M.A. JAVED SHAHEEN, JUDICIAL MEMBER.---The titled appeal has been filed by the registered person under section 46 of 'the Sales Tax Act, 1990 against the Order-in-Appeal No.ST-12 of 2006, dated 31- 8-2006 passed by learned Collector of Customs, Sales Tax and Federal Excise (Appeals), Faisalabad.
2. Brief facts of the case are that the appellant-registered person is a manufacturer of sugar and allied products. During the audit proceedings for the tax period March, 2001 to September, 2001 various irregularities and omissions were observed as under:--
(1) Wrong filing
(2) Short filing
(3) Inadmissible Input Tax Adjustment
(4) Inadmissible Input Adjusted against Electricity used for Nontaxable activities.
(5) Inadmissible Input Adjusted against Telephone Bills and Hotel Bills.
(6) Inadmissible Input, Tax Adjusted under section 7 (Irrelevant Tax Period)
(7) Illegal Adjustment of Further Tax in the month of June, 2002.
(8) Evasion of Further Tax.
Based on the above-said irregularities/omissions the case was referred to the concerned adjudicating authority for decision. Show-cause notice was issued to the registered person in which further .Tax was evaded by the appellant leviable under section 3(1-A) of the Sales Tax Act, 1990. It had further been alleged that the appellant paid further tax upto June, 2002 but after the said period onward they had not been paying further tax @ 3%. It was further pointed out that the registered persons evaded sales tax during the period 6/2002. On the basis of the above facts, the registered persons were called upon to show cause as to why a total amount of Rs.49,777,665 should not be recovered from them along with penal action under section 33 of the Sales Tax Act, 1990. The adjudication proceedings culminated in passing of order-in-original bearing No. 5/2006, dated 21-2-2006.
3. Being aggrieved with the treatment meted out by the adjudicating authority, the registered person preferred an appeal before the first appellate authority who partially allowed the appeal of the appellant. Being dissatisfied with the treatment by the first appellate authority, hence this appeal before this Tribunal praying for setting aside of the said orders of both the authorities below.
4. The learned counsel appearing on behalf of the appellant contended that all of the appellant's supplies were to registered persons. He further contended that registered person as defined in section 2(25) of the Sales Tax Act prior to 2001 means a person, who is registered or is liable to be registered under the Act. He also contended that through an amendment a proviso was added to this definition whereby it had been added that a person is liable to be registered but is not actually registered shall remain liable to further tax under subsection (1A) of section 3. On the, basis of this situation, the learned counsel vehemently contended that appellant is a registered person and thus would not be liable to pay "further tax". According to him any further tax even if due should be recovered from the person who received/purchased supplies from the appellant and whereas the said tax could not be recovered from the seller i.e. Appellant.
5. In support of his contention; he produced before us various judgments of the apex Court reported as 2009 PTD 762 (Lahore High Court titled as Messrs Tanveer Weaving Mills v. Deputy Collector of, Sales Tax and others 2009 PTD (Trib.) 785), 2009 PTD 2004 (Lahore High Court) titled as Messrs Meraj Din v. Collector Customs Lahore and 2009 PTD 578 (Lahore High Court). At the end, he contended that even otherwise the order-in-original is void, illegal and ab initio being issued in violation of section 36(3) of Sales Tax Act, 1990. According to him as per the provisions of the said section a show-cause notice had to be decided within 90 days or within a period of maximum 180 days if an extension had been granted by the FBR/CBR. To strengthen his contentions, he relied upon the judgment of Lahore High Court reported as 2009 PTD 762, 2009 PTD 1978 and 2008 PTD
578. Keeping in view the afore-mentioned, reported judgments, it is humbly prayed that the show- cause notice as well as order-in-original is liable to be set aside/ vacated.
6. The learned DR supported the order of the learned adjudicating officer.
7. We have heard the arguments advanced by the rival parties at length and have also gone through the relevant facts and case-law cited at bar. After going through the assertion made by the respective parties, we would like to first deal with the second contention of the learned AR i.e. Regarding the order-in-original being illegal, void ab initio as it had been passed after the period of more than 180 days outside the maximum period prescribed by law. The contention raised by the learned counsel for the appellant-registered person was duly supported by the binding judgment of the Lahore High Court, Lahore. He also draw our attention in the case of Messrs Super Asia Muhammad Din and Sons v. Collector, cited as 2008 PTD 60 whereby the Hon'ble High Court while adjudicating the similar issue involved therein have taken the opinion as under:-- The claim of the revenue that the prescribed limitation of 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 a 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 tax-payer thereby creating certainty that after its expiry even if there was a good case for creation of liability he will not be dragged.
8 In view of the findings of the Hon'ble High Court, it is crystal clear that the order-in-original was passed after the mandatory period of 180 days and is thus illegal, void ab initio and cannot be sustained in the eye of law. The appeal can be accepted on this point alone without going into any other issue, however, in order to satisfy our conscience we have also examined the other issue raised by the appellant regarding merits of the case. He also drew our attention in the judgment of Messrs Waqas and Co. v. Customs, Central Excise and Sales Tax Appellate Tribunal and another passed by Lahore High Court, Multan Bench, whereby the Hon'ble Court took the following view:-- Thus, the bare reading of the section itself makes it abundantly clear that further tax can only be charged and paid if it is established that taxable supply is made to an "unregistered person".
Neither it is in the judgment of the Adjudicating Officer nor from the judgment of the learned Tribunal it could be ascertained that many efforts were made to find out that taxable supplies were made by the wholesalers to such persons who were not registered or who fall in the exceptions of the proviso to section 3(1A) of the Act. It appears that both the lower forums presupposed without there being any material on D record that all the retailers to whom taxable supplies were made by the wholesalers were unregistered persons.
9. In the light of the above discussion, we are left with no option but to accept the appeal of the appellant-registered person and this would result into set aside the orders of both the authorities* below as well as to vacate the show-cause notice.
10. As a result, the appeal of the appellant-registered person is accepted to the extent and in the manner as indicated above. .