Assessment of tax

Section 23 of the Sindh Sales Tax on Services Act, 2011 ('the Act 2011') prescribes the procedure for assessment of tax and its subsection (2), while prescribing the procedure to be adopted by the Assessing officer prior to determining the tax liability, categorically shows that, prior to passing "the Original Order", the Assessing Officer must give to the taxpayer a show-cause notice ; its purpose is to put the person on notice about the allegations for which the authorities intend to proceed against him and to give an opportunity to explain his position

Main object of issuance of a show-cause notice is to intimate the concerned party about nature of allegations, contravention and penal action intended to be taken against him, therefore, it is mandatorily required to be served upon the taxpayer under S. 75 of the Act, 2011

Section 75 of the Act 2011 provides procedure for service of notice, order or requisition on a person named therein either in person, through agent, by registered post, by courier service or in the manner provided for service of a summons under the Code of Civil Procedure, 1908

However, S. 75 of the Act, 2011 is required to be read in juxtaposition with S. 27 of the General Clauses Act, 1897 ('the Act 1897') which provides that wherever in a Provincial or a Central Statute the expression "served by post" or any other similar expression is used, then "the service shall be deemed to be affected by properly addressing, prepaying and posting by registered post a letter containing the document"

Section 27 of the Act, 1897 provides for the raising of a presumption that unless contrary is proved, the service of addressee shall be deemed to have been affected

Though, undoubtedly, under S.27 of the Act, 1897 there is a presumption that the addressee has received the letter sent by registered post but such presumption is rebuttable and it is open to the party concerned to raise objection before the Court to deny the presumption by stating that he never received any notice

In the present case, the Appellant denied the presumption of effective service and the respondent / Department had produced proof of delivery of show-cause notice as well as "the Original Order", which were duly acknowledged by two persons including appellant

In such circumstances, the burden to prove such contention laid upon the appellant

Although the appellant denied proper service of show-cause notice and "the Original Order" but he did not bring on record anything supporting his contention, and he did not even mention the source of information through which he came to know about "the Original Order"

Therefore, it stood proved that appellant was duly served with the show-cause notice prior to passing "the Original Order"

Perusal of "the Original Order" showed that the same had been passed on the strength of the record available on appellant's portal and not merely because of his absence

As the appellant was duly served but he deliberately remained away from the proceedings, therefore, principle of audi alteram partem' was not applicable in the present case

In absence of any defense, despite valid service, the Assessing Officer had no other option but to proceed against the appellant ex-parte

Appeal stood dismissed.

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.

When legislators have authorized the assessment officer under subsection (3) of S. 40 to condone the delay caused in making assessment order after issuance of the show cause notice to the defaulter who has not deposited the amount of sales tax due to the authority under the law, then the authority in terms of S.99 cannot extend the delay, if any, caused by the assessment officer in passing assessment order within time set out under subsection (3) of S.40 after show cause notice to the taxpayer.

Mere notice did not ordinarily give rise to any cause of action as it did not amount to an adverse order which affected rights of any party

Tendency to assail notices in Constitutional jurisdiction while bypassing statutory hierarchy of remedy and redress was deprecated

High Court declined to interfere in the notices issued by authorities to petitioners

Constitutional petition was dismissed, in circumstances.

Pursuant to filing of a sales tax return on monthly basis before the due date, no right accrues to the service providers for a number of reasons

Such is only a determination of input/output tax adjustment and its refund, if any

No finality of the same as against the concept of a deemed assessment order

Service recipient is merely required to see that whether any sales tax has been charged to it by the service provider; and if so, then the service recipient is entitled to adjust the same as its input tax

Secondly, it may be a case that the service recipient is to act as a withholding agent under the Sindh Sales Tax on Services Act, 2011; and in all such circumstances it has nothing to do with any vested right being accrued to it.

Appellant was taxed for his failure to pay output tax against amounts received/revenue earned on international incoming calls, being taxable activity under entry No. 6 of 2nd Schedule to the Punjab Sales Tax on Services Act, 2012

Contention of appellant was that its activity being export of services was exempt from payment of tax in Punjab under R.12 of Punjab Sales Tax on Services (Adjustment of tax) Rules, 2012

Validity

Rule 12 of Punjab Sales Tax on Services (Adjustment of Tax) Rules, 2012, was a conjunctive provision which had to satisfy all the conditions mentioned therein, since the said services had been used in Pakistan therefore, no relief could be pleaded under said rule

Contention of appellant was rejected

Appeal was party allowed.

Appellant was taxed for his failure to pay output tax against amounts received/revenue earned on international incoming calls, being taxable activity under entry No. 6 of the 2nd Schedule to the Punjab Sales Tax on Services Act, 2012

Validity

Activity of long distance international calls fell under telecommunication services being an integral part of the same

Appellant itself had admitted to be engaged into various telecommunication services agreements with foreign LDI (Long-Distance and International) companies

Appellant was found to be engaged in providing LDI calls and allied telecommunication services

International incoming calls had been notified by PTA on agreed settlement rate and such services constituted value of taxable service and the Punjab was entitled to collect tax to the extent of international incoming calls terminating in Punjab

Activity of appellant being telecommunication services squarely fell under serial No. 6 of the 2nd schedule to the Punjab Sales Tax on Services Act, 2012, hence taxable

Appeal was party allowed.

Appellant was taxed for his failure to pay output tax against amounts received/revenue earned on international incoming calls, being taxable activity under entry No. 6 of the 2nd Schedule to the Punjab Sales Tax on Services Act, 2012

Contention of appellant was that it had already paid sales tax on certain amount but it was not excluded from the total value while calculating the sales tax liability

Validity

Appellate Tribunal directed the officer exercising jurisdiction over the case to seek the proofs of sales tax paid by the appellant and accordingly exclude the corresponding revenue from the taxable value of service

Adjudicating officer was required to have calculated the amount by applying Tax Fraction Formula

Adjudicating officer was further directed to afford reasonable opportunity to the appellant for furnishing the proof of tax paid to tax authorities other than Punjab with a view to ascertaining the actual quantum of liability payable to Punjab Revenue Authority

Appeal was party allowed.

Show-cause notice issued to the appellant alleged that it being franchisee had deposited certain amounts in the Bank account of the franchiser on account of royalty and advertisement, etc

Additional Commissioner, on failure of appellant to file any reply, passed the assessment order

Appeal filed against said order was dismissed

Validity

Appellant had failed to file any reply or submit any documents before the Additional Commissioner, but in total contrast to the admitted fact, the Commissioner (Appeals) in his order had stated that impugned order was passed after taking into account the contentions and documents produced by the appellant before the Additional Commissioner

Observation of the Commissioner (Appeals) was sufficient to hold that the Commissioner (Appeals) did not look into the record rather the order was passed merely on the basis of his imagination

Commissioner (Appeals) had mentioned the arguments of the appellant in the opening paragraph of his order but had failed to dilate upon the grounds of the appellant i.e. double taxation, wrong calculation of tax liability and paying of tax by the appellant throughout the period of alleged default

Order passed by Commissioner (Appeals) did not fulfill the requirements of the adjudication rules

Case was remanded to the Commissioner (Appeals) for decision afresh.

