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Petitioner: Messrs PESHAWAR ELECTRIC SUPPLY COMPANY, WAPDA HOUSE, PESHAWAR VS Respondent: C.I.R., R.T.O., PESHAWAR
Court Name: Appellate Tribunal Inland Revenue Judge(s): Jawaid Masood Tahir Bhatti, Muhammad Riaz Title:Messrs PESHAWAR ELECTRIC SUPPLY COMPANY, WAPDA HOUSE, PESHAWAR vs
C.I.R., R.T.O., PESHAWAR Case No.:S.T.As. Nos. 96/PB, 98/PB of 2013 and 170/PB, 159/PB, 145/PB of 2011 and 8/PB of 2012 Date of Judgment:2014-06-02 Reported As: 2015 PTD (Trib.) 1112 Result: Order accordingly Judgment ORDER Out of these five appeals, four are the cross appeals against the two separate impugned orders of the learned CIR(A) bearing Order-in-Appeal No,31 of 2013 dated 19-8-2013 arising out of the assessm ent Order No,4 of 2013 dated 13-2-2013 and Order-in-Appeal No,492 of 2010 dated 30-5- 2011 arising out of the assessm ent Order No,7 of 2010 dated 27-11-2010, two each filed by the department and the Registered Tax Person i,e, Messrs Peshawar Electricity Corporation. The fifth appeal has been filed by the department against the impugned Order-in-Appeal No,376 of 2010 dated 24-5-2011 arising out of the assessment Order No,1 of 2010 dated 29-6-2010. 2. The Revenue Department has also filed a miscellaneous application titled above requesting for vacation of stay granted by this Tribunal vide order dated 24-10-2012 in MA (Stay) No,7/PB/2012 in respect of Order-in-Appeal No,376 of 2010 dated 24-5-2011 subject matter of above titled appeal bearing No,STA No,145/PB/2011 filed by the department. The titled miscellaneous application has already become infructuous as the stay was allowed in 2012 for 90 days which has already elapsed. The miscellaneous application is therefore dismissed having become infructuous. 3. Brief facts of the Appeal No, S.T.A. No, 145/PB/2011 are that the Additional Collector (Adjudication) on the basis of audit of accounts of the Peshawar Electric Supply Company (PESCO) (the respondent in this case). Issued Show-Cause Notice bearing C.No, ST &FE/Adc/Adj/79/09/9245 dated 2-7-2009 asking to explain as to why the principal amount of Rs, 3,383,920,930 for the period May 2008 to March 2009 should not be recovered under sections 11(2) and 36 (1) along with default surcharge etc. Under section 34(1) of the Sales Tax Act, 1990. The respondent in this case the PESCO
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filed reply to the above mentioned Show-Cause Notice wherein charges levelled in the Show- Cause Notice were denied. As there were substantial mistakes in the Show-Cause Notice, therefore, a reconciliation committee was constituted for rectification of the anomalies and discrepancies in the notice pointed out by PESCO's Counsel. Consequently certain figures were corrected and tax liabilities were reduced to Rs,2.462,631,249 vide reconciliation report No C. No, ST/Audit/Pesco/09/12341 dated 15-10-2009. After the proceedings the Additional Commissioner Inland Revenue decided the case vide Assessm ent Order No 01/2010 dated 29-6-2010 and the respondent/PESCO was held to be in default of sales tax amounting to Rs,2,462,631,249 in terms of sections 11 and 36 of the Sales Tax Act, 1990 along with the default surcharge under section 34 ibid. Penalty equal to 5% of the tax involved was also imposed under section 33(5) of the Sales Tax Act, 1990. On appeal by the respondent/PESCO, the learned Commissioner Inland Revenue (Appeals) Peshawar accepted the appeal and tax liability was abolished vide Order-in-Appeal No, 376/2010 dated 24-5-2011. It was also directed that the issue relating to double adjustment amounting to Rs,30,141,383 should be decided by Commissioner Inland Revenue, RTO Peshawar on the basis of application already submitted by PESCO.- Now the RTO, Peshawar has filed the instant Appeal against the impugned Order. However the decision relating to the aforesaid issue of double adjustment has not been disputed. 4. On behalf of the respondent taxpayer at the very outset preliminary objections has been raised. It is submitted that the Additional Commissioner who passed the impugned Order-in-Original 01/2010 dated 29-6-2010 did not have jurisdiction to decide the subject case on 29-6-2010. It has been pleaded that section 30 of the Sales Tax Act as it existed before 28-10-2009, was regulated by S.R.O. 547(1)2008 dated 11-6-2008 where under sales tax authorities were appointed and jurisdiction was assigned to them. The said section 30 was substituted through Finance (Amendment) Ordinance, 2009 dated 28-10-2009 and as a result jurisdictions exercisable under Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005 were consolidated. But no Notification/SRO on the pattern of S.R.O. 547(1)/2008 dated 116-2008 was issued or published in the official gazette appointing sales tax A authorities and assigning than jurisdictions which was mandatory for carrying out any proceedings by an officer of Inland Reveune under Section 30 of the Sales Tax Act, 1990. According to the learned representative of the respondent, substituted subsection (30), on and after 28-10-2009 required a notification in the official gazette by the Board to appoint Inland Revenue Officers for different cases/class of cases. Reliance in this regard has been placed on 2012 PTD (Trib.) 1335 Messrs Naseem Plastic House, Faisalabad v. CIR, RTO, Faisalabad; 2012 PTD (Trib.) 1094 Punjab Beverages Company (Pvt.) Ltd. Faisalabad v. CIR, RTO, Faisalabad; 2012 PTD (Trib.) 1040 Commissioner (Legal Division), Inland Revenue, RTO, Faisalabad v. Messrs Zahidgee Fabrics (Pvt.) Ltd. Faisalabad. 