' The titled sales tax appeal has been filed by the registered person against the impugned Order- in-Appeal No, 08/2012 dated 02-12-2013 passed by the Commissioner Inland Revenue (Appeals) in appeal No, 291/24-12-2012 filed by the registered person against the Assessment Order No, 08/2012 dated 21-11-2012 passed by the DCIR, Audit Unit VI, Zone II, RTO, Peshawar. Now, the appellant has contended on the following grounds:--
1. That the CIR(Appeals-IV), Islamabad has erred in law and failed to consider the case law proving the principle of law that the learned Deputy Commissioner Inland while issuing the subject show cause notice dated 23.05.2012 involving Rs, 344,251,356/- Revenue has acted beyond his pecuniary jurisdiction as laid down in S.R.O. 555(1)/96 dated 1st July, 1996. SRO 555(1)/96 dated 1st July 1996 which remained in the field till it was rescinded vide SRO 594(I)/2012 dated 01-06-2012.
SRO 555(I)/96 dated 01.07.1996 is linked with sections 11 and 36 of the Sales. Tax Act, 1990 and the show cause notice has also been issued under these sections.
2. That the CLR.(Appeals-IV),Islamabad has not at all examined our submission that the Assessment Order No, 08/2012 has not been passed within the period stipulated in the Sales Tax Act, 1990.
3. That no one should be prejudiced by an act of the state/state functionaries. The Sales Tax Return can only be filed electronically/ online on the then prescribed form i,e, S.T.R.7. The Appellant has declared and the web based Sales Tax return format has automatically adjusted the same amount against the input tax paid by the Appellant in the monthly sales tax returns as provided in the prescribed STR-7 Form.
4. It is settled law that a fiscal provision of a statute is to be construed liberally in favour of the taxpayer and in case of any doubt, the same is to be resolved in favour of the taxpayer/registered person. The formula given in the aforesaid STR.7 form should be implemented in favour of the Appellant.
5. That Chapter III of the Sales Tax Special Procedure Rules,2007 notified vide S.R.0 480(I)/2007 prescribes special procedure for collection and payment of sales tax on electric power. Rules 13,14 & 15 thereof read with sections 3,6,7,8 and 8-B ibid fully justify the addition of the sales tax @ Rs, 6/- KWH collected from the Steel Melters by PESCO in its output tax. The Appellant has paid sales tax on the purchase of electricity. However, if the Appellant is not allowed output tax collected on the supply of the same electricity - then it will be a clear case of double taxation not envisaged by the law. It may be added that the concept of sales tax in Pakistan is based on Value Added Tax
(VAT) philosophy and the entire burden of Sales Tax paid at different stages has to be passed on to the ultimate consumer of the 1 goods under VAT.
6. That the Federal Board of Revenue vide order C.No,3(15) STJ/09/33608 dated 20.08.2009 on the subject of "Re-opening of the Order-in-Original dated 21.07.2009 in respect of M/s. Karachi Electric Supply Company Ltd. Karachi passed by the Additional Collector Large Taxpayers Unit, Karachi" issued under section 45A(I) of the Sales Tax Act, 1990 has allowed the KESC adjustment of total Sales Tax collected including the amount calculated under Rule 58H from the Steel Melters in Karachi. In this case the KESC has also adjusted Sales Tax collected at fixed rate from the Steel Melters during the fiscal years 2007-2008 & 2008-2009. The relevant part of the order is reproduced below: "The order has been examined. The sales tax collected from steel sector through electricity bills has been allowed by FBR for inclusion in input tax of electric supplying companies in monthly Sales Tax/Federal Excise Return. Unless this is changed, action taken by M/s KESC is legal one and Order in Original No, 41/2009 dated 21.07.2009 in the instant case is liable for re-opening."
' To deny the same adjustment to PESCO would amount to discrimination between KESC and PESCO, which is not permissible under Article 25 of the Constitution of the Islamic Republic of Pakistan, 1973. It is settled principle of law that among equals the law should be equal and should be equally administered and that the like should be treated alike. Reliance is placed on 2000 SCMR 1956; PLD 2005 Lah. 428</i>.
IT IS SUBMITTED THAT THIS LEGAL POINT HAS NOT BEEN PREVIOUSLY RAISED BEFORE THIS HONORABLE TRIBUNAL AND DESERVES FAVORABLE CONSIDERATION.
7. That this Honorable Tribunal has previously decided the Appeal filed by PESCO in a similar case of Steel Melters, in the light of the judgment given by the Lahore High Court in Reference No, S.T.R.
