The appellant/Department through this appeal has objected to the Order-in-Appeal No, 14 dated 21-5-2013 passed by the learned Commissioner (Appeals-I) Inland Revenue, on the following grounds:--
(i) That the impugned order is illegal, unlawful and without lawful authority, hence is not sustainable in the eyes of law.
(ii) That CIR Appeals was not justified in setting aside the order-in-original because order under section 66 was an independent order against which appeal lies as provided under section 45B of the Sales Tax Act, 1990.
(iii)That CIR Appeals was not justified in setting aside the order-in-original because in response to refund application filed under section 66, show cause notice and subsequent order-in-original are to be passed under section 66 of the Sales Tax Act, 1990.
(iv)That CIR Appeals was not justified in setting aside the order-in-original because order under section 11 of the Sales Tax Act, 1990 result in creation of tax demand, whereas, order under section 66 does not in creation of tax demand
(v) That the impugned order is result of misreading and non reading of evidence/record available on file.
2. Brief facts leading to this appeal are that the respondent taxpayer filed an application under section 66 of the Sales Tax Act, 1990 on 28-8-2007 claiming refund of the amount of Rs,153,571,852 paid as further tax during the period from 1-7-1998 to 30-6-2004. Out of this amount, the claim of Rs,9,240,107 pertaining to the period from July 1998 to June 1999 was rejected by the then Commissioner Inland Revenue, LTU, Lahore vide order No, 1 of 2010 dated 17-6-2010. Against the said order, the taxpayer filed an appeal before this Tribunal. The said order was annulled by this Tribunal vide its judgment passed in S.T.A. No, 163/LB of 2012. The taxpayer requested the department for giving appeal effect and in compliance of the judgment passed by this Tribunal, the appellant department allowed refund of the amount of Rs,9,240,107 which had been paid as further tax during the period from July 1998 to June 1999. Since the appellant/department had not passed any order in respect of remaining refund claim of the amount of Rs,144,331,745 paid as further tax during the period from 1999 to 2004, the taxpayer made several requests to the Chief Commissioner Inland Revenue, LTU, Lahore to allow refund of the aforesaid amount but neither the refund was allowed nor any order was passed on the refund application. Aggrieved of the treatment meted out by the Department, the taxpayer filed a complaint before the Federal Tax Ombudsman. In his order dated 16-7-2012 passed in Complaint No, 272/LHR/ST(59)/ 537/2012, the Honorable FTO was pleased to direct the Department to decide the pending refund claim as per law within 21 days of the receipt of the required documents/record. Subsequently through the show cause notice dated 21-11-2012, the Deputy Commissioner Inland Revenue called upon the taxpayer to show cause as to why its refund claim to the tune of Rs,144,331,745 may not be rejected under section 66 read with section 3B and section 2(25) of the Sales Tax Act, 1990. The said show cause notice was duly replied by the taxpayer but the Deputy Commissioner being dissatisfied with the reply of the taxpayer, rejected the refund claim. Against the order-in original, the taxpayer filed first appeal before the learned CIR Appeals-I Lahore. The learned first appellate authority accepted the appeal of the taxpayer and annulled the order passed by the adjudicating authority hence the department has filed the instant appeal.
3. The learned counsel appearing on behalf of the department has argued that the- impugned order passed by the learned CIR Appeals is illegal and without lawful authority as the refund claimed filed by the respondent/taxpayer was barred by time and further submitted that order under section 66 of the Sales Tax Act, 1990 is an independent order against which appeal lies as provided under section 45B of the Sales Tax Act, 1990. He further argued that the learned CIR Appeals was not A justified to consider the, show cause notice as barred by time under section 11 of the Sales Tax Act, 1990 because section 11 of the Sales Tax Act, 1990 only apply in those cases where tax demand has been created against the taxpayer whereas the instant case pertains to the- refund which is only dealt under section 66 of the Sales Tax Act, 1990.
4. The learned counsel has further contended that the impugned order is result of misreading and non-reading of evidence/record available on file, as the taxpayer has failed to establish that the incidence of tax has not been passed on to the consumer. It has also been contended that mere non charging of further tax on the invoice does not prove that the incidence has not been passed on to the consumers. He relied upon the judgments reported as 2010 PTD 967, PLD 2005 SC 605 and 2001 PTD 2094.
5. The learned A.R. on the other hand supported the findings recorded by the first appellate authority and has argued that the show-cause notice is hit by limitation prescribed in section 11 of the Sales Tax Act, 1990 which require an officer of Inland Revenue to issue a show cause notice in various situations inter alia including where a person claims input tax credit or refund which is not admissible under the Act hence the show cause notice for rejection of refund was required to be issued as per provisions contained in subsections (2) and (5) of section 11 of the Sales Tax Act, 1990 and within a period of five years. The learned counsel further contended that the taxpayer neither had charged nor had collected further tax from its buyer during the period from July 1998 onwards hence there is no question that incident of tax had been passed on to the buyers. Relying on the same documents/record for the year 1998-1999, the department has already allowed refund of the amount of Rs,9,240,107 which had been paid by the taxpayer as further tax1% of the value, however, while rejecting the claim for the period July 1999 onwards, the department has concluded that since the taxpayer had passed on the incidence, it is not entitled for refund. The learned AR has further argued that the taxpayer had not enhanced the selling price of the sugar after imposition of further tax and continued selling product at the same price on which it was selling prior to imposition of further tax therefore, there is no question of passing of incident of the amount paid as further tax on to the consumer. It has been contended that selling the product at the same price before and after the imposition of further tax, is a conclusive proof that the taxpayer neither charges further tax nor had recovered the amount from its customers. The learned counsel has also placed before this Bench the following judgment reported as 2000 SCM R 1266, PLD 1998 Supreme Court 64, 1992 SCM R 1898, 2011 SCM R 1279, 2010 PTD 251, 2008 PTD 1973, 2008 PTD 981, 2005 PTD (Trib.) 1571, 2003 PTD 2867 and 2002 PTD 3043.