5. The learned LA for the Department on the other hand has argued that the Additional Commissioner Inland Revenue was fully competent and had jurisdiction to decide this case. It has been pleaded that section 30 was substituted by Finance Act, 2010 assented on 30-6-2010 w,e,f, 5- 6-2010 while it was earlier substituted through Finance (Amendment) Ordinance, 2010 promulgated on 6-2-2010 and Finance (Amendment) Ordinance, 2009 promulgated on 28-10- 2009. It has been pleaded that the provisions relating to appointment by the Board by notification in the official gazette were deleted through the Finance Act, 2010 which came into operation on 5- 6-2010. It is been argued that the citation quoted by the respondent representative are per incurium and hence not applicable to the instant case because all the cited cases were decided before 5-6-2010 i,e, the date of substituiion of Section 30 of the Sales Tax Act, 1990 whereas the impugned Order-in-Original was passed on 29-6-2010.
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6. In this regard the learned counsel for the respondent/PESCO has pleaded that the Finance Act, 2010, according to Section 1 thereof, came into force on 1-7-2010 and thus amendment in Section 30 whereby determination of jurisdiction by notification in the official Gazette was deleted came into effect w,e,f, 1-7-2010. It is argued that reliance on Provisional Collection of Taxes Act, 1931 is also not relevant because these sections relate to imposition, increase, reduction of duty and taxes while the change in designation or jurisdiction of various officers is outside the scope thereof. It has been further pleaded that the Honourable Supreme Court of Pakistan in case titled Engineer lqbal Zafar Jhagra and another v. Federation of Pakistan and others 2013 SCMR 1337 = 2013 PTD 1491 has held that sections 3, 4 and 5 of the Provisional Collection of Taxes Act, 1931 are unconstitutional and thus amendment in section 30 cannot come into force on 5-6-2010 when the Finance Bill was presented in the National Assembly. 7. We have considered the submissions made on this legal issue from both the sides. We are of the view that this Tribunal has already held in cases reported as 2012 PTD (Trib.) 1335, 2012 PTD (Trib.) 1094 and 2012 PTD (Trib.) 1040 that promulgation of a notification appointing various Inland Revenue Officers for different cases in the official gazette by the Federal Board Revenue after substitution of Section 30 of the Sales Tax Act, 1990 by the Finance Amendment B Ordinance, 2009- and the Finance (Amendment) Ordinance, 2010 is mandatory. The appellant's plea that the Finance Act, 2010 came into operation on 5-6-2010 is belied by section 1 of the Finance Act, 2010 which clearly provides the coming into operation of that enactment w,e,f, 1-7-2010. 'Resultantly the impugned Order-in-Original is held to have been passed without jurisdiction in view of the cases already decided by this Tribunal. 8. The second preliminary legal objection raised by the respondent representative is in respect of period of limitation for passing the order-in-original. In this regard it has been pleaded that the adjudication/ assessm ent has not been finalised within the period stipulated in sections 11 and 36 of the Sales Tax Act in view of the following facts:-- Date of Issue of Show-Cause Notice is 20-7-2009. The period provided under the law i,e, 120 days were over on 19-11-2009 and even 30 days adjournment expired on 18-12-2009. Further more Even Collector's extension by 60 days over on 16-2-2010 but the Date of order-in-original is 29-6-2010. Date of extension by FBR as per the order is 29-4-2010 30-6-2010 and the Date of dispatch of order = 9-7-2010. While the Date of receipt of order is 15-7-2010 It is argued that the Show-Cause Notice issued on 20-7-2009 became time barred in any case on 16-2-2010 and the extension granted by the FBR on 29-4-2010 till 30-6-2010 is invalid because period of limitation already expired cannot be extended. Reliance in this regard has been placed on the decision reported as:-- 2009 PTD 762 in the case of Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax. Wherein it was held that order-in-original was not valid for having been passed after expiry of 90 days provided under S.36 of the Sales Tax Act, 1990; and that CBR had no power to grant an extension. Period of 90 days could be extended by Collector for proper reasons for another 90 days before expiry of original 9b days. In another case reported as:- 2011 PTD 2358 in the case of Commissioner of Income Tax/Wealth Tax, Legal Division Multan v. Musarrat Mumtaz Lady Dr. c/o D.H.Q. Hospital, D.G. Khan wherein it was held that once limitation starts running no subsequent event can stop of suspend it In this regard following reported decisions have also been referred:-- 2008 PTD 60.---Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. The Collector of Sales Tax, Gujranwala wherein it was held that once limitation had started to run and had come to an end the assessee had acquired a vested right of escapement of assessment by lapse of time.
