MUHAMMAD SAJID MEHMOOD SETHI, J.---This consolidated judgment shall decide instant Reference Application, along with following connected cases, as common questions of law and facts are involved in these cases:-
1. STR No:156 of 2015 titled Commissioner Inland Revenue, Faisalabad v. M/s Kamal Limited, Faisalabad.
2. STR No.157 of 2015 titled Commissioner Inland Revenue, Faisalabad v. M/s Kamal Limited, Faisalabad.
3. STR No.160 of 2015 titled Commissioner Inland Revenue, Faisalabad v. M/s Habib Haseeb Spinning Mills Private Limited, Faisalabad.
2. Through these Reference Applications under section 47 of the Sales Tax Act, 1990 ("the Act of 1990"), following common question of law, asserted to have arisen out of orders passed by learned Appellate Tribunal Inland Revenue Lahore Bench, Lahore ("Appellate Tribunal"), has been proposed for our opinion:- "Whether on the facts and circumstances of the case, the amendment in section 11 of the Sales Tax Act, 1990, made vide Finance Act, 2012, is procedural in nature and applies to all the pending adjudications?"
3. Precise allegation in all these cases is that respondent-taxpayers claimed / received inadmissible refund / input tax adjustment against the invoices of blacklisted units, without any physical transfer of goods, thus, demands of sales tax along with default surcharge and penalty were raised by Assistant Commissioner Inland Revenue. Feeling aggrieved, respondent-taxpayers filed appeals before Commissioner Inland Revenue (Appeals), which were partly allowed. In further appeals, learned Appellate Tribunal observed that Show-Cause Notices ought to have been issued under Section 36 of the Act of 1990 instead of Section 11(3) as latter was introduced in statute book vide Finance Act, 2012 and the matters were relating to the years 2008, 2009, 2010, 2011 and March, 2012 and proceeded to vacate the orders of Taxation Officer.
4. Learned Legal Advisor for applicant-department submits that amendment in Section 11 of the Act of 1990 is procedural in nature and applies to all pending cases, hence, impugned orders are unsustainable in the eye of law.
5. Contrarily, learned counsel for the respondent-taxpayers submits that Section 11(3) was not given retrospective effect, thus, was not applicable in these cases. He adds that since Show-Cause Notices are illegal, the assumption of jurisdiction and superstructure built thereon also do not have sanctity and, thus, liable to be annulled.
6. We have heard the arguments of learned counsel for the parties at length and perused the record with their able assistance.
7. The Sales Tax Act, 1990 came into force on 01.11.1990 through notification dated 28.10.1990, issued under subsection (3) of section 1, in order to consolidate and amend the law relating to the levy of a tax on the sale, importation, exportation, production, manufacture or consumption of goods. The said tax is called sales tax. At the time of promulgation of said Act, there were two distinct provisions relating to adjudication of cases i.e. section 11 and section 36. Section 36 was omitted vide the Finance Act, 2012 and the provisions thereof were inserted in section 11 as subsections (3) and (4). The legislature, therefore, consolidated the provisions relating to adjudication by substituting section 11. Section 11, in its present form, reads as under:- "11. Assessment of Tax and Recovery of Tax not levied or short levied or erroneously refunded.--
(1) Where a person who is required to file a tax return fails to file the return for a tax period by the due date or pays an amount which, for some miscalculation is less than the amount of tax actually payable, an officer of Inland Revenue shall, after a notice to show-cause to such person, make an order for assessm ent of tax, including imposition of penalty and default surcharge in accordance with sections 33 and 34: Provided that where a person required to file a tax return files the return after the due date and pays the amount of tax payable in accordance with the tax return along with default surcharge and penalty, the notice to show cause and the order of assessment shall abate.
(2) 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 a 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.
(3) Where 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 fund erroneously made shall be served with the notice requiring him to show-cause for payment of the amount specified in the notice.
(4) Where, by reason of any inadvertence, error or misconstruction any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded, the person liable to the amount of tax or charge or the amount of refund erroneously made shall be served with a notice requiring him to show-cause for payment of the amount specified in the notice; Provided that, where a tax or charge has not been levied under this subsection the amount of tax shall be recovered as tax fraction of the value of supply; ............
