1. The department through this appeal has objected against the Order-in-Appeal No.48 dated 14-5- 2011 arising out of the Order-in- Original No.6 regarding periods from 17-7-2005 to 17-12-2008. Following grounds have been framed:- "(2) That the learned CIR(A) was not justified to delete the Special Excise Duty levied under section 3A of Federal Excise Duty Act, @ 1%.
(3) That the learned CIR(A) was not justified to delete the penalty for non-maintenance and production of record as the penalty was imposed on solid grounds."
2. The department in this appeal has objected against the deletion of special excise duty levied under section 3A of the Federal Excise Duty Act, @ 1% and against the deletion of penalty for non- maintenance and production of record. We have found that the learned CIR(A) has given detailed justification in this respect for deletion of Special Excise Duty and penalty. The relevant portion of the learned CIR(A) in this respect is reproduced hereunder:-- "I find 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 3 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 in the instant case the Revenue officer had not been authorized by the Board to conduct the audit of the appellant, 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 initio. Reliance is in this regard is placed on a judgment of learned ATIR 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. Under these circumstances of the case, the impugned order in original being passed without heaving jurisdiction/authorization in this regard is annulled.
3. 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". The above cited case is on all fours with the case in hand. Here it would not be out of place to refer here to a judgment of the Apex court reported as 98 Tax 95 which it has been held that when law requires something to be done in a particular manner, then same must be done in that manner or may not be done at all.
4. Further it is observed that: The de-registration was done by the department itself. Thus door to go out of tax purview was shown by the department itself to the appellant. This, however, led the appellant to assume that now it was free from the charge of sales tax. This may be seen as a collusion in terms of section 36(1) of the Act. As far the bank entries are concerned, these cannot be treated as taxable supplies.
5. The AR in this regard placed reliance on a judgment of Karachi High Court reported as 2004 PTD
868. This judgment has been followed by the Tribunal. In a recent judgment 2010 PTD 1376 wherein it was held that:-- "The respondent, not only presumed without any co-relative evidence, that all the receipts in the bank accounts of the 'appellant were on account of supplies and all the withdrawals pertain to appellants' purchases. The respondents, by doing so also tried to shift the burden on the appellants to prove it otherwise for each and every transaction in all of their bank accounts. 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. 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. This view gains strength from the judgment of Sindh High Court, Karachi dated 12-11-2003 in Special Sales Tax Appeals Nos.99 and 100 of 2002, reported as 2004 PTD 868." The case-law relied upon by the department decided by Customs Tribunal in re: Messrs Maria Enterprises Multan v.
6. Collector of Customs, Sales Tax and Federal Excise (Appeals) is former in time and hence cannot be relied. However, questions raised in that case by the learned. Tribunal are very important. But that just leads one to be presumption (may be very strong) that bank entries might be the taxable supplies. But tax is imposed either on the basis of clear and, express letter of law or availability of a deeming provision. Tax cannot be imposed on the basis of presumptions how strong it may be.
7. Since there is no provision in Sales Tax Act to treat bank entries as sales, the action of the department cannot sustain in the eyes of law. In a case reported as (IITC 26 (Sindh), it was held that:- "As observed in Maxwell on the Interpretation of statues, 4th Ed., page 429; Statutes, which impose pecuniary burden, are subject to the rule of strict construction. It is a well settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties."
8. As the decisions of honourable High Court and learned Tribunal are binding on sub-ordinate authorities 1996 PTD (Trib.) 388 respectfully following the decision reported as 2010 PTD 1376, I hold that treating of bank entries as taxable supplies sales is not maintainable.
9. It may be seen that department made no efforts to scrutinize the entries. Nor it went after various transactions. Rather it is adopted on early course to impose tax on the appellant, which was not approved by higher appellate fora.
10. As regards special excise duty, section 3A(2) of Federal Excise Duty Act says that.
(2) Special duty levied under subsection (1) shall be in addition to any duty levied under section 3.
