2002 PLP 1573 (PTD)

Khan Abdul Ghafoor Khan Daha and another v. Controller of Estate Duty, Government of Pakistan PLD 1969 Lah. 175 ref. (g) Sales Tax Act (VII of 1990)

Ss.11 & 36

Constitution of Pakistan (1973), Art. 199

Constitutional petition

Show-cause notice

Remand of case by original Authority

Dispute was with regard to evasion of huge amount of sales tax by the petitioner

Show-cause notice was issued to the petitioner by the Authorities on the basis of some material collected by detecting agency

Reply was filed by the petitioner and the matter was adjudicated by the Authorities

Adjudicating Officer, after number of hearings, remanded the case to the detecting agency coupled with the guidelines to further probe the matter

Validity

No provision of law was referred to in the notice- under which it was served

Sales Tax Officer as original Authority could only proceed under Ss. 11(2) & 36(1) of the Sales Tax Act, 1990, and there was no provision for remand, hence, the order of remand was not sustainable

Such legal lacuna being not curable remand order passed by the original Authority was void, without lawful authority and the same was set aside

Constitutional petition was allowed in circumstances. Waqar Azim for Petitioner. Khan Muhammad Virk for Respondents. Date of hearing: 16th January, 2002. The petitioners are manufacturers of Washing Machines, Room Air Coolers and Geysers. The respondent No.1 Additional Collector of Sales Tax, Custom House, Gujranwala served-them with a show-cause notice on 6-4-1998 alleging evasion of huge amounts of sales tax during the period from 1-1-1993 to 31-8-1997. Also they were confronted with some material collected by detecting agency which was mainly based upon the guarantee cards allegedly issued by them during the said period.

2. The submissions made in the reply to the notice were not found tenable and accordingly the matter was referred for adjudication to respondent No.3 Additional Collector Sales Tax-I, Custom House; Lahore

3. After a number of hearings the respondent No.3 as Adjudicating Officer through his order, dated 8-12-1998 remanded the case to the Detecting Agency coupled with guidelines to them to further probe the matter and submit the case again after holding the inquiries so desired by him. The operative part of the decision of respondent No.3 reads as under: -- "Although Company's accounts are not transparent, high electricity bill abnormal sales of scrap having no reasonable ratio comparable with the raw material account for, documentary evidence in the form of warrantee cards issued by Company's own authorized dealers reflecting the sales but not recorded in sales tax records and tax evaded on the same goes on to establish the element of evasion but to allege clandestine removal of goods involving sales tax to the extent of Rs. 80,96,68,601 against the alleged sales of Rs.5,24,90,78,350 on single evidence basis only is not maintainable at this stage and it is not at all possible for any Adjudicating Officer to ascertain the exact quantum of evasion when case still needs basic investigation

4. The order of remand so made has been challenged through this Constitutional petition. It is inter alia claimed that an Adjudicating Officer under the Sales Tax Act, 1990 has no power to remand the case to the Detecting/Investigating Agency to provide them another opportunity to fill in lacunas earlier pointed out by him. By way of an application preferred during the pendency of this Constitutional petition it is pointed out that subsequently the department carried out an audit of the petitioner from July, 1997 to 11-8-2001 and found only a sum of Rs. 19,60,841 outstanding' against him. Even that demand, according to the petitioner way based mostly upon matters other than the total turnover declared by the petitioner during the period involved. The major part of the demand raised as a result of that audit report for the aforesaid period is stated to have already been paid.

5. The respondents-Revenue agrees that the Adjudicating Officer could not remand the matter to the Detecting Agency. It is, however, stated that the Department has already challenged the impugned order of remand, dated 8-12-1998, before the Customs Excise and Sales Tax Appellate Tribunal. According to the learned counsel for the Revenue during the pendency of that appeal this Constitutional petition cannot proceed as the matter needs to be referred to the Adjudicating Officer for a decision on merits.

