SYED MANSOOR ALI SHAH, J. --- Introduction: ' Scope and interpretation of Section 11A of Sales Tax Act, 1990 ("Act"), in particular the term "tax due as indicated in his return8," has come up for consideration before this Court. {{FOOT NOTE}} #TBS 9 in the sum of Rs 139,363,703/-, Rs 305,646,539/- and Rs 226,108,191/- #TBE
2. This judgment will decide the instant appeal, as well as, connected appeals and writ petitions mentioned in Schedule A as all these cases revolve around the interpretation of section 11A of the Act, thus, raising similar question of law arising out of similar facts. Facts:-
3. On facts, it is submitted that the appellant filed its sales tax returns for the months of July, August sand September, 2013 and fully paid the amount of tax due indicated in the said returns.9 Inspite of the same, the appellant has been served with Notices under section 11A of the Act, dated 28.10.2013, for 'short paid amount of tax. The Notices have been issued on the ground that amount of sales tax to be charged by the appellant from its consumers under the Sales Tax Special Procedure Rules, 2007 has been incorrectly reflected in the sales tax return. The sales tax reflected in the electricity bills issued by the appellant to its consumers, available on its website, constitutes output tax of the steel sector units and is not subject to input tax adjustment by the appellant under the above Rules. Therefore, as a result of the said deduction, the appellant has made short payment of tax due, which is liable to be recovered under Section 11A of the Act.
4. Learned counsel for the appellant argues that Section 11Aof the Act is an exception to Section 11 of the Act and has a limited application. He submits that if the amount of tax due indicated in the sales tax return is not paid only then can an action be initiated under Section 11A of the Act. He further submits that in the present case, the tax due indicated in the sales tax return has admittedly been fully paid. Information collected from the electricity bills of the consumers placed on the website of the appellant company does not constitute "tax due as indicated in his return" in terms of Section 11A of the Act. It is argued that in case of any discrepancy or incorrect calculation, as pointed out by the respondent department, between the figures reflected in the actual electricity bills placed on the website of the appellant company and the amounts indicated in the return, only proceedings for assessm ent of tax under Section 11 of the Act can be initiated against the appellant (subject to the provision of section 25 of the Act). Under the said provision, an opportunity is provided to the taxpayer to rebut the allegations leveled by the department followed by adjudication of the dispute after granting a hearing to the appellant. The special procedure under Section 11A dispenses with the requirement of show cause notice, only because the taxpayer is penalized for not depositing the amount of tax due after voluntarily indicating the same in the sales tax return. Learned counsel submits with utmost respect that the learned Judge in chambers erred in holding that the exercise of verification and comparison of the amount of tax due "indicated" in the sales tax return with the electricity bills available on the website of the appellant, fell within the scope of section 11A of the Act.
5. Learned counsel for respondent department raised a preliminary objection that the ICAs No,77/2014 and 78/2014have not been filed by an authorized person. On merits, he submits that under Section 26 of the Act, the appellant is under an obligation to submit true and correct sales tax return, hence reliance for the purpose of verification and comparison has been rightly placed on the electricity bills issued by the appellant as the said bills are invoices in terms of Rule 16 of the Sales Tax Special Procedure Rules, 2007. He submits that section 11A is subject to verification of the sales tax returns and in case of any discrepancy said section can be invoked against the taxpayer.
He submits that the impugned judgment propounds the correct legal position, hence the instant appeal and the connected petitions are not maintainable.
6. We have given due consideration to the arguments of the learned counsel for the parties and have gone through the record, as well as, the impugned judgment of the learned Judge in chambers.
Preliminary Objection
7. It is submitted that ICAs No, 77/2014 and 78/2014 have not been filed by an authorized.Person, hence they are not maintainable. Reference has been made to the Authority Letter (undated) issued by the Manager (Corporate Accounts) , GEPCO Ltd, Gujranwala which authorizes one Mr Muhammad Masood, Deputy Manager (Banking & Tax) to sign a "writ petition" on behalf of GEPCO.
