Titled appeal has been filed at the instance of the registered person, calling in question the impugned Order-in-Appeal dated 10-8-2010; passed by the Commissioner Inland Revenue (Appeals) RTO, Jail Road, Faisalabad. The sole grievance of the registered person is that the learned CIR(A) confirmed the order of the Deputy Commissioner (Inland Revenue) who had no lawful authority under the law to proceed against the registered person.
2. The common facts relevant for the disposal of present appeal are that the registered person did not file monthly sales tax returns for the period of September, October and November, 2009. On 5- 1-2010, Show-Cause Notices were issued by Deputy Commissioner Inland Revenue, Enforcement-2, Regional Tax Office, Faisalabad confronting levy of minimum tax under section 11(5) read with para 21 of Sales Tax General Order No. 3 of 2004. In reply thereto, it was submitted that sales tax return could not be filed and output tax thereon could not be deposited as the funds of the taxpayer were diverted by the bank towards their. DCIR passed the orders in original on 9-2-2010 which were accordingly issued on 17-2-2010. In order to pay the tax demand created by the department a representation was made to the F.B.R. By the appellant with the request to pay the same in installments. F.B.R. Granted the request to pay the tax in installment vide C. No. 1(21)STM/2002-VOL- II, dated 4-3-2010.
4. The appeals filed by the taxpayer were finally heard by the learned first appellate authority on 10-8-2010, however, by that time the amount actually due stood paid in installments. On appeal the issue of jurisdiction was raised besides the arguments on merits regarding the amount actually due and default surcharge/penalty. The learned CIR(A) confirmed the orders in original in tow hence this appeal before the Tribunal.
5. Both the parties have been heard and relevant orders perused. The learned A.R. Vehemently argued the case and submitted that 'the impugned orders have been passed under section 11(5) of the Sales Tax Act, 1990. Certain amendments in the aforesaid provision were made through Finance Ordinance, 2009, dated 28-10-2009, and the amended provision at the material time when the show-cause notice was issued and the impugned orders were passed read as under:-- Original Section 11 Amended Section 11 (5). Notwithstanding anything in subsection (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.(5). Notwithstanding anything in subsection (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. It was contended by the learned A.R. That from the above text it is evident that the orders in original were to be passed by "an officer of the Inland Revenue" and the said expression has been defined in section 2(18) of the Sales Tax Act, 1990 and the same was also amended through the aforesaid Ordinance, and the amended provision read as under:-- "(18) "Officer of Inland Revenue" means an officer appointed under section 30"
Further submitted that the order is to be passed under section 11(5) by an officer of the Inland Revenue who has been appointed under section 30 of the Sales Tax Act, 1990. It was pointed out that section 30 was also amended through Finance Amendment Ordinance, 2009 and the amended provision at the material time stood as under:-- "30. Appointment of authorities.---(1) For the purposes of this Act, the Board may, by notification in the official Gazette, appoint in relation to any area, any case or any class of cases specified in the notification, any person to be---
(e) a Chief Commissioner Inland. Revenue
(f) a Commissioner of inland Revenue
(g) an Additional Commissioner Inland Revenue
(h) a Deputy Commissioner Inland Revenue"
7. While continuing with the arguments, the learned A.R. Pleaded that combined. Reading of all the aforesaid provisions indicates that the order under section 11(5) were to be passed by "an officer of the Inland, Revenue" who had been appointed through a notification in the official Gazette for the purpose of Sales Tax Act in relation to case/area specified in the notification. As per provisions of section 30 as it stood prior to the amendment, the S.R.O. 547(1)/2008, dated 11-6-2008 had been issued appointing sales tax authorities and assigning them jurisdiction. However, after the amendment of Section 30 and related amendments narrated above, no notification/S.R.O. Was issued and published in the official Gazette appointing sales tax authorities and assigning them jurisdiction with regard to the case or area of the registered person which is a pre-requisite for any proceedings by an officer of the Inland Revenue against this taxpayer. Hence the impugned order passed against the taxpayer are without lawful authority and of no legal effect.
8. The learned A.R. Drew the attention of the bench to the impugned order and pointed out that the learned CIR(A) has impliedly admitted that there is no notification in the official Gazette on the pattern of earlier S.R.O. 547(I)/2008 yet he has held that the spirit of law has been fulfilled as the orders of the F.B.R. Appointed sales tax authorities and assigning them jurisdiction were 'issued.
Reference has also been made to F.B.R's. Orders C.No.1(32)/2009-MIIA, dated 24-11-2009 which in fact pertains to re-designation of posts made under section 4(1)(h) and section 5(1)(b) of Federal Board of Revenue Act, 2007 and not in pursuance of section 30 of the Sales Tax Act, 1990. Reliance has also been placed upon another Order No.1805-M-IIA/2009, dated 25-11-2009 which is in fact a transfer and posting order placing certain officers in the Regional Tax Office, Faisalabad and not a statutory notification under section 30 of the Sales Tax Act, 1990. Whereas all the aforesaid orders are administrative orders and there is no notification/S.R.O. Published in the official Gazette on the pattern of earlier S.R.O. 547(I)/2008 issued in exercise of amended powers available under Section
30. Therefore, F.B.R's. Jurisdiction order C.No.1(19)1R-Jud/2009(A), dated 25-11-2009 assigning jurisdiction to Commissioners. Inland Revenue is not a substitute for stipulated mandatory notification published in the official Gazette appointing authorities for the purpose of Sales Tax Act and assigning jurisdiction to them.
