Offences and penalties

Perusal of Section 37A of Sales Tax Act, 1990 shows that if such provisions are allowed to be invoked independently without any reference to the other relevant provisions of Sales Tax Act, 1990 including section 2(37) tax fraud, section 3 Scope of Tax, section 11 Assessment of tax and section 33 Offences and Penalties, the same would be in violation of substantial provisions relating to charge of sales tax and assessment of sales tax, as it would give unbridled powers to officials of sales tax to initiate criminal prosecution against a registered person or any person within the supply chain, including registration of FIR and arrest, even without creating a lawful demand under the law

Such interpretation in respect of provisions of section 37-A of Sales Tax Act, 1990 would make the provisions of Sales Tax Act, 1990 redundant, whereas, redundancy cannot be attributed to legislation.

Perusal of Section 37A of Sales Tax Act, 1990 shows that if such provisions are allowed to be invoked independently without any reference to the other relevant provisions of Sales Tax Act, 1990 including section 2(37) “tax fraud”, section 3 “Scope of Tax”, section 11 “Assessment of tax” and section 33 “Offences and Penalties”, the same would be in violation of substantial provisions relating to charge of sales tax and assessment of sales tax, as it would give unbridled powers to officials of sales tax to initiate criminal prosecution against a registered person or any person within the supply chain, including registration of FIR and arrest, even without creating a lawful demand under the law

Such interpretation in respect of provisions of section 37-A of Sales Tax Act, 1990 would make the provisions of Sales Tax Act, 1990 redundant, whereas, redundancy cannot be attributed to legislation.

Default surcharge ought not to be imposed in a perfunctory manner and may only be warranted upon proper adjudication as to willful default and the presence of mens rea.

Penalties under fiscal laws are quasi criminal in nature and warrant imposition in the presence of culpable intent.

Even non-payment of tax due to misinterpretation of law in good faith does not attract a penalty.

Neither the smuggled goods nor the carrier (coach) was produced before the Trial Court, which were required to be produced by the prosecution in support of its version

None of the passengers of the coach nor its conductor were associated as witness by the Investigating Officer

Benefit of such doubt was not extended in favour of the accused by the Trial Court at the time of recording conviction of the accused, for which he was entitled

Impugned judgment suffered from mis-reading, non-reading and mis-appreciation of law and evidence, which was not sustainable

Appeal against conviction was accepted, in circumstances.

Imposing of penalties in case of committing default in payment of tax or late filing of sales tax returns is not automatic and some determination which regard to element of mens rea is required and the presence of mens rea is essential for imposition of any penalty under the law

Mens rea, in short, denotes the state of mind that would compel a person to deviate from the law or to commit an offence which also encompasses recklessness within its ambit

Concept of mens rea basically resolves around the state of mind and the conduct of the person and it is necessary to establish mens rea before levying penalty.

Imposing of penalties in case of committing default in payment of tax or late filing of sales tax returns is not automatic and some determination with regard to element of mens rea is required and the presence of mens rea is essential for imposition of any penalty under the law

Mens rea in short denoted the state of mind that would compel a person to deviate from the law or to commit an offence which also encompassed recklessness within its ambit

Concept of mens rea basically revolved around the state of mind and the conduct of the person

Necessary to establish mens rea before levying penalty and imposition of penalty was a quasi-criminal act.

Section 3 of Sales Tax Act, 1990 is a charging section but under the said section the appropriate authority is officer of Inland Revenue, whereas S.6 defines the mode and manner of collection of sales tax at import stage by the Customs Authority, resultantly, it is not a charging section instead a machinery section

Section 7 of the Sales Tax Act, 1990, speaks about determination of tax liability at the time of filing of sales tax return under S. 26 of the Sales Tax Act, 1990, this is a machinery section as well and S.33 contains penal clauses synonymous to S. 156(1) of the Customs Act, 1969

Section 34, Sales Tax Act, 1990, speaks about default surcharge to be paid upon contravention and establishing of the charge under charging section

Section 148 of Income Tax Ordinance, 2001, prescribes the procedure for collection of income tax at import stage by the authorities referred therein, meaning thereby that the said sections are independent under which no charge can be invoked.