105/2011 dated 06.10.2011. Later on, the Honorable Peshawar High Court upheld the decision again referring to the judgment given by the Lahore High. Court. It is respectfully submitted that the facts of the PESCO's case Lahore High Court case are distinguishable.
' It is submitted that in the Lahore High Court judgment, LESCO has charged:
(i) Sales Tax from Steel Melters u/s 3(1)(a) ibid for the supply of electricity made to the Steel Melters and, the other at fixed rate on behalf of the F.B.R. as final discharge of Sales Tax liability of the Steel Melters payable by Steel Melters for their subsequent supplies.
' The Lahore High Court has disallowed adjustment of input of the second collection. However, LESCO has been allowed adjustment of the Sales Tax u/s 3(1)(a). It is categorically pleaded that PESCO has not collected the aforementioned two types of Sales Tax from the Steel Melters.
Chapter XI relating to special procedure for payment of fixed tax @ Rs, 4.75 per KWH by Steel Melters, Re-roller and ship breakers was inserted in the Sales Tax Special Procedure Rules, 2007 vide SRO 678(1)/2007 dated 6.07.2007. This rate was enhanced to Rs,6 per KWH vide SRO 525(1)/2008 dated 11th June 2008 w.ef 1st day of July 2008. The CBR clarified this levy vide C.
N0.3/13-STB/98 dated 28th July 2007 as follows: "It is clarified that under provisions of SRO 678(1)/2007 dated 6.07.2007, Steel Melters and Re-rollers shall pay sales tax @ Rs, 4.75 per unit of electricity billed/consumed by them which is inclusive of their sales tax liability on electricity."
' It is submitted that this clarification by FBR was not brought to the notice of the High Court. It is submitted that Column NO.19 titled "Accumulated debit" in STR-7 Form as applicable in 2011 provided automatic adjustment of Sales Tax paid by Steel Melters against the input tax of PESCO.
However a clarificatory amendment has been made in Sales Tax return vide SRO 1004(1)/2012 dated 17th August 2012 whereby the fixed Sales Tax paid by the Steel Melters has been bifurcated in following two parts: "13. Electricity supplied to steel sector KWH 13a. Sales Tax portion of Sr. 13 collected at normal rate (adjustable against input)
13b. Remaining Sales Tax portion of Sr. 13 (non-adjustable input) = (13-13a)
15 Output Tax = (9+ 12+ 13a+ 14a)
17. Accumulated Debit= (15-16)"
' The above discussion clearly reveals that the facts of the LESCO case adjudicated by the Lahore High Court are different from the facts of the instant appeal and hence the ratio of the Lahore High Court judgment in LESCO's case is not applicable to PESCO and PESCO is entitled to adjustment of Sales Tax collected from Steel Melters.
8. That there is no provision in Chapter XI or section of Sales Tax Act, 1990 whereby the Appellant is precluded from claiming addition of tax collected under Rule 58H in its output tax. Any amount collected from consumers including Steel Melters is to be considered and constituted output tax adjustable under section 7 of the Sales Tax Act, 1990. No rule can be interpreted in conflict of the main statute and the subject rules do not affect the principle embodied in section 7.
9. That the appellant, as required by law, were electronically filing returns on the prescribed Form STR7 and Column 19 thereof automatically added the tax collected from Steel Melters under Column 15 in output tax as per rules and provisions of the Sales Tax Act, 1990. Thus there is no mens rea involved in this case. Even otherwise the concept of guilty intention is alien to a government owned organization as its functionaries do not gain even a single penny by non- payment of taxes. Hence imposition of default surcharge and penalty is not tenable. It has been held by Superior Courts that mens rea or willful default is essential ingredients for imposing punitive provisions of the Sales Tax Act, 1990.
10. That the audit of the Appellant for the period from July 2011 to December 2011 was conducted illegal and unlawfully.
11. That disallowing the addition of Sales Tax collected from Steel Melters @ Rs, 6/- per KWH in our output tax will enhance our refund of an equal amount. It is submitted that there is no loss of revenue involved in this case."
2. Brief facts giving rise to the present appeal are that during the desk audit of M/s Peshawar Electric Supply Company Ltd., Peshawar (the PESCO), it revealed that the PESCO has collected sales tax @ Rs, 6 per unit of electricity consumed from steel melters but adjusted the same against their input tax. It was alleged that the aforesaid sales tax has been collected under Chapter XI (Special Procedure for Payment of Sales Tax by Steel Melters, Re-rollers, Ship Breakers) of the Sales Tax Special Procedure Rules, 2007 and this amount was not adjustable as it was final and net discharge of tax liability of the steel melters. The assessing officer ordered recovery of Rs, 344,251,356/- u/s 11(2) and 36(1) of the Sales Tax Act, 1990 alongwith default surcharge and penalty equal to 5% of the amount of tax involved u/s 33 ibid. The Registered Person filed an appeal before the learned Commissioner Inland Revenue (Appeals), who upheld the decision given by the Deputy Commissioner Inland Revenue, hence this appeal before the Tribunal.
