2011 PTD (Trib (PLP)

KHAWAJA FAROOQ SAEED, (CHAIRPERSON).

In the instant case, the appellant has preferred appeal against the Order-in-Appeal No.724 of 2007 dated 31-12-2007 passed by the learned Collector Sales Tax and Federal Excise, Faisalabad. Facts in short are that the appellant is a registered/manufacturer exporter and he had claimed refund amounting to Rs.30,14,155 for the tax period 5 of 2005. On 1-11-2006, the Revenue issued a Show-Cause Notice vide C.No.ST/Refund/SC/222/06/5462 to the appellant and many discrepancies/irregularities were alleged therein besides informing the appellant as to why input tax/refund amounting to Rs.30,14,153 may not be rejected in terms of section 11(2) of the Sales Tax Act, 1990 and why penal action may not be taken under section 33(11)(a)(c) of the Sales Act, 1990. On the basis of this show-cause notice, the Assistant Collector initiated the court proceedings and after going through the relevant record, he rejected the appellant's version and refused to grant input tax refund. This forced the appellant to file appeal before the Collector (Appeals) who, by virtue of his order dated 31-12-2007 granted partial relief to the appellant however, the claim of refund to the extent of Rs.973,937 way rejected and to that extent upheld the Order-in-Original No.104 of 2007 dated 31-1-2007. This dispensation has compelled the appellant to come up in further appeal before the Hon'ble Appellate Tribunal Inland Revenue. Both the rival parties have been heard at length and relevant record perused. Before me, the learned counsel appearing on behalf of the appellant raised many grounds of appeal however, on legal grounds, he vociferously contended that the show-cause notice issued by the Adjudicating Officer (Assistant Collector) is in violation of section 45(I)(iii) of the Sales Tax Act, 1990, thus the impugned Order?-in-Original is without lawful authority. Section 45(I)(iii) of the Sales Tax Act, 1990 reads as under:-- Iii Assistant Collector Cases falling under subsection (2) of section 11 and section 36 provided that the amount of tax involved or the amount erroneously refunded exceeds ten thousand rupees, but does not exceed one million rupees Perusal of section 45 of the Sales Tax Act, 1990 reveals that the learned Adjudicating Officer (Assistant Collector) could at the relevant time issue show-cause notice involving amount of tax or the amount erroneously refunded not exceeding one million. The next plea of the appellant is that the Show-Cause Notice bearing C.No.ST/Refund/SC/222/06/5462 dated 1-11-2006 is vague and unspecific. In support of the contention reliance is placed upon a case-law cited as 2007 PTD 2265 in re: Messrs Inam Packages, Lahore v. Appellate Tribunal Custom House, Lahore, relevant portions of the case cited supra are being reproduced as under: "Show-Cause Notice generally alleged contravention of numerous provisions but neither specific provision of contravened law nor manner of its contravention was specified by authorities

Motives or reasons causing/occasioning alleged evasion were also not stated under S. 36 of the Sales Tax Act, 1990 by the notifying authority

Show-Cause Notice was vague, unspecific and too general to enable a reader or notified person to make out or clearly identify particular clause/subsection or reason or period of limitation applicable in terms of Sales Tax Act, 1990. Further it was also held in this judgment that "Show-cause notice served upon assessee by notifying authority was patently illegal, without lawful authority and all orders based thereupon were liable to be set aside

Validity of show-cause notice was fundamental to assumption of jurisdiction by Revenue Authority to pass order passed against assessee were devoid of jurisdiction and lawful authority". The unarguable conclusion thereto is that mere mentioning the words non-levy, short-levy or erroneous refund of tax or charge cannot be the basis for a show-cause notice. It has to be founded upon non-levy, short-levy or erroneous refund caused by any of the above reasons, which being the dominant factor also determines the period of limitation thereto. In absence of any of three conditions or the jurisdictional facts, the taxing authorities shall have no power to jurisdiction to serve a show-cause notice under section 36 of the Sales Tax Act, 1990. After going through the contentions of the appellant and in view of the judgment cited above, I am convinced that the order is on the basis of a vague notice. It is totally based more on assumptions. The superior courts have held in a number of cases that "where a thing was provided to be done in a particular manner, it has to be done in that manner and if not so done, the same would not be lawful" re: 2003 SCMR 1505. This principle has the support of the Constitution of The Islamic Republic of Pakistan, 1973 Article 4 also. On facts there is do evidence in the show-cause notice with regard to the objection that the Input Tax paid has not been deposited as there is no audit of the supplier. Furthermore, the percentage determined for value addition for creating the demand also is without any cogent reason. The superior courts have never permitted addition in the value on F estimate basis. The action of the department being against the express provision of the Sales Act, fixation of value addition is against law re: 1998 PTD (Trib.) 3478, 1999 PTD 4147. Such an addition has never stood the test of appeal. However, one thing which cannot be ignored is that the objection of the Revenue includes some particular observation. Some of the invoices have been considered as fake/flying under the provisions of section 7(2)(i) of the Sales Act, 1990. Certain suppliers are not registered while some of them have not filed returns. In some cases there is objection with regard to transfer of goods objecting that no such transfer has actually taken place. In any case taking in view the legal objections a well as the fact that the claim with regard to some of the claimed suppliers is doubtful, I cancel the order with the direction to issue a fresh and clear show-cause notice. Obviously for allowance of output tax it is paramount to ensure the deposit of the input tax in Government Treasury. This results in cancellation of the order and reappraisal of the issue on the basis of record to be provided by the assessee. H.B.T./193/Tax(Trib.)????????????????????????????????????????????????????????????? Order accordingly.