' The appellant Airblue Limited is engaged in the business of operating an airline under license from Civil Aviation Authority of Pakistan and render services in respect of travel by air to passengers and cargo within Pakistan and abroad. The services rendered by appellant is subject to levy of Federal Excise Duty under Entry Nos.3 and 4 of Table-II of First Schedule to Federal Excise Act, 2005.
2. Through this appeal the appellant has objected against the impugned Order-in-Appeal No, 43 of 2012 dated 10-10-2012 of the learned CIR(A) who has upheld the Sales Tax Order-in-Original No, 40 of 2012 dated 20-7-2012 passed by Assistant Commissioner Inland Revenue, Enforcement Unit No, V, Large Taxpayers Unit, Islamabad wherein he has imposed default surcharge and penalties from July 2011 to January 2012.
3. Mr. Tahir Razzaque Khan, FCA learned Authorized Representative of the appellant has contended that the show-cause notice issued by the ACIR was tentative and sketchy as it does not mention the details and particulars of default. The show-cause notice dated 27-3-2012 issued by ACIR read as "... Whereas, during the audit of Enforcement-V, Zone-II, Large Taxpayers Unit, Islamabad conducted by Internal Audit Inland Revenue, Rawalpindi for the period July 2011-2012. It was pointed out that Messrs Airblue Limited, Islamabad having sales tax Registration No, 0701980507455 (hereinafter referred to as respondents), were required to furnish their sales tax and federal excise return for the tax period July 2011 to January 2012, in term of sections 6 and 26(1) of the Sales Tax Act, 1990 and section 4 of the Federal Excise Act, 2005, within due date---And whereas the respondents have late filed their Sales Tax and Federal Excise return for the aforesaid period, i,e,, after the due date and thereby contravened the provisions of sections 6 and 26(1) of the Sales Tax Act, 1990 and section 4 of the Federal Excise Act, 2005, punishable under sections 33(1) and 33(5) of the Sales Tax Act, 1990 and section 19(1) of the Federal Excise Act, 2005---Now, therefore, Messrs Airblue Limited, are hereby called upon to show cause, under section 11(1) of the Sales Tax Act, 1990, as to why a penalty and default surcharge, under sections 33(1) & (5) and 34 of the Sales Tax Act, 1990 and sections 19(1) and 8 of the Federal Excise Act, 2005 respectively, should not be imposed upon you."
' Learned representative of the appellant argued that the above referred show-cause notice does not state and manifestly specify any amount of default surcharge or penalty. In the absence of any specific amount the appellant has been relegated to the conjuncture, speculation and calculations in the hands of ACIR. He has contended that the show-cause notice is liable to be set aside on this ground alone.
' He pointed out that the appellant is engaged in the business of airline under the license from Civil Aviation Authority of Pakistan and render services in respect of travel by air to passengers within Pakistan and internationally and is subject to Federal Excise Duty under Federal Excise Act, 2005.
According to him there is no activity undertaken by appellant which falls under the purview of Sales Tax Act, 1990 (i,e,, supply of goods). He contended that appellant is subject to excisable services, therefore, the provision of Sales Tax Act, 1990 are not applicable. Federal Excise Act, 2005 is a complete code as far as chargeability of penal action on account of penalty and default surcharge is concerned. He has contended that the default was not intentional. He submitted that there remained operational issues and problem with the e-portal of FBR during the impugned period. He submitted that communications were made with appellant between the period from 25-10-2010 to 11-9-2012 and submitted copies of emails and letters written to e-fbr portal and concerned enforcement officer.
' He has pleaded that the penalty could only be levied in such cases where mens rea could be attributed to a taxpayer whereas neither such a finding has been recorded in Order-in-Original nor in Order-in-Appeal. He requested that the amount of penalty and default surcharge may please be deleted. Learned AR in this respect has placed reliance on the following judgments of the (i)
Humayun Ltd. v. Pakistan and others reported as PLD 1991 SC 963 (ii) Mamy Beverages v. Naseem reported as 1995 PTD 91 (LHC); (iii) Millat Tractors Limited v. Collector of Sales Tax and Central Excise reported as 2003 PTD 1445 (LHC); (iv) D. G. Khan Cement Company Ltd., reported as 2004 PTD 1179
(SC) = 2004 SCM R 456; (v) Collector of Sales Tax and Central Excise v. Baba Farid Sugar Mills Ltd., reported as 2004 PTD 823 (LHC); (vi) Shamroz Khan v. Muhammad Amin reported as PLD 1978 SC 89 (SC); (vii) Additional Collector Sales Tax v. Rupali Polyester Limited reported as 2005 PTD 2412 (LHC); (viii) Pakistan State Oil Limited v. Collector of Customs, Sales Tax and Central Excise reported as 2006 PTD 397 (LHC); (ix) Deputy Collector Central Excise and Sales Tax v. I.C.I. Pakistan Limited reported as 2006 SCM R 626 (SC); and (x) The order in the case of the taxpayer / appellant Airblue Limited v. CIR, Zone-II, LTU in STA No, 217/IB/2011 order dated 21-5-2012 passed by this Tribunal.
