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 17.03.2022 to the appellant company asking to explain as to why the principal amount of Rs. 2.068 Billion 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 vide Assessm ent Order No. 04/2023 dated 07.11.2022 ordered for recovery of sales tax alongwith 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 appeal 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 30.04.2024. On due date, Mr. Hussain Ali Sherazi, Mouzzam Ali Butt, Advocate appeared on behalf of the appellant company and argued his case, while Mr. Ishfaq Ahmed, DR appeared to represent the respondent Tax Department and defended the order passed by learned CIR(A), Peshawar.
4. The learned AR 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 17.03.2022 while the impugned Assessment order dated 07.11.2022 has been received by the appellant on 28.11.2022. He 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 learned 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. He also contended that the extension granted by the Learned Commissioner I.R is not tenable as per the latest law settled by this Tribunal and the apex court of the country. Reliance in this regard was placed on:--PTCL 2017 CL. 736 (SC); 2020 PTD 147 = PTCL 2020 CL. 159 (SC); 1999 SCMR 1881; PTCL 1983 CL. 46 (Supreme Court of India), PTCL 2022 CL. 281 & Orders dated 01-02-2024 passed in STA No. 151/PB/2023 & STA No. 152/PB/2023. 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. Lastly, the learned A.R 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.
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-apportionment of input tax as per sub rules (2) & (3) of Rule 25 of Chapter IV of Sales Tax Rules, 2006. He urged that the calculation made by the RTO is not correct as per the procedure provided under Rule 25(3) of the Rules, 2006 ibid and due to this miscalculation, the RTO has overstated the amount of Rs. 22.26 Billion in the garb of exempt goods. The learned AR has also highlighted that this miscalculation was also patent from the record whereby the appellant specifically raised Ground Nos. 14 to 16 before the CIR(A), however, no finding was passed in this respect. He next contended that it is settled principle of law that no tax can be levied on the basis of presumptions and intendment and onus to prove that the transaction was chargeable to tax was squarely on the Revenue Department. In this respect, he placed reliance on the decision reported as 2023 PTD 1492. He further submitted that the main and sole supply of taxpayer is "electricity", which is split into `taxable & Exempt supplies, thus input tax paid on the purchase of electricity i.e., Input Tax paid to "CPPA" relevant to exempt supplies of electricity shall be apportioned as per sub-rule (2) of Rule 25 ibid. In this regard, he has submitted a calculation chart alongwith documentary proof in the forms of Annexure-C and the Sales Tax Returns. While concluding his arguments, the learned A.R. 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.
7. On the contrary, the learned D.R submits that the Assessment order was passed well within stipulated period of time which was extended by Commissioner-IR for 90 days vide approval dated 22-07-2022. In support thereof, he was placed reliance on section 56 of the Sales Tax Act, 1990 and the judgment reported as 2010 PTD 660. Furthermore, the Learned D.R has contended that the justification submitted by the appellant in the shape of chart was based on miscalculation having no logical basis. He therefore, pleaded that the appeal be dismissed.
8. We have perused the impugned Assessment order, the order by the learned CIR (Appeals), the case laws referred and the available record of the case. The Show Cause Notice in the instant case was issued on 17.03.2022 and the Assessment order dated 07-11-2022 has been received by appellant company on 28-11-2022 i.e. after 255 days from the show cause notice.
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)
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.
10. The L/AR has termed the order-in-original to be time barred in time and passed in violation of law and settled principle on three counts. Firstly, that the order was passed after the expiration of the statutory time limitation stipulated in section 11(5) of the Act. With regard to the extension granted by the Commissioner I.R on 22.07.2022 for 90 days, the appellant has also asserted that the extension given by the Commissioner on 22.07.2022 is illegal and in support thereof, the judgments of the Honourable Supreme Court reported as 1999 SCMR 1881 & PTCL 1983 CL. 46 have been referred. In these cases, it has been held that an opportunity of being heard ought to have been given to the aggrieved party before orders for extension were made. Thirdly, that the Commissioner IR has not given any reason for granting extension in time which also makes such extension defective and incurable according to the L/AR.
