SHAHID MASOOD MANZAR, (CHAIRM AN).---- The titled appeal has been preferred by the registered person assailing the order dated 10.10.2018, passed by the learned Commissioner Inland Revenue, L TU, Lahore.
2. Succinct facts leading to the instant case are that physical stock taking of the registered person was carried out on 11.12.2017 under section 38 of the Sales Tax Act, 1990 wherein certain discrepancies were detected.
Accordingly , a show-cause notice dated 21.12.2017 was issued by the concerned Deputy Commissioner Inland Revenue. However , the said show-cause notice was later on withdrawn in the light of certain judgments of the Hon'ble Lahore High Court. The concern ed Commissioner initiated afresh proceedings and after scrutiny of stock taking carried out on 11.12.2017, observed that there was considerable difference between declared closing stocks and physical closing stocks of finished goods. These differences of stocks have been sold out by the registered person without payment of due sales tax payable there. Therefore, the registered person evaded sales tax amounting to Rs.1,406,215/-.
3. It is further observed by the concerned Commissioner that as per sales tax returns for the tax periods April 2015 to October 2017, the registered person declared 5.75% sales of soaps out of total sales whereas as per stock taking of work in progress of goods, it is observed that out of total work in progress of soap and washing powder there on 90% manufacturing of soap. This means that the registered person deliberately did not declare the actual sales of soap and evaded sales tax payable thereon. This fact has been further proved that as per stock taking report as on 31.12.2017, the closing stocks of soaps was 38.23% and as per instan t stock taking the closing stocks of soaps was also 35.75%. From this position, it is observed by the Commissioner that it is impossible that a person holding work in process 90% and finished stocks of soap 38.23% on 31.12.2016 and 35.75% as on 11.12.2017 can sell the goods only @ 5.75% from April 2015 to October 2017. This fact is further established through available stock of main raw material of soaps which was also available with the registered person @ 34.07%. Accordingly , the Commissioner presumed that the registered person did not declare the complete sales of soaps in sales tax returns and did not pay sales tax amounting to Rs.204,242,189/-. The said calculation was made on the basis of 35% sales of soaps which was taken on the basis of work in progress as well as stock taking report of 31.12.2016 and instant stock taking carried out on 11.12.2017. Accordingly , the registered person was charged with the contravention of sections 3(1A), 6, 7, 8, 22, 23 and 26 of the Sales Tax Act, 1990 and was thus called upon through fresh show-cause notice dated 31.05.2018 as to why an amount of Rs.205,648,404/- may not be recovered under section 11(2) along with default surcharge under section 34 and penalty under section 33(5) of the Sales Tax Act, 1990. The registered person duly replied to the show-cause notice but the reply submitted did not find favour of the learned CIR. Consequently , the impugned assessment order was passed wherein the above said amount of tax ordered to be recovered from the registered person. Hence, this appeal.
4. On facts the learned counsel contended that the record that the term 90% manu facturing of soap was presumed by the learned DCIR itself. On perusal of the four-years tax periods comparison from July 2014 to June 2018, it is evident from record that the registered person mainly deals in detergent averagely 0 89.22% and laundry soap 010.78%. The registered person did not suppress any sale of laundry soap. By adopting/presuming the wrong production capacity of 90% instead of 10.78% the learned DCIR created a huge sales tax demand against the appellant. It is pertinent to mentioned here that in the immediately preceding Tax Periods i.e., July 2013 to June 2014 the department did not made any such type of treatment when the case of the registered person selected under section 72B of the Sales Tax Act, 1990. During the course of assessment proceedings all the relevant record consisting of purchase and sales registe rs, stock register , copies' of the purchase invoices and bank statements duly produced before the concerned officer. But even not a single objection was raised by the concerned officer and made assessment on presumption basis only to harass the taxpayer . Further , a purchase summary of the fatty acid consisting same tax periods is as under: Sr.
No.Tax yearSupplier name Quantity in KgsAmount 1 2015Gamalux Oleo Chemicals (Pvt.) Ld.190,00011,750,000 2 2016 Gamalux Oleo Chemicals (Pvt.) Ld.176,00012,826,000 3 2017Gamalux Oleo Chemicals (Pvt.) Ld.61,7506,175,000 Humza Traders394,56019,191,288 Mapak Edible Oils (Pvt.)
