ORDER: DR. SHAH KHAN, ACCOUNTANT MEMBER. (1) The above titled appeal has been filed by the appellant company against the appellate order dated 22.05.2023 passed by the Learned Commissioner Inland Revenue (Appeals), Peshawar, whereby appeal of the appellant company was rejected.
2. Briefly stated facts of the case are that the appellant company is engaged in the business of purchase, transmission and distribution of electrical energy in the Districts of Khyber Pakhtunkhwa.
In the instant case, Deputy Commissioner-IR (DCIR) issued show cause notice on 15.09.2022 to the appellant company asking to explain as to why the principal amount of Rs. 153.178 million alongwith default surcharge & penalty should not be recovered under Section 11(2) of the Sales Tax Act, 1990.
In response, the appellant filed reply to the above mentioned show cause notice, wherein charges leveled in the show cause notice were denied. After the proceedings, the Assistant Commissioner- IR (ACIR) vide Assessment Order No. 07/2023 dated 09.03.2023 vacated demand of Rs. 5,889,143/- and ordered for recovery of sales tax amounting to Rs. 147 million along with default surcharge and penalty. The appellant company felt aggrieved with treatment and went into appeal before the L/CIR(A), who vide impugned order, rejected the appeal of the appellant company and confirmed the order of ACIR. Being not satisfied with the above treatment, the appellant company has filed the instant appeal before this forum, to contest the findings of L/CIR(A), on the grounds detailed in the memo of appeal.
3. This case was fixed for hearing today on 01.02.2024. On due date, Mr. Hussain Ahmad Sherazi, Mr. Mouzzam Ali Butt, Advocate alongwith Mr. Farooq Azam, ACCA/ARs appeared on behalf of the appellant company and argued their case, while Ms. Fouzia Iqbal, DR appeared to represent the respondent Tax Department and defended the order passed by learned CIR(A). Peshawar.
4. The learned ARs have raised the preliminary objection as to the impugned Assessment order being time barred under section 11(5) of the Sales Tax Act, 1990. He submitted that the Show Cause Notice has been issued on 15-09-2022 while the impugned Assessment order dated 09.03.2023 has been received by the appellant on 21.03.2023. They highlighted that the date of receipt of order is the crucial date to determine the period of limitation. In this respect, he placed reliance on the decisions reported as 2022 PTD 809; PTCL 2019 CL. 555 and 2007 PTD 430. The L/AR stated that in all these cases, it has been held that date of communication of order is the crucial date to determine the period of limitation.
5. In addition, the learned A.R submitted that it is well settled principle of law that the period prescribed by Section 11(5) of the Act, 1990 ibid for completion of adjudication proceedings is mandatory and not directory. Reliance was placed on 2015 PTD 1068; 2014 PTD (Trib.) 448; 2017 PTD 1756; 2020 PTD 568; PTCL 2019 CL 555 and 2016 PTD 358. He stressed that a thing required by law to be done in a certain manner must be done in the same manner as prescribed by law or not at all. The learned A.R also pleaded that where an order is hit by limitation, its merits need not be discussed and in support thereof he relied on: 2009 PTD 1247 (SC); 2011 SCMR 676 and 2020 CLC Note 12. The learned ARs contended that the issuance of show cause notice without any audit proceedings makes Section 25(5) of the Act, 1990 redundant. In this regard, his reliance was placed on 2017 PTD 1372; 2005 PTD 1537 & 2013 PTD 372. Lastly, the learned ARs urged that the case of the appellant has been made on the basis of financial statement which is not permissible under the law. Reliance was made on the latest decision dated 04.10.2023 passed by the Peshawar High Court in STR No. 93-P/2022& 2013 PTD (Trib.) 2130.
6. As regards the merits of the case, the learned A.R vehemently asserted that the sole allegation levelled in the Assessm ent Order relates to the non-payment of sales tax on supply of free electricity to employees. He asserted that the PESCO supplies free electricity to its employees and charges the leviable amount of sales tax thereon in terms of Section 3 of the Act, 1990. However, as per applicable procedure decided in the WAPDA meeting held on December 27, 1999, the amount of GST is not collected from employees, rather the same is paid by the taxpayer himself that is reflected as a negative (credit) balance on the employee electricity bills. He next contended that the GST charges in bills are declared in Sale Tax Return along with other domestic consumers in normal manner and paid/adjusted by the taxpayer. In this support, he referred to the Employees'
Electricity bills, Employee authorization forms, MIS Report-3, CP-41 Form and Sales Tax Return.
