This appeal was filed on 01.02.2012 with The Tribunal and was heard by that Tribunal against the impugned Order-in-Original No.02/2011 dated 15-12-2011 passed by the Respondent/Commissioner Inland Revenue.
2. The appellant Registered Person (RIP) is a multinational public limited company engaged in the business of manufacture and sale of petroleum products. The Appellant is engaged in the country- wide distribution as well as export of POL products and is registered under the Sales Tax Act, 1990 in the categories of the importer, manufacturer, distributor, wholesaler and exporter.
3. Before discussing merits or demerits of the appeal, it would be pertinent to briefly discuss the background of the case in order to understand the controversy in a clear perspective. The appellant R/P filed their Sales Tax return for the month of September 2008 wherein declared fuel supplies of Rs.1,034,518,563/- to different airlines such as M/s. Air Blue and other non-registered persons/foreign airlines operating from Pakistan and claimed these supplies as zero rated in terms of Section 4 of Sales Tax Act, 1990, meaning thereby that the R/P did not pay any sales tax on these supplies. This quantum of supplies otherwise attract charging of sales tax @ 16% in terms of Section 3 of the Sales Tax Act, 1990 which comes at Rs.165,522,970/- but since the R/P claimed such supplies as zero rated under section 4(b) of the Sales Tax Act, 1990 it did not pay no tax on these supplies.
4. The appellant R/P accordingly thereafter lodged a refund claim for the same month to the tune of Rs. 393,248,183/-. During scrutiny of this refund claim, it was observed by the department that Messrs Shell Pakistan Ltd, had unlawfully claimed its supplies made to Messrs PIA, Messrs Air Blue and other foreign airlines as zero rated as it had not followed the law in terms of Section 4(b) of Sales Tax Act, 1990 and has thus not charged sales tax amounting to Rs.165,522,970/- on these supplies. The sales tax automated refund system STARR also did not validate the refund claim on a number of objections. Accordingly thereafter, the R/P was Show caused on violation of Section 4(b) of the Sales Tax Act, 1990 vide letter C. No.01(10)LTU/ST & FE/REF/BG/SPL/09/1618653 dated 16-11- 2009 wherein the Deputy Commissioner Refund of LTU, Karachi categorically confronted the R/P on its unlawful zero rating claim by violating Section 4(b) read with Section 24 of the Customs Act, 1969 and not filing Export GD and making such supplies only on the basis of delivery notes to the recipients without mentioning their registration numbers and without any receipt of confirmation thereupon. However while passing the consequential Order-in-Original (0-in-0) No. 02/2010 dated 15-02-2010, the DCIR concerned condoned the law i.e. Section 4(b) of the Sales Tax Act, 1990 which he was not empowered to do. As a consequence of that 0-in-O dated 15-02-2010, the R/P was able to get a refund of Rs. 362,858,222/, issued in its favour which also included unlawful zero rating claim of Rs.165,522,970/-. Since, that order of the DC, Inland Revenue, LTU, Karachi suffered defects of propriety as well as legality, the Commissioner Inland Revenue Zone-IV, LTU, Karachi called for that 0-in-0 No. 02/2010 dated 15-02-2010 by passing a fresh Order-in-Original dated 16-12-2011 in terms of Section 45A of the Sales Tax Act, 1990 which is the subject matter of this appeal.
5. In order to understand the controversy further, it would be utterly essential to briefly discuss the relevant provisions of the respective laws here. If we look at chargeability operates under the Sales Tax Act, 1990, Section 3 of the Act provides for charging sales tax on all supplies at the prescribed rate; however if any supplies qualify the requirements of Section 4 of the Sales Tax Act, 1990, zero% sales tax is charged on them and hence such supplies are called zero rated supplies. In the instant situation the R/P claimed its fuel supplies to different airlines as zero rated by claiming these supplies to fall under Section 4(b) of the Sales Tax Act, 1990 and did not charge any tax on such supplies. However during scrutiny, it was noted that the RIP did not fulfill any of the requirements of Section 4(b) of the Sales Tax Act, 1990, hence its zero rating claim was found unlawful. For the sake of understanding, the relevant provision of the Sales Tax Act, 1990 i.e. Section 4(b) is reproduced herewith which provides for goods to be charged at zero per cent.
(6) supply of stores and provisions for consumption abroad on a conveyance proceeding to a destination outside Pakistan as specified in Section 24 of the Customs Act, 1969 (IV of 1969).
It is evident from above that only such stores and provisions shall qualify as zero rated which fulfill the conditions as specified in Section 24 of the Customs Act, 1969. Section 24 of the Customs Act, 1969 is also reproduced herewith as follows:- Section 24: Provision 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 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 voyage or journey on which the conveyance is about to depart."
A plain reading of above in conjunction with Section 4(b) of the Sales Tax Act, 1990 clarifies that only such quantities of -goods on a conveyance proceeding abroad would constitute zero rated supplies as the appropriate officer of customs may determine with regard to the size of the conveyance, the number of passengers and crew and the length of journey on which the conveyance is about to depart. Through S.R.O. 371(1)/2002 dated June 15, 2002, the FBR had designated an officer having designation of Principal Appraiser/Superintendent as appropriate officer who have been assigned the powers for the purpose of Section 24 of the Customs Act, 1969.
Hence, it appears evident .From perusal of above referred provisions of the relevant statutes that any claim of zero rating in terms of Section 4(b) of the Sales Tax Act, 1990 required determination of zero rated quantity by the appropriate officer of Customs which required filing of Export GD (Goods declaration) before that designated appropriate officer for such zero rated quantity determination.
The R/P admittedly never filed such Export GDs for zero rated quantity determination as warranted under section 24 of the Customs Act, 1969.
Hence, it was contended that since the zero rated quantities claim was never determined as warranted under section 4(b) of the Sales Tax Act, 1990 read in conjunction with Sec4ion 24 of the Customs Act, 1969, the R/P's claim of zero rating was liable to be rejected and was consequently held unlawful.
6. This appeals is filed in this backdrop and against the impugned Order-in-Original dated 16-12- 2011 passed in terms of Section 45A of the Sales Tax Act, 1990 by the Commissioner Inland Revenue
(CIR) Zone-IV, LTU, Karachi through which the CIR called for earlier 0-in-O of the Officer of Inland Revenue dated 15-02-2010 in which he unlawfully allowed the claim of zero rating in the subject month by condoning the law i.e. Section 4(b) of the Sales Tax Act, 1990 in conjunction with Section 24 of the Customs Act, 1969 which he was not empowered to do.
7. The appeal was heard on 13-03-2012. Mr. Muhammad Naseem, the learned counsel of the Appellant has assailed the impugned 0-in-O as per Memo of appeal and also as per written arguments. The DR of the department Mr. Shakeel Ahmad Kasana, vehemently argued and rebutted each of the ground of appeal and also filed department's written arguments which have been perused and placed on record. The grounds and the rebuttal are as under:-- GROUND A and B: Lack of Jurisdiction The learned AR of the Appellant argued on the lines that there was no jurisdiction vested with the Commissioner Inland Revenue, LTU, Karachi since the precise authority and jurisdiction to deal with the goods exported as zero rated and awarding clearance was vested with the officers of Customs Department under section 24 of the Customs Act, 1969 and there is no ambiguity in this behalf since the language of Section 24 of the Customs Act, 1969 is plain and simple. Furthermore, the learned AR of the appellant provided the copies of Show Cause Notice (SC N) dated 16-11-2009 and Order-inOriginal No. 02/2010 dated 15-02-2010, a copy of refund application addressed to the Collector Sales Tax (Enforcement), LTU, Karachi etc and claimed in this regard that the then DCIR, LTU, Karachi passed the Order-in-Original (0-in-0) No. 02/2010 dated 15-02-2010 after consultation and approval of the Commissioner Inland Revenue and the Chief Commissioner Inland Revenue.
He argued in this regard that perusal of SCN and the 0-in-0 reflect copies of both these documents were sent to the Commissioner and the Chief Commissioner, hence he tried to establish that both the higher authorities were involved in the process of such proceedings. On the basis of that premise, he argued further that the scope of the Section 45A(4) of the Sales Tax Act, 1990 does not permit indulgence in a matter in which Chief Commissioner Inland Revenue and/or the learned Respondent Commissioner themselves have already assumed indulgence. The DR of the department rebutted this argument by clarifying that the impugned order was passed by the Commissioner Inland Revenue under Section 45A of the Sales Tax Act, 1990 and not under the Customs Act, 1969 and she called for an order passed by an officer of Inland Revenue and not that of any Customs authority. The whole controversy revolved around allowance of zero rating in term of Section 4(b) of the Sales Tax Act, 1990 and it was the Inland Revenue department which had the bona fide and lawful right to examine and allow such claim. He explained further that the order passed by the Commissioner Inland Revenue under section 45A of the Sales Tax Act, 1990 was lawful as the subject section empowered the Commissioner Inland Revenue to call' for any order of the Inland Revenue officers which suffer from impropriety and illegality. In the instant case, the Commissioner Inland Revenue passed the impugned Order-in-Original under section 45A of the Sales Tax Act, 1990 through which she called for an earlier Order-in-Original No. 02/2010 dated 15- 02-2010 whichwas passed by an Inland Revenue officer of LTU, Karachi which suffered from impropriety or illegality. On the question of indulgence of higher authorities during the proceedings of first 0-in-0 dated 15-2-2010, the DR of the department vehemently denied any such act on the following basis:--
(i) It is a known fact and common practice that the when a show cause notice is issued, its copies are sent to higher authorities for information from which it simply cannot be construed that the higher authorities were involved in the proceedings.
(ii) It is also a known fact and common practice that copies of Order-in-Original are always sent to higher authorities for information from which it simply cannot be construed that the higher authorities were involved in the proceedings.
(iii) There is no provision for approval for issuance of refund under the Sales Tax Act, 1990.
(iv) Under the law the power to issue SCN and pass an 0-in-0 or issue refund is vested with the Inland Revenue Officer and there is no scope of consultation or involvement of higher authorities in neither the process, nor the law allows so. Mere furnishing of copies for information to higher offices (which is an established norm) does not construe that higher authorities in anyway gave approval of refund.
(v) In the light of foregoing, the case laws relied upon by the learned AR of the R/P does not need rebuttal as irrelevant.
We have heard the both sides and perused the laws. Section 45A of the Sales Tax Act, 1990 empowers the Commissioner Inland Revenue (CIR) to call for any order of any Inland Revenue Officer suffering from impropriety or illegality. The argument of the learned AR of the Registered Person that it was the duty of Customs department to regulate A all exports is well founded however, the facility of zero rating has to be allowed under the Sales Tax Act, 1990 and we are of the view that it was the right as well as responsibility of the Inland Revenue Department which is governing the Sales Tax Act, 1990 to examine, accept or reject such claim as per law. Regarding communication with the higher authorities during the initial proceedings of sanction of refund, it does not construe or establish that any approval from the higher authorities was sought or granted while passing the 0-in-0 dated 15-02-2010. The learned AR also could not provide any substantive evidence that there was any approval involved in the process. Since the 0-in-0 dated 15-02-2010 was passed by the Officer of Inland Revenue by applying his own mind, it is our view that without prejudice even if any consultations happened, that does not implicate or bar the action of the Commissioner Inland Revenue (CIR) to invoke section 45A under the law. Therefore we are of the view that the order passed by the CIR, Zone-IV, LTU, Karachi was well within her lawful jurisdiction and the appeal accordingly fails on this score.
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 technical and procedural lapse
(c) Past and closed transactions The learned AR of the R/P contended that in compliance with Section 4(b) of the Sales Tax Act, 1990 read in conjunction with Section 24 of the Customs Act, 1969 filing of Export GD was merely a procedural lapse under rules and a procedure under rules being a subordinate legislation could not have overruled the dictates and commands of Section 24 of the Customs Act, 1969. Reliance has been placed on the following case laws in this regard. a) PLD 1990 SC 1034 Lah. 316 b) PLD 2001 Karachi 52, c) 2001 SCMR 1806, d) 1993 SCMR 1232 e) 2002 PTD 2959. f) PLD 1989 SC 64 g) 2007 SCMR 729 h) 2005 SCMR 69 i) 1996 SCMR 856 The learned AR of the R/P argued further that 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. The learned DR of the department has been heard and written rebuttal to the above ground of appeal has been perused which categorically stated that the learned AR of the R/P misconceived that the procedure of filing of Export GD was a subordinate legislation or was warranted under any rules made in lieu of Section 24 of the Customs Act, 1969. Through written arguments this Tribunal's attention was invited towards the findings of the Commissioner Inland Revenue from Pages 13 to 16 of the impugned order and the same are reproduced as under:-- The above contention of the taxpayer does not hold any ground. Non-compliance of the section 24 of the Customs Act, 1969 is not a procedural lapse but contravention of a substantive law. The procedure of filing goods declaration and getting determined the quantity of provision and stores to be exported free of customs duty (in this case zero rated as warranted under section 4(b) of Sales Tax Act, 1990) having regard to the size of the conveyance, the number of passengers and crew and the length of voyage or journey on which the conveyance is about to depart, is the substantive part of the law as laid down in under section 4(b) of Sales Tax Act, 1990 read with Sections 24 and 131 of the Customs Act, 1969. In this instant case, the procedure is not a subordinate legislation but is made part of the substantive law by the legislature keeping in view its importance and impact on revenue collection. It is pertinent to point out here that the whole superstructure of Customs Act, 1969 is based on this procedure of filing of GDs which is so important that in case of its non compliance or breach, any activity of bringing in or taking out of any goods from Pakistan becomes smuggling. This procedure is the substantive law as its narrated within the Customs Act, 1969 itself and not in rules which usually are made to define procedures otherwise. Therefore this very procedure of filing of GDs is squarely different than any other procedures elsewhere in other laws as it is the only and fundamental basis of Customs Act, 1969. This is the reason that the appropriate officer was specifically designated for the purposes of Section 24 of the Customs Act, 1969 vide S.R.O. 371(1)/2002 dated June 15, 2002.
