2010 PLP (Trib (PTD)

HUMAYUN KHAN SIKANDARI, MEMBER (TECHNICAL).--This appeal has been filed by Messrs Sulaimani Marble Tiles Industries, Peshawar (hereinafter called as the appellant) against the consolidated Order-in-Appeal No.230 of 2003, dated 21-7-2003, passed by the Collector of Customs, Sales Tax and Federal Excise (Appeals), Peshawar.

2. Precisely, the stated facts of the case as recapitulated from the available case record are that during the course of audit of the appellant, it was pointed out that the unit had violated the provisions of Sales Tax Act, 1990 in the following ways: (i) The party was a registered person and liable to pay Sales Tax @ 15% under section 3 of the Sales Tax Act, 1990 but actually it is paying Sales Tax @ 2% under Section 3-A of the Sales Tax Act, 1990. Thus, they had short paid the tax liability to the tune of Rs.131,961, which also attracted the additional lax of Rs.52.713 (upto 15-3-2001); (ii) Value of supplies had been suppressed to a great level which even did not cover The company's expenses. In order to get a reasonable value of supply the audit team had calculated it on the Cost Plus Approach, which showed that the party was liable to pay Rs.138,179 as Sales Tax along with additional tax of Rs.49763 (calculated upto 15-3-2001).

3. Hence, the appellant was alleged to have violated the provisions of sections 3, 6, 26 and 36, punishable under sections 33 and 34 of the Sales Tax Act, 1990 and he was liable to pay Sales Tax of Rs.270,151 along with additional tax of Rs.102,476 (upto 15-3-2001) for which a contravention case was framed against him. Accordingly, a show-cause notice was issued to the appellant and after hearing the parties, the Deputy Collector of Customs Central Excise and Sales Tax (Adjudication), Peshawar vide his Order-in-Original No.96 of 2002, dated 21-9-2002, ordered as under: "(6) I have gone through the case record and considered the written as well as oral submissions of both the parties. It has been observed that the unit was paying Sales Tax @ 2% instead of the standard rate of 15% without any authority or permission by the competent forum. It has thus, been confirmed that the unit was subject to 15% Sales Tax but paid Sales Tax @ 2% at its own will. As regards the suppression of value of supplies, the fact is corroborated from the declaration which the unit submitted to the National Survey Team. In the said declaration, the unit has shown its production as 1.3 million. Thus, the charges of non-payment of Sales Tax at the standard rate and the suppression of value of supplies stand established. The unit is accordingly directed to deposit the principal amount of sales tax along with additional tax under section 34 of the Sales Tax Act, 1990 penalty @ 5% is also imposed under section 33(2)(c) of the Sales Tax Act, 1990."

4. Being aggrieved of the impugned order-in-original, the appellant filed an appeal before the learned Collector of Customs, Sales Tax and Federal Excise (Appeals), Peshawar, who vide his Order-in-Appeal No.230 of 2003, dated 21-7-2003, ordered as under: "(10) The perusal of the record revealed that the appellant has a very weak case. Neither they are interested in pursuing the appeal as they did not appear on so many dates fixed for hearing by the undersigned and my predecessor. Keeping the legal and factual aspects and record available on file in view, I am of the firmed opinion that the case of short payment as aforesaid, is well founded. Appeal is, therefore, dismissed."

