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Official Citation: 2024 PTD 1174
Court / Jurisdiction: Peshawar High Court
Year of Decision: 2023
Decision Date: 2023-12-31
Parties: Commissioner Inland Revenue, Regional Tax Office, Peshawar vs M/s. JUDGMENT
Ruling Summary: This decision was rendered by the Peshawar High Court on 2023-12-31, officially reported as 2024 PTD 1174. In this matter between Commissioner Inland Revenue, Regional Tax Office, Peshawar and M/s. JUDGMENT, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2024 PTD 1174
Court Name: Peshawar High Court Judge(s): Abdul Shakoor, Syed Arshad Ali Title:Commissioner Inland Revenue, Regional Tax Office, Peshawar vs M/s.
JUDGMENT
Reported As: PTCL 2024 CL. 243, 2024 PTD 1174 Result: References are answered accordingly Judgment
JUDGMENT: MR. JUSTICE SYED ARSHAD ALI. (1). This consolidated judgment is aimed to dispose of the instant Sales Tax Reference as well as the connected Sales Tax References, the details whereof is provided in Annexure 'A' to this judgment, as adjudication of common questions of law and facts are involved therein. 2. Brief facts of the case are that the Respondent/Peshawar Electric Supply Company Ltd ("Company") is a registered Company under the Company's law of Pakistan and is owned by the Federal Government; deals in the distribution of electricity in the province of Khyber Pakhtunkhwa. 3. On 02.07.2019, a show cause notice was issued to the Company wherein it is alleged that the sales tax audit of the Respondent/Company was conducted by the Assistant Collector (Audit) Sales Tax & F.E. RTO, Peshawar in pursuance of the order of Addl: Collector Sales Tax & Federal Excise, Peshawar. In the said audit proceeding serious discrepancies were noticed relating to inadmissible input adjustment by the Company. The show cause notice was contested by the Company by offering its explanation through a written reply and also produced record during the adjudication by the Assessing Officer i.e. Addl: Commissioner Inland Revenue (Audit Division-II). On conclusion of the proceeding the Assessing Officer has held that the input adjustment claimed by the Company to the extent of Rs. 2,462,631,249/- is inadmissible in terms of section 7(1) 8 (1) (a) and 59 of the Sales Tax Act, 1990 ("Act") read with Rule 13 (1)(2) (b) of Special Procedure for collection and payment of sales tax on electric power notified vide Chapter III of SRO. 480(I)/2007 dated 09.06.2007 and accordingly the order was passed. The Company challenged the Order-in-
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Original dated 29.06.2010 through Sales Tax Appeal No. 3 of 2010. The Commissioner Inland Appeal partially allowed the appeal to the extent of an amount of Rs: 2,432,489,866/- and ordered for modification of the impugned Order-in-original vide judgment dated 24.05.2011. 4. The said order had aggrieved both; the Company as well as the Revenue, therefore, two separate appeals were filed one by the Company bearing No. STA.96/PB 2013 and the other by the Revenue bearing 170/PB/2011. The Tribunal through impugned order has partially allowed the appeal of the Company vide order dated 02.06.2014 and has also disposed of the appeal filed by the Revenue in certain terms. Revenue being aggrieved of the judgment of the Tribunal has filed the instant references. 5. At the very outset the learned counsel representing the Company has raised an objection to the maintainability of these References being barred by time, which are reproduced as under:-- STR No. 03-P/2015 The impugned judgment was passed by the worthy Tribunal on 02.06.2014 which was communicated and received to the petitioner on 03.09.2014 whereas the petitioner-department has filed the instant reference on 29.11.2014, however, it was incomplete and returned with objections and re-submitted on 09.03.2015 after taking several opportunities. STR No. 04-P/2015 The impugned judgment was passed by the worthy Tribunal on 02.06.2014, which was communicated and received to the petitioner on 03.09.2014 whereas the petitioner-department has filed the instant reference on 2.11.2014, however, the case was returned being incomplete and re-submitted on 09.03.2015 after availing several opportunities. STR No. 05-P/2015 The impugned judgment was passed by the Worthy Tribunal on 02.06.2014, which was communicated and received to the Petitioner on 03.09.2014 whereas the Petitioner-department has filed the instant Reference on 29.11.2014, however, the was incomplete therefore, returned with the objections and resubmitted on 09th March 2015 after taking several opportunities. STR NO. 06-P/2015 The impugned judgment was passed by the Worthy Tribunal on 02.06.2014 which was communicated and received to the Petitioner on 03.09.2014 whereas the Petitioner-department has filed the Reference on 29.11.2014, however, being incomplete it was returned with objections for removal and resubmitted on 09.03.2015 after taking several opportunities. STR No. 07-P/2015 The impugned judgment was passed by the worthy Tribunal on 02.06.2014 which was communicated and received to the Petitioner on 03.09.2014 whereas the Petitioner-department has filed the instant Reference on 01.12.2014, however, reference. being incomplete returned with objections for removal and re-submitted on 09.03.2015 after taking several opportunities. Writ Petition No. 2371-P/2016 The impugned judgment was passed by the worthy Tribunal on 02.06.2014 whereas the Petitioner- department has filed the instant writ petition on 17.06.2016, however, the same was returned and re-submitted on 18.06.2016 after taking several opportunities. STR No. 09-P/2018 The impugned judgment was passed by the worthy Tribunal on 06.01.2018 whereas the Petitioner- department has filed the instant Reference on 27.02.2018, however, the same was returned with objection and resubmitted on 24.03.2018. STR No. 10-P/2018 The impugned judgment was passed by the worthy Tribunal on 06.01.2018, which was communicated and received to the Petitioner on 30.01.2018 whereas the petitioner department has filed the instant Reference on 25.04.2018.
