MRS. AMBREEN ASLAM, JUDICIAL MEMBER .----Through this order , we intend to dispose of titled appeal filed by the appellant/registered person against the Order-in-Appeal No. CIR (Appeals -III)/2016/83/2016 dated 30-06- 2016 passed by the learned Commissioner-IR (Appeals-III), Karachi on the following grounds:- "ii. That the order passed by learned Commissioner Inland Revenue (Appeals-I II, Karachi as well as order -in- original is bad in law and on facts. iii. That the learned Commissioner Inland Revenue Appeals-HI, Karachi was not justified in confirming the findings of the learned Officer Inland Revenue, which has been passed based on misreading and non reading evidence produced before learned CIR-A(HI), Karachi in view of the facts of the case. iv. That the learned Commissioner Inland Revenue Appeals-III, Karachi has erred in confirming the findings of order -in-original based on surmises and assumption to achieve the revenue target in view of the farts of the case. v. That the learned Commissioner Inland Revenue Appeals-III, Karachi was not justified in confirming levy of Sales Tax under section 3(1) of Sales T ax Act, 1990 in view of the facts of the case. vi. That the learned Commissioner Inland Revenue Appeals-Ill, Karachi was not justified to pass order without giving proper opportunity of being heard to the appellant in view of the facts of the case. vii. That the learned Commissioner Inland Revenue Appeals-HI, Karachi has erred in confirming order -in-original which was based on issuance of show-cause notice under section 11(3) of the Sales Tax Act, 1990 which is ab- initio unlawful and without jurisdiction in view of the facts of the case. viii. That the learned Commissioner Inland Revenue Appeals-Ill, Karachi, has erred in confirming recovery of principle amount of sales tax under section 3(1) along with default surcharge under section 34 of the Sales Tax Act, 1990 in view of the facts of the case.
PRAYER In view of the above submission, it is therefore respectfully prayed on behalf of the above named appellant that this Honorable Tribunal may kindly be pleased to set aside the impugned order passed by learned CIR-A-III, Karachi so as the order passed by learned Officer Inland Revenue, Incharge-II and P Cell, Zone-I, RTO, Karachi or grant any other relief which your honour may deem fit and proper under law ."
2. Brief facts of the case are that, in pursuance of Federal Board of Revenue Letter No.4(6)ST -L&P/2014 dated 31- 03-2014 , physical verification of declared premises of Al-Ameen Denim Mills (Pvt.) Ltd. was conducted to ascertain the admissibility of zero rating facility on consumption of utilities. During the course of physical verification of premises situated at Plot No. A-04, Mangopir Road and Plot No.A/20, A/B SITE, it was observed that the appellant had rented out premises to other persons who were unauthorizedly availing zero rating facility on gas/electricity in violation of section 4(d) of the Sales Tax Act, 1990 read with SRO 1125(1)/2012 dated 30-12-201 1 (as amended).
Accordingly , show-cause notice was issued to the appellant. In response to which the appellant informed that the premises has been given on fixed income and that the party to which the said premises has been given is also involved in textile production. This reply of the appellant did not find favour being contrary to facts on ground and impugned order was passed on the basis of average bills of electricity/gas as reportedly the appellant did not provide the requisite bills despite repeated requests.
3. Against the said treatment meted out by the Officer Inland Revenue, the taxpayer preferred appeal before learned CIR (Appeals), who decided the appeal of the taxpayer by passing Order-in-Appeal bearing No. CIR(Appeals-III)/2016/83/2016 dated 30-06-2016 with the following observations: "6.2.4 Thus, as far as Sales Tax Act, 1990 is concerned, it by necessary implicatio n rules out the establishment of mens-rea for imposing penalty which would otherwise be specifically required for charging a person with punishment for an offence. This is besides the fact that the appellant filed misleading and evasive statements not only before the officer but also this office that the premise in question was handed over to a party during textile business. But could not substantiate its claim by any documentary evidences whatsoever . Facts on ground were to the contrary . Also, the facility of zero rating was allowed specifically to the appellant being in textile sector . The appellant discontinued its business is evident from its sales tax returns filed at Nill/Null and rented out it to other parties as surfaced during physical verifi cation and reflected through income tax returns wherein property/rental income was declared. The appellant was under legal obligation to intimate the department for discontinuance of zero rating facility on letting out its prem ises to unauthorized parties. But failed to do so and allowed its misuse causing loss of revenue. Hence the charges framed against the appellant stand proved making him liable for default surcharge and penalty under section 33(1 1)413).
