' This appeal along with application for stay of demand was filed on 30-11-2011 with the Tribunal and was heard by that Tribunal against the impugned Order-in-Original No,1 of 2011 dated 6-10-2011, passed by the Respondent/Commissioner Inland Reven e.
1. The appellant. Is a multinational public limited company engaged in the business of manufacture and sale of petroleum products. During the long past years the appellant has richly contributed to the exchequer of the country by way of huge payments of both direct and indirect taxes. The appellant is engaged in the country-wide distribution as also export of POL products and is registered under the Sales Tax Act, 1990 as also in the categories of the importer, manufacturer, distributor, wholesaler and exporter.
2. Since the year 1969 the appellant has been undertaking supply of petroleum products for consumption abroad to Air lines proceeding to destinations outside Pakistan in terms of section 24 of the Customs Act, 1969 (IV of 1969). Accordingly section 4(1) of the Sales Tax Act, 1990 treats and adopts these supplies under section 3 as zero rated which means the same is not liable to Sales Tax.
3. The appeal is divided into five chapters as under:--
(I) Chapter I being the applicable section of the Customs Act, which is further divided into 14 paras on pages 1 to 7 of the Memo. Of Appeal.
(II) Chapter II relates to indulgence and participation of the Sales Tax authorities Inland Revenue, including Commissioner of Sales Tax and Regional Commissioner Inland Revenue while the Refund was issued. This chapter is further divided into eleven paras from (I) to (II) and further sub-paras (i) to (vii) on pages 7 to 11 of the Memo of Appeal.
(III) Chapter III relates to indulgence of Commissioner of Inland Revenue, Zone IV, LTU, Karachi as per sub-paras, (1) to (6) which highlights defects of show cause notice dated 20-6-2011 summarising defects therein,
(IV) Chapter IV relates to the facts and the defects in the Order-in-Original No,1 of 2011 dated 6-10- 2011 running into 6 paras.
(V) Chapter V relates to Questions and Grounds of Law and Facts contained in paras (A) to (L).
(VI) In the end there is prayer for the declaration of Order-in-Original 1 of 2011 dated 6-10-2011 ascribed as coram nonjudice, based on change of opinion, suffering from grave defects of jurisdiction, bad in law and contrary to the facts and circumstances of the case and liable to be so declared and liable to be annulled, while further pointing out various defects and conclusions thereon.
4. The appeal was heard on 9-12-2011. The Tribunal upon hearing of arguments granted interim stay and directed the appellants to furnish precise legal arguments and the case-law within a weeks time and ordered for stay till the final order was framed and to furnish a copy thereof to the respondent. The appellant submitted these written arguments on 14-12-2011 to the Tribunal as also to the Department. However, the department did not submit any reply to the Memo of Appeal, the legal arguments dated 14-12-2011, the affidavit and the case law. We have accordingly proceeded with the appeal as per existing record after waiting for a substantial time.
5. Mr. Muhammad Naseem, the learned counsel of the appellant has assailed the impugned order- in-original as per Memo. Of Appeal and also as per written arguments A to R which are reproduced as under:-- "GROUND A LACK OF JURISDICTION
(I) There is no jurisdiction vested with the Commissioner Inland Revenue, LTU, since the precise authority and jurisdiction to deal with the goods and award clearance had vested with the officers of Customs Department under section 24 of the Customs Act, 1969 (hereafter "the 1969 Act") and there is no ambiguity in this behalf since the language of the section is plain and simple. The said section reads as under:-- "Provisions and stores may be exported free of duty.---Goods produced or manufactured in Pakistan and required as provisions and stores on any conveyance proceeding to any foreign port, airport or station may be exported free of customs-duty 1[***J in such quantities as the appropriate officer may determine having regard to the size of the conveyance, the number of passengers and crew and the length of the voyage or journey on which the conveyance is about to depart."
(II) It is to be further observed that subsection 4(b) of the Sales Tax Act, 1990 (hereafter: "the 1990 Act") provides goods to be charged at zero per cent.
(b) supply of stores and provisions for consumption aboard a conveyance proceeding to a destination outside Pakistan as specified in Section 24 of the Customs Act, 1969 (IV of 1969).
