2013 PLP (Trib (PTD)

The appellant has filed appeal before this Tribunal against Order-in-Appeal No.ST-393/2011/1338 dated 22-1-2013 passed by the Commissioner Inland Revenue (Appeals-II), Islamabad on the following grounds:-- (1) That the Order-in-Original being passed on the basis of time-barred Show Cause Notice is unlawful being coram non judice and thus is liable to be set aside as acts of omission and commission taken without jurisdiction are illegal and void ab-initio. (2) That the respondent No. 3 has violated the provisions of section 11(5) of the Sales Tax Act, 1990 in as much as the Show Cause Notice was issued after expiry of limitation provided for in referred section 11(5) of the Sales Tax Act, 1990. (3) That the Federal Board of Revenue is not competent, under section 74 of the Sales Tax Act, 1990, to condone the time limit for issuance of Show Cause Notice. (4) That the Federal Board of Revenue has condoned the time limit in flagrant violation of maxim audi alteram partem. (5) That the act of the Federal Board of Revenue to condone the time limit for issuance of Show Cause Notice is mala fide, so as to cover the blatant omission on part of the field formations/ respondent No.3. (6) That the respondent No. 3 has failed to provide in clear and explicit words the grounds/reasoning/basis in the Show Cause Notice and thus the Show Cause Notice in itself, to say the least, is faulty. (7) That the respondent No. 3 has not provided, in the Show Cause Notice, basis of alleged amount of Rs.4,079,560, which under the law were required to be furnished. (8) That the respondent No. 3 has not mentioned the contravention of section 2(46) of the Sales Tax Act, 1990 nor the same is alleged in the Show Cause Notice. (9) That the respondents Nos. 2 and 3 have wrongly construed the Collection and Payment of Sales Tax on Natural Gas Rules, 1999, in as much as to establish their nexus with section 2(46) of the Sales Tax Act, 1990. (10) That the respondents Nos. 2 and 3 have fell in error while holding that appellant has failed to provide documentary evidence; which as a matter of admitted fact pertains to more than 10 years back and the appellant is not required to retain the same in accordance with provisions of section 24 of the Sales Tax Act, 1990. (11) That, without prejudice to the grounds recorded hitherto, the respondent IJOM, 2 and have erred white not considering the facts of the case. (12) That the order-in-original passed by the respondent No. 3 is not a speaking order. (13) That the respondent No 3 is not justified in invoking section 11(3) of the Sales Tax Act, 1990, in circumstances of the case. (14) That the respondent No. 3 was not justified while levying default surcharge and penalty under sections 34 and 33(5) of the Sales Tax Act, 1990 and the respondent No. 2 was not justified to confirm the same.

2. Brief facts of the case are that the registered person undervalued the supply of LPG for the purpose of payment of sales tax which caused short realization of sales tax amounting to Rs.4,079,560 for the period 4/2011 to 6/2002. Therefore, the officer confronted the issue to the registered person through show cause notice dated 8-11-2012 to which reply of the appellant was considered as unsatisfactory, therefore, the officer passed Order-in-Original No.7 of 2013 dated 21-11-2012 for the recovery of principal amount along with default surcharge and penalty under sections 34 and 33(5) of the Sales Tax Act, 1990.

3. This appeal came up for hearing on 10-4-2013. At the very outset, the learned counsel for the appellant argued that the show cause notice C.No.166 dated 8-11-2012 was issued by the respondent in flagrant violation of section 11(4) of the Sales Tax Act, 1990, after lapse of more than 10-years from the relevant tax period which is (i.e.) April 2001 to June 2002 and the same was void ab-intio and without lawful jurisdiction. The learned DR explained that the time bar pointed out by the learned counsel of the appellant did not apply to this case, as the FBR had condoned the time limitation for issuance of show cause notice under the authority vested in it by section 74 of the Sales Tax Act, 1990.