The main obligatory Section under the Customs Act, 1969 is Section 131 which warrants filing of GDs for all type of exports (Duty free/zero rated or otherwise) and the designated Custom's officer could ascertain quantum of zero rated supplies only if goods declarations were filed before him. It was R/P's legal obligation to file GD for ascertainment of zero rated quantity of jet fuel and the criteria to ascertain such zero rated quantum is clearly defined within Section 24 of the Customs Act, 1969 itself. How could the designated Customs officer determine the quantum of jet fuel to be supplied duty free if the goods declaration is not filed before him? Section 4(b) of Sales Tax Act, 1990 warrants that zero rated supplies will be in accordance with Section 24 of the Customs Act, 1969 which spells out the criteria for such determination as the size of conveyance, the number of passengers and crew on board and length of the voyage or journey, whichever is applicable. If the GDs are not filed how could the Customs officer determine such zero rated supplies and how could the Registered Person claim those supplies as zero rated by not paying tax on them?
It is obvious that Section 24 of the Customs Act, 1969 which is relevant to duty free exports/zero rating could only be invoked once goods declaration (GD) is filed as Section 131 of the Customs Act, 1969 warrants that in all types of export (duty free or otherwise) a goods declaration (GD) has to be filed. Keeping in view the foregoing discussion, it is abundantly clear that filing of GD is a substantive provision of law and the cases relied upon by the counsel of the taxpayer Company are distinguishable as does not cater the instant situation. Furthermore, if such practice of claiming zero rated supplies/ export is allowed without following the lawful course of filing GD and determination of zero rated quantity by a State Authority, such supplies would tantamount to smuggling as defined under Section 2(s) of the Customs Act, 1969. The same is reproduced herewith for the sake of ready reference. Section 2(s) "Smuggle" means to bring into or take out of Pakistan, in breach of any prohibition or restriction for the time being in force, or evading payment of Custom duties or taxes leviable thereof.
(emphasis ours)
It is abundantly clear that first and foremost restriction for any exports including duty free export/zero rating is filing of GD as warranted under Section 131 of the Customs Act, 1969. Since the RIP didn't file the same and provided jet fuel to airlines which allegedly proceeded to foreign destinations, the nature of such transaction has changed to taxable supplies. Last but not the least, law requires filing of GDs before the designated State authority prior to export or claiming zero rating hence mere certificates from airlines now can not absolve the RIP from such contravention as only the designated State Authority under the law was authorized to determine the quantum. Of zero rated fuel to be allowed before occurrence of that event. Reliance in this regard is placed on the Honourable Supreme Court of Pakistan's judgment in the case CIT v. Haji Mola Bux Corporation Ltd. Reported as PLD 1990 SC 990 = 1990 PTD 821 and also in the case of Mian Muhammad Saeed and others v. Province of West Pakistan reported as PLD 1964 SC 572 wherein it has been ruled that "no man can take advantage of his own doings".
Further to that this departmental contention also derives force from numerous judgments the Honourable Supreme Court of Pakistan as well as High Courts which has clearly held the legal principal that if law requires something to be done in a certain manner, it has to be done that way or not at all. Reliance in this regard is placed on following judgments: i) 2001 SCMR 838 [Supreme Court of Pakistan] In the case of Assistant Collector Customs v. Messrs Khyber Electric Lamps: the Apex Court held in the case as follows: "It is well settled proposition of law that a thing required by law to be done in a certain manner must be done in the manner as prescribed by law or not at all." ii) 2010 SCMR 1437 [Supreme Court of Pakistan] The Apex Court held as follows: " It is a settled proposition of law that when a thing is to be done in a particular manner it must be done in that way and not otherwise." iii) Reliance is also placed on Atta Muhammad Qureshi's case PLD 1971 SC 61 iv) Reliance is also placed on Mughal Surgical's case 2005 PLC 634 v) PLD 2002 Karachi 60: In the case of Muhammad IdreesPetitioner v. Collector of Customs and others: The Honourable Court held as follows: "It is established principal of law that the things should be done as they are required to be done or not at all. Nobody can be allowed to contravene, flout or violate the statutes or the rules framed thereunder in the name of national interest or any other so-called high or sublime idea or ideal.
The rule of law requires that every person in execution of law should follow strictly the law as laid down and should not exceed the limit of law for any reason whatsoever."
In the light of foregoing it is evident that the taxpayer has not followed the procedure as laid down under the law and willfully contravened it, hence RIP 's contention in this regard is rejected. On the ground of past and closed transaction, the DR of the department vehemently contested that the instant situation does not fall into the definition of past and closed transaction as the legislature provided for calling for any order of any Officer of Inland Revenue in terms of Section 45A(3) of the Sales Tax Act, 1990 within (05) years of passing of such order. In the light of foregoing it was pleaded that the appeal of the appellant RIP be rejected being without any merit. We have heard the both sides, perused the ground pressed and rebuttal filed by the department as mentioned supra and are of the considered view that the objections raised by the learned AR of the appellant hold no ground hence appeal on these grounds accordingly fails.
Ground D. Invalidity of Show Cause Notice Dated 20.06.2011 The learned AR of the appellant contested that the Show Cause Notice No. CIR-Zone-IV/SCN-Shell Pakistan/45A/LTU/83 dated 20.06.2011 was invalid since suffering from defects such as no mention of Section under which it was issued, and being vague, obscure, incomplete, non-speaking and totally blind for a reply and could not have been reckoned and treated as a proper show cause notice and it was barred by time limitation. Case laws relied upon on the above contention are mentioned as follows:-- a) 2001 SCMR 83 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 l) 2000 PTD 1798 m) 2004 PTD 3020 The department filed its written rebuttal to this ground which has been perused and examined in the light of produced record/ copy of subject show cause notice dated 20-06-2011. The department's contention in response has been that the subject SCN dated 20-06-2011 was issued in terms of Section 45A of the Sales Tax Act, 1990 as the provisions of Section 45A within itself provide for issuance of a show cause notice and that section i.e. Section 45A was accordingly mentioned in the subject SCN. Hence the contention of the AR of the R/P is misplaced and is merely a misstatement of facts. The department further asserted through its written rebuttal to the above ground that the SCN was not barred by time limitation as Section 45A(3) of the Sales Tax Act, 1990 permitted to invoke this Section within (05) years of passing of the 0-in-0 being called for. The department also filed written rebuttal to the other allegation of the learned AR of the appellant R/P such as the SCN was obscure, incomplete, non-speaking and totally blind for a reply as not being well placed. A copy of subject SCN notice has also been furnished to the Tribunal along with department's written reply. The learned DR of the department argued that that SCN clearly reflected illegality in the 0-in-0 dated 15-02-2010 whereby the Officer of the Inland Revenue condoned the law itself i.e. Section 4(b) of the Sales Tax Act, 1990 which he was not empowered to do. He argued further that the intent of the department to call for such 0-in-0 which suffered from above defects of legality and propriety was clearly confronted through that SCN and the arguments of the learned AR of the Appellant were misplaced. The department's contention has been examined in the light of Section 45A(3) of the Sales Tax Act, 1990 which empowered the Commissioner to invoke Section 45A within (05) years of the passing of the order being called for and the action of the CIR is found well within her jurisdiction and within the prescribed time limitation. We after having examined the subject SCN notice hold that it did not suffer from any of the defects as pointed out by the learned AR of the appellant R/P as mentioned supra and the appeal fails on this ground accordingly.
Ground E. Change of Opinion and Fishing and Roving Enquiries.
The learned AR of the Appellant filed this ground by asserting that the Commissioner Inland Revenue passed the impugned 0-in-0 on mere change of opinion and erred in throwing off inquiry and evidence collected by the Deputy Commissioner Inland Revenue whose earlier 0-in-0 she called for. He has also repeated the ground that such 0-in-0 of the DC Inland Revenue was passed with the tacit approval and participation of the Chief Commissioner and Commissioner however the same has already been decided by us in the earlier paragraphs of this order. In support of his contention he relied upon the following case laws:-- 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 e) 2002 PTD 661 (HC Kar) ii) CASE-LAW ON FISHING AND ROVING ENQUIRIES a) 1957 32 ITR 89 b) (1967) 64 ITR 516 c) ITA 2400/2401/KB/91-92 d) (1995) PTD (TRIB) 580 e) (1995) PTD (TRIB) 1152 f) (1982) 1381 ITR 742 The learned DR of the department vehemently argued that the situation under question neither constituted change of opinion by the department nor it constituted any fishing or roving enquiries.
He explained in this regard that the impugned order of the CIR was passed by her in terms of Section 45A of the Sales Tax Act, 1990 which warranted calling for any order of the Officer of Inland Revenue which suffered from defects of propriety of illegality. Since the Order she called for suffered from both these defects as evident from the body of her order at numerous places, it simply doesn't not constitute charige of opinion. He argued further that the nature of the provision of Section 45A is rectificationery under the corrective mechanism provided in the Sales Tax Act, 1990 which empowers the Commissioner to correct any order of any lower authority which suffered from illegality or propriety. Such power was provided in the statute by the legislature and could be beneficial both for the revenue as well as the taxpayers in case any order of a lower authority suffered from defects of propriety or legality. The presence of such powers vested with a very senior officer like Commissioner to amend any order of a junior authority was common in all tax laws and nowhere such power was construed as change of opinion. Since the order passed by the DC Inland Revenue was unlawful as he condoned the law itself i.e. Section 4(b) of the Sales Tax read in conjunction with Section 24 of the Customs Act, 1969, the Order of the Commissioner to lawfully call for such order in terms of Section 45A of the Sales Tax Act, 1990 cannot be considered as change of opinion or fishing or roving enquiry by any stretch of imagination. Further to that and without prejudice to above, the original SCN dated 16-11-2009 issued by the DC, LTU, Karachi before passing that illegal 0-in-O dated 15-02-2010 which has been called for now by the Commissioner Inland Revenue also supports the point of view of the Commissioner in the impugned order and establishes further that the department never changed its stance. For the sake of ready reference the relevant extract (Para. # 2) from that SCN dated 16-11-2009 is reproduced herewith which is clearly in line with the findings of the Commissioner in the impugned Order:--
2. Whereas during scrutiny of the refund claim, it has been observed that Messrs Shell Pakistan Limited, have not charged sales tax amounting to Rs. I65,522,970/- on the supplies made by them to M/s. PIA, M/s. Air Blue, export processing zone and other non registered persons (foreign airlines operating from Pakistan) since they have claimed these supplies to be "local zero rated supplies".
It was further observed that these so called "local zero rated supplies" were made without filing an Export GD as required under Section 4(b) of the Sales Tax Act, 1990 read with Section 24 of the Customs Act, 1969. Furthermore, these supplies have been made only on the basis of delivery note issued to the recipients without mentioning their registration numbers and without any receipt or confirmation.
Perusal of above clearly reflect that the department's contention has not been changed and the Commissioner Inland Revenue passed her Order lawfully in terms of Section 45A of the Sales Tax Act, 1990 by calling for an Order passed as a consequence of above referred SCN wherein the officer of Inland Revenue unlawfully condoned the law although the same was confronted properly to the Registered Person as reflected supra. Hence it is evident that the impugned Order of the Commissioner was infact a corrective order not any change of opinion or any fishing or roving inquiry. Further to that and through written rebuttal to the above ground, the department referred to Page # 7 of the Commissioner's impugned Order wherein it has been established that it was the Registered Person who changed its opinion a number of times and not the department. For the sake of ready reference a few instance of change of opinion of the appellant are discussed hereunder as also established in the impugned Order:
(1) During proceedings before the DC, LTU, Karachi, the R/P admitted their contravention of law of not filing Export GD to get their zero rated claim ascertained by way of furnishing with the department an undertaking vide their tax consultant's letterNo.KST-AA-126 dated 24 November 2009 to file Export GDs in future however, before this august Court the learned AR of the appellant has admitted that the appellant never filed Export GD and as per his grounds it has wrongly been argued that the R/P was not required to do so.
(2) Your Appellant itself admitted in the impugned order of the Commissioner that other Oil Marketing Companies were filing Export GD for claiming their ascertained zero rated claim under section 4(b) of the Sales Tax Act, 1990.
(3) Your Appellant itself filed Export GDs for supply of fuel to EP Z's under Section 4 to claim those supplies as zero rated supplies then how could it blow hot and cold in the same breath by claiming that filing of GD was not required for claiming zero rated supplies to airlines. With regard to the ground related to fishing and roving enquiry, the department through its written arguments asserted that no fishing or roving inquiry was made. The illegality and impropriety of the 0-in-0 dated 15-02-2010 was evident on its face i.e. The DCIR condoned the law and the Commissioner vide her order under section 45A merely corrected the same after affording due opportunity of being heard to the appellant and passing a speaking order in which all the grounds raised were satisfactorily rebutted according to law. We have heard the both sides and carefully examined arguments of both the learned AR of appellant and the DR of the department and we are of the considered view that the arguments of the learned DR of the department carry force hence the appeal on the above ground accordingly fail.
Ground F & G. One Merely based on Conjectures and Not Discharging Burden of Proof and Violation of Qanun-e-Shahadat.
The learned AR of the Appellant through this ground assailed the impugned order of the Commissioner Inland Revenue that sales tax demand was re-imposed on mere conjectures and 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 e) PLD 1959 (SC OF PAK) 364 The learned AR of the Appellant through this ground argued that 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. Reliance is placed on:-- i) Qanun-e-Shahadat Order, 1984 ii) 1993 PTD 206 iii) 1997 PTD (Trib.) 2209 In response to the same the department vehemently contested that the learned AR of the appellant has not been able to point out even a single instance as to how the impugned order was based on conjectures, how and in which manner the burden of proof was not discharged by the CIR and in what respect Qanun-e-Shahadat Order was violated. However without prejudice to above, the department through their written rebuttal to the arguments argued that the impugned order was passed after complying with all the legal formalities, well within jurisdiction and time limitation and after affording reasonable opportunity of being heard to the R/P and all their arguments were satisfactorily rebutted in that speaking order as per law. This august Tribunal could see for itself from the record, copy of SCN and the impugned order which is a speaking order that no violation whatsoever has been occurred as alleged in the above grounds. It was pleaded that the learned Tribunal may accordingly reject all the above baseless grounds. We have heard the both sides and perused the record. We have no hesitation to confirm that the learned AR of the Appellant has no case on the above grounds as the appeal accordingly fails to this score.
