Case Summary & Legal Holding

This judicial decision was delivered by the BOARD-OF-REVENUE-SINDH-APPELLATE-TRIBUNAL. The matter involves proceedings between SUNDER MEHRAN BUILDERS and COMMISSIONER (APPEALS-I), SINDH REVENUE BOARD, KARACHIHonorable Justice Alia Anwer,Nabi Bukhsh Shar, officially reported as 2026 PTD 650. The court reviewed applicable Pakistani statutes, procedural requirements, and governing case-law authorities. The full text below contains the complete facts, arguments, and legal reasoning rendered by the honorable bench.

Full Judgment Text & Judicial Ruling

2026 P T D (Trib.) 650 [Appellate Tribunal Sindh Revenue Board] Before Alia Anwer, Member Judicial Messrs SUNDER MEHRAN BUILDERS Versus COMMISSIONER (APPEALS-I), SINDH REVENUE BOARD, KARACHI and another Appeal No.AT-97 of 2023, decided on 31st October, 2023. (a) Sindh Sales Tax on Services Act (XII of 2011)--- ----Ss. 23 & 75---General Clauses Act (X of 1897), S. 27---Assessment of tax---Ex-parte proceedings---Notice to taxpayer, issuance of---Expression "served by post"---Scope---Presumption of effective service, rebutability of---Scope---Principle of audi alteram partem---Inapplicability---Section 23 of the Sindh Sales Tax on Services Act, 2011 ( the Act 2011 ) prescribes the procedure for assessment of tax and its subsection (2), while prescribing the procedure to be adopted by the Assessing officer prior to determining the tax liability, categorically shows that, prior to passing "the Original Order", the Assessing Officer must give to the taxpayer a show-cause notice ; its purpose is to put the person on notice about the allegations for which the authorities intend to proceed against him and to give an opportunity to explain his position---Main object of issuance of a show-cause notice is to intimate the concerned party about nature of allegations, contravention and penal action intended to be taken against him, therefore, it is mandatorily required to be served upon the taxpayer under S. 75 of the Act, 2011---Section 75 of the Act 2011 provides procedure for service of notice, order or requisition on a person named therein either in person, through agent, by registered post, by courier service or in the manner provided for service of a summons under the Code of Civil Procedure, 1908---However, S. 75 of the Act, 2011 is required to be read in juxtaposition with S. 27 of the General Clauses Act, 1897 ( the Act 1897 ) which provides that wherever in a Provincial or a Central Statute the expression "served by post" or any other similar expression is used, then "the service shall be deemed to be affected by properly addressing, prepaying and posting by registered post a letter containing the document"---Section 27 of the Act, 1897 provides for the raising of a presumption that unless contrary is proved, the service of addressee shall be deemed to have been affected---Though, undoubtedly, under S.27 of the Act, 1897 there is a presumption that the addressee has received the letter sent by registered post but such presumption is rebuttable and it is open to the party concerned to raise objection before the Court to deny the presumption by stating that he never received any notice---In the present case, the Appellant denied the presumption of effective service and the respondent / Department had produced proof of delivery of show-cause notice as well as "the Original Order", which were duly acknowledged by two persons including appellant---In such circumstances, the burden to prove such contention laid upon the appellant---Although the appellant denied proper service of show-cause notice and "the Original Order" but he did not bring on record anything supporting his contention, and he did not even mention the source of information through which he came to know about "the Original Order"---Therefore, it stood proved that appellant was duly served with the show-cause notice prior to passing "the Original Order"---Perusal of "the Original Order" showed that the same had been passed on the strength of the record available on appellant's portal and not merely because of his absence---As the appellant was duly served but he deliberately remained away from the proceedings, therefore, principle of audi alteram partem' was not applicable in the present case---In absence of any defense, despite valid service, the Assessing Officer had no other option but to proceed against the appellant ex-parte---Appeal stood dismissed. Mst. Samina Begum v. Muhammad Haq Nawaz Khan and 2 others 2023 MLD 103 ref. (b) Sindh Sales Tax on Services Act (XII of 2011)--- ----S. 43---Qanun-e-Shahadat (10 of 1984), Art. 129(g)--Non-filing of returns by the taxpayer---Penalty, imposition of---Mens rea, presence / absence of---Effect---Burden of proof---Scope---Court to presume existence of certain facts---Scope---There is no cavil to the proposition that mens rea is the basic ingredient to impose any of the penalties prescribed under the law, while burden to prove existence of mens rea