(III) In that manner the clearance of goods at the Airports is provided in two different manners as highlighted below:- ' Clearance of zero rated exports in terms of section 24 of the Customs Act, 1969 "on determination of quantities which the appropriate officers had to determine, having regard to the size of clearance..... Etc ' Provision of Rule 37 is not attracted. Clearance of other exported goods u/s 131(a) and (b)/not zero rated Upon filing of GDs and in that Compliance of Rule 37 of the Sales Tax Rules, 2006.
' The words "excise duty and Sales Tax" were omitted by Finance Ordinance, 2002.
(iv) The learned CIR has grossly erred in mixing up the two altogether different situations provided under the Customs Act, 1969 and has not appreciated the distinctive treatment allowed to zero rate exports.
(v) Thus in respect of PIA, Air Blue and other international flights the requirement of filing of GDs, as per clear mandate of section 24 of the 1969 Act, was clearly and amply done away with. And for this reason all the Appropriate Officers of the Customs Department, posted during October 2008, cleared the zero rated exports without asking for GDs as a necessary requirement and goods were cleared in keeping with the said facts and circumstances. The objection of the learned CIR in the impugned order, is therefore not correct in law and on facts and particularly when flights have gone away after proper verification for more than 3 years past after the clearance by Appropriate Officers of competent jurisdiction.
(vi) The order-in-original therefore lacks in jurisdiction and lawful authority. Reliance is placed on case-law as shown below:--
(a) PLD 1972 SC 271, (b) PLD 1995 Karachi 587, (c) PLD 1997 Lahore 1, (d) 1997 PTD 47, (e) 1980 PTD 406, (f) 1984 PTD 137, (g) 1989 PTD 1010, (h) PTCL 2004 CL 18, (i) 2006 PTD 1644, (j) PLD 1952 Lah.
582, (k) PLD 2000 SC (AJ&K) 20, (1) 2003 CLC 1622, (m) 2009 SCMR 1622, (n) 2010 PTD 465, (o) 2011 PTD 886 (Sindh High Court (c) [p.891] F and (p) Crawford, the Constitution of Statutes GROUND B LACK OF JURISDICTION INVOKING SUBSECTION (4) OF SECTION 45A OF THE SALES TAX ACT, 1990
(1) In para 4 of the Order-in-Original 1 of 2011 dated 6-10-2011 (at page 21 of the appeal file) the Respondent Commissioner Inland Revenue has relied upon the above titled provision. Earlier his show cause notice C.No,C1R-Zone-IV/SCN-Shell Pakistan/45A/ LTU/83 dated 20-6-2011 issued by the learned respondent Commissioner had also invoked the same subsection (4) of section 45A of the 1990 Act which reads as under:- "(4) The (Commissioner) may, suo moto, call for and examine the record of any proceeding under this Act or the rules made thereunder for the purpose of satisfying himself as to the legality or propriety of any decision or order passed by an officer of Inland Revenue subordinate to him and pass such order as he may deem fit."
(2) The scope of the section does not permit indulgence in a matter in which Chief Commissioner Inland Revenue and/or the learned Respondent Commissioner themselves have already assumed indulgence e.g.
(i) The refund application Annex A-1 on page 31 was addressed to the Collector Sales Tax (Enforcement), LTU, Karachi vide refund claim No,10 of 2008 dated 29-12-2008. An undertaking was submitted by the appellant to the Collector Sales Tax Enforcement Annex A-3 on page 32. It is this application which has been considered and allowed and the requisite refund issued.
(ii) During the pendency of the refund claim the appellant has addressed letters to the Chief Commissioner, LTU (now RCIT) and the CIR, LTU some letters and communications as per (a)
Annex B-2 at pages 41-50, (b) Annex B-3 at pages 51-52, (c) Annex B-4 at pages 53, (d) Annex B-4 at pages 54-55, (e) Annex B-6 at pages 56-58, (f) Annex B-7 at pages 59-62, (g) Annex B-8 at pages 63-66 and (h) Annex B-9 at pages 67-73, all addressed to the Chief Commissioner and the Commissioner LTU.