Ground H: Ignoring Case Law Cited in the Reply The learned AR of the Appellant argued through this ground 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 her during proceedings of the impugned Order.
In response to this ground the department through their written rebuttal asserted that all the case laws furnished during proceedings were distinguishable as relevant to procedural lapse/subordinate legislation/rules. The learned CIR in the impugned order has already established this fact in detail and the department has invited this Tribunal's attention towards the relevant extract of the impugned order which has been reproduced as follows for the sake of ready reference:-- The above contention of the taxpayer does not hold any ground. Non-compliance of the section 24 of the Customs Act, 1969 is not a procedural lapse but contravention of a substantive law. The procedure of filing goods declaration and getting determined the quantity of provision and stores to be exported free of customs duty (in this case zero rated as warranted under section 4(b) of Sales Tax Act, 1990) having regard to the size of the conveyance, the number of passengers and crew and the length of voyage or journey on which the conveyance is about to depart, is the substantive part of the law as laid down in under section 4(b) of Sales Tax Act, 1990 read with Sections 24 and 131 of the Customs Act, 1969. In this instant case, the procedure is not a subordinate legislation but is made part of the substantive law by the legislature keeping in view its importance and impact on revenue collection. It is pertinent to point out here that the whole superstructure of Customs Act, 1969 is based on this procedure of filing of GDs which is so important that in case of its non compliance or breach, any activity of bringing in or taking out of any goods from Pakistan becomes smuggling. This procedure is the substantive law as its narrated within the Customs Act, 1969 itself and not in rules which usually are made to define procedures otherwise. Therefore this very procedure of filing of GDs is squarely different than any other procedures elsewhere in other laws as it is the only and fundamental basis of Customs Act, 1969. This is the reason that the appropriate officer was specifically designated for the purposes of Section 24 of the Customs Act, 1969 vide S.R.O. 371(1)/2002 dated June 15, 2002.
The main obligatory Section under the Customs Act, 1969 is Section 131 which warrants filing of GDs for all type of exports (Duty free/zero rated or otherwise) and the designated Custom's officer could ascertain quantum of zero rated supplies only if goods declarations were filed before him. It was R/P's legal obligation to file GD for ascertainment of zero rated quantity of jet fuel and the criteria to ascertain such zero rated quantum is clearly defined within Section 24 of the Customs Act, 1969 itself. How could the designated Customs officer determine the quantum of jet fuel to be supplied duty free if the goods declaration is not filed before him? Section 4(b) of Sales Tax Act, 1990 warrants that zero rated supplies will be in accordance with Section 24 of the Customs Act, 1969 which spells out the criteria for such determination as the size of conveyance, the number of passengers and crew on board and length of the voyage or journey, whichever is applicable. If the GDs are not filed how could the Customs officer determine such zero rated supplies and how could the Registered Person claim those supplies as zero rated by not paying tax on them?
It is obvious that Section 24 of the Customs Act, 1969 which is relevant to duty free exports/zero rating could only be invoked once goods declaration (GD) is filed as Section 131 of the Customs Act, 1969 warrants that in all types of export (duty free or otherwise) a goods declaration (GD) has to be filed. Keeping in view the foregoing discussion, it is abundantly clear that filing of GD is a substantive provision of law and the cases relied upon by the counsel of the taxpayer Company are distinguishable as does not cater the instant situation. Furthermore, if such practice of claiming zero rated supplies/export is allowed without following the lawful course of filing GD and determination of zero rated quantity by a State Authority, such supplies would tantamount to smuggling as defined under Section 2(s) of the Customs Act, 1969. The same is reproduced herewith for the sake of ready reference. Section 2(s) "Smuggle" means to bring into or take out of Pakistan, in breach of any prohibition or restriction for the time being in force, or evading payment of Custom duties or taxes leviable thereof.
(emphasis ours)
It is abundantly clear that first and foremost restriction for any exports including duty free export/zero rating is filing of GD as warranted under Section 131 of the Customs Act, 1969. Since the R/P didn't file the same and provided jet fuel to airlines which allegedly proceeded to foreign destinations, the nature of such transaction has changed to taxable supplies. Last but not the least, law requires filing of GDs before the designated State authority prior to export or claiming zero rating hence mere certificates from airlines now can not absolve the R/P from such contravention as only the designated State Authority under the law was authorized to determine the quantum of zero rated fuel to be allowed before occurrence of that event. Reliance in this regard is placed on the Honourable Supreme Court of Pakistan's judgment in the case CIT v. Haji Mola Bux Corporation Ltd. Reported as PLD 1990 SC 990 = 1990 PTD 821 and also in the case of Mian Muhammad Saeed and others v. Province of West Pakistan reported as PLD 1964 SC 572 wherein ft has been ruled that "no man can take advantage of his own doings".
Further to that this departmental contention also derives force from numerous judgments the Honourable Supreme Court of Pakistan as well as High Courts which has clearly held the legal principal that if law requires something to be done in a certain manner, it has to be done that way or not at all. Reliance in this regard is placed on following judgments: 2001 SCMR 838 [Supreme Court of Pakistan] In the case of Assistant Collector Customs v. Messrs Khyber Electric Lamps: the Apex Court held in the case as follows: "It is well settled proposition of law that a thing required by law to be done in a certain manner must be done in the manner as prescribed by law or not at all." ii) 2010 SCMR 1437 [Supreme Court of Pakistan] The Apex Court held as follows: "It is a settled proposition of law that when a thing is to be done in a particular manner it must be done in that way and not otherwise." iii) Reliance is also placed on Atta Muhammad Qureshi's case PLD 1971 SC 61 iv) Reliance is also placed on Mughal Surgical's case 2005 PLC 634 PLD 2002 Karachi 60: In the case of Muhammad IdreesPetitioner v. Collector of Customs and others: The Honourable Court held as follows: "It is established principal of law that the things should be done as they are required to be done or not at all. Nobody can be allowed to contravene, flout or violate the statutes or the rules framed there under in the name of national interest or any other so-called high or sublime idea or ideal. The rule of law requires that every person in execution of law should follow strictly the law as laid down and should not exceed the limit of law for any reason whatsoever."
In the light of foregoing it is evident that the taxpayer has not followed the procedure as laid down under the law and willfully contravened it, hence R/P's contention in this regard is rejected. We have heard the both sides and carefully examined the issue. We have no hesitation to state that the procedure of filing of goods declarations for all kinds of imports and exports is the foundation pillar of the Customs Act, 1969. The importance of this procedure is so vital that this has been made part of the substantive law i.e. Section 131 of the Customs Act, 1969 and this is not any routine procedure which are made under rules/subordinate legislation. Its importance is all the more evident from the plain reading of the Customs Act, 1969 wherein the legislature has warranted that in case any import of export is made without filing of GD, that constitutes "smuggling" in terms of Section 2(s) of the Customs Act, 1969. Keeping in view the above, we are mindful of the fact that if this procedure of filing of GDs is allowed to be done away with as merely being a procedure, it will tantamount to encourage further violation of law even smuggling. We also have perused the case laws relied upon by the learned Commissioner and the same have been found to carry force in the instant situation and by following the same dictates of the Honourable Supreme Court of Pakistan and High Courts we hold that filing of Export GD for ascertainment of zero rated quantum was essential procedure as laid down in the substantive law. The appeal fails on this ground accordingly. Ground I, J & K: Past Practice, Affidavit not rebutted and Justification for penalty and Additional Tax lacking The learned AR of the Appellant argued in these grounds that the learned Commissioner Inland Revenue has erred in ignoring arbitrarily and the past practice for many years could not have been abandoned without seeking prior approval of FBR. Furthermore, he argued that affidavits which have been part of appellant's appeal have not been controverted. In his last ground he argued that 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 approri and while it did not establish at all that the conduct of the appellant was contumacious, mala fide and violated. The department filed its written rebuttal to these grounds and he vehemently contested that all the above three grounds were misplaced and were not based on facts of the case. Each tax period is an independent period and this principal has been upheld by numerous appellate and higher legal fora. However, without prejudice to above, any unlawful act on the part of the appellant in the past which went uncorrected/un noticed by the department cannot be made basis of not correcting the same for a period which has not been barred by time limitation. Rather it would be an act of willful omission on the part of the department to not to address any unlawful action either on the part of the department or the taxpayer. Further to that the department clarified that no affidavit whatsoever has ever been furnished to the department hence there was no question of filing of counter affidavit. In addition the department also argued further through the written rebuttal to the above grounds that the action taken by the CIR in terms of Section 45A of the Sales Tax Act, 1990 was within her lawful jurisdiction and within the functions assigned to her under the statute. The learned AR of the appellant has not pointed out under what legal provision it was required to seek approval from the FBR? Further to that and without prejudice to above the department also strongly objected to the last ground regarding, imposition of penalty and additional tax. It was asserted by the department that the impugned order of the learned CIR has established that the appellant RIP violated the Sections 4 and 10 of the Sales Tax Act, 1990 hence additional tax and penalties were accordingly charged. The above grounds of appeal and their rebuttal have been perused and both the parties have been heard. We have no hesitation to say that the action of the Commissioner Inland Revenue to call for an order of a subordinate officer of Inland revenue which suffered from legal and propriety defects was lawful and well within her jurisdiction. The learned AR of the Appellant have not pointed out as to under what provision of the Sales Tax Act, 1990 the CIR was bound to seek approval from FBR to correct an unlawful action of a subordinate officer, hence we hold her order on this ground as valid accordingly. We also decide the issue with regard to penalty and additional tax accordingly as the violation of relevant Sections of Sales Tax Act, 1990 has been established in the impugned order, we hold charging bf additional tax and penalty was well within law.
7. The appeal is disposed off as indicated above. Sd/- (SHAISTA ABBAS)
ACCOUNTANT MEMBER (JAWAID MASOOD TAHIR BHATTI) JUDICIAL MEMBER
8. I have gone through the above referred proposed order of my learned fellow Accountant Member and with all respect could not be convinced with the views and therefore, respectfully differ with the above said views and findings.
9. I have noted that in the past months and year, the Appellant has been undertaking supply of petrol products for consumption abroad to AIR lines proceedings to destinations outside Pakistan which are cleared under Section 24 of the Customs Act, 1969 (IV of 1969) and for that the Sales Tax Act, 1990, as per section 4(1) thereof treats and adopts these supplies under section 3 as Zero rated.
It thus appears that the Sales Tax Act, which deals with the budgetary situation is only an enabling Act, the clearance at Airports and Exits are controlled and administered under the Customs Act.
Relevant provisions at the cost of repetition and with commentary are again reproduced hereunder: "A. THE SALES TAX ACT Section 2- Definitions
(i) "S.2(48)" Zero-rated supply means a taxable supply which is charged to tax at the rate of zero percent under section 4."
(ii) Section 4 of the Sales Tax Act, defines as under"- "4. Zero rating.---Notwithstanding the provisions of Section 3,1***] the following goods shall be charged to tax at the rate of zero percent: -
(a) goods exported, or the goods specified in the Fifth Schedule;]
(b) Supply of stores and provisions for consumption abroad a conveyance proceedings to a destination outside Pakistan as specified in Section 24 of the Customs Act, 1969 (IV of 1969); " and
(c) such other goods as the Federal Government may, by notification in the official Gazettee, specify."
It was contended by the Learned Counsel of the Appellant that the concept of "Zero rated supply" was introduced only for .The purpose of claiming adjustment or refund of input tax under the Sales Tax Act there is no such scheme in the Customs Act, 1969. In this regard the case of [Park Davis and Company Ltd. And others v. Collector of Customs reported as 2006 PTD 1976] has been referred. In this regard case of Messrs Blue Horizon (Pvt.) Ltd. Sialkot v. The Collector (Appeals) Northern Zone and others reported as PTCL 1999 CL 162 (CESTAT) Islamabad. Messrs Shaheen Steel Finance Gujranwala V. Govt. Of Pakistan and 4 others reported as 2009 PTD 722. Collector of Sales Tax and Federal Excise Peshawar v. Messrs Associated Industries Ltd. Nowshehra and others reported as 2010 PTD (Trib.) 601 has also been refered wherein it has been held that the Goods declared exempt fall under section 13 and goods declared zero rated are exempt under section 4. Both zero rate and exempt supplies do not carry any tax liability. In this respect section 45A(4) of Sales Tax Act has been referred which reads as under:-- "The Commissioner may, suo motu, 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.] as many decisions."
It is contended by the Learned Counsel for the Appellant that the power to check the exports is relatable to Appropriate Officer of the Customs Department vide Notification 56(1)/93 dated 19.1.93 and also as per section 26 i.e. The power of scrutiny and investigation is vested with the Asstt.
Collector under section 26 as amended.
According to learned counsel of the Appellant, there are four International Airports at that time in Pakistan, Karachi, Lahore, Islamabad and Peshawar and more than 50 flights per day other than ships were operating on a particular day. And of course it appears there would be more than 1500 appointees as appropriate officer to perform the notified functions/duties per day as per section 24 of the Customs Act, for the month of September, 2008 and since the supervision in all these precise flights and the conduct of "appropriate officers" had not been questioned and no misconduct or blemish on their part was taken notice of by the Collector of FBR, while the flight already left four years back, it was all are already a past and closed transaction. He was of the view that the alleged violation, if any, had necessarily to be in respect of section 24 of the Customs Act, 1969, which for the purpose of this case is the substantive statute and applicable law and not the Sales Tax Act, 1990, which is only an enabling statute borrowing certain provisions of Customs Act, 1969 and the officer whereof were not performing any function or act in clearing the conveyance in a supposed an conjectural violation thereof in the process of exports. It was contended that it becomes clear and without doubt that the clearance to the Airlines and others was to be examined by the Appropriate Officer of the Customs Department under section 131 of the Customs Act, 1969 and the Appropriate Officers of the Customs Department have awarded clearance for the full month. The superior officers of the Appropriate Officers have not found any blemish with these customs officers under disciplinary rules, revis;on or exercise of powers under section 195 of the Customs Act, 1969 or under section 179 of the Customs Act by way of adjudication. Since if the default were established it would have involved confiscation of goods and a penalty both. The case preponderantly relates to section 24 of the Customs Act and even for the sake of argument it cannot be assumed that the clearance had not been awarded correctly and it was violative of section 131(a) and (b) of the Customs Act, 1969, and Section 29 and other sections of the Customs Act, 1969 and the CBR's instructions under this section do not contemplate any such violation after the flights have departed. It was submitted that in all that section 4(b) of the Sales Tax Act, 1990 may be looked into and there is no non-compliance of any part of the said statute by any context.
