Mher Muhammad Arif Sargana, Judicial Member.--This judgment shall dispose of the above titled two appeals as the question of facts and law are the identical.
STA No, 49/LB/2008.
2. This appeal has been directed against order in original No, 14/2007, dated 27.09.2007 passed by the learned Collector, through which the appellant was directed to pay sales tax amounting to Rs,2,29,81,341/- alongwith additional tax. A penalty equivalent to 100% of the tax involved was also imposed.
3. The facts giving rise to this appeal are that during audit/investigation/inquiry of refund claim files of the appellant for the tax periods June, 2003 and August, 2003 to June, 2004, it was observed that tax fraud has been committed by availing bogus/illegal and inadmissible refunds fraudulently. As a consequence of adjudication proceedings, the appellants were directed to pay sales tax amounting to Rs,2,29,81,341/- alongwith additional tax. A penalty equivalent to 100% of the tax involved was also imposed.
STA.No, 50/L13/2008
4. This appeal has been directed against order in original No, 13/2007, dated 27.09.2007 passed by the learned Collector, through which the appellant was directed to pay sales tax amounting to Rs,2,68,98,697/- alongwith additional tax. A penalty equivalent to 100% of the tax involved was also imposed.
5. The appellant filed appeals before this Tribunal on 23.10.2007, which were returned with the remarks that these were not maintainable under Section 46 of the Sales Tax Act, 1990, as the impugned order was passed by the learned Collector of Sales Tax and Federal Excise, Gujranwala.
The appellant filed writ petitions before the Hon'ble Lahore High Court, Lahore against return of the appeals by the Tribunal. The Hon'ble Lahore High Court, Lahore vide its orders dated 12.12.2008 passed the following orders:-- "Accordingly, the observation made by the Assistant Registrar of the Appellate Tribunal dated 23.10.2007 returning the appeal and refusing to entertain the same is set aside. The petitioner will now approach the Tribunal which will entertain and decide the appeal taking into consideration all the legal and factual issues raised before them."
6. Hence, these appeals.
7. The appeals were fixed for hearing on 27.08.2009. Mr. Muhammad Nawaz Cheema Advocate, appeared on behalf of the respondent, filed his power of attorney and sought adjournment. On his request the appeals were adjourned to 15.09.2009. On the said date Mr. Muhammad Akram Nizami Advocate, learned counsel for the appellant argued the case, but Mr. Muhammad Nawaz Cheema Advocate, learned counsel for respondent requested for adjournment. Again on his request the cases were adjourned to 29.09.2009. On the said date i,e, 29.09.2009, the clerk of the learned counsel for respondent appeared and requested for adjournment on the ground that the learned counsel was busy before the Hon'ble Lahore High Court. On his request the appeals were adjourned to 30.09.2009. On the said date i,e, 30.09.2009, none appeared on behalf of the respondent, which showed their least interest. In these circumstances, we are left with no other alternative but the decide the appeals on merits and on the basis of available record.
8. The main grounds of the appellant, as urged in the memo of appeal, are:--
(a) That the show cause notice has been issued without any lawful authority and jurisdiction. The statute has provided the authority of the persons to adjudicate the issue vide Section 45 of the Sales Tax Act, 1990. The provisions of Section 45 do not include the office of the Collector of Sales Tax to adjudicate the cases. It is a settled principle of law that the authority who cannot decide the issue, has no authority to issue show cause notice. The sales tax statute further suggests that an appeal can be filed against the orders passed by the officers appointed under Section 45 before the Collector of Sales Tax (Appeals) against the orders passed by the sales tax officer under Section 10, 11, 36, 45 or 66 ibid. By virtue of the aforesaid provisions of law, the appellant has been deprived to file an appeal before the Collector of Sales Tax (Appeals). As such, the show cause notice was illegal being issued without any legal authority and jurisdiction, hence was liable to be vacated, therefore, the order in original passed on the basis of the aforesaid illegal show cause notice is also liable to be declared illegal.
(b) That the show cause notice and the impugned order in original itself suggests that the audit of the appellant was carried out by the Collectorate of Sales Tax, but no audit observation was communicated to the answering respondent, as required under Section 25(3) of the Sales Tax Act, 1990. Therefore, the show cause notice which has been issued without adhering to the requirement of law was illegal and liable to be vacated therefore, ignoring the legal fiction the impugned order in original has been passed which is illegal and liable to be vacated.
(c) That the impugned order in original is sketchy and non speaking in all the set of allegations leveled therein and dots not contain any evidence which could be made basis to allege the appellant for the commission of the aforesaid so called tax fraud. The provisions of law invoked in the show cause notice and the impugned order in original is liable to be set aside being illegal.