6, We have considered the above referred contentions from both the sides and found that the learned CIR appeals has given detailed justification in respect of time barred show-cause notice.
The relevant portion of the learned CIR appeals in this respect is reproduced hereunder:--
(i) The learned AR then referred to the provisions of section 11(2) read with section 11(5) of the Act to contend that he show-cause notice for rejection of refund was hit by limitation and any super- structure based on a void show-cause notice has to be declared as void. He referred to the judgment of the honorable Supreme Court of Pakistan in re: Collector Karachi v. PSO [2011 SCMR 1279] wherein the honorable Supreme Court of Pakistan noted that 54 notices were issued purportedly under section 32(2) of the Customs Act instead of section 32(3) and in some cases even after 36 months. Not only were the show-cause notices quashed having been issued after the time limitation, the honorable Supreme Court directed in para 12 "A huge loss has been caused to government exchequer mainly due to the negligence of relevant functionaries of Customs department against which action must be initiated by concerned Collector for dereliction of duty and being inefficient which amounts to misconduct and a report in this regard be furnished to the Registrar of this Court within a period of one month for perusal of the Bench in chambers."
(ii)He also referred to 2008 PTD 971 and .2008 PTD 1973 to contend that the impugned order based on a time-barred show cause notice had to be quashed. He stated that issue of time imitation was so important that the honorable Sindh High Court Karachi in re: GULISTAN TEXTILE v.
COLLECTOR 2010 PTCL 444 observed that the show-cause notice in the said case was issued After more than five years under section 11. Although at the relevant time there was no limitation for issuing the show-cause notice and the provision of time limit of five years for issuing such a notice was inserted only subsequently in section 11(4) of the Act vide Finance Act, 2008. Nonetheless the honorable Sindh High Court Karachi quashed the proceedings holding them to be barred by time having been initiated after more than five years.
(iii)I have examined the preliminary objection of the learned AR and it has impressed me, because the language of section 11(2) is explicit and it refers to the registered person who "has claimed refund which is not admissible under this Act" and empowers the officer to determine the amount of tax refund which he has unlawfully claimed". In this scenario I fail to see how the learned DCIR could take refuge behind the facade of section 66, which in any case enjoined upon him "that the application or claim filed under this section shall be disposed of within a period not exceeding ninety days from the date of filing of such application or claim". Hence seen from whichever angle it is beyond doubt that the impugned order is based on a show-cause notice which was barred by time and thus cannot be acted upon. Accordingly the same is set aside.
7. It has been correctly held by learned CIR(A) that the show cause notice for rejection of refund shall be issued under subsections (2) and (5) of section 11 of the Sales Tax Act, 1990 within a period of five years and no such provisions are available under section 66 of the Sales Tax Act, 1990 for issuance of show-cause notice hence the show-cause notice issued after more than five years was barred by time. After considering the observation of the learned CIR(A) reproduced above and submission of the learned counsel of the respondent, we find no warrant for interference in the impugned order. The learned CIR(A) has discussed all the issues in detail and no interference, in this respect is therefore, required.
8. So far the objection regarding the impugned order is result of misreading and non-reading of evidence/record available on file. The appellant/department alleged that refund claimed had not been received on 28-8-2007, therefore, the refund claim was time barred. The learned counsel of the taxpayer placed on record the receipts of refund claimed filed on 28-8-2007 which was duly signed and stamped by the department. It was also alleged that the taxpayer had already passed on the incidence of tax to the consumer. It is noted that in compliance of the judgment passed by this Tribunal in S.T.A. No, 163/LB/2012, the appellant/department has already allowed refund of the amount of Rs,9,240,107 which had been paid by the taxpayer/respondent as further tax for the year 1998-1999 and the department has not disclosed as to why the subject claim for the period July 1999 onwards is different from the claim for the period from July 1998 to June 1999, during which the taxpayer had issued invoices, filed sales tax returns, maintained annual accounts in the same manner as had been maintained in the period from July 1999 onwards. When the department had already allowed refund for the period from July 1998 to June 1999 based on the record of the taxpayer then there was no lawful reason for rejecting the refund for the period from July 1999 onwards for which the taxpayer had maintained the record identical to that of the period 1998-99.
Such a change in opinion is not sustainable under the law. It is not disputed before us that the taxpayer had not charged the further tax from its buyers and the selling 'price of the sugar after imposition of further tax remained unchanged and the taxpayer had not enhanced the selling price of the sugar after imposition of further tax rather continued selling the product at the same price on which it was selling prior to imposition of further tax, hence it cannot be held that the incidence of further tax was added by the taxpayer while selling the sugar. In this regard a decision of the Honorable Supreme Court of Pakistan reported as 2000 SCM R 1266 has been referred to wherein it has been held that since the taxpayer, according to record, has not enhanced the selling price of the sugar, it cannot be argued that the incident of tax was added to the price and passed on to the punchers. The ratio laid down by the Honorable apex court is squarely applicable to the instant case as the record depicts that the amount paid as further tax was neither charged nor was recovered from the buyers. Keeping in view the above facts and legal position we are of the view that the learned CIR(A) has rightly annulled the order passed by the taxation officer and therefore, no interference in this regard is required. The appeal filed by the department is dismissed.
It is ordered accordingly.