Show-cause notice issued to the appellant alleged that it being franchisee was required to declare its true sales but such information was concealed which act was "tax fraud"

Additional Commissioner held the appellant liable for evasion of sales tax

Appeal against said order was dismissed

Validity

After issuance of the show-cause notice, total 5 dates of hearing were fixed by the Additional Commissioner

Except on two dates of hearing, no one appeared before the Additional Commissioner on behalf of the appellant and on all the said five dates of hearing, request for adjournments were made

Such conduct was more than enough to prove the lethargic and evasive attitude of the appellant

Additional Commissioner had rightly observed that the continuous absence and requests for adjournments had proved that the appellant had nothing to say in its defence

Record on the basis of which show-cause notice was issued was the sales tax returns of the franchiser, therefore, it could not be considered as controversial

No benefit could be extended to the appellant for its lethargic, evasive and contumacious attitude and conduct before the lower forums

No illegality or irregularity was found in the impugned orders

Appeal was dismissed.

Show-cause notice was issued to the appellant for providing construction services to Civil Aviation Authority under a contract

Despite providing taxable services the appellant neither declared the same in sales tax returns nor paid the tax under Punjab Sales Tax on Services Act, 2012

Additional Commissioner passed the order wherein the appellant was held liable to pay sales tax on services

Appeal filed against said order was dismissed, however, the tax payable by appellant was reduced

Contention of appellant was that Civil Aviation Authority could not be taxed by any Provincial Authority directly or indirectly and that since appellant was an agent of Civil Aviation Authority therefore, taxing the appellant would amount to taxing Civil Aviation Authority

Validity

Appellant tried its utmost to make it a case against the Civil Aviation Authority whereas Civil Aviation Authority never felt aggrieved of the impugned orders and never made any effort to become party to the proceedings

Contract between appellant and Civil Aviation Authority was admitted but despite demand copy of the contract was not provided by the appellant

Contract was an important document and the appellant was required to produce it before the concerned officer but he failed to do so which showed that the appellant had tried to conceal something from the Punjab Revenue Authority

Impugned orders were well-reasoned and speaking ones wherein all the aspects of the case were attended and discussed

Appeal was dismissed.

Assessing officer determined the sales tax to be payable by respondent on finding that the respondent had paid trade mark fee and management services fee on account of franchise services

Commissioner (Appeals) set aside the order-in-original by holding that respondent's place of business did not exist in Sindh and that both services were being received in another Province

Validity

Assessing officer had failed to consider the place where the respondent had acquired the services and where such services were used

Department had failed to establish that the franchise services were exclusively acquired within the territory of Sindh and such services were exclusively used for manufacturing in Sindh

Respondent had not disputed that its retail outlets were spread over in the entire province of Sindh

Services acquired by respondent were partly used in retailing and marketing in Sindh

Both the forums below had failed to consider such aspect of the case

Order-in-original and order-in-appeal were set aside, in circumstances

Case was remanded to the assessing officer to determine as to what part or portion of services acquired by the respondent were used in marketing and retailing in Sindh

Appeal was allowed.

Show-cause notice is a basic document and it sets the assessment proceedings in motion and is necessary to confront the taxpayer with the grounds on the basis of which show cause notice is issued so that the taxpayer may prepare his defence accordingly

Taxpayer cannot be taken by surprise and condemned unheard

Deviation from Tariff Heading confronted in the show cause notice is violative of law.

Adjudication Officer, during the course of examination of Sales Tax and Federal Excise returns of the registered person for the tax periods July 2012 to June 2013, observed certain discrepancies and show-cause notice was issued which culminated into an order-in-original

Appeal filed before the Commissioner Inland Revenue (CIR) (Appeals) was dismissed

Contention of registered person was that the Adjudication Officer had issued impugned second order-in-original in spite of the fact that first order for the same tax periods July 2012 to June 2013 was finalized by his predecessor by invoking the provisions of S.11(2) of the Sales Tax Act, 1990

Validity

Perusal of the first order-in-original passed as a consequence of post refund audit carried out under S.25, Sales Tax Act, 1990, appellate order passed by CIR (Appeals) and the Tribunal's order revealed that said orders were passed for the tax periods July 2012 to June 2013 which was again adjudicated by Adjudication Officer

Adjudication Officer lacked power to reopen, re-adjudicate and review proceedings in the garb of second show-cause notice under S. 11 of Sales Tax Act, 1990

Subsequent action to review or improve the first order could have been carried out by the higher authority i.e. either by the Federal Board of Revenue under S. 45A(1) or by the Commissioner under S.45A(4) of Sales Tax Act, 1990

Initiation of second adjudication through show cause notice and its completion through second order-in-original was not sustainable, which was accordingly annulled and the order of the CIR (Appeals) was accordingly vacated

Appeal of the registered person was allowed.

Blacklisting and suspension of a registration was an extreme step having paralyzing effect on business and on its financial reputation as well

Such action was to be taken as last resort after establishing gross violation of main factors i.e. (i) if registered person was found to have committed tax fraud and (ii) registered person had issued fake invoices

Due to sensitivity and severity of extreme action of blacklisting, legislature had assigned the powers of suspension and blacklisting under S. 21 to a senior officer i.e., a "Commissioner Inland Revenue"

Such action resulted in complete standstill of the business of the registered person, on the other hand, if an assessment order/order-in-original was passed under S. 11 and tax demand of billions of rupees was created, the business remained operative

Any order passed under S. 11 made only financial impact on business of only one person

Order of suspension or blacklisting any registered person was equal to complete closure and shutting down of business

Commissioner, as a result of suspension or blacklisting, basically declared transactions made by such person with other registered persons as illegal and void under the provisions of Sales Tax Act, 1990, which directly impacted legal right of such persons

Blacklisting order created hundreds or thousands of new litigations, which burdened tax judicial system

Appellate Tribunal observed that order of suspension or blacklisting had to be passed after full verification, complete scanning, satisfaction and authentication by Commissioner himself that tax fraud was established on registered person with documented concrete evidence.

