Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: Messrs ATTA CABLES (PV r.) LTD., LAHORE VS Respondent: The COMMISSIONER INLAND REVENUE LTU, LAHORE
Court Name: Appellate Tribunal Inland Revenue Judge(s):Nazir Ahmad, Sohail Afzal, Fiza Muzaffar, Ch. Anwaar-ul-Haq, Ch. Shahid
Iqbal Dhillon Title:Messrs ATTA CABLES (PV r.) LTD., LAHORE vs The COMMISSIONER INLAND REVENUE LTU, LAHORE Case No.: S.T.A. No.1194-A/LB of 2012 and MA (AG) No.41/LB of 2013 Date of Judgment:2013-07-09 Reported As: 2016 PTD (Trib.) 792 Result: Order accordingly Judgment ORDER CH. ANWAAR UL HAQ (JUDICIAL MEMBER):--The titled appeal has been filed on behalf a registered person called in question the order vide No. Dated 13-11-2012 passed by the Commissioner (Appeals-I) Lahore on the following grounds:-- The Commissioner Inland Revenue Appeals had completed the hearing of appeal in two hearings whereby, tax department remain unable to attend the hearing. Subsequently, no notice was ever served on the taxpayer company. However, while finalizing appellate order, the appellate authority solely relied on the contention of the tax department. The appellate Commissioner neither served notice of any further hearing not confronted the taxpayer with the information given by the tax department. Accordingly, concluding remarks and the order passed by the CIR(A) is unjust, unfair and unlawful. The Commissioner Appeal's apprehension that the pertinent information has been concealed by the taxpayer is unjust and unfair. Moreover, the comments of Commissioner Appeals are totally baseless and unjust without confronting the taxpayer. That the tax levied by the tax officer amounting to Rs.43,758,843/- along with penalty and additional surcharge and confirmed by the commissioner appeals is unjust and unfair. During court proceedings, the learned A.R. Of the appellant sought permission to raise additional ground which is allowed. The same is also reproduced as under:- "That on last date of hearing it was argued by the undersigned that the officer who issued show cause notice in the subject case, adjudicated the entire matter, passed the assessment order and determined the liability of the appellant he was not competent to do so in term of S.R.O. 555(1)/1996
---
## Page 2
dated 01-06-1996. Perusal of the aforesaid Notification reveals that adjudicating officer (Deputy Commissioner) cannot adjudicate the matter which revenue was involved more than one million. (copy of SRO is enclosed). Whereas in this case, he passed the assessment order of Rs.43,785,843/- vide order dated 13-11-2012 which is much beyond its jurisdiction." 2. The facts of the case in brief are that the appellant is engaged in manufacturing and sale of Enameled Copper wire and Paper covered insulated copper strips. An information was received by the Directorate of Intelligence and Investigation to the effect that gang misused sales tax registration No. Of registered persons for issuing of fake sales tax invoices. The Directorate of Intelligence and Investigation alleged that the appellant had also claimed input tax against the invoices issued by the said gang: The appellant was allegedly as one of the buyers from the said so-called gang. The Directorate of Intelligence and Investigation prepared audit/contraventin n report in the light of which the DCIR, Audit-I Zone-I, LTU, Lahore issued show cause notice wherein it was alleged that the appellant was involved in the tax fraud and demanded an amount of sales tax Rs.43,785,843/- that was earlier claimed/adjusted as input tax. Subsequently, the order was issued by learned DCIR imposing the sales tax amounting to Rs.43,785,843/- as pointed out in the contravention report. Moreover, he also imposed default surcharge along with 100% penalty. 3. Being aggrieved by the treatment meted out by the learned DCIR, taxpayer/appellant filed first appeal before the learned CIR (Appeals), Lahore, who dismissed the same and upheld the order of the DCIR, with the following observations:-- "I have deliberately not reproduced the observations of the learned officer and arguments of the learned AR in extenso because the proceedings in this case took a new turn when the appellant in view of the amnesty scheme announced by the government, the appellant deposited the principal amount to claim waiver of penalty and default surcharge. The contents of the said scheme contained in S.R.O. No.606 are reproduced as under:-- S.R.O. 606(I)/2012:---The exercise of the power conferred by section 34A of the Sales Tax Act,1990, the Federal Government, in supersession of its notification No.S.R.O. 563(1)/2012 dated 25th May, 2012 is pleased to exempt the whole amount of default surcharge and penalties payable by person against whom an amount, of sales tax is out standing on account of illegally adjusted input tax, subject to the following conditions: i. Whole of the principal amount of illegally adjusted sales tax is paid by the 25th June, 2012 and ii.any case, complaint or proceedings filed by the registered persons before any court of law, Federal Tax Ombudsman or any other authority is withdrawn by the said date. 2. Any criminal proceedings lodged by the department shall abate from the date of complying with the above conditions by the registered person. The Department placed a copy of the order of the Honourable Lahore High Court dated 26-06- 2012 whereby the Writ Petition No.8624/2011 has been withdrawn. Subsequent to this, the appellant applied to the department for waiver of penalty, default surcharge and abatement of criminal proceedings in terms of SRO mentioned supra that was accepted vide letter C.No.I.I. S Tax/Misc- Corr/S.Tax/fraud/3309/6712 dated 09-07-2012 by the department. It is unfortunate that the learned AR did not inform me about this development that was his duty to place all the relevant facts on record. Nonetheless, in view of the above factual position, the appeal is dismissed as the appellant has conceded the case made out against him. The appellant cannot be allowed to blow hot and cold in the same breath. As the saying goes; you cannot have your cake and eat it too." 4. The learned AR assailed the impugned order before us on the grounds mentioned above. However, the main thrust of arguments of the learned AR that issuance of show came notice and on the basis thereof passing the order in original was without jurisdiction as having been issued/passed by the Deputy Commissioner Inland Revenue not competent in terms of S.R.O.