On the basis of the said Letter, it is argued that the concerned person has not been specifically authorized to file the abovementioned appeals. Learned Counsel for the appellant has placed on record a booklet comprising 42nd Board Resolution of GEPCO dated 22-6-2006 wherein the Chief Executive Officer ("CEO") of GEPCO has been authorized to institute and defend cases in Courts and to engage counsel and give powers of attorney on behalf of GEPCO. The CEO has been further authorized to delegate this power to any other officer of the company. Vide Letter dated 25-10-2010 the CEO has further delegated the said power to two officers, including the officer who signed the said appeals. The Board Resolution and Letter of Delegation is part of the booklet submitted by the learned counsel for GEPCO, which has been placed on the record as Mark "A". From the above we find that officer concerned has been duly authorized to institute the appeals. The preliminary objection is, therefore, overruled. As an abundant caution, we have gone through the authorization in all the connected matters and have found them in order.
On Merits
8. Sales Tax is premised on a self-assessment paradigm, where the tax due is self-assessed by a taxpayer and deposited alongwith the monthly sales tax return. Supervision and monitoring of the self-assessm ent regime is through the process of audit provided under sections 25 of the Act.
Once the taxpayer is selected through audit and the department is of the view that the taxpayer has an outstanding tax liability, the case undergoes assessment of tax through the process of adjudication under section 11 of the Act. Therefore, the self-assessed amount of tax due by the taxpayer in its sales tax return can only be altered through fresh assessment of tax under the section 11 of the Act, subject to the process of selection of a taxpayer thouqh audit. Section 11 provides for assessm ent of tax where a taxpayer fails to file a return, or pays an amount which is less than the amount of tax due or has made short payment or has claimed input tax credit or refund which is not admissible. The section further provides that where by reason of collusion or deliberate act any tax has not been levied or has been short levied or has been erroneously refunded, or by reason of inadvertence, error or misconstruction any tax has not, been levied or short levied or has been erroneously refunded, the Officer of Inland Revenue passes an assessment order along with penalty and default surcharge. Section 11 is the only provision under the Act which provides for assessm ent of tax through adjudication in case the self-assessed tax of the taxpayer, according to the department is unpaid or short paid for the above reasons. Post assessment if the taxpayer fails to pay the tax assessed, recovery can be initiated against the taxpayer under section 48 of the Act.
9. Section 11A on the other hand is neither a dispute settlement provision nor a provision that deals with assessm ent of tax but is infact a special recovery provision akin to Section 48. It proceeds on the assumption that the self-assessed tax due indicated in the sales tax return by the taxpayer is correct and final. Therefore, in case of failure to pay or make short payment of the same, recovery of the differential amount is initiated without further ado and the requirement of due process through issuance of a show cause notice is dispensed with. Section 11A states as under:- "11A. Short paid amounts recoverable without notice.-Notwithstanding any of the provisions of this Act, where a registered person pays the amount of tax less than the tax due as indicated in his return, the short paid amount of tax along with default surcharge shall be recovered from such person by stopping removal of any goods from his business premises and through attachment of his business bank accounts, without giving him a show cause notice and without prejudice to any other action prescribed under section 48 of this Act or the rules made thereunder." (emphasis supplied)
' The amount of tax due has to be indicated in the return, which is defined under Section 2 (29) to mean any return required to be furnished under Chapter-V of the Act. Under Section 26 every registered person is required to furnish a true and correct return in the prescribed form. Rule 14 of the Sales Tax Rules, 2006 ("Rules") specifies that return has to be in form STR-7 alongwith all its annexures. The format of the relevant portion of the return under the law is as follows:- {{TABLE}} Government of Pakistan Sales Tax federal Excise Return "STR-7 [See rule 14011 NON w 3. NAO. r OA 5.1.., cue rMo .
111111.111111 MIMI 1 I I I 1.4...11T.
1;al LAWS w, coo 4 Ind.... WV.