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6. The learned counsel for the Company has argued that during filing of the Reference when it was returned by the Deputy Registrar of this Court, it was re-submitted beyond the period as extended by the Deputy Registrar of this Court, therefore, the Reference was filed beyond the period of limitation and while relying upon the case law "Asad Ali etc Vs The Bank of Punjab etc (PLD 2020 SC 736) and Province of Punjab Vs Muhammad Arif & Co (PLD 2022 Lahore 596). Learned counsel has maintained that references should be dismissed. 7. The said assertions of the learned counsel for the Respondent/Company has weighed, however, it is equally settled principle of law that when the Appellate Court is seized of different matters wherein a common question of law is involved and if any or some appeal is/are within time involving adjudication of common question of law then in such a circumstances it is not appropriate to dismiss the time barred appeals. "Subedar Sardar Khan through Legal heirs & others Vs Muhammad Idrees through General Attorney and another (PLD 2008 SC 591) and Sheikh Akhtar Aziz Vs Mst. 524)." The References were initially filed by the Petitioner within time provided by law, however, on certain occasions it was returned to the Petitioner to remove certain objection. During the said process the Petitioner did not take the time for submission of reference seriously and there is delay on part of the Petitioner while resubmitting the references. Hence, reference bearing No. 09/2018 involving adjudication of similar question of law is within time. Therefore, we are not inclined to dismiss these References on limitation. Therefore, the objection of Respondent/Company in this regard is overruled. 8. Moving on to the merit of the case, both the parties have filed their respective written arguments and have proposed the following questions of law for determination of this Court:-- ##TS##(i). What is the effect of non-conclusion of adjudication within the period provided under Section 36 (Now section 11) of the Act, by the Assessing Officer? (ii). Whether the Tribunal has not erred by ignoring section 30 of the Sales Tax Act, 1990 while holding that Additional Commissioner has illegally concluded the assessment proceedings and thus the order was corum non judice? (iii). Whether input adjustment can be legally allowed to the Company against the pilferage and theft in the supply of electricity in terms of section 7 & 8 (1) (a) of the Sales Tax Act. 1990. (iv). Whether the Respondent/Company could claim input adjustment against supplies of electricity in the tribal area which was at the relevant time not subject to the impost of sales tax in terms of the law laid down by the apex Court in the case of M/s Gul Cooking Oil's (PTCL 2008 CL. 221) and Pakistan through Chairman FBR and others Vs Hazrat Hussain (PTCL 2018 CL. 700)? 9. After hearing the parties and going through the record as well as the written submissions produced by the learned counsel representing the parties; our findings on the questions of law raised in the instant as well as in the connected references are as follows:-- Questions No. 1 & 2 10. In the present case show cause notice was issued to the Company on 02.07.2009 and the impugned order of assessm ent was passed on 29.06.2010 thus, it took the Assessing Officer, 11- months and 27-days to conclude the proceeding. The period provided under section 36 of the Act (Now omitted) for disposal of the matter at the relevant time was 120-days extendable up to further 60-days as per proviso to the said section. In order to appreciate the respective arguments, we would first refer to the relevant law upon which the parties are relying. "36. Recovery tax levied or short levied or erroneously refunded.-- (1) ..... (2) ..... Provided that order under this section shall be made within one hundred and twenty days of issuance of show cause notice or within such extended period as the commissioner may for
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reasons to be recorded in writing, fix, provided that such extended period shall in no case exceed sixty days. Provided further that any period during which the proceedings are adjourned on account of a stay order or Alternative Dispute Resolution proceedings or the time taken through adjournment by the petitioner not exceeding thirty days shall be excluded from the computation of the periods specified in the first proviso. (4) For the purpose of this section, the expression "relevant date" means-- (a) the time of payment of tax or charge as provided under section 6; And (b) in a case where tax or charge has been erroneously refunded, the date of its refund" Sec: 74. Condonation of time-limit.