' The title appeal has been preferred by taxpayer under section 46 of the Sales Tax Act, 1990 calling in question the impugned order No,3577 dated 11-5-2012 passed by the Commissioner Inland Revenue (Zone-II), RTO, Faisalabad'.
2. The relevant facts in brief are that the taxpayer is doing business under the name and style of Messrs Shehzadi Polypropylene Industry having manufacturing unit situated at 17-Km, Samundri Road to Jhang Road Bypass, Faisalabad. The registered person indulged in the process of manufacturing and sale of polypropylene bags and poly sacks (cloth). The taxpayer is importing raw material- for manufacturing of its own finished goods. The Commissioner (IR), Zone-II, RTO, Faisalabad issued notice C. No,3400 dated 3-5-2012, the relevant portion is reproduced as under ft
(2) Authentic information has been received that Messrs Shehzadi Polypropylene Industries is involved in manufacturing of Polypropylene bags which were supplied to unregistered person and flour mills whereas fake/flying invoices are being issued to the textile units to claims/obtain illegal/fraudulent refunds.
(3) In view of the above facts and information received, officers/ officials were posted vide Order No,3076 dated 30-3-2012 under section 40B of the Sales Tax Act, 1990 at the manufacturing premises of the registered person. The officials posted at the premises reported that during the course of monitoring of business activities, it has been observed that the registered person is found involved in manufacturing of Polypropylene bags which were supplied to unregistered persons and flour mills. It was found that the registered person has also installed embroidery machines but has not declared any sales/receipts. The registered person has installed these machines without intimation to the department at the manufacturing premises and enhanced production of the unit has also not been declared in Sales Tax returns."
3. The taxpayer duly responded to the show-cause notice and filed his written explanation but the same did not find favour with the concerned Commissioner. Accordingly, the statutes of the registered person was suspended from the date of its registration till further order in exercise of power conferred under section 21(2) of the Sales Tax Act, 1990 read with Rule 2(5) of the Sales Tax Rules, 2006 notified vide S.R.O. No,555(I)/2006 dated 5-6-2006 and clause "N" of the Sales Tax General Order No,3 of 2004 dated 12-6-2004. The Commissioner (IR), Zone-II, RTO, Faisalabad relied on the date acquired by invoking the provisions of sections 25A and 38 of the Sales Tax Act. Feeling aggrieved with the aforesaid order, the taxpayer filed the instant appeal.
4. The learned AR on behalf of taxpayer strongly contested all the notices under sections 38, 25(A) and order under section 21, as are without any lawful jurisdiction. It is asserted by the AR that the order under section 21 is passed without giving reasonable opportunity of being heard and even the allegations are outside the scope of section 21 of the Sales Tax Act read with General Order No,3 of 2004. The sample/data obtained under sections 25A/38 is without adopting due procedure of law. It is contended by the AR that in response to impugned show cause notice under section 21, the taxpayer straightaway challenged the jurisdiction of the Commissioner but the Commissioner instead of resolving the issue of jurisdiction passed an illegal order under section 21 and suspended the registration of the registered person without affording an opportunity of explaining the allegations leveled in the show cause notice. It is submitted by the AR that the whole story of the suspension order is based on flimsy grounds and without recording any facts on record. The allegations of the suspension are summarized as under:--
(a) The appellant made 96.6% sale to Textile sector.
(b) The appellant has not declared sale of wastage/drum/PP bags etc
(c) The appellant has not declared any sale/work done on embroidery machine.
4. It is asserted by the learned AR that there is nowhere expressly provided under the Sales Tax Act, 1990, that the sale could be made to textile sector only. It is submitted by the AR that the contention of the department that actually sale is made to Flour Mills is without any cogent reason and solid evidence as almost 99% of the payments received by the appellant through banking channels from the textile sector. Moreover, no steps are taken to verify the supplies from the textile sector to which the department has issued refunds after due verifications and post refund audits. He further argued that the jurisdiction of the case lies with the Commissioner (IR), Zon-III, RTO, Faisalabad. The manufacturing unit is situated at 17-Km, Samundri Road to Jhang Road Bypass, Faisalabad which falls under "IQBAL TOWN". According to FBR's Notification C. No,57(2)S-DOS/2011-28918-R dated 28th February, 2011 read with jurisdiction order vide No,CIR (Zone-III)/ RTO/Fsd/01 dated 8th March, 2011 the jurisdiction over the case lies with Commissioner (IR), Zone-III, RTO Faisalabad. The registered person primarily challenged the jurisdiction of the Commissioner (IR), but instead of rebutting the primary allegation of the registered person, the Commissioner wrongly relied on section 2(23) of the Act, which only defines the "registered office" and ignored the provisions of rule 5(1)(c) of Sales Tax Rules, 2006. It is further explained by the AR that the application for registration filed by the registered person mentioning office address as P-142, Purani Lakkar Mandi, Karkhana Bazar, Faisalabad and manufacturing unit address as 17-Km, Samundri Road to Jhang Road Bypass, Faisalabad. It is contended that the Commissioner does not entertain the plea taken by the taxpayer under the garb of "Approbation and Reprobation ". It is submitted by the AR that the Commissioner emphasized on principle of "Approbation and Reprobation" and made reliance on number of cases without mentioning contradiction statements given by the appellant. The appellant explained that his office and manufacturing unit addresses are different. The statement given by the taxpayer duly endorsed by the department that the office and manufacturing addresses of the appellant are different. There is no contradictory statement given by the appellant; "Approbation and Reprobation" does not play any role in this case. In this behalf, the AR drew our attention to Rule 5(1)(c) of Sales Tax Rules, 2006 vide S.R.O. No,555(I)/2006 dated 5th June, 2006 in which procedure for assumption of jurisdiction is explained.