11. We have examined the issue and contentions of the two sides carefully Record transpires that the show cause notice was issued on 17.03.2022. Record further transpires that the appellant company has sought adjournments of proceedings which were allowed as such for maximum 60 days in terms of the proviso to section 11(5). Record further transpires that the Commissioner IR has granted extension in time through order sheet dated 22.07.2022 for a period of 90 days. Record further reveals that the order-in-original mentions the date of passing of the order to be 07.11.2022 and the date of dispatch of the order, according to the department is 18.11.2018 while the appellant claims to have received the order on 28.11.2022. With reference to the above, we have carefully examined the relevant record and have found that the impugned order-in-original suffers from crucial and fatal defects regarding time limitation and related aspects. These defects are discussed in the following lines.
(i) If the extension granted by the Commissioner IR through order sheet dated 22.07.2022 for 90 days is considered to be as in accordance with taw, then the time limitation of 270 days (120+60+90) from the issuance of the show cause notice expired on 12.12.2022, while the order-in- original has been claimed by the department to have been passed on 07.11.2022. We are not inclined to accept the contention of the L/DR that the order was passed on or before 12.11.2022. This is because at top of the order in the column on the right in the first page, the date of order has been mentioned as 18.11.2022. The order is manual and not through the iris system to prove the stance of the L/DR that it was actually passed on or before 12.11.2022 and that the mentioning of passing date as 18.11.2022 in the order itself was a mere mistake. The order has been dispatched to the appellant taxpayer on 18.11.2022. In the presence of the date of the order mentioned in the order itself to be 18.11.2018. It is thus evident that the order has been passed on and then also dispatched on 18.11.2022.
(ii) Without prejudice to the above, the so-called approval granted by the Commissioner IR for extension of time for 90 days does mention any reason in writing for such extension. The relevant order sheet entry dated 22.07.2022 reads as "Approved. For n.a.p.l". Thus, the extension has been granted in a perfunctory manner without application of mind and in disregard for the requirement of the proviso to section 11(5). We have thus found that in the instant case, no valid reasons have been mentioned in the order nor have such reasons been made known to this forum for extension of time limitation by the L/CIR. Hence, following decisions and settled principle with matter, it is established that the extension granted by the learned Commissioner I.R is not as per law and the Assessment order is not passed within the stipulated period of the Sales Tax Act, 1990 and thus is time burred.
(iii) The appellant has not been confronted with through a notice before granting such extension and also not informed about such extension in time. This is against the implication of the relevant proviso and settled principle in the matter.
12. The issue relating to extension granted by the Commissioner has been thoroughly discussed by the Appellate Tribunal Inland Revenue, Islamabad in a recent decision reported as PTCL 2022 CL. 281, wherein the following dictum has been laid down:- "The aforesaid application was accepted by the CIR on the same date without giving any justifiable reasons and without any opportunity of being heard having been given to the appellant. The appellant, therefore, got no chance to resist the application for extension and to show that no sufficient cause had been shown and that therefore, no order of extension was justified or should be granted.
