The present appeal, filed by a private limited company, under section 46 of the Sales Tax Act, 1990 "Act" impugns the order dated 25.06.2014 issued by the learned Commissioner-IR (Appeals)
"CIR(A)" in respect of an earlier appeal filed against assessment order dated 05.06.2014 passed by the ACIR, Audit, RTO-I, Lahore.
2. The brief facts of the case are that the appellant company operates under Chapter II of the Sales Tax Special Procedures Rules, 2007, engaged in the 3-S business of sales/service of Honda brand parts and commission income from 'Honda' brand cars in Pakistan. Present controversy is based on audit observations. Audit report dated 15.05.2014 followed by a show cause notice dated 16.05.2014 was issued by the ACIR requiring explanation on various charges levelled therein. In response thereto, replies were submitted and after conducting hearings, through the assessment dated 05.06.2014, sales tax liabilities at Rs.6,795,085/- on account of retail sales, Rs.770,285/- for short payment of tax and Rs.856,398/- on account of excessive input tax alongwith penalties and default surcharge were adjudged against the appellant, however, following categorical penalties were also imposed:- Sr. No.Particulars Rupees
(i) Penalty for non filing of sales tax returns40,000
(ii) Penalty for wrong filing of sales tax returns20,000
(iii) Penalty for withholding tax 10,000
(iv) Penalty for sales tax registration 5,000 Feeling aggrieved an appeal Was filed before the learned CIR(A) who upheld all charges leveled against the appellant, except in respect of issue of withholding sales tax, rest of the order passed by ACIR was maintained by the learned CIR(A). This has compelled the appellant taxpayer to come up in further appeal before this court.
3. The AR vehemently argued that the department tad earlier issued income tax audit notice under section 214C of the Income Tax Ordinance, 2001 and later on withdrew the same that the case was never selected by the FBR. Later it was again intimated that the case was selected for sales tax under section 72B of the Act. The appellant joined the audit proceedings and presented the complete record. The ACIR deputed auditor to conduct the audit of the taxpayer who time and again visited the business premises of the appellant without any record. The taxpayer was not satisfied with this action of the auditor, hence he made a complaint to the Chief Commissioner.
The AR further argued that proceedings initiated by the ACIR, on the basis of malicious audit report, solely based on presumption of law by misinterpreting/misreading the provisions of Act and Special Procedures Rules, 2007, is equivalent to severe maladministration of justice on the part of department and a nullity in the eyes of law, being based on overstepping the lawful jurisdiction available with the assessing authorities under the Sales Tax Act, 1990.
4. During the course of hearing, the learned AR prior to taking up the specific issues involved in the appeal, briefly dilated upon the overall scheme of the Act and read out the relevant provisions of law. The learned A.R. Highlighted another important aspect of this case i.e. a complaint against the respondent on the issue of unfair practice during audit, which is reportedly pending before the Chief Commissioner of Income Tax. The learned A.R. Of the appellant vehemently contended that the independent judicious view should have been adopted by the IRS authorities while passing the impugned findings to avoid the great inconvenience. It was argued that that the impugned order passed by the ACIR reflects her lack of understanding on the facts as well as legal position on the matter and her intervention in the case is a classic example of carelessness, highhandedness and arbitrariness. He further argued that huge arbitrary tax demand with penalties, which are purely on flimsy grounds bluntly speaks a lot about the mindset of the ACIR which is nothing but an act of maladministration of justice. It was argued that the findings should be recorded on the basis of material available and not on his own whims. He argued that all the necessary proof of sales tax and input tax properly certified by Honda Atlas were also duly placed before the lower officers who failed to considered the same. While summarizing the scheme of law, the learned AR firstly read out the provisions relating to charge of tax and thereafter, in this respect, explained the concepts of Input tax, output tax, supply, taxable supply, taxable goods, taxable activity, final consumers, retailer, retail tax, input/output adjustment and overriding effect of Special Procedures Rules for Sales Tax etc. The AR submitted that the issues involved in the present appeal require consideration of these principles, in support of his contentions various judgments of higher as well as superior fora were also referred through written arguments. Present appeal is taken up and decided in terms of following observations.
5. In the context of the matter in appeal and in the stated background the learned AR referred to the provisions of the Act, as were applicable during the period involved in the subject appeal.