Plea raised by taxpayer was that proper opportunity of hearing was not allowed to him and claim of input sales tax was disallowed on presumptions

Validity

No provision of delegation of powers like S.210, Income Tax Ordinance, 2001 existed with the Commissioner

Delegatee could not further delegate his powers and only Commissioner was competent and empowered to undertake assessment proceedings under S. 11 of Sales Tax Act, 1990 and not any other officer

Show cause notice issued under S. 11 of Sales Tax Act, 1990 by Additional Commissioner Inland Revenue was of no legal effect who was not empowered to issue notice and could not pass order in question as such powers exclusively vested with the Commissioner

Order-in-Original passed by Additional Commissioner Inland Revenue was without jurisdiction or in excess of jurisdiction and without any legal effect

Action of authorities was even otherwise not lawful as input tax was otherwise related to taxable activity or related to taxable supplies

Items on which input tax was claimed were allowable under S. 7 of Sales Tax Act, 1990 and none of input tax was unrelated to taxable activities/supplies

Items on which input tax was claimed otherwise did not fall in negative list of SRO No. 490/2004 dated 12-06-2004 as amended by SRO No.450(I)/2013 dated 27-05-2013

Electrical fittings, pipes, wires, cables, etc., were those directly used in taxable activity thus falling outside ambit of SRO No. 490/2004 dated 12-06-2004 as amended

Appellate Tribunal Inland Revenue set aside order passed by lower appellate authority

Appeal was allowed in circumstances.

Assessing Officer initiated proceedings against the registered person for violation of provisions of Ss.2(14), 7(2)(i) & 8(1)(ca) of Sales Tax Act, 1990 and vide order-in-original was directed to deposit principal amount, default surcharge and penalty

Said order-in-original was upheld by the appellate authority

Validity

Registered person had made purchases during the years 2011, 2012; while the units were blacklisted and suspended in the year 2013 and the matter was resolved

No provision existed in Sales Tax Act, 1990 to save directly show-cause notice to any person under S.11(2)(3) of said Act, without following procedure as prescribed by Ss.25, 38 & 72-B of said Act

In the present case, no notice under Ss.25, 38, 72-B of Sales Tax Act, 1990, was issued as per law for assumption of jurisdiction of the case

Impugned show-cause notice being coram non judice and without lawful authority, superstructure built on the same would fall flat

Once the self assessed tax due was considered to be correct and final, any order suffering from patent illegality or without jurisdiction, would deserve to be knocked out

Orders passed by the authorities below having no legal sanctity in the eye of law were vacated/annulled in circumstances.

Proceedings under S.11 of Sales Tax Act, 1990 can only be initiated through process of audit under S. 25 of Sales Tax Act, 1990

Self-assessed amount of tax due by taxpayer in its sales tax returns can only be altered through fresh assessment of tax under S. 11 of Sales Tax Act, 1990 subject to process of selection of taxpayer through audit provided under S.25 of Sales Tax Act, 1990

Material evidence collected for show-cause notice under S. 11(2) of Sales Tax Act, 1990 needs to be credible and can at best, pass test of fair trial and due process, if it is an outcome of an inquiry or investigation envisaged under proviso to S. 25(2) of Sales Tax Act, 1990 and/or in Ss. 37/38 of Sales Tax Act, 1990

Anything short of such process not only would lead to persecution of taxpayer and may make mockery of fundamental right of fair trial.

Taxpayer was aggrieved of show-cause notice issued under S.11(2) of Sales Tax Act, 1990 for recovery of additional tax liabilities without selection of case or without audit by Commissioner Inland Revenue

Validity

No provision of delegation of powers like S.210 of Income Tax Ordinance, 2001 existed with Commissioner Inland Revenue

Delegatee could not further delegate his powers and only Commissioner was competent and empowered to undertake assessment proceedings under S.11 of Sales Tax Act, 1990 and not any other officer

Show-cause notice issued under S.11 of Sales Tax Act, 1990 by Additional Commissioner Inland Revenue was of no legal effect who was not empowered to issue notice and could not pass order in question as such powers exclusively vested with the Commissioner

Order-in-Original passed by Additional Commissioner Inland Revenue was without jurisdiction or in excess of jurisdiction and without any legal effect

Such show-cause notice issued under S.11 of Sales Tax Act, 1990 was ab initio void, illegal as notice was to be issued under S.25 of Sales Tax Act, 1990

Web-portal Evidence Showed that all the parties which were blacklisted subsequently were active taxpayers at the time of transactions

Appellate Tribunal Inland Revenue set aside the orders passed by officers below as same were without jurisdiction

Appeal was allowed accordingly.

Taxpayer was aggrieved of post remand proceedings where no fresh show-cause notice was issued under S.11(2) of Sales Tax Act, 1990 for recovery of additional tax liabilities without selection of case or without audit by Commissioner Inland Revenue

Validity

Appellate Tribunal Inland Revenue had remanded cases for fresh considerations after affording reasonable opportunity of being heard to the registered persons

Resultantly, original orders as well as show-cause notices were cancelled and set aside by Tribunal

Assessing Officer in order to initiate fresh consideration for tax periods under S.11 of Sales Tax Act, 1990, was to issue fresh show-cause notices and after affording reasonable opportunity of being heard, had to finalize proceedings after fulfilling conditions laid down under provisions of S.11 of Sales Tax Act, 1990

Assessing officer, in the present case, after remand of cases did not initiate proceedings under S.11 of Sales Tax Act, 1990 and instead of issuing fresh show-cause notices, issued hearing notice

Such order passed by assessing officer under Ss.33 & 34 of Sales Tax Act, 1990 without assessment of principal amount of tax and based on earlier show-cause notice were not maintainable, without jurisdiction which were set aside

No provision of delegation of powers like S.210 of Income Tax Ordinance, 2001 existed with the Commissioner Inland Revenue

Delegatee could not further delegate his powers and only Commissioner was competent and empowered to undertake assessment proceedings under S.11 of Sales Tax Act, 1990 and not any other officer

Show-cause notice issued under S.11 of Sales Tax Act, 1990 by Additional Commissioner Inland Revenue was of no legal effect as he was not empowered to issue notice and could not pass order in question, as, such powers exclusively vested with the Commissioner

Order-in-Original passed by Additional Commissioner Inland Revenue was without jurisdiction or in excess of jurisdiction and without any legal effect

Penalty and default without mala fide intention was not maintainable in the eyes of law

Such penalty and default and surcharge imposed were deleted

Appeal was allowed accordingly.

