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Petitioner: Messrs R.M. GULISTAN ENGINEERS AND CONSTRUCTORS (PVT.) LTD. VS Respondent: The COMMISSIONER INLAND REVENUE (APPEALS-IV), KARACHI
Court Name: Appellate Tribunal Inland Revenue Judge(s): Abdul Nasir Butt, Abdul Qayyoom Sheikh Title:Messrs R.M. GULISTAN ENGINEERS AND CONSTRUCTORS (PVT.) LTD. vs The
COMMISSIONER INLAND REVENUE (APPEALS-IV), KARACHI Case No.: S.T.A. No,15/KB of 2013 Date of Judgment:2015-04-29 Reported As: 2016 PTD (Trib.) 1957 Result: Order accordingly Judgment ORDER The instant Appeal arises from the order No CIR/A/IV/07 dated 20.12.2012, passed by Ld. CIR (Appeals-IV) Karachi, whereby the Appeal was dismissed and the Order-in-Original No, 01/2012 dated 10.05.2012 passed by Officer Inland Revenue, Unit-2, Zone-1, RTO-II, Karachi was upheld by the Ld.CIR (Appeals). 2. Brief facts of the case are that the appellants namely Messrs R.M. Gulistan Engineers and Constructors (Pvt.) Ltd. Bearing STR No, 1100999976755 were alleged for short payment of duty and taxes on import of Seamless Steel Pipes/Tubes and the goods declaration/record showed wrong application of S.R.O. 575(I)/2006 at the time of clearance of goods. In this regard the two show cause notices dated 28.03.2012 and 21.04.2012 were issued by the officer of Inland Revenue UNIT-02 ZONE-I, RTO-II, Karachi to the appellants for recovery of alleged dues. A show cause notice issued vide letter No,545 dated 28.3.2012 was issued to the Appellants which is reproduced below for the sake of convenience: "SHOW CAUSE NOTICE Examination of Goods Declaration/record reveals that you had imported seamless steel pipes/tubes classified on which you have not paid Sales Tax and F.E.D. As the time of imposed in this regard the observation as under: The Appellants had got assessed/cleared their goods i.e, Ductile Cast Iron Pipes under H.S. Code 7303.0000 instead of H.S. Code 7304.3900 at the lower rate of Custom Duty along with inadmissible benefit of serial Nos.1(J) and 6 of the S.R.O. 575(I)/2006 dated 5.6.2006 despite the fact that the impugned goods do not fall within the ambit of machinery and equipment.
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Therefore, on the above grounds, it is established that the Appellants namely Messrs R.M. Gulistan Engineers and Constructors ( Pvt.) Ltd. Of Karachi willfully, intentionally and knowingly evaded duty and taxes in the respect of sales tax amounting to Rs, 11,531,519/= and amounting to Rs, 69,306/-in respect of FED. iv. Therefore, the Appellants namely Messrs R.M Gulistan Engineers and Contractor ( Pvt.) Ltd. Are hereby called upon to show cause under Section 36(1) of the Sales Tax Act, 1990 and under Section 14 of the Federal Excise Act, 2005 as to why the above noted short paid amount of Sales Tax and Federal Excise amounting to Rs,11,600,825/- in violation of sections 2(6),3,6 ibid may not be recovered from the Appellant along with default surcharge under Section 34 and penalty under Section 33 of the Sales Tax Act, 1990 and Sections 3, 15 of the FED Act, 2005 may not be recovered from you along with default surcharge under Section 8 and penalty under Section 19 ibid. Second Show Cause Notice No,741 dated 21.4.2012 was issued to the Appellants which states as under:- Examination of Goods Declaration/record reveals that the Appellants have imported seamless steel pipes/tubes classified on which the Appellants have not paid Sales Tax and F.E.D as the time of imposed in this regard the observations are as under:- The Appellants namely Messrs R. M. Gulistan Engineers and Constructors (Pvt.) Ltd. Had got assessed/cleared their goods i.e, Ductile Cast Iron Pipes under H.S Code 7303.0000 instead of H.S. Code 7304.3900 at the lower rate of Customs Ditty along with inadmissible benefit of serial Nos.1(3) and 6 of the S.R.O. 575(1)/2006 dated 5.6:2006 despite the fact that the impugned goods do not fall within the ambit of machinery and equipment. Iii. Therefore, on above grounds it is established that the Appellants Messrs R.M.Gulistan Engineers and Constructors (Pvt.) Ltd., Karachi willfully, intentionally and knowingly evaded duty and taxes in respect of Sales Tax and FED of the following period of which detail is as under:-- S. No.G.B. No.DATE (PERIOD) DESCRIPTION SALES TAX SHORT PAIDFED SHORT PAID 1. 