(iii) The learned D.R. In reply submitted that mere forwarding of some letters to the authorities did not mean their participation in the refund proceedings. The contention was refuted by the appellant's counsel that it was not mere furnishing copies of letters but repeated meetings held with the Chief Commissioner, LTU and the Commissioner Inland Revenue. Besides the Appellant's Advocate had himself also met the Chief Commissioner (now) Regional Commissioner on 27-11- 2011 while explaining to him the Appellant's Advocate mentioned the case of Messrs Shell. And the learned RCIT admitted to him I detail the departmental point of view establishing fully well that the learned Chief Commissioner was fully consulted as to merits of the case and the proposed action also contemplated.
(iv) It may further be noted that the appellant's counsel and Representatives (while the refund proceedings were under way) had participated in a meeting called by the RCIT on 21st December.
This meeting took place and is confirmed further in appellant's letter Annex B-7 on page 57 (second par a). .Accordingly the matter which has been discussed, considered and participated by the Commissioner (Enforcement and Collection) and the Chief Commissioner, LTU and this all could not be referred or treated merely as indulgence of "subordinate" officers.
(v) It is also submitted that if all this correspondence of the appellant was uncalled for. The learned authorities ought to have objected to them then and there and returned the communication as uncalled for. The objection as such has no merit whatsoever.
(vi) It is thus concluded that there has been serious blunder in the exercise of jurisdiction again.
' Reliance is placed on the following case-law:--
(a) PLD 1972 Lah. 316, (b) PLD 1969 Dacca 451, (c) 1990 PTD 974 Kar. HC, (d) 2001 PTD (Trib.) 3810, (e)
2003 PTD (Trib.) 279, 09 1991 PTD 217 Kar. HC, (g) 1991 PTD (Trib.) 226; (h) (1989) 176 ITR 352 Pat. HC,
(i) (1970) 77 ITR 6 SC India, (j) (1979) 118 ITR 585 Rajastan HC, (k) (1974) 96 ITR 78 Mad. HC and (1)
(1962) 46 ITR 152 Punjab HC Delhi.
Ground C: OTHER DEFECTS IN THE ORDER
(a) IN A CONFLICT BETWEEN STATUTE AND PROCEDURE THE PROVISION OF STATUTE PREVAILS
(b) CLAIM OF REFUND COULD NOT BE REFUSED ON SOME TECHNICALITIES AND PROCEDURAL LAPSE
(c) PAST AND CLOSED TRANSACTIONS
(i) That firstly the clearance of goods having been authorized by more than 1500 Appropriate Officers, appointed by the Customs Department in Oct. 2008 under section 24 of the 1969 Act the said Department has not questioned or also by the Respondent Commissioner Inland Revenue, who did not dispute the said clearance of goods then (while claiming to be falling under section 131 of the 1969 Act.) Secondly speaking once again about the arbitrary indulgence of the learned Respondent Commissioner Inland Revenue as per his impugned order-in-original for an alleged violence of procedural requirement under Rule 37 of the Sales Tax Rules, 2002 vide S.R.O. 555 (I)/2006 which would also become only a futile exercise. Besides further the said Rule being a subordinate legislation, could not have overruled the dictates and commands of section 24 of the Custom Act. Reliance is placed on:-
(a) PLD 1990 SC 1034, (b) PLD 2001 Karachi 52, (c) 2001 SCMR 1806, (d) 1993 SCMR 1232 (e) 2002 PTD 2959, (f) PLD 1998 SC 64, (g) 2007 SCMR 729, (h) 2005 SCMR 69 and (i) 1996 SCMR 856.
(ii) When examined from yet another angle the alleged omission, if it were true and correct (of not calling for GDs for October, 2008 since relatable to more than 1500 Appropriate Customs Officers) for arguments sake while exercising jurisdiction under section 131 read with section 24 of the Customs Act which would not and does not fall within the framework of jurisdiction of the Sales Tax Department. And since all this was never questioned by the Customs Authorities as also by the learned Commissioner Inland Revenue, who also has not disputed the acts of clearance of goods effected by the said Appropriate Officers. And if there had been any legal or jurisdictional default these more than 1500 Appropriate Officers would have been made liable to grave charges of misconduct and dereliction of duty. Consequently the jurisdiction on the part of CIR to constitute the impugned orderin-original in question was lacking a legal sanction ab initio and authority.
(iii) In that manner the indulgence of the learned CIR for a past and closed transaction and the contemplated remedy in revising the Refund Order on the part of CIR do not contemplate any competent proceedings under law.