5. On the contrary, the learned DR supported the order of the Commissioner and opposes the line of arguments adopted by the AR.
6. We have heard the arguments put forth by the learned representatives of both the sides and have carefully gone through the available record. Before arriving any conclusion on the point of jurisdiction, we deem it appropriate to reproduce the relevant provisions of law:-- Rule 5 of Sales Tax Rules 2006
5. Application for registration.---(1) A person required to be registered under the Act shall, before making any taxable supplies, apply to the CRO, through electronic means as provided by the Board or otherwise, through owner member or director, as the case may be. Such, application shall be made in the form STR-2, as annexed to these rules, transmitted to the CRO electronically or through registered mail or courier service. Such application will specify the Collectorate in whole jurisdiction the registration is sought, as per criteria given below namely:--
(a) in case of a corporate person that is a listed public limited company or an unlisted public limited company or a private limited company, the area where the registered office is located;
(b) in case of a person not incorporated, the area where the business is actually carried on; and.
(c) in case of a person not incorporated, having a single manufacturing unit, whose business premises and manufacturing unit are located in different areas, shall apply for registration in the Collecorate of the area in whose jurisdiction his manufacturing unit is located: ' Provided further that a corporate person shall have the option to apply for transfer of registration to the Collectorate having jurisdiction where the place of business is located.
(emphasis ours)
7. The language of above rule is very clear for assuming the jurisdiction. One has to follow the above rule which is very much clear that taxpayer having single manufacturing unit the jurisdiction of the registered person lies where the manufacturing unit is located. The learned AR in this behalf also referred to a decision of this Tribunal recorded in M.A. (AG) No,60/LB/2012 and S.T.A.
No,669/LB/2011 dated 10-5-2012; where it was held as under:-- "Order-in-Original was passed without assumption of jurisdiction and beyond limitation period as prescribed under section 36(3) of the Sales Tax Act which are mandatory in nature. Further the extension granted by FBR also does not go in the favour of the department. The adjudicating authority has passed order-in-appeal in flagrant violation of the existing provisions of law. The superstructure built upon the show-cause notice issued under section 36(1) will struck down as the show-cause notice is completely silent in regards to "collusion" or "deliberate act" on the part of the registered person. The show-cause notice is also without mentioning any detail of tax periods and names of suppliers of cotton ginners to whom payment of sales tax was not remitted on cotton purchased by him. We are of the considered view that the order-in-original is held illegal on facts as well as on law hence, is annulled and declared of no legal effect."
8. Similar view was also taken by the Hon'ble Lahore High Court, Lahore , in a case re: Mahmood Barni v. I.A.C. Of Income Tax, Gujranwala and others reported as 2005 PTD 165 wherein their Lordships have held that:- "The settled principles regarding administration of justice are that officials/authorities dispensing justice and exercise judicial powers are supposed to apply their mind to the cases and to determine respective stances taken by the parties and after evaluating those to give their own verdict justified by reasons, I am sorry that I am remarking with a very heavy heart that the order impugned can in no manner be placed in the arena of judicial orders."
' A view also taken by the Hon'ble Supreme Court of Pakistan in a case re: Pakistan through Secretary Finance, Islamabad and 5 others v. Aryan Petro Chemical Industries (Pvt.) Ltd. And others, reported as 2003 PTD 505; wherein their Lordships have held that:- "A statutory rule cannot enlarge the scope of the section under which it is framed and if a rule goes beyond what the section contemplates, the rule must yield to the statute. The authority of executive to make rules and regulations in order to effectuate the intention and policy of the Legislature, must be exercised within the limits of mandate given to the rule making authority and the rules framed under an enactment. The rules framed under a statute if are inconsistent with the provisions of the statute and defeat the intention of legislature expressed in the main statute, same shall be invalid. The rule-making authority cannot cloth itself with power which is not given to it under the statute and thus rules made under a statute neither enlarge the scope of the Act nor can go beyond the Act and must riot be in conflict with the provisions of statute to repugnant to any other law in force."
The mention of the definition "registered office" in section 2(23) of the Act, in the impugned order was inapt and, in fact, the provision applicable was Rule 5(1) (c). The rule is also not inconsistent with the provisions of the main Act. The taxpayer has duly mentioned both the addresses in his application and principal place of business of the taxpayer is his manufacturing unit. Moreover, facts are also not properly appreciated by the Commissioner. The scope of General Order No,3 of 2004 is very limited where manufacturing unit/office is not traceable, but no such dispute arises in this case. The department could have initiated proceedings under section 36 against evasion of tax, if any.
9. In view of the above, we are of the considered opinion that the proceedings initiated are without lawful jurisdiction as jurisdiction over the case vests with the Commissioner (IR), Zone-III, RTO, Faisalabad and all the proceedings initiated vide notices issued under sections 25A, 38 as well as order passed under section 21 by the Commissioner (IR), Zone-II, RTO, Faisalabad are without lawful jurisdiction. Hence, the impugned order dated 11-5-2012, being without any lawful jurisdiction is hereby cancelled.
10. Since, we have accepted the taxpayer's appeal on the point of jurisdiction and the other submissions made by the learned AR, though carry substantial weight, need not to be adjudicated upon.
11. Appeal of the taxpayer succeeds in the above manner.