--Where any time or period has been specified under any of the provisions of the Act or rules made thereunder within which any application is to be made or any act or thing is to be done, the Board may, at any time before or after the expiry of such time or period, in any case or class of cases, permit such application to be made or such act or thing to be done within such time or period as it may consider appropriate. Provided that the Board may, by notification in the official Gazette, and subject to such limitations or conditions as may be specified therein, empower any Commissioner to exercise the powers under this section in any case or class of cases. ARGUMENTS OF LEARNED COUNSEL FOR REVENUE 11. The learned counsel for revenue while arguing the matter and in the written arguments has provided the following details relating to proceedings by the Assessing Officer:-- 20.07.2009 Show cause notice. 22.07.2009 Adjourned at Respondent's request to 17.08.2009. 17.08.2009. Adjourned at Respondent's request to 08.09.2009. 08.09.2009 Adjourned at Respondent's request to 12.09.2009. 12.09.2009 Request on behalf of Respondent to form reconciliation committee--Request accepted. 60-days' time extension under section 36 (3) sought...Time extended. 15.10.2009 Reconciliation committee report forwarded to adjudicating authority. 17.10.2009 Respondent appeared before adjudicating authority and sought time for written comments. 28.10.2009 Adjudicating authority become dysfunctional due to amendment in law. 25.11.2009 FBR issued jurisdiction order of CCIR and CIR. 10.02.2010 Law settled IRO Jurisdiction on promulgation of Finance Act, 2010. 29.04.2010 FBR extended time till 30.06.2010. 29.06.2010 Dt of Order. 15.07.2010 Order received by Respondent. The learned counsel for Revenue has relied upon the law laid down by the apex Court in the case of "WAK Ltd Multan Road, Lahore Vs Collector Central Excise & Sales Tax Lahore (Now Commissioner Inland Revenue (2018 SCMR 1474), M/S Abbasi Enterprises through Proprietor & another Vs Collector of Sales Tax Peshawar (PTCL 2009 CL. 35), Assistant Collector of Customs AFU Airport Lahore Vs M/S Triple-M Pvt Ltd through Managing Director & others (PTCL 2006 CL. 152), M/S Amin & Son Tailor Mianwali Vs Secretary Revenue Division Islamabad (2010 PTD 21), (2009 PLC 258), (PLD 2008 Lahore 200), Dilbadshah Vs S. Rehmat Shah etc (PLD 2007 Peshawar 103), (2007 CLC 315), (2007 PTD 127), M/S Zamindara Paper & Board Mills Vs Collector Central Excise & Sales Tax (2007 PTD 840) and Investment Corporation of Pakistan & others Vs Sun Shine Jute Mills Ltd (2005 CLD 713), by arguing that failure of the Assessing Officer to conclude the assessm ent proceeding within the statutory period would not render the same illegal. The learned counsel has further maintained that it was a unique case of its nature because at the relevant time
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the jurisdiction at one point of time was vested with the hierarchy established under the Customs Act to decide the matter, however, later to decide/adjudicate upon all the disputes arising out of Sales Tax as well as the Customs Act which was later bifurcated and then the officers of the Sales Tax as explained under section 30 of the Act were given jurisdiction to decide the same, therefore, the delay which occurred in the proceedings when through a speaking order was extended by the Federal Board of Revenue then the objection is thus not maintainable because the proceedings were initiated in the present case by Addl: Collector (Adjudication) whereas the order was passed by Addl: Commissioner Inland Revenue, as the proceedings were then transferred in terms of the amendment made in the Sales Tax Act, 1990. ARGUMENS OF LEANRED COUNSEL REPRESENTING PESCO (COMPANY). 12. The learned counsel representing the Company has refuted these arguments by arguing that the limitation once started could not stop and the adjudicating officer was required to have passed the order within the statutory period as provided under section 36 of the Act and further the Federal Board of Revenue had no authority to have extended the period of adjudication beyond six months as a whole in view of the law laid down by the apex Court in the case of "Collector of Sales Tax Gujranwala Vs M/S Super Asia Muhammad Din (PTCL 2017 CL 736)". The learned counsel has further maintained that even otherwise when the period was extended up to 30.06.2010, the order was passed on 29.06.2010 and was communicated to the Company on 15.07.2010 which is thus against the law and beyond the period of limitation as held by the apex Court in the case of Mujahid Soap (PTCL 2019 CL 555). The learned counsel has also placed reliance on the law laid down by the superior Court in the cases of "Messrs Sabir Daud Exports, Faisalabad Vs Secretary, Revenue Division, Islamabad (2007 PTD 430) and Commissioner Inland Revenue Vs M/s Golden Pearl Cosmetics (PTCL 2018 CL 72)." OPINION OF THE COURT 13. The instant case is unique