ORDER The titled appeal has been filed at the instance of revenue/department arises out of Order- in-Appeal No. 185 of 2010, dated 3.9.2010 passed by the learned Commissioner Inland Revenue (Appeals), Faisalabad whereby he accepted the appeal filed by the registered person against Order-in- Original No. 14 of 2010, dated 1.6.2010.
2. Succinctly stated, relevant facts of the case are that the respondent received refund of sales tax worth' Rs. 7,532,675 incurred in connection with zero rated supplies for the months July, 2003 to January, 2005, whereupon a show- cause notice bearing C. No. 262, dated 6.5.2010 was issued by the department as to why amount of tax refunded may not be recovered from the respondent under Section 36(1) of the Act due to subsequent black-listing of his suppliers. Adjudication proceedings culminated by upholding recovery against the respondent and then being aggrieved with the treatment meted out at adjudication stage, respondent then filed the first appeal before the learned Commissioner of Appeals who accepted the same and vacated demand of sales tax.
3. Now the revenue-department feeling aggrieved and dissatisfied with the proceedings mentioned supra has now come up in second appeal before this Tribunal. The learned DR while arguing on behalf of the department has vehemently contended that the first appellate authority without considering the factual aspect of the case, has concluded adjudication proceedings on the issue of time- barred show-cause notice without touching the merits of the instant case. On this other hand, the learned counsel for respondent forcefully urged that the impugned show- cause notice and consequent adjudication order passed by the learned Deputy Commissioner Inland Revenue is illegal and without jurisdiction as no notification for appointment of Inland Revenue Officers was issued in the Official Gazette as required under Section 30 of the Act. It was, therefore, maintained that the, whole proceedings are without lawful authority and of no legal effect. Learned counsel further argued that the demand raised in the impugned show-cause notice is time-barred under Section 36 of the Act. Conversely, the learned DR has impliedly admitted that there is no such notification published in the official Gazette on the pattern of S.R.O.
547(1)/2008 yet he has contented that the sprit of law has been achieved by the Circular C.
No.1(19)1 R-Jud/2007-Pt, dated 11.11.2009.
4. We have heard the learned representatives and have gone through the record of the case, relevant provisions of the statute with assistance of both the respective rival parties and also examined the case-law cited at the bar. There is considerable merit in the contentions raised by the learned counsel for the respondent. The pivotal facts are that a new Service Group namely "Inland Revenue Service" was created through Finance (Amendment) Ordinance, 2009 made effective from 28.10.2009 and by creation of this group, jurisdictions under Income Tax Ordinance, 2001, Sates Tax Act, 1990 and Federal Excise Act, 2905 were consolidated. Consequently, a number of provisions of the Sales Tax Act, 1990 inter alia including amendments in Section 11 (Assessment of tax) and Section 36 (Recovery of not-levied or short-levied or erroneously refunded) were made.
5. In the instant case, it was maintained that show-cause notice dated 6.5.2010 was issued and subsequent Order-in-Original No. 14 of 2010, dated 1.6.2010 was passed by a "Deputy Commissioner inland Revenue (Audit Division-I, Unit-3), Faisalabad" who was not duly appointed as an "Inland Revenue Officer" and was never assigned jurisdiction to the case of respondent through a notification published in the official Gazette under Section 30 of the Sales Tax Act, 1990. It was mentioned that Section 45 of the Act, providing for "Powers of Adjudication" was also omitted through Finance (Amendment) Ordinance, 2009 and "Assistant Collector or Deputy Collector" remained no more I empowered to adjudicate upon cases falling under Sections 11 and 36 of the Act. Relevant provisions are reproduced hereunder:- Original Section 11 (5) Notwithstanding anything in sub-section (1), where a registered person fails to file a return, an officer of the Sales Tax Department, not below the rank of Assistant Collector, shall subject to such condition as specified by the Board, determine the minimum tax liability of the registered person. Amended Section 11 (5) Notwithstanding anything In sub-section (1), where a registered person fails to file a return, an officer of the Inland Revenue, not below rank of Assistant Commissioner, shall subject to such condition as specified by the Board, determine the minimum tax liability of the registered person.
6. The legal background of aforesaid assertions is that in Sales Tax Act, 1990 certain amendments were made through the Finance (Amendment) Ordinance, 2009 promulgated on 27.10.2009 which was superseded by Finance (Amendment) Ordinance, 2010 dated 7.2.2010. Through, both these Ordinances, certain amendments were made in Sections 11(5) and 36(3) of the Sales Tax Act, 1990 whereby the words "Collector" was substituted bv the word "Commissioner* and the words "Sales Tax Department" or "Sates Tax" as the case may be" were substituted bv the words "Inland Revenue." The expression "Officer of the Sales Tax" used in Section 11(5) and Section 38(3) In the original provisions and "Officer 6f Inland Revenue" used in the amended Sections 11(5) and 36(3) have been defined in Section 2(18) of the Act and its substituted clause reads as under:- "S. 2(181. "Officer of Inland Revenue" means an officer appointed under Section 30."