198818 270207 (Feb. , 2007)Ductile cast iron Pipe H.S. Code No.7303Rs.15,124/- ----- 2. 242380160407 (Apr., 2007)Ductile cast Iron Pipe H.S. Code No.7303Rs.2,365,360 ----- 3. 437768011107 (Nov.,2007)Ductile cast Iron Pipe H.S. Code No.7303Rs.3,252,248 ----- 4. 605886100408 (Apr., 2008)Ductile cast Iron Pipe H.S. Code No.7303Rs.5,625,786Rs.69,306 Rs.11,531,518 Rs.69,306 iv. Therefore, the Appellants are hereby called upon to show cause under Section 36(1) of the Sales Tax Act, 1990 and under Section 14 of the Federal Excise Act, 2005 as to why the above noted short paid amount of sales tax and federal excise amounting to Rs,11,600,824/- in violation of sections 2(6), 3,6, ibid may not be recovered from the appellant along with default surcharge under section 34 and penalty under section 33 of the Sales Tax Act, 1990 and sections 3, 15 of the FED Act, 2005 may not be recovered from them along with default surcharge under Section 8 and penalty under Section 19 ibid. 3. The impugned Order-in-Original No, 01 of 2012 dated 10.5.2012 was issued by the officer of Inland Revenue/S.O. (Mac-Unit -02) Zone-1 Regional Tax Office-II, Karachi where the officer of Inland Revenue finalized the assessm ent under Section 36(1) of the Sales 'Tax Act, 1990 on the basis of issues confronted vide above referred show cause notices.
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4. The Appellants filed an Appeal before Ld. Commissioner Inland Revenue (Appeals-IV) Karachi who vide impugned order No, CIR/AV/07 dated 20.12.2012 dismissed the Appeal of the Appellant and upheld the Order-in-Original No, 01 of 2012 dated 10.5.2012 passed by the OIR. The Appellants feeling aggrieved of have thus filed present appeal under section 46 of Sales Tax Act, 1990 before this Tribunal against the impugned order No,CIR/A-IV/07 dated 20.12.2012 passed by Ld. CIR(A). The grounds mentioned in the Memo of Appeal are reproduced below as under:-- 1) That this Appeal is directed against Order-in-Appeal No, CIR/AIV/07 dated 20.12.2012 passed by the Commissioner Inland Revenue (Appeals-IV) Karachi to the extent of charging of alleged Sales Tax amounting to Rs,11,531, 518/- and Federal Excise Duty amounting to Rs,69,306/-holding that same was payable on imports made of Ductile Iron Pipes during tax periods Five years ago pertaining to the months of February, April, November 2007 and April 2008. ' That the aforesaid impugned Order-in-Appeal dated 20.12.2012 and also the impugned Order-in- Original No,01/2012 dated 10.5.2012 are unlawful, illegal, coram non judice and void ab initio having being passed on the basis of misunderstanding of law and facts on the part of Respondents Nos.1 and 2. As such aforesaid impugned Order-in-Appeal and as well as impugned Order-in -Original being against the law and facts are liable to be set aside inter alia on the following grounds:--- 3) That the impugned Order-in-Appeal dated 20.12.2012 passed by Respondent No,1 to the extent of aforementioned charges of Sales Tax and Federal Excise is not tenable in law since the same matter in respect of the same imports of the Appellants and pertaining to same Goods Declarations of the same import period have been adjudicated by Officers of two different revenue departments namely Additional Collector of Customs Model Customs Collectorate of PACCS Custom House Karachi and officer of Inland Revenue / SO, MAC Unit - 02 Zone I, RTO-II Karachi. This in complete derogation of the provisions enshrined in Article 13 of the Constitution of the Islamic Republic of Pakistan 1973 and also constitutes an act of "Double Jeopardy". It makes the whole proceedings unlawful, illegal, coram non judice and ab initio null and void. 4) That Show Cause Notice bearing No,MCC /SCN -21/PCA/ LHR/ Audit-C/148/STEEL PIPE/GULISTAN/ADC/ADJ/PACCS/2011 dated 19.12.2011 was issued by Additional Collector of Customs Model Customs Collectorate of Paces Custom House, Karachi in wake of Contravention Report C. No Case No, (2/2011) PCA/LHR/AUDIT-C/148/2011/667 dated 25.11.2011 instituted by Appraising Officer and forwarded by Deputy Director Directorate of Post Clearance Audit