CH. SHAHID IQBAL DHILLON (JUDICIAL MEMBER).--- This appeal has been filed under section 46 of the Sales Tax Act, 1990 at instance of the taxpayer/appellant calling in question the Order-in- Appeal No.506/2016 dated 26-08-2016 passed by the learned CIR (Appeals), R.T.O., Faisalabad.
2. Succinct facts leading to the instant case are that the appellant has adjusted input tax worth Rs.1,271,187/- during the financial year commencing from 1st July-2011 ending on 30th June-2012.
Based on the said omission and irregularities, adjudication proceedings were initiated by the taxation officer by way of issuance of show-cause notice dated 09-02-2016 under section 11(2) of the Sales Tax Act, 1990 for recovery of adjusted amount of input tax besides penalty on account of non-production of record and late-filing of sales tax returns. Resultantly, adjudication proceedings were culminated on ex pane basis in passing of an order dated 15-02-2016 which was challenged before the learned CIR(A) who instead of discussing the legal side of the case and replying the query raised before him, through cogent reasoning, utilized his energies to upheld the findings of the learned adjudicating authority. Learned counsel for the appellant at the very outset has vociferously contended that impugned show-cause notice and consequent adjudication order issued under section 11(2) of the Act for recovery of sales tax are illegal, void ab initio and without jurisdiction. It was forcefully urged on behalf of the appellant that assumption of jurisdiction by the learned adjudicating authority was an act contrary to law, as such, all the subsequent orders of authorities below based thereupon are also liable to be set aside. Further substantiating his contention, the learned AR submitted that an inchoate and vague show-cause notice without providing any detail of the suppliers and their invoices was served upon the appellant. He pointed out that the notice was not self-contained and what to speak of compliance, it was not possible to comprehend it unless the relevant material was sorted out with the office of the respondent.
3. Conversely, when the learned DR confronted with the situation cited supra, in counter arguments, he has assailed the case on similar grounds and charges as leveled earlier in impugned show- cause notice as well as adjudged in consequent orders and has failed to put-forth any explanation to justify any deviation from the arguments advanced by the learned AR and has fully supported the orders passed by both the authorities below simply re-endorsing the basis evolved therein.
4. We have heard both the rival parties at a considerable length and have also gone through the case record as well as relevant provisions of law with their able assistance. Before, we discuss the arguments addressed at the bar, it is worthwhile to refer to the operative part of impugned show- cause notice relevant for the purpose of this case:-- "Now on the basis of aforesaid facts, you M/s. Abdullah Enterprises are charged with the violation of sections 3, 7, 8, 10, 22, 23, 25, 26 and 73 of the Sales Tax Act, 1990 and are called upon to show cause as to why penalty under section 33(9) (c) of the Sales Tax Act, 1990 may not be imposed and sales tax amounting to Rs.1,271,187/- may not be recovered from you under section 11(2) of the Sales Tax Act, 1990 along with default surcharge and penalty under sections 34 and 33 of the Act."
(underlining for emphasis)
5. On a careful consideration of the pros and cons of the controversy between the parties and in- depth consideration of the submissions advanced at the bar, we of the firm opinion that instant case is neither a case of assessm ent of tax on the basis of any short-payment nor of non-payment nor of inadmissible input tax credit or refund claimed therefore, assumption of jurisdiction under section 11(2) of the Act for recovery of adjusted amount of input tax without issuing show-cause notice under section 11(3) ibid is illegal and without jurisdiction. It is well-settled principle of law that if the Statute enacts that certain action shall be taken in a certain manner and in no other manner, such requirement is absolute and that negate to attend or non-compliance will invalidate the whole proceedings. There is no doubt that sections 11(2) and 11(3) of the Act are distinct in nature and issuance of separate show- cause notices under these sections are precedent condition for assumption of jurisdiction. Section 11(2) of the Act would apply only where any person has short paid or has not paid tax due on supplies made by him or has claimed input tax credit and refund which is not admissible under law whereas section 11(3) of the Act can be invoked in case of taxpayer's 'collusion' with the tax officials or due to his 'deliberate Act'. Since, show-cause notice issued in the instant case for recovery of adjusted amount of input tax is completely silent with regard to 'collusion' or 'deliberate act' on the part of the appellant, the very acquiring of jurisdiction is illegal and ab initio void. For reference, relevant provisions of sections 11(2) and 11(3) of the Act are reproduced herein below:-- Section 11(2) Section 11(3)
Where a person has not paid the tax due on supplies made by him or has made short payment or has claimed input tax credit or refund which is not admissible under this Act for reasons other than those Specified in subsection (1), an officer of Inland Revenue shall after aWhere by reason of some collusion or deliberate act any tax or charge has not been levied or made or has been short levied or has been erroneously refunded, the person liable to pay any amount of tax or charge or the amount of refund erroneously made shall be served with the notice requiring him to notice to show cause to such person, make an order for assessment of tax actually payable by that person or determine the amount of tax credit or tax refund which he has unlawfully claimed and shall impose a penalty and charge default surcharge in accordance with sections 33 and 34.show cause for payment of the amount specified in the notice.