in its nature because at the relevant time as the law was that there was integrated system of adjudication involving the State revenue (Custom Duty and Sale Tax) under any of the taxing statute. Prior to the substitution of the Finance Act, 2010, section 30 of the Act of 1990 had described the officers of revenue in the following manners:-- (i). Collector of Sales Tax (ii). Collector Sales Tax (Appeal) (iii). Addl: Collector of Sales Tax (iv). Deputy Collector of Sales Tax (v). Assistant Collector of Sales Tax etc. 14. The Finance Act of 2010 had substituted the same by the nomenclature as, (i) Chief Commissioner Inland Revenue (ii) Commissioner Inland Revenue (iii) Addl: Commissioner Inland Revenue (iv) Deputy Commissioner Inland Revenue etc 15. However, when the Finance Ordinance, 2010 was presented in the parliament its lapsed on 05th June, 2010 as parliament did not approve it which was later promulgated as Act of the Parliament w.e.f. 05.10.2010, therefore, there was an obvious confusion during the period of adjudication regarding the authority of the Collector viz-e-viz the Assistant Commissioner/Deputy Commissioner Inland Revenue to decide the issue at hand. 16. It is the contention of the Revenue that in the present proceedings adjournment was sought by the Company on 22.07.2009, 17.08.2009, 18.09.2009 and even a request was made by the Company to form a reconciliation committee on 12.09.2009, therefore, sixty (60)-days' time was extended by the competent authority in terms of proviso to erstwhile section 36 (3) of the Act (Now omitted and re-enacted as section 11). It was during the said period i.e. 28.10.2009 that the adjudicating
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authority under the integrated regime became dysfunctional and through another notification dated 11.11.2009, the matter was assigned to the adjudicating officer under the Act of 1990. However, the jurisdiction to adjudicate matter relating to the adjudication of the dispute relating to Sales Tax was settled on 10.02.2010. In this view of the matter through an order dated 29.04.2010, the Federal Board of Revenue had generally extended the time of adjudication by the new incumbents till 30.06.2010 and the order of adjudication in this case was passed on 29.06.2010 which was communicated to the Respondent/Company on 15.07.2010. 17. The language of proviso to sub-section 3 of section 36 of the Act is very clear that adjudication should be completed in 120-days of issuance of show cause notice or with such extended period as the Commissioner may, for reasons to be recorded in writing fix which shall not in any case exceed ninety (60) days. Thus, a total period in which the adjudication was to be completed at the relevant time was 180-days. Similarly, section 74 of the Act deal with condonation of time limit which section is general in nature according to which, where any time or period has been specified under any of the provisions of Act or rules made thereunder within which any application is to be made or any act or thing is to be done, the Board may, at any time before or after the expiry of such time or period, permit such an act or thing to be done within such a time or period as it may consider appropriate. Admittedly, the Adjudicating Officer took 11-months and 27 days' time in conclusion of the proceeding. In this regard the main reliance of the learned counsel for the Revenue is upon the judgment of Mis. WAK Ltd Multan Road, Lahore Vs Collector Central Excise & Sales Tax Lahore (Now Commissioner Inland Revenue (2018 SCMR 1474), whereas the reliance of the Company was mainly on the judgment passed in the case of Collector of Sales Tax Gujranwala Vs MIS Super Asia Muhammad Din (PTCL 2017 CL 736). We would like to refer the said judgments for our guidance. 18. The legal question whether the time period provided under section 36 (which was omitted through Finance Act, 2012) and was re-enacted in form of Section 11 in the Act was mandatory or directory. In this regard we would like to refer pars 6, 7 & 11 of the judgment of the Apex Court in Super Asia case. "6. The ultimate test to determine whether a provision is mandatory or directory is that of ascertaining the legislative intent. While the use of the word 'shall' is not the sole factor which determines the mandatory or directory nature of a provision, it is certainly one of the indicators of legislative intent. Other factors include the presence of penal consequences in case of non- compliance, but perhaps the clearest indicator is the object and purpose of the statue and the provision in question. It is the duty of the Court to garner the real intent of the legislature as expressed in the law itself. Reference may be made to the cases of Syed Zia Haider Rizvi and others. V. Deputy Commissioner of Wealth Tax, Lahore and others (2011 SCMR 420), in Re. Presidential Election, 