(d) That the impugned order in original is also liable to be declared illegal being barred by time under first proviso of sub-section (3) of Section 36 of the Sales Tax Act, 1990.
(e) That the refund claims were sanctioned by the appropriate officer of Sales Tax after due scrutiny of the record and documentary evidence submitted by the appellant. At the time of sanctioning of refund due enquiry from the respective suppliers to the extent of issuance of invoices, supply of goods, as well as issuance of banking instruments was carried out and after satisfying the genuineness of the claim the department finalized the refund claims. It is pertinent to mention here that the enquiry pertains covering the period starting from June, 2003 to June, 2004.
During this period different offices carried out the audits of the appellant firm and they did not agitate any audit issue, which could nullify the claim of the appellant firm. The contravention report was based on presumptions without any supporting evidence and the legal sanctity as required under Section 25 of the Sales Tax Act, 1990. The impugned order in original suggests that the Respondent No, 1 without applying his mind judiciously has passed the subject order in original which is illegal and liable to be set aside.
(f) That the preamble of the order in original suggest that an appeal against the impugned order in original has to be filed before the Appellate Tribunal under Section 46 of the Sales Tax act, 1990. A simple reading of the said section will reveal that an appeal can be filed before this Hon'ble Appellate Tribunal where the orders have been passed under Section 45-A or 45-B of the Sales Tax Act, 1990. This proves strongly that the Respondent No, 1 for the satisfaction of his own ambitions has passed the impugned order in original which is based on presumption and supposition. Hence, the same is liable to be declared illegal and accordingly set aside.
(g)
9. Arguments were heard. The learned counsel for the appellant argued exactly on the lines of submissions made in the memo of appeal.
10. We have heard the learned counsel for the appellant and perused the record available before us. Section 45 of the Sales Tax Act, 1990 deals with the powers of adjudication, the same is reproduced as below for ready reference:-- [5.Power of Adjudication.--[(1)] In cases involving assessm ent of tax, charging of [default surcharge], imposition of penalty and recovery of amount erroneously refunded [or any other contravention] under this Act or the rules made thereunder, the jurisdiction and powers of adjudication of the Sales Tax Officers shall be as follows:--
(i) Additional CollectionCases falling under sub- section(2) of Section 11 and Section 36 without any restriction as to the amount of tax involved or amount erroneously refunded.
(ii)Deputy Collector:(a) Cases falling under sub- section (1)of Section 11. (b) Cases falling under sub- section (2) of Section 11 and Section 36 provided that the amount of tax involved or the amount erroneously refunded exceeds one million rupees, but does not exceed two and a half million rupees.
(iii)Asstt. Collector: Cases falling under sub- section (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.
(iv)Superintendent: Cases falling under sub- section (2) of Section 11 and Section 36 provided that the amount of tax involved or the amount erroneously refunded does not exceed ten thousand rupees.] 11.Bare reading of Section 45 reveals that the Collector does not figure anywhere in that section, meaning thereby that the Collector has not been given adjudication powers. The learned Collector has exercised his powers under Section 31 ibid while passing the impugned order in original. It is imperative to reproduce Section 31 as under:-- "31. Powers.-An officer of sales tax appointed under Section 30 shall exercise such powers and discharge such duties as are conferred or imposed on him under this Act; and he shall also be competent to exercise all powers and discharge all duties conferred or imposed upon any officer subordinate to him."
12.It is very much clear that under Section 31 ibid, the officer of sales tax appointed under Section 30 shall exercise such powers and discharge such duties and not under Section 45 ibid. The powers of adjudication have been delegated under Section 45 of the Act. The Collector has otherwise vested with powers under sub-section (4) of Section 45A of the Act, which says "that the Collector may, suo moto, call for and examine the record of any proceeding under this Act or the rules made thereunder for the purpose of satisfying himself as to the legality or propriety of any decision or order passed by an officer of sales tax subordinate to him, and pass such order, as he may deem fit." We are of the firm opinion that the learned Collector on the executive side, in presence of powers under sub-section (4) of Section 45A of the Act, could not exercise powers of adjudication under Section 45 of the Act. Section 31 and sub-section (4) of Section 45A of the Act are different to each other. We are of the view that if the departmental view point of exercising powers under Section 31 of the Act is considered true then there was no need of sub-section (4) of Section 45A.
Further, the orders passed by the officers, in exercise of powers under Section 45, are appealable before the learned Collector-(Appeals), whereas there is no forum mentioned in the Act where the order passed by the learned Collector on the executive side could be assailed, which is against the natural justice. The learned Collector, having laid his hands upon a matter amenable only to adjudication proceedings, clearly violated the provisions of Section 45 of the Act. The impugned orders are declared to be without jurisdiction. Resultantly, both the appeals are accepted and the impugned orders in original are set aside and the show cause notices are vacated.