11. Since in the instant case DCIR did not point out that if Excise duty was leviable on the goods manufactured by the appellant, how he could levy special duty which is in addition to any duty already levied under section 3. As the language of law suggests that first excise duty should be levied under section 3 only then, in addition to that, special excise duty could be levied. There was no justification to levy Special Excise Duty @ 1% in the absence of Duty leviable under section 3 of the Act. It may also be seen that section 3A of Act was made operative i.e.f. 1-7-2007, but DCIR levied special duty for the entire period under consideration which is wrong. So special excise duty levied under section 3A is also deleted.
12. There is another aspect of the case i.e. Show-cause notice was issued to an individual namely Mr. Muddasar Hussain. So this is not the case of an AOP as per department on admission.
13. As regards penalties for non-maintenance and production of records, it is observed here that when the main charge of making taxable supplies is not established, the impugned penalties are not maintainable and same are also deleted."
14. The learned DR is supporting the order in original passed by the adjudicating authority. He has contended that in the case of tax fraud the law does not impose any time constraint or the past period for which the record of an accused may be scrutinized. It was prayed by the learned DR that the order passed by the learned CIR (Appeals) Multan may kindly be vacated and the order of the Inland revenue Officer may kindly be restored.
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 order-in-appeal has been passed according to the applicable law of the land and there is no illegality in the order. According to the learned AR the whole exercise conducted by the Directorate of Intelligence and Investigation is without any lawful authority and hence nullity in the eyes of law. The powers of the respondent for conducting the audit of any taxpayer according to learned AR 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. He has stressed that the appellant- department was not authorized by the Board to conduct the audit in this case 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. He has argued that the similar issue has already been decided by this Tribunal vide Sales Tax Appeal No.706/LB/09 dated 4-11-2010. He has argued that the show-cause notice as well as order in original is beyond jurisdiction of the Deputy Commissioner of Inland Revenue in terms of S.R.O. 555(1)/1996 dated 1-7-1996 hence the impugned order is void ab initio. Under the said notification issued by the Federal Board of Revenue in terms of section 36 of the Sales Tax Act, 1990, the Deputy Commissioner of Inland Revenue has been authorized to adjudicate the cases involving assessment of sales tax, charging of additional tax and imposition of penalty provided that the amount of tax involved does not exceed Rs.1,000,000 whereas in the instant case, the Deputy Commissioner had adjudicated the case involving sales tax of Rs.33,222,896 which according to him is without jurisdiction. Reliance in this regard has been placed on the judgment of the Tribunal reported at 2011 PTD (Trib.) 1943. According to learned counsel the appellant-department has accepted the findings of the learned CIR (Appeals) to the extent that no principal amount of sales tax is recoverable and only special excise duty and penalty is recoverable. He has contended that admittedly, the respondent is not making taxable supply hence not liable to be registered under the Act and the demand of Special Excise duty and penalty for non-maintenance of record is not justified. He has argued that the learned CIR (Appeals) has rightly held that the transaction appearing in the bank statement cannot be treated as taxable supplies. The decision in this respect is also based on the Judgments of the Hon'ble High Court and this Tribunal which are binding upon the lower fora. Reliance in this respect has been placed on the following case laws:--
(1) PTCL 2004 CL I (H.C. Lah.) and (2) 2010 PTD 1376 The learned counsel has submitted that the appeal filed by the department is also defective as no appeal fee has been paid by the appellant which is against the mandatory requirement of Rule (11) of the Appellate Tribunal Inland Revenue Rules, 2010. These is no exemption to the department under the rules, hence the appeal is liable to be rejected on this ground also. He has contended that no intimation to the filing of appeal by the department has been made to the respondent as required under Rule (12) of the above said rules and may kindly be rejected. He has submitted that the appeal is also defective as the Commissioner Inland Revenue (Appeals), Multan was not made a party as an appellant but the Additional Director has filed the appeal who is not authorized to file appeal under section 33 of the Federal Excise Act 2005 or the Sales Tax Act, 1990.
16. We have considered the arguments from both the sides. After considering the above reproduced observations of the learned CIR(A) and the submissions of the learned counsel of the respondent we find no warrant for interference in the impugned order as the special excise duty and the penalty both have been deleted placing reliance on the earlier decision of the Tribunal. The learned CIR(A) has discussed all the factual as well as legal issues in detail and has rightly allowed the relief. No interference, in this respect, is therefore required. The appeal filed by the department is, therefore, dismissed. .