Ltd.56,190 4,831,145 Muhammad Jameel Charbi Pogri15,480 1,387,899 4 2018 Allanasons (Pvt.) Ltd. import from India192,400 12,806,070 MLI Chemicals import from Thailand272,880 20,292,923 Gamalux Oleo Chemicals (Pvt.) Ltd.228,030 22,803,000 Humza Trader 90,650 4,189,705 Muhammad Jameel Charbi Pogri42,876 3,860,985 Grant Total 1,720,816120,114,015
5. The perusal of above summary of purchase of fatty acid for the Tax Periods July 2014 to June 2018 clearly shows that the registered person decla red its production of sale according to its production capacity . The expression "carrying on business" connotes a continuous trade or occupation involving time and labour as also some investment, which may be regarded as an independent trade or occupation by itself capable of being sold or transferred as such. The person carries on the business of selling goods is liable to pay Sales Tax on the aggregate of amounts of sale-price received or receivable by him in his capacity as a person carrying on business minus the deduction allowable therefrom under the law. Thus, the registered person duly declares its sales tax liability during relevant Tax Periods in the monthly Sales Tax returns.
6. The learned AR assailed the impugned order of the CIR as contrary to law and facts of the case. It is submitted by the learned AR that very initiation of proceedings under section 38 and consequential order passed under section 11 of the Sales Tax Act, 1990 is not sustainable in the eye of law. It is contended by the learned AR that show-cause notice dated 31.05.2018 issued under section 38 is illegal as the same period has already been proceeded by the DCIR vide show cause notice dated 21.12.2017 and consequently proceedings were dropped vide order dated 31.05.2018. He asserted that whole exercise is baseless and review of earlier proceedings which is not warranted under the provisions of law. It is vehemently contended by the learned AR that the re-opening of assessment in the absence of fresh material on record on mere change of opinion has no legal effect and subsequent proceedings based on such void notice were also without lawful authority . It is settled law that "information" in these provisions includes to true and correct state of law derived from judicial decisions. But when, the assessing authority , at the time of making assessment, took one view of the prevailing law and later learnt that another officer had taken another view to tax similar transactions without there being any change of law or an authoritative judicial pronouncement, the assessing authority cannot treat such knowledge as an "information" so as to enable him to make an additional assessment. Mere suspicion is not a suf ficient ground".
7. He further argued that the initial barren of proving that any turnover has escaped assessment or there has been an under-assessment is upon the department. But this only means that in order to justify initiation of the proceedings it is necessary for the assessing authority to established at least one transaction, the turnover of which was not included in the original assessment. Once that is done, it is for the registered person to satisfy that no turnover has escaped assessment or that the escaped turnover is of certain magnitude. If the taxing authority intends to bring to tax the turnover of the registered person, which according to him, has escaped assessment, by reason of a deliberate attempt on the part of the registered person to avoid the net of taxation, where there is no clinching evidence, but only circumstantial evidence to establish the jural relationship vendor and purchaser , the onus on the department becomes heavier , the department should scrutinize the material on record with lynx eye at every material time to countermand the same. That no suppression of supplies was made by the registered person and he submitted that the impugned order pertains to tax periods April 2015 to October 2017 whereas stock taking out was carried out on 11.12.2017. Any suppression of supplies in any preceding or succeeding tax periods could not be charged on the basis of estimation alone on the basis of facts not relev ant to those tax periods is not sustainable in the eye of law .
8. The learned AR further submitted that stock taking upto tax period February , 2017 has already been completed vide order dated 06.03.2017 and the registered person paid final payment. at Rs.5,530,183/- on 28.03.2017 with the approval of the department. Thus, he contended that the impugned order up to tax periods February 2017 is liable to be cancelled being double assessment for the same tax periods. The learned AR placed before us copy of order dated 06.03.2017 and copy of paid CPR. He further asserted that assessment upto tax period June 2016 under section 11(2) has already been completed vide order dated 20.03.2017 and the registered person paid final payment of tax on 03.04.2017 with the approval of the department. Hence, he contended that the impugned order up to tax period June 2016 is also liable to be cancelled being double assessment for the same tax periods.
9. The learned AR while continuing his arguments has also contended that the liability has been determined on formula basis and that too only on presum ption which did not enjoy any legal back ing as the law does not provide any sort of formula assessment. Thus, the learned AR contended that the tax liability created on estimated formula basis cannot be endorsed in any provision of Sales Tax Act.
10. Conversely , the learned DR supported the order passed by the Commissioner and he contended that default on the part of the registered person is patent as the company has concealed huge sales. He contended that sales tax liability has rightly been worked out by the Commissioner on the basis of stock taking carried out through proceedings initiated under section 38 of the Sales Tax Act, 1990.
