NAZIR AHMAD (JUDICIAL MEMBER).---The above titled miscellaneous application as well as appeal have been filed at the instance of the registered person. Mr. Khuram Shahbaz Butt, Advocate and Miss Nida Malik, ITP are present on behalf of the registered person whereas none is pleasent on behalf of the department. Therefore, ex parte proceedings are conducted against the department by resorting of Rule 22(1) of ATIR Rules, 2010.
2. First of all, we take up the miscellaneous application, through which the applicant/registered person seeks permission to and the following new common grounds of appeal along with other grounds of main appeal already filed for adjudication:--
(i) That the order in original is barred by time in (sic) of sections 11 and 36 of the Sales Tax Act, 1/90.
(ii) That the show-cause notice is silent about the subsection of section 36 under which it has been issued which renders it legally defective.
(i.e) That the levy of penalty of appellant under section 33 does not flow from the show-cause notice C.No.20-Collr(Adj)ST/LHR/ 2001/3228 dated 19-5-2001.
3. The learned counsel of the registered person/applicant has vehemently argued that above mentioned legal points could not be raised in the original grounds of main appeal filed against the impugned order. He further submits that the above mentioned additional grounds being purely question of law directly go to the root of this case, which can be raised at any stage of the appeal proceedings.
4. Arguments heard and record perused. We find ourselves in agreement with the submissions made on behalf of the applicant being, legally tenable. Therefore, we have no hesitation to accept the miscellaneous application for the period uncle- consideration and allow the above additional common grounds of appeal raised through above titled miscellaneous application to be considered as part of the grounds taken as per memo. Of main appeal.
5. Now, we come to the main appeal filed by the registered person which has been directed against the Order-in-Original No.ST-15/2002 dated 14-1-2002 recorded by Collector (Adjudication), Collectorate of Customs, Sales Tax and Central Excise, Lahore.
6. Facts in brief emanating from record leading to the instant appeal are that the appellant is a Chartered Accountant by profession practicing as a consultant in sales tax matters and represents his client at audit as well as appeal stage. A show-cause notice dated 19-5-2000 was issued by the Collector (Adjudication), Custom House, Lahore to Messrs Alpine Textile Industries, Flat No.8, 2nd Floor Sharif Complex, Main Market, Lahore, in which they were charged with the contravention of various provisions of law and were called upon to show-cause as to why the evaded sales tax/further tax amounting to Rs.40,822,345 should not be recovered from them along with the additional tax (to be calculated at the time of disposal) under sections 11(2)(4), 34 and 36 of the Sales Tax Act, 1990 besides taking penal action against them under section 36 of the Act. Besides above, in the said show-cause notice the appellant was also alleged with the following allegations:---
(a) As per audio recording which was provided by an informer Mr.Masood Ahmad, Senior Auditor was dealing the case at that time and Mr. Ghias-ud-Din, Attorney of M/s Alpine Textile Industries was involved in bargaining.
(b) In spite of directions, the appellant was reluctant to produce proprietor of the business concern for certain clarification and was deliberately avoiding to disclose the particulars of the owner/proprietor of the said business.
7. Said show-cause notice was properly replied by the appellant as well as by deducting agency through its Deputy Superintendent. These proceedings were culminated into Order-in-Original No.ST.15 of 2002 dated 19-2-2002 and a penalty of Rs.12,246,703 was imposed on the appellant , which has been impugned before this Tribunal. Furthermore on the basis of said order, a F.I.R. Was also registered by the department against Mr. Ghias-ud-Din, Attorney of the registered person, which was heard by Ch. Iftikhar Hussain, Special Judge Customs, Taxation' and Anti-Smuggling, Lahore, and Mr. Ghias-ud-Din was acquitted from the charges levelled against him vide judgment dated 15-7-2008. The appellant has challenged the impugned order on the following grounds:--
(i) That the impugned order does not refer any reasoning for the rejection of the contentions raised by the appellant in the written reply. At the most, the impugned order apparently seems a clerical and verbatim reproduction of the show-cause notice and then the reply without applying judicious mind.
(ii) That the learned respondent has not exercised the jurisdiction vested in him properly, by not giving weightage to the facts and the law on the subject over the provisions of Sales Tax Act, 1990.
Moreover penalty cannot be imposed in case where the appellant has been discharging his professional duties and obligations.