1974 (AIR 1974 SC 1682), Lachmi Narain V. Union of India (AIR 1976 SC 714) and Dinesh Chandra Pandev v. High Court of Madhya Pradesh and another [(2010) 11 SCC 500] 7. From the plain language of the first proviso, it is clear that the officer was bound to pass an order within the stipulated time period of forty-five days, and any extension of time by the Collector could not in any case exceed ninety day's. The Collector could not extend the rime according to his own choice and whim, as a matter of course, routine or right, without any limit or constraint: he could only do so by applying his mind and after recording reasons for such extension in writing. Thus, the language of the first proviso was meant to restrict the officer from passing an order under section 36(3) supra whenever he wanted. It also restricted the Collector from granting unlimited extension. The curtailing of the powers of the officer and the Collector and the negative character of the language employed in the first proviso point towards its mandatory nature. This is further supported by the fact that the first proviso was inserted into section 36(3) supra through an amendment (note:- the current section 11 of the Act, on the other hand, was
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enacted with the proviso from its very inception in 2012). Prior to such insertion, undoubtedly there was no time limit within which the officer was required to pass orders under the said section. The insertion of the first proviso reflects the clear intention of the legislature to curb this earlier latitude conferred on the officer for passing an order under the section supra. When the legislature makes an amendment in an existing law by providing a specific procedure or time frame for performing a certain act, such provision cannot be interpreted in a way which would render it redundant or nugatory. Thus, we hold that the first proviso to section 36(3) of the Act land the first proviso to the erstwhile section 11(4) and the current section 11(5) of the Act] is/was mandatory in nature. 11. Learned counsel for the appellants also slated that the Collector under the first proviso to section 36(3) of the Act was empowered to grant extensions. Learned counsel for the respondent argued that the Collector could only extend time during the subsistence of the time limit provided in the former part thereof accordingly, as per section 36(3) of the Act, once the time period of forty-five days for passing the order under the section ibid had passed, no extension could be granted. We do not find any force in this argument. Undoubtedly the Collector has the power to grant extensions which cannot exceed ninety days. as is manifest from the wording of the latter part of the first proviso. however it is not incumbent upon the Collector to extend the time within the currency of the initial time period of forty-five days: it is entirely possible to extend the time even after the expiry of the initial time period but the critical period in this regard is ninety days because at the expiry of this maximum period time cannot be further extended By way of illustration, as per the first proviso to section 360) of the Act, flan officer fails to pass an order within forty-five days (the initial time period), the Collector need not grant an extension within such forty-five days, instead he can do so after the said number of days. However, since the latter part of the first proviso only allows him to grant an extension of ninety days, thus any extension granted must not exceed the maximum limit of one hundred and thirty-five days (forty-five plus ninety) from the date of the show cause notice. 19. Similarly, the extension of time under section 74 by the FBR also came under consideration before the apex Court in Super Asia case ibid which was dilated upon in para 12 of the judgment which reads as under:-- 12. As regards the reliance placed on section 74 of the Act, it provides that where a time frame has been stipulated in the Act within which an act or thing is to be done, the Board, or the Commissioner notified by the Board, are empowered to permit such act or thing to be done within such time period as they may consider appropriate. Passing an order under section 36(3) of the Act is certainly an act or thing to be done under the Act. Therefore, the Board (which expression shall hereinafter include Commissioner notified by the Board) has the power under section 74 of the Act to permit the passing of an order under the aforesaid section within such time period as it may consider appropriate. While applying the principles of harmonious construction, we find that the proviso is restricted in its application to the section it is attached to, whereas section 74 of the Act is of general applicability and shall apply to all the provisions of…
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