' He has also drawn the attention of the bench towards determined tax refunds for Tax Years 2009 and 2011 which is amounting to Rs,124.674 million and has also submitted before this bench the copies of assessm ent orders. He has stated that the refunds were assessed at Rs,80.540 million and Rs,44.134 million respectively in Tax Years 2009 and 2011, respectively. He argued, without prejudice to other grounds of appeal, that the department still owed substantial amount of refund to the appellant as the tax liability ranged between Rs,29.428 million to Rs,84.683 million during impugned tax periods.
4. On the other side representing the respondent department the learned DR, Mr. Imran Shah, ACMA, in his turn supported the orders of the authorities below and contended that in the instant case if the appellant has faced some difficulty with the e-portal of FBR, the appellant is duty bound and should have paid the amount of duty manually in order to establish the bona-fide. Late deposit of tax is the conclusive evidence of wilful default on part of the appellant. He has therefore contended that the orders of both the officers below may please be upheld.
5. We have examined the available record and considered rival arguments. First point we are to take up is the matter of issuance of show-cause notice by ACIR. It is, now, settled law that any proceedings A taken without issuing proper show-cause notice would be illegal. According to Guide to Central Excise - Law and Practice by Arvind P. Datar & B.N. Gururaj, Sixth Edition, Volume-1, an authoritative commentary on the Indian Central Excise Act, 1944, pp. 544 and 830, which has been referred by learned counsel of the appellant the show-cause notice must satisfy following basic requirements:--
(i) The notice must be properly served on the concerned person and must give sufficient time to enable him to prepare his case;
(ii) Notice should be adequate and not merely repeat the statutory language without giving facts or other particulars;
(iii) The notice must require the party to show cause to the proper officer why he should not pay a certain stated amount;
(iv) The grounds in the show-cause notice should be clear, specific and unambiguous;
(v) Notice should be issued on the subjective satisfaction of the concerned officer. A notice issued in pursuance of advice is illegal and liable to be quashed;
(vi) The basic principle is that a show cause must be real show cause, keeping an open mind with regard to the subject-matter of the inquiry proposed and if the show-cause notice bears out a foreclosed or prejudged mind that would violate the principle of natural justice;
(vii) Where the notice merely states that "it appear" that the assessee has violated some conditions and duty demanded, without asking the assessee to show cause, it amounts to violation of natural justice. Demand set aside;
(viii) The amount must be stated and manifestly specified in the notice itself;
(ix) The amount determined by the authority as payable shall not exceed the amount specified in the show-cause notice; and
(x) Such amount which the party is ordered to pay must be stated and manifestly specified in the order without relegating the party to conjuncture and calculations for ascertainment of the amount ordered to be paid.
' We have noted that the show-cause notice cited supra lacks basic requirement as has been referred above in respect of show-cause notice as there is no mention of specific allegations in relevant tax period, quantum of default, application of specific statute (whether Federal Excise Act, 2005 or Sales Tax Act, 1990). The perusal of show-cause notice reveals that the ACIR has merely reproduced the observation of the Internal Audit Inland Revenue and not bothered to translate the audit observation into a sustainable show-cause notice by incorporating the required necessary details. Under such a situation the contention of learned AR have force that the show-cause notice is liable to set aside.
