2021 PLP 1154 (SCMR)

UMAR ATA BANDIAL, J.

The Respondent is a registered person under Sales Tax Act, 1990 ("the Act") in his capacity as an importer. However, he is still not a registered person even in his capacity as a manufacturer/supplier. The matter in issue is that the petitioner-department served the Respondent with a show cause notice dated 29.02.2016, alleging default in payment of sales tax from 07/2001 to 06/2005. Section 11(5) of the Act prescribes a limitation period of five years from the relevant date for commencing action through a show cause notice against the person in default. To overcome the delay of nearly 15 years in the issuance of the said notice the petitioner obtained permission dated 25.01.2016 from the Federal Board of Revenue ("FBR") under section 74 of the Act for condoning such delay.

2. The afore-noted show cause notice was challenged by the Respondent in the writ jurisdiction of the High Court but that effort failed. Thereafter, the matter was taken before a learned Division Bench of the Lahore High Court where the Respondent's appeal has succeeded. It has been held that the provisions of Section 74 of the Act do not expressly or impliedly envisage the supersession of statutory limitation periods protecting assessees against the initiation of action against them by the petitioner authorities. This is because the expiry of the limitation period accrues a vested right in favour of the assessee. The learned counsel for the petitioner has explained that the controversy in the matter involves tax fraud; and fraud vitiates the most solemn proceedings. He is not in a position to cite any authority concerning tax law where the limitation period has been waived or ignored in the case of tax fraud.

3. More importantly, the order passed under section 74 of the Act by the FBR fails to state any reason for extending the limitation period for issuance of a show cause notice against the Respondent. The said requirement is meant to ensure fairness and transparency in the exercise of statutory discretion by the FBR which suffers from opacity and therefore unreasonableness. It is also noted that section 74 of the Act neither specifically envisages nor provides guidance, criteria or parameters for overriding any limitation period prescribed by the Act for initiating action against a taxpayer. Consequently, on the facts of the present case we are not inclined to interpret the said provision as authorising the unchecked reversal of a statutory limitation period and consequential legal rights created by it. In the circumstances, the show cause notice issued by the petitioner department suffers from fatal defects that float on the face of the record. Accordingly, we are not inclined to interfere with the impugned judgment.

4. As far as the maintainability of the petitioner's ICA is concerned, no remedy is provided in the Act against the issuance of show cause notice, therefore the ICA filed by the Respondent was competent under section 3 of the Law Reforms Ordinance, 1972.

5. For what has been discussed above, we do not find any merit in this petition. The same is accordingly dismissed. Leave refused. MWA/F-5/SC Petition dismissed.