Referring to the specific provisions of the statute, the learned AR submitted a synopsis stating that charge of tax has been prescribed by the legislature or taxable supplies that are made by a registered person in the course or furtherance of taxable activity; taxable supply, as referred to in the charging section, means supply/sale of taxable goods. Reverting back to the facts, the learned AR argued that the foremost issue which requires consideration is whether or not the tax paid by the appellant under special procedure rules constitute fulfillment of statutory obligation under the Act against sale of taxable goods. It is not a disputed position that sales have been made to final consumers in the present case. The expression "Final Consumers", the AR stated, has not 'been defined in the Act, therefore, its extent and scope would be determined by reference to the ordinary dictionary meanings and under the established principles of statute interpretation, commonly known as the principle of 'Ejusdem Generis'. This principle, AR submitted, provides that words and phrases occurring in a provision of law are not to be taken in an isolated or detached manner, dissociated from the context, but these are to be read together and construed in the light of overall context of the provision of the law. Taking this line of argument it was argued that the expression "final consumers" as used in the Sales Tax Special Procedures Rules, exclusion of motor cycle dealer and induction of words vehicle dealers by the authorities below is to be interpreted in the light of words associated to it and not in pure isolation as per whims and wishes of the IRS authorities. In this respect, the AR relied upon judgment of Hon'ble Lahore High Court reported as 1973 PLD 837 "In order to ascertain the meaning of any word or phrase that is ambiguous or susceptible to more than one meaning, the court may properly resort to the other words which the ambiguous word is associated in the statute.... It is a fundamental principle of interpretation of statutes and of the notification or orders issued thereunder that the Courts have to proceed on the assumption that each word therein was used with a purpose..." By placing reliance on the above judgment it was submitted that what needs to be ascertained is the scope and extent of expression "final consumers" and exclusion of word 'motor cycle dealer', a phraseology that is being regarded as ambiguous and/or susceptible to more than one meanings and under the principles laid down by the Hon'ble Lahore High Court the expression/words have to be construed to be a mode which has similar attributes to that of a 'sale' or 'taxable activity' under the special procedure rules and limitation provided under the law.
6. The learned DR while rebutting the submissions of the appellant reiterated the contents of the orders passed by authorities below and submitted that tax has been rightly levied by the ACIR in the assessm ent order. The author of the assessment order also tendered written submissions.
While defending the orders of the authorities below, the learned DR read out the observations made by the authorities below in their respective orders but no new line of argument was presented. The learned DR concluded the arguments and submitted that tax was properly charged on the subject amounts and as such the orders of the authorities below do not suffer from any infirmity.
7. We have given due consideration to the submissions of both the sides, perused the record and have also considered the ratio of the decisions relied upon by the parties. In the present appeal it is not a dispute that the transaction constituted taxable activity. The main dispute is that whether or not the act of paying sales tax as retailer on sales made to final consumers by the appellant under the special procedure rules constituted supply chargeable to tax at normal / standard rates. If the answer to this proposition is in negative the charge would not mature and on the other hand if the answer is in affirmative the conclusion would be that the tax was legally charged by the ACIR. In determining the answer to the aforesaid proposition, the line of arguments and decisions relied upon by the AR are very relevant and forceful. We are in agreement with the learned AR that not all supplies/sales undergo the incidence of tax at standard rate and only such supplies/sales, which are in respect of a supply as defined/classified under rule 5(3) of the Special Procedures Rules, are required to be considered for the purposes of payment of sales tax at standard rate. In this case, the conclusion drawn by both authorities below is based on wrong application of law, therefore, erroneous, factually incorrect, patently illegal and perverse, which has resulted in great miscarriage of justice. After going through the record and the submissions by the parties, it does not take long for us to conclude that the orders of the authorities below are not sustainable being passed in violation of established, time tested and settled principles of justice. There is a plethora of case law that in taxing statutes, one can only look at the language used in the law, since there is no room for intendment or presumption in the interpretation of law. The same rule of A taxation i.e. a person sought to be taxed can only be taxed when he comes within the letter of law is squarely applicable in this case. We have noted that none of the authorities below have given any specific lawful reasons on the basis of which it has been concluded that the appellant is liable to pay sales tax at the standard rate against sales made to final consumers as Retailer while the applicable law on the issue for the period under consideration i.e., Chapter II of Special Procedures Rules clearly negate the stance of the authorities below and fully supports the view point of the appellant.
8. The undisputed facts relevant to the issue in hand are that the appellant carries out the activity of sale of cars on behalf of Honda Atlas Cars. The procedure that is followed in this respect is that a customer visits the business premises of the appellant; deposits the cheque/PO etc. Drawn in the name of the Honda Atlas Cars or its agent (the appellant); the same is forwarded along with customer details by the appellant; the Honda Atlas company communicates the acknowledgement and tentative delivery date; the car, once it is ready, is dispatched to the agent (appellant); the appellant intimates the customer about the arrival of the car; customer collects the car from the appellant and the commission is remitted to the appellant after the customer collects the car from agent (appellant). In none of the case has there ever been any deviation from the process stipulated above, that is to say, in none of the case the car is sold to the appellant and/or the money is received from the customer for appellant own utilization. Without exception the money is received,. Through cheque/PO etc, in the name of the Honda Atlas or agent (appellant) and the invoice regarding sale of car is issued by the Honda Atlas directly in the name of the customer after receiving price of car through the appellant. It is rightly argued that the entire case made out by the IRS authorities below is based on improper and incorrect appreciation of the facts of the case and law on the issue. Contrary to the business model in place, the both authorities below assumed that the appellant is involved in business of selling cars directly to the buyers/consumer. It is under this assumption that the authorities below held "The analysis of the total sales of the respondent reflects that the sales as dealer (sales of motor vehicles) are 97.50%."