(i.e) That where the controversy between the department and appellant relates to interpretation of different legal provisions, the learned respondent has no jurisdiction to impose the penalty.
(iv) That the appellant was not supposed to pay the tax evaded and therefore any penalty for failure to pay that tax would be least justified to be levied with any penalty.
(v) That the learned respondent has totally ignored the role of the appellant, whose name does not appear any where but in the subsequent happening i.e., conducting and attending the audit proceedings and before the said proceeding the appellant no way was linked with Alpine Textile Industries (Registered Person) who is the principle accused.
(vi) That while giving findings in the impugned order, the learned respondent could not attribute any role whatsoever to the appellant which clearly shows that the appellant appeared subsequent to his appointment as attorney and subsequent to the date of accomplishment of the said fraud.
(vii) That the learned respondent has based the impugned order on surmises and conjectures.
There is apparent want to judicious as well as judicial application of mind. The appellant has not been found liable for any act under section 33 of Sales Tax Act, 1990.
(viii)That the learned respondent being a public functionary was under obligation to consider the contentions of the appellant and apply his mind by adopting settled principles of law regarding application of penal provisions of the Act to which aspect the learned respondent has turned a blind eye approach.
(ix) That learned respondent while giving the impugned order has failed to appreciate the judgment reported as:-- 2001 PTD (Trib.) 2888, 1999 PTD 1892, 2002 PTD (Trib.) 300 PTCL 2001 CL 197(sic).
(x) That the learned respondent has miserably failed to discharge onus or to proved any mens rea on the part of the appellant. Therefore, the penalty having been imposed causally and mechanically, is not tenable in the eyes of law.
(xi) That imposition of penalty and additional tax in the impugned order is not a natural corollary and consequence of any act on the part of the appellant.
(xii) That the impugned order unlawful for the reason that the same has been passed on a date which was not fixed for hearing and further that the appellant had not been provided right of audience after issuances of corrigendum.
8. At the very outset, learned counsel has opted to assail the impugned order-in-original (ONO) on the issues, which have been raised before us as per miscellaneous application as additional grounds. He has apprised the court that show-cause notice in the instant case was issued on 19-5- 2001, against which order-in-original was passed on 14-1-2002, contrary to the provisions contained in sections 11(4) and 36(3) of Sales Tax Act, 1990 (hereinafter called the Act). According to the said provisions, the Sales Tax Authorities are bound to pass ONO within 45 days of the issuance of notice. Explaining this, he has maintained that mandatory period for passing the ONO after issuance of show-cause notice in that particular time was 45 days and if the, order, due to any reason, could not be passed by an officer of sales tax, he was, under the law, bound to obtain extension within that stipulated 45 days but as per learned counsel of the appellant, the same has not been done and this fact is, evident from the ONO. So he has vehemently asserted that the order is barred by time and has got no value in the eyes of law and the same merits cancellations In order to lend credence to his submissions, he has referred before the following reported judgments:-- 2009 PTD 1978, 2009 PTD 2004 (H.C. Lah.), 2009 PTD 762 (H.C. Lah.), 2008 PTD 578, 2010 PTD 1522, 2010 PTD 2117, 2010 PTD 1469 and 2010 PTD 1636 etc. Etc.
9. It is also the contention of learned counsel of the appellant that the show-cause notice dated 19- 5-2001 is defective being silent about the mentioning of any subsection of section 36 under which it has been issued. Thus allegations levelled therein are not specific in nature. Explaining his view point, the learned counsel maintained that section 36 of the Act provides two subsections i.e., 1 and 2 which give two different situations flourishing under the said section but in the show-cause notice, sales tax authority failed to point out relevant subsection. So in his opinion the show-cause notice is also defective on this score. Furthermore, according to learned counsel the levy of penalty on the appellant under section 33 of the Act does not flow from the said notice, which also renders the same to unsustainable. Reliance in this regard has been placed on the ratio settled in the reported judgments cited as 1987 SCMR 1840, AIR 1962 Madras 366, 2010 PTD (Trib.) 2157, 2011 PTD (Trib.) 738 and 2010 PTD (Trib.) 451, wherein passing of order-inoriginal beyond the scope of show- cause notice has been held unwarranted under the law.
10. On the other hand, none is present on behalf of the department to dislodge the line of arguments adopted by learned counsel. It is pertinent to mention that on the last date of hearing i.e., 25-4-2011 no body from the respondent/department tendered his appearance nor any application for adjournment was received. Hence, the matter is decided ex parte but on merits.