Lahore under the Authority of Directorate General Post Clearance Audit Islamabad vide his letter C.NO PCA/ AUDIT/ PERMISSION/ 70/2011 dated 29.11.2011 addressed to Member Customs Federal Board of Revenue Islamabad and Copies endorsed to SA to Chairman Federal Board of Revenue Islamabad and Member (IRS) Federal Board of Revenue Islamabad and Chief Collector of Customs (South), Custom House, Karachi. The matter therefore became sub judice before Customs Authorities where jurisdiction was lawfully exercised by a Revenue Department serving under the domain of Federal Board of Revenue Islamabad. The case has since been adjudicated by Additional Collector of Customs MCC PACCS Custom House Karachi and Order-in-Appeal No,7001 dated 23.1.2013 has been issued by learned Collector of Customs (Appeals) against which an Appeal is filed before the Honourable Customs Appillate Tribunal Karachi Bench Karachi by the Appellants. 5) That subsequently two Show Cause Notices No,OIR/MAC UNIT-02/Zone-1/RT0-11/Kyc/ 2012/545 dated 28.3.2012 and No,OIR/AC-/MAC/RTO-II/Kyc/2012/741 dated 21.4.2012 were issued to the Appellants by Respondent No, 2 in respect of the same matter which is arbitrary, unlawful and illegal exercise of power and against the established norms of natural justice, equity and fair play. Issuance of multiple show cause notices by the same authority has been deprecated by the Superior Judicial Fora. The Appellant needs to bring it on record that neither of the aforesaid two show cause notices dated 28.3.2012 and 21.4.2012 of the Inland Revenue has so far been withdrawn by Respondent No 2. In addition to the above, the issuance of aforesaid two show cause notices
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subsequent to the issuance of Show Cause Notice dated 29.12.2011 by Additional Collector of Customs MCC Paccs Custom House, Karachi is tantamount to a clear cut violation of Article 13 of the Constitution being also an act of " Double Jeopardy" to the detriment of the Appellants and is therefore null and void ab initio and all subsequent acts and proceedings conducted there under are also .Unlawful, illegal, coram non judice and ab inito null and void. ' That the issuance of aforesaid two show cause notices dated 28.3.2012 and 21.4.2012 by Respondent No,2 comes within the ambit of a fishing and roving enquiry in terms of Honourable Apex Court of Judgment in the case of Assistant Director Intelligence and Investigation v. Messrs B.R. Herman PLD 1992 SC 485. The incurable legal lacunae of a Show Cause Notice cannot be cured through issuance of another Show Cause Notice to the same tax payer on the same subject. ' That the jurisdiction exercised by Additional Collector of Customs MCC Paccs Custom House Karachi for adjudication of the subject matter is within the four corners of law as substantiated by the following documents on record. Legal opinion / Adjudication of cases relating to Levy and Collection of Federal Excise Duty, Sales Tax and withholding tax on imported goods issued by Ministry of Law, Justice Government of Pakistan vide their office Memorandum F. 242/ 2012-Law / I dated 11.7.2012 forwarded by Secretary (Tariff -I) Federal Board of Revenue Islamabad vide his letter C.No,3(32) TAR-I/90 dated 6.8.2012 and further forwarded to Directors Post Clearance Audit Karachi and Lahore by Additional Director Head quarter Director General Post Clearance Audit Islamabad vide his Letter C.No,PCA/ Head quarter/Circulation/2012-1394 dated 23.8.2012. These aforesaid letters inter alia clarified that officers of Customs are competent to take cognizance of any short paid amount of Sales Tax and Federal Excise Duty at import stage and adjudicate such cases in view of the provisions of Sales Tax and Federal Excise Act. 8) That the act of "Double Jeopardy" through issuance of multiple show cause notices and adjudication proceedings by Officers of Model Customs Collectorate of Paccs Custom House Karachi and Inland Revenue Services has been acknowledged by officer of Inland Revenue Unit-02 Zone I RTO-II Karachi vide his letter No, OIR/ Unit-02 /Zone-I / RTO-II / KHI / 2012/ 06 dated 16.11.2012 addressed to Commissioner Inland Revenue-RTO -II Karachi. Reference is made to Para 