On the basis of the aforesaid arguments and submissions, it could be safely concluded that authorities below clearly erred in imposing tax on 'Retail Sales" made by the appellant from its business premises to the final consumers. The issue can be seen from another angle. Sales tax in its present shape for all practical purposes is similar to the Value Added Tax. It is generally called as consumer's tax. It is ultimately charged from buyer and even if there is any transaction in between among the manufacturer, distributor, wholesaler and the consumer, the tax passes on to the ultimate consumer. Sales tax is an indirect tax with its ultimate impact on the consumers, therefore, liabilities under the Act cannot be worked out in a fanciful manner based on mere surmises, estimates and conjectures and by adopting self devised formats having no legal support. The appellant is not the buyers (without exception) of the cars and he is operating as an agent to whom commission is paid for rendering of intermediary services. The goods (cars) are sold directly to the consumers/buyers after receiving price of car through agent (appellant), therefore, sales tax liability on sale/purchase of cars shall be zero on the part of appellant. This fact has been duly admitted by the authorities below that appellant is not liable to pay sales tax on sale of cars.
9. A perusal of the impugned orders when cross-examined with the applicable law on the issue reveals that learned authorities below fell in grave error in misconceiving the unambiguous provisions of the Act, specially Special Procedure Rules and as such sales made to final consumers/general public was wrongly charged to tax at standard rate of sales tax. The impugned orders reflect lack of understanding on the facts as well as inability to grasp the legal position on the matter. It is inevitable to reproduce the flimsy and fanciful observations made by the authorities below "The analysis of the total sales of the respondent reflects that the sales as dealer (sales of motor vehicles) are 97.50% whereas, the sale of spare parts is only 2.50%....A dealer cannot be treated as retailer by any stretch of imagination. Moreover, if the respondent is treated a retailer, there is no answer about the principal/ major activity of the respondent i.e. The sale of vehicles.. .The respondent is not exclusively a retailer of spare parts and thus cannot be treated a retailer for the purpose of payment of tax under Chapter-II of the Rules on certain/small portion of supplies i.e. Spare parts". This state of affairs reflects that the authorities below even do not know the basic facts of the case that sale of cars is not the taxable supplies/business activity of the appellant but he is just earning commission out of sale of cars by Honda Atlas Cars to the buyers all over Pakistan. How the department can treat the taxable activity of Honda Atlas Cars as sales of a 'commission agent' solely working on behalf of manufacturer on commission basis? The ratio of 97.50% by assuming the sales of cars as sales of appellant is nothing but shows the sketchy knowledge of officers below about fiscal laws as well as accounting principles. The findings that appellant is not exclusively a retailer of spare parts and thus cannot be treated a retailer for the purpose of payment of tax under Chapter-II of the Rules on certain small portion of supplies i.e. Spare parts, also depicts intentional misreading/non-reading of law. A Retailer operates under Chapter II not only pays tax under this chapter but also liable to pay tax at standard/normal rates when sales/supplies are made to a person who deducts income tax at source under the Income Tax Ordinance, 2001. Such supplies shall not be subjected to tax under this chapter but at a standard rate under section 3 of the Act and the supplier shall be entitled to deduction of input tax paid on purchase of the goods so supplied at standard rates.
10. Regarding application of Chapter II of the Sales Tax Special Procedures Rules, there is a principle of law which provides that words and phrases occurring in a provision of law are not to be taken in an isolated or detached manner, dissociated from the context, but these are to be read together and construed in the light of overall context of the provision. The expression "Retailer" and final consumer of goods (auto parts) is to be interpreted in the light of words associated to it and not in pure isolation to directly jumped to Chapter VIII. Reliance may be placed on the following judgment of Hon'ble Lahore High Court in 1973 PTD 453. The AR also referred latest judgment passed by Learned Chairperson in S.T.A. 387/LB/2014 wherein the scope of Chapter II of Special Procedures Rules has been elaborated and even in case of other Honda dealer the judgment of this court in S.T.A.No.1/IB/2009 dated 20.04.2011 sufficiently supports the view point of the appellant "Retailer--- Dealer---Admittedly, the registered person was not a dealer and had been registered as a retailer, thus R.123 of the Sales Tax Special Procedures Rules, 2006 was not applicable and the registered person had rightly been dealt with under the relevant rules".