---
## Page 3
555(1)/1996 dated 01-07-1996 holding the field at the relevant time. He submitted that the pecuniary jurisdiction of the Deputy Commissioner was to. Deal with the cases involving amount of tax not exceeding one million rupees whereas the show cause notice was issued for the alleged amount of Rs.43,785,843/- exceeding such limit, thus, the Deputy Commissioner Inland Revenue was not competent to issue the show cause notice or adjudicate the matter or passed order-in- original being beyond the said monetary limit provided in the above referred S.R.O. Reliance was placed on the judgment of Tribunal discussed in the subsequent paras here-under. He further contented that the said SRO remained dormant till the omission of section 45 of the Sales Tax Act, 1990 i.e. 28-09-2009, the said S.R.O. Became applicable on omission of the said- section. He contended that S.R.O. 555(1)/1996 dated 1-7-1996 was operative and holding the field till 01-06-2012 i.e. The date it was rescinded by the Federal Board of Revenue vide S.R.O. 594(1)/2012 dated 01-06- 2012. 5. The learned DR on the other hand while opposing the arguments advanced by the learned counsel for the appellant supported the impugned order and contended that S.R.O. 555(1)/1996 dated 01-07-1996 only issued in respect of officers of Collectorates and not the Officer of Inland Revenue and on omission of section 45 from the Sales Tax Act, 1990, every Officer of Inland Revenue was competent to issue show cause notice and adjudicate the case irrespective of pecuniary jurisdiction. He further contended that the show cause notice was rightly issued under sections 11(2) and 36(1) of the Sales Tax Act, 1990 and the Deputy Commissioner Inland Revenue was competent to adjudicate the matter. 6. We have considered the arguments put-forth by the learned representatives of both the sides and perused the available record and also perused the judgments cited at bar. In our considered view, the pivotal issue that arises out of the impugned order and is required to be deliberated upon is that whether or not the first adjudicating authority the learned Deputy Commissioner Inland Revenue could assume jurisdiction in absence of section 11(3) and section 45 of the Sales Tax Act, 1990 and under sections 11 and 36 of the Sales Tax Act, 1990 in respect of those cases where the amount of tax involved exceeds one million rupees. To appreciate the points raised by the appellant it is necessary to narrate briefly the history of the legislation on the subject at which the powers were given to the adjudicating officers to adjudicate upon the matters relating to sales tax. The Sales Tax Act, 1990 enabled the Federal Board of Revenue to frame rules, issue notifications, orders amtmg others, for the purposes of this Act. In pursuance thereof Section 11(3) since repealed, of the Sales Tax Act, 1990 empowered the Federal Board of Revenue "to issue a notification in the official Gazette, specify the officers of sales tax authorized to take action under the provisions of subsection (1) and subsection (2)," By virtue of this power, the Federal Board of Revenue issued a notification S.R.O. 555(1)/1996 dated 1-7-1996. According to the said notification powers had been given to the officers of sales tax to adjudicate the cases involving assessment of sales tax, charging of additional tax, imposition of penalty and recovery of amount erroneously refunded subject to limitation and conditions as specified therein. This notification was replaced by a permanent legislation i.e. Section 11(3) of the Sales Tax Act, 1990 was omitted and section 45 substituted by virtue of the Finance Ordinance, 2000 which also contained a similar powers to the Officers of Sales Tax given in the earlier Notification S.R.O. 555(1)/1996 dated 01-07-1996. Subsequently the "Inland Revenue Services" (IRS) Department was created by the Revenue Division vide Office Memorandum No. F-6/2/2009-CP-II dated 12-09-2009 with the intention to bring the Federal Excise Act, 2005, Sales Tax Act, 1990 and Income Tax Ordinance, 2001 under one roof. Against this back ground "Finance Amendment Ordinance, 2009" was promulgated by virtue of which section 45 of the Sales Tax Act, 1990 and section 31 of the Federal Excise Act, 2005 was omitted. These amendments were continued in force till 05-06-2010 through subsequent "Finance
---
