1. The department through this appeal has objected against the Order-in-Appeal No.47 dated 30-4-2011 arising out of the Order-inOriginal No.5 regarding periods from 17-3-2004 to 10-7-2005. Following grounds and prayers has been framed:--
(1) That the learned respondent No. 2 at Para No. I of his findings at Page No. 6 of the impugned order-in-appeal agreed with the departmental assertions based on documentary evidences which confirmed the carrying on the business of respondent No. 1 by Mr. Imtiaz Karim but astonishingly the learned respondent No.2 the case against the department which is bad in law and needs to be set aside. Sales Tax case cannot be annulled on the grounds that no observation or action was initiated against the respondent No.1 under Income Ordinance, 2001 which is also bad in law and showed that the impugned order was issued in haste without application of judicial mind.
(2) That minimum threshold for registration under the Sales Tax Act, 1990 was raised to Rs.5 million in the budget 2004-2005. This budgetary measure resulted the deregistration of the respondent No.1 during December, 2004 as their declared sales at that time was less than the aforesaid threshold. The respondent No.1 vide the then Collectorate's Letter No. 517/04/ ST/R & 1/19964 dated 13-12-2004 (Annex-D) informed regarding their de-registration with the direction that they will be liable to get themselves registered under the Sales Tax Act, 1990 when their turnover exceed Rs.5 million. The available information revealed that bank accounts of respondent No.1 indicated receipts of Rs.28,084,495 against taxable supplies during the period March, 2004 to June, 2005 which was much higher than the threshold limit. Moreover, the respondent No.1 consumed 234,700 units of electricity and paid Rs.1410437 during the year 2004-2005 which also proved that the actual quantum of sales of respondent No.1 was much higher than the threshold limit but they knowingly, fraudulently and dishonestly did not get them registered and kept on working without sales tax registration, hence involved in massive evasion of government taxes causing revenue losses to the National Exchequer by committing tax fraud.
2. The learned respondent No.2 totally ignored the aforesaid realities while deciding the impugned order which is also bad in law and showed that the impugned order was issued in, haste without application of judicial mind.
(3) That learned respondent No.2 held that bank entries of the respondent No.1 cannot be taken as taxable supplies. Reference of Hon'ble Appellate Tribunal reported as 2010 PTD 1376 and judgment of Karachi High Court reported as 2004 PTD 868 have been made, it is worth mentioning here that the aforesaid both judgments states that the bank receipts without any correlative evidence and nexus cannot be taken as supply whereas in the instant case the strong relation had already been established on admission of the respondent No.1 and respondent No. 2 that the `respondent No.3 was registered with sales tax department during the period under reference making taxable supplies of PVC pipes which aspect has also been totally ignored by the respondent No.2 that order passed by the Hon'ble Appellate Tribunal, Lahore in Sales tax Appeal No.61/LB of 2007 in case of Messrs Maria Enterprises Multan v. Collector of Customs, Sales Tax and Federal Excise (Appeals) Multan and others (Annex-"F") is former in time hence cannot be relied is strongly denied as the same is still in field and finding of which relates to the circumstances where the taxpayer does not respond or cooperate to justify their bank receipts by producing the relevant documentary evidences. In this judgment the Hon'ble Bench held that "it is crystal clear that the learned Collector (Appeals) had provided an opportunity to the learned counsel for the appellants to prove the excess amounts available in their bank account with documentary evidence but they failed to do so. In my opinion, if the appellants received the amount from foreign, OD obtained from the bank as loan etc., which were lying in their account why they were hesitated to disclose the genuine source of these amounts with documentary proff. The question in very simply but the appellant side twisted the same for the reasons best known to him.".
3. The learned respondent No.2 did not consider any appreciate the above mentioned judgment in positive manner while deciding the impugned appeal which clearly shows the sanctity, legality and propriety of the said impugned order in appeal.
(4) That the learned respondent No.2 declared the show cause notice as barred by the time in the impugned order in appeal without considering that the instant case was a tax fraud case. The findings of the learned respondent No.2 in this regard is bad in law on the basis of following solid grounds;
(a) the finding of the learned respondent No.2 that the sales of the respondent No.1, during the period 17-3-2004 to 30-6-2004 was Rs.3,575,111 which was less than 5 million threshold, hence he was not liable to pay sales tax, is net correct as the aforesaid value of sales was related to only two and half months whereas the minimum threshold of 5 million should be based on turnover of any twelve tax periods. The respondent No.1 was liable to get themselves registered under the Sales Tax Act, 1990 when their turnover exceed Rs.5 million in next twelve tax periods was much higher than the threshold limit but the learned respondent No.2 totally ignored the aforesaid reality while deciding the impugned order which is also bad in law and showed that the impugned order was issued in hate without application of judicial mind.