Appellant was imposed upon penalties for its failure to furnish monthly statements in term of S.165 of Income Tax Ordinance, 2001

Validity

Appellant had reasonably explained the cause of its failure to file the statements by stating that it was facing problems in electronically filing them because in some cases IRIS portal was not importing CPRs while uploading the CPRs from the payment tab of IRIS

Appellant had shifted the burden of proof upon the department and the department had a very good chance to controvert the alleged ineffectiveness of IRIS but nothing was available on the record which could suggest that the department had tried to controvert such assertion

Department could not be permitted to generate new income under the grab of penalty

Impugned order was set aside

Appeals were accepted.

Section 33 of Sales Tax Act, 1990, contains penal clauses synonymous to S.156(1) of Customs Act, 1969 and can only be invoked for the contravention of the respective provisions of Sales Tax Act, 1990 and not the Customs Act, 1969

Section 148 of Income Tax Ordinance, 2001, prescribes the procedure for collection of income tax at import stage by the authorities referred therein, meaning thereby that the said sections are independent under which no charge can be invoked

Provisions of Sales Tax Act, 1990 and Income Tax Ordinance, 2001, can only be invoked for the contravention of the respective provisions of Sales Tax Act, 1990 and Income Tax Ordinance, 2001 and not for the Customs Act, 1969

Referred sections of Sales Tax Act, 1990 and Income Tax Ordinance, 2001, are independent and have no nexus whatsoever with any provision of the Customs Act, 1969

Issuance of show-cause notice by invoking irrelevant/erroneous sections of independent statute by unauthorized authority rendered the same void and of no legal effect.

Penalty can only be imposed if non-payment of tax on the part of taxpayer is proved as mala fide, wilful, contumacious and having an element of mens rea.

Reply of the appellant to show-cause notice was accompanied by copies of invoices and break up/summary of expenses in the prescribed format

Commissioner had passed the order on the same date when the reply was filed, which indicated that the documents provided by appellant were not even looked into properly

Appeal was accepted, impugned order was set aside and the case was remanded for decision afresh.

Penalty provisions are at least quasi-criminal proceedings and the presence of mens rea is essential for imposition of any penalty under the Income Tax Ordinance, 2001.

Appellant filed monthly statements under S.165, Income Tax Ordinance, 2001 but the assessing officer observed that the tax was not properly withheld

Assessing officer held that out of the salaries paid at Rs.22,937,920/-, taxable payments were shown at Rs.14,729,456/- and the record of the remaining amount of Rs.8,208,464/- was not produced; out of the other expenses amounting to Rs.74,690/-, only record relating to the amount of Rs.4500/- was produced and that the amounts of Rs.74,164/- and Rs.49,598/- on account of repair, maintenance, printing and stationery were not supported by the required details

Validity

Assessing officer had not specifically mentioned the details which were withheld

Assessing officer had imposed the penalty without confronting the appellant and without establishing mens rea

Appellate Tribunal remanded the matter to the assessing officer with directions to specifically identify the payments for which details were not provided

Appeals were disposed of accordingly.

Section 3 of Sales Tax Act, 1990 is a charging section and under this section the appropriate authority is an Officer of Inland Revenue

Section 6, Sales Tax Act, 1990 defines the mode and manner of collection of sales tax at import stage by the customs authorities, resultantly it is not a charging section instead, it is a machinery section

Section 33 contains penal clauses and S.34, Sales Tax Act, 1990 speaks about default surcharge to be paid upon establishing the charges under the charging sections

Section 148 of Income Tax Ordinance, 2001 prescribes the procedure for collection of income tax at import stage by the authorities referred therein

No charge can be framed and show-cause notice cannot be issued under said sections, which are independent and have no nexus with each other.