Ground D. INVALIDITY OF SHOW CAUSE NOTICE NO.CIR-ZONE-IV/SCN-SHELL PAKISTAN/45A/LTU/83 DATED 20-6-2011 ' That the show-cause notice No, CIR-Zone-IV/SCN-Shell Pakistan/45A/LTU/83 Dated 20-6-2011 is by itself invalid in law, since suffering from following grave defects and violation of law and it destroys and annihilates also the upcoming orderin-original in totality:--
(i) The show-cause notice does not show as to the section of the Sales Tax Act under which the said show-cause notice was issued.
(ii) The show cause notice is vague, obscure, incomplete, nonspeaking and totally blind for a reply and could not have been reckoned and treated as a proper show cause notice.
(iii) In Para. 2 of the so-called Show Cause Notice, while complaining non-levy of sales tax of Rs,14,34.82,687 it has not been mentioned as to what "conditions" under section 4(b) of Sales Tax Act, 1990 and section 24 of the Customs Act were not fulfilled and were wanting in compliance.
(iv) Since it does not identify and specify as to what record of Refund Claim was scrutinized and what illegality and impropriety in the order had come to surface as per para 4 thereof, the contention is incorrect on face.
(v) Also it does not identify how and in what manner the said order was found liable to be amended as per para 5 of the impugned notice.
(vi) And also in claiming that legal action was contemplated without identifying as to what "legal action" it was to be.
(vii) And all that record allegedly examined in the absence of the appellant, or his lawyer, acquired and relied upon by the learned Commissioner to be correct, was a feign and invalid exercise violating the provision of Qanun-e-Shahadat Order, 1984.
(viii) Para 3 of the show-cause notice objects to the non fulfillment of the condition of filing of Goods Declaration as the basic requirement of section 4(b) of the Sales Tax Act, 1990 (which is legally not tenable. The show cause notice otherwise does not state any authority for this contention, while the crucial fact has been ignored that clearance was already granted by the Appropriate Officer of the Customs Department under section 24 of the Customs Act in early October, 2008. The plea of the learned Commissioner has no legal basis.
(ix) In fact the order-in-original passed by the Deputy Commissioner itself confirmed the legality of the clearance awarded more than three years earlier by the Appropriate Customs Officers.
(x) The show cause notices being incorrect on facts and unlawful the order passed thereon holds no legal sanction or clearance.
(xi) The show cause notice has become barred by limitation.
' Note: Copious case-law on the above contention is furnished and has also produced before the Tribunal:--
(a) 2001 PTD SCMR 83(sic), (b) 2003 PTD 1257, (c) 2003 PTD 1797, (d) 2005 PTD 480, (e) 2003 PTD 1593, (f) 2002 MLD 180, (g) PTCL 2001 CL 558, (h) 1992 SCMR 1898, (i) 2003 PTD 1047, (j) 2003 PTD 1354, (k) 2004 PTD 714, (1) 2000 PTD 1798 and (m) 2004 PTD 3020.
' Ground E. CHANGE OF OPINION AND FISHING AND ROVING ENQUIRIES
(1) The learned Commissioner Inland Revenue has passed order-in-original on mere change of opinion and also erred on its very face in creating any lawful demand. The appellant had furnished sufficient bank guarantees and appellant had a long history of paying of their legal tax demands while contributing huge revenue to the exchequer in terms of CBR's directives under section 27 of the Customs Act.
(2) That the learned Commissioner Inland Revenue has grossly erred in throwing off the inquiry and evidence collected by Dy. Commissioner Inland Revenue and in satisfying himself that all supplies made to EPZ and flights proceedings to the destination outside Pakistan or supplies made to Processing Zone PIA, Air Blue or other foreign airlines had paid their liability and there was no sales tax liability pending at then and had accordingly dropped the proceedings vide Order-in-Original No, 3 of 2010 dated 13-3-2010 (Annex B-10 to the main Appeal)
(3) In that the Refund was allowed with the tacit approval and participation of Regional Chief CIR and the CIR. The Accounts data's, evidence were called for and the refund was found eminently admissible after detailed enquiries which could not have been reopened on the legal principle of change of opinion and fishing and roving enquiries:--
(i) CASE-LAW ON CHANGE OF OPINION
(a) (1990) PTD 155 SC, (b) (1991) PTD 217 (HC KAR), (c) 1993 SCMR 96, (d) 1993 SCMR 493 and (e)
2002 PTD 661 (HC KAR).
(ii) CASE-LAW ON FISHING AND ROVING ENQUIRIES
(j) (1957) 32 ITR 89, (k) (1967) 64 ITR 516, (1) I.T.As. 2400/ 2401/KB/91-92, (m) (1995) PTD (TRIG) 580,
(n) (1995) PTD (Trib.) 1152 and (o) (1982) 1381 ITR 742.
