2009 PLP 43 (PTD)

4. During the hearing, the AR confirmed that the complainant had not filed any appeal against Collector of Appeals' order. He reiterated the arguments advanced in the written complaint, emphasizing that the impugned order-in-original was hit by time limitation as it was passed after the expiry of 90 days as prescribed in sections 36(3) and 11(4) of the Sales Tax Act, 1990. Even the Collector of Appeals ignored complainant's pleas regarding time limitation. As for respondents' plea that the complainant had filed complaint six months after it had the notice of the matter, the AR submitted that the complainant had filed appeal against the impugned order-in-original before Collector of Appeals, who passed his order on 2-2-2006. Since the complaint was filed against Collector of Appeals, order on 28-3.2006, upholding an illegal and time barred order-in-original, the same was filed within time; hence it was not time barred. Both the order-in-original and order-in- appeal may be cancelled.

5. The DR submitted that the complaint was not maintainable as per the provisions of section 9(2)(b) of the FTO Ordinance, 2000. The provisions of section 36(3) were directory and not mandatory. The DR reiterated on behalf of Collector of Appeals the arguments advanced by the Collector of Appeals' in the parawise comments submitted by him. The DR confirmed that in this case no extension was obtained/granted by the competent authority either under section 36(3) or section 11(4) or section 45 of the Sales Tax Act, 1990.

6. At the next date of hearing, the AR submitted that yarn and canvas were purchased by the complainant from seven units legitimately. The order-in-original was passed on 30-7-2005 whereas in the case of two suppliers namely Messrs Naqsh-e-Lasani Spinning Industries and Messrs S.M.II Textile Mills NOCs were issued by the respondents on 12-2-2004 and 3-7-2004 deleting their names from the list of suspect units yet the adjudication authority did not give benefit on that account. The other four units were only suspect units and one unit namely Messrs Javed Textile was merely under suspension. At the time the purchases were made, none of the units was included in the negative list or suspect list or were declared suspect because the purchases were made during the period from January, 2003 to May, 2003 when the units were registered with the Sales Tax Department.

7. The DR submitted that the audit was finalized and contravention report was issued on 5-12-2003. At that time all units were in the negative list. The AR stated that the contravention report was, dated 5-12-2003. The units were not in the negative list at the time when the complainant made the purchases.

8. The arguments of the two sides and records of the case have been considered and examined. This complaint has been filed against Collector of Appeals' order, dated 2-2-2006, upholding a time-barred Order-in-Original No.227 of 2005, dated 30-7-2005 passed by the Deputy Collector. The complaint was filed in the FTO Secretariat on 28-3-2006. As such it does not attract the provisions of section 10(3) of the FTO Ordinance, 2000. According to subsection (3) of section 36 of the Sales Tax Act, 1990, the competent authority after considering the objections of the person served with a notice to show cause under subsection (1) or (2) of section 36 of the Act can determine the amount of tax or charge payable. The Proviso of the aforesaid section reads as under:-- "Provided that order under this section shall be made within ninety days bf issuance of show cause notice or within such extended period as [Collector or as the case may be the Collector (Adjudication)] may, for reasons to be recorded in writing, fix, provided that such extended period, shall in no case exceed ninety days." The Proviso to section 11(4) of the Sales Tax Act, 1990 reads as under:-- "Provided that order under this section shall be made within ninety days of issuance of show cause notice or within such extended period as an officer of Sales Tax may, for reasons to be recorded in writing, fix, provided that such extended period shall in no case exceed ninety days."

9. It is observed that in the present case show cause notice was issued on 15-12-2003, the case was decided by the D.C. on 30-7-2005 after the expiry of original period of 90 days as prescribed in sections 11(4) and 36(3) of the Sales Tax Act, 1990. Admittedly, no extension in the period for deciding the case was ever. obtained/granted. The D.C's order is, therefore, hit by time limitation as provided in the aforesaid sections of the Act and is liable to be annulled.