4. (b & c). The learned respondent No.2 admitted that bank receipts of Rs.23,509,384 as sales of the respondent No.1 declaring the same as hit by time limitation by ignoring that the respondent No.1 was involved in tax fraud as they knowingly, fraudulently and dishonestly did not get them registered and kept on working without sales tax registration even the fact that their actual value of supplies was much higher than the threshold limit.
5. Tax Fraud Case:-- The respondent No.1 was involved in tax fraud as they knowingly, fraudulently and dishonestly did not get them registered and kept on working without sales tax registration and getting receipts in undeclared bank accounts. Investigation of respondent No.1 was initiated during March, 2009 but the respondent No.1 failed to produce record to justify their bank transactions reflected in business bank accounts despite several notices/summons. It is resulted into inordinate delay in finalization of the investigation. Hence, this, office has to rely on available information/record including electricity bills, the bank statements reflecting voluminous receipts having close nexus with the taxable supplies, the burden of proof of the same lies with the registered person in terms of section 2(37) of the Sales Tax Act, 1990 and the judgment of the Hon'ble Customs, Excise and Sales Tax Appellate Tribunal, Lahore in S.T.A. No.61/LB of 2007 dated 10-7-2009 in case of Messrs Maria Enterprises, Multan v. Collector of Customs, Sales Tax & F. Excise (Appeals), Multan.
6. Section 2(37) of the Sales Tax Act, 1990 clearly enunciates; 'tax fraud' means knowingly, dishonestly or fraudulently and without any lawful excuse (burden of proof of which excuse shall be upon the accused).
(i) doing of any cat of causing to do any act, or to take any
(i) omitting to take any action or causing the omission action , including the making of taxable supplies without getting registration under this Act; or (i.e) falsifying or causing falsification the sales tax invoices.
7. "Since the consignment in dispute were wrongfully removed from the Oil terminal of the petitioner from home consumption with a clear intention to evade the payment of customs duties and charges, the procedure provided under section 30(b) of the Act, 1969 would hardly be applicable and the consignments shall be liable to be charged at the highest rate which were prevalent at any of the four stages:--
(i) the date of in-bonding of the consignments;
(ii) the date of detection of unlawful removal of the consignments; (i.e) the date on which ex-bonded bills were filed after the detection of unlawful removal; and
(iv) the date on which the evaded duties and charges actually deposited.
8. The law is well settled that one cannot be allowed to take advantage of his wrong act or fraud played by him and in fact applying the law applicable to the lawfully taking away of consignments from the bonded warehouse, if applied in such cases, would amount to placing a premium on the fraud played by an importer involved in the act of smuggling.
9. Where a person does fraud and does not come up with clear hands, the Hon'ble Supreme Court observed in this case that: ................... Furthermore in law, the petitioner seeking leave to appeal against the High Court order is not entitled to the discretionary and equitable relief from this Court in the exercise of Constitutional jurisdiction as he has not approached this court or the foras prescribed under the Constitution and the law with clean hands. One who seeks equity must have equities in his favour.
10. The importer had come in petition before the S.C. Claiming that highest rate of duty was charged and that show cause notice issued under section 32 was also barred by time. The court heard the argument and observed that fraud was committed, duty was evaded and in that situation the petitioners have not come up with clean hands. Besides, the payment of evaded duty was made under arrangement of payment. The Hon'ble Court had rejected the petition.
(5) That no order in appeal number, order dispatch number was allotted to the impugned order in appeal and copy of the same was not served to the appellant which is clearly bad in law and showed the sanctity, legality and propriety of the impugned order in appeal and showed that the impugned order was issued in haste without application of judicial mind.
11. PRAYER We have heard the learned representatives from both the sides and have also perused the impugned order-in-appeal, the order-inoriginal and the other available record of the case. The appellant as per the impugned order of the learned CIR(A) has conducted business of manufacturing of PVC pipes in the name and style of Prime PVC factory. As a result of the investigation conducted by the Intelligence and Investigation Department of the F.B.R. It was found that two persons namely Mr. Imtiaz Kareem and Mudassar Hussain carried together the said business but this claim of the investigation department was denied by Mr.Imtiaz Kareem who asserted that he started business i.e.f. January, 2009 with the name and style of Al-Qaim PVC Pipes.
12. The department officials issued summon to both the partners under section 47 of the Act requiring them to produce documents but no compliance in this regard was made. The Investigation department called information from MEPCO and from the income tax department which revealed certain discrepancies between the actual expenses and the electricity bills provided by the MEPCO.