6. The second issue is relating to the defective e-portal of FBR. During the course of hearing the learned DR has attempted to demonstrate that the tax payment can be made in the exchequer manually, therefore, the default is established beyond any doubt. In the rejoinder, the learned AR has rebutted the argument of learned DR and stated that above situation is correct as far as taxpayer is liable to pay any advance tax but the situation is otherwise where the adjustment of input tax is involved. As regard the payment of FED is concerned it cannot be done unless the monthly ST&FE return is complete. He submitted that there are number of steps which need to be taken in the order of sequence and in such situation it is not possible for the appellant to deposit the amount of except without first preparing and filing the monthly ST&FE return. He submitted that it is built in the system of e-portal that while calculating the tax liability the computer verifies the amount of input tax claimed by the appellant by cross matching invoices with suppliers in the database. The computer automatically deducts the amount of input tax of blocked, blacklisted and non-filer of tax returns and resultantly tax liability is shown in the tax return. Most of the time, the learned AR contended, e-portal do not allow the appellant to submit the return due to non- availability of back-end annexure connected with the data input button. The learned DR candidly conceded that the entire process of e-filing contained a number of steps which are required to be taken and in such a situation it was not possible for the appellant to deposit the tax amount without preparing and finalizing the monthly sales tax cut federal excise return.
7. In view of above stated facts and circumstances we cannot reach to different conclusion as decided by this bench in Sales Tax Appeal No,217/IB/2012 dated 21-05-2012 in the case of appellant in identically similar facts and circumstances has held that " we cannot escape the irresistible conclusion that no mens rea could be attributed to the appellant who otherwise appears to be a compliant taxpayer. Levy of penalty and additional tax under such circumstances is certainly unjustified. In arriving in this conclusion, we are fortified by the ratio of the judgment of the Supreme Court of Pakistan in the case of Humayun Limited v. Pakistan and others reported as PLD 1991 SC 963 which was followed in number of subsequent judgments delivered by the Supreme Court and High Courts. With these observations we set-aside the orders of the authorities below as they are not sustainable in the eye of law. The amount of penalty and additional tax, thus, stands deleted." In view of above findings in earlier round of litigation, the amount of penalty and default surcharge is hereby deleted.
8. The next issue in appeal is regarding the applicability of statute under which to regulate the imposition of penalty and default surcharge. Whether provisions of Sales Tax Act, 1990 would be applicable or the penal provisions of Federal Excise Act, 2005 shall hold the field under the facts and circumstances of the appellant? In order to decide this point we would like to place reliance on the decision of this Tribunal in S.T.A. No 217/IB/2012 dated 21-5-2012. The related paras of the judgment is reproduced as follows:-- "It is also a well-settled legal proposition that where the law prescribe a specific method/procedure for doing an act, it should be done strictly in accordance with the laid down procedure or not done at all. Sections 8 and 19(1) of the Federal Excise Act, 2005 provide a specific method / procedure for the levy of penalty which the ACIR was bound to adhere to. The amount of penalty levied by the ACIR neither conforms to the procedure nor to the quantum and its method of calculation as laid down in section 19(1) of the Federal Excise Act, 2005 which for the sake of reference is reproduced hereunder:
19. Offences, penalties, fines and allied matters.---(1) And person who fails to file or files an incorrect return within the period specified in subsection (1) of section 4 or fails to make payment or makes short payment of duty on any account, shall pay a penalty of five thousand rupees in case of non-filing of return and ten thousand rupees or five per cent of the duty involved whichever is higher in case of short payment of duty due in addition to the amount due from him and without liabilities which may be determined against too may be taken against him under this Act action or prejudice action to on other which and rules made there under: Provided that where a person files the return within fifteen days after the due date he shall pay a penalty of one hundred rupees for each day of default"; From the perusal of Order-in-Original it is more than evident that learned CIR (A) as well as learned ACIR did not bother to keep the above quoted provision of law in mind while passing the order under sections 11(1) of the Sales Tax Act, 1990. He also appears to be totally ignorant of the fact that penal provisions of Sales Tax Act are also not eligible in the case of appellant for the simple reason that the Air-Transport services are not liable to sales tax. Both assumption and exercise of jurisdiction by the ACIR are, therefore not sustainable in the eye of law. On this score, the Order in Appeal and Order-in-Original of authorities below is declared to be illegal and void ab initio."
' As the Tribunal has dilated the issue agitated in the appellant's own case previously we therefore respectfully following the earlier precedent in the case of appellant in S.T.A. No,217/IB of 2012, hold the same and declare the show-cause notice, Order-in-Original and Order-in-Appeal of authorities below to be illegal and void ab initio and are therefore set aside.
' Appeal is allowed.