Case of appellant was selected for audit under S.42-B of the Federal Excise Act, 2005 and Assessing Officer, proceeded to pass the assessment order along with default surcharge and penalty against the appellant

Appeal filed by the appellant, was partially rejected by the Appellate Authority

Validity

Main issue involved in the appeal was; whether the appellant was liable to adjust input tax on food, beverages and other services in terms of S.7 of the Sales Tax Act, 1990, or it would hit by Notification No. SRO 490(I)/2004, dated 12-6-2004

Appellant, being an Airline, under Sales Tax Act, 1990, was entitled for the adjustments of input tax in terms of S.7 of the Act and Notification S.R.O. No.550(I)/2006, dated 5-6-2006 on food, beverages and other services

Provisions of Sales Tax Act, 1990, were applicable on the services rendered in respect of travel by air of passengers within the territorial jurisdiction of Pakistan

Collection of Federal Excise Duty on services rendered by Airline within territorial jurisdiction of Pakistan, was deemed to be like the output tax payable on supplies (Supply of Services) under Sales Tax Act, 1990

Passengers were offered meals/eatables and drinks etc. during the flight; which had direct nexus and was integral part of travel service to passengers

Flight crew/staff, between the period of returning from one flight to another flight, was entitled to stay in designated hotels arranged by the Airline

Any input tax incurred with reference to crew, was directly attributed to the taxable activity of the Airline

Any sales tax paid/incurred on the crew/staff of the Airline and the input tax paid on the refreshment of passengers, was having direct attribution on the furtherance of taxable activity

Any input tax paid on said activity, was admissible in terms of S.7 of the Sales Tax Act, 1990

Input tax suffered on account of receiving services from different vendors/suppliers was admissible

Assessing Officer, had failed to point out a single instance of misuse of personal usage on part of the management of Airline in respect of input tax incurred

Notification SRO No.490(I)/2004, dated 12-6-2004, provided exception to items on which the input tax was not admissible

Exemption was for the 'goods', otherwise than 'stock in trade'

Input tax claimed by the Airline, was allowed and demand raised in that respect, was deleted and appeal was accepted accordingly.

Conditions/ situations mentioned in show-cause notice under S.11 of the Sales Tax Act, 1990; that the registered person had failed to file the returns; that the registered person had not paid the tax due on supplies or made short payment or had claimed input tax credit or refund which was inadmissible

If assessment was made in absence of any detail or proper allegation regarding said situations, same would be misconceived

Appellate Tribunal observed that Adjudicating Authority was required to apply its mind cautiously to indicate under S.11(2) of the Sales Tax Act, 1990 as to under what situation assessment was sought

Assessment to some extent being a penal action; registered person had to be prepared to meet the consequences of an assessment of tax

In the present case, no revenue loss was involved, particularly, when the supplier had already collected and deposited the output tax

Registered persons having not violated any provisions of S.11(2) of the Sales Tax Act, 1990, order-in-original was not sustainable and appellate authority had erred in law to uphold the same

Impugned orders of both the authorities below, being illegal and void ab initio on facts as well as on legal issues, were set aside by the Tribunal, in circumstances.

Registered person who was engaged in the business of sales of imported goods and fell under F.T.R. vide SRO No.645(I)/2007 dated 27-6-2007; in compliance of letter had explained in detail before the adjudicating authority, that as Government had collected at import stage tax at the rate of two percent of the value of goods imported by commercial importer; in addition to the tax chargeable under S.3(1)(2) of the Sales Tax, no sales tax would be charged from the said importers on subsequent supply of goods imported by them

Adjudicating Officer, while passing the order-in-original, had not considered the submission made by the registered person

Charge levelled in the show-cause notice, was held to be established and recoverable under S.11(2)(3) of the Sales Tax Act, 1990

Said order-in-original, had been upheld by the Commissioner Inland Revenue (Appeals)/Appellate Authority below

Validity

Under relevant provisions of Ss.7-A & 71 of Sales Tax Act, 1990 and SRO No. 645(I)/2007, dated 22-6-2007, importer was entitled to deduct input tax paid during a tax period for the purposes of taxable supplies made, from the output and the value addition tax paid at the import stage would form part of the input tax

Conditions stipulated in S.11 of the Sales Tax Act, 1990, did not exist in the case, impugned order under S.11(2)(3) of the Sales Tax Act, 1990, was misconceived

Adjudicating authority was required to apply its mind cautiously and indicate the registered person as to under what reason assessment of tax was sought

Notice issued to the registered person was defective and the error was not curable; as it did not indicate the reason to reassess the already assessed tax

Impugned show-cause notice being illegal ab intio, proceedings initiated on the basis of the said notice, were set aside

Impugned orders of both the authorities, being illegal and void ab initio were cancelled by the Appellate Tribunal.

Imposition of penalty on taxpayer for non-payment of sales tax on services in terms of S.43 of the Sindh Sales Tax on Services Act, 2011

Reference to High Court

Question before the High Court was whether the Appellate Tribunal was justified in deleting penalty imposed on the taxpayer in terms of Serial Number 3 of S.43 of the Sindh Sales Tax on Services Act, 2011

Validity

Perusal of record revealed that Appellate Tribunal had confirmed penalty on the taxpayer for non-registration and failure to file returns but deleted the penalty imposed in terms of Serial Number 3 of S.43 of the Sindh Sales Tax on Services Act, 2011 for the reason that since there was no assessment order passed under S.23 of the Sindh Sales Tax on Services, 2011 by which taxpayer's liability could be determined, therefore the said penalty was not justified

High Court observed that in absence of determination of any sales tax liability through an assessment under S.23 of the Sindh Sales Tax on Services Act, 2011, penalty on taxpayer in terms of Serial Number 3 of S.43 of the Sindh Sales Tax on Services Act, 2011 could not be imposed

Order of Appellate Tribunal, therefore, depicted the correct legal position

Reference was answered, accordingly.

Record had shown that assessee had made late payments beyond one hundred and eighty days to his supplier and received refund of input tax on the strength of invoices issued by said suppliers, who subsequently were blacklisted

No controversy existed in the manner of payments, having been transacted through prescribed Banking mode; but its time was delayed over one hundred and eighty days, beyond date of tax invoice, due to certain financial constraints and pecuniary hardship

Such act on the part of assessee, was not deliberate and contumacious having caused for financial problems, which was beyond control of assessee

Said procedural lapse, and technical omission, entailing no revenue loss at all, was condoned to maintain inalienable right of input tax and assessee, could not be deprived of his statutory right of input tax due to any procedural omissions; because neither any procedural mistake would affect legal entitlement; nor such procedural lapse had caused any prejudice to the department

Acts of inadvertence on the part of assessee, due to any procedural mistake would not create demand of sales tax

Liability to pay sales tax was on the supplier under S.3(3)(a) of Sales Tax Act, 1990, which was independent to the provisions of S.73 of the Sales Tax Act, 1990

Deposit of sales tax, being independent to payment under S.73 of the Sales Tax Act, 1990, in case of delayed payments, no revenue loss was involved, particularly when the supplier had already paid output tax to the Government

Demanding refunded amount of input tax back from the buyer, despite having it deposited by the supplier in the national exchequer, would amount to double taxation, not permissible under any law

Refund of input tax, was a substantive right of the assessee, which could not be taken away or withheld on mere technicalities and procedural lapses

Subsequent blacklisting, would not disentitle the buyer from his lawful right of input tax in respect of invoices issued, when supplier was a registered and active person, unless those invoices were specifically declared false; and had direct nexus with blacklisting

Impugned order of the department being based on facts, and strictly in accordance with law, would not call for any interference which was upheld

Appeal filed by the department, being devoid of any merits was dismissed, in circumstances.