4. We have heard the rival arguments on this fundamental question of law. In our considered opinion, the FBR has not been vested with the authority to condone a statutory limitation provision envisaged in section 11(4) of the Sales Tax Act, 1990. The statutory provision contained in section 11(4) of the Sales Tax Act, 1990 relevant to issuance of show cause notice before assessment of tax is reproduced as under:-- Section

11. Assessment of Tax:-- Subsection 4. - No order under this section shall be made by an officer of Sales Tax unless a notice to show cause is given to the person in default specifying the grounds on which it is intended to proceed against him and the officer of Inland Revenue shall take into consideration the representation made by such person and provide him with an opportunity of being heard: Provided that order under this section shall be made within one hundred and twenty days of issuance of show cause notice or within such extended period as the Commissioner may, for reasons to be recorded in writing, fix provided that such extended period shall in no case exceed sixty days: Provided further that any period during which the proceedings are adjourned on account of a stay order or Alternative Dispute Resolution proceedings or the time taken through adjournment by the petitioner not exceeding thirty days shall be excluded from the computation of the periods specified in the first proviso.

5. From the perusal of the statutory text contained in section 11(4) of the Sales Tax Act, 1990, it is evident that a show cause notice can be lawfully issued only within 05-years from the date of detection of a default under the Sales Tax Act, 1990. However, this period of 5-years can be extended by the Commissioner, in no case, beyond a period of 60-days. Therefore, the total period within which a show cause notice can be issued comes to 5-years and 60-days. In this case, the show notice was issued on 8-11-2012 in respect of a default transaction made by the appellant 12-years ago. Therefore, we are in full agreement with the counsel's contention that the show cause notice issued after 12-years is without a lawful authority.

6. Now we come to the analysis of the learned DR's contention that the FBR had condoned a lapse of statutory time limitation provided under section 11(4) of the Sales Tax Act, 1990 through exercise a power vested in it under section 74 of the Sales Tax Act, 1990. The context of section 74 is reproduced as under:-- Section

74. Condonation of time-limit: - Where any time or period has been specified under any of the provisions of the Act or rules made thereunder within which any application is to be made or any act or thing is to be done, the Board may, in any case or class of cases, permit such application to be made or such act or thing to be done within such time or period as it may consider appropriate: Provided that the Board may, by notification in the office Gazette, and subject to such limitations or conditions as may be specified therein, empower any Commissioner to exercise the powers under this section in any case or class of cases. A careful reading of the section 74 of the Sales Tax Act, 1990 suggest that the FBR's power of condonation under section 74 of the Sales Tax Act, 1990 cannot be exercised under an application is made to the Board seeking such condonation.

7. In this case, the appellant did not make any application for condonation of delay in issuance of the show cause notice to him. It is evident that condonation was allowed by FBR on the request of the respondent but not notice was issued to the appellant before condoning the statutory time limit. Hence, the Board had no lawful appellant before condoning the statutory time limit. Hence, the Board had no lawful authority to pass an order of condonation of delay in issue of show cause notice. Secondly, there no doubt in our mind that the FBR's power to condone a time limit under section 74 of the Sales Tax Act, 1990 only applies to the time limitation for passing an adjudicatory order on anything which addresses a genuine difficulty of a taxpayer for example the breach of time limit for filing of a tax returns or refund/input claim and any other act for which an applicant has an otherwise legal right arising from any other provision of the Sales Tax Act, 1990. This power does not extend to the statutory limitation of time referred to in section 11(4) of the Sales Tax Act, 1990. If FBR's authority to condone a time limit as fundamental as the time limitation provided in section 11(4) of the Sales Tax Act, 1990 is accepted, it will lead to opening of a pandora box, leading to which hunting of the taxpayers in cases where the FBR's or it sub-ordinate offices failed to take timely action against a taxpayer claimed by them to be in default. Therefore, we condone that the show cause notice C.No.166 dated 8-11-2012 was issued by the respondent without a lawful authority and that FBR's has not jurisdiction to condone the delay in question under section 17 of the Sales Tax Act, 1990. As a result, the entire adjudicatory proceedings in this case at the level of the learned Assessing Officer and later confirmed by the learned CIR(A) are annulled, on the basis of the ratio settled in the cases namely STPRC 0128, 2006 PTD 537 and 2006 PTD 337 decided by the Honorable Supreme Court of Pakistan and 1999 PTD (Trib.) 8, 2008 PTD 1973 and (sic) PTCL 75 decided by the Honorable High Courts of Pakistan. Since the learned counsel of the appellant argued his case on the aforesaid question of law alone, we find it unnecessary to discuss the merit of the case on facts.

8. This order consists (05) pages and each page bears my signature. SAK/82/Tax(Trib.) Order accordingly.