11. The grave defects in the assessm ent order have made no impression on the learned appellate authority, rather, he has gone a step further and has mobilize evidence against the appellant by confirming the void and patently illegal order by mechanically stating that the same is lawful so much so charges of tax fraud have been confirmed in a fanciful manner. It may be noted that under the constitution all state functionaries are expected to work within the permissible norms of law and justice. Any undue and harsh action by the state functionaries against a taxpayer speaks volume of mala fide on their part as a flagrant violation of law and procedure. The action of the authorities below is patently illegal and reflects highhandedness because both authorities intentionally ignored/ misread/non-read the unambiguous wording of section 71 of the Act and wrongly apply the law at their own whims in the instant case:--
71. Special procedure.---Notwithstanding anything contained in this Act, the Federal Government may, by notification in the official Gazette, prescribe special procedure for scope and payment of tax, registration, book keeping and invoicing requirements and returns, etc. In respect of such supplies as may be specified therein.
12. Perusal of above would reveal that the same is a non-obstante provision having overriding effect over any provisions of the Act in force for the time being. The connotation "anything" used in this section broadly expands the scope of the provisions of section 71 for the purposes of overriding effect on all the provisions contained in the Act. The connotation may have diversity of meanings and may be employed to indicate "all" or "every" as well as "some" or "one", therefore, it clearly follows that meaning of the said words used in the statute are dependent upon the context and subject matter of the statute. In the instance case there is no ambiguity that the provision of section 71 has an overriding effect over the all provisions of the Act. In order to appreciate the strong contention of the appellant it is important to cross examine the relevant provision of the Act with the Chapter II of Sales Tax Special Procedures Rules, 2007:-- Chapter II: Application.---The provisions of this Chapter shall apply to the registered persons, including jewellers, who make supplies from retail outlets to final consumers and such persons shall be deemed to be retailers in respect of such supplies for the purposes of this Chapter: Provided that the provisions of this Chapter shall not be applicable to dealers of motorcycles and specified electric goods who shall pay sales tax as prescribed in Chapter VIII and XIII, respectively, and shall also not be applicable to manufacturercum-retailers who sell their products through retail outlets.
13. Section 71, empowers Federal Government to prescribe Special Procedure for Scope and Payment of tax, registration, bookkeeping etc. By notifying the same in official Gazette. Perusal of chapter II transpires that legislature provides a procedure for collection of sales tax from the person registered and operated as Retailers. The said sales tax has to be paid on the rates specified in the Chapter II ibid. It is a matter of common knowledge that sales tax whether deducted or collected does not constitute part of cost or value. However, in case of end users/final consumers alone it constitutes part of the sale in the normal parlance and understanding of costing method. The legislature in its wisdom has categorized the mode and method of payment of sales tax even by a person registered as Retailer and wisely restrict the admissibility of input sales tax credit on certain categories of taxpayers, however, when sales are effected through final consumers no input sales tax was admissible for a person registered and operated as Retailer as in the case of present appellant. This court is also well aware of the crucial fact that earlier the word "dealer of motor cycle" was used in Rule 3 of Chapter II ibid, to exclude the said category of taxpayer from the domain of Sales Tax Special Procedures Rules for retailers which was later-on substituted with the word "Vehicle Dealer" through S.R.O. 608(1)/2014 dated 02.07.2014 after the passing of Finance Act, 2014, obviously applicable with effect from tax period July, 2014 (tax year 2015). The subsequent pivotal changes in the special procedure rules sufficiently proves that prior to amendment the word 'Vehicle Dealer' was alien to the Chapter II ibid but in the instance case the officers below miserably flout the law by inducting word of their own choice in the statute book, which renders the whole proceedings a nullity in the eyes of law. Consequentially, it is unequivocally held that issuance of show cause notice and thereafter passing of assessment order is unlawful, patently illegal, arbitrary, discriminatory, violative of the norms of justice and blind exercise of discretionary powers. The ACIR has no lawful authority to mold the provisions of the Act in the favor of revenue and against the appellant by inducting words of her own choices in the statute book i.e., Chapter II ibid. It is quite strange to note that commentary made by some aliens has been adopted to bypass the provisions of the law enacted by the legislature. The act of first appellate forum to ignore this crucial issue is equivalent to denial of justice by misreading the law to unduly favour the alleged false practices in department by applying the law wrongly. A statute is required to be read as a whole and not in a piecemeal manner while the interpretation of law is the sole prerogative of the courts with the Hon'ble Supreme Court having the final say in the matter.