Show-cause notice was issued as to why inadmissible input tax may not be rejected and declared output tax may not be recovered from appellant under S.11(3) of the Sales Tax Act, 1990, along with default surcharge and penalty under Ss.33 & 34 of the Sales Tax Act, 1990

Appellant was proceeded in absentia without providing him any opportunity of hearing, and case was decided at his back

Said order of adjudicating Authority had been upheld by Appellate Authority below

Validity

Impugned show-cause notice and consequent adjudication order pertaining to the period from July 2008 to March 2012 for recovery of sales tax purportedly adjusted illegally, issued under S.11(3) of the Sales Tax Act, 1990 were illegal and without jurisdiction; because at that juncture of time, in case of any inadmissible and illegal input tax adjustment, the provisions of S.36 of the Sales Tax Act, 1990, were applicable for its recovery and by virtue of Finance Act, 2012 provisions of S.36 of the Act, were deleted and new S.11(3) was inserted to the Sales Tax Act, 1990, in such case, where any recovery of inadmissible and illegal adjustment was requisitioned

Deletion of S.36 and insertion of S.11(3) of Sales Tax Act, 1990, had no retrospective application and was without any saving clause for protection of recovery cases under S.36, for the period prior to that insertion

Whole exercise carried out under S.11(3) of the Sales Tax Act, 1990 was illegal, unlawful and without jurisdiction

Provisions of S.11(3) of the Act, were not deemed to be curative, remedial and beneficial in nature; as it curtailed right of a registered person not to be called upon to show-cause notice after expiry of time limitation under S.36(2) of the Sales Tax Act, 1990 by impeding him with tax liabilities beyond three years in case of inadvertence, error and misconstruction as well

Provisions of S.11(3) of the Sales Tax Act, 1990, in circumstances, could not be made applicable retrospectively

Whole proceedings culminated under S.11(3) of the Sales Tax Act, 1990, were declared to be illegal, void ab initio and nullity in the eyes of law

Any right or vested interest accrued to a party under a law, could not be snatched away or curtailed by subsequent addition and deletion in law

Right of law existing on a day on which omission or commission was made, was a vested right, which was governed by prevailing on that day and not by the law prevailing on the date of its decision and that vested right could be taken away only by a subsequent amendment

Case was to be decided in accordance with law prevalent at that moment of time, when an omission or commission was made

Impugned show-cause notice as well as consequent orders, were declared to be illegal, void ab initio and were set aside and appeal filed by taxpayer was accepted, in circumstances.

Appellant/company was manufacturer-cum-exporter and was engaged in making of zero-rated supplies of textiles and textile articles thereof

Department, while conducting post audit of the appellant refund files for the months from August-2010 to June 2012, observed that appellant had illegally claimed/received refund of input tax; on the strength of invoices issued by a company, whose registration was suspended and subsequently was blacklisted

Show-cause notice for recovery of already refunded amount of sales tax, was issued to appellant, asking to pay back the amount of tax under S.11(3) of the Sales Tax Act, 1990; which was allegedly inadmissibly sanctioned

Impugned show-cause notice and adjudication pertaining to the tax periods from August 2010 to June 2012, were illegal and without jurisdiction, because amendment in S.11(3) of Sales Tax Act, 1990 took effect from 1st July, 2012; would not be applicable to cases, where the default had been committed in the tax periods prior to that amendment

Law applicable in the matter was provisions of S.36 of the Sales Tax Act, 1990, when amount of tax was refunded and not as it stood during the period when show-cause notice and adjudicating order, was issued at belated stage

By deletion of S.36 and insertion of S.11(3) to Sales Tax Act, 1990, without its any retrospective application and saving clause for protection of recovery cases under S.36 for the period prior to that insertion, there remained a statutory gap for the cases of recovery where amount of refund was erroneously or illegally sanctioned prior to 1st July, 2012

In the present case, department had invoked the provisions of newly inserted S.11(3) of the Sales Tax Act, 1990; which was applicable prospectively and not retrospectively and even no saving clause for protection of such omitted provision as contained in S.36 of the Sales Tax Act, 1990, was given, therein

Right of law existing on a day on which omission or commission was made, was a vested right and that right was governed by law prevailing on the date of its decision, and that vested right could be taken away only by a subsequent amendment, if it so provided expressly, or by necessary intendment

Case was to be decided in accordance with the law prevalent at that moment of time when an omission or commission was made

Whole proceedings, in the present case, were infested with legal infirmity and substantive illegalities, tantamounted to patent violation of mandatory statutory provision, in utter disregard of the principles of settled law

Impugned show-cause notice, as well as consequent orders were declared to be illegal, void, ab initio without jurisdiction, nullity in the eyes of law and were set aside.

Contention of the petitioner was that impugned order was ultra vires and without lawful authority as the same had been passed beyond a period of 180 days from issuance of show-cause notice to the petitioner

Held, that per S. 11 of the Sales Tax Act, 1990; beyond a period of 120 days of the issuance of the show-cause notice, the Commissioner may extend the period for reasons to be recorded and extended period could not exceed ninety days

Such mandate of law was very clear and intention of the Legislature was that matter of adjudication by officer of revenue should be concluded within a period of 120 days and in case the same was not done, the matter should be referred to Commissioner for an extension who may do so upon valid grounds and for reasons which had to be recorded in writing

Extension of such period was conspicuously missing in the present case and it was not disputed by the parties that the show-cause notice was served upon the petitioner on 28.7.2009 whereas order-in-original was dated 01.07.2010, which was almost one year beyond the period of issuance of show-cause notice

Order-in-original, in the present case, had clearly been passed beyond the time prescribed under S. 11(5) of the Sales Tax Act, 1990

Impugned order-in-original was set aside, and Constitutional petition was allowed, accordingly.