10. In the background of the facts and legal position discussed as above the Appellant counsel has contended that the taxpayer in this case submitted an application for refund against unadjusted input tax amounting to Rs.393,248,183/- under section 10 of the Sales Tax Act, 1990 read with Rule 39A of the Sales Tax Rules, 2006 for the month of September, 2008 against a bank guarantee to the extent of 50% of the refund amount representing the unadjusted balance of input Sales Tax paid by the Appellant on purchase of taxable goods of these assuredly local zero rated supplies made during the tax period. After examining the circumstances and facts on record provisional sales tax refund was ordered vide C.No.1 (10) LTU/ ST&FE /REF /BGSPL 09/16-16-835 dated 2.5.(Annex A/7 on page 52 of Memo of the appeal. However, only six months later Dy. Commissioner (Refunds)
Mr.Younus Ali Magsi) issued a show cause notice vide C. No . 01(10)LTU/ST&FE/Ref/BG/SPL/09/ 1618653 DL 16 . 11 .2009 and the objection raised was (1) that an amount of Rs.165,522,970/- relating to the supplies made to PIA, Air Blue, Export Processing Zone and other non registered persons were not local zero rated supplies and (2) that an amount of Rs.54,391,122/- as refund on account of zero-rated export to Afghanistan was not validated by STARR system. There was no other objection.
Leaned Counsel has contended that the first reply of the Appellant to the Dy. Commissioner is contained in letter No.KST-AK-117 dated 18.11.2009, which appears at pages 56 to 62 of the memo of appeal. The letter explains under section 1.1 that the exports through PIA and Air Blue and foreign airlines operating from Pakistan was supported by delivery notes which had been accepted by the Appropriate Officer and no objection was raised.
11. It was also submitted that zero rating of sales tax is admissible on supply of taxable goods i.e. Stores and provisions for consumption on a conveyance proceedings to any destination outside Pakistan and EPZ. So the zero rated claim is correct and there was no evasion of sales tax_ Copiesof GDs were furnished by the Appellant.
In this respect various references were also placed on record that the goods had been supplied to the foreign flights which had left during September, 2008 years before and had not been questioned. Section 24 of the Customs Act was referred and reference made to Customs Preventive Manual not also providing any obligation on an oil marketing company or supplier of taxable goods to out bound conveyance from any duty paid stock and or not relating to bounded godown/terminal. It was argued by the Learned AR that a bare reading of S.24 of Customs Act does show that it dealt with the subject of examination of customs duty outside Pakistan. It was not a case where finished goods were being exported. The appellant company had been supplying jet fuels to foreign flights from its duty-paid stocks and such products were generally purchased locally from oil refineries. As such under section 24 the Appellant company made supplies as "zero rated" and Appellant Shell was not required to raise goods declarations in relation to zero rated supplies made to foreign flights. The omission of words "excise duty and sales tax" from section 24 of the Customs Act vide Finance Ordinance, 2002 was also referred as important to justify the plea.
Clause 56 of Chapter XV of the Customs Preventive Manual providing a procedure applicable for supply of jet fuels to out-bound aircrafts was also referred. He has contended that the procedure thereunder is applicable only to jet fuels. The appellant furnished delivery notes and zero rated invoices issued to PIA, Air Blue and other resident and non resident airlines (in original) in support of its claim vide letter KST-AK 109 dated 6.11.2009.
It was argued that vide para 1.10 of the reply the appellant has pointed out the past practice as in the year 2005-06 sales tax and federal excise audit was carried out when the audit team scrutinized the delivery notices and invoices issued to the foreign airlines supporting the company's contention that the legal requirement with relation to zero rated supplies were complied with by Appellant Shell. And there was more than sufficient evidence again that the supplies were exempt in accordance with law not only in the past but this practice was accepted for 12 months in the year 2006 and another 12 months in the year 2007. It was also submitted that Appellant was a case covered by the principle of substantial compliance as per verdict of the Hon'ble Supreme Court in the case reported as PLD 1989 SC 222 holding that the substantive law was to be looked into and not mere technicalities. Learned Counsel in this case has also presented a copy of the order dated 17.2.2012 passed by a Division Bench of this Tribunal in STA No.145/KB/2011 relating to the refund for the month of October 2008 in which almost similar and same facts, arguments and grounds had been raised and the said Division Bench of this Tribunal vide that order had decided the appeal in favour of the Appellant. Para 9 thereof reads as under:-- "We have heard the learned counsel and considered the copious case law furnished and examined the facts of the appeal which have remained un-controverted and not rebutted.
Accordingly, we set aside the O-N-0. Ordered accordingly. The Appellant would stand entitled to the Refund as per claim"
The learned counsel for the appellant has pointed out that since a Division Bench of the Tribunal has already decided almost all the issues in favour of the Appellant and against the department, the findings and order thereof have binding effect on the present Division Bench who has to adopt and follow the same. Reliance in this regard is placed on:-- PLD 1963 SC 296 PLD 1995 SC 423 1997 PTD (Trib.) 879 PLD 1963 W.P. Karachi 280 It was contended that there was 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 (hereinafter "the 1969 Act") and there was no ambiguity in this behalf since the language of the section is plain and simple. It was argued that the ONO lacks in jurisdiction and lawful authority. Reliance was 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 0 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 It was argued by the Learned AR that the show cause notice suffers from the following grave defects and violation of law:-
(a) In the show cause notice it has not been shown as to the section of the Sales Tax under which the show cause notice was issued.
(b) The show cause notice is vague, obscure, incomplete, nonspeaking and totally blind for a reply and could not be answered as proper show cause notice.
(i) In para 2 of the show cause-notices while complaining non-levy of sales tax of Rs.165,522,970/- 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. Ii) Since it does not identify as to what record of Refund Claim was scrutinized and what illegally and impropriety in the order came to surface as per para 4 thereof. Also it does not identify how and in what manner the said order was found liable to be amended as per para 5. And also that legal action was contemplated without identifying what "legal action" was contemplated. Iii) And all such record was assumed by the Commissioner by whom and from whom and contrary to Qanun-e-Shahadat Order, 1984 and in the absence of the Appellant or his counsel. It was contended that the show cause notice was without jurisdiction and thoroughly imperfect in law since the learned CIT Inland Revenue was in fact participating in all the prior proceedings before the Deputy Commissioner Refunds along with RCIT and held no jurisdiction to proceed under section 45A of Sales Tax Act while this was a case where various clearances for the month of October, 2008 had been allowed by various officers under sections 130 and 131 of Customs Act and not one single such clearance was awarded by an officer of Inland Revenue or was questioned by the Customs Department.
Para 3 of the show cause notices 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 whereas the show cause notice does not state any authority for this contention. The crucial fact has been ignored that clearance was already granted by the Appropriate Officers of the Customs Department under sections 24 and 131 of the Customs Act already in early September, 2008. Infact the O-N-0 earlier passed by the Dy. Commissioner himself did not touch upon the legality of the clearance awarded about more than four years earlier by the Customs Officers which had become a past and closed transaction. According to Learned Counsel it has been ignored that there was no sales tax liability vis-a-vis Messrs PIA International, Air Blue, Export Processing Zone and other non-registered persons (foreign airlines operating from Pakistan) and copious evidence furnished has been ignored by the learned CIR.
It is argued that 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.
12. 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, was, therefore, not correct in law and on facts and particularly when flights have gone away after proper verification for more than four years past after the clearance by Appropriate Officers of competent jurisdiction. It was argued that if the show cause notice suffers from such grave mistake the ONO will be liable to cancellation as has been held in many judgments by the Hon'ble Superior Courts. Reference in this regard were made as follows:-- a) 2001 SCMR 838 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) S.T.A. No.K-70/2003 1) S.T.A. No.H-191/2005 It was contended 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 0-N-0 has been rendered liable to be set-aside. Reliance was 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) k) 2011 SCMR 408 (SC PAK)
13. I have noted that during the course of arguments on behalf of the Appellant, number of case- law were referred but the main ground of argument was that in the past as well as in the subsequent years on the similar and same facts as are in the present appeal, the issues has been decided in favour of the Appellant. In this respect the order dated 17.02.2012 in S.T.A. No. 145/KB/2011 has been referred. I am therefore, of the view that keeping in view the already decided appeal on the similar facts and circumstances in the case of the present taxpayer without distinguishing the facts or the law applicable, the appeal for the period under review cannot be disallowed. Sd/- (JAWAID MASOOD TAHIR BHATTI) JUDICIAL MEMBER
14. As the difference of opinion has arisen therefore, the matter is referred to the Honourable Chairman for appointing referee member to decide the following question: "Whether in view of the already decided issues on the similar facts and circumstances in the case of the present taxpayer, the Division Bench of the Tribunal can deviate from the view already taken without distinguishing the facts and case law applicable and declaring the already decided case being per incuriam or otherwise?"
Sd/- (JAWAID MASOOD TAHIR BHATTI) JUDICIAL MEMBER Sd/- (SHAISTA ABBAS)
ACCOUNTANT MEMBER Muhammad Naseem, Advocate [A.R] for Appellant. Mr. Shakeel Kasana, D.R.
For Respondent.
Date of hearing: 18-02-2014. Date of order: 13-06-2014 PER: MUHAMMAD JAWED ZAKARIA, [Judicial Member (Referee Judge)
14. The above appeal has been marked to the undersigned as Referee Judge to resolve the difference of opinion occurred between the learned Members of the Division Bench in the said order bearing S.T.A. No. 14/KB of 2014 dated 15.12.2011. The following consented question was framed by the learned Members and thus referred to me for authoritative decision: "Whether in view of the already decided issues on the similar facts and circumstances in the case of the present taxpayer, the Division Bench of the Tribunal can deviate from the view already taken without distinguishing the facts and case law applicable and declaring the already decided case being per incuriam or otherwise?"
15. Being a referee judge, my finding would be restrictive on the issue revolved around. In the question mentioned supra. It seems be proper to examine the various arguments addressed and their authenticity in the present case.
16. However, it would be worthwhile to mention here the facts on which the difference of opinion arose. First I will visit the order of the learned Accountant Member, consisting in Paras 1 to 7 running on pages 1 to 24 is the order of learned Accountant Member, Ms. Shaista Abbas while she found legal and propriety defects and infirmities and in findings the impugned order of the CIR(A) to be lawful and well within jurisdiction, while also confirming the penalty and additional tax which according to her was not in violation of relevant section of Sales Tax Act, 1990. The then learned Judicial Member (Now Chairman) Mr. Jawaid Masood Tahir Bhatti, however, in paras 8 to 13 [pages 25 to 38] did not agree with the views and findings of the learned Accountant Member and therefore The Learned Judicial Member had respectfully differed with the aforesaid view and findings. He thus, hold that the said order lacked in jurisdiction and propriety, while agreeing with the contention of the Appellant's Advocate. The two Learned Members, therefore, referred the Appeal to the Hon'ble Chairman for the opinion of a third Member vide a para 13 of the Tribunal's Order appearing on page 27. Hence, this issue referred to the undersigned for resolving the controversy between the learned Members.
17. Before me at the very outset Mr. Muhammad Naseem, Sr. Advocate, the learned counsel for the appellant challenged the validity of the proposed order of the learned Accountant Member. The learned counsel very ably argued that the opinion of the learned Judicial Member in favour of the taxpayer has been formulated in the binding decision of following the Division Bench's Judgment contained in S.T.A. No.145-KB/2011 which is a 15 pages order authored by learned Accountant Member Mrs. Zareena N. Zaidi and Syed Muhammad Jamil Raza Zaidi, Judicial Member. He argued that, thus, before the present single Member the opinion in favour of the Appellant already stands out settled and approved by three Member as against only one Member disagreeing. He prayed that this court of referee Judge is, therefore, expected to respect the judgment of the majority.
18. The learned counsel for the appellant submitted that the learned Judicial Member has based his findings by following an earlier judgment referred above relates to refund for the month of October 2008 while the present order relates to the refund for the month of September 2008.
Against the said order the Department has already filed a Reference to the High Court which is as pointed out, is pending. The exhaustive arguments as taken in appeal by the counsel were also considered. It is, therefore, not germane and proper for the department to contest the order of the learned Judicial Member for the sake of mere arguments as, he contended, that the order and finding of the Learned Judicial Member is based on binding precedent and in accordance with the doctrine of consistency and uniformity. It is also pointed out that this treatment as above has a long practice and history for many years, otherwise, in this very case.
19. The learned counsel for the appellant submitted that the argument as to the concept of section 24 of the "Customs Act vis-a-vis section 4(1) of the Sales Tax Act has been dealt with as page 25 of the order as under:-- "I have noted that in the past months and year. It thus appears that the Sales Tax Act, which deals with the budgetary situation is only an enabling Act, the clearance at Airports and Exits are controlled and administered under the Customs Act."
20. The learned counsel referred to para 9, the learned Judicial Member has relied upon the under mention judgments of superior jurisdiction. Here again the ratio of a Division Bench judgment on page 26 (as referred to above) settles the question of jurisdiction beside many other ratio subsequently on Page 26 of this order:-- 'In this regard the case of Park Davis & Company Ltd and others v. Collector of Customs reported as 2006 PTD 1976 has been referred. In this regard case of Messrs Blue Horizon (Pvt.) Ltd. Sialkot v. The Collector (Appeals) Northern Zone and others reported as PTCL 1999 CL 162 (CESTAT) Islamabad M/s. Shaheen Steel Finance Gujranwala v. Govt of Pakistan and 4 others reported as 2009 PTD 722 Collector of Sales Tax and Federal Excise Peshawar v. M/s. Associated Industries Ltd Nowshehra and others reported as 2010 PTD (Trib.) 601 has also been referred wherein it has been held that the Goods declared exempt fall under section 13 and goods declared zero-rated are exempt under section 4. Both zero-rate and exempt supplies do not carry any tax liability."
