OMV (PAKISTAN) EXPLORATION G.M.B.H. ISLAMABAD VS COMMISSIONER INLAND REVENUE (LEGAL), ISLAMABAD Ss. 7, 8 (1)(ca) & 73---Input tax adjustment---Conditions---Failure of supplier to deposit sales tax received from purchaser---Dispute pertained to denial of input tax credit to taxpayers in exercise of authority under S. 8(1)(ca) of Sales Tax Act, 1990 when the tax was duly paid but the supplier had been delinquent in depositing such sales tax in the government treasury---Validity---When conditions prescribed by S. 7 of Sales Tax Act, 1990 for purposes of input tax adjustment are satisfied and payment for such supply has been made in compliance with the requirements of S. 73 of Sales Tax Act, 1990 the purchaser is entitled to seek input tax adjustment unless the same is prohibited by S.8 of Sales Tax Act, 1990---System of rule of law is based on individual responsibility and liability and a taxpayer cannot be made to suffer due to delinquency of another, unless the taxpayer is complicit in such wrongdoing---Sales tax is charged in VAT mode and where a purchaser has paid the tax due for the value addition attributable to a supplier, as part of consideration for the supply paid in accordance with requirements of S. 73 of Sales Tax Act, 1990 it cannot be assumed that the Legislature intended to subject such purchaser to double-taxation for the supplier's failure to deposit the sales tax received from the purchaser in the treasury---Purchaser, in paying input tax to supplier as part of consideration for supply, acts in accordance with requirements imposed by provisions of Sales Tax Act, 1990 and where the supplier, who receives such sales tax payment as an agent on behalf of the State, fails to deposit the same with the treasury, it is the supplier that is at fault and ought to be penalized by tax authorities and not the purchaser---Once a purchaser discharges its obligation to pay input tax to asupplier in the manner prescribed by law, there accrues a proprietary entitlement to benefit from such tax payment by seeking its adjustment against output tax due from him, when not otherwise prohibited by S. 8 of Sales Tax Act, 1990 and such entitlement cannot be denied due to any wrongdoing or delinquency on the part of supplier that the purchaser is neither complicit with nor has any control over---High Court declared that any contrary interpretation of Ss. 8(1)(ca) & 8A of Sales Tax Act, 1990 would be in breach of Arts. 4, 10A, 23, 24 & 25 of the Constitution---Reference was disposed of accordingly.

OMV (PAKISTAN) EXPLORATION G.M.B.H. ISLAMABAD vs COMMISSIONER INLAND REVENUE (LEGAL), ISLAMABAD Ss — 2026 PTD 392 ISLAMABAD

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