11. We have heard the arguments advanced by learned counsel and carefully gone through the available record and relevant provisions of the Act. As far as passing of ONO beyond the time limitation as provided in section 36 is concerned, before we dilate and refer to the case-laws relied on by the learned counsel, relevant sections 11(4) and 36(3) are reproduced as under: -- Section 11(4) (4) No order under this section shall be made by an officer of Sales Tax unless a notice to show cause is given within five years to the person in default specifying the grounds on (which it is intended to proceed against him and the officer of Sales Tax shall take into consideration the representation made by such person and provide him with an opportunity of being heard: Provided that order under this section shall be made within [forty five days of issuance of show- cause notice or within such extended period as the Collector [x x x x] may, for reasons to be recorded in writing, fix provided that such extended' period shall in no case exceed [ninety] days.
Section 36(3) (3) The officer of Sales Tax empowered in this behalf shall, after considering the objections of the person served with a notice to show cause under subsection (1) or subsection (2), determine the amount of tax or charge payable by him and such person shall pay the amount so determined: Provided that order under this section shall be made within jforty five days] days of issuance of show-cause notice or within such extended period as [the Collector] [x x x x x x x x x] may, for reasons to be recorded in writing, fix, provided that such extended period shall in no case exceed [ninety] days.
12. The perusal of above section clearly transpires that after issuance of show-cause notice, the authority is legally bound to pass ONO within 45 days of the issuance of show-cause notice and if due to any reason, he fails to pass the order, then he is legally bound to seek extension for further period, which shall not in any case exceed 90 days and it is also to mention here that such extension must be in writing and the reasons for delay must be incorporated in it. The show- cause notice in the instant case was issued on 19-5-2001 and the order-in-original was passed on .14-1-2002 while time limitation of forty-five days as per section 36 stood expired on 3-7-2001. The case laws relied on by the learned counsel of the appellant adequately supports his contention.
The honourable High Court in a number of judgments has held the passing of order-in-original after the statutory time limitation as nullity in the eyes of law. Extracts from some of the judgments are reproduced for the sake of reference:--
(i) Super Asia Muhammad Din and Sons v. Collector of Sales Tax 2008 PTD 60 "The claim of the Revenue that the prescribed limitation of 45 days for completion of adjudication proceedings as provided through Finance Ordinance, 2000 and enhanced to 90 days by Finance Act, 2003 is merely directory cannot be accepted. It is settled law that where inaction on the part of the public functionary within the prescribed time is likely to affect the rights of a citizen the prescription of time is deemed directory. However, where a public functionary is empowered to create liability against a citizen only within the prescribed time, it is mandatory . The acceptance of contention of the Revenue in that regard will make a provision of law redundant and nugatory. Redundancy or superfluity of an Act of Parliament and a provision of law cannot be readily accepted. All the more so, 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."
(ii) Messrs Tanvir Viewing Mills v. Deputy Collector Sales Tax 2009 PTD 762 (H.C. Lah.) As is clear from the language of the above proviso, it has limited the scope of exercising of the jurisdiction after issuance of notice to basically 90 days or such extended period as the Collector after duly recording proper reasons in writing has fixed. However, it is again subject to the limitation in the manner that the said extension also cannot be for more than 90 days. The period for deciding the order-in-original after issuance of a notice under section 36(1) and (3) thus is maximum 180 days including earlier 90 and extended 90 days. Obviously if the extension has been given by the Collector before the expiry of the earlier 90 days.
(i.e) Messrs Meraj Din v. Collector Customs, Excise and Sales Tax 2009 PTD 2004 The aforesaid question came up before this Court and was adjudicated upon in the case reported as Messrs Tanvir Weaving Mills through Director Finance v. Deputy Collector Sales Tax and 4 others 2009 PTD 762, wherein it was held that the order under section 36(3) must be passed within the period prescribed in proviso to the said provision. The learned counsel for the department has not been able to persuade us to hold otherwise. Consequently, the question raised is answered in the negative in favour of the taxpayer. Reference is disposed of accordingly.
(iv) 2009 PTD 1978 "Regarding the actual controversy that the case having been assessed after the expiry of limitation, the provision of section 11(4) read with section 36(3) have been referred. In this case show-cause notice having been issued on 28-6-2003 the reply of which was filed on 14-7- 2003 keeping the case pending for almost over 19 months is against the legal requirement. So far as the facts of the case is concerned, neither the same are controverted nor even otherwise there can be any dispute about that as the same stand further confirmed by the order in the case of F.T.O.