"In our opinion under such circumstances, a determination requires a judicial approach, and cannot be done ex-parte. After insertion of Article 10-A in the Constitution of Pakistan, 1973, "fair trial" and "due process" are fundamental rights of every citizen for determination of his civil rights and obligations. Before passing the order reason should be confronted and be given an opportunity of being heard.- Therefore, we are of the considered opinion that before passing the order for extension in time under the proviso of sub section (2) of Section 14 of the Act, the affected parties must be given an opportunity of being heard and thereafter pass a speaking order. Therefore, the answer to question No. (iii) is in the negative against the department. (Emphasis Supplied)
13. In view of the above, it is now settled principle of law that prior to granting extension, the learned Commissioner-IR is obliged to provide an opportunity of hearing to the affected parties. However, in the instant case, no such opportunity has been granted which renders the extension order illegal & void even it is admitted for the sake of argument that the impugned order has been passed on or before 07.11.2022. The impugned Assessment order is thus time barred and incurable on this count also. There plethora of judgments wherein it has been settled that if the order is on the face of it is time barred then there is no need to touch the merits of the case. Reference in this regard may be made to 2009 PTD 1247: 2011 SCMR 676 = 2011 PLC (C.S) 856 and 2020 CLC Note 12. It is also important to note that the appellant has specifically raised this ground at serial No. 3 of the grounds of appeal before the Commissioner (Appeals). However, no finding has been given in this regard which also comes under the ambit of a non-speaking order. Reliance in this regard may be placed on 2027 PTD 871 & 2022 PTD 1356.
14. On the other side, the learned DR has relied upon the judgment reported as 2010 PTD 660 & Section 56 of the Act, 1990. We have found that this judgment is not applicable to the facts of this case where section 11 of the Sales Tax Act, 1990 clearly requires that order shall be made within the stipulated period. Similarly, the department has made emphasis on section 56 of the Sales Tax Act, 1990, which is also not much relevant to the issue of extension. This section has no relevancy with the time barred Assessm ent Order. It is important to note that these assertions made by the learned DR have already been decided by this Tribunal in the judgment reported as 2015 PTD (Trib.) 1112. Para 20 of the judgment refers.
15. As regards the merits of the case, we are also inclined to agree with the arguments of the learned A.R that the department has misinterpreted the procedure enumerated under Rule 25 of the Sales Tax Rules, 2006. The appellant company has provided the calculation chart alongwith all supporting evidence, available as Annexure-34, which establishes that the proper procedure has been adopted by the appellant under Rule 25 ibid. It is imperative to state here that the appellant company has time and again raised the objection regarding overstatement of figures amounting to Rs. 22.26 Billion before both the fora below but neither the Assessing Officer nor the Learned CIR(A) have given any finding in this regard. Even otherwise, it is a clear violation of section 24-A of the General Clauses Act, 1897. The law is very clear on this issue that any order passed by judicial or quasi-judicial authority, has to be supported by lawful, reasons. In this regard, reference may be made to the judgments reported as PLD 1959 SC (Pak) 272, PLD 1970 SC 158, PLD 1970 SC 173, 1984 SCMR 1014, 2003 CLD 105, 2005 YLR 1742, 2021 PTD 871 and 2022 PTD 1356. It is also well settled exposition of law that a fiscal provision of a statue is to be construed liberally in favour of the taxpayer and in case of any doubt, the same is to be resolved in favour of the taxpayer/registered person. Reliance in this regard may be made on 2007 SCMR 1367--PAKISTAN through Secretary Finance and others--Versus Messrs LUCKY CEMENT and another--(1992) 66 Tax 246 (SC Pak)-- Mehran Associates Ltd. Vs. CIT, Karachi.
16. After considering the submissions and the case laws cited above, we are of the view that the contentions of the appellant company have substantial force both on facts and in law. It appears that the documentary evidences produced by the appellant company and the provisions of law discussed above have failed to attract attention of the Department and, accordingly, charges relating to non-apportionment of input tax, are held to be illegal. Even otherwise, the documentary evidence produced by the appellant substantiates the plea that the proper apportionment as stipulated under Rule 25 of the Sales Tax Rules, 2006 has been made.
17. 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 time barred and the show cause notice and the impugned Assessment order as well as Order-in-Appeal are palpably illegal and bad in law. As such, we hereby vacate the impugned show cause notice and consequent orders of both the authorities below being illegal, lawful and void ab-initio.Resultantly, the instant appeal filed by the registered person is accepted in above terms.
18. The titled appeal is disposed of in the manner and to the extent as dilated supra.
19. This order consists of (10) pages and each page bears my signature.