lies upon the department and to discharge such burden, the department has to bring on record that all possible measures were taken to get the law complied with by the taxpayer but he deliberately and willfully abstained himself from complying with the subject provisions of law---Record revealed that in compliance of S. 23 of the Sindh Sales Tax on Services Act, 2011 ( the Act, 2011 ), department issued show-cause notice which was duly served upon appellant but neither he responded to show-cause notice nor did he appear before the Assistant Commissioner---In such circumstances, following the rule of presumption provided under Art. 129(g) of the Qanun-e-Shahadat Order, 1984 ( the Order, 1984 ), the department was justified to draw an inference that appellant's appearance before the Assistant Commissioner would have caused an unfavorable result, therefore, he abstained himself from responding to show-cause notice---Therefore, appellant's absence before the Assessing Officer, despite valid service of show-cause notice, showed his deliberate and willful default to comply with the provision of law, which was sufficient enough to establish existence of mens rea in non-filing of subject returns by the appellant---In the present case, admittedly, the appellant did not carry out any taxable service, therefore; he filed "NULL" returns since the date of his registration with the department---Non-filing of return did not cause any loss to government exchequer, therefore, gravity of non-compliance of legal provision was on the lower side---Nevertheless, on account of non-compliance of S.30 of the Act 2011 by the appellant, the machinery of law came into motion, which could not be overlooked---In such circumstances, the idea of token penalty cames into operation, which in fact was a step toward reformation of the appellant in particular and society in general---Appellate Tribunal Sindh Revenue Board imposed "token penalty" upon the appellant of Rs.5,000/----Appeal stood disposed of accordingly. (c) Sindh Sales Tax on Services Act (XII of 2011)--- ----Ss. 30 & 43---Constitution of Pakistan, Arts. 5 & 18---Non-filing of returns by taxpayer---Penalty, imposition / quantum of---Right to freedom of trade etc.---Obedience of law and Constitution---Word inviolable , meaning of---Doctrine of sovereignty---Scope---Article 18 of the Constitution provides right to freedom of trade, business or profession but such right is not absolute as the same is subject to law which governs such trade, business or profession, therefore, Art. 18 has to be read in juxtaposition with Art. 5 of the Constitution---In order to secure fundamental rights, every citizen has to adhere to the relative law and policies issued by the Government having binding effect under the doctrine of sovereignty---Rights and duties are two sides of the same coin and both go side by side---Article 5 of Constitution categorically envisages the obedience of law and the constitution---Word inviolable used therein means that it is never to be broken and infringed; meaning thereby it is the sole responsibility of every citizen to obey law, rather than taking it (the law) for granted---To be loyal to the State is basic duty of all citizens and they have to be obedient to the Constitution and the law, wherever they may be---Degree of penalty must be proportionate to the wrong committed---Where the wrong was trivial or committed under some unavoidable circumstances or for the first time, mercy and leniency was a rule---In the present case, admittedly, the appellant did not carry out any taxable service, therefore; he filed "NULL" returns since the date of his registration with the department---Non-filing of return did not cause any loss to government exchequer, therefore, gravity of non-compliance of legal provision was on the lower side---Nevertheless, on account of non-compliance of S.30 of the Act 2011 by the appellant, the machinery of law came into motion, which could not be overlooked---In such circumstances, the idea of token penalty come into operation, which in fact was a step towards reformation of the appellant in particular, and society in general---Appellate Tribunal Sindh Revenue Board imposed "token penalty" upon the appellant of Rs.5,000/----Appeal stood disposed of accordingly. Mst. Fatima Faryad and others v. Government of Punjab and others 2020 CLC 836; President Balochistan High Court Bar Association and others v. Federation of Pakistan and others 2012 SCMR 1784 and Muhammad Aslam v. The State and another PLD 2006 SC 465 ref. Appellant in person. Nabi Bukhsh Shar, AC (Mirpurkhas) for Respondent. Dates of hearing: 7th September and 21st September, 2023. ORDER ALIA ANWER, MEMBER JUDICIAL.---The appellant has assailed the order dated 17.05.2023 vide Order-in-Appeal (hereinafter referred to as the first Appellate Order ) No.122/2023 passed by the Commissioner (Appeals-I) in Appeal No.503/2022 whereby the penalty, amounting to Rs.330,000/- imposed in terms of S.No.2 of the Table under section 43 of the Act, 20111 by the Assistant Commissioner, Mirpurkhas Division vide Order-in-Original No.2800/2022 (hereinafter referred to as the Original Order ) dated 29.11.2022, has been reduced to the extent of 25% making the same as Rs.247,500/-. 