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2007 PTD 202---Ghandhara Nissan Diesel v. Collector of Customs wherein it was held that once a matter become barred by time then the subsequent enhancement in the period of limitation shall not have the effect of reopening the past .And closed transaction. 1999 SCMR 1881 --- Khalid Mehmood v. Collector of Customs, Customs House, Lahore wherein it was held that if initial period of two months envisaged in S. 168 is allowed to go by without any extension having been made, a vested right may come to accrue to the affectee and Collector should be obliged to issue a notice and accord necessary hearing before granting any extension. 2012 PTD (Trib.) 1650 --- Pak Electron Ltd. v. Additional Collector wherein it was held that non timely extension of time period prior to expiry of entire stipulated period is legally considered dead and new spirit cannot be infused into it by any means or on account of any reason whatsoever. 1990 CLC 868 --- Pakistan International Airlines Corporation v. Central Board of Revenue, Islamabad wherein notice was declared void and of no legal effect, being beyond time and all orders passed subsequently in pursuance thereto also were declared without lawful authority. On the basis of the above reported decisions it has been argued that the period of limitation in a fiscal statute creating liability against a taxpayer, once expired, cannot be extended. It is contended that even this extension upto 30-6-2010 is not relevant because the impugned Order- in-Original No, 01/2010 dated 29-6-2010 has been dispatched on 9-7-2010 and was received by the respondent on 15-7-2010. 9. On the other side the learned LA for the appellant Department has argued that the respondent secured adjournments in this case on different dates whereafter a reconciliation committee was formed. The 60 days extension under section 36(3) of the Sales Tax Act, 1990 was secured on 15-10- 2009. It is pleaded that Finance Act, 2009 dated 28-10-2009 created a new hierarchy of Inland Revenue Officers while section 45 of the Sales Tax Act, 1990 providing powers of adjudicating officers was omitted and Section 25 was also amended. It has been pleaded that there was complete uncertainty regarding the pending adjudication cases after omission of section 45 and amendment in section 25 while the matter was finally clarified by FBR vide orders dated 10-2-2010. It has been asserted that after re-organization of the Department, Federal Board of Revenue was requested to extend the time limit and the orders were issued by the FBR on 29-4-2010 extending the period to finalize adjudication. It is argued that under section 74 the FBR can extend any time limit specified under any provision of the Sales Tax Act, 1990 or the rules made thereunder. Reliance has been placed on the decision reported as 2008 PTD 2025 whereby it has been held that extension in the period of limitation period can be granted even after the original 90 days at any time before 180 days of the Show-Cause Notice. It has been stressed that the Honourable Supreme Court vide its order reported in PLD 2006 SC 209 has held that:-- "No order can be scraped or annulled or set aside, only on the ground that the same has been passed with unreasonable delay. There is no such concept attached to the judicial and quasi judicial proceedings, unless provided in the statute.". It has been pointed out that the impugned Order-in-Original No, 01/2010 was passed on 29-6-2009 but the delay in the postal delivery of this order is beyond the human control of the adjudicating authority while the date of passing the order is the crucial date as section 56 clearly distinguishes - between making an order and serving an order. Reliance has been placed on the decisions reported as 2010 PTD 660 and 2007 PTD (Trib.) 803 whereunder date of framing the Assessment under section 64 of the Income Tax Ordinance, 1979 has been held to be the crucial date. It has also been argued that C.G.O. No,12 of 2002 has no relevancy and applicability on the instant case. The learned LA for the Department has argued that the Sales Tax Act, 1990 does not provide any consequence for non-compliance or failure to comply with the provisions of section 36(3) thereof. It is submitted that there are numerous statutes which provide a time frame for adjudication or other matters without providing any consequences for failure to comply with the same. And all
