SAMAN RAFAT IMTIAZ, J.
1. Through the instant Writ Petition, the Petitioner [Oracle Systems Pakistan (Private) Limited, Islamabad ("Petitioner Company") has assailed the Recovery Notice dated 20.09.2017 ("Impugned Recovery Notice") issued under Section 14 of the Federal Excise Act, 2005 ("FED Act, 2005") read with Rule 60(1)(b) & (d) of the Federal Excise Rules, 2005 ("FED Rules, 2005") by the Respondent No. 5 [Deputy Commissioner Inland Revenue, Large Taxpayers Unit, Islamabad] ("Deputy Commissioner/Respondent No. 5") to the Petitioner's bank i.e., Citibank, N.A. ("Bank"). The Petitioner also seeks direction to the Respondents to return Rs. 1,947,153,365/- that was forcibly recovered from the Petitioner's bank account while declaring that the Deputy Commissioner/Respondent No. 5's actions are mala fide and ultra vires the law and the Constitution of the Islamic Republic of Pakistan, 1973.
2. The facts, as per the Memo of Petition, are that the Petitioner Company was incorporated in Pakistan on 15.03.2007 under the Companies Ordinance, 1984 and is primarily engaged in distributing software and hardware products and providing support for such products along with consultation and education services on information systems. The software and hardware products sold by the Petitioner Company to customers in Pakistan are developed and owned by other Oracle entities outside Pakistan. The Petitioner Company distributes the said products by virtue of a Distribution Agreement (effective as of 01.06.2009) ("Distribution Agreement") between itself and Oracle CAPAC Services, an Irish Company ("OCAPAC"), whereby the Petitioner Company was appointed as a non-exclusive authorized distributor of OCAPAC for the products within Pakistan.
3. The Deputy Commissioner/Respondent No. 5 issued a Show Cause Notice dated 12.01.2017 under Section 14 of the FED Act, 2005 to the Petitioner Company alleging that the latter failed to charge and deposit Federal Excise Duty ("FED") in respect of the payments allegedly made on account of Franchise Service, Royalty or Technical Service Fee as per the Distribution Agreement from 01.06.2013 through 31.05.2015. The Petitioner Company sought extension to reply to the Show Cause Notice vide letters dated 02.02.2017, 20.02.2017, and 03.03.2017 and finally submitted a detailed reply vide Letter dated 15.03.2017, wherein the Petitioner Company demonstrated that no adverse action was warranted against it. The Deputy Commissioner/Respondent No. 5, without informing that the Petitioner's requests for extension had been rejected, passed an Order in Original ("ONO I") on 28.02.2017 wherein it decided all issues against the Petitioner Company. Consequently, the Deputy Commissioner/Respondent No. 5 raised a demand of Rs. 1,378,899,188/- along with default surcharge (to be computed subsequently) and penalty under Sections 8 and 19(1) of the FED Act, 2005 against the Petitioner. The ONO I was received on 09.03.2017 by the Petitioner Company by post.
4. Being aggrieved and dissatisfied with the ONO I, the Petitioner Company filed an Appeal before the Respondent No.3 [Commissioner Inland Revenue (Appeals-II), Islamabad] ("Commissioner- Appeals/Respondent No. 3") on 03.04.2017. On the same day, the Petitioner Company also filed a Stay Application before the Commissioner-Appeals/Respondent No. 3.
5. The Petitioner Company further approached this Court vide W.P. No. 1300 of 2017 praying for an injunction till its Appeal was adjudicated upon by the Commissioner-Appeals/Respondent No. 3 and for a further period of seven days thereafter. On 06.04.2017, this Court was pleased to pass an ad interim Order with the direction to the learned counsel for the Respondents No. 3 to 5 [Commissioner Inland Revenue (Appeals), Commissioner Inland Revenue and the Deputy Commissioner Inland Revenue] to take the necessary steps so as to ensure that the Petitioner's Appeal as well as the Stay Application are taken up for hearing expeditiously and until the matter is taken up for hearing by Commissioner- Appeals/Respondent No. 3, no adverse measures may be taken against the Petitioner.
6. The Petitioner Company's Stay Application was fixed and heard by the Commissioner- Appeals/Respondent No. 3 on the very next day i.e. 07.04.2017 and ad interim relief was granted to the Petitioner Company.
7. Since the maximum thirty days' period during which recovery of tax can be stayed by the Commissioner-Appeals/Respondent No. 3 pursuant to Section 33 (1A) of the FED Act, 2005 was going to expire on 06.05.2017, the Petitioner Company approached this Court through W.P. No. l645 of 2017 which was disposed of on 04.05.2017 ("Stay Order") whereby the Respondents were restrained from taking any coercive action against the Petitioner Company for a period of seven days of the decision in respect of the Petitioner's appeal before the Commissioner- Appeals/Respondent No. 3.