2. Appellant submits that he got himself registered with SRB with the hope of receiving Government contract in the field of "Construction Service" but he never acquired any contract from government. Appellant contended that he was never served with the show-cause notice and "the Original Order". Appellant argued that on 18.05.2023 he came under shock, when he received the first Appellate Order dated 17.05.2023 through M&P Courier service whereby his appeal bearing No.503/2022 was disposed off with reduction of penalty to the extent of 25% making the same as Rs.247,500/-. Appellant argued that he contacted the concerned Assistant Commissioner who misguided him about the dates of hearing as well as progress of the appeal due to which the same was decided in his absence. Appellant contended that he has been condemned unheard against the principle audi alteram partem Appellant submits that he already filed returns for the subject months as "NULL". He prayed that instant appeal may be allowed and the penalty imposed upon appellant may be waived upto 100%. 3. Assistant Commissioner vehemently opposed the arguments advanced by learned counsel for appellant. He submits that prior to show-cause notice, appellant was served with notice dated 05.01.2022 vide consignment No.122001829955 which was duly served. He further contended that appellant was also served with the show-cause notice dated 30.07.2022 vide consignment No.122002065229 for his appearance and to explain his position as to why penal action under clause 2 of the table under section 43 of the Act, 2011 should not be taken against him. He submitted that, despite valid service upon appellant, he did not respond to show-cause notice and preferred to stay away from the proceedings. Assistant Commissioner contended that apart from the above having no other alternate, the then Assistant Commissioner passed "the Original Order" dated 29.11.2022 which was also communicated to the appellant via M&P Courier service vide consignment No.122002099993, duly acknowledged by Jai Kumar. Assistant Commissioner (Unit-34) submitted that appellant impugned "the Original Order" before Commissioner Appeals, who allowed reduction of penalty upto 25% vide "the first Appellate Order". In support of his arguments, he submitted proof of service of show-cause and "the Original Order" upon the appellant. Assistant Commissioner supported the impugned order and prayed for dismissal of instant appeal. 4. After hearing arguments of both the side, following are the points for determination before this Tribunal; 1. Whether appellant was duly served with the show-cause notice dated 30.07.2022 prior to passing "the Original Order"? 2. Whether appellant has been condemned unheard against the principle audi alteram partem ? 3. Whether there exists mens rea in non-filing of returns for the subject 33 tax periods? 4. Whether appellant is liable to pay penalty? If yes, to what extent? 5. What should the order be? POINT No.1: 5. Section 23 of the Act, 2011 prescribes the procedure for assessment of tax and its subsection (2) prescribes the procedure to be adopted by the Assessing Officer prior to determining the tax liability and it reads as under; 23. Assessment of Tax.--(1) . . .. (2) No order under 1[subsections (1) or (1A)] shall be made by an officer of the SRB unless a notice to show-cause is given to the person in default within 2[eight years] from the end of the tax period to which the order relates specifying the grounds on which it is intended to proceed against him and the said officer shall take into consideration the representation made by such person and provide him with an opportunity of being heard if the person so desires. (Underlining is emphasized) 6. Bare reading of the above provision categorically shows that, prior to passing "the Original Order", the Assessing Officer must give to the taxpayer a show-cause notice. Its purpose is to put the person on notice about the allegations for which the authorities intend to proceed against him and to give an opportunity to explain his position. The main object of issuance of a show-cause notice is to intimate the concerned party about nature of allegations, contravention and penal action intended to be taken against him, therefore; it is mandatorily required to be served upon the taxpayer under section 75 of the Act, 2011, which reads as under; 75. Service of orders and decisions.--(1) Subject to this Act, any notice, order or requisition required to be served on an individual for the purposes of this Act shall be treated as properly served on the individual if:- (a) personally served on the individual or, in the case of an individual or under a legal disability the agent of the individual; (b) sent by registered post or courier service to the individual's usual or last known address in Pakistan: or (c) served on the individual in the manner prescribed for service of a summons under the Code of Civil Procedure, 1908 (No. V of 1908). (2) .. 