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such provisions are treated to be directory and not mandatory. According to the learned L.A. For the Department where consequential provision of failure to comply with the direction of time limit is not stated in the statute, said phrase would be treated as directory and not mandatory. Further reliance in this regard has been placed on the following decisions:-- (i) 2010 PTD 21, (ii) 2009 PLC 258, (iii) PLD 2008 Lah. 200, (iv) PLD 2007 Pesh. 103, (v) 2007 CLC 315, (vi) 2007 PTD 127, (vii) 2007 PTD 840 and (viii) 2005 CLD 713. 10. The above points raised by the Department have been rebutted by the learned Advocate of the respondent PESCO and it has been emphasised that Federal Board of Revenue had no authority to grant extension after the expiry of the limitation period as the subject case has become a closed and past transaction. It is pleaded that judgments quoted by the learned L.A of the Department are inapplicable to the facts of this case. Regarding the decisions of the Honourable Supreme Court reported as:-- 2006 PTD 769 = PLD 2006 SC 209 According to learned Advocate of the respondent the contention is negated in very clear words by the first two quoted sentences of this judgment as reproduced below No order can be scraped or annulled or set aside, only on the ground that the same has been passed with unreasonable, delay. There is no such concept attached to the judicial and quasi judicial proceedings, UNLESS PROVIDED IN THE STATUTE. (Emphasis Supplied) It is submitted that in that case, Show-Cause Notice was issued on 10-7-1989 and the case was decided on 26-9-1992 under the Customs Act, 1969. The Honourable High Court vide reported order (2002 YLR 792) quashed the proceedings on the ground that it was not passed within a reasonable time. However no time limit was prescribed to complete the adjudication proceeding in 1992 i,e, at the time of issuance of adjudication order, in the Customs Act, 1969. This judgment itself excludes its operation to cases where time period is mentioned in the statute itself and is thus not applicable to our case as time limit has been provided in sections 11 and 36 ibid. Limitation period to adjudicate the cases has now also been provided in section 179 ibid w,e,f, 1-7-2000 vide Finance Ordinance, 2000. Regarding decisions reported as 2010 PTD 660 and 2007 PTD (Trib.) 803 Learned Advocate contended that these two cases relate to interpretation of the word 'Assessment' as used in section 64 of the Income Tax Ordinance, 1979. An entry in the relevant officially prescribed Register (Demand and Collection Register) has been made within time. These judgments are not applicable to facts of this case where section 11 and section 36 (as then applicable) of the Sales Tax Act, 1990 clearly require that order shall be made within the stipulated period and section 56 read with section 70 clearly links the making of that order with the receipt of the order by the concerned party. In addition there is no similar prescribed register in the sales tax cases. Regarding decision quoted as 1966 PTD 40 it is submitted that it is an incorrect citation. Regarding decision reported as 2008 PTD 2025 it is submitted that this judgment provides that limitation period under section 36(3) is mandatory while the. Department is perhaps relying on the observation that extension in the period of limitation can be passed even after the original 90 days at any time before 180 days of the show-cause notice. This judgment is inapplicable to the facts of this case because Show-Cause Notice in this case was issued on 20-7-2009 and order of extension was issued by the Board on 29-4-2010 i,e, after 279 days while all possible extensions included, period of limitation to decide the case has expired on 16-2-201.0. We have already quoted the judgments whereunder period once expired cannot be extended. Regarding decision reported as 2010 PTD 21 it is submitted that this case relates to FTO order which provides that belated claim of refund was not barred by time. Since time limit for issuance of refund was directory and not mandatory, this order is not applicable to the facts of this case as a liability is being created against the respondent in this case. It is contended that there are dozen of
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orders wherein this Tribunal and the Honourable Superior Courts have held that period provided in section 36 ibid is mandatory as it relates to creation of liability against a citizen/taxpayer. Regarding reported case 2009 PLC 258, PLD 2008 Lah. 200 and 2007 CLC 315. It is submitted that these cases relate to the Constitution of Pakistan,1973 and different enactments like Representation of the People Act,1976, Civil Procedure Code, 1908, Limitation Act, 1908, Sindh Buildings Control Ordinance,1979 e.g. 2009 PLC 58 refers to disciplinary proceedings - Federal Service Tribunal directed the Zarai Taraqiati Bank to hold fresh inquiry within 4 months - It was held by the High Court that period of .4 months was not mandatory - This judgment is not applicable to the facts of this case as we are not discussing any disciplinary proceedings in this case and dozens of judgments of this Honorable Tribunal and Honourable Superior Courts have been