8. The Commissioner-Appeals/Respondent No. 3 passed the Order-in-Appeal dated 18.08.2017 ("Order-in-Appeal"), whereby the ONO I was upheld. After an inordinate delay of almost one month, the Order-in-Appeal was received by the Petitioner Company on 13.09.2017. Aggrieved of the Order-in-Appeal, the Petitioner Company filed an Appeal and Stay Application before the Respondent No. 2 [Appellate Tribunal Inland Revenue, Islamabad] ("Appellate Tribunal/Respondent No. 2"). The Petitioner Company was informed through a hearing notice issued by the Appellate Tribunal/Respondent No. 2 dated 20.09.2017 that the Stay Application was fixed for hearing on the very next day i.e. 21.09.2017.
9. On 20.09.2017, in blatant contradiction to the Stay Order granted by this Court, the Deputy Commissioner/Respondent No. 5 issued the Impugned Recovery Notice to the Bank under Section 14 of the FED Act, 2005 read with Rule 60(1)(b) & (d) of the FED Rules, 2005. Through the Impugned Recovery Notice, the Deputy Commissioner/Respondent No. 5 demanded the Petitioner Company's Bank to deduct Rs. 1,947,153,365/- from the Petitioner Company's bank account. This amount included an amount of Rs. 499,309,218/- on account of default surcharge which was not communicated to the Petitioner Company prior to issuance of the Impugned Recovery Notice and hence, the Petitioner Company was not aware of any basis on which such default surcharge was calculated by the Deputy Commissioner/Respondent No. 5.
10. The Petitioner Company informed Petitioner Company's Bank that the Impugned Recovery Notice should not be complied with as the Petitioner Company is protected by the Stay Order passed by this Court. The Petitioner Company's Bank was further informed that the Judgment of this Court in Huawei Technologies (Private) Limited versus Commissioner lnland Revenue, 2016 PTD 1799 applies with full force to the Petitioner Company. Through the Judgment, this Court has held that a taxpayer must be served with a notice requiring it to make the payment within the prescribed time before any bank accounts are attached. In response, however, the Deputy Commissioner/Respondent No. 5 issued the false statement that the stay granted by this Court had expired on 20.09.2017. Under extreme pressure from the Deputy Commissioner/Respondent No. 5 and the officers of the National Bank of Pakistan, who were both present at the premises of the bank, the Petitioner Company's Bank on the same day hastily prepared a pay order of Rs.
1,947,153,365/- lying in the Petitioner Company's Account Number PKIMNGR172630007 and handed it to the Deputy Commissioner/Respondent No. 5.
11. The hearing of the Petitioner Company's Stay Application by the Appellate Tribunal/Respondent No. 2 was postponed to 22.09.2017 as the Accountant Member of the Appellate Tribunal/Respondent No. 2 was unwell. On 22.09.2017, the Petitioner Company's Stay Application was heard by the Appellate Tribunal/Respondent No. 2 and interim relief was granted to the Petitioner Company for a period of forty days. This stay was extended by the Appellate Tribunal/Respondent No. 2 through its Order dated 30.10.2017 for a period of sixty days and further extended through a subsequent Order dated 28.12.2017 for another sixty days.
12. The learned counsel for the Petitioner Company contended that the Stay Order granted by this Court specifically restrained the Respondents from taking any coercive measure against the Petitioner Company during a period of seven days from the date of Order-in-Appeal of the Commissioner-Appeals/Respondent No. 3. The learned counsel submitted that such seven day period commenced from the date of communication of the Order-in-Appeal to the Petitioner Company which was 13.09.2017 although it was passed on 18.08.2017 and as such the stay continued till 20-09-2017. He therefore submitted that the Impugned Recovery Notice issued on 20- 09-2017 was in violation of the Stay Order. In order to establish such date of communication the learned counsel submitted that copy of the Order-in-Appeal dated 18.08.2017 bearing a handwritten notation stating "received on 13.09.2017". However, there is no stamp disclosing the identity of the recipient. The learned counsel for the Petitioner contended it was forwarded to the Petitioner Company by the Petitioner Company's Bank along with the Impugned Recovery Notice.
The contention was that the aforementioned copy of the Order-in-Appeal bearing the receiving date was provided by the Respondents to the Bank in order to establish the date of receipt by the Petitioner Company. However, there is no covering letter of the bank which would establish the foregoing contentions. In any event, the learned counsel highlighted that the date of communication of the Order-in-Original was mentioned in the Petitioner Company's Appeal before the learned Appellate Tribunal/Respondent No. 2 which was never denied by the Respondents prior to the instant Petition.