2 of the aforesaid letter which in so many words substantiate the claim of the Appellant in respect of the act of "Double Jeopardy" committed by the officer of Inland Revenue who proceeded the adjudication proceedings in the subject matter much after the issuance of show cause notice by Additional Collector of Customs MCC Paccs Custom House, Karachi. The doctrine of "Double Jeopardy" corresponds to the principle of "autrefois acquit and autrefois convict" and it prohibits a duplicate trial and a duplicate punishment for the same offence. Reliance is placed upon the judgment of the Honourable High Court of Sindh at Karachi in the case of Messrs Mehran Motor Car Company v. Collector of Customs Appraisement reported as 2004 PTD 1482 wherein it has been held that: "Where the recovery of tax short levied and imposition of the penalty in appropriate cases, operated into different fields and their areas of operation were distinct, then the question of double jeopardy. Would not arise. If after the enforcement of demand on account of short levy, the Authority, through separate proceedings again called upon the importer to pay the short levied amount, then the same would be a case of double jeopardy." ' Similarly, the superior judiciary has laid down certain principles which were well taken by the Honourable High Court of Sindh at Karachi in a case reported as 2004 PTD 3620 in the following manner: "Neither any appeal was preferred by the Sales Tax Department assailing the findings nor any revisional proceeding were initiated. The effect was that the order passed by the Additional Collector of Adjudication, attained finality having binding effect on the Sales Tax Department. Reagitating of same issue by the Sales Tax Department is against all the principles of
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administration of justice and fair play. This course of action cannot be allowed because, firstly, it is against the principles of administration of justice, secondly it is discriminatory in nature, as any order passed adjudication not assail in appeal by an assessee, is always treated to be final and the same principal should be applied to the department; thirdly, it militates against the principles applicable to the tax matters, that the issues once settled and accepted by the department shall not be allowed to deviated, because it will create uncertainty which has always been deprecated and disapproved by the Superior Courts, Legislature as well as the Board itself". 9) As such the action of Respondent No,2 subsequent to the issuance of Show Cause Notice by the Additional Collector of Customs MCC (Paccs) Karachi is a negation of the ratio decidendi determined by the Superior Judicial vide their above referred to Judgments. 10) That the learned Respondents Nos.1 and 2 were not justified to pass the impugned Order- in - Appeal No CIR -/A -IV/ 07 dated 20.12.2012 and impugned Order-in-Original No, 1 of 2012 dated 14.5.2012 on the basis of show cause notices dated 28.3.2012 and 21.4.2012, which itself was issued on incorrect appraisal of facts and were defective in nature. In that the learned officer Inland Revenue did not know the vires of duties and taxes leviable or about various PCT Headings under which the exemption was available to the Appellants at the time of import almost five years ago and was duly granted earlier by the customs authorities upon submission of all requisite documents and fulfilling all the formalities of relevant PCT Heading and nothing as such has been discussed by him in the impugned order. 11) From the perusal of Item description of goods as mentioned on each GD, it can be seen that the goods imported being "Ductile Cast Iron Pipes" were project specific, meant for use in the project of Pakistan Defence Officers Housing Authority for which certificate from the said Authority was also required to be produced along with Pakistan Engineering Council License at the time of import. This fact is unanimously to be recorded in the column for "Item Description of goods" in each GD. 12) That the goods imported being project specific were not available in the local market and had no commercial value in the market. The left over pipes imported by the appellant registered persons are still lying in the Appellants Godown. The exemption/concession granted by the legislature was therefore conditional and prevailing at the time of import around five years back and the learned officer Inland Revenue was not justified to revert such exemption earlier granted by the legislature vide S.R.O. 575(I)/2006, without establishing on record any misdeclaration on the part of the Appellant registered person and that also after a period of five years, which is simply a negation of average human comprehension and common sense on the part of Respondents Nos.1 and 2. 