Further the tax can be levied under the authority of law and mere convenience of tax collector in recovering tax liability, is no ground to deviate from substantive provision of law. The ACIR instead of observing the spirit of law i.e., special procedure rules, has adopted novel method for impugned levy, by changing the provisions of law by inducting word of her own choice. Such practice is not legally permissible. Where an order passed by any forum, authority or court is patently illegal or against express provisions of law, if allowed to stay intact tantamount to and causes prejudice and serious breach of legal rights of taxpayers / citizens. To enjoy the protection of law and to be treated in accordance with law is the inalienable right of every citizen.
14. It is also noted with grave concern that without observing the mode and method provided under section 25 of the Act and STGO 03 of 2004, show cause notice was issued on 16.05.2014 while audit report was served on 15.05.2014. In utter disregard of norms of justice and fair play, instead of clarifying the matter of lawful jurisdiction, revenue flouted the law by saying that no time limit is needed between audit report and SCN. The issue of inducting words "Vehicle Dealer" in the Chapter II ibid remained untouched by both authorities. The Hon'ble apex court in 2012 CLD 520 defines "Mala fides" as it literally means in bad faith and action taken in bad faith is usually action taken maliciously, in which the person taking the action does so out of personal motives either to hurt the person against whom the action is taken or to benefit oneself. In 1993 SCMR 633 the Hon'ble Court observed "Order passed by an officer in exercise of judicial/quasijudicial functions, was passed by the official relying on provisions of law, which were no longer on the statute book, such circumstance raising an apprehension in the mind of the High Court that the officer was acting mala fide. The High Court, remarked that the official concerned was not a fit person who could be conferred powers to exercise judicial or quasi judicial functions. It is quite strange how and under which provision of law and under what authority, provisions of the Act have been altered by inducting word "vehicle dealer" in Chapter II ibid. As per own whims solely to create a huge flimsy demand of tax which is otherwise a nullity. How authorities below being tax employees can undo/alter/modify the act of Majlis-e-Shoora (Parliament)/Legislature by inducting words of their own choices in the law? If section 25 of the Act has prescribed a specific method for doing of a thing in a specific manner and provided I certain rights to the taxpayers, such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted. The power exercised by the assessing officer is a rare instance of overstepping the lawful jurisdiction. Audit Report was served on 15.05.2014 while show cause notice was issued on 16.05.2014, valuable rights provided by the legislature to the taxpayers under section 25 of the Act to avoid penalties cannot be usurped by IRS officials by applying law at their own whims. Under section 72 of the Act all officers employed in the execution of Act shall observe and follow the orders, instructions of the Board but it appears the officers below are not only above the law but also superior to the Board. Having given deep deliberation to the facts of this case and the relevant provisions of law, we find the show cause notice, consequential assessm ent order and order in appeal stuffed with grave illegalities and maliciousness, which render whole proceedings null and void in the eyes of law. Considering the above situation, we hold that the action of the ACIR does not find any support from legal provision of the Act and the Rules made there under. Impugned order is therefore, held to be void ab-initio, patently illegal, capricious, vindictive, biased and without lawful authority, hence, quashed because there is no concept of "unfettered discretion" in the fiscal laws and arbitrary exercise of discretionary powers has to be struck down as held in 2001 SCMR 256 that discretion becomes an act of discrimination when it is improper or capricious exercise or abuse of discretionary authority and the person against whom that discretion is exercised faces certain ppreciable disadvantages which he would not have faced otherwise.
15. In case of other crucial issue regarding charges of tax fraud, perusal of show cause notice as well as orders of authorities below show that no case of any tax fraud has been made out whereby the burden of proof can be shifted to the appellant. It has become clear from the definition of "tax fraud" that in order to attract the tax fraud provisions, initial burden lies on the department to show that the taxpayer, knowingly, dishonestly or fraudulently and without any lawful excuse had done any act or caused any act to be done or has omitted to take any action or has caused the omission to take any action in contravention of duties or obligations imposed under this Act or rules or instructions issued there-under with the intention of understating the tax liability or underpaying the tax. The initial burden, to prove that the provisions of tax fraud were attracted, lay on the department and not on the taxpayer and in the instant case, the IRS authorities below have miserably failed to discharge their onus and for this reason charge of tax fraud has no legal consequences and the department has been failed to establish any such act against the appellant. Reliance may be placed on 2004 PTD 868 and 2007 PTD 468. The charge of tax fraud vide order dated 05.06.2014 has no legal consequence in the light of above referred judgment wherein it has been laid down that "in order to attract the provision of tax fraud the initial burden lies on the department and not on the accused person." In another case 2011 PTD 866, it is held "initial burden to prove, that the provisions of tax fraud were attracted, lied on the respondent/ department but it has failed to discharge the onus and for this 'reason charge of tax fraud has no legal consequence in the light of judgment of Hon'ble High Court, in the case of Messrs Al-Hilal Mines. The department is not in possession of any documentary evidence to prove alleged tax fraud; therefore, order so passed on 05.06.2014 is patently illegal which has been passed solely to penalize the appellant for taking stand against the revenue functionaries allegedly involved in corrupt practices. Confirmation by the appeal commissioner is based on wrong application of law without appreciating the legal as well as factual position of the case, hence disapproved. If the department is permitted to conduct the void proceedings without adhering to any lawful jurisdiction then it will compromise the neutrality of the taxation system. It will also create a statutory anomaly whereby the department has to exercise jurisdiction within four corners of law but in this case the department is doing injustice with the appellant on its own whims. Act of assessing officer to pass order and confirmed unlawfully by appeal commissioner is declared as ab-initio void having no effect in the eyes of law. The learned appeal commissioner ought to have acted as an unbiased and impartial umpire otherwise it will be very hard to escape from the allegations of mala fides and maladministration of justice. When an illegal action will flow from a public functionary, it will certainly be tainted with mala fide. The learned appeal commissioner has maliciously and wrongly held that the appellant failed to satisfy and build up his case even at this forum. Being public servants, authorities below cannot exercise unfettered powers without any check and balance.