7. Section 75 of the Act, 2011 provides procedure for service of notice, order or requisition on a person named therein either in person, through agent, by registered post, by courier service or in the manner provided for service of a summons under the Code of Civil Procedure. This section is, however; required to be read in juxtaposition with section 27 of the General Clauses Act, 1897 which provides that where ever in a Provincial or a Central Statute the expression "served by post" or any other similar expression is used, then "the service shall be deemed to be affected by properly addressing, prepaying and posting by registered post a letter containing the document". This section provides for the raising of a presumption that unless contrary is proved, the service of addressee shall be deemed to have been affected. For ready reference section 27 of the General Clauses Act, 1897 is reproduced here; "27. Meaning of service by post.---Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post whether the expression "serve" or either of the expressions "give" or "send" or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post." 8. No doubt, under section 27 of the General Clauses Act, 1897 there is a Presumption that the addressee has received the letter sent by registered post but such presumption is rebuttable and it is open to the party concerned to raise objection before the Court to deny the presumption by stating that he never received any notice. 9. Appellant denied the presumption of effective service and the respondent has produced proof of delivery of show-cause notice as well as "the Original Order", which were duly acknowledged by Khem Chand (appellant) and Jai Kumar, respectively. In such circumstances, the burden to prove such contention lies upon the appellant. Although the appellant denied proper service of show-cause notice and "the Original Order" but he did not bring on record anything supporting his contention. He did not even mention the source of information through which he came to know about "the Original Order". 10. In view of the above discussion it stands proved that appellant was duly served with the show-cause notice prior to passing "the Original Order", hence; this point is answered in affirmative. POINT No.2: 11. Perusal of "the Original Order" shows that the same has been passed on the strength of the record available on appellant's portal and not merely because of his absence. The findings of the Assessing Officer were upheld by the appellate forum i.e. Commissioner Appeals with reduction of penalty upto 25%. It has been argued by the appellant that he has been condemned unheard by the Assessing Officer, against the principle audi alteram partem . 12. The concept of fair trial and due process has always been the golden principles of administration of justice and after incorporation of Article 10-A in the Constitution, it has become more important that due process must be adopted for conducting a fair trial. The principle enshrined in maxim audi alteram partem i.e. "nobody should be condemned unheard" has to be applied in all judicial and non-judicial proceedings. The Assessing Officer seems to be conscious of such a legal proposition, therefore; he ensured proper service of show-cause notice upon the appellant. The principle audi alteram partem is attracted in a case where the party was denied a right of hearing or he was not duly served prior to initiating proceedings against him. As discussed above, the appellant was duly served but he deliberately remained away from the proceedings, therefore; principle audi alteram partem is not applicable in the present case. In absence of any defense, despite valid service, the Assessing Officer had no other option but to proceed against the appellant ex-parte. In this regard I am guided with the principle laid down in the case of Mst. Samina2 wherein it has been held that; "5. Regarding the contention of the learned counsel that the petitioner was condemned unheard by the Rent Controller, it may be observed that the principle 'audi alteram partem' is attracted only in a case where the opportunity of hearing is not afforded by the Court to a party to the proceedings in spite of the fact that the party was present before the Court or was absent but was not properly served in accordance with law. The principle shall not apply in a case where the party, despite proper service of notice and opportunity granted by the Court, chooses to remain absent, or appears either personally or through counsel and then deliberately abstains itself from participating in the proceedings." 