7. In view of above discussion, I have no hesitation in confirming the impugned order being passed in accordance with law ."
4. Being aggrieved and dissatisfied with the Order dated 30.06.2016 passed by learned Commissioner Inland Revenue (Appeals-III), Karachi, the taxpayer preferred titled appeal before this Tribunal.
5. On the date of hearing, Mr. Vishwa Mittar Sahitya, Advocate attende d proceedings on behalf of appellant/registered person while none appeared on behalf of respondent/department despite adequate service of notice.
6. The learned counsel of the appellant argued that the order passed by learned Commissioner Inland Revenue (Appeals-HI, Karachi as well as order-in -original is bad in law and on facts. He further argued that the learned Commissioner Inland Revenue Appeals-II I, Karachi was not justified in confirming the findings of the learned Officer Inland Revenue, which has been passed based on misreading and non-reading evidence produced before learned CIR-A(III), Karachi in view of the facts of the case.
7. The learned AR of the appellant/taxpayer stated that the learned Commissioner Inland Revenue Appeals-III, Karachi has erred in confirming the findings of order-in-original based on surmises and assumption to achieve the revenue target in view of the facts of the case. He further stated that the learned Commissioner Inland Revenue Appeals-III, Karachi was not justified in confirming levy of Sales Tax under section 3(1) of Sales Tax Act, 1990 in view of the facts of the case.
8. The learned counsel of the appellant/taxpayer contested that the learned Commissioner Inland Revenue Appeals-III, Karachi was not justified to pass order without giving proper opportunity of being heard to the appellant in view of the facts of the case. He further contested that the learned Commissioner Inland Revenue Appeals-III, Karachi has erred in confirming order-in-o riginal which was based on issuance of show-cause notice under section 11(3) of the Sales Tax Act, 1990 which is ab-initio unlawful and without jurisdiction in view of the facts of the case.
9. The learned AR of the appellant/taxpayer contended that the learned Commissio ner Inland Revenue Appeals-III, Karachi, has erred in confirming recovery of principle amount of sales tax under section 3(1) along with default surcharge under section 34 of the Sales Tax Act, 1990 in view of the facts of the case. Accordingly , he prayed that this Honorable Tribunal may kindly be pleased to set aside the impugned order passed by learned CIR-A-III, Karachi so as the order passed by learne d Officer Inland Revenue, Incharge-II & P Cell, Zone-I, RTO, Karachi or grant any other relief which your honour may deem fit and proper under law .
10. During the proceedings of the case, the learned counsel of the appellant/taxpayer relied upon the decision vide S.T.A. No.355/KB-2016 dated 10-10-2016 passed by this tribunal and he also submitted a copy of the said decision in his support.
11. We have considered 'the arguments advanced by the learned representative of the appellant, perused the record including impugned orders and grounds containing in the appeal. To decide the instant appeals the question before us whether the impugned order requires interference?
12. Precisely the department alleged against the taxpayer that physical verification of declared premises was conducted by the department to ascertain the admissibility of zero rating facility on consumption of utilities so the department found that the taxpayer rente d out the said premises to someone who were availing zero rating facility on gas/electricity unauthorizedly .
13. Learned counsel of the taxpayer during the course of arguments placed copy of letter dated 7th April, 2011 duly received by the Regional Tax Office, Karachi on 08th April, 2011 for the sake of convenience we are reproducing the same as under:- "7th April, 201 1 The Commissioner (R) Zone-I, Regional T ax Office, Karachi SUBJECT INFORMA TION REG, VER Y POOR BUSINESS CONDITION SALES T AX REG NO.10051 1100982 Dear Sir , We wish to inform you that due to poor business conditions, we have given out textile plant on fixed income basis.
We are registered under the zero rates facility being in the textile sector and the above information is only being conveyed to you for information for any change if needed.
Yours sincerely , Sd/- Director . "
14. From the above letter , it is evident that the taxpayer had already informed to the department regarding its business position so in our view the mens rea as alleged by the department at all not established because the taxpayer duly informed to the department along with, we have observed that the department received the letter of the taxpayer on 08th April, 2011 and the order-in-original was passed on 11-04-2016 it means the application/letter of the taxpayer was kept pending by the department unattended for long period and instead of thrashing out the substantial information, the departmen t made the taxpayer scape-goat. We are afraid to say that the Commissioner(A) has also not apprised the said facts in its true sens.
15. So keeping in mind above facts and circumstances, we are of the view that impugned order does require interference, the same is set aside in result appeal of the taxpayer is allowed.