The learned AR contended that the DCIR (Respondent No, 3) while issuing the show cause notice dated 23-05-2012 u/s 11 and 36 has acted beyond his pecuniary jurisdiction of Rs, 1 Million as laid down in SRO 555(I)/96 dated 01-07-1996. He argued that this SRO was alive on 23-05-2012 when the show cause notice was issued. He relied on the judgments (i) PTCL 2015 CL. 787 --- M/s Engineers Associated Precast (Pvt.) Ltd. Vs. The CIR, RTO, Lahore, (ii) PTCL 2014 CL.262 --- M/s Siddique Enterprises, Faisalabad vs. The CIR, Faisalabad, (iii) 2013 PTD (Trib.) 316 - - M/s Chenab Board, Faisalabad vs. CIR(A) RTO, Faisalabad, (iv) 2013 PTD (Trib.) 1001 -- Central Power Generation Co. Ltd. Guddu vs. CIR, Zone, RTO, Lahore, (v) 2013 PTD (Trib.) 1189 -- M/s Malik Enterprises, Rawalpindi vs. CIR (Appeal-III), Islamabad, (vi) STA No, 126/LB/2012 --- Islam Engineers (Pvt.) Ltd. Lahore verses The Commissioner Inland Revenue Zone VIII, RTO II, Lahore, (vii) 2011 PTD 2128 --- [Karachi High Court] M/s Aluminum Processing Industrial International (Pvt.) Ltd. through Manager verses Pakistan through Chairman, Central Board of Revenue, Islamabad and 2 others, (viii) 2010 PTD 465 (Karachi High Court)--- Collector of Customs, Model Customs Collectorate of PaCCS, Karachi Vs. M/s Kapron Overseas Supplies Co. (Pvt) Ltd, Karachi, (ix) 2011 PTD (Trib). 467 --- M/s Interloop (Pvt)
Limited, Faisalabad Vs. Collector of Sales Tax, Faisalabad, (x) 2015 PTD (Trib.) 1112 --- M/s Peshawar Electric Supply Company, Peshawar.
The Counsel for the Appellant argued that the impugned assessment order has been passed in 184 days while Section 11 of the Sales Tax Act, 1990 provided a limitation period of 120 days to complete the proceedings thereunder and resultantly the impugned Assessment Order No, 8/2012 dated 21- 11-2012 by the DCIR is illegal and void. In this regard, he relied on (i) 2015 PTD 1068 (LHC) --- Commissioner Inland Revenue vs. M/s AZGARD NINE LTD., (ii) 2015 PTD (Trib.) 1112 --- M/s Peshawar Electric Supply Company, Peshawar, (iii) 2015 PTD (Trib.) 1094 --- M/s Al-Haseeb Corporation, Faisalabad vs. Additional Collector Customs, Faisalabad, (iv) 2015 PTD (Trib.) 1543 --- M/s Al Aziz Paper Mills, Lahore vs. Collector F.E. & S.T, Lahore, (v) 2014 PTD (Trib.) 448 ---M/s Fazal Paper Mills (Pvt.) Ltd., OKARA vs.CIR, RTO, Lahore, (vi) 2014 PTD (Trib.) 1233 --- M/s Elahi Traders, Faisalabad vs. Commissioner Inland Revenue, RTO, Faisalabad, (vii) PTCL 2005 CL. 841---CBR / Sales Tax Department V. M/s Pace International, Rawalpindi, (viii) 2013 PTD (Trib.) 537 ---Zamindara Paper Mills (Pvt.) Ltd. Lahore vs. CIR (Legal Division), RTO, Lahore, (ix) 2013 PTD (Trib.) 639 -- M/s Techno Fabrik (Pvt.) Ltd. vs. CIR Unit-VIA RTO, Karachi, (x) 2013 PTD (Trib.) 834 --- M/s Shahid Cable Industries, Lahore vs. CIR, Zone VIII, RTO II, Lahore, (xi) 2001 SCMR 676 ---Raja Khan vs. Manager (Operation),Faisalabad Electric Supply Company, (xii) 2009 PTD 2004 (H.C) ---M/s Meraj Din through Partner v. Collector Customs, Excise and Sales Tax (Appeals) Lahore and 2 others, (xiii) STR No, 21/2011 (H.C) ---Commissioner of Inland Revenue vs. M/s Innovox Industries, (xiv) 2008 PTD 578 --- M/s Hanif Straw Board Factory through Proprietor v Add. Collector (Adj.), Customs, Central Excise and Sales Tax, Gujranwala, (xv) 2013 PTD (Trib.) 2174 --- Army Welfare Trust, Rawalpindi vs. CIR,LTU, Islamabad and (xvi) 2007 PTD 430 --- M/s SabirDaud Exports vs. Secretary, Revenue Division, Islamabadand the CBR's letter C. No,1 (23) C (legal) 107 dated 06.02.2007.