13) The learned Respondents Nos.1 and 2 while passing the impugned order-in-Appeal and impugned order-in-original were not justified to dispute a closed and past transaction beyond a period of three years which they were not authorized to do so as provided under Section 32(3) of the Customs Act, 1969. 14) As regard the issue of jurisdiction taken by the Authorized Representative before Respondent No,1 and rebutted by learned Respondent No,1 it is submitted that once the Audit Observations were issued under the authority Director General Directorate General of Post Clearance Audit Islamabad the matter brought to the knowledge of Chairman Federal Board of Revenue Islamabad, Member Customs FBR Islamabad, Member IRS FBR Islamabad, Contravention Report prepared and Show Cause Notice issued by the Additional Collector of Customs Model Customs Collectorate of PACCS Custom House Karachi, the Officer of Inland Revenue Department Zone-1 RTO-II Karachi should have refrained himself from issuing multiple show cause notices to the Appellant and could have sought orders from Federal Board of Revenue Islamabad. It is not a question of competency or exercise of greater lien on part of the Customs Authorities to have taken up the case for alleged recovery of escaped amount of Sales Tax and Federal Excise Duty but a subtle proposition of law
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involving "Doctrine of Double Jeopardy" and blatant violation of the provision of Article 13 of the Constitution. If jurisdiction has been vested concurrently in the hands of two revenue departments as per documents on record, clarification needs to be issued by Federal Board of Revenue Islamabad together with appropriate amendments made in the relevant statutes to avoid such confusion by two Revenue Departments working under its Domain. The interpretations placed by quasi judicial officers of both revenue departments may not serve any purpose and the litigation may never end up. The end result would be that the tax payer has to suffer the brunt of concurrent jurisdiction awarded to two revenue departments by the legislature in the form of litigation, cost of legal counsels, and mental agony for no fault of their own. It was logical on the part both the Revenue Departments to have tackled up this anomalous situation with average human comprehension common sense and restrain rather than entangling into an unwarranted never ending competition nothing more than a wild goose chase. 15) Set aside the impugned order passed by Respondent No,1 and impugned Order-in-Original No, 1 of 2012 dated 10.5.2012 passed by Respondent No,2 as these orders are against law and facts and being ab initio null and void and coram non judice. 5. The perusal of record shows that during the pendency of present Sales Tax Appeal No, (STA No, 15/KB/2013) in this Tribunal, the appellants filed a C.P. No,D-2065 /2014 in the High Court of Sindh at Karachi. Through the petition, the Appellant had impugned the order dated 10.04.2014 passed by the Appellate Tribunal Inland Revenue in M.A. (Stay) No, 18/KB12014 (STA No, 15/KB/2013), whereby the application of the Appellant seeking stay of recovery of demand during pendency of the appeal before the Tribunal had been declined. The subject petition before Hon'ble High Court was finally fixed for hearing on 11.03.2015 and disposed of with following directions:- 'Accordingly instant petition is being disposed of with the directions to the Customs Appellate Tribunal (Inland Revenue), Karachi Bench to decide the appeal of the petitioner bearing S.T.A No, 15 of 2013 within a reasonable time preferably within a month from the order of this Court provided no further adjournment will be sought by any party; and till disposal of the appeal by the Customs Appellate Tribunal (Inland) Revenue, Karachi, the petitioner shall not enforce the recovery of impugned demand. Accordingly instant petition is disposed of along with listed applications." 