' This order shall dispose of the titled appeal filed by the registered person against the Order-in- Appeal No,171 of 2012 dated 16-5-2012 passed by Commissioner Inland Revenue (Appeals), Faisalabad.
2. Brief facts of the case as narrated in the impugned order are that the Assistant Director Intelligence and Investigation, FBR, Faisalabad reported to the Adjudication Officer that as per Board's approval C. No,4(4)STM/2005 dated 10-6-2010, Directorate of Intelligence and Investigation, FBR, was empowered to conduct Investigative audits of various units relating to packing sector including Messrs Chenab Board.
' Therefore, notices/summons were issued to Messrs Chenab Board, Under - Bridge, Nishtabad, Near Akbar Floor Mill vide C.No,CII/S.Tax/11/10/522 dated 22-6-2010 with initial intimation that Messrs Chenab Board had claimed/adjusted illegal sales tax to the tune of Rs,14,157,136 as input tax on the invoices issued by suppliers/ registered persons and that the sales tax claimed on such invoices was not deposited by such suppliers/registered persons in the national exchequer as per scrutiny of soft data of summaries and profile of the said unit and its suppliers. Subsequently, reminder vide notice C. No,CII/S.Tax/11/10/588 dated 14-7-2010 and final notice vide C. No,CII/S.Tax/11/10/1142 dated 27-10-2010 were issued but the registered person failed to provide satisfactory reply. Therefore, on the basis of above facts, a case F.I.R. No,03 of 2011 dated 4-4-2011 was lodged against Messrs Chenab Board and others who had claimed to the tune of Rs,141,157,136 as input tax on the invoices issued by suppliers/ registered persons and that the sales tax claimed on such invoices was not deposited by such suppliers registered persons in the national exchequer. During investigation, it was concluded that above mentioned registered persons being wholesalers/ manufacturers of paper cone, paper and paperboard etc. Claimed/adjusted invalid input tax to the tune of Rs,141,157 million during July 2005 to June 2010 in the aforesaid manner. Furthermore, registered persons as mentioned in the above said F.I.R. Issued invalid sales tax invoices, thus facilitating the exporters and other registered persons to claim input tax adjustment/refund to the aforesaid effect.
Aforesaid act, thus, prima facie constitutes "tax fraud", as defined under section 2(37) of the Sales Tax Act, 1990. Thereafter the accused Sakhawat Ali son of Barkat Ali owner of Messrs Chenab Board was arrested on 19-4-2011 and on the pointation of the said accused record of the said unit was resumed on 20-4-2011 which was submitted before the Special Judge, Customs and Taxation, Lahore along with interim challan. The appellant was also issued a show cause notice C. No,150 dated 13-8-2011 by Assistant Commissioner Inland Revenue whereby he was called upon to show cause why an amount of sales tax to the tune of Rs,26,687,248 along with default surcharge amounting to Rs,15,125,422 under sections 34 and 36(1) of the Sales Tax Act, 1990 from the registered person may not be recovered for violation of various provisions of Sales Tax Act, 1990 and Federal Excise Act, 2005. The appellant filed reply on 10-9-2011 wherein he denied all the allegations and submitted that they were incorrect. The Deputy Director I&I also filed a reply dated 1-2-2012 where after the Adjudication Officer passed the Order-in-Original No,11 of 2012 dated 7-2- 2012. Feeling dissatisfied the registered person filed the first appeal before the learned CIR(A).
Partial relief was allowed to the appellant. Still feeling dissatisfied the registered person has come up in this further appeal.