7. We have noted that according to the provisions of Section 30 of the Act as it stood prior to the said amendments, appointment and jurisdiction of "Sales Tax Officers" was made through notification required to be published in the official Gazette. Accordingly a Notification No. S.R.Q 547(1)/2008, dated 11.6.2008 was issued appointing sales tax authorities and assigning them jurisdiction for a case or area. However, after amendment in Section 30 and others related amendments as narrated above, no such notification was issued thereunder and published in the official Gazette for appointment of "Inland Revenue Authorities" for assigning them jurisdiction of a case or area. Since no notification was issued nor published in the official Gazette, the impugned show-cause notice and consequent adjudication order was incompetently passed by the learned "Deputy Commissioner Inland Revenue, Faisalabad" who was not duly appointed as an "Inland Revenue Officer" and was never assigned jurisdiction to the case of respondent through a notification, duly published in the official Gazette under Section 30 of the Sales Tax Act, 1990.
8. In order to clearly understand the scope of above discussion, relevant provisions of Section 30 of the Act as it stood at the relevant time is reproduced hereunder:- "S. 30. Appointment of Authorities.-(1) For the purposes of this Act, the Board may. Bv notification in the official Gazette, appoint in relation to any area, any case, or class of cases specified in the notification, any person to be-
(a) a Chief Commissioner Inland Revenue.
(b) a Commissioner Inland Revenue.
(c) an Additional Commissioner Inland Revenue.
(d) a Deputy Commissioner Inland Revenue.
(e) an Assistant Commissioner Inland Revenue.
(f) an Inland Revenue Officer.
On plain reading of above-mentioned provision of law, it is clear that the Inland Revenue Officers should have been appointed by the Federal Board of Revenue through a notification published in the official Gazette but the instant case was adjudicated by way of assumption of jurisdiction by "Deputy Commissioner Inland Revenue, Faisalabad" who was never appointed as an Inland Revenue Officer to adjudicate upon the cases of assessment of tax and recovery of not-levied or short levied or erroneously refunded amount through a notification published in official Gazette under Section 30 of the Act. It is now a well-settled principle that if the law had prescribed method for doing a thing in a particular manner, such provision ^of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in manner other than provided by law would not be permitted. The same enunciation of law has been reiterated by the august Supreme Court of Pakistan in judgments reported as (2001 SCMR 838) and (2003 SCMR 1015). As such, jurisdiction for adjudication assumed by the learned Deputy Commissioner Inland Revenue by its own will was not backed by any legal provisions. Thus, the whole exercise of adjudication is illegal and without jurisdiction.
9. It is also evident that prior to amendment through Finance (Amendment) Ordinance, 2009, requirement of a notification under Section 30 of the Act published in the official Gazette by issuing Notification No. S.R.O. 547(1)/2008, dated 11.6:2008 was fulfilled wherein authorities were appointed and jurisdiction was assigned. In the instant case, no mandatory condition of appointment and jurisdiction of "Deputy Commissioner Inland Revenue" was fulfilled. Instead a Circular/Order C. No. 1(19)IR-Jud/2007- Petitions, dated 11.11.2009 was issued which can neither be termed as a notification or a statutory regulatory order nor its publication was made in the official Gazette under Section 30 of the Sales Tax Act, 1990. It clearly indicates that unless, there is a fresh notification issued under Section 30 published in the official Gazette, legal infirmity would prevail since the executive order dated 11.11.2009 could not be equated with the notification published in the official Gazette.
10. Consequently, the outcome of the discussion is that no notification or statutory regulatory order under Section 30(1) of the Act published in the official Gazette appointing Officers of Inland Revenue and assigning them jurisdiction over the case of respondent on the pattern of earlier Notification No. S.R.O. 547(1)/2008, dated 11.6.2008. Therefore, act of assumption of jurisdiction by "Deputy Commissioner inland Revenue" for issuing show-cause notice and passing adjudication order is patently without jurisdiction. The lack of publication of a notification for appointment of Officers of Inland Revenue Authorities in the official Gazette under Section 30 of the Act renders the whole exercise of abdication in the instant case by the "Deputy Commissioner Inland Revenue" nullity in the eye of law. It is principle of law that the lawful jurisdiction is the basic ingredient of any proceedings against the tax-payer and the same is to be derived from the expressed provisions of law. The provisions relating to jurisdiction are to be strictly construed as there can be no taxation on the basis of assumption and one has to be taxed as per letter of law and not spirit of law.
