The appellant in this appeal has objected against the order of the Federal Board of Revenue (F.B.R.) dated 12-9-2007 reopening the Order-in-Appeal No.3 of 2007 dated 16-1-2007 passed by the Learned CIR(A) which was regarding Order-in-Original No.103 of 2006 dated 6-10-2006. The following grounds and prayer have been framed by the appellant.
GROUNDS "(19). The impugned order is an after-thought, ultra vices, unlawful and void.
(20) The cause of action i.e. Copy of the respondent No.2s reference dated 28-7-2007 made to respondent No.1 has not yet been supplied to the appellant despite the appellant's request in this regard.
(21) No show-cause notice has been issued by respondent No.1 before creating an adverse order against the appellant. Moreover, the appellant was not afforded any opportunity of hearing before passing the impugned order. Therefore, the impugned order is ex pane and in breach of the principles of natural justice as embodied in the legal maxim AUDI ALTERAM PARTEM.
(22) The impugned order does not indicate any impropriety and/or illegality in the Order-in- Original No.3 of 2007.
(23) The power to compound an offence rests with the Collector in terms of section 37-A(4) of the Act. The Collector did not compound the appellant offence despite several requests made since 1999 upto 2003, which implies refusal of the request to compound the offence.
(24) The raid was declared illegal and contrary to the provision of sections 40 and 40-A of the Act vide the honourable Sindh High Court's judgment dated 4-9-2003 and the prosecution proceedings were quashed vide the honourable Sindh High Court's judgment dated 25-2-2004. After determining no liability under the Order-in-Original No.103 of 2006 and Order-in-Appeal No.03 of 2007, no prosecution proceeding could be deemed to be pending and left to be compounded under section 37-A and/or the amnesty notification.
(25) The C.B.R. Is not a Sales Tax Officer/Collector within the meaning of Chapter-VI of the Sales Tax Act, 1990 and/or under the Central Board of Revenue Act, 1924. Accordingly, the C.B.R. (respondent No. 1) could not lawfully assume the functions and powers of a Collector of Sales Tax for the purpose of section 37-A(4) of the Sales Tax Act, 1990.
(26) The respondent No.1 did not call for and/or examine the record of the case "on its on motion" in breach of the provisions of section 45-A of the Sales Tax Act, 1990. The C.B.R. Also did not call for and/or examine record of the case. Moreover, the impugned order dated 12-9-2007 is time-barred as it was as it was pawed after the expiry of the prescribed limitation of 5 years in terms of section 45(3) of the Act when reckoned from the date of appellant's application dated 28-12-1999.
(27) (27) The impugned order is mala fide as it is intended only to unlawfully deprive the appellant of its legitimate right to get the refund of Rs.9,441,059 paid under the amnesty scheme without prejudice and under protest.
(28) The appellant may be allowed to produce such other documents/ record and to submit further written/oral arguments at the time of hearing in support of this appeal.
PRAYER (29) For the reasons and the grounds mentioned above, it is prayed that the honourable Tribunal may be pleased to declare the respondent No.1 's order dated 12-9-2007 as mala fide, time-barred, ultra vires, ex pane, unlawful and void and to direct the respondent No.2 to treat the appellant's refund claim dated 3-5-2005 to be still pending with him which he should decide immediately.
(30) The prescribed appeal fee has been paid vide the Treasury Challan dated 16-11-2007 and the letter of authorization is placed."
(31) We have heard the learned representatives from both the sides and have alto perused the impugned order dated 12-9-2007 passed by the F.B.R. And the order in appeal, the order-in-original and have also perused the available record of the case, documents and the case-law referred by the appellant.
3. The facts leading to the instant appeal are that the appellant in this case is a private limited company incorporated under the Companies Ordinance having its business and factory at Karachi. The appellant is a manufacturer and processes certain aluminum products being registered under Sales Tax Act with S.T. Registration No.02-7610-002-91. According to appellant, on 3rd June, 1999, the sales tax officers raided the premises of the appellant without any notice or any reason and resumed all the records of the appellant. It is contended that again on 5th June, 1999, the said officers raided the sales premises of the appellant in Hyderabad Colony, Karachi and resumed the records and computers of the appellant as well as record of another company Messrs Khan Trading Company operating in the premises of the appellant. On 9th June, 1999, the said officers raided once again the premises of the appellant and took away computers of the appellant company. The officers also filed an F.I.R. No.3 of 1999 dated 5-6-1999 against the appellant which was processed against the appellant in the Court of Special Judge (Customs and Taxation) where the contravention report was prepared alleging that:-
(a) The appellant had sold goods worth Rs.148.6 million during 1997-1998 as against the declared sale of Rs.14 million causing loss of sales tax of Rs.16.8 million.
(b) The appellant had made local sales of Rs.190 million during 1998-99 (upto April, 1999) as against the declared sale of Rs.21.98 million causing loss of sales tax of Rs.21.5 million; and
(c) The appellant had suppressed local sale of imported goods worth Rs.6.4 million (importing during 1997-98) causing loss of sales tax of Rs.0.8 million.
4. The department on the basis of above referred contravention report, served a show cause notice for the recovery of the alleged short payment of sales tax along with additional tax and also proposing penal action under clauses 2(cc), 4(a), 4(c), 4(d), 4(e), 4(f) of section 33 and under sections 37-A, 37-B, 37-C(1)(a) and (c) of Sales Tax Act, 1990 for the alleged breach of provision of sections 2(46), 2(37), 3, 6, 11, 22, 23, 26 and 36(1). Subsequently, Federal Government vide notification bearing S.R.O. 1349(1)/1999 dated 17-12-1999, announced a general amnesty scheme.
The appellant filed an application dated 20-12-1999 intending to avail the said amnesty and also submitted pay order worth.