3. Learned AR at the outset submitted that the Director of Intelligence and Investigation had no power to conduct the audit. He submitted that the show cause notice was issued on 13-8-2011 for the tax period 1st July, 2005 to August 2006 was time-barred. He submitted that before 1st July 2007 Directorate of Intelligence and Investigation had no power. The learned counsel for the registered person contended that issuance of show-cause notice and on the basis thereof passing the order- in-original was without jurisdiction as having been issued/ passed by an officer of Inland Revenue not competent in term of S.R.O. 555(1)/1996 dated 1-7-1996 holding the field at the relevant time. He submitted that the pecuniary jurisdiction of the Assistant Commissioner was to deal with the cases involving amount of tax not exceeding five hundred thousand rupees whereas the show cause notice was issued for alleged inadmissible input tax adjustment exceeding such limit, thus, the Assistant Commissioner Inland Revenue was not competent to issue show cause notice or adjudicate the matter or pass original order being beyond the said monetary limit provided in the above referred S.R.O. He further contended that the said S.R.O. Remained dormant till the omission of section 45 of the Sales Tax Act, 1990 and from the date i,e, 5-6-20.10, the said S.R.O. Became applicable on omission of said section. He contended that S.R.O. 555(1)/1996 dated.1-7-1996 was alive and holding the field till 1-6-2012 i,e, the date it was rescinded vide S.R.O. 594(I)/2012 dated 1- 6-2012. He contended that if the S.R.O. 555(1)/1996 were not in the field prior and after omission of section 45 of the Sales Tax Act, 1990, there was no reasons to rescind the same on 1-6-2012 after about 2 years on omission of section 45 of the Sales Tax Act, 1990. He relied on a judgment of hon'able Supreme Court of Pakistan in case "Izhar Alam Farooqi, Advocate v. Sheikh Abdul Sattar Lasi and other" (2008 SCM R 240) and the consolidated judgment dated 11-10-2012 of this Tribunal in Appeals No, S.T.A. No,530/LB of 2011 and S.T.A. No,578/LB of 2011 and judgment dated 6-4-2012 passed in S.T.A. No,55/LB of 2012. He also contended that S.R.O. 555(1)/1996 dated 1-7-1996 was very much in the field because the said S.R.O. Was rescinded on 1-6-2012 vide S.R.O. 594(1)/2012 dated 1- 6-2012 and Para-2 of said S.R.O. Clarified that the notification shall take effect on and from 2nd day of June, 2012. He contended that till 1-6-2012, the notification S.R.O. 555(I)/1996 dated 1-7-1996 containing the pecuniary jurisdiction of the officers was in the field and as such the findings of the Assistant Commissioner, Inland Revenue as well as Commissioner, Inland Revenue (Appeals-1), Lahore were erroneous being without any legal backing and the show cause notice and the original order passed by un-authorized officer were a nullity in the eyes of law. He further submitted that since the show cause notice and original order were without jurisdiction, thus, the impugned order is also illegal and without jurisdiction as held in case "Messrs Kamran Industries v. Collector of Customs (Exports), Karachi and 4 others" (PTCL 1996 CL 1). He submitted that the case of tax fraud was made against the appellant on flimsy grounds. He submitted that section 2(37) which defines tax fraud reads as under:-
(37) " tax fraud means knowingly, dishonestly or fraudulently and without any lawful excuse (burden of proof of which excuse shall be upon the accused).
(i) doing of any act or causing to do any act; or
(ii) omitting to take any action or causing the omission to take any action, including the making of taxable supplies without getting registration under this act; or
(iii) falsifying or causing falsification the sales tax invoices, in contravention of duties or obligations imposed under this Act or
(iv) instructions issued there under with the intention of understanding the tax liability or underpaying the tax liability for two consecutive tax periods or overstating the entitlement to tax credit or tax refund to cause loss of tax;"
' He submitted that it is abundantly clear from -reading the definition of "tax fraud" that the mandatory condition put forth for committing tax fraud is that the alleged person should have done any act knowingly, dishonestly or fraudulently and without any lawful excuse. He further submitted that there is not an iota of evidence whatsoever wherefrom it could be deduced that the appellant has knowingly or dishonestly or fraudulently committed tax fraud by claiming input tax adjustment against the sales tax invoices issued by the alleged fraudster gang. He submitted that even the audit contravention report could not establish with any concrete reasoning that the appellant was involved in tax fraud. He further submitted that the representatives of the detecting agency fabricated the record and documents titled as "Sales Tax Working for the month of July, 2006 to December, 2010" and "Sales for July, 2006 to December, 2010" with mala fide and ulterior motives and adjudication order was passed on that fabricated record which was neither resumed from the registered person nor it finds mention in the resumption memo dated 20-4-2011, moreover this record was never shown to the appellant nor he was confronted with this record. He contended that whole exercise of creating the 'huge demand of Sales Tax is illegal, superficial and self fabricated. He further submitted that retrospective application of an executive order of blacklisting of suppliers of the registered person is against the law as interpreted by the superior courts and this tribunal. On the basis of above arguments, learned counsel prayed that order-in-original as well as order-in-appeal may be set aside.