6. We have given a patient lengthy hearing to both parties. Ld. AR of the appellant has also placed written arguments for consideration before this Tribunal which are reproduced as under:- a) That the case was originally initiated by Director General of Post Clearance Audit Federal Board of Revenue Islamabad vide his letter C. No, PCA/Audit/ Permission/70/2011 dated 29th November 2011 to Member (IRS) FBR Islamabad, wherein it was alleged that the Appellants Messrs R.M. Gulistan Engineering and Constructors (Pvt.) Ltd. Willfully, intentionally and knowingly evaded duty and taxes to the tune of Rs,23,335,392/- (Customs Duty Rs,10417619/- Sales Tax Rs,11531519/- and Income Tax Rs,1316948/- Federal Excise Duty Rs,69306/-. That the aforesaid letter of Director General PCA Islamabad was forwarded to Chief Commissioner RTO-II, Karachi by Director (I & I IR (HQ) vide his letter C.No, 2 (71) BTB-PCA/11- ) 173245-R dated 21.12.2011 whereby the Chief Commissioner RTO-II, Karachi was apprised that an amount of Rs,12.917 Million has been worked out as short payment of Sales Tax, Income Tax and Federal Excise Duty. The Chief Commissioner was further advised to obtain detail contravention reports either from the concerned Collectorate or from Directorate General (PCA) before initiation of recovery proceedings. In pursuance of the aforesaid letter of Director (I&I) IR HQ Additional Commissioner IR (HQs) from the office of Chief Commissioner Inland Revenue Regional Tax Office-II, Karachi vide his letter No, CCIR/RT0-11/Audit/SO-V/2011- 2012/5473 of dated 2.4.2012 requisitioned a detailed contravention report and Import Data of the Appellants for initiating necessary recovery proceedings for the period from 1.7.2008 to 30.6.2009, 1.7.2009 to 30.6.2010 and 1.7.2010 to 30.6.2011. The Additional Commissioner IR (HQs) Karachi upon receipt of the requisite information from the office of Director, Post Clearance Audit, Custom House, Karachi vide
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his letter No, CCIR/RT0-11/Audit/SO-V/2011-2012/5794 dated 12.4.2012 informed the Director (I & I IR HQ), Islamabad that show cause notices to recover short paid Sales Tax, Income Tax and Federal Excise Duty on the basis of Contravention Report and Import Data provided by Director Directorate General of Post Clearance Audit Custom House, Karachi were being issued to the Appellants for making alleged aforesaid short recovery. The Additional Commissioner IR (HQs) also informed Director I & I IR (HQ) vide his letter No, CCIR/RTO-II/Audit/SO-V/ 2011-2012/6450 dated 12.5.2012 regarding short realization of duty and taxes on import of seamless steel pipes/tubes by the Appellants Messrs R.M. Gulistan Engineering and Constructors (Pvt) Ltd Karachi. ' That in wake of the above proceedings the officer Inland-MACUnit-02-Zone-1,RTO-II, Karachi issued two Show Cause Notices bearing No, OIR/MAC/UNIT-02/ZONE-1/RTOII/KYC/ 2012/545 dated 28.3.2012 and Show Cause Notice No, OIR/AC/MAC/RTO-II/KYC/2012/741 dated 21.4.2012 to the Appellants for recovery of alleged short paid amount of Sales Tax and Excise Duty amounting to Rs,11,600,825/-. The Appellants deem it imperative to bring it on record that the Show Cause Notices issued by the Inland Revenue Officer MAC-Unit-02-Zone-I, RTO-II, Karachi were completely based upon the contravention report Case No, 02/2011PCA/LHR/ Audit-C/148/2011/667 dated 25.11.2011 initiated by the office of Directorate of Post Clearance Audit ( PCA) Lahore. ' That the Appellants at this stage may like to register their first preliminary legal objection in respect to the jurisdiction of the officers of Directorate General of Post Clearance Audit who have no legal mandate under the Sales Tax Act, 1990 or the Federal Excise Act, 2005 for initiating cases of short recovery of Sales Tax or Federal…
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