## Page 4
Amendment Ordinance, 2010" and finally through "Finance Act, 2010" aforesaid amendments were saved with effect from 06-06-2010 which are still continued in the respective statutes. 7. We shall now proceed to discuss the principal point argued before us in respect of the notification S.R.O. 555(1)/1996 dated 01-07-1996 as to whether this notification was reactivated and in force after the date when section 45 was omitted. To appreciate this issue it will be appropriate to reproduce aforesaid SRO hereunder:-- "GOVERNMENT OF PAKISTAN CENTRAL BOARD OF REVENUE SALES TAX WING Islamabad, the 1st July, 1996 NOTIFICATION (SALES TAX) S.R.O. 555(I)/96.---In exercise of the powers conferred by subsection (3) of section 11 and section 36 of the Sales Tax Act, 1990, the Central Board of Revenue is pleased to authorise the officers of sales tax specified in column (2) of the table below to adjudicate the cases involving assessment of sales tax, charging of additional tax, imposition of penalty and recovery of amount erroneously refunded subject to limitations and conditions as are specified in column (3) of the said table:- S. No.Designation of Officer Limitations and Conditions (1) (2) (3) 1. Superintendent/Senior Auditor.Cases falling under subsection (1) of section 11 of the Act. 2. Assistant Collector Cases falling under subsection (2) of section 11 and section 36 of the Act, provided that the amount of tax involved or the amount erroneously refunded does not exceed five hundred thousand rupees. 3. Deputy Collector Cases falling under subsection (2) of section 11 and section 36 of the Act provided that the amount of tax involved or the amount erroneously refunded does not exceed one million rupees. 4. Additional Collector Cases falling under subsection (2) of section 11 and section 36 of the Act without any restriction as to the amount of tax involved or amount erroneously refunded. Amended vide S.R.O. 1318(1)/98, dated 28-11-1998 8. Before proceeding Maher, it would be convenient to consider the nature of the said notification which is clearly a procedural notification giving the powers to the Officers of Sales Tax Collectorate to adjudicate upon the matters in respect of the cases involving assessment of sales tax, charging of additional tax, imposition of penalty and recovery of amount erroneously refunded subject to limitation and conditions as specified therein. This notification does not create any right or liability. We have already seen that this notification was replaced by a permanent legislation, section 11(3) of the Sales Tax Act, 1990 was omitted and section 45 substituted by the Finance Ordinance, 2000. Subsequently, Finance (Amendment) Ordinance, 2009 was promulgated by virtue of which section 45 of the Sales Tax Act, 1990 and section 31 of the Federal Excise Act, 2005 was omitted. These amendments were continued in force till 05-06-2010 through subsequent Finance (Amendment)
---
## Page 5
Ordinance, 2010 and finally through Finance Act, 2010 the amendments were saved in the said Acts with effect from 06-06-2010 which are still continued in the statutes. Notifications issued under the said provisions have not been saved either in the Sales Tax Act, 1990 or through any notification. As explained by Lord Reading C.J. In Watson v. Winch:- "It has been long established that, when an Act of Parliament is repealed, it must be considered (except as to transactions passed and closed) as if it had never existed It would follow that any bye-law made under a repealed statute ceases to have any validity unless the repealing Act contains some provision preserving the validity of the bye-law notwithstanding the repeal." As the parent section 11(3) of the Sales Tax Act, 1990 under which the notification S.R.0.555(I)/1996 was made has been repealed without any saving clause for this notification. 9. We have in our mind section 24 of the General Clauses Act, 1897 and if the submission of the learned AR that the notification would be a bye-law that would have continued notwithstanding the repeal of section 11(3) of the Sales Tax Act, 1990 is accepted then it will be in conflict with Section 24 of the General Clauses Act, 1897. Section 24 of the General Clauses Act, 1897 is reproduced hereunder:-- Section 24. "Where any Central Act or Regulation is, after the commencement of this Act, repealed and re- enacted with or without notification, then, unless it is otherwise expressly provided, any appointment, notification, order, scheme, rule form or bye-law made or issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions re-enacted continue in force and be deemed to have been made or issued under the provisions so re-enacted, unless and until it is superseded by any appointment, notification, order scheme, rule form or by- law, made or issued under the provisions so re-enacted and when any Central Act or Regulation, which, by a notification under S. 5 or 