Ground F: Order-In-Original MERELY BASED ON CONJECTURES AND NOT DISCHARGING BURDEN OF PROOF ' That the learned Commissioner of Inland Revenue has erred in re-imposing Sales Tax demand of Rs,1,43,482,687 under section 36(1) of the 1990 Act on mere conjectures without caking to even find out how such amount was constituted overlooking the long, detailed and elaborate proceedings as contained in the order-in-original dated 13-3-2010 passed by the Dy. CIR. The sales tax refund payment order was issued even after 1-1/2 months since the date of furnished Refund Order No,888 of 2010 dated 28-4-2010 (Annex B-10A, page 85 of the appeal file). In that the burden of proof on the part of CIR was not discharged. Reliance is placed on:--
(a) 2002 PTD 700 (HC KAR), (b) 2002 PTD 407 (HC KAR), (c) PLD 1996 Kar. 68, (d) 1992 SCMR 1083 and (e) PLD 1959 (SC of Pak.) 364.
Ground G: VIOLATION OF QANUN-E-SHAHADAT ORDER, 1984 ' The learned Commissioner Inland Revenue decided the case without examining the facts and evidences correctly ignoring the provisions and commands of Qanun-e-Shahadat Order, 1984, which shows that the whole proceedings were based on engineered prejudice and ignoring legal rights of the appellant. Reliance is placed on:-
(i) Qanun-e-Shahadat Order, 1984
(ii) 1993 PTD 206
(iii) 1997 PTD (Trib.) 2209 ' Ground H: IGNORING CASE-LAW CITED IN THE REPLY DATED 29-6-2011 ON PAGE 89 ANNEX C-2 ' That the learned Commissioner Inland Revenue has erred in throwing off the five judgments of the superior courts and Tribunal as furnished by the appellant's counsel before him at then in the reply dated 29-6-2011 (Annex C -2 pages 91 and 92 of the appeal file). He also erred in relying upon irrelevant case-law cited in his order which he did not discuss in the hearing e.g. I) (1992) 62 Taxation 57 (SC Pak), (II) PLD 1964 SC 572 ' Ground I: Past Practice ' That the learned Commissioner Inland Revenue has erred in ignoring arbitrarily and in not deciding that the past practice for many years could not have been abandoned without seeking prior approval of FBR. The past practice is sacrosanct as per copious judgment of the superior courts. Thereupon the order-in-original has been rendered liable to be set aside. Reliance is placed on the following case-law:--
(a) PLD 1970 SC 453, (b) 1985 SCMR 1753, (c) 1989 SCMR 353, (d) PLD 1997 SC 700, (e) PLD 1965 SC 90, (f) 1998 SCMR 2013, (g) 2002 PTD 955 (HC Kar.), (h) 2002 PTD (Trib.) 625, (i) 2004 PTD 2516 (HC Kar.), (j) 2004 PTD 2524 (HC Kar.) and (k) 2011 SCMR 408 (SC Pak).
' Ground J: AFFIDAVIT NOT REBUTTED ' The appellant has furnished his Appeal, Grounds, facts and Miscellaneous Applications properly supported by Affidavits which have not been (1) controverted and/or (2) refuted by counter affidavits, which are not open to dispute.
(a) 1986 PLC (C.S.) 560 and 1980 CLC 2007, (b) 1986 CLC 745 (Kar.), (c) 1986 CLC 1408 (Kar.), (d) 1993 SCMR 662, (e) 1991 MLD 1243, (f) (1974) 94 ITR 1, (g) (1984) 146 ITR 40 and (h) 1986 PTD (Trib.) 119.