5. It was further stated that previous judgments of Peshawar Tribunal and the Hon'ble Peshawar High Court are based on the Hon'ble Lahore High Court judgment in Reference No, 105/2011 dated 06-10-2011 involving Lahore Electric Supply Company (the LESCO). It was pleaded that the Hon'ble Lahore High Court judgment is not applicable to the PESCO's case in view of different facts of two cases as the LESCO has charged two types of Sales Taxes (a) Sales Tax from Steel Melters u/s 3(1)
(a) ibid for the supply of electricity made to the Steel Melters and, (b) the other at fixed rate on behalf of the F.B.R. as final discharge of Sales tax liability of the Steel Melters payable by Steel Melters for their subsequent supplies. According to him, the Hon'ble Lahore High Court has disallowed adjustment of input of the (b) collection, while the LESCO has been allowed adjustment of the sales tax u/s 3(1)(a) ibid. It was argued that the appellant/PESCO has not collected the aforesaid two types of sales tax from Steel Melters and has only collected sales tax @ Rs, 6 per unit.
It was also stated that the FBR has clarified vide letter C. No, 3/13-STB/98 dated 28th July 2007 that the sales tax paid by the Steel Melters and Re-rollers is inclusive of their liability of sales tax on electricity. In this regard, the learned AR relied on FBR's order C.No,3(15) STJ/09/33608 dated 20.08.2009 wherein the FBR has allowed KESC adjustment of sales tax collected from Steel Melters.
It was pointed out that aforesaid FBR's clarification dated 28-07-2007 & FBR's Order dated 20-08- 2009 were not brought to the notice of the Hon'ble Lahore High Court. Hence, the ratio of the LESCO's case is not applicable to the Appellant/PESCO's case.
The learned Counsel for the Appellant submitted that the Columns 13,13A, 13B, 15 and 17 of the S.T.R. 7 Form as applicable in 2011 provided automatic adjustment of sales tax paid by the Steel Melters against the input tax of the Appellant/PESCO. The sales tax return could only be filed electronically and adjustment of input tax relating to Steel Melters was made by the FBR's computerized system itself for no fault on the part of the PESCO. It was contended that no one should be prejudiced by an act of the State/state functionaries. In this regard, reliance was placed on 1997 SCMR 209 ---The State vs. Asif Adil, 2002 SCMR 134 --- Sajawal Khan Vs Wali Muhammad & Others.
The learned Counsel for the Appellant pleaded that doubt if any in case of fiscal statute is to be resolved in favour of the taxpayer. Reliance in this regard was placed on the decision of the Hon'ble Supreme Court reported as (1992) 66 Tax 246 SC Pak.-- Mehran Associates Limited vs. CIT, Karachi, 2003 PTD 760/2004 STR 369 --- M/s Hinopak Motors Limited vs. Federation of Pakistan, (1996) 74 Tax 9(H. C.Lah)--- Rijaz (Pvt.) Ltd. vs. Wealth Tax Officer, Lahore, and 2003 PTD (Trib.) 2525 --- Appeal No, 1600/LB/2001.
It was contended that the imposition of penalty and default surcharge was not lawful as there is no mensrea involved in this case. Reliance was placed on the decision of the Hon'ble Supreme Court reported in 2004 PTD 1179 (S. C.)/PTCL 2004 CL. 224 --- D.G. Khan Cement Company Ltd. Vs. Federation of Pakistan, PTCL 2009 CL 250 ---M/s Shahmurad Sugar Mills vs. The Collector of Customs, Sales Tax & Federal Excise, Hyderabad, PTCL 2001 CL 627 --- Nestle Milk Pak Ltd. Vs. Addl. Coll. (AO, Multan, PTCL 2006 CL 209 --- M/s Cherat Cement vs. Collector of Customs, Sales Tax and Central Excise (Adjudication) Rawalpindi, and PTCL 1995 CL 415 --- M/s Lone China (Pvt.) Ltd. vs. Additional Secretary, Ministry of Finance, C.B.R., Karachi.