relied upon wherein the period of limitation under section 36 has been held to be mandatory. Regarding reported case 2007 PTD (Trib) 127 and 2007 PTD (Trib) 840 it is submitted that these judgments have been passed on 26-7-2006 and 28-11-2005 respectively by a single technical member of the now defunct Customs, Excise and Sales Tax Appellate Tribunal. These single member judgments does not hold the field NOW as this Tribunal and the Honourable Superior Courts have repeatedly held that period provided by. Section 36 is mandatory. It is submitted that judgments given by higher fora always supersede the orders of the subordinate hierarchy. Regarding reported case 2005 CLD 713 it is submitted that this judgment provides that time limit of 3 years prescribed in section 319 of the Companies Ordinance, 1984 is directory This judgment is not applicable to this case because specific always excludes the general provisions. In this case, this Tribunal and the Honourable Superior Courts have all held that period provided in Section 36 is mandatory. 11. We have considered the above submissions from both the sides. Two basic points requiring decision on this issue to our view are as follows:-- (i) Whether the period of limitation entailing creation of tax liability provided in sections 11 and 36 of the Sales Tax Act is mandatory or directory. (ii) Whether such period of limitation can be extended after expiry thereof. This Tribunal and the Honourable High Courts in scores of judgments have decided that period of limitation in section 11 and section 36 is mandatory. Reference may be made in this regard to 2008 PTR 34 (S.C. Pak.), 2009 PTD 1978 (H.C.), STR No,21/2011 (H.C.), 2009 PTD 2004 (H.C), 2013 PTD (Trib.) 4, 2013 PTD (Trib.) 379, 2013 PTD (Trib.) 639, 2013 PTD (Trib.) 834. It is noteworthy that even the Federal Board of Revenue vide C.No,1 (23) C (legal), 107 dated 6-2-2007 has circulated the opinion of Law Division in this regard whereunder the above mentioned period of limitation has been held to be mandatory. The underlined principle settled by the Honourable High Courts is that where issue involved entails creation ,of liability against a taxpayer, the period of limitation is mandatory. As regards extension in the period of limitation under section 74 of the Sales Tax Act, 1990, the contention made by the respondent appears to be more plausible and in consonance with the principle of law laid down in various judgments of this Tribunal, the Honourable High Court and Supreme Court of Pakistan relied upon by the learned Advocate for the respondent PESCO. It is thus evident that extension given by the FBR on 4-2-2010 has been granted after the expiry of the prescribed limitation period and, is thus of no avail and the impugned Order No, 1/2010 dated 20-6-2010 is held to be void as having been passed after the prescribed period of limitation. 12. Now coming to the merits of the case, the main contention of the E Department is that the respondent PESCO has not used unbilled units of electricity in the taxable supplies and hence it is not entitled to input tax adjustment relating to unbilled units under section 8(1)(a) of the Sales Tax Act which provides that a registered person shall not be entitled to claim or deduct input tax paid on the goods used or to be used for any purpose other than for taxable supplies made or to be made by him. Reliance has been placed on decision reported as PTCL 2002 CL 23020(sic)CESTATE,
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Karachi. It has been pleaded that the learned CIR (Appeals) relied on the FTO's decision which has been set aside by the President of Pakistan. According to the Department, no provision exists in Sales Tax Act, 1990 which allows Transmission and Distribution losses (T & D losses) to the electric distribution companies. It has been further submitted that reliance on FBR's Letter dated 7-12-2004 is not tenable because this letter has been overruled by Rule 37(A) of the S.R.O. 1236(1)/2005 which provides:- "37-A. Discharge of tax liability by KESC.---(I) In case of KESC, sales tax shall be paid on the basis of supply of electric power billed to the consumers after adjustment of input tax in terms of sections 7 and 8 of the Act and as provided under sub-rule (3). (2) The KESC shall file a monthly return under section 26 of the Act and Chapter II of the Sales Tax Rules, 2005, and deposit the amount of sales tax payable for the tax period by the due date. (3) Input tax adjustment shall be admissible to the KESC in proportion to the quantum of electric power billed during the tax period." It has been pleaded that this S.R.O. Read with S.R.O. 480(1)/2007 dated 9-6-2007 clearly leads to the inference that 'T & D losses in violation of Section 8 of the Sales Tax Act, 1990 are not admissiole. It was further…
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