This appeal under section 66 of the PSTS A, 2012 "The Act" was filed against the order dated 06.11.2015, passed by the Commissioner (Appeals) PRA Lahore.
2. Briefly , the facts leading to file this appeal are that on 17.08.2015 Additional Commissioner Enforcement-01 issued a show-cause notice (SCN) to the appellant on the basis of an ongoing investigation and having credible information wherein. It was stated in the notice that the master "Franchiser" namely M/s. SUBW AY International had an account with HSBC Bank, Karachi and that the appellant had also an account with the same bank and that the appellant deposited certain amounts in favor of M/s. SUBW AY International on account of Royality/F AF and advertisement etc. it was further stated in the said SCN that a "Franchisee" had to pay, standard fees, reduced fees, extension fees, satellite fees, add on fees, advertisement fees, and royalty , to the master "Franchiser" and that the "Franchise" agreement revealed that the "Franchisee" had to pay Franchisee fee @ $10,000/-, the Royalty @ 8% of gross sale and the FAF payments/advertisements charges/contributions @ 4.5% of gross sale, on weekly basis. The SCN further stated that despite repeated written and verbal requests neither the appellant provided the requisite record nor paid any heed to it. The SCN alleges the non/short deposit of PSTS on franchise tax, restaurant services, penalty for non-provisions of record(s), default surcharge, penalty for late deposit of Punjab Sales tax, and for non-filing of returns. The total amount was calculated as Rs.3,072,320/- for tax period, October 2012 to March 2014 along with penalty and default surcharge (to be calculated later on).
3. As per available record, the appellant failed to put up any defense or to file any reply which resulted into the passing of assessment order against the appellant on 28.08.2015. Feeling aggrieved, the appellant filed an appeal before the Commissioner (Appeals) PRA Lahore. The said appeal was dismisse d vide order dated 06.11.2015.
Being dissatisfied, the appellant has preferred this appeal.
4. Learned counsel for the appellant has argued that the very issuance of SCN to the appellant was illegal and without jurisdiction because in the judgment passed by the Hon'ble High Court in case titled "The Institute of Architects, Pakistan v. Province of Punjab and others ", all notices issued by the authority were declared illegal;- That the order impugned was passed without adjudicating all the contentions raised by the appellant hence is a non-speaking order;- That the Commissioner (Appeals) has only adjudicated the issues of applicability of tax on franchise fee and penalty but rest of the contentions remained unattended;- That the appellant was deprived of his legal right of fair trial;- That the findings of the Commissioner (Appeals) are unlaw ful and contrary to chapter xii of PSTS (Specific Provisions) Rules 2012 hence, not sustainable;- That both the orders impugned were passed without allowing the credit of tax on "Franchise Fee etc." in accordance with Rule 60 of PSTS (Specific Provisions)
Rules;- That the order impugned was passed without providing sufficient opportunity of being heard;-That imposition of penalty for alleged default of non-furnishing of returns is against the law and facts because the appellant had filed the returns with FBR prior to registration with PRA;- That the Commissioner (Appeals) made incorrect working of tax rates;- That no mens rea or willful default, on part of the appellant was established before the forums below but even then the pena lty was imposed. Lastly contends that the appeal may kindly be accepted and the order impugned may be set-aside. Learned counsel has relied upon the following judgments.
Nishat Hotel and Properties Limited and others v. The Province of Punjab and others (PLD 2019 Lah. 729 = 2019 PTD 2050 )
The Institute of Architects, Pakistan v . Province of Punjab and others" (2016 PTD 1 130)
5. On the other hand learned DR has opposed this appeal by arguing that the issuance of SCN was absolutely legal and that the judgment of Hon'ble High Court referred by the appellant, had no negative effect on it;- That Rule 60 of PSTS (Specific Provisions) Rules 2012 is not applicable in the facts of this case;- That the calculations made by the assessing of ficer were correct. Lastly argued that appeal may kindly be dismissed.