4. The learned D.R. On the other hand while opposing the arguments advanced by the learned counsel for the registered person supported the impugned order and contended that the audit was valid. He further contended that S.R.O. 555(1)/1996 dated 1-7-1996 only issued in respect of officers of Collectorates and not the officer of Inland Revenue and on omission of Section 45 from the Sales Tax Act, 1990, every officer of Inland Revenue was competent to issue show cause notice and adjudicate the cases irrespective of pecuniary jurisdiction. He further contended that the show cause notice was rightly issued under Section 36 of the Sales Tax Act, 1990 and the Assistant Commissioner, Inland Revenue was competent to adjudicate the matter.
5. In rebuttal, the counsel for the registered person submitted that S.R.O. 555(1)/1996 dated 1-7-1996 was very much applicable because section 72A inserted vide Finance Act, 2010 clarified the position of the said S.R.O. Stating that any reference to Collector, Additional Collector, Deputy Collector, Assistant Collector, Superintendent, Senior Auditor and an officer of Sales Tax where-ever occurring in this Act and the rules, notifications, clarification, general order made or issued thereunder shall be construed as reference to Commissioner Inland Revenue, Additional Commissioner, Inland Revenue, Deputy Commissioner, Assistant Commissioner, Inland Revenue, Audit Officer and an officer of Inland Revenue respectively meaning thereby the reference to Assistant Collector in the S.R.O. 555(1)/1996 dated 1-7-1996 shall be read as Assistant Commissioner, Inland Revenue. He further argued that subsection (3) of section 36 of the Sales Tax Act, 1990 was very much in the field when the show cause notice was issued and as such the officer, of Sales Tax/Inland Revenue "empowered in this behalf" can only issue show cause notice to determine the amount of tax or charge payable by such person. He contended that after omission of section 45 of the Sales Tax Act, 1990, the S.R.O. 555(1)/1996 was in field empowering the officers to issue show cause notice and to adjudicate the matters in term of Section 36 of the Sales Tax Act, 1990.
6. We have heard the learned counsel for the registered person as well as learned DR, perused the record and the case-law cited at the bar. The show cause notice and the adjudication were held in term of sections 11(2) and 36(1) of the Sales Tax Act, 1990. The Board in exercise of powers conferred by subsection (2) of section 11 and section 36 of the Sales Tax Act, 1990 had authorized the officers of the Sales Tax specified in the said notification to adjudicate the cases involving assessment of sales tax, charging of additional tax, imposition of penalty and recovery of amount erroneously refunded subject to limitation and conditions as specified in S.R.O. 555(1)/1996 dated 1-7-1996.
According to the said notification, the Assistant Commissioner, Inland Revenue was competent vide Serial-2 of the Table to said S.R.O. To adjudicate cases falling under sections 11(2) and 36 of the Sales Tax Act, 1990 provided that the amount of tax involved does not exceed five hundred thousand rupees. The designation Assistant Collector, Additional Collector and other officers of the Sales Tax where-ever appearing was to be read as Assistant Commissioner Inland Revenue, Additional Commissioner Inland Revenue etc by virtue of section 72A of the Sales Tax Act, 1990 which reads as under:- "72A. Reference to authorities.--Any reference to Collector, Additional Collector, Assistant Collector, Assistant Collector, Superintendent, Senior Auditor and an officer of. Sales Tax, where-ever occurring, in this Act and the rules, notifications, clarifications, general orders or orders made or issued thereunder, shall be construed as reference to Commissioner Inland Revenue, Additional Commissioner Inland Revenue, Assistant Commissioner Inland Revenue, Assistant Commissioner Inland Revenue, Superintendent Inland Revenue, Inland Revenue Audit Officer and an officer of Inland Revenue, respectively."