13. Secondly, the learned counsel for the Petitioner Company urged that despite the fact that the Appeal had been filed before the Commissioner-Appeals/Respondent No. 3 and was pending for over four months no notice was served upon the Petitioner Company prior to sending the Impugned Recovery Notice to the Petitioner Company's Bank and acting upon it.
14. Lastly, the learned counsel for the Petitioner Company submitted that the case law that has developed provides that no recovery proceedings should be initiated till a decision has come from an independent forum i.e. Appellate Tribunal/Respondent No. 2 and he submits that according to the law the period of limitation for filing an appeal before the Appellate Tribunal/Respondent No. 2 is sixty days and in this case Appeal before the Appellate Tribunal/Respondent No. 2 was filed on 20.09.2017 yet on the same date the Impugned Recovery Notice was issued. The learned counsel for the Petitioner relied on Messrs Pakistan LNG Limited through Authorized Representative versus Federation of Pakistan, through Secretary Revenue Division, Ministry of Finance, Islamabad and 2 others, 2022 PTD 1763.
15. On the other hand, the learned counsel for the Respondents submitted that the seven day period as referred to in the Stay Order passed in W.P. No. 1645/2017 categorically states that such period shall commence from the date of decision. He submitted that the date of decision as mentioned in the Stay Order cannot be read as the date of communication as the latter date is only relevant for the purposes of appeal as per Sections 34 of the FED Act, 2005. Whereas, for the purposes of recovery the relevant date is the date on which the government dues are adjudged as per Rule 71 of the Sales Tax Rules, 2006 ("STR, 2006"). He further submitted that the date of Order- in-Appeal i.e. 18.08.2017 was very much in the knowledge of the Petitioner Company as they were duly represented by the A.R. and as such recovery on 20.09.2017 was not in violation of the Stay Order. He also denied that the date of communication to the Petitioner Company was 13.09.2017 as contended by the Petitioner Company. Lastly, he submitted that an alternate remedy is available to the Petitioner Company in terms of Section 44 of the FED Act, 2005 whereby refund can be claimed in case of favourble decision by the learned Appellate Tribunal/Respondent No. 2 and in this respect both the learned counsel apprised this Court that the learned Appellate Tribunal/Respondent No. 2 has already decided the Appeal in favour of the Petitioner Company and has remanded the matter to the Assessing Officer.
16. In respect of Messrs Pakistan LNG Limited, the learned counsel for the Respondents submitted that the distinguishing factor in such case was that there were material violations of the law and as such the recovery was not found sustainable despite pendency of appeal, whereas, in the instant case according to the learned counsel there are no violations of the law as the impugned recovery was made after the seven day period provided for vide Stay Order and before the Stay Order passed by the learned Appellate Tribunal/Respondent No. 2 on 22.09.2017 and even otherwise there are disputed questions of facts involved.
17. While exercising his right of rebuttal, the learned counsel for the Petitioner relied upon Rule 48, sub-rules 7 and 8 of the FED Rules, 2005 to argue that the order must be communicated and that time commenced from date of communication and in this respect he relied upon Quaid e Azam Thermal Private Limited versus FBR, 2020 PTD 165. He highlighted that the instant Petition is Writ of Certiorari wherein alternate remedy does not preclude this Court from exercising jurisdiction under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973.