21. The learned counsel vehemently argued that the blunder in the exercise of jurisdiction on the part of the Commissioner Inland Revenue as per section 45A of the Sales Tax Act has further been highlighted on Pages 26, 27, 28 and also discussed fairly on pages 29 and 30 in the order of Learned Judicial Member. Besides in these case the refund was issued in this very case also which was approved by the Commissioner and the Chief Commissioner LTU as per copies of reference filed with the Appeal. The refund order could, therefore, not be disputed by .The Commissioner Inland Revenue, According to Law since this would amount to correcting mistakes of superiors or equivalents and the exercise would be beyond the scope of section.
22. The learned counsel for the appellant submitted that a further discussion thereon is contained in Para 11 on Page 30 in sub-paras [numbered 11(a), 11(b)(i),(ii) and (iii), on pages 30,31,32, and 34 of dissenting order of the Learned Judicial Member.
23. The learned counsel for the appellant further submitted that the principle of allowance to past practice was referred in (Para iii) unnumbered and reliance was placed on PTD 1989 SC 222 Messrs Nishat Mills Ltd v. Collector of Central Excise. Reliance on the judgment in S.T.A. No.145/KB/2011 is also discussed on Pages 31 and 32 of the order of the Learned Judicial Member.
24. The learned counsel for the appellant challenging the jurisdiction of Inland Revenue Tax Authorities, many judgments of copious case law had been relied upon him and cited on Page 33 which were not distinguished by the Learned Accountant Member in her order.
25. The learned counsel for the appellant contended that the show cause was also challenged as observed by the Learned Member Judicial as per Pages 33. The entire show cause notice dated 6.10.2011 was argued to be defective in law and on facts thus, the basis of show cause notice was completely shaken, hence the whole order of the Learned Accountant Member was demolished.
26. The learned counsel argued that in formulating her opinion and discussion the Learned Accountant Member has ignored the requirement of Qanun-e-Shahadat Ordinance.
27. The Learned Counsel of the taxpayer point out that the various other arguments have been addressed in reply to Departmental arguments before the Division Bench which the Learned Accountant Member failed to rebut and controvert. The appellant has been filing affidavits in support of his claims and assertions which were not refuted by counter affidavits. At then Rule 13 of Tribunal Rules was also illegally bypassed. In support of the arguments the following case laws were cited by the learned counsel for the appellant which were totally ignored:-- i) PLD 1989 SC 222 ii) 2009 PTD 212 iii) PLD 1995 SC 423 iv) 1997 PTD (Trib.) 879 v) 2006 PTD 1976 vi) PTCL 1999 CL 162 PAST AND CLOSED TRANSACTIONS
28. The learned counsel once again submitted that about the arbitrary indulgence of the learned Commissioner Inland Revenue as per his impugned ONO for an alleged violence of procedural requirement under Rule 37 of the Sales Tax Rules, 2002 vide S.R.O. 555(1)/2006 which would also become only a futile exercise. Also the said Rule being a subordinate legislation, could not have overtaken the dictates and commands of section 24 of the Customs Act.
29. It was argued by the learned counsel that firstly the clearance of goods having been authorized by more than 1500 Appropriate Officers, appointed by the Customs Department in Sept. 2008 under section 24 of the 1969 Act the said Department has not questioned or also by Commissioner Inland Revenue, who did not dispute the said clearance of goods at then (while claiming its to be falling under section 131 of the 1969 Act). When examined from yet another angle the alleged omission, if it were true and correct of not calling for GDs for September, 2008 since relatable to more than 1500 Appropriate Customs Officers for arguments' sake exercising jurisdiction under section 131 of the Customs Act which would not and does not fall within the framework of jurisdiction of the Sales Tax Department. 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. 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 ONO in question was lacking a legal sanction ab-initio. In that manner the indulgence of the learned CIR for a past and closed transaction and the contemplated remedy in revising the Refund Order do not contemplate any competent proceedings under law. INVALIDITY OF SHOW CAUSE NOTICE NO.CIR-ZONE-IV/ SCN SHELL PAKISTAN/45A/LTU/83 DATED 20.6.2011
30. The learned counsel submitted that the show cause notice No. 06.10.2011 is by itself invalid in law, since suffering from following grave defects and violation of law and it destroys and annihilates also the upcoming ONO 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 be reckoned and answered 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.165,522,970/- 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 mere 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 came 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, assumed by the learned Commissioner to be correct, was a feign and invalid exercise violating the 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 whereas the show cause notice does not state any authority for this contention, while the crucial fact has been ignored that clearance was already granted by the Appropriate Officers of the Customs Department under section 24 of the Customs Act already in early September, 2008. The plea of the learned Commissioner has no legal basis.
(ix) In fact the order in original passed by the Deputy Commissioner itself relied upon the legality of the clearance awarded more than three years earlier by the Appropriate Officers of Customs, who had never worked under the CIR.
(x) The show cause notices being incorrect on facts and unlawful the order passed thereon holds no legal sanction or clearance. CHANGE OF OPINION AND FISHING AND ROVING ENQUIRIES
31. The learned counsel argued that:--
(a) The learned Commissioner Inland Revenue has passed ONO on mere change of opinion and also erred on its very face in creating an unlawful 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.
(b) 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 ONO 02/2010 dated 15.2.2010.
(c) In that the Refund was allowed with the tacit approval and participation of Regional Chief CIR and the CIR. The Accounts datas, 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. MERELY BASED ON CONJECTURES AND NOT DISCHARGING BURDEN OF PROOF
32. The learned counsel for the appellant argued that the learned Commissioner of Inland Revenue has erred in re-imposing Sales Tax demand of Rs.165,522,970/- under section 36(1) of the 1990 Act on mere conjectures without caring to even find out how such amount was constituted overlooking the long, detailed and elaborate proceedings as contained in the ONO dated 15.2.2010 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.784/2010 dated 09.04.2010. In that the burden of proof on the part of CIR was not discharged. VIOLATION OF QANUN-E-SHAHADAT ORDER, 1984
33. The learned counsel for the appellant urged that 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.
IGNORING CASE LAW CITED IN THE REPLY DATED 13.12.2011
34. The learned counsel for the appellant vehemently argued 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 in the reply dated 13.12.2011. 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.
PAST PRACTICE
35. The learned counsel argued 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 ONO has been rendered liable to be annulled.
JUSTIFICATION OF PENALTY AND ADDITIONAL TAX LACKING
36. That the learned counsel vehemently contended that the Commissioner Inland Revenue has erred in imposing penalty of Rs.8,276,148/- and proposing further penalty and additional surcharge, thus the penal action has been proposed is absolutely without jurisdiction and void ab-initio and no penalty could have been imposed for which there is no show cause notice and while he did not at all claim that the conduct of the appellant was contumacious, mala fide and not suitable.
37. The learned counsel contended that the refund due may be ordered to be paid along with additional refund compensation for the delay in issuing refund within time as per parallel cases.
38. The learned D.R. On the other hand, strongly supported the orders of the officers below as well as proposed order authored by the learned Accountant Member. The Learned D.R., submitted that the observation of Leaned Accountant Member and the same may be treated as his arguments before this bench.
39. I have heard both the rival parties and I have .Privilege to go through the order of the Tribunal as well as difference of opinion/ dissenting note written by the learned Judicial Member. As mentioned in the preceding paragraphs that being the Referee Judge. I have to record my findings in respect of earlier judgment of the Tribunal bearing STA No. 145/KB of 2011 dated 17.02.2012 which was bypassed by the learned Accountant Member while writing judgment. The operative part of the Order is reproduced as under:-- "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 officer 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.
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 valid 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 written 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 ONO. Ordered accordingly the Appellant would stand entitled to the Refund as per claim."
40. The above judgment delivered by the Tribunal in appellant's own case specifically relied by the learned counsel for the appellant being based on similar facts and circumstances to the present appeal. The operative paragraphs from the proposed order of the learned Accountant Member are reproduced as under:- "The departmental filed its written rebuttal to these grounds and he vehemently contested that all the above three grounds were misplaced and were based on facts of the case. Each tax period is independent period and this principal has been upheld by numerous appellate and higher legal fora. However, without prejudice to above, any unlawful act on the part of the appellant in the past which went un corrected/ un-noticed by the department cannot be made basis of not correcting the same for a period which has not been barred by time limitation. Rather it would be an act of willful omission on the part of the department to not to address any unlawful action either on the part of the department or the taxpayer. Further to that the department clarified that no affidavit whatsoever has ever been furnished to the department hence there was no question of filing of counter affidavit. In addition the department also argued further through the written rebuttal to the above grounds that the action taken by the CIR in terms of Section 45A of the Sales Tax Act, 1990 was within her lawful jurisdiction and within the functions assigned to her under the statute.
The learned AR of the appellant has not pointed out under what legal provision it was required to seek approval from the FBR? Further to that and without prejudice to above the department also strongly objected to the last ground regarding imposition of penalty and addition tax. It was asserted by the department that the impugned order of the learned CIR has established that the appellant R/P violated the Sections 4 and 10 of the Sales Tax Act, 1990 hence addition tax and penalties were accordingly charged."
The above grounds of appeal and their rebuttal have been perused and both the parties have been hearth We have no hesitation to. Say that the action of the Commissioner Inland Revenue of call for an order of subordinate officer of Inland Revenue which suffered from legal and propriety defects was lawful and well within her jurisdiction. The learned AR or the Appellant have not pointed out as to under what provision of the Sales Tax Act, 1990 the CIR was bound to seek approval from FBR to correct an unlawful action of a subordinate officer, hence we hold her order on this ground as valid accordingly, we also decide the issue with regard to penalty and additional tax accordingly as the violation of relevant Sections of Sales Tax Act, 1990 has been established in the impugned order, we hold charging of additional tax and penalty was well within law."
41. From perusal of the above finding recorded by the learned Accountant Member it is evident that neither the learned Accountant Member discussed the case bearing STA No. 145 /KB of 2011 dated 17.2.2012 mainly relied placed by the learned counsel for the appellant of the earlier judgment of the appellant's own case nor distinguished the same and hence arrived at erratic conclusion. However, the learned Judicial Member while disagreeing with the judgment of the learned Accountant Member recorded his findings based on the earlier judgment in the appellant's own case. The relevant excerpt from the order of the learned Judicial Member is reproduced as under:-- "13. I have noted that during the course of arguments on behalf of the Appellant, number of case law were referred but the main ground of argument was that in the past as well as in the subsequent years on the similar and same facts as are in the present appeal, the issues has been decided in favour of the Appellant. In this respect the order dated 17.02.2012 in S.T.A. No.145/KB/2011 has been referred. I am, therefore, of the view that keeping in view the already decided appeal on the similar facts and circumstances in the case of the present taxpayer without distinguishing the facts or the law applicable, the appeal for the period under review cannot be disallowed."
42. Therefore, while agreeing with the order of the learned Judicial Member I hold that the law of precedent is very much clear and a judgment of the earlier Division Bench is binding on another similar Division Bench. The Tribunal being the last and final fact finding authority. It is the duty of the Tribunal to decide the cases on the basis of the law laid down by the Supreme Court and High Court or by the Tribunal. Every effort must be made by the Tribunal to decide the legal issue by taking help from the decisions of the Supreme Court and if there is no direct authority of the Supreme Court on the point then of the jurisdictional High Court and lastly of any other High Court.
HISTORICAL BACKGROUND OF DOCTRINE OF PRECEDENT (STARE DECISIS) IN PAKISTAN
43. It is noted that the provisions of the Government of India Act, 1935, section 212, which then contained the doctrine of precedent. What remains to be noticed is that there is no more striking an example of the doctrine of precedent in operation than the famous case of Moulvi Tamizuddin Khan. The only law in question there, and the only law which was declared void and invalid on the ground that it had not received the assent of the Governor-General, was section 223A of the Government of India Act, 1935. The people of Pakistan well cognizant with the magnitude of the constitutional crisis that it created. For the present purpose, it is sufficient to say that its enunciatory part, or ratio decidendi, had the effect of rendering all such laws, which had till then been treated and acted upon as valid laws, invalid and ineffective. The crisis as we know culminated in the birth of the doctrine of state necessity, enunciated in the Reference case.
Now, I would quote the following Articles: - ARTICLE 189 "Any decision of the Supreme Court shall, to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all other courts in Pakistan."
ARTICLE 201 "Subject to Article 189, any decision of a High Court shall, to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all courts subordinate to it."
ARTICLE 203 "Each High Court shall supervise and control all courts subordinate to it."
44. The effect of Articles 189 and 201 is to accord constitutional recognition to the doctrine of precedent; by them, the decisions of the Supreme Court and the High Courts to the extent that they decide a question of law or are based upon or enunciate a principle of law are also laws; the courts' interpretation of the Constitution or a law becomes integral part of the Constitution, or as the case may be, of the law so interpreted; similarly, a principle of law enunciated by the courts becomes, under Articles 189 and 201, the law of the land. Per Article 203 The Hon'ble Jurisdictional High Court in exercise of supervisory jurisdiction is competent to take all measures for preventing flagrant mal-administration of justice in sub-ordinate court/tribunal.
45. The expression 'law' as such has occurred in sub-clause (a)(i), sub-clause (b)(ii) of Clause (1), Clause (3), Clause (4-A) and Clause (5) of Article 199 of the Constitution; it has been used also in various other provisions of the Constitution such as Article 4, Article 5 and Article 8. "Article 5, Clause
(2) of the Constitution provides: "Obedience to the Constitution and law is the inviolable obligation of every citizen wherever he may be and of every other person for the time being within Pakistan".