Learned counsel for respondent quoted the judgment of honourable Supreme Court of Pakistan in case of "Messrs Facto Belarus Tractor Ltd. v. Government of Pakistan" reported as PLD 2005 SC 605 = 2005 PTD 2286- which contains elaborate and comprehensive discussion on the issue of lack of publication of authorization letter in official Gazette. The rule enunciated in the said judgment is as under:- "The second reason for not granting relief to the Petitioner is lack of publication of authorization letter dated 26th June. 1996 in official Gazette as held in "Province of East Pakistan v. Hasan Askary"
(PLD 1971 SC 82) and "Moosa and Co. v. Collector of Customs. Karachi" (PLD 1977 Karachi 710). Thus, it can be conveniently held that authorization letter dated 26th June, 1996 was not issued by the relevant executive authorities of the Federal Government in accordance with the provisions of Article 90 of the Constitution of Islamic Republic of Pakistan read with Rule 12 of the Rules of Business, 1973 coupled with the reasons that authorization letter was not gazetted in order to make it public in light of the. Judgments noted herein above, therefore, it could have not furnish basis for granting relief to the petitioner vide judgment dated 19th February, 2001."
11. The learned counsel further placed reliance on the following extract from the judgment of honourable Sindh High Court, Karachi in case of "Commissioner of Sales Tax (Central), Karachi v.
Messrs Pakistan Services Limited, Karachi" reported at PLD 1983 Kar. 297 which is as follows:- "Mr. S. Haider Ali Pirzada then relied upon a letter of the Central Board of Revenue No. 9(82) S.T., dated 8.12.1968, whereby in the opinion of the Central Board of Revenue, bakery products manufactured and sold in the hotels were not exempt from sales tax. Learned counsel for the applicant argued that Central Board of Revenue is the authority to make rules and this letter of Central Board of Revenue is to be placed on the same footing and should be given the same status as any other rule and relied upon. Province of West Pakistan v. Din Muhammad" (PLD 1964 SC 21) for the proposition that departmental instructions issuecd by rule-making authority should have the same effect as rules formally made by the authority. The principle in this Supreme Court case is not applicable in the instant cases as under Section 39 Of the Sales Tax Act, 1951, rules made by the Central Board of Revenue are required to be published in the official Gazette and' only then they have effect. Admittedly. This letter of Central Board of Revenue has not been published in the official Gazette and as such it cannot be accepted as provision amending or supplementing the notifications or rules already in force."
12. We have also observed that the show-cause notice issued on 6.5.2010, is hopelessly barred by statutory time limitation as the same was issued after the prescribed time limit of five years under Section 36(1) of the Act and the result is that like in the suit for recovery of money, after lapse of time prescribed by law of limitation, the intended recovery has become unenforceable. Where an executive authority exercises its jurisdiction after the expiry of the period provided in a Statute, such exercise of jurisdiction, without any iota of doubt is illegal and ab initio void. The phrase "shall be served with a notice, within five years of the relevant date" conveys the intention of the legislature that show-cause notice and issuance of the same,- within five years, is a mandatory requirement for an action under Section 36(1) of the Act and the term 'shall' used in subsection (1) of Section 36 ibid makes the compliance of provision of law mandatory and there is no escape to it and one limitation had started to run and had come to an end, the tax-payer had acquired a vested right of escapement of assessm ent by lapse of time. We are of the considered view that when the prescribed limit is beneficial for the citizen and restricts the executive power to touch the pocket of a taxpayer thereby creating certainty that after its expiry, even if there was a good case for creation of liability he will not be dragged in. Reliance can be made on the judgment of honourable Supreme Court of Pakistan, in case of "Collector of Customs, Sales Tax, (West), Karachi v. Messrs K&A Industries, Karachi"reported as 2006 PTD 537 wherein their ( lordships have laid down as under:- "Learned counsel when confronted with the provisions of sub-section (2) of Section 36 of the Sales Tax Act, 1990 and was failed upon to explain as to whether in respect of the year of 1994-95, show- cause notice dated 12th August, 1999, was within the prescribed limitation i.e. Three years. He could not answer satisfactory. Thus, it is held that show-cause notice was served beyond the period of limitation as prescribed in sub-section (2) of Section 36 of the Sales Tax Act. 1990 and as such learned High Court had rightly non-suited the petitioner. Petition is dismissed and leave declined."
The honourable Supreme Court of Pakistan in another case re: "Federation of Pakistan though Secretary, Finance, Islamabad and 4 others v. Messrs Ibrahim Textile Mills Ltd. And others" reported as 1992 SCMR 1898 observed as under: 'The cardinal principle of law is to be considered for the recovery of short levied duties.-The cardinal principles of Law are:-
(1) that all are equal before law whether Citizen or State.
(2) secondly, if a law prescribes period of time for recovery of money, after its lapse, recovery is not enforceable through Courts.
(3) thirdly, that while construing a financial statute, its terms are strictly to be followed."
13. In view of what has been discussed hereinabove and particularly in the light of law and judgments quoted supra, we are in full agreement with the learned counsel for the respondent, we hold that the impugned show-cause notice and consequent adjudication order passed by the learned Deputy Commissioner Inland Revenue being illegal, void ab initio and without jurisdiction be set aside and the Instant appeal filed by the revenue department being devoid of any merit is hereby dismissed.