9. It was also averred at the bar that observations of the CIR(A) that the order issued by the F.B.R.
Had requisite attributes of notification and even if they were not published in the official Gazette but placing them on the F.B.R. Website was sufficient and hence the object of publication in the Gazette stood fulfilled as the F.B.R. Website is more easily accessible for the public as compared to the official Gazette. The learned A.R. Tried to distinguish by submitting that as per law, provision 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. It is evident that prior to amendment through Finance Amendment Ordinance, 2009/2010, the requirement of notification in the official Gazette existed and the Board had complied with the earlier requirement by issuing Notification S.R.O. 547(I)/2008, dated 11-6-2008 wherein authorities were appointed and the jurisdiction was assigned. It clearly shows that unless there is fresh notification in the official Gazette the legal infirmity would-prevail since the Executive Orders dated 11/25-11-2009 could not be equated with the notification published in the official Gazette. Hence the impugned adjudication orders are bad in law as having been passed without a lawful authority. The learned A.R. Also pleaded that the CIR(A) did not discuss and distinguish following case-law relied upon in support of issue of publication in the official Gazette: 2005 PTD 2286, 1983 PTD 117, 2006 PTD 2821 and 2003 PTD 757.
Further argued that instead of discussing and rebutting the aforesaid direct precedents on the issue, the Commissioner (Appeals) referred to other judgments having indirect reference hence not relevant in view of the direct judgment of superior Courts on the point in issue in the context of taxing statutes. Hence, the order in original were passed without jurisdiction and as such of no legal effect.
10. The main argument of the appellant is that the order-in-original has been passed by an authority who had no jurisdiction as neither any notification/S.R.O. Was issued under section 30(1) of the Sales Tax Act, 1990 nor the notification/S.R.O. Was published in the official Gazette appointing the aforesaid authority for the purposes of Sales Tax Act and assigning jurisdiction over the case of the appellant on the pattern of earlier S.R.O. 547(1)/2008, dated 11-6-2008.
11. The learned A.R. While commenting upon the impugned order, submitted that Commissioner (Appeals) in paras 9 and 10 of the Appellate Order has observed that certain notifications were issued by the F.B.R. Subsequent to promulgation of the Finance Amendment Ordinance, 2009. Whereas, perusal of the same indicates that the notification referred to in para 9 dated 24-11-2009 has been issued under sections 4(1)(h) and 5(1)(b) of the Federal Board of Revenue Act, 2007 for re-designation of posts and the same cannot be equated with notification/S.R.O. In pursuance of section 30(1) of the Sales Tax Act, 1990. Similarly, the other notifications referred to in para 10 of the appellate order are in fact transfer and posting orders of the officers and again do not fulfill the requirement of notification/S.R.O. Under section 30(1) with regard to the requirement of publication of notification under section 30(1) in the official Gazette the learned CIT(A) in para. No.13 of the appellate order observed as under:--- ..................... Although the procedure prescribed by law may not have been strictly followed, the requirement spirit of law stands fulfilled."
12. The learned A.R. Highlighted that it is an established principle of taxing statutes propounded by the Superior Courts that one has to be taxed as per letter of law and not spirit of law. The lawful jurisdiction is the basic ingredient of any proceedings against the taxpayer and the same is to be derived from the express provisions of law. The Hon'ble Supreme Court of Pakistan in its judgment reported as 2005 PTD 2286 has held as under:- "68. 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 Mossa 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 reason that authorization letter was not gazetted in order to make it public in light of the judgments noted hereinabove therefore, it could have not furnished basis for granting relief to the petitioner vide judgment dated 19th February, 2001."
13. Whereas the honourable Sindh High Court in a judgment reported as 1983 PTD 117 in a similar proposition has held as under:-- "Mr. S. Haider Ali Pirzada then relied upon a letter 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 authority to make the rules and this letter of Central Board of Revenue is to be placed on the same footings and should be given the same status as any other rule and upon Province of West Pakistan v. Din Muhammad for the proposition that departmental instructions issued 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."
14. We have heard the learned counsel for both the parties and have also gone through the case- law cited at the bar, we have no hesitation to hold that no notification/S.R.O. In order to amend earlier S.R.O. 547(1)/2008 was issued and published in the official Gazette, hence the authority passing the order-in-original has not been appointed under section 30(1) for the purposes of Sales Tax Act and the case of the appellant was not assigned to him by express delegated legislation as per precedent and pattern of S.R.O. 247(1)/2008. Hence, the assumption of jurisdiction and passing of, order-in-original is illegal and void.
15. The learned A.R. Appearing on behalf of the registered person/ appellant has acknowledged that tax was actually due and submitted that the same was paid in installments after getting approval from the C.B.R. And the appellant was discharged of tax liability while the Commissioner Appeals has confirmed the minimum tax liability ignoring para 23. Of STGO No. 2 of 2004 which requires determination of actual liability through audit. It has been pleaded that the audit of the said period under consideration was carried out and actual liability was determined which is the same figure which has already been paid by the taxpayer. In view of the above it is directed that demand over and above the actual liability determined in the audit observation No. 34, dated 8- 10-2010 would be deleted. Similarly, additional tax and penalty is also deleted as delay in the payment of tax was not wilful rather under compelling circumstances and F.B.R. Has also acceded to the request of the company for payment in installments considering the aforesaid circumstances. The aforesaid direction is also in accordance with the principle laid down by the honourable Supreme Court in 2004 SCMR 456 = 2004 PTD 1179 that the imposition of penalty and additional tax is not mandatory and there is discretion left with the authorities to allow any concession. It E was observed that:- "28. Each and every case has to be decided on its on merits as to whether the evasion of payment of tax was wilful or male fide, decision on which depend upon the question of recovery of additional tax. In the facts and circumstances of this case, we find that non-payment of sales tax within tax period was neither wilful, or it could be construed to be mala fide evasion of payment of duty, therefore, the recovery of additional tax as penalty or otherwise was not justified in law."
16. Appeal of the registered person is disposed of in the aforesaid manner. .