2026 PLP (Trib (PTD)

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 relevant Law and Policies issued by the Government, having binding effect under the Doctrine of Sovereignty as held in the case of Mst. Fatima Faryad4 There is no cavil to the proposition that rights and duties are two sides of the same coin and they both go side by side. Article 5 of the Constitution categorically envisages the obedience to 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 the basic duty of all citizens and they have to be obedient to the Constitution and the law, wherever they may be as held in the case of President Balochistan High Court Bar Association5.

24. In view of the above I am of the considered view that appellant is liable to pay penalty for non-ompliance of section 30 of the Act, 2011. So far as the quantum of penalty is concerned, under the doctrine of proportionality, penalty should correspond to the gravity and it must fit the wrong-done. The quantum of penalty must be determined in consideration of (a) the nature of wrong-done (b) the circumstances in which the wrong was done, (c) the gravity and degree of deliberation shown by the wrong-doer, and (d) and its impact as a whole on society.

25. The crux of the above discussion is that 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 is a rule. In this regard I am guided with the principle laid down in the case of Muhammad Aslam6, therein it was held that; "8. ...... We may point out that the purpose of sentence is prevention of crime and to discourage the others to turn to crime. It is generally agreed that leniency in the matter of sentence in serious offences is against the object and wisdom of law whereas the rationale behind the deterrent punishment is to eliminate the crime or at least to reduce and discourage the crime in the interest of peaceful atmosphere in the Society. The ultimate purpose of deterrence or the lenient view in the matter of sentence directly or indirectly is the reformation of an individual as well as the Society. The concept of lenient view in the punishment is to bring down an offender to reform himself and restrain from repeating the crime whereas the goal of deterrence in the sentence is reduction in crime in the Society due to fear of law."

26. The purpose of promulgation of the Act, 2011 is to levy tax on services provided, originated, executed or consumed Sindh. It is an admitted position carry out any taxable service, rendered, received, in the Province of that appellant did not therefore; he filed "NULL" returns since the date of his registration with the department. Non-filing of return admittedly did cause any loss to government exchequer, therefore; gravity of non-compliance of legal provision is on the lower side. Nevertheless, on account of non-compliance of section 30 of the Act, 2011 by the appellant, the machinery of law came into motion, which cannot be overlooked. In such circumstances, the idea of token penalty comes into operation, which in fact is a step forward towards reformation of the appellant in particular, and society in general.

27. In view of the above discussion, I feel appropriate to impose a "token penalty" upon the appellant. Appellant is, therefore; directed to pay a token penalty of Rs.5,000/- (five thousand rupees) to the department, within 15 (fifteen) days of receipt of this order.

28. With the above observations, instant appeal stands disposed of. The copy of this order may be provided to the learned representatives of the parties. MQ/6/TAX(TRIB) Appeal disposed of. 1 The Sindh Sales Tax on Service Act, 2011. 2 Mst. Samina Begum v. Muhammad Haq Nawaz Khan and 2 others (2023 MLD 103), 3 The Qanun-e-Shahadat Order, 1984 4 Mst. Fatima Faryad and others v. Government of Punjab and others (2020 CLC 836) 5 President Balochistan High Court Bar Association and others v. Federation of Pakistan and others (2012 SCMR 1784) 6 Muhammad Aslam v. The State and another (PLD 2006 Supreme Court 465).