2012 PLP (Trib (PTD)

S.T.A. No.169/LB/11. The titled sales tax appeal has been preferred at the instance of taxpayer, calling in question the impugned order passed by the learned CIR (Enforcement and Collection), Sialkot, dated 22-1-2011. 2. Facts relevant for the disposal of present appeal are that the department observed that the taxpayer had to make payment of sales tax either on the basis of consumption of electricity; units consumed per metric ton and the prescribed rates for payment of sales tax or on the basis of value of steel supplies as prevalent in the market. For the purposes of assessment, a show-cause notice dated 28-7-2010, was issued by the adjudicating authority wherein it was confronted that the taxpayer short paid the sales tax for the tax periods January and March 2010, amounting to Rs.8561626 deliberately and committed tax fraud in terms of section 2(37) of the Sales Tax Act, 1990. The adjudicating authority had decided the case vide order-in-original dated 8-9-2010, wherein he adjudicated the payment of sales tax on the service charged said to be rendered by the taxpayer amounting to Rs.73556 along with default surcharge and penalty of Rs.5,000 and vacated the show-cause notice. The said decision of the adjudicating authority, in departmental view, had caused colossal loss of revenue. Accordingly, the order-in-original was re-opened in terms of section 45-A of the Act by the Commissioner Inland Revenue (Enforcement and Collection Division), Sialkot, for the following reasons:-- (i) The show-cause notice was issued only for the tax period January, 2010 and March, 2010 but the, order-in-original under reference entails subsequent tax period upto August, 2010. (ii) The tax liability was calculated on the basis of service charges by the buyer said to be in terms of STGO No. 3 of 2004, dated 12-6-2004. The adjudicating authority did not examine the issue whether the respondents were liable to pay the sales tax on service charges as vendors of other suppliers or had themselves to make payment of sales tax as assessable on the value of supplies prevalent in the market. This aspect was not duly cared for. (iii) The issue of service charges as vendors was not constituent part of the show-cause notice which was not only focused but adjudicated as well. The adjudicating authority had gone beyond the scope of show-cause notice dated 28-7-2010. (iv) The provisions of STGO No. 3 of 2004, dated 12-6-2004(E) Rule 13 pertaining to the services rendered by vendors were not examined carefully so as to ascertain whether the provisions under reference were applicable in this case or not. (v) The F.B.R. has issued S.R.O. 345(I)/2010, dated 24-5-2004 and S.R.O. 346(I)/2010, dated 24-5-2010, for payment of sales tax, and the same were not considered or commented at all during the process of adjudication. 3. On the basis of above observations, a show-cause notice dated 1-10-2010 was issued to the taxpayer for recovery of tax, as tabulated on page-6 of the impugned order, in terms of sections 11(2) and 36(1) of the Sales Tax Act, 1990. The proceedings were culminated into passing a revised order-in-original dated 22-1-2011. 4. The learned AR of the appellant at the very outset of the proceedings submitted that very initiation of proceedings by the Commissioner (Enforcement and Collection) under section 45A of the Sales Tax Act, 1990, is not tenable in the eye of law as the said authority is not vested with the powers of adjudicating authority. It is contended by the AR that the Commissioner (Enforcement and Collection) cannot made re-assessment under section 45A of the Act. It is submitted by the AR that by illegally invoking the provisions of Section 45A the learned Commissioner has taken away the statutory right of the taxpayer to file appeal under section 45B of the Act. In this behalf, it is explained by the AR that the order was issued on 8-9-2010 and received by the taxpayer on 9-9-2010, therefore, legal time to file appeal was till 8-10-2010. It is asserted by the AR that the provisions of section 45A cannot be invoked before 8-10-2010. On merits, the learned AR of the appellant strongly challenged the reopening of the case and submitted that five reasons given by the Commissioner are against the facts and circumstances of the case. It is submitted by the AR that departmental view that the adjudicating authority itself included the period January to August 2010, whereas the show-cause notice was only issued for January and March, is not correct. In this behalf, it is explained by the AR that on the plea of the appellant that they had worked on services basis for the months of January to August 2010, the adjudicating authority had lawfully included the period of April 2010 to August 2010 as is evident from the order sheet, entry of the adjudication proceedings. As regards departmental objection of non-adherence of STGO No. 3 of 2004, it is submitted by the AR that as per said STGO, the taxpayer worked on labour and had to charge sales tax to such extent for which the services provided. In this behalf, it is asserted by the AR that they had submitted all the relevant record on the basis of which adjudicating authority decided the case. Even otherwise, it is contended by the AR that the said STGO is not binding on the taxpayer as well on the Adj. authority. 