In Article 175(2), both the expressions 'Constitution' and 'law' have been used to distinguish sub- constitutional 'law' from the Constitution. In Article 8 which is the first Article Part II, in Chapter 1, which chapter provides for fundamental rights, in Clause (1), the expression 'law' has been used in contra-distinction with "any custom or usage having the force of law". It was established very early in the United States of America in Marbury v. Madison [5 US (1 Cranch) 137] that the Constitution is law - "superior law" - and this is what the constitution recognizes expressly and by necessary implication.
46. It appears that in considering the ambit of the expression 'law' as used in Article 199 of the Constitution, it is necessary to keep in mind the provisions of Articles 189, 190 and 201 of the Constitution. Article 189 of the Constitution provides: "Any decision of the Supreme Court shall to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all other courts in Pakistan". Article 199 directs all executive and judicial authorities throughout Pakistan to act in aid of the Supreme Court. Article 201 reads: "Subject to Article 189, any decision of a High Court shall to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all courts subordinate to it". Articles 189 and 201 appear to recognize the doctrine of precedent; the application of that doctrine has the consequence of enabling the benefit of a decision to accrue to all persons, other than parties, who are similarly affected.
47. It is well settled that when the Constitution speaks of law, it is speaking of the law as interpreted or declared by the Judges in the exercise of the judicial power of the State. In the words of the Supreme Court of America the interpretation of a constitutional provision "enunciated by the Court is the supreme law of the land" like the Constitution itself. Or, as was put in Al-Jehad Trust y.
Federation of Pakistan, [PLD 1997 SC 84, 193] the interpretation of a provision of the Constitution by the Supreme Court "becomes part of the Constitution". The same is true of the interpretation of a statute. When the question before the court is as to the interpretation of a provision of the Constitution or any enactment or statutory instrument and the court decides that question, it decides a question of law within the meaning of Articles 189 and 201 of the Constitution. As was held in Al-Jehad Trust case (supra) since the interpretation of the Constitution or any enactment becomes law, it is incumbent on all executive and judicial authorities to act in aid of the Supreme Court as they are required to do by Article 190 by treating that interpretation as law. Thus, though the advice of the Prime Minister is under the Constitution binding upon the President, yet the Supreme Court held in Al-Jehad Trust Case that the advice would be binding only if it is in accordance with the law as declared by the Supreme Court. There can therefore, be no doubt that where the Supreme Court or a High Court has interpreted a provision of the Constitution or any enactment or statutory instrument, the interpretation is as much binding upon the judicial and executive authorities as the Constitution, the enactment or the statutory instrument, as the case may be. This was brought into sharp focus in Duport Steels Limited v. Sirs [(1980) 1 All ER 529]. The provisions of the Trade Union and Labour Relations Act, 1974 had been interpreted by the House of Lords in Express Newspapers Limited v. MacShane [(1980) 1 All ER 65] but that interpretation was not followed by the Court of Appeal. This evoked strong observations from the House of Lords. Lord Edmund Davies referred to Viscount Simonds LC's observations in Scruttons v. Midland Silicones Limited [(1962) 1 All ER 1, 7] namely.
"For to me heterodoxy or as some might say, heresy, is not the more attractive because it is dignified by the name of reforms. Nor will I easily be led by an undiscerning zeal for some abstract kind of justice to ignore our first duty which is to administer justice according to law, the law which is established for us by Act of Parliament or the binding authority of precedent".
Lord Scarman observed that the case raised "some profound questions as to the proper relationship in our society between the courts, the government and Parliament". His basic criticism of the judgments in the Court of Appeal was that "in their desire to do justice the court failed to do justice according to law. When one is considering law in the hands of the Judges, the law means the body of rules and guidelines within which society requires its Judges to administer justice".
48. Under Articles 189 and 201, apart from decision on a question of law, a decision that is based upon or enunciates a principle of law is also binding upon the subordinate courts and on the principle laid down in Al-Jehad Trust case (supra) also on the executive authorities. For example, if the question is as to the share of a person in a property and the Supreme Court, in the absence of an express provision in the relevant statute, decide it on the maxim "equality is equity", that enunciation will be binding upon the subordinate courts. Now suppose that a subordinate judicial, quasi-judicial or executive authority, in deciding a case, acts contrary to the principle so enunciated. The decision will have to be treated against 'law', within the meaning of Article 189.
49. This approach receives strong support from the Hon'ble and learned Justice Hamood-ur- Rehman, J (as he then was) interpreted the expression "in an unlawful manner" in sub-clause (b)(i) of Article 98(2) of the 1962 Constitution (which corresponds to sub-clause (b)(i) of Clause (1) of Article 199 of the 1973 Constitution) in Government of West Pakistan v. Begum Agha Abdul Karim Shorish Kashmiri. The words "in an unlawful manner", said Hamood-ur-Rehman, J: "have been used deliberately go give meaning and content to the solemn declaration under Article 2 of the Constitution itself that it is the inalienable right of every citizen to be treated in accordance with law and only in accordance with law. Therefore, in determining as to how and' in what circumstances a detention would be detention in an unlawful manner one would inevitably have first to see whether the action is in accordance with law if not, then it is action in an unlawful manner. Law is here not confined to statute law alone but is used in its generic sense as connoting all that is treated as law in this country including even the judicial principles laid down from time to time by the superior courts. It means according to the accepted forms of legal process and postulates a strict performance of all the functions and duties laid down by law".
50. It is already discussed that by Article 189 any decision of the Supreme Court shall, to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all other courts in Pakistan;: and by Article 201, "Subject to Article 189, any decision of a High Court shall, to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all courts subordinate to it." As has been seen, a High Court's decision is binding upon courts subordinate to it; its decisions are not, under Article 201, binding upon itself. It seems however that in over-ruling a decision, it will be guided by the same principles as have been evolved by the Supreme Court. These view of the Court of Appeal as to its jurisdiction to follow its previous decisions were approved by the House of Lords in the same case reported as Young v.
Bristol Aeroplane Company [(1946) 1 All ER 98] said Lord Simon L.C:-- "One of the conclusions reached in the judgment of the Master of the Rolls, with which I agree, is that if the Court of Appeal, when sitting in one of its Divisions, has in a previous case pronounced on a point of law which necessarily covers a later case coming before the court, the previous decision must be followed (unless, of course, it was given per incuriam or unless the House of Lords has in the meantime decided that the law is otherwise), and that this application of the rules governing the use of precedents binds the full Court of Appeal no less than a Division of the court as usually constituted."
51. The law as to the jurisdiction of the Court of Appeal of England as laid down in Young v. Bristol Aeroplane Company [(1946) 1 All ER 98] was noticed in Province of East Pakistan v. Sirajul Haq Patwari [PLD 1966 SC 854, 920-923]. In that case the matter, of no little importance, for consideration was whether it was in order for the full bench of the High Court to disregard the conclusions reached by the earlier special bench on several of the questions of law on which the full bench had made pronouncements to the contrary effect. The Hon'ble Cornelius, Chief Justice, the one of the great judge the world has ever produced, pointed out that in East Pakistan v. Dr. Azizul Islam [PLD 1963 SC 296], the Supreme Court had indicated that where a Division Bench of the 'High Court was inclined to take a different view from that declared in an earlier judgment of a similar Division Bench, one course open to the court was "to have expressed their doubts regarding the view taken in the precedent case, in a court of co-equal jurisdiction, while yet following that view and left the matter to be raised in appeal before this court." The alternative course under the rules of the High Court, it was pointed out, was to refer the matter to a larger bench: "A decision by a bench of three judges- of a High Court is, by tradition and practice, invested with the highest authority. It is in the best interest of maintenance of the standing which the High Court possesses, by virtue of position given to it by the Constitution, and the terms of the Letter Patent law, that the highest respect should be paid, and should be seen to be paid, by all concerned, to every decision proceeding from the High Court, and most of all to pronouncements on points of law by benches composed of three or more judges."
52. In the view of the Hon'ble Cornelius Chief Justice, it would be conducive very greatly towards the same result as was reached in Young v. Bristol Aeroplane Company viz, to secure-
(1) that the High Court functioned as one Court,
(2) that no appearance was given of an appeal being always available within the High Court, by constitution of a larger Bench to re-consider the law laid down by an earlier Full Bench,
(3) that due respect was paid to a decision by a full Bench of three Judges, and
(4) that being charged with the high function of interpreting and pronouncing upon the validity of laws, and being thus itself a source of law, the High Court should avoid giving a decision directly inconsistent with that given by itself earlier, and thus speaking with two voices on a point of law, where no question arose of resolving inconsistency between two or more earlier decisions.
53. As regards Articles 189 and 201 only that decision is binding which (a) decides a question of law or (b) is based upon a principle of law, or (c) enunciates a principle of law. In other words, what in legal jargon is the ratio decidendi of a decision is when the decision.
(a) decides a question of law;
(b) is based upon a principle of law, or
(c) enunciates a principle of law.
When a court interprets the Constitution or an enactment, it decides a question of law. For example, in Brutus v. Cozens [(1972) 2 All ER 1297] Lord Reid said that the meaning to be attributed to enacted words is a question of law, being a matter of statutory interpretation; and under Article 185, clause (2)(f), an appeal lies to the Supreme Court if, "the High Court certifies that the case involves a substantial question of law as to the interpretation of the Constitution." Where the court has construed a statute, so said Lord Greene speaking for the full court in Young v. Bristol Aeroplane Co. [(1944) 2 All ER 293, 298], "or a rule having the force of a statute, its decision stands on the same footing as any other decision on a question of law."
In Al-Jehad Trust v. Federation of Pakistan (supra), it was held that the interpretation of a provision of the Constitution by the Supreme Court "becomes part of the Constitution." Interpretation may also amount to enunciation. In Cooper v. Aaron [358 US 1; 3 L Ed 2d 5] it was held that "interpretation of the 14th Amendment enunciated by this Court in the Brown case is the supreme law of the land.............. "
When a decision is based upon a principle of law already settled, then it falls under (b) and will also acquire the binding force, and to be within (c) above, it is necessary not only that the decision enunciates a principle, but it must also relate to law. Enunciation can only be when a point is finally adjudicated upon by the Supreme Court.
For example, the maxim audi alteram partem contains a well known principle of natural justice and as the decisions of the Supreme Court e.g. Chief Commissioner v. Mrs. Dina Sohrab [PLD 1959 SC 45], M/s. Faridsons Ltd. Government of Pakistan [PLD 1961 SC 5371 and Province of East Pakistan v.
Noor Ahmed [PLD 1964 SC 451] are based upon this principle of natural justice, the principle has become the law of Pakistan and is binding within the meaning of Articles 189 and 201.
But, generalizations made by judges which are based on their wordly experience or understanding of human nature are neither law nor enunciation of a principle of law however, we may observe, with profound respect, there could be possible grounds under specific law/facts and circumstances for overruling precedents. However, these principles were re-iterated in Multiline Associates v. Ardeshir Cowajee [PLD 1995 SC 423], Muhammad Saleem v. Fazal Ahmad [1997 SCMR 314], Babar Shehzad v. Said Akbar [1999 SCMR 2518] and Ardeshir. Cowasjee v. Karachi Building Control Authority [1999 SCMR 2883]. In the last mentioned case, the position was summed up as follows:-- "It may be pointed out that a Bench of the same number of Judges of the same High Court, or of the Supreme Court, cannot deviate from the view of an earlier Bench as rightly has been held in the case of Mu'Wine Associates v. Ardeshir Cowasjee and others in relation to the High Court." In the following words: "In such circumstances, legal position which emerges is that the Second Division Bench of the High Court should not have given finding contrary to the findings of the 1st Division Bench of the same court on the same point and should have adopted the correct method by making a request for constitution of a larger Bench, if a contrary view had to be taken. In support reference can be made to the cases of the Province of East Pakistan v. Azizul Islam PLD 1963 SC 296 and Sindheswar Ganguly v. State of West Bengal PLD 1958 SC (Ind.) 337, which is the case of Indian Jurisdiction. We, therefore, hold that the earlier judgment of equal Bench in the High Court on the same point is binding upon the Second Bench and if a contrary view had to be taken, then request for constitution of a larger Bench should have been made."
All these cases were noticed in All Pakistan Newspapers Society v. Federation of Pakistan [PLD 2004 SC 600, 617] and the above-noticed view was re-affirmed.
54. The above judgments of the superior courts are binding on this Tribunal being sub-ordinate to the High Court. The recent judgment of the Hon'ble High Court cited supra, is squarely applicable in the case of the taxpayer and in favour of the taxpayer and binding on this Tribunal. The said Article 201 read with Article 189 of the Constitution of Pakistan quoted supra.
55. The above Articles make it abundantly clear that subject to the decision of Supreme Court of Pakistan, the decision of High Court of a province is binding on its own sub-ordinate Courts.
However, only that decision is binding which involves a question of Law, or is based upon, or enunciates a principle of Law. Principles of law laid down superior Courts provide guidelines for decisions by sub-ordinate Courts in cases , where those principles are attracted. These principles are in nature of dicta to be rigidly followed by sub-ordinate Courts. The reliance may also be placed in the case reported as PLD 1982 Lah. 214 Re: Noor Ahmed v. State, wherein it was held that principles of Law laid down by superior Courts were not only guidelines for decisions by subordinate Courts but also in nature of dicta to be rigidly followed by said Courts. In the case reported as 1983 CLC 2382 Ghulam Nabi v. Addl. District Judge, it was held that where there is contrary view of two High Courts on one point the High Court's decision is binding on its sub- ordinate Courts, which should give preference to same on the decision of other High Court.
However such decision can only yield to decision of Supreme Court. In Rehmat Ali v. Jan Muhammad, reported as 1983 SCMR 1109 it was held that judgment of High Court in constitutional jurisdiction is a decision of High Court on point of law and is binding on sub-ordinate Courts. Civil Court cannot hold same order to be illegal and ultra vires which the High Court has already found.