Section 3 of Sales Tax Act, 1990 is a charging section and under said section the appropriate authority is an Officer of Inland Revenue

Section 6, Sales Tax Act, 1990 defines the mode and manner of collection of sales tax at import stage by the customs authorities, resultantly it is not a charging section instead, it is a machinery section

Liability of sales tax of a registered person is determined for a tax period under S. 7, which stipulates that, subject to the bar contained under S. 8, a registered person is entitled to deduct the input tax that has already been paid from the output tax

Net amount arising thereby is paid along with the monthly return under S.26 of Sales Tax Act, 1990

Section 33 contains penal clauses and S.34 provided default surcharge to be paid upon establishing the charges under the charging sections

Section 148 of Income Tax Ordinance, 2001 prescribes the procedure for collection of income tax at import stage by the authorities referred therein

No charge can be framed under said sections

No show-cause notice can be issued under said sections, which are independent and have no nexus with each other.

Section 3, Sales Tax Act, 1990, being a charging section cannot be invoked by anyone other than an officer of Inland Revenue

Section 6 is a machinery section that lays down the procedure relating to collection of sales tax at import stage

Customs authorities, with the exception of Clearance Collectorate, cannot charge anyone under the said section

Section 7 provides determination of sales tax liability at the time of filing sales tax return, and thus a machinery section

Section 33 contains penal clauses synonymous to S. 156(1) of Customs Act, 1969 and S.34 provides about default surcharge to be paid upon contravention and establishment of charge

Both the sections are independent under which no charge can be invoked

No show-cause notice can be issued under said sections

Issuance of show-cause notice while invoking irrelevant/erroneous provisions renders the same void ab initio and of no legal effect.

Section 3, Sales Tax Act, 1990, being a charging section cannot be invoked by any Authority other than an officer of Inland Revenue

Section 6 of the said Act is a machinery section that lays down the procedure relating to collection of sales tax at import stage while S.7 lays down about determination of sales tax liability at the time of filing sales tax return, thus a machinery section

Section 33 of Sales Tax Act, 1990 contains penal clauses synonymous to S.156(1) of Customs Act, 1969

Section 34 of Sales Tax Act, 1990 deals with default surcharge to be paid upon contravention and establishment of charge

Section 148, Income Tax Ordinance, 2001 prescribes the procedure for collection of income tax at import stage by the authorities referred therein

Said sections are independent under which no charge can be invoked

No show-cause notice can be issued under aforesaid sections which are independent and have no nexus with each other

Issuance of show-cause notice while invoking irrelevant/erroneous provisions renders the same void ab initio and of no legal effect.

High Court may have relied upon a wrong provisions of law (in the Sales Tax Act, 1990], and enhanced the amount of fine imposed by the Trial Court, but the same power was also available to the High Court under S. 37-A(3) of the said Act, therefore, no prejudice had been caused to the accused persons on account of erroneous application of the relevant provision of the Sales Tax Act, 1990 by the High Court

Appeal was dismissed accordingly.

On the basis of voluntary confessional statements of the accused persons, the Trial Court convicted them, however, the sentence awarded was the period they had already spent in jail which was treated as sentence already undergone

Further, a fine/penalty in the sum of Rs.3000/- was imposed in each case

High Court maintained the punishment of sentence undergone but enhanced the amount of fine imposed by the Trial Court to the amount equal to loss of tax fraud committed; held, that the question of discretion in imposing fine had become totally irrelevant on account of the 'clear and unequivocal admission/ confession made by the accused persons that they had committed the offence and defrauded the exchequer of an amount of Rs.2,04,60,105/

After having allowed the imprisonment as that already undergone, the amount of fine imposed should have been equivalent to the loss caused to the exchequer

No justification or reason had been recorded by the Trial Court for the exercise of discretion in favour of the accused persons by imposing a paltry sum of Rs.3000/- as fine in a mechanical manner

High Court validly and for appropriate reasons, enhanced the amount of fine

Appeal was dismissed accordingly.

Court should impose a fine which was commensurate with the amount of loss that the accused had caused to the exchequer through tax fraud

Expression, "may extend" used in S. 37-A(3) of the Sales Tax Act, 1990 did not mean that the court had an unbridled and unrestricted discretion to impose as much or as little fine, as it may deem fit

Discretion had to be exercised keeping in view the facts and circumstances of the case.