10. It was held by the FTO in Complaint No.805 of 2003, involving sales tax liability, that "in the instant case show cause notice was issued on 16-6-2002 and order-in-original was passed on 13-5-2003 after about 11 months of the issuance of notice which is clearly hit by time limitation as provided in law. Maladministration is therefore established". The FTO, therefore, recommended in that case that the competent authority should cancel the order-in-original. The department represented against the aforesaid FTO's decision before the President of Pakistan. The President was pleased to reject the representation of the department vide order, dated 7-5-2005, paragraphs 3 and 4 of which are reproduced below:-- (3) "The department contends that the time limit under section 36(3) ibid was merely directory and not mandatory. The contention does not seem to be valid. Where inaction on the part of a public functionary within the prescribed time is likely to affect the rights of a citizen the prescription of time is deemed directory but where a public functionary is empowered to create liability against a citizen only within the prescribed time it is mandatory. The FTO's decision must be sustained. (4) Accordingly, the President has been pleased to reject the representation of the department".

11. In the present case also, a liability has been created against the complainant inasmuch as it had been directed to deposit sales tax along with additional tax and penalty as adjudged vide Order-in-Original No.227 of 2005, dated 30-7-2005. The aforesaid order-in-original was passed after, expiry of the mandatory period of 90 days of the issuance of the show cause notice and was hit by time limitation as provided in sections 11(4) and 36(3) of the Act. The respondents contend that the Appellate Tribunal had in various judgments held that the time limit prescribed in the proviso to subsection (3) of section 36 of the Sales Tax Act, 1990 was not mandatory. With due deference to the decisions of the Honourable Appellate Tribunal, this is to point out that the President of Pakistan is the highest authority under the FTO Ordinance XXXV of 2000. His decision is binding in all proceedings under the aforesaid Ordinance. The President has already held vide Presidential Order dated 7-5-2005, passed on departmental representation against FTO's findings in complaint No.805 of 2003, referred to above, that the time limit in cases where a public functionary is empowered to create liability against the citizen only within the prescribed time limit, is mandatory. Adjudication Officer's failure to decide the case within the time prescribed in law amounts to maladministration.

12. Respondents' argument that the complainant delayed the proceedings in deciding the case by not appearing at hearings and by seeking adjournments is not tenable. In the first place, the complainant's AR contends that there was nothing on record to establish that delay in deciding the case was caused by the complainant. Even otherwise, the provisions of law were quite clear: the adjudication of the case had to be finalized within the prescribed time limitation. The adjudication authority should have abided by it. If the complainant was delaying the proceedings, as alleged by the respondents, or was not appearing at the hearings or was seeking adjournments the authority could have neutralized the so-called delaying tactics by disallowing adjournments sought by the complainant or in the event of non-appearance at hearings it could well have easily decided the case on the basis of available records so as to enable itself to adhere to the prescribed time limit within which the case had to be decided and thus to remain on the right side of law.

13. The Collector of Appeals before whom the complainant had agitated the issue of time limitation failed to consider complainant's plea of time limitation as laid down in section 36(3) of the Sales Tax Act, 1990 and also did not consider FTO's findings in complaint No.805 of 2003 sustained by Presidential Order dated 7-5-2005. Clearly, the order -in-original passed in this case is hit by time-bar as provised in law and is, therefore, void and illegal. Accordingly, the Order-in-Appeal No.38/ST/06, dated 2-2-2006 is also not legally sustainable as if failed to (i) hold the order-in-original passed by the D.C. as barred by time despite complainant's pleas on that account and (ii) provide justice to the complainant. Respondents' contention that the FTO's jurisdiction did not extend in the case is misplaced. This forum is fully competent to investigate cases involving `maladministration'. Maladministration is established. Accordingly, it is recommended that the Revenue Division direct the competent authority to:-- (i) Re-open impugned Order-in-Original No.227 of 2005, dated 30-7-2005 and Order-in-Appeal No.38/ST/06 dated 2-2-2006 under the provisions of section 45A of the Sales Tax Act, 1990 and annul the aforesaid order-in-original, as being hit by time limitation as provided in law, as well as annul the order-in- appeal for illegally upholding the aforesaid time-barred order-in- original and may proceed in accordance with the provisions of law. (ii) Compliance be reported within 30 days of the receipt of this order. C.M.A./137/FTO Order accordingly.