Ir. Desuipnon Greet Vales Tazaraf Valuer Saha TO e.
1 0 ., I Dermot Pu:fuses from Register., ...SW rescinding fixed 44 1 4..1.-.
7 f9eeare Put cnoses loan u-reysere Person ane.a a 3 hnords 0.0ene1.00 nub 01......a0 masa, ,.31 ce conerrOs 1 .11 4 CAA. Goods I Foe.. Assels (Domestic Purchases a 0,147r1S) 3nne..0.148 .. Lope for the month = (1 3 41 _IS_ fi 1 c4edit conedlomaid *Om PR.10.5(.3.11.1.0013)
NM creak*. Opals ;relating*, eaterpl. Nontaxed stipples of rads ce services et 1'
R Art tem/laird Crerht = (5 8 - 7) i14 a. a 9 TodF Goods re Remoras supphed bcaly Seul Anneec el tO G."1 O'' S.13Fe7 FIRPhed 104" ferteeneerhaei arrax.c 41 Ii I Exports eeme.0 4 12 E .Tea Tan under Chapter WI of ST Speeur procedural:twee, 2007 nrinee-C MIT' *gads) islet) . ' uern.c s. 1 '
13 Electricity suppled In Wet Sew.. `la Saki Tax portion 01 Sr 13 collected at normal rate (adruslable 13o Remelting eales lax portion of Sr 13 (norearhustatie against input) = (13' lam tea Gas suppled lo LNG sector (ronnal rah 99. Of value) Amu{ 4 I Saes Tax porton of Si 14 coSeeted * normal rate (.,tradable Nan* input) . il. Remaning Soles Tali portion of Sr 14 fnon-adjustable against input) e lie -.Teal IN (Maul Tax (41 12 13a 14a) to Saes Tar deducted by endtholding aoenss) leas.{ 17 re Accumulated Debit = (15 18)
Retail Turnover . For Ihe WW1 . ..1 ' .
14 R........
3.1.p sod by ship Breakers- 'r . u tans 20 Re-meltable SCI.D add by Ship breakers ' 14,TM1 21 Sales Tar pavapie by Steel SKIP under *vial Procedure "these liebrhly ws natralldladra IRS* h.1.0061Y04.-. 1011ViRf0 : .Ente..S 1 e '
72 Sales Tax valfifte/i as vathholdrna agent 33 Sales Taw Anears pcluding Pnncna Emfault Su hero* 8 Penalty ... Stea,,el .
2 F. ' t 24 Wriefner en idea korn S.510.18110 ) 340* 9.,.../Av Mt Yes aeud 101, *701, ;CalreldR 1441.10480111141140.'e of (84 I or 930% 53-e at Oa, .7)04410 puyt e. Otiereesi fexoli '
2 Admissible Credit er 24 = Yes men 6, if 24 = No IfICA (least 26 Excess Unadjusted Credit (if 24 = Yes and 25 , .11 111191.(25 -.17).:0113.1414..a.'24.=34Riben.l.9.- Al ' 7 27 Credit Camed lone** on accournof .Value Additun tat . ' . 041 28 Carry Forward Avodable Its the purpose* reflex!, (20. 27) ,. .
29 Refund Clamed (ProSale Stock St iteMent as Adbpalltnate..Difile 4 later 09i Pe*AY 11 28. 29, uteri ((28. 29) 2)1 011ienull271' * . . . xr Creed to be carved forward 31 Federal Excise Duly. (FEE11(Trawbach ' e Mar E 32 Sales Toe Payable (if 17 e 25 Oen-07 ,.25); olherense ters4.411,b 14 18 14 21. 2 .'2A - 33 R .
Federal Ex/sei:fury 10,E01Peyable, . Armee .
34 P., 9,,,1-.YY (R1.) Payable 15 Tot* amount to be patd...(3 33,14-F '16 Tax pad on nooneeprenous retUrntepplefateer Yale of amindelfreium . - "37. - Ralante Tee Rayable/.(Refundahle) =-13S ..36).
