2013 PLP (Trib (PTD)

These cross appeals arise from Order No. 203 dated 9-6-2012 passed by Commissioner (Appeals).

2. Mian Ashiq Hussain, Advocate Supreme Court, assisted by Mr. Ghulam Rasool Advocate, representing registered person, has opened his case with preliminary objection on jurisdiction to issue show-cause notice under section 36(1) of Sales Tax Act, 1990. He has read the notice dated 31-12-2011 purportedly issued under section 36(1). The basis of the show-cause notice were some invoices allegedly issued by non-filer, suspended and blacklisted supplier companies. Learned counsel has pointed out that department is not sure about the status of invoices in question as the word 'believed' is used instead of conformity any prima facie evidence to show any collusion or deliberate act of evasion. For this reason; he argues that notice under section 36(1) was ab-initio without jurisdiction. To strengthen his arguments, he has relied on Apex Court's judgment reported as 2005 PTD 480 and two judgments one by Lahore High Court reported as PLD 1989 (LHC)47, (2008) 97 Tax 29 (H.C. Lah.) and another by Appellate Tribunal Inland Revenue reported as 2011 PTD (Trib.)

808. Learned counsel has also read relevant paragraphs of the judgments where issuance of vague show-cause notices was deprecated. However, assisting fairly learned counsel also has placed before us a judgment by Honourable Supreme Court in Zamindara Paper and Board Mills case reported as 2008 SCMR 615, where Honourable Court has laid down that substance of a show-cause notice should be seen rather than the provisions referred therein. To conclude his argument; on preliminary objection, learned counsel submits that in the light of Apex Court judgment, notice in question can, at the most, be construed to have been issued under section 36(2) and the limitation applicable would be three years. As period involved in show-cause notice is of twelve months, out of which five months shall become time barred. Nevertheless; he argues that most of the invoices issued within limitation period could not be subjected to sales tax. He explains that sales tax can be charged only on supply of goods, but the registered person being Public Limited Company (100% Govt. owned) is involved in some other transactions also, which are not taxable under Sales Tax Act, 1990. He further argues that even the invoices which are taxable under Sales Tax Act, 1990, were genuinely issued and registered person has documents to prove its veracity.

3. DR vehemently opposed the arguments and submits that registered person did not cooperate in adjudicating proceedings and could not produce any document in support. Some of the arguments taken before this forum were not raised before the adjudicating officer. DR, who is assisted by Mr. Javed Badar; DCIR, RTO, Faisalabad could not point out from the show-cause notice that the registered person was confronted on any act of collusion or deliberate evasion or misuse of the alleged invoices, knowingly. The above said DCIR, however, submits that use of invoices of a blacklisted Company itself was a proof of deliberate act of using any inadmissible invoice.

4. Heard both the parties record perused. We have carefully examined the provisions of section 36 (1)&(2) and we agree with the submission of learned counsel that it carries some pre-conditions. The relevant provisions are reproduced hereunder for convenience:-- "

36. Recovery of tax not levied or short-levied or erroneously refunded.

(1) Where by reason of some collusion or a deliberate act any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded, the person liable to pay any amount of tax or charge or the amount of refund erroneously made shall be served with notice, within five years of the relevant date, requiring him to show cause for payment of the amount specified in the notice. (2) Where, by reason of any inadvertence, error or misconstruction, any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded, the person liable to pay the amount of tax or charge or the amount of refund erroneously made shall be served with a notice within three years of the relevant date, requiring him to show cause for payment of the amount specified in the notice: Provided that, where a tax or charge has not been levied under this subsection, the amount of tax shall be recovered as tax fraction of the value of supply." Subsection (1) of section 36, if compared with subsection (2), shows that legislature has addressed two different situations in both the subsections; one where the registered person makes any evasion deliberately and in collusion with any fraudulent element and the second where the tax was not paid due to any inadvertence. For this reason, under subsection (1) the limitation is five years whereas under subsection (2) the limitation is three years.

5. Language of the show-cause notice confirms the plea taken by appellant's caused that collusion or deliberate act of tax evasion was never confronted. We agree that the show-cause notice can at the most be taken to have been issued under subsection (2) of section 36 and we hold accordingly. In view this, both the orders below are vacated. Case is remanded to Taxation Officer having jurisdiction of the case now and direct to treat the show-cause notice as issued under section 36(2) and proceed de novo keeping in view the limitation provided therein. The Taxation Officer shall also decide the objection about the chargeability of sales tax on certain invoices. He shall pass a speaking order after considering all legal objections. Order accordingly. CMA/6/Tax(Trib.) Order accordingly.