Department vide S.R.O. No. 594(I)/2012 dated 01-06-2012 while exercising powers under S. 11 of Sales Tax Act, 1990 rescinded S.R.O. No. 555(I)/1996 dated 01-6-1996

Held, that at the time of issuance of S.R.O. No. 594(I)/2012 dated 01-06-2012, provisions of S. 11(3) of Sales Tax Act, 1990 were not available on statute book whereunder S.R.O. No. 555(I)/1996 dated 01-06-1996 was issued

S.R.O. No. 555(I)/1996 dated 1-6-1996 had already lost its legal efficacy since date of enforcement of Finance Ordinance, 2000 whereunder S. 11(3) of Sales Tax Act, 1990 was omitted

Department had no answer to query as to whether at the time of rescinding notification, any other SRO was issued or amendment was brought on statute book for assumption of jurisdiction to any authority regarding performing function of adjudication except powers as given under S. 30(3) of Sales Tax Act, 1990.

Pecuniary jurisdiction of officers of sales tax, additional tax, penalty and recovery of amount erroneously refunded was primarily notified by Board vide S.R.O. No 555(I)/1996 dated 01-06-1996 in exercise of powers conferred by S. 11(3) of Sales Tax Act, 1990

Later on by virtue of S. 45 of Finance Act, 2000 titled as 'Power of adjudication' was added to Sales Tax Act, 1990 and at the same time provisions of S. 11(3) of Sales Tax Act, 1990 empowering the Board to notify adjudication powers of sales tax officers were omitted

Powers of adjudication for officers of sales tax became a subject of supreme legislation as enacted under new provisions of S. 45 of Sales Tax Act, 1990 and Board remained no more empowered through subordinate legislation by way of any notification to specify pecuniary jurisdiction of officers of sales tax for adjudication

After enactment of S. 45 of Sales Tax Act, 1990 which was a supreme legislation, provisions of S.R.O. No. 555(I)/1996 dated 01-06-1996 which by all means was a subordinate legislation became redundant and ineffective till its rescission vide S.R.O. No. 594(I)/2012 dated 01-06-2012.

S.R.O. No.555(I)/96 dated 01-6-1996 was clearly a procedural notification giving powers to officers of Sales Tax Collectorate to adjudicate upon matters in respect of cases involving assessment of sales tax, charging of additional tax, imposition of penalty and recovery of amount erroneously refunded subject to limitation and conditions as specified therein

Said notification did not create any right or liability

S.R.O. No.555(I)/96 dated 01-6-1996 was replaced by permanent legislation that was S.11(3) of Sales Tax Act, 1990 which was omitted and S.45 was substituted

Subsequently, S.45 of Sales Tax Act, 1990 was omitted by Finance (Amendment) Ordinance, 2009

Such amendments continued in force through subsequent Finance (Amendment) Ordinance, 2010 and finally through Finance Act, 2010, and such amendments were saved which still continued in the statute

Notifications issued under said provisions had not been saved in Sales Tax Act, 1990 or through any notification

If notification would be considered as a by-law that had continued notwithstanding the repeal of S. 11(3) of Sales Tax Act, 1990 then it would be in conflict with S. 24 of General Clauses Act, 1897.

Adjudication order was passed on ex parte basis without providing the taxpayer with any opportunity of being heard which was not only against norms of natural justice but also contrary to S.11(5) of Sales Tax Act, 1990 as the principle of "Audi alteram partem that "nobody should be condemned unheard" had not been observed

Provisions of S.11(5) of Sales Tax Act, 1990 had clearly provided opportunity of hearing before passing an adverse order against tax payer.

Whole proceedings, in the present case, had been carried out by tax functionaries without due process of law and act of revenue department for creating huge liability of sales tax had been done without providing the tax-payer with any opportunity of hearing and without confronting material evidences collected by department

Department had violated fundamental right of tax-payer because right of due process of law like notice, opportunity of hearing and confronting of evidences collected by department was a fundamental right of every tax payer as guaranteed under Art.10-A of the Constitution

Any determination of rights or order passed in respect of a person falling short of due process and fairness of facts was illegal and unconstitutional.

According to Ss.2(34) & 11 of Sales Tax Act, 1990 tax period consisted of one month and every taxpayer/registered person was required to file a return for a tax period on 15th of next month of tax period and in case Department found that any registered person had failed to file return or short levied tax or he had been refunded erroneously, then in such eventuality, Department could assess correct amount of tax whereas in case of previous periods, department was empowered to conduct audit on basis of record once in a year.

If tax was not paid within one month due to non-filing of return or if return filed, short levied of tax could be subject to assessment and not for a year i.e. 12 tax periods

Law did not empower tax authorities to pass an order for 12 tax periods in garb of monitoring instead of one month

Department, if of the view that registered person had paid short tax consisting of more than one tax period then law empowered Department to conduct audit for previous tax periods and levy correct tax evaded by registered person.

In the present case, Authority had conducted audit of appellant/registered person under S.25 of the Sales Tax on its own, without any prior selection from the Federal Board of Revenue, on the basis of random or parametrict criteria under S.72-B of the Sales Tax Act, 1990, which was illegal and without jurisdiction

Where the basic statutory notice was illegal and without lawful authority, the whole superstructure built on same, would have to fall on the ground automatically and whatever proceedings in its consequences, in the shape of any show-cause notice or adjudication order, or appellate order, or even recovery notice, would also become illegal, unlawful and without jurisdiction

No provision existed in the Sales Tax Act, 1990 for undertaking any such reconciliation outside the ambit of "audit proceedings" under S.25 of the Sales Tax Act, 1990

Provisions regarding selection of audit by the FBR, were made mandatory w.e.f. 1st July 2010

Any audit exercise conducted thereafter, without adhering to due process of law by subordinate tax functionaries, without selection of audit by the Board, was not only illegal and unlawful, but also without lawful competency and legal jurisdiction.

Order-in-original, was passed in the case much after the tax period three years after the supplier unit was declared blacklisted

Department was not within the ambit of law while passing the order against the appellant/registered person for the reason that the supplier was blacklisted

Supplier in question was operative during the period when the business/transaction took place

Both the orders, and show-cause notice, were declared to be illegal, void and without lawful authority and legal impropriety

All orders, being illegal were set aside

Departmental appeal was dismissed being without merits, and appeal of registered person, was disposed of accordingly.