In the case reported as Province of East Pakistan v. DR. Azizul Islam PLD 1963 SC 296 it was held that "If there is decision which constitutes direct authority on a question by High Court another Bench of same strength of the High Court if inclined to take to a different view they should have referred the matter to a larger Bench. Alternatively, they could have expressed their . Doubts regarding the view taken in the precedent case in a court of equal strength, while following the view and left the matter to be raised in appeal before Supreme Court." In the case Murad Ali v. Collector of Central Excise and Land Custom reported as PLD 1963 W.P. Karachi 280 it was held "The decorum and dignity requires that a Division Bench should have respect for the decision given by the other Division Benches and in case it intends to take a different view it should made a reference to a Full Bench." In the case Nishat Talkies v. CIT reported as 1986 PTD 591 it was held that "We disapprove the practice of not considering and relying upon the judgments of our Superior Courts. It is the duty of every court and Tribunal in Pakistan to follow the judgments of Supreme Court. Under Article 189 of the Constitution any judgment of the Supreme Court which decides a question of law or enunciates a princiOle of law is binding on all Courts Pakistan. Likewise and in the same terms, Article 201 provides that subject to Articles 189, 201 and 203 all judgments of the High Court are binding on all the Courts subordinate to it. We hope in future learned Tribunal will be careful in this regard. In the case 1996 PTD (Trib.)
388 it was held" a judgment of the Income Tax Appellate Tribunal has the force of precedent which can be inferred from the fact that the judgments of those Courts and Tribunal which are reported in the law journals under the Law Reports Act, 1875 which have the force of precedent. Explanation to Section 5 of the Law Reports, 1875 reads as follows:-- "Explanation - For the purpose of this Act the expression, Court or Tribunal' includes the Federal Shariat Court, A service Tribunal, the Income Tax Appellate Tribunal and the National Industrial Relations Commission."
56. From the above discussion, this doctrine of precedent (STARE DECISIS) means 'to abide by former precedents." Blackstone elucidated the doctrine thus:-- "For it is an established rule to abide by former precedents, where the same points come again in litigation: as well as to keep the scale of justice even and steady and not liable to waver with every new judge's opinion as also because the law in that case being solemnly declared and determined, what before was uncertain, and perhaps indifferent, is now become a permanent rule, which is not the breast of any permanent judge to alter or vary from, according to his private sentiment, therefore, the ratio decidendi of a judgment is a binding precedent."
57. The ratio decidendum of a decision is the judicial reason on which that decision is founded. It is what that case decides generally, or rule of law for which it is an authority. It is of universal application. It binds the subject, the executive and the subordinate courts alike. The principle decided will be applied whenever a new case comes up for decision. Where the judgment acts against the whole world, that is, in rem, the findings in that case may be conclusive even against third parties. It is of paramount importance that law declared by courts should be certain, clear and consistent. But like all principles evolved by man for the regulation of the social order, the doctrine of binding precedent is circumscribed in its governance by perceptible limitations, limitations arising by reference to the need for readjustment in a changing society, a readjustment of legal norms demanded by a changed social context.
58. The effect of binding precedents in Pakistan is that the decisions of the Supreme Court are binding on all the courts. Indeed Article 189 of the Constitution embodies the rule of precedent. All the subordinate courts are bound by the judgments of the High Court. A single judge of a High Courts, is bound by the judgment of another single judge and a fortiori judgments of Benches consisting of more judges than one. So also, a Division Bench of High Court is bound by judgments of another Division Bench and Full Bench. A single judge or Benches of High Courts cannot differ from the earlier judgments of coordinate jurisdiction merely because they hold a different view on the question of law for the reason that certainty and uniformity in the administration of justice are of paramount importance. But, if the earlier judgment is erroneous or adherence to the rule of precedents results in manifest injustice, differing from the earlier judgment will be permissible.
When a Division Bench differs from the judgment of another Division Bench, it has to refer the case to a full Bench. A Single judge cannot differ from a division of a Division Bench except when that decision or a judgment relied upon in that decision is overruled by a Full Bench or the Supreme Court, or when the law laid down by a Full Bench or the Supreme Court is inconsistent with the decision. It may be noticed that precedent ceases to be a binding precedent--
(i) if it reversed or over-ruled by a higher;
(ii) when it is affirmed or reversed on a different ground;
(iii) When it is inconsistent with the earlier decisions of the same rank;
(iv) When it is sub silentio; and
(v) When it is rendered per incuriam
59. The binding nature of a decision is of two types: one is in relation to the facts and the other is in relation to the principles of law. A principle of law declared would be treated as precedent and binding on all. The finding of facts would bind only the parties to the decision itself and it is the ultimate decision that binds. The case in hand the issues of law as well as question of fact have already been stand decided and settled by the earlier division bench of this Tribunal vide judgment bearing STA No. 145 /KB of 2011.
60. Research and survey of long chain judicial rulings emerges the following principles:- o In a country like ours which is governed by rule of law, law has to be certain and uniform which is fundamental to the rule of law. o Certainty of the law, consistency of rulings and comity of courts.
All flowering from the same principle converge to the conclusion that a decision once rendered must later bind like cases. o Uniformity and consistency are the core of judicial discipline. o That is why the doctrine of stare decisis is part of our judicial system. o As per the doctrine of precedents, precedents not only have great authority, but must where applicable be followed. The practice of treating precedents as absolutely binding is necessary to secure the certainty of the law, predictability of decisions being more important than approximation to an ideal. Authoritative decisions must be followed, whether they are approved of or not, they being legal sources of law. o In Income-tax matters, which are governed by Federal Statute, when there is a decision of another High Court on the interpretation of a statutory provision, it would be a wise judicial policy and practice not to take a different view (whatever one's own view may be) barring, of course, certain exceptions, like:? o where the decision is sub silentio, o per incuriam, o Purely, wholly and exclusively obiter dicta or o Based on a concession or takes a view which it is impossible to arrive at or o There is another view in the field or there is a subsequent amendment of the statute or reversal or implied overruling of the decision by a Higher Court or some such or similar infirmity is manifestly perceivable in the decision. o The Income-tax Ordinance is an all Pakistan statute and it is desirable in the interest of uniformity that one bench of Tribunal should follow the decision of another bench of Tribunal of the same strength. o The established practice and policy is that one High Court should ordinarily accept the view taken by another High Court on the interpretation of a provision in an all Pakistan statute. o Decision in an earlier case is binding on a subsequent Bench-Law of precedent. The law of precedent is that a decision of a Division Bench given in an earlier case is binding on a subsequent Bench. o The law declared by the High Court of a state is binding on the authorities or tribunals under its superintendence and they cannot ignore it either in initiating a proceeding or deciding the rights involved in such proceeding. The launching of a proceeding in contravention of the law laid down by the High Court would be invalid and the proceeding themselves would be without jurisdiction. o Law on the binding effect of an order passed by a Court of law is well settled. Nor there can be any conflict of opinion that if an order had been passed by a Court which had jurisdiction to pass it then the error or mistake in the order can be got corrected by a higher Court or by an application for clarification, modification or recall of the order and not by ignoring the order by any authority actively or passively or disobeying it expressly or impliedly. Even if the order has been improperly obtained the authorities cannot assume on themselves the role of substituting it or clarifying or modifying it as they consider proper Any order passed by a Court of law, more so by the High Court and especially the Supreme Court whose decisions are declaration of law are not only entitled to respect but are binding and have to be enforced and obeyed strictly. No Court much less an authority howsoever high can ignore it. Any doubt or ambiguity can be removed by the Court which passed the order and not by an authority according to its own understanding. o High Court decision may be ignored only if the operation of the judgment is suspended by the Supreme Court.-The authorities and the Tribunals functioning within the jurisdiction of a particular High Court in respect of whom the High Court in respect of whom the High Court has the power of superintendence under the constitution are bound to follow the decision of the High Court unless, on an appeal to the Supreme Court, the operation the judgment is suspended. It is not permissible for the authorities and the tribunal to ignore the decisions of the High Court or to refuse to follow the decisions of the High Court on the pretext that an appeal has been filed in the Supreme Court which is pending or that steps are being taken to file an appeal. If any authority or the Tribunal refuses to follow any decision of the High Court on the above grounds, it would be clearly guilty of committing contempt of the High Court and is liable to be proceeded against. o The doctrine of binding precedent has the merit of promoting a certainty and consistency in judicial decisions, and enables an organic development of the law, besides providing assurance to the individual as to the consequence of transactions forming part of his daily affairs. And, therefore, the need for a clear and consistent enunciation of legal principles in the decisions of a court. o Where any High Court renders a decision against the department on a substantial question of law of general importance which is not acceptable to the department, it is highly desirable that the department should take up the matter in appeal before the Supreme Court, at the earliest available opportunity, in order to obtain Supreme Court's decision so that the law is settled by the highest Court of the land and no uncertainty is left in the administration of the fax law. o A judgment delivered by the Tribunal is binding on the subordinate court including tax authorities and CIR(A).
They are bound to follow the judgment of the Tribunal in its true letter and spirit. The Assessing Officer/OIR being an inferior officer vis-a-vis the Tribunal, was bound by the judgment of the Tribunal and therefore, They should not have tried to distinguish the same on untenable grounds. It is well established tents of precedents that Tribunal decision to be followed by lower authorities. o Principles of consistency and certainty occupy a very prominent position in the law of precedent which as to be adhered to in order to maintain discipline in the administration of justice. Conflict of view by' different Benches of the same forum is bound to create confusion and ultimately chaos o Tribunals and Courts must give consistent judgments qua similarly placed persons. 2006 SCMR 496 =2006 PLC (C.S) 355 Division Bench differing from earlier Division Bench, should refer case to Larger Bench or while following earlier cases express their doubt and leave matter to be raised by appeal before Supreme Court. PLD 1963 SC 296 o Earlier judgment of equal bench in the High Court on the same point is binding upon Second Bench. If however, a contrary view has to be taken then request for constitution of a Larger Bench should be made. PLD 1995 SC 423 o Decision of a Division Bench binding on Division Bench with same or lesser number of Judges. 178 ITR 548 o Difference of opinion between two Division Benches - Bench disagreeing with the earlier view has to make reference to a Larger bench for resolution of such difference --- If the Income Tax Appellate Tribunal while passing its order was in disagreement with the earlier view of another Bench of the Tribunal, the proper course available to it was to refer the matter to its Chairman for constitution of a Larger Bench to resolve such difference of opinion between the two Benches. 2007 PTD 1533 o Orders of the Tribunal deviating from the earlier decision given by a Division Bench of same strength set aside and remanded back to the Tribunal with the directions to place the file before, the learned Chairman to form a Larger Bench and direct it to hear and dispose of the appeals within a period of 90 days from the receipt of order by the Registrar of the Tribunal. 176 ITR 2007 When a Bench adopts a view different or contrary to the view earlier expressed by a Bench of equal jurisdiction, then legal propriety demands reference of case for constitution of a larger Bench or leave it to be settled in appeal by higher Court. 2004 PTD 62 o Whether Second Bench of Tribunal in judicial courtesy should not have proceeded to decide matter in presence and availability of judgment of Bench of equal strength in favour of assessee on same legal and factual issues - Held yes. Whether such matter ought to have been referred to Chairman for constitution of larger Bench-Held, yes- High Court set aside both impugned orders and remanded case to Chairman for constitution of Full Bench or Larger Bench not comprising any member of two Division Benches which had earlier decided appeals. 93 Tax 72 o Division bench differing from earlier Division Bench.
Should refer case to Larger Bench or while following earlier case express their doubt and leave matter to be raised by appeal before Supreme Court. The object of this principle is to maintain uniformity and consistency of views/decisions in difference Benches of the same Court and is aimed at two foster, develop and channelize the system of justice to an extent sufficient enough for the general public to repose its firm confidence in the same. PLD 2004 Pesh.47 Decision of a Division Bench is binding on other Division Benches of the same judicial institution and it is absolutely necessary to observe the principle in order to avoid conflicting decisions by the Benches of equal strength which is bound to create complication, confusion and chaos which will result in uncertainty and would be ultimately disastrous to the administration of justice. 1997 PTD 879 o Ratio settled by the Appellate Tribunal is binding upon a Bench of equal strength. 1998 PTD 3319 o Principles of consistency and certainty occupy a very prominent position in the law of precedent which has to be adhered to in order to maintain discipline in the administration of justice. 2003 PTD 2321 Principal object behind all legal formalities is to safeguard the paramount interest of justice-Legal precepts were devised in order to view to import certainty, consistency and uniformity to the administration of justice and to secure same against arbitrariness, errors of individual judgment and mala fides. PLD 2008 Lah.685 The settled law that a decision of a Division Bench is binding on another Division Bench and that a Single Bench has no authority not to follow a decision of a Division Bench. In this connection, I would like to refer to the decision reported as 1997 PTD 879 wherein Mr. Mujibullah Siddiqui who was Chairman of this Tribunal at that time and now has been retired as a Judge of the Sindh High Court recorded the following findings?
"We have been observing during the last few years with anxiety that due to lack of assistance and several other reasons the law of precedent has not been followed strictly in the administration of Justice. In addition to various other principles, the principles of consistency and certainty occupied from prominent position and these principles should always be adhered to in order to maintain discipline in the administration of justice and maintain discipline in this behalf. Thus, we proposed to consider the principles in this behalf as enunciated and affirmed ,,by the Superior Courts, in the interest of better administration of Justice and to bring certainty in this behalf. It needs no emphasis that the conflict of view by different benches of the same forum is bound to create confusion and ultimately chaos which is not desirable on the fact of it."
In this regard another case has been referred reported as 2003 PTD (Trib.) 835 wherein in a difference of opinion has arisen between the learned members and the matter was referred to third referee member who while placing reliance on the above decision of the Tribunal has recorded the following findings: -- "The above discussion leaves no scintilla of doubt that in view of the law as laid down by the superior Courts the decision of a Division Bench is binding on the other Division Benches of the same judicial institution. As already held by the Honourable High Court and honourable Supreme Court it is absolutely necessary to observe this principle in order to avoid the conflicting decisions by the Benches of equal strength which is bound to create complications, confusion and chaos which will result in uncertainty and would be ultimately disastrous to the administration of justice. If there is difference of opinion between the High Courts, all the subordinate Courts including Benches of the Income Tax Appellate Tribunal are required to follow the view taken by the High Court within whose jurisdiction they are working. 2005 PTD 2586 [Karachi High Court] Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ Messrs ATLAS INVESTMENT BANK LTD. V.