(5) No order under this section shall be made by an officer of Inland Revenue unless a notice to show-cause is given within five years, of the end of the financial year in which the relevant date falls, to the person in default specifying the grounds on which it is intended to proceed against him and the officer of Sales Tax shall take into consideration the representation made by such person and provide him with an opportunity of being heard:"
Subsection (1) of section 11 is attracted when a person who is required to file a tax return, fails to file the return for a tax period by the due date, or pays an amount which, because of some miscalculation, is less than the amount of tax actually paid. It is obvious from the language of the said provision that it contemplates a situation which does not involve a dispute regarding the actual amount payable as tax by the registered person. Likewise, subsection (2) envisages a situation 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 a refund which is not admissible under the Act of 1990 for reasons other than those specified in subsection (1). The language clearly shows that subsection (2) also envisages eventualities which do not involve the short levy or non-levy of tax i.e. the tax due is not disputed. Whereas, subsections (3) and (4) deal with situation relating to a tax or change not having been 'levied or made', or having been 'short levied' or erroneously refunded.
However, subsection (3) is attracted where lapse is allegedly due to some collusion or deliberate and subsection (4) applies where default is due to inadvertence, error or misconception. These subsections are actually section 36, since omitted, with the only difference in that where the recovery of sales tax relates to cases of inadvertent / non-willful default, the time limitation of three years has been enhanced to five years, thus, the time limitation for assessment and recovery of sales tax due is being generalized to five years irrespective of the nature of default. Limitation to initiate proceedings in matters, involving allegations of inadvertence, error or misconstruction was three years as per Section 36(2) of the Act of 1990, which is now five years in substituted section 11 and the situation is covered under subsection 11(4).
7. Show-Cause Notices in these cases were issued under Section 11(3) of the Act of 1990, which are analogous to Section 36(1), and not a single word including limitation is changed as both sections provide limitation of 5-years. We have gone through the contents of Show-Cause Notices, the same are self-explanatory, contain the detailed facts, allegations with supporting material and specifically intimate the respondent-taxpayers that if they do not respond to it adverse action might be taken against them. The grounds and reasons are explicitly set out. Omission to mention in the show-cause notice the specific provision which is alleged to have been contravened is not fatal and does not ipso facto make it void. Instead of taking into consideration technicalities, the Court should look into the matter from different angles. It should also see whether substantial compliance has been made and the omission, if any, has caused any prejudice to the taxpayer.
We are of the view that merely because the show-cause notices were labelled under section 11(3) instead of Section 36, is not such defect of vagueness to undergo the test of judicial scrutiny and this omission has also not caused any prejudice to respondent-taxpayers, thus, the same cannot be declared invalid under the law. Furthermore, there was no question of retrospective application of section 11(3) of the Act of 1990. Reference can be made to Collector of Sales Tax and Central Excise, Lahore v. Zamindara Paper and Board Mills and others (2008 SCMRR 615), Commissioner of Income Tax, Karachi v. Abdul Ghani (2007 PTD 967) and Commissioner of Income Tax, Peshawar v. Messrs Islamic Investment Bank Ltd. (2016 SCMR 816).
8. In view of the above, it is manifestly clear that learned Appellate Tribunal has misunderstood the factual as well as legal planes of the matter, which has rendered the impugned orders unsustainable in law. The proposed question is also not couched in proper manner, which is formulated as under:- Whether in the facts and circumstances of the case, learned Appellate Tribunal was justified to annul the show cause notice as well as orders of authorities below on merely mentioning of section 11(3) instead of section 36, especially when no prejudice has been caused to respondent- taxpayers?
9. As a sequel to above discussion, our answer to the proposed question is in negative i.e. in favour of applicant-department and against respondent-taxpayers.
10. It is clear from the above, the main issues raised by parties have not been decided by learned Appellate Tribunal, therefore, this Court in reference jurisdiction is deprived of the views of the Appellate Tribunal, as this Court has to decide Reference Application on the basis of facts determined by Appellate Tribunal. Resultantly, the impugned orders, in all cases, are set aside, and the matters are remanded back to learned Appellate Tribunal for decision afresh after providing opportunity of being heard, to both the parties.
These Reference Applications are disposed of.
11. Office shall send a copy of this order under seal of the Court to learned Appellate Tribunal as per section 47(5) of the Sales Tax Act, 1990.