CH. SHAHID IQBAL DHILLON, JUDICIAL MEMBER.---Titled appeal has been filed under section 46 of the Sales Tax Act, 1990 ("the Act") at the instance of registered person calling in question Order-in- Appeal No. 574/2016 dated 03-10-2016 passed by the learned Commissioner (Appeals) Inland Revenue, Faisalabad.
2. Succinct history of the instant case are that Inland Revenue Officer, on selection of audit by FBR, has conducted audit of appellant's sales tax records for the financial year commencing from 1st July-2012 ending on 30th June-2013 which is resulted into certain discrepancies on basis of which a show-cause notice dated 15-02-2016 was issued as to why an amount of sales tax worth Rs.
793,609/- may not be recovered under sections 11(2) and 11(3) of the Act and as to penalty under sections 33(1) and 33(9)(c) ibid may not be imposed in violation of sections 6, 7, 11, 22, 23, 25 and 26 of the Act along with default surcharge under section 34 ibid. Resultantly, adjudication proceedings were culminated on ex parte basis and appellant was proceeded in absentia without affording him with any opportunity of hearing vide an order dated 29-02-2016 which was challenged before the learned CIR(A) who partially vacated demand of sales tax and upheld liability to the extent of Rs.
431,548/- vide its order dated 03-10-2016 on issue of (i) inadmissible input tax adjusted (ii) late- filing of sales tax returns (iii) suppression of sales. Learned counsel for the appellant has vociferously contended that allegations against the appellant are baseless because the appellant procured the alleged goods under coverage of proper sales tax invoices issued under section 23 of the Act as duly incorporated in supplier's sales registers, sales tax returns, summary statements and due tax was also paid in its monthly sales tax returns for periods in question and too all payments were made through banking channel as requisitioned under section 73 of the Act therefore, appellant has rightly claimed/adjusted input tax under section 7 of the Act. It was forcefully urged on behalf of the appellant that late-filing of sales tax returns within due date does not always invite imposition of penalty under section 33(1) of the Act unless, it is proved that the said omission was either wilful or based on some mala fide. Learned counsel further argued that penalty could only be levied in such cases where mens rea could be attributed to a taxpayer whereas neither such finding has been recorded in the adjudication order nor in the first appellate order. He requested that the amount of penalty for late filing of sales tax returns may please be vacated. Conversely, when the learned DR confronted with the situation cited supra, in counter arguments, she 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.
3. The arguments of the learned representatives of both the rival parties have been heard, the orders of the authorities below as well as relevant record and provisions of law and the case laws cited by the learned AR of the taxpayer have also been perused carefully.
4. There is no doubt that appellant does hold valid sales tax invoices duly incorporated in supplier's sales tax return and summary statement for relevant tax period and too the appellant in the instant case has transacted all payments to his supplier namely M/s. Amir Sizing Industries through banking channel by complying with the mandatory provisions of section 73 of the Act therefore, the appellant cannot be deprived of from legitimate right of input tax adjustment as no violation in this regard is found to have been committed by him.
5. As far as, the second issue is concerned, we have observed with grave concern that alleged late filing of sales tax returns for the tax periods in question is not intentional and wilful but is due to certain financial problems which are beyond human control and the appellant, being constrained by these liquidity hardships, could not file sales tax returns within time which cannot be termed as "deliberate and intentional failure" particularly in instant case where no mala fide and wilful default is attributed at his part. In the case of M/s. Bhola Weaving Factory v. Customs, Excise and Sales Tax Appellate Tribunal and another" reported as (2004 PTD 1048), Hon'ble Lahore High Court has already ruled that mens rea is an essential ingredient while enforcing penalty provisions against an assessee and levy of penalty is a matter of discretion which must be exercised by the authorities judiciously. The Hon'ble Supreme Court of Pakistan in case of "M/s. D. G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others" reported as (2004 SCM R 456), has also laid down that where non-payment of the tax within due date is neither wilful nor it could be construed to be mala fide, imposition of penalty is not justified under law. We are of the firm opinion that in simply delay in filing of sales tax returns does not attract imposition of penalty without establishing mala fide and wilful default on the part of a taxpayer and there is no material available on record that late filing of sales tax returns was mala fide or wilful act of appellant's company therefore, imposition of penalty for late filing of sales tax returns under section 33(1) of the Act is not only illegal but also unjustified.