7.The learned A.R has also relied upon the earlier judgment passed by the ATIR on the subject issue between the same parties reported as 2015 PTD (Trib.) 1112-M/s PESCO Vs. C.I.R, R.T.O wherein the subject issue has been thoroughly examined and then decided in favour of the appellant (PESCO).
He further drew our attention to the order dated 31.08.2023 passed in the Assessment Order No. 02/2024 for the same tax period wherein the figures mentioned in CP-41 Form were duly reconciled with the figures mentioned in sales tax returns of the ax period 2017-2018. While concluding his arguments, the learned ARs stated that the appellant is not liable to default surcharge and penalty under section 33(5) of the Act as there is no wilful evasion of sales tax. In addition, there cannot be any mens-rea in the case of a public sector organization where its functionaries have not stake or benefit in short payment of taxes. In this respect he placed reliance on the judgments reported as 2004 PTD 1179 = PTCL 2004 CL. 224 & 2006 PTD 1132. On the basis of above arguments, the learned AR has requested to allow the appeal.
8. On the contrary, the learned DR submits that the case was actually decided on 09.03.2023 when the final hearing took place and this is also reflected in the heading of the order-in-original which records the date of judgment to be 09.03.2023, it was further asserted that the appellant was allowed adjournment and extension in time vide requests for adjournment letters dated 28.09.2022, 31.10.2022, 28.11.2022, 12.12.2022, 27.12.2022, 03.02.2023 and 20.02.2022. Consequently, it is pleaded that the case was "decided" within a period of 120 days from the issuance of the show cause notice when the period of 60 days adjournment granted is excluded from above. Furthermore, the Learned DR has contended that the Electricity Bills produced by the taxpayer show the value of supply in credit (negative payments) without charging sales tax payable under section 2(46), 3(1)
(a) of the Sales Tax Act, 1990. Therefore, the same are chargeable to Sales Tax under section 3(1) of the Act.
9. To resolve the controversy, it is important to reproduce the relevant provision of the Sales Tax Act, 1990 for ease of reference:-- Section 11 (5) proviso:-- "Section 11. Assessment of Tax and recovery of tax not levied or short-levied or erroneously refunded:- (1)...........................................
(2)...........................................
(3)...........................................
(4)...........................................
(5)..........................................
"Provided that order under this section shall be made within one hundred and twenty days of issuance of show cause notice or within such extended period as the Commissioner may, for reasons to be recorded in writing fix provided that such extended period shall in no case exceed ninety days:"
"Provided further that any period during which the proceedings are adjourned on account of a stay order or Alternative Dispute Resolution proceedings or the time taken through adjournment by the petitioner not exceeding sixty days shall be excluded from the computation of the period specified in the first proviso". (Emphasis added)
10. From the above, it transpires that the Assessment Order shall be passed within stipulated period of 120 days from the date of issuance of the show cause notice. Reliance in this regard is placed on 2015 PTD 1068; 2014 PTD (Trib.) 448; 2017 PTD 1756; 2020 PTD 568; PTCL 2019 CL 555 and 2016 PTD
358. In all these cases, it has been held that the first proviso to the current section 11(5) of the Act is mandatory in nature, and the natural corollary of non-compliance with their terms would be that any order passed beyond the stipulated time period would be invalid. It is a trite law that a thing required by law to be done in a certain manner must be done in the same manner as prescribed by law or not at all. Reliance is placed on 2001 SCMR 838; 2003 SCMR 1505; 2014 SCMR 1015; 2020 CLC 106 (LHC) and 2020 YLR 2297.