6. The provisions of sections 11(2) and 11(3) of the Sales Tax Act, 1990 are very much clear in their tone and tanner that where a tax due on supplies has not been paid or has been short paid or has been claimed as input tax credit or refund, which is not admissible under the Act, proceedings are to be initiated under section 11(2) of the Act however, section 11(3) of the Act deals with a different situation where any tax or charge has not been levied or made or has been short levied or any amount which has been refunded/adjusted due to some collusion or deliberate act, the person liable to pay any amount of tax or charge or the amount of refund erroneously made or adjusted shall be served with a notice within five years, of the relevant date, requiring him to show cause for recovery of the amount specified in the notice. In the present case, amount of input tax has already been adjusted by the appellant hence; recovery of the same was to be made under section 11(3) of the Sales Tax Act, 1990 and not under section 11(2) of the Act. The unarguable conclusion thereto is that any order passed under section 11(2) of the Act can be equoted with an assessment order determining the amount of tax actually payable by a registered person and in no way, can be purported to be a judgment for adjudging any recovery of tax or charge, non-levied or made or has been short levied or has been erroneously refunded or adjusted in its legal semantics and jurisprudence. Reliance in this regard can safely be placed on the judgment of Division Bench of this Appellate Tribunal in case of "M/s. Ahsan Enterprises, Faisalabad v. The CIR(A), Faisalabad and others" reported as (2015 PTD (Trib.) 1839).
7. Needless to observe that the show-cause notice issued to appellant has failed to reflect whether alleged act of adjustment of input tax was the result of collusion or the same was a deliberate step to defraud the Government. The phrase "where by reason of" mandates that the revenue authority cannot assume jurisdiction and issue show-cause notice for recovery of sales tax until and unless, the revenue authority is seized of sufficient evidence "by reason of" which 'collusion' or 'deliberate act' is established. The onus to prove the allegations of collusion or of a deliberate act lay on the department. In case of recovery of any tax or charge has not been levied or made or has been short levied or has been erroneously refunded or adjusted, it is mandatory for the department to show that the taxpayer had the knowledge or had the reason to believe that his acts are the result of 'collusion' or are 'deliberate' otherwise; allegations would be vague and would not be in E accordance with law. Since, prerequisite show-cause notice as required by law has not been served upon the appellant; therefore, no straightforward notice for recovery of alleged input tax could be issued. Validity of the show-cause notice is a precedent condition for acquiring the lawful assumption of jurisdiction by the revenue authorities to pass the impugned orders and the show- cause notice and consequent orders have herein been held to be patently devoid of jurisdiction and the lawful authority. The ratio decidendi in judgment of Hon'ble High Court, Lahore in case of "M/s. lnam Packages, Lahore v. Appellate Tribunal Customs, Central Excise and Sales Tax, Lahore" reported as (2007 PTD 2265) is the most relevant in all fours to the case at instance of the appellant.
8. A perusal of impugned show-cause notice further reveals that the same is vague, defective, flawed and legally invalid as it does not contain necessary particulars of the suppliers and detail of invoices, etc nor was the detail of the transactions confronted therefore, failed to meet , the foundational legal requirements. Non-specification of material particulars incurring disentitlement of adjustment of input tax vitiates the whole proceedings. It is well-settled law that a show-cause notice must contain a complete and comprehensive charge-sheet along with material evidences provided therein enabling the taxpayer to defend himself and a notice not disclosing essential particulars of the charges, any action based upon it would also be illegal and void ab initio.
Therefore, notice should not be issued mechanically and hypothetically, but should exhibit a proper application of judicial mind of issuing authority as in the financial Statutes, money after all does matter. The authority has to state and disclose in the show-cause notice, the purpose for which the party is required to produce the documents or to supply information for proving the genuineness of the transactions. Unless, such purpose is specified in the notice, it will be a matter of any body's guess and the accused party will be put into dragging inquiry without any specific particulars of the allegation or facts disclosed to him. Even in cases of suspicion of commission of illegality, details must be provided to the party to enable him to have an opportunity to produce all the relevant documents and disclose information. It is trite law that where cogent reasons are not communicated to concerned person, the show-cause notice will have no effect on the rights of registered person hence, subject show-cause notice cannot be termed a valid show-cause notice in its true meanings as such, the same is void and of no legal effect. We therefore hold that impugned show-cause notice without disclosing essential particulars of the charges leveled against the appellant and without disclosing circumstantial facts and material evidences unveiling nature of allegations with detailed information and circumference of charge-sheet, on basis of which the appellant has been proceeded against; is an action taken in violation of the' principles of natural justice and accordingly struck down being not only illegal and without jurisdiction but also contrary to the basic fundaments embodied in the Constitution of Pakistan. The cardinal principle of interpretation of a fiscal statute seems to be that all charges upon the subject are to be imposed by clear and unambiguous words. There is no room for any intendment nor there is any equity or presumption as to a tax. In this regard, we gain strength from the landmark judgment of Hon'ble Supreme Court of Pakistan in case of "Assistant Director Intelligence and Investigation, Karachi v. M/s. B.R. Herman and others" reported as PLD 1992 SC 485.
9. In view of what has been stated above, the impugned show-cause notice issued in the instant case without fulfilling mandatory requirements of law is illegal and without jurisdiction. Be that as it may, consequent orders are also declared to be illegal, ab initio void and nullity in, the eyes of law and accordingly, are hereby set aside. The appeal is accepted as prayed for and disposed off in the manners as dilated supra.