' Ground K: JUSTIFICATION OF PENALTY AND ADDITIONAL TAX LACKING That the learned Commissioner Inland Revenue has erred in imposing penalty of Rs,71,741,341 and proposing further penalty and additional surcharge. The penal action as proposed is absolutely without jurisdiction and void ab initio and no penalty could have been imposed for which there is no show cause notice appropriate and while he did not at all claim that the conduct of the appellant was contumacious, mala fide and violated. Reliance is placed on the following:--
(a) 2004 SCMR 456, (b) 2002 PTD (Trib.) 300, (c) 2005 PTD 1984, (d) 2005 PTD 1978, (e) 2005 PTD 1953, (f) 2003 PTD 1445 and (g) 2004 PTD 2771."
6. In the face of the Legal Arguments the appeal was argued before us by Mr. Muhammad Naseem, Advocate on 9-12-2011. There has been no reply statement and no counter affidavit. The Departmental Representative failed to demolish any of the Grounds addressed and the copious case-law cited for each issue. We accordingly directed the Departmental Representative not to enforce any recovery till the Department receives an order from us. In the mean time the D.R. Was permitted to rebut the grounds and the contention filed in the Memo. Of Appeal within a week's time. The appellant's learned Advocate was requested to file a resume of the Grounds of Appeal by filing written arguments with copy thereof served on the department. The appellant's counsel submitted these arguments and the applicable case-law, reproduced as above within the time given while the. Department has chosen not to file any rebuttal of Appeal, case-law, and affidavit or of the legal written arguments. Accordingly we have proceeded with the judgment on the basis of record before us.
7. Having considered the' facts, arguments and the case-law argued as above and brought on record we hold as under:--
(i) the Commissioner Inland Revenue holds no jurisdiction to pass the impugned order in assailing clearance of goods accorded by the officers of the Customs Department in the month of October, 2008. This was a matter relating to the Customs Act and the Commissioner Inland Revenue held no jurisdiction to object to the proper clearance of goods in October, 2008;
(ii) the exercise of jurisdiction on the part of the Commissioner Inland Revenue under section 45A(4) is not correct, proper and lawful since in that the clearance was allowed by the officers of the customs department, and such officers were not subordinate officers of the Inland Revenue and the CIR held no such powers of amending or correcting their orders.
(iii) the Commissioner Inland Revenue seems to have relied upon non compliance of Rule 37 of the Sales Tax Rules while the appropriate offices of Customs had allowed clearance on the basis of section 24 of the Customs Act. The said rule can not apply overlooking the provision of statute and while in conflict with the statute it has to give way. The refund claim of October 2008, having already been processed and granted could not have been refused on some mere technicalities and procedural lapse. The claim lodged in October 2008 had' already been delayed for more than 3 years.
(iv) The disputed approval of Dy. Commissioner or no approval by him would not make a difference since even the Dy. Commissioner Inland Revenue also could not have exercised any jurisdiction to interfere with the clearance.
(v) for various defects as per paras 1 to 10 of the appeal the show cause notice since based on conjectures and the order-in-original impugned without discharging the burden of proof and in violation of Qanun-e-Shahadat Order, 1984 by itself is invalid while it is also barred by limitation.
Whereas it appears to be eminently based on mere change of opinion and substantially based on fishing and roving enquiries;
(vi) The impugned order-in-original has been passed contrary to the past practice of many years which has been by passed without obtaining permission of the FBR;
(vii) the penalty and additional tax have been imposed without prior show cause notice as above while it is also not held that the conduct of the appellant was contumacious, mala fide, volitional and deliberate;
(viii) that copious case-law submitted by the appellant at the time of hearing as also on 9-12-2011 as also written arguments submitted in writing on 14-12-2011 has not been distinguished or assailed.
8. The appellant has filed an appeal properly supported by an affidavit as per Inland Revenue Tribunal Rules, the department has failed to file reply, or any statement or any counter affidavit. The respondent has also not filed any rebuttal to the legal arguments submitted on the orders of this Bench, and there is no explanation for the default.
9. We have heard the learned counsel and considered the copious case-law furnished and examined the facts of the appeal which have remained uncontroverted and not rebutted.
Accordingly we set aside the order-in-original. Ordered accordingly the appellant would stand entitled to the Refund as per claim.