5A of the Scheduled Districts Act, 1874, or any like law, has been extended to any local area, has, by a subsequent notification, been withdrawn from and re- extended to such area or any part thereof the provisions of such Act or Regulation shall be deemed to have been repealed and re-enacted in such area or part within the meaning of this section." [emphasis supplied] We consider that this submission is entirely without force and in this conclusion we find support from Interpretation of Statute by Craies on Statute Law, 6th Edn. Page 334: which reads as under:- "If the statute under which bye-laws are made is repealed, those bye-laws are impliedly repealed and cease to have any validity unless the repealing statute contains same provision preserving the validity of the bye-law notwithstanding the repeal. This follows from the rule .... When an Act of Parliament is repealed it must be considered (except to transactions passed and closed) as if it had never existed." 10. After creation of Inland Revenue Services (IRS) Department, section 30(3) of the Sales Tax Act, 1990 was substituted through Finance Act 2010 which only empowered Commissioner Inland Revenue to direct their subordinate Officers to perform functions in respect of such persons or classes of persons or such areas as the Commissioners may direct. Section 30(3) of the Sales Tax Act, 1990 is reproduced hereunder:- Section 30(3). "Additional Commissioner Inland Revenue, Deputy Commissioners Inland Revenue, Assistant Commissioner Inland Revenue, Superintendent Inland Revenue, Inland Revenue Audit Officer, Inland Revenue Officer, Inspector Inland Revenue, and officer of Inland Revenue with any other designation shall be subordinate to the Commissioner Inland Revenue and shall perform their function in respect of such persons or classes of persons or such areas as the Commissioners, to whom they are subordinate, may direct." [emphasis supplied]
---
## Page 6
By virtue of the power given in the aforesaid section, the Commissioners Inland Revenue issued jurisdictional orders for their subordinate officers and directed them to perform their functions in respect of such persons or classes of persons or such areas as they were directed. According, to the said jurisdictional orders powers had been given to the Officers of Inland Revenue inter alia under sections 11 and 36 to adjudicate the cases involving assessment of sales tax, charging of additional tax, imposition of penalty and recovery of amount erroneously refunded subject to limitation and conditions as specified therein. By following the jurisdictional order issued by the Commissioner Inland Revenue the learned Deputy Commissioner Inland Revenue had rightly issued the show cause notice under sections 11(2) and 36(1) of the Sales Tax Act, 1990 and passed the Order-in-Original dated 29-05-2012. Whereas, the S.R.O. 555(1)/1996 dated 01-07-1996 was inconsistent with the provisions of section 30(3) of the Sales Tax Act, 1990 and only deals with the officers of defunct Customs, Excise and Sales Tax group cadre. The Honorable Supreme Court of Pakistan in the case titled as A.R.Awan and 2 others v. City District Government, Karachi reported as 2011 SCMR 691 held that:-- "It is not for the court to extend the scope of the Act on the ground of convenience when the language of the law is clear beyond doubt". 11. We have also observed that the FBR vide S.R.O. 594(1)/2012 dated 01-06-2012 stately while exercising powers under section 11 of the Sales Tax Act, 1990 rescinded S.R.O. 555(I)/1996/dated 01- 07-1996, reproduced hereunder:-- GOVERNMENT OF PAKISTAN MINISTRY OF FINANCE, ECONOMIC AFFAIRS, STATISTICS AND REVENUE (REVENUE DIVISION) Islamabad, the 1st June, 2012. NOTIFICATION (SALES TAX) S.R.O. 594(1)12012.---In exercise of the powers conferred by clause (46) of section 2, clause (b) of subsection (2) of section 3, section 11, clause (a) of subsection (2) of section 13 and section 36 of the Sales Tax Act, 1990, the Federal Government is pleased to rescind the following Notifications, namely:- (i) No. S.R. 0. 555(1)/1996, dated the 1st July, 1996; (ii) No. S.R.O. 849(1)/1997, dated the 25th September, 1997; (iii) No.S.R.O. 103(1)/2005, '.Dated the 3rd February, 2005; (iv) No. S.R.O. 15(1)/2006, dated the 6th January, 2006; and (v) No. S.R.O. 644(1)/2007, dated the 27th June, 2007. 2. This Notification shall take effect on and from the 2nd day of June, 2012. 