High Court may have relied upon a wrong provisions of law (in the Sales Tax Act, 1990], and enhanced the amount of fine imposed by the Trial Court, but the same power was also available to the High Court under S. 37-A(3) of the said Act, therefore, no prejudice had been caused to the accused persons on account of erroneous application of the relevant provision of the Sales Tax Act, 1990 by the High Court

Appeal was dismissed accordingly.

On the basis of voluntary confessional statements of the accused persons, the Trial Court convicted them, however, the sentence awarded was the period they had already spent in jail which was treated as sentence already undergone

Further, a fine/penalty in the sum of Rs.3000/- was imposed in each case

High Court maintained the punishment of sentence undergone but enhanced the amount of fine imposed by the Trial Court to the amount equal to loss of tax fraud committed; held, that the question of discretion in imposing fine had become totally irrelevant on account of the clear and unequivocal admission/confession made by the accused persons that they had committed the offence and defrauded the exchequer of an amount of Rs.2,04,60,105/

After having allowed the imprisonment as that already undergone, the amount of fine imposed should have been equivalent to the loss caused to the exchequer

No justification or reason had been recorded by the Trial Court for the exercise of discretion in favour of the accused persons by imposing a paltry sum of Rs.3000/- as fine in a mechanical manner

High Court validly and for appropriate reasons, enhanced the amount of fine

Appeal was dismissed accordingly.

Court should impose a fine which was commensurate with the amount of loss that the accused had caused to the exchequer through tax fraud

Expression, "may extend" used in S. 37-A(3) of the Sales Tax Act, 1990 did not mean that the court had an unbridled and unrestricted discretion to impose as much or as little fine, as it may deem fit

Discretion had to be exercised keeping in view the facts and circumstances of the case.

Petitioner in the present case, sought quashment of FIR registered against him under S. 23(1) of the Foreign Exchange Regulation Act, 1947, on the ground that the basis of the FIR was a raid carried out at petitioners' premises without obtaining a warrant

Validity

Federal Investigation Agency conducted raid at the premises of the petitioner in violation of S.19(3) of Foreign Exchange Regulation Act, 1947 as under said section it was mandatory that before carrying out any proceedings, a complaint in writing by a person authorised by the Federal Government or State Bank, supported by statement of said person on oath, was to be made and the same was a mandatory requirement before issuance of warrant by court of competent jurisdiction

Impugned FIR and all consequential proceedings against petitioner were, therefore, liable to be quashed

Constitutional petitioner was allowed, accordingly.

Accused were charged with allegations that they were involved in charging sales tax on fake invoices and they were not depositing the same in the government exchequer, thus had caused huge loss to national exchequer

Trial Court convicted accused persons on basis of confessional statements

Validity

Filing a Constitutional petition, rather than revision against an order passed on confessional statement of accused, carried no weight

Non-mentioning of exact amount in charge sheet by Trial Court was not fatal so as to vitiate whole proceedings

Accused persons were convicted under Ss. 33(5), 33(11) & 33(13) of Sales Tax Act, 1990

Revision petitions were disposed of accordingly.

Violation of any provision of Pakistan Electronic Media Regulatory Authority Ordinance, 2002 is a cognizable offence punishable with imprisonment for a term which may extend to 4 years or with fine or both in addition to the confiscation of the equipment

Any authorized officer or its nominee can physically inspect a distribution service station at any time and in doing so he can seek the aid of police

If any violation of the Ordinance, rules, regulations or terms and conditions of licence is found, the officer can seize the equipment.

No penalty under S. 33 of Sales Tax Act, 1990 could be imposed and adjudged against a taxpayer through an adjudication order until and unless each and every subsection was specifically mentioned and confronted in show-cause notice and if any penalty imposed without confronting relevant provisions as contained in subsections of S. 33 of Sales Tax Act, 1990 it would definitely fell beyond the scope, stance and contents of show-cause notice which would render the same illegal, unlawful and void ab initio

Where any adverse finding was given in adjudication order on allegations or violation or provisions of law which were not incorporated and confronted in show-cause notice then entire proceedings would be rendered illegal and void for reason of breach of principles of natural justice which was also breach of law.

