2000 PLP 1798 (PTD)

Explanation.

For the purpose of this section, the expression "relevant date" means-- (a) the time of payment of tax or charge as provided, under section 6;and (b) in a case where tax or charge has been erroneously refunded, the date of its refund.

48. Recovery of arrears of tax.

(1) Where any amount of tax levied, penalty imposed or demand raised under any bond or other instrument executed. under this Act is due from any person, the Officer of Sales Tax may:

(a) deduct the amount from any money owing to person from whom such amount is recoverable and which may be at the disposal or in the control of such Officer or any Officer of Income Tax Customs or Central Excise Department;. (b) require by a notice in writing -any person who holds or may subsequently hold any money for or on account of the person from whom tax may be recoverable to pay to such Officer the amount specified in the notice; (c) stop removal of any goods from the business premises of such person till such time the amount of tax is paid or recovered in full; (d) seal the business premises till such time, the amount of tax is paid or recovered in full' (e) attach and sell or without attachment any movable or immovable property of the registered person from whom tax is due; (f) may recover such amount by attachment and sale of any movable and immovable property of the guarantor, person, company, bank or financial institution, where a guarantor or any other person, company,, bank or financial institution fails to make payment under such guarantee, bond or instrument. (2) For the purpose of recovery of tax, penalty or any other demand raised under this Act, the Officer of Sales Tax shall have the same powers which under the Code of Civil Procedure, 1908 (V of 1908). a Civil Court has for the purpose of recovery of an amount due under a decree. " The provisions of section 48 above are penal in nature and consequently under settled law cannot be enforced without a show-cause notice being served on the party concerned. In any case it has to be read in conjunction with section 36, which clearly lays down that serving of a show cause notice is mandatory. However, the learned counsel for the defendant No.3 submitted before me that the copy of the audit observation dated 23-11-1998 was sent to the plaintiff and that constitutes such show-cause notice. It may be advantageous here to reproduce contents of the letter issued by Assistant Collector (Refund) Collectorate of Sales Tax, Karachi. "SUB: AUDIT OBSERVATION N0.128 MADE BY C.B.R. AUDIT TEAM. During the course of audit by the team of C.B.R the following amount has been pointed out recoverable against you alongwith addition tax due thereon. Recoverable amount Rs.91,93,438 (calculated upto 15-10-1998. Additional tax Rs.1,21,54,204 Rs.2,13,46,642 You are hereby directed to clarify your position within three days, otherwise the same will be adjusted from your refund claim." A perusal of this letter would show that it does not contemplate to be a show-cause notice by any standards. It basically is an intimation of audit observation made by the C.B.R audit team and shows to the plaintiff the state of their account. This letter also admits the existence of a balance of the refund amount in favour of the plaintiffs and only states that in the absence of payment of the amount demanded it will be adjusted against that refund claim. There is no indication in this letter that the defendant No.3 had given any intimation to the plaintiffs of their intention to adjust the amounts due against any other payment that may be due to them by any other Government body. The law has provided for a show-cause notice to be issued and thus it is- necessary that such show-cause notice should clearly indicate that it happens to be a show-cause notice, so that the person to whom it is issued is aware that if he does not appear to show cause, adverse action might be taken against him. It is obvious that no such intimation can be gleaned from this particular letter. Consequently, I do not find that this letter would -constitute a show-cause notice under the provision of Sales Tax Rules, 1992 or Sales Tax Act, 1990. ISSUE N0.2: Here the audit observation dated 23-11-1998 sent to the plaintiffs becomes meaningful. The fact remains that through this letter the plaintiffs were warned that the accounts in respect of the sales tax payable by them were certainly in arrears. Consequently, as per general -law the defendant No.3 were fully entitled to exercise lien on the amounts held by them on account of refund claim of the plaintiffs and such exercise of lien can -by no standard be regarded as a violation of section 36 of Sales Tax Act, 1990 or the principle of natural justice. Indeed in this letter, the offer was made to the plaintiff to clarify their position. It has been urged before me. that any clarification was indeed provided by the plaintiffs to the defendants. Under the circumstances, I find that the defendant No.3 were justified in stopping further payment of the refund amount to the plaintiffs without further clarification forthcoming from them. ISSUE NO. 4 view of my above findings, I direct that: (1) The defendant No.3 will transfer the amount of Rs.1,566,534 recovered back to defendant No.4 within one month. (2) That the defendant No.4 is directed not to make payments of the duty draw back to the plaintiffs from this amount till a decision in this regard has been made by the defendant No.3 after serving a show-cause notice under the provision of section 36 of the Sales Tax Act, 1990 to the plaintiffs whereupon defendant No.3 is directed to give due opportunity to the plaintiffs to explain their point of view. (3) The defendant No.3 is directed to examine the claim of refund of the plaintiffs afresh after giving due opportunities to them for being heard and till such re-examination is undertaken the plaintiffs will not be entitled to any refund claim. (4) If after decision taken by defendant No.3 as per directions above the plaintiffs are aggrieved, they may avail of necessary remedies in ` law. The suit is disposed of in the above terms Q.M.H./M.A.K./U-1/K Order accordingly.