11. With reference to the above, we have perused the impugned Assessment order, the order by the learned CIR (Appeals), the case law referred and the available record of the case. The Show Cause Notice in the instant case was issued on 15.09.2022 and the Assessment order dated 09.03.2023 has been received by PESCO on 21.03.2023. The receipt stamp on the titled page of the Assessment order establishes that the Assessme nt order was received by PESCO on 21.03.2023. We have examined postal envelop (enclosed as Annex-2 with the written submissions) which transpires that the Assessm ent Order was infact handed over to the postal authorities on 16.03.2023. From the above, it becomes evident that the impugned order has been passed on a date prior to 16.03.2023.
The department claims that the order was passed on 09.03.2023. Considering the adjournments for a maximum period of 60 days in terms of the second proviso to section 11(5) of the Act as has been mentioned in the preliminary of the impugned order-in-original, the order could be passed till 13.03.2023. The L/AR has not provided any evidence to the effect that the order been passed after 13.03.2023, hence, the contention of the L/AR that the same has been passed after 13.03.2023 and that the same is barred by time limitation stipulated in section 11(5) is not tenable and is therefore not entertained.
12. As regards the merits of the case, the first charge levelled in the show cause notice and decided by the Assessing Officer and CIR (A) is that the PESCO did not charge sales tax on free electricity provided to employees. It has been argued on behalf of appellant/PESCO that the Assessing Officer as well as the CIR(A) have ignored documentary evidence produced in the shape of sample electricity bills, employee authorization for free provision of electricity, MIS reports, WAPDA Minutes of Meeting, Form CP-41 and sales tax returns. The L/ARS explained that the sales tax was included in the electricity bills issued to the consumer, however, the negative balance indicates adjustment against the employees free units. He has contended that the figures mentioned in the MIS report, Form CP-41 and the Sales Tax Return are reconciled and transpired that the sales tax has been deposited to the Government Exchequer.
13. It has been pleaded by the counsel of the appellant that earlier on the subject issue, a judgment reported as 2015 PTD (Trib.) 1112 has been passed between the parties i.e. M/S PESCO VS. C.I.R, RTO by the Learned Bench of Appellate Tribunal Inland Revenue order dated 02.08.2014, wherein it was held that:--
29. Next issue is the non-payment of sales tax on supplies to associated undertaking (Rs.
12,853,702). This issue relates to nonpayment of sales tax on supply of free electricity to employees. The learned counsel for PESCO has submitted that the relevant record proving payment of the subject sales tax was provided to the Assistant Commissioner Inland Revenue as Annex V of the Rejoinder duly mentioned in Para 3.X on Page 36 of the Assessment Order No. 07/2010 and Annex M of the Rejoinder as mentioned in Para XI on Page 32 of the Order-in z Appeal but the same has not been examined at all by the AC. (IR) or the learned Commissioner Appeals.
It has been pleaded that the relevant record has again been enclosed as Annex XV of the Memo of Appeal. On the other side the Department contention is that PESCO has failed to provide any documentary evidence regarding payment of sales tax on supply of free electricity to its employees.
We have given careful consideration to the rival arguments. As pointed out by PESCO, documentary evidence in the form of month wise GST assessed against WAPDA employees along with electricity bills showing payment of sales tax on free supply of electricity to its employees are available as Annex XV of the Memo of Appeal on the pages 255-276 of the paper book. It appears that these documents have failed to attract attention of the Department and accordingly, charges relating to non-payment of the subject sales tax are held to be disproved.
14. After considering the submissions and the case laws cited above, we are of the view that the contentions of the appellant company has substantial force. The documentary evidence produced in the shape of Electricity Bills alongwith employees authorization forms transpire deduction of GST and the credit amount (negative balance) showed in the Bills indicate adjustment of GST against employees' free units of electricity. The learned A.R has attached electricity bills showing payment of sales tax on free supply of electricity to its employees. It appears that these documents have failed to attract attention of the Department and, accordingly, charges relating to non-payment of the sales tax relating to subject issue are held to be illegal.
15. The foregoing narrations, objective analysis of the issues involved in this appeal and the facts obtaining on record clearly demonstrate that the impugned Assessment order is against correct facts and record. The documentary evidence filed to this forum substantiates the plea that the sales tax relating to free electricity has been paid by the appellant. As such, we hereby vacate the impugned show-cause notice and consequent orders of both the authorities below.
16. The titled appeal is disposed of in the manner and to the extent as dilated supra.
17. This order consists of (08) pages and each page bears my signature.