16. It is further observed that section 36 of the Act empowers the department to recover the amount short paid/not paid/erroneously refunded, yet the action under this section cannot be taken unless the taxpayer has been served with a SCN. In the instance case SCN under section 36 has admittedly not been issued/served upon the appellant, therefore, order passed by ACIR is held to be an order without lawful jurisdiction. Section 11(3) of the Act was never existed in the statue book for the period under appeal i.e., July 11 to June 12 but no comments were offered by the department. It is the duty of the court to weigh conflicting evidence and to draw its own inferences and conclusions in order to administer substantial justice. But in this case, N the learned appeal commissioner has turned a deaf ear to the assertions of appellant and has miserably failed to take notice of the departmental illegalities, perverse and patently illegal acts. The issue of a faulty show cause notice was considered by the Supreme Court in the case of Caltex v. Collector (2006 SCMR 1519) and their lordships while elaborating the issue observed that "...Under section 36 of the Act, the cases of non-levy of tax or short levied or erroneously refund are divided into two categories.
Failure of the authorities issuing show-cause notice to disclose such grounds and reasons may render the notice invalid. The show-cause notice carrying the defect of vagueness may not stand to the test of judicial scrutiny....". This issue was also considered by the Hon'ble Apex Court in 2001 SCMR 838 and their lordships observed that a vague notice fails to meet out the requirement of law. More -precisely, their lordships observed "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 same manner as prescribed by law or not at all".
17. It is a well settled principle of law that where the foundation is defective, the entire edifice built thereon would fall to the ground. Reliance may be placed on the judgment of Hon'ble Apex Court cited as 2007 SCMR 818 and 2007 SCMR 1835 wherein their Lordships observed "It is a settled law that when basic order is without lawful authority then the superstructure built on it would have to fall on the ground automatically". The law laid down by the Honorable Apex court in the above cited cases is binding by virtue of the Article 189 of Constitution. Reliance is placed on 2007 PTD 1458 wherein it has been laid down "It is settled law that once the issues are taken to the Apex Court and the issues are decided at that level then the controversy must be laid to rest. The judgments of Honorable Supreme Court are binding on all the judicial and administrative forums in the country".
Reference in this behalf may be made to the cases of E.A. Evans v. Muhammad Ashraf (PLD 1964 SC 536), Atta Muhammad Qureshi v. The Settlement Commissioner (PLD 1971 SC 61), Muhammad Yousaf Khan v. Muhammad Ayub (PLD 1972 Peshawar 151) and Dost Muhammad v. Government of Balochistan (PLD 1980 Quetta 1). The authorities cannot be allowed to exercise discretion at their whims, sweet will or in an arbitrary manner; rather they are bound to act fairly, evenly and justly.
Reference may be made to the cases of Abid Hussain v. PIAC [2005 PLC (CS) 1117], Abu Bakar Siddique v. Collector of Customs (2006 SCMR 705), Walayat Ali v. PIAC (1995 SCMR 650). In the case of Sharp v. Wakefield [1891 AC 173] Lord Halsbury has observed that when it is said that something is to be done within the discretion of the authorities, it means that something is to be done according to the rules of reason and justice, not according to private opinion, according to law and not, humor. It is to be, not arbitrary, vague, and fanciful, but legal and regular. And it must be exercised within the limit, to which an honest man competent to discharge of his office ought to confine himself. The said case was relied upon by Indian Supreme Court in the case of Union of India v.