' Perusal of the aforesaid provision clearly shows that the Assistant Collector appearing at Serial-2 of the Table to S.R.O. 555(I)/1996 dated 1-7-1996 shall be construed and read as Assistant Commissioner, Inland Revenue and as such the objection of the learned DR that since the Assistant Collector was mentioned in the said notification, thus, it would not apply to the Assistant Commissioner, Inland Revenue is without any substance. It is an admitted position that the tax involved in this case was much beyond the monetary limit prescribed for adjudication of the cases by the Assistant Commissioner, Inland Revenue at Serial-2 of the Table to S.R.O. 555(1)/1996 dated 1-7-1996 and the said S.R.O. Remained in the field till 1-6-2012 when it was rescinded by the Federal Government vide S.R.O. 594(1)/2012 dated 1-6-2012. While rescinding S.R.O. 555(1)/1996 dated 1-7- 1996, the Federal Government specifically A mentioned that the rescinded S.R.O. Shall take effect on and from the 2nd day of June, 2012 meaning thereby that the earlier notification prescribing the pecuniary jurisdiction of the various officers was very much in the field till 1-6-2012 and the contention of the learned counsel for the registered person that the show cause notice and superstructure built there upon by way of original order and the impugned order was without jurisdiction and coram non judice has force and the case-law relied by him fully supports his contention as the Hon'ble Supreme Court of Pakistan in case "Izhar Alam Farooqi, Advocate v.
Sheikh Abdul Sattar Lasi and others" (2008 SCM R 240) has held that the institution specifically barred to adjudicate any matter to the extent of certain mandatory limits shall not be competent and had no jurisdiction to deal with any such matter exceeding such mandatory limits prescribed under the law. Honourable Supreme Court of Pakistan has held in case of Sardar Ahmad Yar Khan Jogezai v. Province of Balochistan 2002 SCM R 122 that "Where essential feature for assumption of jurisdiction is contravened or forum exercises powers not vested in it, or exceeds authority beyond limits prescribed by law, the judgment is rendered coram non-judice and inoperative." Honourable Supreme Court in re "Faqir Abdul Majeed Khan v. Distt Returning Officer and others 2006 SCM R 1713 has observed as under:-- "By now it is well settled that any order which suffers from patent illegality or is without jurisdiction, deserves to be knocked down" Re: PLD 1958 SC 104, PLD 1973 SC 326, PLD 2002 SC 630, 2003 SCM R 50, 2004 SCM R 28, 2004 SCM R 1798."
' It is further pointed that the issue regarding jurisdiction of the officer of Inland Revenue to adjudicate tax matters has already been decided by this Tribunal in case "Messrs Global (Pvt.) Ltd., and another v. Commissioner, Inland Revenue, RTO, Multan" vide order dated 11-10-2011 passed in S.T.A. No,530/LB of 2011 and S.T.A. No,578/LB of 2011 and "Messrs Ibrahim Steel Casting, Dewab Nagar Road, More Emanabad, Gujranwala v. Commissioner Inland Revenue (Appeals), Lahore" vide order dated 6-4-2012 passed in S.T.A. No,55/LB of 2012. In the said cases, it was held that the show cause notice issued by the Assistant/ Deputy Commissioner was beyond his pecuniary jurisdiction in term of S.R.O. 555(1)/1996 dated 1-7-1996 and we find ourselves in full agreement with the aforesaid judgments. In nutshell, show cause notice and order in original passed by the Assistant Commissioner, Inland Revenue, Lahore were beyond his pecuniary jurisdiction as mentioned in S.R.O. 555(1)/1996 dated 1-7-1996 and B being so it was an order coram non judice and without lawful authority. It is further held that the acts of omission and commission taken without jurisdiction are illegal, void ab initio and no action can be taken against the taxpayer in pursuance thereof as held in the case cited as PLD 1996 Kar. 68 "Messrs Kamran Industries v. Collector of Customs (Exports), Karachi and 4 others".
7. In view of above discussion, the appeal is accepted. The impugned order passed by learned CIR(A) is set aside and the order-in-original is declared null and void and of no legal consequences.