On the other side on behalf of the Respondents, the learned Departmental Representative explained that the Assessm ent has been finalised u/s 25 of the Sales Tax Act, 1990. In particular he referred to Section 25(3) ibid which provides that after completion of the audit, the officer of the Inland Revenue may after obtaining the explanation of the Registered Person on all the issues raised in the audit shall pass the order u/s 11 ibid. As regards the expiry of period of limitation to finalise the assessm ent, he stated that the Appellant/PESCO has sought adjournments from June 2012 to November 2012 and CIR, RTO, Peshawar has granted 60 days extension in the period to decide the case by the DCIR. He stated that the Hon'ble Supreme Court vide Civil Appeal No, 2036/2004 has held that no order can be scrapped on the ground of limitation. However he did not provide a copy of the Hon'ble Supreme Court's judgement.
As regards the merits of the case, the learned DR referred to Chapter XI of the Sales Tax Special Procedure Rules, 2007 and argued that the sales tax paid by the Steel Melters is not adjustable against input tax of the Appellant/PESCO. He also referred to the decision given by the Peshawar Tribunal and the Hon'ble Peshawar High Court but did not rebut the explanation given by the learned Counsel for the Appellant that these orders are based on the Hon'ble Lahore High Court judgment which is not applicable to the facts of this case.
During the brief counter arguments, the learned LA for the Appellant submitted that extension of limitation period order for sixty days by the Commissioner Inland Revenue has not been placed on record and appears to be an afterthought because it has not been mentioned in the Assessment Order and even in the impugned Order-in-Appeal by the Commissioner Inland Revenue (Appeals), though this issue of limitation was specifically raised before the Commissioner Inland Revenue (Appeals).
We have perused the impugned orders of the officers below, available record of the case, the case law and documents referred and have given careful consideration to the record and submissions made by the Appellant and the Respondents. The Appellant's contention of the impugned show cause notice dated 23.05.2012 being hit by the SRO 555(I)/96 dated 01.07.1996 which provides a maximum pecuniary jurisdiction of Rs, 1 Million in the case of the DCIR, is valid. The argument relating to this SRO having been rescinded later, is not valid because the same was in the field on 25.05.2012 when the show cause notice was issued. It may be mentioned that this Tribunal has already held in a number of cases that show cause notice issued in excess of the monetary limits prescribed by the SRO 555(I)/96 dated 01.07.1996 during its validity period are unlawful. It is settled law that orders passed without jurisdiction would be non-est in the eyes of law and any transgression of pecuniary jurisdiction would render entire exercise of authority to be void ab initio and illegal. The judgments relied upon by the learned AR of the Appellant in this regard are in order.
Resultantly, the impugned Assessm ent Order and Order-in Appeal by the learned CIR (Appeals) are held to be void on this legal ground.
As regards the issue relating to period of limitation to decide the case, this case has been finalised in 184 days. Section 11(3) provides a maximum of 30 days to be deducted from the specific period on account of adjournments while the Commissioner Inland Revenue for reasons to be recorded can extend this period for 60 days. Even otherwise, it has been rightly contended by the learned AR that the order of the Commissioner Inland Revenue extending the period to decide the case by 60 days does not find mention in the impugned Assessment Order and the impugned Order-in- Appeal. Section 11 provides a period of 120 days which can be stretched by another 30 days -- 150 days to decide the case. But in this case the matter has been decided in 184 days so the Assessm ent Order is held to be hit by the limitation rendering it void u/s 11(3) of the Sales Tax Act, 1990. The CBR's clarification dated 06.02.2007 and judicial pronouncements by this Tribunal and the Hon'ble Superior Courts relied upon by the Appellant fortify the above conclusion.
The submission made as to the automatic adjustment of the sales tax paid by Steel Melters according to S.T.R. 7 Form has not been disputed by the learned DR and are held to be in order. It is also apparent that the ratio of the Hon'ble Lahore High Court decision referred to in the forgoing paragraphs and relied upon by the Peshawar Bench of this Tribunal and Hon'ble Peshawar High Court is not applicable to this case as the Appcllant/PESCO has only collected one sales tax while the Hon'ble Lahore High Court decision is based on payment of two types of sales tax and permission to adjust sales tax u/s 3(1)(a) ibid. The reliance placed on FBR's letter dated 06.02.2007 and FBR's Order dated 20-08-2009 is also valid.
In view of the above discussed facts and the legal position the appeal is allowed.