Kuldeep Singh [2004 (2) SCC 590]. In the cases of State of U.P. v. Muhammad Nooh (AIR 1958 SC 86), Pratap Singh v. State of Punjab (AIR 1964 SC 72) and Fashih Chaudhary v. D. G. Doordarshan [(1989) 1 SCC 189], it has been held that if the act complained of is without jurisdiction or is in excess of authority conferred by statute or there is abuse or misuse of power, a court can interfere.
In such an eventuality, mere fact that there is denial of allegation of mala fide or oblique motive or of its having taken into consideration improper or irrelevant matter does not preclude the court from enquiring into the truth of allegations leveled against the authority and granting appropriate relief to the aggrieved party. If the power has been exercised on a non-consideration or non- application of mind to relevant factors the exercise of power will be regarded as manifestly erroneous. If a power whether judicial, quasi judicial or administrative is exercised on the basis of facts which do not exist and which are patently erroneous, such exercise of power will stand vitiated. The ACIR is not clear in her mind, where and what is violation of law in this case except having clarity on one thing to create huge demand of tax by inducting word of her own choice "Vehicle Dealer" in Chapter II ibid. Relevant portion speaks itself: Page 9 of Order: "These provisions are not applicable to motorcycle dealers, vehicles dealers and supplies of electric home appliances." The registered person is required to pay the remaining sales tax Rs.6,795,085/- on the sales (declared) of spare parts of the motor vehicles. In case, if it is established that the registered person is a retailer then the sales tax (principal) would be chargeable Rs. 16,150,665/-.
Page 8 of Order: Output tax (Calculated)Rs.150,739,540/- Short payment of sales tax on suppliesRs.16,150,665
18. It is quite strange to note how and under which provision of the Act, one business activity of a taxpayer can be charged and treated with three different amounts under the garb of taxes using umbrella of audit. In the instance case three different alien amounts have been referred by the assessing officer like Rs.6,795,085/-, Rs.150,739,540/- and Rs.16,150,665/-. It is also observed with grave concern that both authorities below never compared the four quarterly sales tax returns of the appellant taxpayer with the twelve monthly sales tax returns of the suppliers of the goods Honda Atlas Cars Pakistan Limited and buyers of the goods liable to pay sales tax at standard rates who are limited Insurance Companies. Without taking any support from the law enacted by the legislature the authorities below blindly follows the interpretation made by some private persons with the following fanciful remarks "...These provisions are not applicable to motorcycle dealers, vehicle dealers and supplies of electric home appliances". Keeping in view of the strange facts enumerated in this order, it is inalienable to highlight that maladministration in any wing of Board can be taken notice by the wafaqi tax mohtasib and that forum could suggest suitable strong measures to curb the maladministration in view of the facts of a particular case. The appellant may, if so advised, if he had any grievance and considered that there is some high handedness, amongst others -he can file a complaint before the mohtasib, who can provide effective redress, in a case like the present one. That forum has several attributes of a court in many aspects of its powers. It can also move in a matter promptly whenever so needed. At the same time it does not suffer from some of the handicaps, due to the technicalities of procedural nature, which operate as impediments or thwart such like action by the courts. For example the limitation of non-availability of an alternate remedy in the case for the High Court under Article 199 of the Constitution, is not applicable to the said forum. In this context it can be safely concluded, that it can provide the effective and adequate remedy to the appellant against the alleged maladministration on the part of authorities below. It is the tendency of the authorities that often they act on their personal whims and fail to follow the commands of law, but in such a happening they are not protracted by law and the cases made out by them are going to be defeated. With the foregoing detailed observations in the earlier part of this order and categorical remarks, the request of the appellant to suggest disciplinary action against the authorities below is out of the domain of this court, hence, not entertained.
19. The Apex Court of Pakistan in 2006 SCMR 1713 has observed "By now, it is well settled that any order which suffers from patent illegality or is without jurisdiction, deserves to be knocked down "PLD 1958 SC 104, PLD 1973 SC 326, PLD 2002 SC 630, 2003 SCMR 50, 2004 SCMR 28, 2004 SCMR 1798"
In the instance case the revenue has miserably failed to bring forth any material evidence whatsoever to substantiate allegations including tax fraud. It is a well established principle of law that a party making an allegation must bring material evidences to prove the same and any action which is based upon no evidence or flimsy, fanciful grounds, is not permitted by any law of the land. There is no room for any intendment and there is no presumption as to tax, resultantly the consequential penalties along with specific penalty of Rs.40,000/- for non-filing of returns, Rs.20,000/- for wrong filing and Rs.5,000/- for sales tax registration shall stands vacated.
