This appeal arises out of Application No.12/2024 against which consequential order dated 07.01.2025, passed by the Deputy Commissioner Inland Revenue, Unit-I Lyallpur Zone, RTO Faisalabad.

1. Briefly stated the relevant facts of the case are that the appellant is an 'AOP' engaged in weaving and trading of textile fabrics. Its business activity involves purchasing yarn of different counts as raw material, weaving it into grey fabrics partly in-house and mainly through third parties on toll basis and getting the fabric dyed and finished by third parties. Physical verification of business premises of appellant was conducted by the assessing officer and observed that for the period from February 2020 to June 2024 that the appellant claimed inadmissible input tax based on fake/flying invoices, failed to pay further tax on sales to unregistered persons under section 3(1A), and failed to deposit 10% output tax under section 8B. For these reasons, it was inferred that the appellant had committed tax fraud by knowingly, dishonestiy or deliberately and without any lawful exercise as defined under section 2(37) of the Sales Tax Act, 1990 (the Act). Accordingly, proceedings in terms section 21 of the Act read-with Rule 12 of the Sales Tax Rules, 2006 were Initiated against the appellant in the shape of pre-suspension notice dated 04.09.2024. Appellant failed to satisfy the concerned Commissioner IR, with their respective replies which resulted in suspension of theft sales tax registration vide order dated 16.09.2024. Being aggrieved by the Order No.CIR/Lyp Zone/364 dated

16.09.2024 the registered person filed application under section 21(5) of the Sales fax Act, 1990 before the Chief Commissioner IR. After hearing the submissions of AR, the Chief Commissioner IR rejected the appeal of appellant with certain directions to concerned Zone that appropriate action under the law may be carried out to recover the evaded amounts by passing speaking order after giving an opportunity of being heard to the registered person;