13. In view of the above discussion. I am of the considered view that appellant abstained himself deliberately from the proceedings and he was not condemned unheard, hence; this point is answered in negative. POINT No.3: 14. There is no cavil to the proposition that "mens rea" is the basic ingredient to impose any of the penalties prescribed under the law. Term "mens rea" refers to the element of deliberate negligence or willful non compliance of statutory provisions. Mens rea, being a state of mind, does not exist in any tangible form, therefore; its existence has to be established from the act(s) of the assessee. 15. It is well settled principle that burden to prove existence of mens rea lies upon the department and to discharge such burden, the department has to bring on record that all possible measures were taken to get the law complied with by the taxpayer but he deliberately and willfully abstained himself from complying with the subject provisions of law. 16. The provisions of Act, 2011 are taxpayer friendly, especially section 23, which provides the taxpayer a forum to appear before the Assessing Officer and get resolved any of the issues coming under the way of compliance of the subject provision of law. 17. Record reveals that in compliance of section 23 of the Act, 2011, department issued show-cause notice dated 30.07.2022 which was duly served upon appellant but neither he responded to show-cause notice nor did he appear before the Assistant Commissioner. In such circumstances, following the rule of presumption provided under Article 129(g) of the Order, 19843, the department was justified to draw an inference that appellant's appearance before the Assistant Commissioner would have caused an unfavorable result to him, therefore; he abstained himself from responding to show-cause notice. For ready reference Article 129(g) is reproduced as under; 129. Court may presume existence of certain facts. Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case. Illustrations The Court may presume-- (a) ; (b) ; (c) ; (d) ; (e) ; (f) ; (g) that evidence which could be and is not produced would. if produced, be unfavourable to the person who withholds it; (h) ; (i) ; 18. In view of above discussion, I am of the considered view that appellant's absence before the Assessing Officer, despite valid service of show-cause notice, shows his deliberate and willful default to comply with the provision of law, which is sufficient enough to establish existence of mens rea in non-filing of subject returns by the appellant, hence; this point is answered in affirmative. POINTS Nos.4 and 5: 19. Article 18 of the Constitution provides right to freedom of trade, business or profession but such right is not absolute as the same is subject to law which governs such trade, business or profession, therefore; this Article has to be read in juxtaposition with Article 5 of the Constitution which envisages the obedience to law as an inviolable obligation of every citizen. For ready reference Articles 18 and 5 of the Constitution are reproduced as under; 18. Freedom of trade, business or profession. Subject to such qualifications, if any, as may be prescribed by law, every citizen shall have the right to enter upon any lawful profession or occupation, and to conduct any lawful trade or business: Provided that nothing in this Article shall prevent? (a) the regulation of any trade or profession by a licensing system; or (b) the regulation of trade, commerce or industry in the interest of free competition therein; or (c) the carrying on, by the Federal Government or a Provincial Government, or by a corporation controlled by any such Government, of any trade, business, industry or service, to the exclusion, complete or partial, of other persons. 5. Loyalty to state and obedience to Constitution and law. (1) Loyalty to the State is the basic duty of every citizen. (2) Obedience to the Constitution and law is the inviolable obligation of every citizen wherever he may be and of every other person for the time being within Pakistan. 20. Appellant got himself voluntarily registered with the department i.e. Sindh Revenue Board which is governed under the provisions of Sindh Sales Tax on Services Act, 2011 and Sindh Sales Tax on Services Rules, 2011, therefore; he is liable to abide by all the provisions of said Statute. 21. Section 30 of the Act, 2011 requires every registered person to file return till such person maintains his registration and section 43 provides penalties for non-compliance of any of the provisions of the Act, 2011. 22. It is an admitted position that appellant got himself registered with the department voluntarily and did not file monthly returns for the 33 tax periods i.e. January-2018 to June-2018, August-2018 to November-2018 and September-2019 to July-2021. It is pertinent to mention that during the above mentioned tax periods, appellant filed returns for the month of July-2018, as well as for the months of December-2018 to October-2019. 23. In order to secure fundamental rights, every citizen has to adhere to the…

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