6. However, I will not agree. In the first instance a remand is normally made by an appellate or revisional Court/Authority where material brought on record before the trial Court or the lower forum was found deficient in any material aspect which was necessary for the effective disposal of the lis. In the case in hand, the Adjudicating Officer A remanded the matter in absence of any provision in that regard available either under section 11(2) or else where section 36(l),of the Sales Tax Act, 1990 under which he could be assumed to have proceeded. The remand of issue by an original authority in Revenue matters cannot be l approved for a number of reasons: Firstly, as noted above; there is no provision either in the Sales Tax Act, 1990 or for that matter any other taxing statute in B Pakistan which enables or empowers an original authority to remand the matter further to still a lower official functionary. Even as a general proposition of law it appears settled that a. remand should not be made as a matter of course, to allow a party or an authority to fill in lacuna or to improve its case. If an authority in needed one may consult re: Chairman, WAPDA v. Gulbat Khan (1996 SCMR 230). Secondly, all penal proceedings or punitive actions including re opening of an assessment already made in taxing statutes are relate-able to a certain limitation. After the expiry of that limitation the citizen acquires aright of escapement of assessment even if he was otherwise liable to the charge. The view expressed in this regard by this Court finds mention in re: Messrs Shoaib Bilal Corporation v; The Commissioner of Income-tax, Faisalabad Zone, i Faisalabad (1993 PTD 332) which in turn was based upon a judgment of the Hon'ble Supreme Court of Pakistan in re: Nagina Silk. Mills, Lyallpur v. Income-tax Officer (PLD 1963 SC 322). By remanding a matter, as happened in this case, the, Adjudicating Authority gave a fresh lease of life to the five years' limitation prescribed under, subsection (1) of section 36 and of there years limitation as prescribed in subsection (2) thereof. By keeping the matter pending the aforesaid limitation, applicable to different situations impliedly got extended to a considerable period. The remand order therefore, is objectionable oft that account as well. Thirdly, in revenue matters either the case against the subject/assessee is made out or it is lot made out. Where it is made out the concerned authority can proceed keeping in view' the fact that the order so made is to stand the test of an appellate jurisdiction of superior Courts and generally the revisional jurisdiction of Departmental Authorities where the case is not made out against and assessee then the proceedings should immediately be dropped in all fairness and with open heart. Instead of remand at original authority must direct dropping of the proceedings. The result would simply be that executive side of the taxing authority will still be competent to collect evidence and material and to serve the citizen/assessee a show-cause notice subject to the limitation provisions provided invariably in taxing) statutes. In that process they can very well give up that period which had, in the meanwhile, become bar by limitation and can stilt proceed in respect of the period for which, the limitation is still available. That appears to be the only way out which is in accordance with law, justice and fair-play. Lastly, in revenue matters the principle that where two equally acceptable interpretations are possible the one in favour of the subject should be adopted can also be taken benefit of while weighing the evidence and material brought on record against an assessee. If the Revenue Authority be it original, appellate or revisional finds itself indecisive and on the scale the material brought on record against the assessee/subject appears to be unconvincing then instead of taking a chance in favour of the Revenue, the assessee must be let off the hook. An unconvincing assessment order which, is based upon material or evidence to which the authority making the order itself did not find convinced, should never be recorded. Since an assessment order immediately gives rise to a demand against a subject and since levy of tax in. all its forms is necessarily an exaction of money by the State it should not be directed to be made .in a light vein. The purpose invariably is to collect funds for running the State. That purpose should not be extended to intimidation and harassment of a willing taxpayer.

7. Learned counsel for the petitioner is correct in pointing out that the remand order by the Adjudicating Officer being illegal and the same having been assailed by the Department on that very ground, the pendency of such appeal before the Tribunal cannot be a bar for exercise of Constitutional jurisdiction to nullify such order which on the face of it, is without jurisdiction. In somewhat similar situation this Court decided the principle in re: Khan Abdul Ghafoor Khan Daha and another v. Controller of Estate Duty, Government of -Pakistan (PLD 1969 Lahore 175).

8. Learned counsel for the petitioner is also correct in pointing out that the subsequent audit conducted by the Department itself indicates that the show-cause notice issued in this case and the contravention report prepared was too fabulous to be believed. The brake-up of turn over has determined in the said audit report for the period from July, 1997 to 1,1-8-2001 indicates only a slight difference, between the declared and estimated sales. That report, he rightly points out, bears witness to the fact that the turnover confronted to the assessee through the impugned show-cause notice had absolutely no basis at all. The Adjudicating Officer, according to the learned counsel, having coming to somewhat similar conclusion ought to have dropped the proceedings instead of remand.

9. It will be seen that in the show-cause notice no provision of law was referred to under which hit was served. However, there being only the aforesaid provisions under which a Sales Tax Officer as an original authority can possibly proceed and there being no provision for remand, the impugned order, under any of the two provisions is not sustainable at law. That legal lacuna in the order is also not curable. Therefore, this Constitutional petition is accepted and the remand order is declared to bye void and without lawful authority. It shall accordingly be set at naught. Q. M. H. /M. A. K./S-376/L Petition allowed.