6. The last issue is also akin to the proceeding one wherein, appellant is alleged with suppression of sales, presumptively and arbitrarily, on the basis of consumption of electricity units. It is very sensibly held that consumption of electricity units might have any nexus with that of production of goods and any correlation in their between could have been made but no direct relationship can be established in electricity with that of sales and supplies of taxable goods. The impugned demand of sales tax created on the basis of electricity bills is illegal and without lawful authority as neither the Sales Tax Act, 1990 nor the Rules made thereunder prescribe any procedure or formulae to calculate liability of sales tax merely on consumption of electricity units. Under section 3(1)(a) of the Act, sales tax is on sale and supply of goods which necessarily entails 'delivery of goods' or 'receipt of money consideration' and no corroborating evidence for any clandestine removal of goods or for receipts of money consideration has been provided by the sales tax department. The dispossession and actual transfer of goods by the manufacturer to the other party is a basic requirement to bring the goods within the charge and unless, the department is in a position to establish that the assessee did more production and same has bee transferred to another party, sales tax cannot be charged. This is a settled preposition in many a cases as referred to by learned counsel like in a judgment already propounded by a Division Bench of this Appellate Tribunal, Lahore in case of "M/s. Mashallah Paper Board Mills, Faisalabad v. The CIR, R.T.O., Faisalabad" reported as (2017 PTD 880).
7. The learned DR while appearing on behalf of department has contended that as per orders of the authorities below, the appellant has not submitted any documentary evidence at the initial stages of adjudication and now this Tribunal should not entertain any documentary material/evidence and record at this second stage of appeal which was not produced before the departmental functionaries. After going through the relevant provisions of law, we are of the firm opinion that neither the Sales Tax Act, 1990 contain any express provision debarring a taxpayer from submitting any documentary material/evidence at a subsequent stage nor there is any provision in the Act placing restrictions on the powers of appellate authorities i.e. CIR(A) and Appellate Tribunal to entertain the same as this right of a taxpayer cannot be curtailed otherwise, the quasi-judicial forums having powers to mend factual as well as legal infirmities committed by tax functionaries would definitely lost its significance and in turn its quasi-judicial manifesto and prerogatives to make any further enquiry on the basis of material evidences put before them for which they are formed to. A taxpayer cannot be compulsorily deprived of his an alienable right to be dealt with in accordance with law and to be equally treated under the law and if one is allowed to put documentary material evidence on the basis of which is accordingly exonerated and the other one is denied to produce the same in his favour during the course of appeal at belated stage and this right has very much been appraised by the Qanun-e-Shahadat Order, 1984. We are of the firm opinion that any documentary material evidence and record relating to the facts of the case, even if was not produced at initial stage of adjudication before the lower forum, can be allowed to be produced and submitted at subsequent stage before the appellate forum. We also hold that the factual issues neither agitated at the original stage of adjudication nor at the first appeal stage can be considered at the second appeal stage. It is our considered view that the points of facts can be raised at any stage of proceedings including the appeal stage and a number of judgments by the superior Courts lend credence to our aforesaid view.
8. In view of what has been stated hereinabove, particularly in the light of record and keeping in mind the principles laid down by the superior courts in various pronouncements quoted supra, the impugned show cause notice as well as consequent orders of the authorities below are declared to be illegal, ab initio void and are hereby set aside. The titled appeal filed by the registered person is accepted in the manners and to the extent as dilated supra. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.