Authority alleged that appellant/supplier had made supplies to unregistered person and issued invoices to registered buyer just to avoid payment of sales tax at 6% under S.R.O. 283(I)/2011 dated 1-4-2011 and S.R.O. 1125(I)/2011 dated 31-12-2011

Adjudication proceedings were initiated by Adjudicating Authority by way of issuance of a show-cause notice to show as to why amount of sales tax could not be recovered from appellant under S.11(3) of Sales Tax Act, 1990 on account of output tax along with default surcharge under S.34 and penalty under S.33 of Sales Tax Act, 1990

Despite production of record, at both lower forums, appellant failed to get any relief

Validity

Pre-requisite for availing benefit of zero-rating under said Notifications, three conditions were to be fulfilled for a qualifying person (i) doing business in five major zero-rated sectors; (ii) registered under Sales Tax Act, 1990 as manufacturer, importer, exporter or wholesalers and (iii) appearing on an Active Taxpayer List

All those conditions had duly been met with by the appellant; as the person to whom supplies had been made, was doing business in five notified major zero-rated sectors

Held, that supply of "yarn" being notified textile goods fell in five major zero-rated sectors

Benefit of notifications was available to the person doing business in textile and articles thereof

Delegation of powers for operation of bank account to any person, other than owner, but by the authority and consent of owner, could not be termed as 'tax fraud' as defined under S.2(37) of Sales Tax Act, 1990, without establishing any act of dishonesty and fraudulence by the registered person itself

Any record/documents produced by taxpayer during the course of adjudication proceedings, either at the original stage or at the appellate stage, if not discussed and controverted, and had gone unchallenged and unrebutted by the tax functionaries, would itself amount to admission of its legality and authenticity

Supplies made by appellant pertaining to the period when alleged buyer was an operative/active person and not included in the list of blacklisted units; and his subsequent inclusion in that very list of blacklisted units could not operate retrospectively

Beneficial executive order and notification issued by an Executive Functionary could be given retrospective effect

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

Impugned orders passed by authorities below being suffering from grave legal infirmities, were declared to be illegal, void ab initio, and were set aside, in circumstances.

Sub-mission of the taxpayer was that Assistant Commissioner/ Adjudicating Authority, had no pecuniary jurisdiction under S.R.O. No.555(I)/96 dated 1-7-1996 and that under S.R.O. No. 555(I)/96 dated 1-7-1996 Assistant Commissioner, could issue show-cause notice in a case falling under Ss.11 & 36 of the Sales Tax Act, 1990, provided that the amount of tax involved did not exceed Rs.500,000, while amount involved in the case exceeded Rs.13 billion

Validity

Section 1 of the Finance Act, 2010 mentioned the date of its coming into force as 1-7-2010

Substitution of S.25(3), and omission of S.45 of Sales Tax Act, 1990 by Finance Act, 2010, were not relevant to the impugned show-cause notice issued by Assistant Commissioner on 30-6-2010

Orders issued on the basis of a show-cause notice beyond the pecuniary limits provided in S.R.O. No.555(I)/96 dated 1-7-1996, were not fatal

Said S.R.O. was alive and operative till it was rescinded vide S.R.O. No.594(I)/2012 dated 1-6-2012, and it was operative on 30-6-2010

Show-cause notice dated 30-6-2010 was held to be beyond pecuniary jurisdiction; and all subsequent proceedings in pursuance of such an unlawful show-cause notice, were held to be void

Superstructure built on an unlawful foundation, would collapse with all of its parts.

Taxpayer contended that S.11(2) of the Sales Tax Act, 1990 would apply only where any person had not paid the tax due on supplies made by him and S.11(3) of the Sales Tax Act, 1990 could be invoked in case of his collusion with the tax officials or due to a deliberate act; that since Show-Cause Notice issued was completely silent with regard to collusion or deliberate act, the very acquiring of jurisdiction was fatal and void ab-initio; that goods were procured under the coverage or proper sales tax invoices issued in terms of S.23 of the Sales Tax Act, 1990 duly incorporated in supplier's sales registers and summary statements and the suppliers had duly discharged their sales tax liabilities under S.7 of the Sales Tax Act, 1990 in their monthly sales tax returns, the transactions were not hit by the mischief of S.8(1)(ca) of the Sales Tax Act, 1990 as High Court had declared Cl. (ca) of subsection (1) of S.8 of the Sales Tax Act, 1990 as ultra virus of the Constitution; that provisions of S.73 of the Sales Tax Act, 1990 for payments through banking channel had duly been complied with, the refund of input tax against invoices of such suspended or blacklisted person could not be denied and even could not be recovered after insertion of subsection (3) of S.21 of the Sales Tax Act, 1990 wherein it had been categorically provided that input tax shall be allowed if payments were made through banking channel irrespective of the fact that the suppliers units were either blacklisted or their registration had been suspended; and that purchases pertained to the period when suppliers were not blacklisted and subsequent inclusion in the list of suspended unit could not be operated retrospectively

Validity

No notice under S.11(3) of the Sales Tax Act, 1990 alleging collusion or deliberate act on the part of taxpayer had been issued, the very assumption of jurisdiction was illegal and had no lawful authority

Since the very initiation of proceedings was illegal the whole superstructure had no lawful authority and the action of the authorities below was not sustainable in the eyes of law

Other contentions of the taxpayer were legally valid particularly when the First Appellate Authority had accepted the contention of the taxpayer regarding compliance of S.73 of the Sales Tax Act, 1990 and High Court had declared Cl.(ca) of subsection (1) of S.8 of the Sales Tax Act, 1990 as ultra vires of the Constitution

Charge of sales tax upheld by the First Appellate Authority was not sustainable and merits deletion

Show Cause Notice as well as the order of Adjudication Officer was vacated and the impugned order was annulled by the Appellate Tribunal.

Proviso to S.11(5) of the Sales Tax Act, 1990 reflected the aspect that plain words and patent meanings of law were to be applied and interpreted as they were and not latent meanings were to be attached to the patent words which convey the plain and obvious meaning

Commissioner can extend time limit of the Show-Cause Notice within the parameters as provided in the proviso but admittedly in the present case, at no stage of the proceedings, he applied his independent consideration and passed a speaking order

Show-Cause Notice being void ab initio and order passed was unlawful on the face of it.

Section 11(2) of the Sales Tax Act, 1990 would only apply where person had not paid the tax due on supplies made by him and S.11(3) of the Sales Tax Act, 1990 only be invoked on a registered person in case of his "collusion" with the tax officials or due to a "deliberate act"

Show-Cause Notice was completely silent in regards to "collusion" or "deliberate act" on the part of taxpayer

Very basis for acquiring the jurisdiction by issuing a combined notice under two different sections was fatal

Combined notice issued under Ss.11(2) & 11(3) of the Sales Tax Act, 1990 was liable to be declared null and void

Provision of Ss.11(2) & 11(3) of the Sales Tax Act, 1990 were even otherwise different and independent in their application and intention of legislature in this regard could also be verified from the fact that after filing a monthly sales tax return claimed input tax credit or refund which was not admissible under S.11(2) of the Sales Tax Act, 1990 the Inland Revenue Officer shall issue the Show-Cause Notice whereas in S.11(3) of the Sales Tax Act, 1990 revealed that no specific charge "collusion or deliberate act" was levelled in the subject Show-Cause Notice

In absence of any detail or proper allegation regarding "collusion or deliberate act"; it could not be said that the notice had been issued under S.11(3) of the Sales Tax Act, 1990

Whole procedure regarding application of both provisions was provided separately and independently by the legislature

Simultaneous application of Ss.11(2) 11(3) of the Sales Tax Act, 1990 was liable to be declared illegal and void ab initio

Both the orders and Show-Cause Notice of the authorities below were declared to be illegal, void and without lawful authority and legal impropriety and the same was set aside by the Appellate Tribunal.