6. Arguments Heard. Record Perused.
7. The contention of the appellant that vide judgment of the Hon'ble High Court reported in 2016 PTD 1103, all the actions taken and notices issued by the Chairperson of PRA, cting as Authority were declared illegal and without lawful authority therefore, the SCN issued to the appellant is also unlawful and without authority , is a misconceived notion of law because after passing of said judgment i.e., on 25.01.2016, the Punjab Government introduced/inserted section 36 in the PRA Act, 2012, on 05.02.2016. This section reads as under
(a) Any action of the Chairperson on behalf of the Authority , or anything to .the contrary contained in any decree, judgment or order of any court, the sales tax or any other amount levied, charg ed, collected or realized by the functionaries of the Authority from any person shall be deemed to have been validly taken, levied, charged, collected or realized under the Act;
(b) Any action taken by the Chairperson till the establishment of the Authority under section 3 of the Act shall be deemed to be the action taken by the Authority On the same date sub-clause 4 of section 5 of PRA Act 2012 was also introduced/inserted. It reads as under:--
(4) Till such time that the authority is constituted under this Act, the Chairperson shall perform the functions and discharge the duties of the Authority .
Thereafter , on 05.09.2016 sub-clause C of section 36 of PRA Act 2012 was also introduced/inserted. It reads as under
(c) the Authority stands established under section 3 and shall be deemed to have been established with effect from 1st July , 2012.
Cumulative effect of the above-mentioned provisions is that the authority stood established under section 3 of PRA with effect from 01.07.2012 and that all actions taken by the Chairperson on behalf of the D authority were deemed to be the actions validly taken by the Authority . In this view of the matter the objection/contention of the appellant is not well-founded.
8. The assessing of ficer in his order dated 28.08.2015 (Paragraph 3 of the said order) has clearly stated asunder .
3. Before pointing out established tax compliance gaps with reference to the taxpayer under Punjab sales tax on services law, it is pertinent to mention that despite repeated written as well as verbal requests neither heed had been given nor the requisite records had been provided in defense. The Hon'ble Lahore High Court, Lahore, in an order , in Writ Petition No.18968 of 2014 had granted free hand to the respondents (including undersigned) to determine the Punjab sales tax liability in the case the taxpayer has thus remained altogether non-compliant. The facts of the case on record and repeated failure to put up a defense necessitated issuance of a show cause notice under section 24 of Act, 2012 ibid, dated 17.08.2015 for determination of tax liability and assessment of tax. The taxpayer in response thereto vide letter dated 27.08.2015 instead of filing a reply in defense insisted to hold the case till the decision of Hon'ble High Court Lahore. This plea is not entertained since the Hon'ble Court has had itself allowed the determination of tax liability in the case.
Bare reading of it, is enough to conclude that the appellant failed to file any type of reply or to submit any documents before the assessing officer. But in total contrast to this admitted fact, the Commissioner (Appeals) in his order (Impugned) dated 06.1 1.2015 stated that "the impugned order has been passed after taking into account the contentions and documents produced by the appellant before the learned Additional Commissioner (Enforcement-01)".
This observation of the Commissioner is totally against the admitted fact and is sufficient to hold that the Commissioner (Appeals) did not bother to look into the record rather its seems that he passed the order merely on the basis of his imagination. It is also noted by this tribunal that although the Commissioner (Appeals) has mentioned the arguments/contentions of the appellant in the opening paragraph of the order impugned but in his findings, the Commissioner (Appeals) failed to dilate upon the grounds of the appellant i.e., double taxation, wrong calculation of the tax liability , paying of tax by the appellant throughout the period of alleged default. It is also observed by this tribunal that finding of the Commissioner (Appeals) i.e.; -
3. "The appellant was required to pay tax on its revenues and it is also required to deduct at source the payments made to the franchise i.e., M/s Subway Internationals. The former it has paid while the later it has not performed the obligation of deduction of tax as withholding agent and hence, is liable to recovery of this amount under the Punjab Sales T ax on Services Act, 2012. Is not supported by the record or from the facts of the case. The order impugned does not fulfill the requirements of the adjudication rules/law . This tribunal is of the view that the order in question was passed in haste and in a slip shod manner . In all these circumstances the order impugned is set-aside. The appeal in hand is accepted. The case is remanded back to the officer holding jurisdiction for deciding it afresh after attending all the contentions/grounds of the appellant and to pass a well-reasoned order . However , it is made clear that the competent officer will provide only one opportunity to the appellant for advancing the arguments, if any, and if he failed to appear on that date, the Commissioner (Appeals)/competent officer shall pass the final order in light of the observation/directions made by this tribunal, supra.
The Registrar of the Tribunal is directed to communicate this order to all concerned immediately . File of appeal be consigned to record room.