5. Being further aggrieved of the impugned order-in-appeal, the appellant has filed the instant appeal to this Tribunal, inter alia, on the following grounds:-- (a) that the impugned ex parte order-in-appeal is erred both in law and facts, hence, not sustainable in the eyes of law; (b) that the impugned ex parte order is bad in law for not only being vague and non-conclusive but is also based on presumption and surmises rather supported by any cogent evidence; ON TIME BARRED (c) that the impugned ex parte order-in appeal is not sustainable in the eyes of law as the appellant has been condemned for not attending the hearing while in the same order-in-appeal, rejoinder of appellant has been reproduced which not only prove that the impugned order-in-appeal contains material contradiction but also prove that the impugned order has been passed on the back the appellant; (d) that the impugned ex parte order-in-appeal has been passed in violation of principle of natural justice audi alteram partem, as the appellant has been condemned unheard therefore, impugned ex parte order-in-appeal is liable to be set aside on mere this gross violation of principle of natural justice; ON MERIT: (e) that perusal of the case record shows that, in terms of proviso to subsection (3) of Section 36 of the Sales Tax Act, 1990, show-cause notice dated 27-6-2001 should have been decided on 11-8-2002, whereas the instant case show-cause notice has been decided on 18-10-2002 i.e. adjudication order has been passed by more than 478 days beyond the stipulated period of 45 days hence, rendered the impugned order as coram non justice; (f) that the show-cause notice per se is highly misconceived, hence, liable to be vacated, however it is worth to point out that issue of late filing is denied without prejudice as time bar; (g) that the reporting Collectorate has failed to appreciate the fact that under section 3A(2) ibid, the taxpayer obligation was only to the extent of application in proper form which the appellant did and the delay in issuance of the Turn Over Registration Certificate by no stretch of imagination can be attributed to the appellant, therefore, under the circumstances for the laxity on the part of the respondent Collectorate, the appellant cannot be held responsible; (h) that the appellant acted in accordance with section 21(2) and on abolishing fixed tax regime being qualified duly applied in accordance with provision of section 21(2)(b), however, it was the respondent Collectorate, which was guilty for non-action for good two and half years or so, thus, show-cause notice per se is void ab initio, hence, not sustainable; (i) that the appellant is manufacturer of Marble Tiles. The appellant was paying fixed sales tax till 30-6-1999 on Marble Tiles etc. The fixed sales tax procedure was done away w.e.f. 1-7-1999. Accordingly, the appellant applied for registration under turn over scheme. The appellant when contacted the Sales Tax Office, Peshawar was informed that they should record remarks "Applied for" on the monthly/quarterly returns when deposited in the National Bank of Pakistan; (j) that the appellant accordingly submitted the returns under Turn Over Tax Scheme with the above advised remarks of Sales Tax Office. The registration for turn over tax was not issued upto 29-3-2002. The Sales Tax Office has never objected about the turnover returns nor respondents were advised to stop the submission of said returns under the turn over tax regime; (k) that in spite of issuing of reminder, the appellant has not been communicated the sales tax registration number under Turn Over Tax, just to victimize the management. The turnover sales even now is less than Rupees 2.5 Million thus, respondents have been entitled to avail the concession of turnover tax instead of standard rate of tax; (l) that all the units in entire N.-W.F.P have submitted their returns at the rate of 2% of the Sales Tax under turnover tax procedure and the local audit teams have regularly conducted the audit but no objection was raised regarding payment of sales tax through turnover tax setup; (m) that the case circumstances, the conduct of the Collectorate attract the principle of Estoppel as subsequent issuance of Turn Over Tax Registration on the part of the respondent Collectorate is a declaration to the effect that, respondent during the subject period had been entitled under the Turn Over Tax Scheme; (n) that without prejudice, at the most, it is a case of procedural lapse, on the basis of such procedural lapse, duty and taxes cannot be demanded, except penalty or fine prescribed for violation of the rules if provided, such procedural lapses have been condoned by the C.B.R. and the honorable Appellate Tribunal; (o) that besides, sales tax is an indirect tax, its final incidence of burden should be born by the end consumer, therefore, after finding the respondent having qualified for turnover tax and paid it duly and for mere formality, the demand is not sustainable for being ultra vires and at this stage, the respondent cannot shift the burden to the end consumer; (p) that the impugned order is against the principle of "substantial compliance" as in' Pakistan Superior Court while insisting on compliance with the statutory rules in accordance with their provision as also the compliance of parent law; have also by and large has accepted the rule of "substantial compliance" in view to see that they are not applied and operated as a "stumbling block" instead of "stepping stones". They should also be not used simply to trap people by technicalities of these Rules instead of advancing the purpose for which they are formed; (q) that the show-cause notice is mala fide, ultra vires and based on misinterpretation of law, hence liable to be set aside; (r) that the additional tax and surcharge under section 34 of the Sales Tax Act, 1990 are not an intractable liability of taxpayer in as much it all depends upon the attitude of the taxpayer in suffering the default, which if not deliberate, intentional, or contumacious would not qualify from being visited the same; (s) that phraseology of the section 34 still left much discretion to the adjudication officer to differentiate between the cases of the wilful default and default occurred owing to error or inadvertence; PENALTIES/ADDITIONAL TAX:

(t) that without prejudice, a case of legitimate error could not be equated with a wilful evasion specially when there is no motive for evasion involved, thus, under the circumstances of the case, the appellant's company is not liable to any penal provision of Chapter VII of the Sales Tax Act, 1990; (u) that without prejudice of the other submissions in show-cause notice, there is no mens rea attributed to the respondent, hence, no punitive provision of the Sales Tax Act, 1990 is attracted to the appellant cause; (v) that additional tax and surcharge under section 34 of the Sales Tax Act, 1990 are not an intractable liability of a tax payer in as much it all depend upon the attitude of the taxpayers in suffering the default which if not deliberate, intentional, or contumacious would qualify for being visited the same; and (w) that the impugned order/show-cause notice are based on misconception of law and suffering from incurable legal infirmities, thus, liable to be vacated.

6. On the date of hearing fixed for 13-4-2009, the learned counsel for the appellant submitted an application before this forum for interim relief caused by recovery proceedings initiated by the respondent vide recovery notice dated 18-3-2009 and consequent embargo imposed since 11-5-2009 under section 48 of the Sales Tax Act, 1990. He contended that the appellant had an excellent prime facie case in his favour and there was genuine hope of its success. Moreso, the balance of convenience was also in his favour and if the interim relief sought was not granted to the appellant, he would suffer irreparable financial losses and due to the extenuating circumstances, such losses would go against his production capability. On the other hand, the Departmental Representative controverted the arguments advanced by the learned counsel for the appellants and strongly opposed grant of interim relief on the sole ground that the instant appeal was time barred by more than five years.

7. The learned counsel for the appellant also contended that on contrary, the impugned order-in-original is time barred under section 11 of the Sales Tax Act, 1990. He asserted that the annual, turnover of the appellants was below the limit i.e., 2.5 million and his case was fully qualified under section 3-A of the Sales Tax Act, 1990, upon which turnover tax @ 2% is applicable. In view of the foregoing discussion, I granted interim relief to the appellant by granting stay from recovery proceeding till the hearing of the main appeal fixed for 23-6-2009 subject to deposit of 20% of the principal amount of the tax liability involved in this case. The same option was to be exercised within 15 days, failing which the stay granted would stand discontinued. In spite of granting interim relief, the appellant did not deposit 20% of the principal amount of the tax liability involved. It was however, observed that the issue of time-bar involved in the instant case needed further inquiry and as such, the same would be dilated upon at the time of hearing of the main appeal.

8. On the last hearing fixed for 28-10-2009, the learned counsel for the appellant appeared and almost reiterated the same arguments as advanced in the memo. of appeal. On the other hand, the Departmental Representative also reiterated the same arguments as advanced in the parawise comments to the memo. of appeal. I have keenly heard the counsel for the appellant and the Departmental Representative for the respondent and have perused carefully the available case record. Now, I would like to dilate upon the issue of time limitation prescribed for filing an appeal under section 46 of the Sales Tax Act, 1990 as the instant appeal has been filed after 5 years, 9 months and 23 days before this forum on the ground that the appellant did not receive the copy of order-in-appeal passed by the learned Collector (Appeals). The learned counsel for appellant filed this appeal on 21-7-2009 against Order-in-Appeal No.230 of 2003, dated 21-7-2003 on the ground that after placing embargo on their manufacturing premises, they approached the Collector (Appeals) office on 14-5-2009 and obtained a copy of the said impugned order. He further contended that limitation according to Section 45B read with section 56 of the Sales Tax Act, 1990, started from 14-5-2009 and this appeal may be treated within time. On the contrary, the D.R. asserted that in order to resolve this controversy, it would be appropriate for this forum to examine the conduct of the appellant right from the original adjudication proceedings. According to him, the appellant neither appeared before the original adjudicating authority nor before the learned Collector (Appeals) despite the fact that duly registered notices were served at their registered address. Furthermore, the order-in-appeal was also sent through a registered post at their registered address. This clearly reflects the lethargic attitude of the appellant that he did not pay any heed to the adjudication and appellate proceedings and was alerted when embargo was placed on their manufacturing premises. He agitated that the appellant's case is badly barred by time and does not call for any interference by this forum and the impugned order passed by the learned Collector (Appeals) may be upheld and the appeal in hand may be dismissed.