12. In our firm view, at the time of issuance of aforesaid rescinding Notification dated 01-06-2012, the provisions of subsection (3) of section 11 of the Sales Tax Act, 1990 were not available on the statute book, where under S.R.O. 555(1)/1996 was issued. Therefore, it was a futile exercise on the part of the FBR as the said SRO had already lost its legal efficiency since the date of enforcement of the Finance Ordinance, 2000 whereunder subsection (3) of section 11 of the Sales Tax Act, 1990 was omitted. The learned AR also having no answer to the query, as to whether at the time of rescinding notification, any other SRO was issued or amendment was brought on the statue book for assumption of jurisdiction to any authority regarding performing the function of adjudication, except the powers as given under section 30(3) of the Sales Tax Act, 1990. 13. We have also minutely examined the referred judgments by the learned AR, on the point of pecuniary jurisdiction in terms of 555(1)/1996 dated 01-07-1996, relevant portion of the said
---
## Page 7
judgments is re-produced here under:-- STA No.871/LB/2012 Judgment dated 16-10-2012 " (v) He further argued that the Assistant Commissioner Inland Revenue/Audit officer in the subject case was not competent to issue the show cause notice and to adjudicate the matter in view of the provisions of S.R.O. 555(1)11996 dated 01-06-1996 which SRO is still in the field. In terms of the said SRO, an Assistant Collector (now Assistant Commissioner) could adjudicate the cases falling under subsection (2) of section II and section 36 of the act provided that the amount of tax involved or the amount erroneously refund did not exceed Rs. 500,000/I-. The impugned adjudication by the adjudicating authority was, therefore, illegal and void ab initio. The counsel relied on the judgment of this Appellate Tribunal in STA No.530/LB/2011 and STA No.578/LB/ 2011 titled as Messrs Coslab (Pvt.) Ltd. And Messrs Itereos Copy of the said judgment was also placed on record." "(iii) We also agree with the contention of the learned counsel for the respondent regarding pecuniary, jurisdiction of the Assistant Commissioner. Although, the this argument was not pleaded at first appeal stage by the respondent but as per dictum of apex court in referred judgment reported at PTCL 2007 PLC 64(sic) that pure question of law can be raised at any stage of proceedings. The issue of pecuniary jurisdiction of the officers of Inland Revenue under S.R.O. 555(1)/1996 has already been settled by another bench of this Tribunal in STA No.530/LB/2011 and STA No.578/LB/2011 and we concur with the finding in the said judgment. Consequently, it is held that the Assistant Commissioner Inland Revenue Audit officer who issues the show cause notice and passed the Assessment Order, therefore, cannot be assumed to have been passed under the particular statute and is held to be void ab initio." (emphasis supplied] S.T.As. Nos. 530 and 578/LB/2011 Judgment dated 11-10-2011 "4. The learned AR appearing on behalf of the appellant contended that the show cause notice as well as order in original is beyond jurisdiction of the Deputy Commissioner of Inland Revenue in terms of S.R.O. 555(1)/1996 dated 01-07-1996 hence the impugned order is void ab initio. Under the said notification issued by the Federal Board of Revenue in terms of section 36 of the Sales Tax Act, 1990, the Deputy Commissioner of Inland Revenue has been authorized to adjudicate the cases involving assessment of sales tax, charging of additional tax and imposition of penalty provided that the amount of tax involved does not exceed Rs.1,000,000 whereas in the instant case, the learned Deputy Commissioner had been pleased to adjudicate the case involving sales tax of Rs.17,503,680/-. Reliance has been placed on the judgment of the Tribunal reported as 2011 PTD (Trib.) 1943." "9. We also find ourselves in full agreement with the arguments of learned AR that the Show cause notice issued by the Deputy Commissioner was beyond his pecuniary jurisdiction. It has already been held by the Tribunal in its judgments in the appeals supra that a notice issued without jurisdiction is illegal and unlawful and no action can be taken against a citizen in pursuance thereof. It has also been held in the case reported as 2006 PTD 219 and 2011 PTD (Tray.) 1943 that an order without jurisdiction is a fraud on the law and can never be assumed to have been passed under the particular statute." [emphasis supplied] STA No. 55/18/2012 Judgment dated 06-04-2012 "The issue of pecuniary jurisdiction of the officer of Inland Revenue under S.R.O. 555(1)/1996 dated 01-07-1996 has already been settled by another bench of this Tribunal in STA No.530/LB/2011 and STA No.578/LB/2011 and we concur with the findings in the said judgment.…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.