5. On the contrary, the learned DR on behalf of Revenue, supported the re-assessment made in the case and submitted that the Commissioner has rightly invoked his power under section 45A to re-assess the case of the taxpayer. It is contended by the DR that the adjudication officer acted beyond the show-cause notice issued in the case. It is asserted by the learned DR that the taxpayer has mis-presented the facts and circumstances of the case before the adjudication officer which resulted into loss of revenue. 6. We have looked into the matter and after due consideration, we are convinced with the arguments put-forth by the learned AR at bar. We are in agreement with the submissions made by the learned AR of the appellant that the Commissioner (Enforcement and Collection) has illegally and unjustifiably invoked the provisions of section 45A of the Sales Tax Act, 1990, as he was not vested any such power to act as adjudication officer. In the instant case, the Commissioner (Enforcement and Collection) had re-assessed the case of the taxpayer whereas as per C.B.R. Circular C. No. 1 (10)IR-Jud/2009-(A), dated 25-11-2009, it is the Commissioner Inland Revenue (Legal Division) who had to do the job of Adjudication under the Sales Tax Act, 1990. In another Circular C. No. 1(10)/IR-Jud/2009, dated 10-2-2010, it is the Commissioner Inland Revenue (Audit Division) who has to perform duties of Adjudication under Sales Tax Act, 1990. From the perusal of these circular instructions, it is evident that the Commissioners are given specific powers to act. In the present case, the Commissioner (Enforce-ment and Collection) without any jurisdiction acted as Adjudication Officer. During the course of proceedings under section 45A, the Commissioner (Enforcement) appointed a Departmental Representative and based his order upon his explanation and submissions which are also beyond the show-cause notice issued for re-assessment of the case. We are convinced that on the above legal ground, the impugned order is liable to be cancelled. 7. Even on merits, we are satisfied that the Commissioner without any plausible reasoning has reopened the order-in-original passed by the adjudication officer. The first reason given by the Commissioner for reopening of the case that adjudicating authority had issued show-cause notice only for the months of January and March 2010, whereas he adjudicated the period upto August, 2010. In this behalf, we have noted that when the taxpayer taken a stance before the adjudication officer that they did not make any taxable supply but rendered manufacturing services then it was asked by the adjudication officer to provide documentary evidences in support of their arguments. Here, we deem it expedient to re-produce the relevant portion of the order-in-original for ease of ready reference:-- "after came to the knowledge of the undersigned asked the respondent to provide any documentary evidence of such services also till August 2010 and hence the period of April to August was also included in this proceedings." 8. In view of the above, we are satisfied that the adjudication officer has rightly made part of the proceedings the period of April to August 2010. Similarly, the issue of service charges as vendors was part of the show-cause notice (para-3 of the notice) and has specifically been discussed and adjudicated by the Adj: authority. 9. The taxpayer in terms of STGO No.3 of 2004, had worked on labour basis and for this purpose they had to charge sales tax to that extent only which they did. In this behalf, the taxpayer duly provided the relevant record before the adjudication officer who after scrutinizing the same has accepted the stance of the taxpayer. STGO No. 3 of 2004 did not debar the taxpayer to charge sales tax on market value basis. Therefore, the said reason for re-opening of the case is also not maintainable. 10. The next observation of the department is with regard to non-adherence of S.R.O. 345 and S.R.O. 346, dated 24-5-2010. The taxpayer during the relevant period worked as vendor/labour basis and these S.R.Os. are not strictly pertains to such business. The taxpayer duly produced those persons to whom manufacturing services were rendered and during the course of proceedings, the adjudication officer cross-examined these persons and cross checked the record produced by the taxpayer, thereafter, the adjudication officer came to the conclusion that the taxpayer rendered manufacturing services on service charged basis. Therefore, the adjudication officer has rightly held that the charges levelled in the show-cause notice are not established. We are also in agreement of the learned AR's submission that the CIR(E&C) has prematurely reopen the case under section 45A of the Act because due to this illegal action, the learned Commissioner has taken away the statutory right of the taxpayer to file appeal under section 45B of the Act. 11. In view of what has been stated/discussed herein above, we are inclined to hold that the impugned order suffering from grave legal as well factual infirmities is not maintainable in the eye of law is hereby set aside. Appeal of the taxpayer succeeded as prayed for and disposed of in the above manner. M.A. (Stay) No. 97/LB/11 12. The taxpayer has preferred an application for stay of disputed tax demand. Since, we have disposed of main appeal of the taxpayer, the present application has become infructuous which is hereby dismissed. Appeal succeeded. C.M.A./52/Tax(Trib.) Appeal accepted.