2011 PLP 1658 (PTD)

9. According to AR, maladministration was involved on the ground that (i) the complainant had no intimation of 60-day extension in time limit by the Collector; (ii) the O-in-O was back-dated; (iii) the O-in-O was not dispatched within the mandatory time limit prescribed under section 36(3); (iv) the extension in time limit by F.B.R. under section 74 of the Act was unlawful as it was granted without justification after expiry of the period of 60 days extended by the Collector and that the complainant was neither associated with nor intimated about the extensions; (v) the O-in-O was issued by the Additional Commissioner who was not then competent to issue it as the designation 'Additional Commissioner' did not exist in Sales Tax law at that time, and (vi) the O-in-O was highly discriminatory as other public sector distribution companies were being treated differently by the F.B.R.

10. As regards extension of 60 days granted by the Collector under section 36(3) of the Act, the adjudicating officer had to obtain necessary extension of 60 days from the competent authority in order to avoid time bar. As the AR participated in the adjudication proceedings even after the expiry of the extended period of 60 days without raising any objection with regard to the cause or factum of extension by the Collector, his objection at this belated stage in this regard is not maintainable. If the AR required formal intimation, he should have so asked and the onus would have then passed to the adjudicating officer.

11. The AR also contended that since the O-in-O was dispatched by the Department on 9-7-2010 and received by the complainant on 15-7-2010 it showed that it was not finalized on 29-6-2010, but was backdated. The DR, however, submitted that the Order was passed on 29-6-2010, and produced official receipt Nos.506 and 505 showing dispatch of the mail to the complainant and Member Legal, F.B.R., on 9-7-2010. According to DR, the delay in dispatch was on account of countrywide strike by the staff of the Department. As the plea of countrywide staff strike was not disputed by the AR the allegation made by the AR that the O-in-O was back-dated remains unsubstantiated.

12. The DR also placed reliance on the following observation of the Hon'ble Supreme Court of Pakistan in Civil Appeal No.2036 of 2004:-- "no order can be scrapped 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."

13. It is also the AR's contention that the extension granted by the F.B.R. under Section 74 of the Act was unlawful as it was granted after the expiry of the extended time limit by 60 days which expired in 2009 while the extension granted by the F.B.R. was communicated in April, 2010. The AR has placed reliance on a number of judgments of superior courts, the Hon'ble FTO and the Tribunals, and the General Clauses Act. He particularly cited the Lahore High Court judgment reported as 2008 PTD 60:-- "Once limitation has started to run and had come to an end, the assessee had acquired a vested right of escapement by lapse of time."

14. The DR however, placed reliance on the following judgment of Islamabad High Court in Tax Reference 5 of 2008:-- "We have already held that the order of extension can be passed even after the expiry of original ninety days."

15. Both parties were asked to provide evidence in support of their respective positions by any judgment of the Hon'ble Supreme Court of Pakistan. However, they could not do so, stating that the issue was still being contested in the apex court.

16. Prima facie, it seems clear that the F.B.R. extended the time limit vide its letter referred in para. 4 supra based on cogent reasons, and the adjudicating officer decided the case in pursuance of this extension. No maladministration can therefore be attributed to the adjudication officer on this count.

17. As regards the AR's contention about non-existence of the designation of Additional Commissioner in the Sales Tax Department at the time the O-in-O was issued, the DR explained that the F.B.R. had notified the designation of Additional Collector as Additional Commissioner vide Order No.1(6)IR-Judicia1/2009 dated 11-11-2009. The Government also validated this designation through the Finance Act 2010. No maladministration can therefore be attributed to the Chief Commissioner or the Additional Commissioner on this count also.

18. Finally, the AR alleged discrimination on the ground that normal line losses of other companies operating in the country were not being held inadmissible for input adjustment as had been done in their case. The DR however stated that they had simultaneously audited TESCO which was another power distribution company under the jurisdiction of RTO Peshawar. Similar irregularities were discovered in the input tax adjustment of TESCO and had been likewise adjudicated vide O-in-O No.1/2011 dated 29-1-2011. Besides, similar companies operating under jurisdictions of other RTOs in the country were not the responsibility of RTO Peshawar. According to DR, no maladministration could therefore be attributed to the Chief Commissioner or the Additional Commissioner on account of any perceived discrimination.

19. The issue of discrimination alleged by the AR was critical as, prima facie, nowhere in the country, except in the jurisdiction of RTO Peshawar, input adjustment due to line losses/distribution losses as ascertained by NEPRA for individual distribution companies was being disallowed. The position was confirmed by LTU Karachi which deals with KESC by providing a copy of F.B.R. instructions on the subject vide F.B.R. (then C.B.R.) letter No.1(22)STAS/2004 dated 7-12-2004 relevant part of which reads as follows:-- "Subject: REFUND/ADJUSTMENT OF SALES TAX BY MESSRS KESC AGAINST ELECTRICITY NOT BILLED BECAUSE OF THEFT (2) The issue has been examined thoroughly in consultation with Sales Tax Wing. It is observed that the case against KESC is not based on sustainable grounds for the reason that the department has been allowing input tax adjustment against transmission and distribution losses (T&D) to KESC as well as WAPDA. The question remains as to whether the electricity losses due to theft/pilferage be treated as T&D losses or otherwise. Had KESC not declared losses on account of theft/pilferage, the same would have been treated as T&D losses and input tax adjustment against the same would (sic). (3) Secondly, the cost of electricity billed by KESC against which output tax is being paid also includes the line losses, hence, if there were no line losses, the cost of electricity chargeable output/sales tax would have been lower than the one against which is collected. Therefore, practically no loss to government exchequer would incur in case the proposed input tax adjustment is allowed against the electricity loss due to theft/pilferage. (4) It is, therefore, advised that the case of Messrs Karachi Electric Supply Corporation (KESC) may be decided accordingly under intimation to the Board."

20. LTU Karachi has also confirmed that KESC was being allowed input adjustment on this account. Besides, normal wastages in other sectors are also allowed as a matter of routine for purpose of Sales Tax. It therefore transpires that the methodology adopted by RTO Peshawar for calculating inadmissible input adjustment cannot be maintained, being arbitrary and discriminatory.

21. The PATA situation has also to be factored in due to the Court Judgment that Sales Tax was not payable in the PATA area. Similarly, other elements such as non-payment due to extreme law and order situation in the service area of PESCO also need to be examined for a policy decision by the F.B.R. Findings:--

22. Disallowing line losses/distribution losses to the extent of 33.20% as determined by NEPRA being manifestly discriminatory and unlawful is tantamount to maladministration as defined under Section 2(3) of the Ordinance. Recommendations:--

23. F.B.R. to- (i) reopen the impugned O-in-O No.01 of 2010 dated 29-6-2010 in exercise of its powers under section 45A of the Sales Tax Act, 1990 and decide the matter afresh, as per law and practice; (ii) take effective measures to ensure standard treatment of such mundane issues across Pakistan; and (iii) report compliance within 30 days. H.B.T./129/FTO Order accordingly.