Correct subsection of S.11 of the Sales Tax Act, 1990 had not been mentioned in the Show-Cause Notice as S.11 of the Sales Tax Act, 1990 had seven subsections and each subsection dealt with different situation

Requirement was that correct subsection was to be mentioned in the Show-Cause Notice as well as in the assessment order but contrary to that the original adjudicating authority had not done so

Appellate Tribunal directed that re-assessment be framed and the correct subsection be positively reflected in the assessment order, in legal matters, every "comma", "inverted commas"; "semi colon" and subsection had different meaning/interpretation.

Taxpayer contended that adjudication order lacked jurisdiction in respect of cases beyond pecuniary limit of one million rupees; that provisions of S.73 of the Sales Tax Act, 1990 for bank payments had duly been complied with; and that input tax credit against invoices of black listed/suspended suppliers could not be denied after insertion of subsection (3) of S.21 of the Sales Tax Act, 1990 through Finance Act, 2011

Validity

Period of refund claim was 2006-2007 whereas the black listing/ suspension was made at later dates i.e. after the period refund claimed/ adjusted input tax

On the basis of suspension/blacklisting at later dates the refund claimed/adjusted input tax against the invoices issued by the units having blacklisted/blocked status could not be disallowed

Contention regarding retrospective application of the black-listing order/notification were quite convincing

Refund claimed/adjusted input tax was allowed

Case was remanded for checking as to whether or not the application of S.73 of the Sales Tax Act, 1990 had been affected properly

If the answer was in affirmative the registered person should be given effect accordingly and in case of non affirmation the registered person should be given an opportunity of hearing before passing the order.

Registered person contended that as per First proviso to S.11(5) of the Sales Tax Act, 1990 the assessment order was required to be made within 120 days of the issuance of Show-Cause Notice or within such extended period as the Commissioner may for reasons to be recorded in writing, fix, provided that such extended period shall in no case exceed 120 days; that as per proviso to S.11(5) of the Sales Tax Act, 1990 the order of assessing officer shall be passed not later than 120 days from the date of filing of appeal or within such extended period as the assessing officer may for reasons to be recorded in writing, fix and such period shall in no case, exceed 120 days; and that assessment order dated 9-4-2013 was received on 16-4-2013 was passed after a lapse of 241 days from the date of issuance of Show-Cause Notice i.e. 15-8-2012

Validity

Show-Cause Notice was issued on 15-8-2012 and the assessment order was passed on 9-4-2013 while maximum time limit as envisaged by S.36(3) of the Sales Tax Act, 1990 already stood expired

Admittedly order-in-original was passed beyond the prescribed maximum time limit; and adjudicating authority had neither fixed any extended period nor had recorded any reasons for passing of the order after the period prescribed under the law

Once limitation had started to run and had come to an end the assessee acquired a vested right of escapement of assessment by lapse of time

Order being passed after the lapse of statutory period was declared to have been made without lawful authority and of no legal effect

Order having been passed after the lapse of statutory period was without jurisdiction.

Refund of the taxpayer was rejected on the ground that since the taxpayer had passed on the incidence, it was not entitled for refund as the taxpayer had failed to establish that the incidence of tax had not been passed on to the consumer; that mere non charging of further tax on the invoice did not prove that the incidence had not been passed on the consumers

Taxpayer contended that he had not enhanced the selling price of the sugar after imposition of further tax and continued selling product at the same price on which it was selling prior to imposition of further tax therefore, there was no question of passing of incidence of the amount paid as further tax on the consumer; and that selling the product at the same price before and after the imposition of further tax, was a conclusive proof that the taxpayer neither charged further tax nor had recovered the amount from its customers

Validity

When the department had already allowed refund for the period from July 1998 to June 1999 based on the record of the taxpayer then there was no lawful reason for rejecting the refund for the period from July 1999 onwards for which the taxpayer had maintained the record identical to that of the period 1998-99

Such a change in opinion was not sustainable under the law

Taxpayer had not charged the further tax from its buyers and the selling price of the sugar after imposition of further tax remained unchanged and the taxpayer had not enhanced the selling price of the sugar after imposition of further tax rather continued selling the product at the same price on which it was selling prior to imposition of further tax

Incidence of further tax was not added by the taxpayer while selling the sugar

Since the taxpayer, according to record, had not enhanced the selling price of the sugar, it could not be argued that the incident of tax was added to the price and passed on to the purchaser

Record depicted that the amount paid as further tax was neither charged nor was recovered from the buyers

First Appellate Authority had rightly annulled the order passed by the Taxation Officer

Departmental appeal was dismissed by the Appellate Tribunal.

Section 11(3) of the Sales Tax Act, 1990 under which the notification S.R.O. 555(I)/1996 dated 1-7-1996 was issued had been repealed without any saving clause for said notification

If contention of the taxpayer that the notification would have continued notwithstanding the repeal of S.11(3) of the Sales Tax Act, 1990 was accepted, that would be in conflict with S.24 of the General Clauses Act, 1897.

At the time of issuance of rescinding S.R.O. 594(I)/2012 dated 1-6-2012, the provisions of subsection (3) of S.11 of the Sales Tax Act, 1990 were not available on the statue book, whereunder S.R.O. 555(I)/1996 dated 1-7-1996 was issued

Federal Board of Revenue made a futile exercise to issue the said notification as the said S.R.O. had already lost its legal efficacy since the date of enforcement of the Finance Ordinance, 2000 whereunder subsection (3) of S.11 of the Sales Tax Act, 1990 was omitted.

Taxpayer contended that show cause notice had alleged as having supplied pre-casting goods but later on the Department changed their stance and alleged that the taxpayer supplied girders, beams and building wall columns; and Adjudicating Authority went beyond the scope of the show cause notice and that Department did not restrict the specific allegation stated in the show cause notice rather took a new stand which was not incorporated in the show cause notice which was not lawful

Validity

Order-in-original was passed on the ground, which was not mentioned in the show cause notice and thus was illegal and void.