Rs.94,19,059 requesting for compounding of the offence (F.I.R.) in the appellant's case. Again on 21- 2-2003, the appellant requested to compound the offence as due payment was made under the amnesty. The appellant also filed a Civil Suit No. 825 of 1999 and C.P No. D-1310 of 1999 before the Hon'ble High Court of Sindh. A Criminal Miscellaneous Application No. 461 of 2000 were also filed before the Hon'ble High Court of Sindh for the quashment of the proceedings against the appellant.
The matter in this regard also went upto the Hon'ble Supreme Court of Pakistan in Criminal Petition No.. 24-A of 2004. The adjudication officer in this case after considering the above referred proceedings, finally passed an original order No.2 of 2005 dated 3-10-2005 holding therein that the appellant company should pay alleged amount of Rs.39.1 million (minus the amount already paid under the amnesty scheme) along with the additional tax/default surcharge thereon. The penalty of an amount equal to 5% of the tax under clause (5) of section 33(1) and another penalty equivalent to 100% of the amount of tax involved under clauses 11, 12, 13 and 15 each of section 33 of the Act have also been imposed. However, the above said Order-in-Original No.2 of 2005 was set aside and the matter was remanded to the adjudication officer for fresh consideration by the Hon'ble High Court through C.P. No.D-1390 of 2005. The adjudicating authority in compliance of the order of the Hon'ble High Court passed the fresh Order-in-Original No.103 of 2006 dated 6-10-2006 with the following observation:-- "In view of the aforesaid findings, I find that although the department could not produce any material evidence to establish the allegations, as stated in the Show Cause Notice, the respondent (i. e. Messrs Kurdsons, the registered person), cannot absolve themselves of the admitted liability of Rs.9,441,954, as admitted by them in their aforesaid letter dated 22-10-2002 and reiterated by them in their letter dated 21-2-2003.1 hereby order that liability is determined to the extent, of Rs.9,44I,954 although the said amount has already been paid by the respondent under the amnesty scheme praying for compounding of offence. The rest of the allegations and charges made in the Show- Cause Notice are hereby vacated being not sustainable by the department."
Being dissatisfied, the appellant filed appeal before the learned CIR(A). The learned CIR(A) has decided the appeal with the following observation vide the Order-in-Appeal No. 3 of 2007 dated 16- 1-2007:-- "7. 1 have carefully considered the case and find that the amount paid by the appellant in the amnesty scheme was governed by S.R.O. 1349(1)/99 dated 13-12-1999. A perusal of the S.R.O. Shows that it lays down the following para 2(ii) "case in dispute or under audit or under adjudication and cases pending in appeal under sections 45 and 46 of the Sales Tax Act, 1990. However, if the dues are held to be not payable in view of the adjudication order or the appellate order, the amount so paid in terms of this notification shall be refunded within fifteen days of the receipt of the adjudication order or appellate order, as the case may be."
(8) Keeping in view the orders of the High Court in this case and the assertion of the adjudicating officer that the case against the appellant was nor established. I do not find the creation of liability was legally correct as the amount paid in amnesty scheme was under protest and/or for compounding the offence. It would not be out of place to mention that the offence was not compounded. It is, therefore, directed that the amount paid under protest may be processed for refund in line with the orders of the High Court and the provisions contained in para 2(ii) of S.R.O.
1349 of the Sales Tax Act, 1990. The order-in-original is modified to this extent only."
5. No appeal against the above findings of the officers below has been filed by the department. The appellant filed refund claim vide his application dated 2-5-2007 praying for refund of Rs.94,19,059 refundable in terms of the aforesaid observations but, according to the appellant, despite several reminders, the respondent department failed to pass any order. Instead of issuing the refund, the already passed Order- A in-Original No.103 of 2006 has been re-opened under section 45-A of the Sales Tax Act, 1990 through the impugned order dated 12-9-2007 on the back of the appellant without affording the reasonable opportunity of being heard and without issuing any notice to the appellant. It, is contended that order is void ab initio against the law is liable to be cancelled.
We have considered the above said contention of the learned counsel of the appellant and have noted that the F.B.R. Has re-opened the Order-in-Appeal No.3 of 2007 dated 16-1-2007 in exercise of powers conferred under section 45-A of the Sales Tax Act 1990 without considering the fact that under section 45-A, the F.B.R. May of its on motion, call for and examined the record of any 'departmental proceedings' under this Act or Rules made thereunder for the purpose of satisfying itself as to the legality or propriety of any decision or order passed therein by an officer of Sales Tax, it may pass such order as it may think fit. But it has not been considered that in subsection (2) of this section 45(A), it has specifically been mentioned that no proceedings under this section shall be initiated in a case where an appeal under section 45-B or section 46 is pending. It is to note that in this case, the appeal has already been decided by the learned CIR(A). We have further noted that the F.B.R. Under this Section can only call for and examined the record and pass an order regarding the departmental proceedings pending before the officer of sales tax which in no way include the appellate proceedings. We have further noted that in this case, the Order in-Original No.2 of 2005 was passed on 3-10-2005, which was set aside by the Hon'ble High Court with certain directions and subsequently the second Order-in-Original No. 103 of 2006 was passed on 6-10- 2006. The learned counsel for the appellant in this regard has also referred a decision of the Hon'ble Lahore High Court reported as 2004 PTD 714, wherein it has been held that there is no concept of recalling of an order by the C.B.R. Of a subordinate authority specifically in the circumstances where the record was never called for ,nd the affecting party was issued a notice regarding the reopening.
6. Keeping in view the legal position referred to above and the facts .And circumstances of the case, we find no justification for the impugned order dated 12th September, 2007 issued by the F.B.R., which is totally illegal and void order and is, therefore, cancelled.
7. The appeal filed by the taxpayer is allowed. .