Taxpayer contended that sales tax liability for the period from 15-3-2011 to 30-6-2012 had been discharged through cash payment by availing amnesty scheme; and whole principal amount of sales tax had been paid before 30-6-2013 during currency of amnesty scheme; and recovery on account of default surcharge and penalties shall remained abated

Validity

Since taxpayer had discharged his sales tax liabilities by way of depositing principal amount of sales tax within the time frame given under amnesty scheme granted by the Federal Government through a notification duly published in the official gazette, nothing remained payable as an additional amount on account of any default surcharge and penalty.

Heavy penalties had been imposed and adjudged in the adjudication order, whereas no such penalties under the provisions of any of subsections of S.33 of the Sales Tax Act, 1990 had been cited and confronted in the Show-Cause Notice

Validity

No penalty under any subsections (2), (5), (7), (8) & (13) of S.33 of the Sales Tax Act, 1990 could be imposed and adjudged against a taxpayer through an adjudication order until and unless each and every subsection was specifically confronted in the Show Cause Notice and if any penalty was imposed without confronting the relevant provisions as contained in any subsections of S.33 of the Sales Tax Act, 1990, it would definitely fall beyond the scope of Show-Cause Notice which would render the same illegal, unlawful and void ab initio.

Penalty under S, 182(1) of the Income Tax Ordinance, 2001, could be charged up to 0.1% of the tax payable or Rs.5,000 whichever was higher

Section 182(1) of the Income Tax Ordinance, 2001 specifically provided that penalty shall be imposed on the basis of tax payable, whereas in the present case, no tax had become payable on deemed assessment completed for tax years 2010 and 2011

For imposing penalty for default under S.114 of the Income Tax Ordinance, 2001, the pre-requisite was the "tax payable" by a taxpayer which was missing in this case

Levy of penalty was illegal and unjustified

Law should not be used to penalize a taxpayer unless it could be shown that the default on the part of taxpayer had resulted in any loss of revenue

In the present case, no such loss of revenue was evident

First Appellate Authority had rightly deleted the levy of penalty under S.182 of the Income Tax Ordinance, 2001 for tax years 2010 and 2011 which action was maintained by the Appellate Tribunal

Departmental appeal being filed without any merit or substance was rejected.

Revenue had adjusted the adjudged principle amount of sales tax against its refund in consequence of a letter of the taxpayer

Federal Board of Revenue, at the relevant time, issued S.R.O. 648(I)/2011 dated 25-6-2011 which applied to the taxpayer's case as well

Request of the taxpayer on this score in the light of amnesty order/S.R.O. 648(I)/2011, dated 25-6-2011 was allowed and order-in-original was modified accordingly.

Penalty and additional tax was imposed without prior show cause notice while it was also not held that the conduct of the taxpayer was contumacious, mala fide, and deliberate.

Invocation of S.33 of the Sales Tax Act, 1990 without invoking the specific subsection and/or relevant clause of S.33 of the Sales Tax Act, 1990

Validity

Section 33(1) of the Sales Tax Act, 1990 and S.33(2) of the Sales Tax Act, 1990 revealed that the two subsections provided for different penalties for different contraventions, yet the Adjudicating Officer, in the present case, jumping subsection (1) of S.33 of the Sales Tax Act, 1990 and its specific clauses proceeded to impose penalty under S.33(2) of the Sales Tax Act, .1990 without invoking it in the show-cause notice

Affected party needs to be confronted with specific provisions of law under which it was intended to be penalized, this having not been done, the penalty imposed under 5.33 of the Sales Tax Act, 1990 was not sustainable.

Non-payment of tax at the enhanced rate of 181 and late payment of differential amount could not be treated as wilful or mala fide in view of explanation given by the appellant

Demand of additional tax raised on this account was dropped and penalty imposed was remitted by the Appellate Tribunal keeping in view the overall circumstances of the case.