11. After having heard the arguments of both the rival parties and from the bare perusal of the relevant orders as well as relevant provisions of law and material made available before us, we find that submissions made by the learned AR at the bar carries substantial weight. The Commissioner Inland Revenue passed the impugned order on the basis of stock taking carried out on 11.12.2017 under section 38 and passe d the impugned order pertaining to the tax periods relevant to April 2015 to October 2017, whereas the departmen t in earlier proceedings initiated under section 38 passed an order on 06.03.2017 wherein sales tax amount of Rs. 5,530,183/- was adjudged as payable by the appellant pertaining to the tax periods also adjudged through instant proceedings. There is no denying the fact that issuance of second show-cause notice regarding the same tax periods amounts to imposition of double taxation and double jeopardy which could not be given legal credence but also offends and defies the fundamental rights set out in Article 13 of the Constitution of Islamic Republic of Pakistan, 1973 which provides that no person shall be prosecuted or punished for the same offense more than once. The doctrine of "double jeopardy" which corresponds to the principle of "autre fois acquit and autre fois convict" always prohibits a duplicate trial and a duplicate punishment for the same offence. It is also a trite law that re-agitating of the same issue by the tax functionaries is against all the principles of administration of justice and fair play. In the presence of earlier order , another order of the A adjudicating authority is contrary to the first order to hold the field for the simple reason that two contrary orders cannot exist at one and at the same time and any subsequent proceedings initiated with issuance of second show-cause notice and adjudication thereon are therefore patently illegal, null and void ab initio having no legal effect at all. This act is not only against the provisions of sales tax laws but against the norms of natural justice and also in violation of Article 13 of the Constitution of Islamic Republic of Pakistan, 1973, under which a person cannot be vexed twice for the same matter .
12. The impugned tax demand was created for the tax periods relevant to the mont hs of April 2015 to October 2017 on the basis of stock taking carried out on 11.12.2017. In our considered view, each tax period is an independent period and has to be treated as a separate unit. The stock taking carried out for a particular tax period for estimation of sales/supplies is relevant only for the said tax period and it cann ot be made basis for earlier or subsequent tax periods as there are a number of factors on the basis of which the quantum of supplies during a particular tax period depends. We are of the view that the whole estimation of alleged concealed supplies is made on the basis of presumption and there is no room of such presumption in the sales tax law. It is established principal of law of taxation that an assessee can be subjected to tax under a provision of law, which is unambiguous and clear . There is no room for any intendment and there is no presu mption as to tax. In the absence of any deeming provision, the revenue is required to establish that a transaction falls within the parameters of taxable supplies or in furtherance of any taxable activity failing which the Sales tax imposed on the basis of some assumption or presumption not warranted in law shall always be struck down. This view is taken by us from the ratio settled by the Hon'ble Karachi High Court reported as 2004 PTD 868 and ratio settled therein is 'on all fours' applicable in the instance case. In the E instant case before us, the inference was drawn by the department from one tax period to the other tax periods are mere assumption that the sales would have been suppressed in the other tax periods which is not under monitoring. Hence, the whole exercised carried out to impose the impugned tax is not sustainable in the eye of law .
13. It, is crystal clear beyond any shad ow of doubt that there are no provisio ns in section 38 of the Act for conducting an audit of a registered person except empowering an Officer of Inland Revenue by the Board or by the Commissioner to have free access to premises, stocks, accounts and records to examine it and to take into his custody such records to inquire and to investigate cases of tax fraud but after resum ption of record and documents, conduction of its audit and scrutiny thereof can only be made in a way and procedure given under section 25 of the Act therefore, whole exercise of audit carried out under the garb of section 38 of the Act is illegal, ab initio void and without jurisdiction. The Officer of Inland Revenue was not legally empowered by the Commissioner to conduct audit under provisions of section 125(2) of the Act and approval of the Board or the Commissioner under section 38 of the Act was only for free access to business and manufacturing premises of the registered person and its records and documents which never provides powers of conducting of an audit requiring another authority under section 25(2) of the Act providing a mechanism for conduction of its audit therefore, co-existence and co-invocation of both sections might have any meanings but provisions of section 38 of the Act alone in its sole clad are nothing for conduction of al audit without its counterpart provisions as given under subsection (2) of section 25 of the Sales Tax Act, 1990.
14. In view of what has been stated above, particularly in the light facts and circumstances of the case, the appeal filed by the taxpayer is accepted and impugned show-cause notice and consequent order are declared to be illegal, ab initio void and are hereby set aside.