1. Being aggrieved of the two authorities, the appellant has preferred the instant appeal in terms of section 46 of the Act read-with subsection (1) of section 131 of Income Tax Ordinance, 2001 before this Tribunal against the order passed under section 21(5) of the Act.
2. The appeal was fixed for hearing and both the sides were heard in detail. The learned AR appeared and argued that the impugned order of blacklisting is unsustainable in the eyes of law. The primary argument raised was that the mandatory conditions under Section 21(2) of the Sales Tax Act, 1990 were never fulfilled before suspending the appellant. The law requires the Commissioner to form a definite opinion based on proper evidence and reasoning before declaring a registered person as suspended. In this case, no such satisfaction was recorded, nor was the appellant provided with a speaking order. Further, the AR submitted that the department has already completed adjudication proceedings under Section 11 of the Sales Tax Act, 1990. These proceedings resulted into Order-in-Original No.74/2025 dated 14.04.2025 where the matter was fully adjudicated upon. Once proceedings under Section 11 have been concluded, there remains no justification for continuation of suspension or blacklisting. The AR further argued that the indefinite suspension is excessive, unregulated, and unjustified. The suspension was not revisited after the completion of the ONO nor was any fresh inquiry initiated under law. The AR emphasized that Article 18 of the Constitution ensures the right to carry on business, and blacklisting without any current violation or liability amounts to an infringement of fundamental rights.
3. On the factual side, the AR submitted that the allegation of fake/flying invoices is unfounded because not a single supplier of the appellant was blacklisted, suspended, or found non-compliant. All purchases were made from active taxpayers with proper sales tax invoices, supported by payments through normal banking channels. He explained that the HS codes of purchases and sales cannot be identical due to the business cycle of the appellant which involves buying yarn, paying for toll weaving and dyeing, and selling fabric as the final product. He argued that mere difference of HS codes cannot justify disallowance of entire input tax. Regarding non-payment of 10% under section 8B, the AR stated that adjustment of 100% input is only a procedural lapse, and no revenue loss occurs because excess input is carried forward and adjusted or refunded at year-end. Reliance was placed on judgments reported as 2020 PTD 2025 and 2022 PTD 1781. He also submitted that further tax under section 3(1A) is not chargeable on retail sales to end consumers. The appellant was a Tier-1 retailer verified by the Commissioner through Sales Tax General Order 01 of 2022, and sales to end consumers are excluded from further tax under SRO 648(I)/2013
4. Conversely, the learned DR supported the order of the learned CIR as well as the impugned order of CCIR and contended that according to Rule 12 of Sales Tax Rules, 2006, the Commissioner is authorized to suspend / blacklist the sales tax registration of any person who is involved in tax fraud, therefore, the learned Commissioner IR has rightly passed the suspension / black listing order and appeal has been dismissed on merit. She accordingly brayed for the rejection of appeal.
5. We have given due consideration to the arguments advanced by rival parties and perused the relevant available record. It is observed that the suspension order was passed vide Order No.CIR/Lyp Zone/364 dated 16.09.2024 under Section 21(2) of the Sales Tax Act, 1990. However, on a plain reading of Section 21(2), it becomes evident that the legislature has laid down specific conditionalties before such a severe action can be taken. It is not the intention of the law to confer arbitrary powers upon the tax authorities. The invoking of Section 21(2) must be supported by objective facts and proper reasoning. In the instant case, the department failed to substantiate how the conditionalties mentioned in the said section 21(2) were fulfilled prior to the suspension. There is no record of any speaking order or show-cause notice giving the appellant an adequate opportunity to respond or explain their position prior to passing the order of blacklisting. This action on the part of the department is contrary to the established principles of natural justice. Furthermore, after blacklisting the appellant, the assessing officer initiated under section 11 of the Sales Tax Act, 1990 which resulted into Order-inOriginal No.74/2025 dated 14.04.2025 where the matter was fully adjudicated upon for the tax period Feb-2020 to Jun-2024 In view of the above, it is evident that the suspension of the appellant triggered proceedings under Section 11 of the Act, which were exhausted and adjudicated. It is a settled principle of law that suspension or blacklisting is not meant to be a permanent disability. It is a temporary measure subject to review and compliance with legal and procedural safeguards. The Sales Tax Act does not provide for indefinite suspension/blacklisting, especially in the absence of any live dispute, fresh cause of action, or persisting default. Moreover, the Constitution of the Islamic Republic of Pakistan, under Article 18, guarantees the freedom of trade, business, or profession to every citizen. The continued suspension of the appellant offend the spirit of Article 18 and deprives the appellant of its constitutional protection. The right to carry on lawful business cannot be curtailed without cogent reason, and any such restriction must stand the test of legality, proportionality, and procedural fairness. The sales tax registration was suspended on 16.09.2024 since then the registered person is unable to conduct business. It is also worth noting that the department has taken no step to review the suspension status of the appellant even after ONO has been passed. The absence of any further proceedings or inquiry to justify the continued suspension clearly shows that the department's stance is unsustainable. Mere suspicion or past audit observations cannot justify indefinite denial of business. In our view, the punitive measures such as suspension or blacklisting must be rooted in objective facts should not be excessive in duration, and must be subjected to periodic review. There is no indication on record that the department has ever reviewed the status of suspension or issued a fresh notice to justify its continuation. This lack of action confirms that the suspension has lapsed into an indefinite punishment without legal mandate. Even otherwise, after the appellant's entire case was adjudicated under Section 11 of the ACT, there remains no reason for suspension status of the registered person as there is no further pending liability, no prosecution initiated, nor is there any show-cause under progress. In such a scenario, the continue presence of the appellant's name in the suspension is highly unjustified.
6. In light of the above, this Tribunal is of the considered view that the continuation of suspension of the appellant, despite the Order-in-Original was passed under Section 11 and in the absence of any fresh material or cause, is not tenable under the law. Such action amounts to denial of lawful business opportunity, infringes Article 18 of the Constitution, and lacks support of Section 21(2) of the Sales Tax Act, 1990. The impugned suspension order is set aside and the department is directed to restore the appellant's status. Order accordingly.

Tax(Trib) Appeal allowed.