13. Certain transactions were also unearthed by the Customs Intelligence and Investigations.
14. According to the department officials both the above referred partners however denied their business activities in the name of the respondent. The department officials on the basis of bank entries, taking them as sales, the respondent was charged with non payment of due sales tax inter alia other default under various provisions of Sales Tax Act, 1999. The contravention report in this regard was prepared which along with show-cause notice was sent to the adjudicating officer and subsequently the order-in-original after due process was passed against which the respondent filed appeal before the learned CIR(A) who has annulled the order, against which the department has filed appeal before this Tribunal. The learned DR representing the appellant-department has contended that there is no justification for annulling of the order in original, as there was no creditable information that the respondent in this case was involved in a evasion in sales tax and other taxes by manufacturing and supplying of PVC pipes which is a taxable activity and was on a very large scale, but in this regard no sales tax registration was got. According to the learned DR the learned CIR(A) has ignored the fact that the adjudicating authority keeping in view the electricity consumptions, the income tax returns, bank accounts and other relevant documents has passed the order against the respondent which has been annulled without any justification. He has contended that notices/summons issued by the adjudicating authority were duly served but he failed to provide the requisite record for verification/reconciliation purpose. He has contended that although Mr.Imtiaz Kareem appeared before the adjudicating authority but he could not give any explanation regarding the joint account with Mr.Mudassar Hussain. Under the facts, and in the circumstances of the case the learned DR has requested that the impugned order of the learned CIR(A) may please be vacated.
15. On the other hand, the learned counsel of the respondent is supporting the impugned order of the learned CIR(A). He has contended that the adjudicating authority has passed the order in original without keeping in view the fact that the department without conducting audit of the business has passed the order which is not justified. Regarding the bank entries, he has contended that these cannot be treated as taxable supplies. The learned counsel in this regard has placed reliance on the decision of the Hon'ble High Court reported as 2004 PTD 868 which has been followed by this Tribunal in a judgment reported as 2010 PTD 1376 wherein it has been held that there is no provision in the Act purporting to deem the receipts of money in the bank account to be a sale and the withdrawal from the bank account to be a purchase. It is an established principle of taxation that an assessee can be subjected to tax under a provision of law, which is unambiguous and clear. The learned counsel has further contended that invoking of section 36(1) by the department on the day when show-cause notice was issued i.e. 8-7-2010 had become barred by time. In this regard expliining the position he has submitted that the department deregistered the respondent in the present case on 13-12-2004 meaning thereby that his sales were less than five E million threshold and hence was not liable to pay sales tax for the period 17-3-2004 to 30-6-2004. The sales of the respondent as per the adjudicating authority keeping in view the bank accounts from 1-7-2004 to 30-6-2005 were at Rs.12,579,697 while for the period. 2-2004 to 3-6-2005 at Rs.10,929,687. The learned counsel has contended that period was, hit by limitation on 30-6-2010. The alleged sales for' the' period 1-7-2005 to 10-7-2005 were at Rs.1,000,000. The learned counsel, in this regard, has placed reliance on the decisions of the Hon'ble High Court reported as 2008 PTD 981 and 2008 PTD 1973. He has, therefore, requested that the impugned order of the learned CIR(A) may please be maintained.
16. We have considered the rival arguments and find force in the arguments of the learned AR of the respondent that the whole exercise conducted by the Revenue office is without any lawful authority because the powers for conducting the audit of any taxpayer by the Directorate of Intelligence and Investigation has been prescribed in Rule 39(c) of the STGO 03 of the Sales Tax Act, 1990 which provides that the staff of Directorate General of Intelligence and Investigation shall not undertake any audit of any registered person except under specific written authorization from the C.B.R. In each such individual case. However, it is observed that in the instant case the Revenue Officer had not been authorized by the Board to conduct the audit of the respondent, hence the whole exercise is patently illegal and all subsequent proceeding on the basis of illegal audit are also void in the eyes of law, without any authority and void ab intio. Reliance is in this regard is placed on a judgment of this Tribunal bearing S.T.A.No.706/LB/09 dated 4-11-2010 wherein it was held that:- "After considering the submissions advanced from both the sides and the case-law referred, we are of the view that both the officers below have not mentioned in the impugned orders (order in appeal and order in original) regarding authorization in respect of Messrs Supreme Tech International which has no relevance with the case of the appellant. We, therefore, find force in the contentions raised by the learned AR for the appellant . Learned Collector (Appeals) in the impugned order despite referring the above discussed legal issue raised by the appellant has given no observations in this regard. Consequently, the impugned order in appeal of the learned Collector (Appeals) is vacated and the appeal filed by' the appellant is allowed in the manner and to the extent supra."
17. We have also found force in the arguments of the learned counsel of the respondent that neither in this case the department has established with any solid evidence that the taxpayer was carrying on any business, nor any audit have been conducted regarding the business of the respondent and the tax has been imposed only on the bass of the bank accounts. The honourable High Court as well as this Tribunal has held that there is no provision in the Act purporting to deem the receipt of money in the bank account to be a sale and the withdrawal from the bank account to be a purchase. Even otherwise, we have found that the learned CIR(A) has rightly held that the period involved in this case was hit by limitation, but no explanation in this regard has been given by the adjudicating authority. The appeal filed by the department is, therefore, dismissed. .