31 _Select bankaccoi*Oni recedt of rebind , I g . Holder of cNIC.Peo 9.Rne - 7siecrs-n caPedly as..310dreed jrarnclo iccordanc,e boo thevoinsens'Of We . . soWnrOy aka+ r4 to To best appkome ANY of rriy *opium* arta Peter ale ?Obtrude pSen re ese Feruth is 0 ore caereirindoxnokre on a Surtaiined ~WW1. 171 IOW 1.1W Vo.....d .4 Ow ..!..WIF 41440.4 e'
Header aicount Arno . Predate Wee Breslau of Sales yaelf glDen ST fRode.Ran Services (2,0",-.P.)
P. Eo.Li., Salei Ten 'on.,..Coes l Provinbehrufa . Aseoyht 144ad . . Amount 17e071e6: Saes Ft maenuls Balcunntao 133FXXXX 1.12216/ :if()...1 Mot '111irheyP.Althttinh.Hvg . BI(XXXX re2ee5 - Frp Fk.Uore name Gal e ltiptab 11102.3.8:2 ears, =66 musrurai Ga. S!* 14 1394314, 7-0100: . ..e......, CAOe.W.111 Olhe15 '
W ;Te - BXXXXX, 'rote An,an, Total TN. Arnouil.04.1 I ... .1 . In'wordi I CPR No,. I CPR-1, CRR.2 'CPR3, {{TABLE}} ' Annex-C is one of the annexures of the return which provides a summary of domestic sale invoices. The return and its annexures and the domestic sale invoices are two different set of documents. In the present case the domestic sales invoices are the electricity bills (ref: Rule 16 of the Sales Tax Special Procedures Rules, 2007) issued by the appellant. Therefore, the amount of tax due indicated in the return cannot be equated with the amount of output tax reflected in the domestic sales invoices (i,e,, electricity bills of the consumer). Additionally, once the self-assessed tax due is considered to be correct and final under Section 11A of the Act, natural corollary is that all the information in the return including the annexures which leads to the self-assessed amount of tax due, is also correct and final.
11. In the present case, the amount of tax due indicated in the return is being disputed by the department, therefore, in such an eventuality, statutory assessment is required under section 11 of the Act and section 11A has no application to the case of the appellant.
12. We are afraid, the view expressed in the impugned judgment that verification of electricity bill s, placed on the website of the appellant, is permissible and reliance can be placed on any other extraneous information other than the amount of tax due indicated in the sales tax return under section 11A, is not the correct legal position. For section 11A to come into operation, only the amount of tax due indicated by the taxpayer in the sales tax return is to be considered. We may add for the sake of completeness that even though the taxpayer is under a legal obligation to file a true and correct return, any alleged violation of the same can only be resolved through adjudicatory process provided under section 11 of the Act subject to the selection of the case of the taxpayer under the Act and not through the mechanism of section 11A which is purely a recovery provision.
13. Under section 11A the amount of tax due indicated by the taxpayer in the sales tax return is considered to be correct and final. It is then used as a benchmark to see whether the taxpayer has deposited the said amount of tax due along with the sales tax return. In case of failure to deposit the indicated amount of tax due or in case of short payment, recovery proceedings can be initiated against the taxpayer under section 1A.
14. Even otherwise, Section 11 has practically lost its efficacy after the new e-filing system has been enforced. The new system does not entertain any electronic return if the amount of tax deposited by the taxpayer is less than the amount of tax due indicated in the return. Reference is made to Rule 18 of the Sales Tax Rules, 2006.
15. For the above reasons instant appeal, as well as, connected appeals and writ petitions are allowed and impugned Notices dated 28.10.2013 issued. Under section 11A of the Act and subsequent recovery thereunder are declared illegal and 'Without lawful authority and are, therefore, set aside. ICA allowed.