Under section 11(4) of the Sales Tax Act, the competent officer could decide a case within the 90 days from the date of issuance of a notice. Law provides for extension of the same through a formal order for another 90 days. Meaning thereby it has to be finalized within 180 days after obtaining extension from the higher competent authority by due mentioning reasons therein. The order-in-original having been passed after delay over 19 months is barred by time."
13. As evident from the above, the order-in-original in the case in hand was passed beyond the prescribed time limit of 45 days, moreover, the adjudicating authority, as is evident from the order- in-original has neither fixed any extended period nor recorded any reasons for passing the order after 45 days. Keeping in view, the settled legal position on the issue of limitation, we have no hesitation to accept the appeal by declaring the order-in-original as time barred, therefore, nullity in the eyes of law. The impugned order is vacated on this score.
14. Apart from the above, the learned counsel has also argued the other grounds taken in the miscellaneous application wherein passing of ONO beyond the scope of show-cause notice has been contested. We have gone through the contents of the show-cause notice and find the contention of the learned counsel as correct. The perusal of show-cause notice reveals that Messrs Alpine Textile Industries, registered person, was charged with the contravention of various sections of Sales Tax Act and was also called upon to show cause as why the evaded sales tax along with further tax should not be recovered from them under sections 11(2)(4), 34, 36 besides taking penal action under section 33. The appellant was never confronted with the imposition of penalty by the adjudicating authority in the said show-cause notice. Moreover the penalty proceedings being criminal one it is mandatory that the ingredient of offence for which penalty is imposed must be established and properly confronted, which is absent in the instant case. In this context, the case- laws relied on by learned counsel have also been considered and the ratio of some of these cases is reproduced as under:-- 1987 SCMR 1840 However, we are of the opinion that it is not necessary to determine this question of law in the fact of the present case as this petition can be disposed of on the short ground that the order of adjudication being ultimately based on a ground which was not mentioned in the show-cause notice, the order was palpably illegal and void on the face of: it. We hay,' carefully examined the show-cause notice and find no reference whatsoever or necessary facts relating to the ground that the alleged contraband goods were imported into Pakistan from an unauthorized route. In view of this palpable legal infirmity, we do not consider it necessary to examine the other contentions raised by the learned counsel.
AIR 1962 Madras 366 "It was contended by counsel for the respondent that no real prejudice was caused in this case because the petitioner had in his explanation admitted the contravention complained of in the show-cause notice. This cannot be construed as an admission of liability to the penalty imposed under section 167(3). As I have already indicated, the mere insertion of the section or the rule contravened in the show-cause, notice would not be sufficient compliance with the spirit of the law. In addition the show-cause notice must also mention the penalty for the contravention of the provisions of the Act for which penal action is proposed to be taken.
15. From the ratio settled in the above mentioned reported judgments, it is crystal clear that order- in-original passed on a ground, which was not mentioned in the show-cause notice is illegal and void. In the instant case, the taxpayer has been penalized by resorting to provisions of section 33 of the Act, for which he was never confronted as per contents of show-cause notice issued on 19-5- 2001. Therefore, in light of ratio settled by the higher appellate forums, the penalty imposed under section 33 of the Act being not sustainable under the law is deleted.
16. Moreover, it will not be out of place to mention that. Special Judge Customs, Taxation and Anti- Smuggling, Lahore, on the initiation of criminal proceedings after lodging F.I.R., has also acquitted the appellant (Mr. Ghias-ud-Din) from the charges levelled against him by recording a detailed judgment dated 15-7-2008 as per finding given below:-- "As result of the above discussion, I have been constrained to hold that the prosecution has not been able to bring home the guilt to accuse Ghias-ud-Din beyond any shadow of reasonable doubt. I, therefore, acquit him of the charge extending him the benefit of doubt. He is on bail. He is discharged of his bail /surety bonds. The property, if any, of the accused, if it may be with the department, he may have the same after the result of Appeal or Revision, in an appropriate way.
The file be consigned to the record after, completion within the stipulated period."
17. Without going into the details of the facts and merits of the case, the appeal is decided only on the legal issues, because law points precede the facts. Consequently, the appeal is accepted, the impugned order set aside and the show-cause notice vacated. .