9. I notice that the limitation for preferring appeal against any order or decision of Collector (Appeals) under the Act is 60 days from the date of receipt of such order or decision. The day on which the order passed and the period upto issue and receipt of the order are to be excluded in computing the period of limitation of 60 days. The Appellate Tribunal has been empowered to condone the delay in filing the appeal if it is satisfied that the appellant had "sufficient, cause" for not filing the appeal within time. The expression "sufficient cause" ought to receive a liberal construction so as to advance substantial justice by disposing matters on merits. Substantial justice is a material consideration when construing sufficient cause, therefore, the nature of the case and consequences of refusing to condone delay necessarily have to be taken into account. Factors such as the monetary stakes involved and the importance of the issue raised would be relevant for this purpose. Postal delay of unusual type resulting in late filing of appeal also constitutes sufficient cause for condoning the delay.

10. It is by now settled law that delay of each day is to be explained for condonation. Reliance in this regard is placed on: (i) Federation of Pakistan v. Jamaluddin, reported as 1996 SCMR 727; (ii) Income Tax Officer v. Sheikh Miraan Bakhsh and 25 others, reported as 1986 SCMR 1255; and (iii) MEO and another v. Syed Qamoos Shah and 20 others, reported as PLD 2004 Peshawar 40.

11. However, by also placing reliance on the case law cited in the judgment given by Abdul Majeed Tiwana, Chairman, in Customs Appeal No.532/LB of 1999, 2002 Law Notes 207, wherein it has been held that delay in filing the appeal would stand condoned, where application for condonation filed, but not adverted to by the Tribunal. The provisions of subsection (5) of section 194-A of the Customs Act provide, that the Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in subsection (3) or subsection (4) of section 194-A ibid, if it is satisfied that there was sufficient cause for not presenting it within that period. Where the appeal is time-barred and the appellants had made an application for its condonation, but it was not adverted to by the learned Bench of the Tribunal and the appeal was admitted to regular hearing the delay stood automatically condoned.

12. Likewise, the provisions of subsection (2) of section 46 of the Sales Tax Act provides that the Appellate Tribunal may admit an appeal preferred after the period of limitation specified in subsection (1) of section 46 ibid, if it is satisfied that there was sufficient cause for not presenting it within the specified period. I notice that the precedent of one Bench is binding on the other Bench of the Tribunal unless it is set a naught by decision of the full Bench of the Tribunal. I place reliance in this behalf on the case law cited in the case as reported it in 2005 PTD

501. Since the above judgment is by the Chairman of the Tribunal, therefore, I am also in respectful agreement with the principle laid down therein, however, the instant appeal was filed along with application for condonation of delay and the appeal was admitted by this Tribunal to regular hearing on the ground that the issue of time-bar needed further inquiry and as such, the same would be dilated upon while deciding the main appeal in the light of the factual and legal issues involved therein. Since the appellant has raised some crucial, factual and legal issues, which need to be properly determined, therefore, I am inclined to condone the time limitation so as to arrive at the just and fair decision of the case.

13. Since the case has been decided ex parte in violation of the principle of audi alteram partem, I, therefore, set aside the impugned orders by the lower fora and remand the case back to the original adjudicating authority for decision afresh by taking into consideration the Issues raised by the appellant, as reproduced in para. 5 above and by providing ample opportunity of hearing to the rival parties and by also deducing the material evidence if any placed before him and then pass a speaking and judicious order in this behalf. The instant appeal is, thus, accordingly disposed of in the aforesaid manner.

14. This judgment consists of eight (08) pages and each page bears my official seal and signature.

15. Announced. 16 .Attested copy of this judgment be dispatched to the concerned parties at the earliest. H.B.T./137/Tax(Trib.) Case remanded.