20.It is observed that the authorities below never examined the electronic web portal of the appellant wherein no option to file monthly sales tax returns has been provided but only option provided by the Board is to file sales tax returns on quarterly basis, in case of charges on account of short payment of sales and excess input tax for Rs.770,285/- and Rs.856,398/- respectively. Even the report presented by the appellant picked from electronic web portal computerized risk based evaluation of sales tax shows Nil discrepancy. Both officers below never compared the four quarterly sales tax returns submitted by the appellant with the twelve monthly sales tax returns submitted by the suppliers Honda Atlas Cars and buyers of the goods insurance companies who are liable to pay sales tax at standard rates. The act of ACIR to penalize the appellant at her own whims is highly unjust and equivalent to overstepping the lawful jurisdiction. In case of wrong input claim it appears 70 pages of appeals papers have wrongly been ignored and skipped by the learned CIR(A) while the appellant duly argued the issue before the learned CIR(A) that there is a valid input tax available with the appellant for Rs.18,79,4822/- but the appellant waived the major portion due to limitation provided under Chapter-II of the Sales Tax Special Procedures Rules, however, while disposing of the appeal said issue remained untouched by the learned CIR(A) without any logical lawful justification. The impugned proceedings through show cause notice have failed to reflect whether alleged act of short payments were the result of collusion or the same was a deliberate step to deprive/ deceive the public exchequer. The onus to prove the allegations of collusion or of a deliberate act lay on the shoulders of the revenue. When law specifies a particular manner and Procedure then it is obligatory for the functionary of the state to adhere to the same and comply with it in all respects and any negligence, failure or omission to do so invalidate R the proceedings on account of which whole superstructure raised on such defective foundation automatically crumbles down, therefore, tax imposed on account of short payment of sales tax for Rs.770285/- is set at naught being a nullity in the eyes of law. In case of other issue regarding excessive claim of input tax, a plain reading of the impugned appellate order show that this is not a speaking order in which specific issues raised by the appellant regarding availability of valid input tax for Rs.18,79,482/- have not been discussed and dealt with judiciously but ignored abruptly. The controversy is not difficult to resolve whether the taxpayer has made certain payment of sales tax as input tax to Honda Atlas Cars. The appellant claims that documentary evidence in shape of certificate duly issued by Honda Atlas Cars was filed, not only with the department but also provided with the appeal papers, however, the learned CIR(A) has made no observation about the availability of sufficient input tax in the hands of appellant. The appeal commissioner is legally obliged to examine this particular contention of the appellant from relevant record and if this contention is found correct then propriety demands that the revenue should allow it to the appellant without any hitch. It is now well-settled law that an authority exercising statutory powers of adjudication/assessment or appeal affecting valuable rights of the parties, shall act as quasi judicial authority and while exercising these powers must pass a speaking order duly supported by reasoning showing due application of mind to facts as well as law applicable. Any order lacking such criteria is not only illegal and without lawful authority but also of no legal effect. The Superior Courts in number of judgments have time and again disapproved the passing of such perfunctory orders in the causes involving valuable rights of the parties and have also settled that in order to maintain the sanctity of both quasi-judicial and administrative proceedings, it is necessary to maintain oversight on the performance of adjudicating authorities whose orders should not be entirely dependent upon the opinions and comments of the assessing officers. The impugned orders, without any iota of doubt, are perverse and improper based on wrong inference drawn by the learned authorities below from the material evidences available on record and thus, the same are patently illegal, non-judicious and non- speaking. The basic ingredients of due process of law for passing a 'judicial order' are miserably missing in the instance case of the appellant. A non-speaking and sketchy order cannot be said to meet the requirements of the judicial order, which must contain the contentions raised before the authority by the rival parties and its reasoning based on evidential substance for passing a reasoned order in accordance with the relevant provisions of the law which is Sales Tax Act, 1990 read with Section 24-A of the General Clauses Act, 1897.
21. Keeping in view the submissions made on behalf of appellant and considering the facts of the case, we are of the view since the case of appellant has not been considered judiciously by the learned CIR(A) who is the first fact finding authority under the hierarchy of Inland Revenue after passing of any order by the assessing authority. Since the claim of the appellant has not been discussed/rebutted by the learned CIR(A) in clear unambiguous words, we feel it is deemed appropriate to direct the learned CIR(A) to examine the record of appeal, obviously after giving proper and reasonable opportunity of being heard to the appellant, who says that he has all the necessary proof of sales tax input tax properly certified by Honda Atlas and also duly provided in appeal, which will be examined fairly and judiciously and then pass a speaking judicious order on the issue preferably within sixty (60) days of receipt of this order. The appellant is also directed to highlight the issue before the learned CIR(A) out of appeal documents as claimed and cooperate with the learned appellate authority for adjudication of the matter as per law.
22. The subject appeal stands decided in the manner and to the extent discussed above.