COMMISSIONER OF INCOME TAX
61. In view of the above discussion I fully endorse the findings recorded by the then learned Judicial Member. I hereby, not only approve but appreciate the stand taken by the Judicial Member in arriving at correct conclusion. Therefore, the appeal of the appellant stands allowed as the appeal has already been decided by the Tribunal in the appellant's own case vide order bearing STA No.145/KB/2011 dated 17.2.2012 for the reasons that the circumstances and facts of the case and under the same set of facts and law in the instant appeal are similar and the learned Accountant Member has failed to bring out any distinguishing facts.
62. I am of the view that the difference of opinion should not be invoked in a routine matter and ignoring the settled judgments of the same strength of division bench. However, in this case the learned Accountant Member herself in her personal capacity ignored the already delivered judgment of the Division Bench in the appellant's own case whereby the issues were obviously settled in favour of the appellant.
Tribunal has by-passed its own convention.
63. I have already discussed the relative merits and demerits of these two judgments, that the Accountant Member had by-passed a healthy convention which ought to be followed faithfully. For taking divergent views on the same subject in the same cases, of same taxpayer the Division Bench of Tribunal had assiduously stuck to its earlier decision. This healthy convention has been reiterated by the Hon'ble Supreme Court and the learned Tribunal both in Pakistan and India in a quite number of cases some of them cited below.
(i) The Hon'ble Supreme Court of Pakistan in a case the M/s. Multiline Associates v. Ardeshir Cowasjee and two others reported as PLD 1995 SC 423 has held as under:- "--- Earlier judgment of equal Bench in the High Court on the same point is binding upon the second bench - If, however, a contrary view has to be taken, then request for constitution of a larger Bench should be made - [pg 434 and 435]
(ii) In a case law reported as 1997 PTD (Trib.) 879 in M.A. (Rect) No. 80/KB of 1995-96 it was held: Difference of opinion - Conflicting decisions by the benches of the Tribunal - Law of precedent - Whether decision of a Division Bench is binding on the other Division benches of the same judicial institution - Held yes - Whether one Division Bench can disagree with another Division Bench without reference to a larger Bench - Held No - Whether rectification application allowable - Held yes The above discussion leaves no scintilla of doubt that in view of the law as laid down by the superior Courts the decision of a Division Bench is binding on the other Division Benches of the same judicial institution. As already held by the Honourable High Court and Honourable Supreme Court it is absolutely necessary to observe this principle in order to avoid the conflicting decisions by the Benches of equal strength which is bound to create complications, confusion and chaos which will result in uncertainty and would be ultimately disastrous to the administration of justice.'
(iii) The Bombay High Court in the case Subramanian, I.T.O. V. Siemens India Ltd. Reported as (1985)
156 ITR 11 has held as under:-- "Where there is a conflict between different High Courts, he must follow the decision of the High Court within whose jurisdiction he is (functioning), but if the conflict is between decisions of other High Courts, he must take the view which is in favour of the assessee and not against him. Similarly, if the ITAT has decided a point in favour of the assessee, he cannot ignore that decision and take a contrary view, because that would equally prejudice the assessee. He can, however, reject claims which are clearly and indisputably untenable and about which a different view is not rationally possible."
(iv) The Supreme Court of India by a bench of three judges in Union of India v. Godfrey Philips India Ltd. (1986) 158 ITR 574 (SC) is also a clear authority for the law of precedent, uniformity, consistency, stability and certainty: The issue which came up for consideration before the Supreme Court in the case of GODFRY PHILLIPS INDIA LTD related to the question of promissory estoppel on which an elaborate decision of the Supreme Court had earlier been rendered by a bench of two judges in Motilal Padampat Sugar Mills v. State of UP and others (1979) 2 SCR 641 and in spite of that decision being brought to its notice a later bench of two judges of the Supreme Court did not either follow or reaffirm the view expressed in MOTILAL PADAMPAT SUGAR MILLS's case but took a contrary view even after noticing the earlier decision while rendering its judgment in Jeetram v. State of Haryana (1980) 3 SCR 689 and hence the issue of promissory estoppel as a principle of law in its application to the State action became uncertain and that is why the matter had again to be examined by the Supreme Court by a bench of three judges in Union of India v. Godfrey Phillips India Ltd. (supra) and all the three learned judges were unanimously of the view that subsequent bench of co-ordinate jurisdiction should not decide the matter before it but should refer the issue to a larger bench, if found appropriate. The decision of the Supreme Court in GODFREY PHILLIPS' case is, therefore, a clear authority for the pro-position that no decision should be taken by a bench of co-ordinate jurisdiction ignoring the view already expressed by another bench of the same Court and if it is inclined to disagree or deviate, the bench may do so but the bench cannot decide the matter but has only to refer the issue to a larger bench to resolve the apparent conflict of views. Extract from Pages Nos. 589 and 590 of the report (1986) 158 ITR 574 (SC Ind)
"We must concede that the subsequent decision of this Court in Jeet Ram v. State of Haryana (1980) 3 SCR 689, takes a slightly different view and holds that the doctrine of promissory estoppel is not available against the exercise of executive function of the state and the state cannot be prevented from exercising its functions under the law. This decision also expresses its disagreement with the observations made in Motilal Padampal Sugar Mills' case (1979) 118 ITR 326 (SC), that the doctrine of promissory, suggesting by necessary implication that the doctrine of executive necessity is available to the Government to escape its obligation under the doctrine of promissory estoppel. We find it difficult to understand how a Bench of two judges in Jeet Ram's case, could possibly overturn or disagree with what was said by another bench of two judges in Motilal Padampal Sugar Mills' case. If the bench of two judges in Jeet Ram's case found themselves unable to agree with the law laid down in Motilal Padampat Sugar Mills' case, they could have referred Jeet Ram's case to a larger bench, but we do not think it was right on their part to express their disagreement with the enunciation of the law by a co-ordinate bench of the same Court in Motilal Padampal Sugar Mills case (1979) 118 ITR 326 (SC)."
64. Before parting with this I may observe that no doubt, every Courts has its plenary powers to deliberate upon every issue agitated before it, as well as any other issue arising on the materials placed before it in the manner known to law, after giving a prior notice and affording an opportunity of being heard. This power of discharging the statutory functions whether discretionary or obligatory, should be in the interest of justice and confined within the legal permissibility. In doing so, the Judge should disengage himself of any irrelevant and extraneous materials which come to his knowledge from any source other than the one presented before him in accordance with law, and which are likely to influence his mind one way or the other. In this context, it may be appropriate to recall the following view expressed by Benchamin Govdozo in this Treatise "The Judge as a Legislator."
"The Judge, even when he is free, is still not wholly free. He is not to innovate at pleasure. He is not a kinghterrnat roaming at will in pursuit of his own deal of beauty or of goodness. He is to draw his inspiration from consecrated principles. He is not to yield to spasmodic sentiment, to vague and unregulated benevolence. He is to exercise a direction informed by tradition, methodized by analogy, disciplined by system."
65. The judicial convention well-settled in the tribunal is to regard a full bench or Division bench order to the tribunal as biding on the benches of same strength. Carrying this principle further, the Gujarat High Court in Sayaji Iron and Engineering Co v. CIT reiterated that no tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another bench of the same tribunal on the same facts, and if a bench of a tribunal on identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another bench of the tribunal on a earlier occasion, that will be destructive of the institutional integrity itself. If the tribunal wants to take an opinion different from the one taken by an earlier bench. It should place the matter before the Chairman of the tribunal so that he could have the case referred to a full larger bench of the tribunal consisting of three or more members.
66. I may further add that cool and smiling face of the judicial officer adds to the judicial decorum.
Judicial discipline and comity of courts require not only due application and adoption of the dictum laid down by the superior courts but also by taken judicial notice of pronouncements made by the cognate benches of equal hierarchy.
67. It is found by me in this case that the same Tribunal, though manned by different Accountant Member on different occasions, and with reference to the same Taxpayer and assessments relating to different periods, has come to conflicting decisions on the same set of facts and law which, on the face of it, should be embarrassing to the revenue and assessees in general. There is of course no provision in the Income tax Ordinance relating to the matter and the doctrine of res judicata also may not be applicable to orders of the Tribunal. Even so, in my opinion, it is proper and desirable that when any particular Member of the Tribunal takes a particular view on the same set of facts and law, it does not contradict itself and come to a diametrically opposite view later; but in such a case, it to be followed the earlier view of the same strength of this Tribunal and, if and when the aggrieved party applies, should make a reference to this Court for full / larger bench. No Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another bench of the same Tribunal on the same facts. It may be that the members who constituted the Tribunal and decided on the earlier occasion were different from the members who decided the case on the present occasion. But what is relevant is not the personality of the officers setting over the Tribunal or participating in the hearing but the Tribunal as an institution. If it is to be conceded that simply because of the change in the personnel of the officers who manned the Tribunal, it is open to the new officers to come to a conclusion totally contradictory to the conclusion which had been reached by the earlier officers manning the same tribunal on the same set of facts or law, it will not only shake the confidence of the public in judicial procedure as such, but it will also totally destroy such confidence. The result of this will be conclusions based on arbitrariness and whims and fancies of the individuals sitting in the Courts or the tribunals and not reached objectively on the basis of the facts placed before the authorities. If a bench of a tribunal on the identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another bench of the tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single judge takes a view different from the one taken by another judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly if a Division bench differs from the view taken by another Division Bench it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal wants to take an opinion different from the one taken by an earlier bench, it should place the matter before the Chairman of the Tribunal so that he could have the case referred to a Full / Larger Bench of the Tribunal consisting of three or more members. In the case in hands and in the absence of any fresh material, the learned Accountant Member was not justified in coming to an entirely different and contrary conclusion on the same set of facts.
68. Normally, there should not have been a difference of the opinion in such a case, because it is the convention of the Tribunal that whenever there is a decision of the Tribunal on an identical point, that decision should be followed unless some points not covered by that decision arise or the law, in the meanwhile, has been amended or a decision of the Supreme Court is available taking a contrary view. Even when such things happen, the convention that we have built up is that the Bench should refer the case to a larger bench for decision instead of itself differing from the view expressed by another bench. This is to develop a healthy convention that one coordinate bench should not criticize or refuse to follow the view expressed by another coordinate bench. That apart, the Supreme Court and High Courts have not only approved of this practice, but even judicially laid it down as a guideline for the Tribunal.
The Hon'ble Supreme Court of India in a judgment reported as AIR 1980 SC 1762, speaking in another context, Mr. Justice Krishna Iyer in Ambika Prasad v. Sate of U. P., pointed out the importance of following earlier precedents. In his characteristic language, Krishna Iyer J. Pointed out as follows.
(p.1764)
Every new discovery or argumentative novelty cannot undo or compel reconsideration of a binding precedent. It is fundamental that the nation's constitution is not kept in constant uncertainty by judicial review every season because it paralyses, by perennial suspense, all legislative and administrative action on vital issues deterred by the brooding threat of forensic blow-up. This, if permitted, may well be a kind of judicial destabilization of State action too dangerous to be indulged in save where notional crisis of great moment to the life, liberty and safety of this country and its millions are at stake, or the basic direction of the nation itself is in peril of a shake-up. It is wise to remember that fatal flaws silenced by earlier rulings cannot survive after death because a decision does not lose its authority "merely because it was badly argued, inadequately considered and fallaciously reasoned."
In a case law 1979 SCMR 159 the Hon'ble Supreme Court of Pakistan in the case Pakistan International Airline v. Sindh Labour Court held as under:-- The same learned judge, who decided this petition in Messrs Shafquat Silk Factory v. Presiding Officer, Second Sindh Labour Court, Karachi and others (1979 PLC 400) held that in view of the second proviso to section 1(4) Standing Order No. 15 was not applicable to establishment with 49 or less workers as the extent and application of this Standing order was controlled by section 1 of the Ordinance. However, he changed his opinion and held that the procedure prescribed by Standing Order No. 15 had to be observed. The reason assigned for taking the latter view was that he was not provided -enough assistance in the earlier case. As is the judicial practice, a Single judge is bound by his previous opinion; and if subsequent he feels that his earlier opinion requires a review, then he should have referred the matter to a larger Bench. But this practice was not followed. The Supreme Court of Pakistan in a case reported as Central Insurance Co Ltd. v. CIT 1997 PTD 71.
Leave to appeal already granted against judgment of High Court -Whether rule of consistency applicable - Held yes. Since earlier this court has already granted leave against the judgment of the High Court which is also the subject matter of the present petitions, in order to follow the rule of consistency, we are inclined to grant leave in the present cases to consider inter alia the question on which earlier leave has been granted. However, we are not inclined to grant any stay order.
Leave is, accordingly, granted."
69. The above two judgments of the Division Bench of this Tribunal are on an identical point and for the same taxpayer and in the interregnum neither the law had changed nor had the superior Court or larger bench rendered any decision on the subject. It is settled that the earlier judgment in taxpayer's own case has not been overruled has to be taken as good law abiding and binding precedent. There was no occasion for any difference of opinion between the two members, since they were convention bound to follow the earlier decision of Division Bench of this Hon'ble Tribunal in this very case of taxpayer. Even under anyd circumstances, the learned Division Bench while deciding later judgment was bound to follow the earlier judgment. Therefore, it goes to establish that in case of conflicting judgments, the decision which is favourable to the taxpayer should be followed and the subsequent different view taken is illegal and per incurium. Law of precedent, uniformity and consistency should be honoured. Hence, the earlier judgment bearing S.T.A. No. 145/KB of 2011 dated 17.2.2012 covered the entire aspects of the issues involved in this appeal in question and gave the decision accordingly and the same has not been overruled neither by the larger Bench of this Hon'ble Tribunal nor by any Superior courts. Therefore, the earlier judgment is to taken as good law and binding judgment.
70. For the detailed reasons discussed supra, I concurred with the findings of the learned Judicial Member in its entirety. Therefore, we answer the question in negative and in favour of the appellant.
71. Consequently, the appeal is hereby allowed.
(MUHAMMAD JAWED ZAKARIA)
JUDICIAL MEMBER