18. In addition, the learned counsel in support of his contentions placed reliance on, Quaid e Azam Thermal Private Limited versus FBR, 2020 PTD 165, Mujahid Soap & Chemical industries versus Customs Appellate Tribunal, 2019 SCMR 1735, Kinza National Bank of Pakistan versus Sacked Employees Review Board Establishment Division, 2019 PLC(CS) 1516, H.M. Extraction Ghee & Oil Industries versus FBR, 2019 SCMR 1081, Association of Builders & Developers of Pakistan versus Province of Sindh, 2018 PTD 1487, M/s MAROSH and others versus Federation of Pakistan, 2018 PTD 1787, Khalid Mehmood versus Naseem Akhtar, 2017 MLD 338, Huawei Technologies Pakistan versus Commissioner Inland Revenue, 2016 PTD 1799, Urban Developers Associates through Managing Parter versus Commissioner Inland Revenue and others, 2016 PTD 2242, Rishad Choudri versus Cantonment Board, Karachi, 2014 PTD 136, Magna Processing Industries versus Pakistan, 2014 PTD 841, FESCO versus Federation of Pakistan and others, 2014 PTD 1549, Engro Vopak Germinal Ltd. versus Pakistan, 2012 PTD 130, Shahnzwaz Private Limited versus Pakistan, 2011 PTD 1558, Iqbal Hussain versus Federation of Pakistan, 2010 PTD 2338, Hydri Ship Breaking Industries versus Sindh Government, 2007 MLD 770, Sunrise Bottling Company Limited versus Pakistan, 2006 PTD 535, Yasir Board Industry versus CBR, 2006 PTD 1054, Nur Begum versus Settlement & Rehabilitation Commissioner, 2003 SCMR 501, Z.N. Exports Private Limited versus Collector of Sales Tax, 2003 PTD 1746, Town Committee versus Authority under Payment of Wages Act, PLD 2002 SC 452, Attock Cement Pakistan Limited versus Collector of Customs, PTD 1999 1892, M/s Pfizer Laboratories versus Federation of Pakistan, PLD 1998 SC 64, Airport Support Services versus Airport Manager, 1998 SCMR 2268, Shoaib Bilal Corporation versus Commissioner of Income Tax, (1993) 67 Tax 233, Mehran Associates Limited versus Commissioner Income Tax, 1993 SCMR 274, Julian Hoshang Dinshaw Trust versus Income Tax Officer, 1992 PTD 1, Government of Punjab versus Muhammad Mahboob, PLD 1988 SC 376, Usmania Glass Sheet Factory versus Sales Tax Officer, PLD 1971 SC 205, Rahim Shah versus Chief Election Commissioner, PLD 1973 SC 24, Murree Brewery versus Pakistan, PLD 1972 SC 279, Government of West Pakistan versus Begum Agha Abdul Karim, PLD 1969 SC 14, University of Dacca versus Zahir Ahmed, PLD 1965 SC 90, Commissioner of Income Tax versus Fazlur Rehman, PLD 1964 SC 410, Nagina Silk Mills versus Income Tax Officer, PLD 1963 SC 322, Mehboob Ali Malik versus Province of West Pakistan, PLD 1963 Lahore 575, The Burmah Oil Company versus The Trustees Port of Chittagong, PLD 1962 SC 113, Pakistan versus Qazi Zaiuddin, PLD 1962 SC 440, Allah Ditta versus Muhammad Saeed Vatoo, PLD 1961 Lahore 479, M. Amir Khan versus Controller of Estate Duty, PLD 1961 SC 119, S.A. Haroon versus Collector of Customs, PLD 1959 SC 177, and two unreported Judgments passed by this Court and Appellate Tribunal Inland Revenue, Islamabad in M/s Tecnimont SpA versus Pakistan through Ministry of Finance, etc. W.P.No. 268/2017 and Oracle System Private Limited, Islamabad versus The CIR, LTU, Islamabad, FEA No. 35, 36, 100 & 101/2017, respectively.
19. I have heard the learned counsel for the parties and have also perused the available record.
Now I will take up each argument presented by the learned counsel for the Petitioner and its response by the learned counsel for the Respondents in seriatim: i. Stay Order dated 04.05.2017
20. In a nutshell, the argument made on behalf of the Petitioner in this regard was that this Court by way of the Stay Order dated 04.05.2017 restrained the Respondents from taking any coercive measures against the Petitioner Company for the recovery of the disputed FED till the lapse of seven days of the Order-inAppeal in respect of the Petitioner Company's Appeal pending before the Commissioner-Appeals/Respondent No. 3. The bone of contention between the parties is that the Petitioner contends that the said period began on the date of communication of the Order-in- Original i.e. 13.09.2017 in which case the issuance of the Impugned Recovery Notice dated 20-09- 2017 and the recovery on such date was in violation of the Stay Order whereas the Respondents maintain that the period commenced on the date of Order-in-Appeal i.e. 18.08.2017 and as such there was no violation of the Stay Order on 20-09-2017.
21. Both the counsels referred to various provisions of the FED Act, 2005 and the FED Rules, 2005 as well as the STR, 2006 to support their respective arguments. Reference to other provisions of the law is indeed a useful tool to ascertain the intention of the Legislature when interpreting legislation.
However, in the instant case, it is this Court's Stay Order which requires interpretation. In order to appreciate the true import of the Stay Order it is useful to reproduce its concluding paragraph:- "6. In view of the facts of the case, as stated hereinabove, and taking into consideration the law laid down by the Superior Courts in the cases referred to above, as well as the Order dated 18.04.2016, passed by this Hon'ble Court in W.P.No. 1367/2016, I am inclined to grant, as a stopgap measure, temporary relief to the petitioner by directing respondent No. 2 to decide the petitioner's appeal expeditiously, preferably within a period of 60 days from today. Until the lapse of seven days of decision on the petitioner's appeal, no coercive measures shall be taken against the petitioner for the recovery of this disputed FED by the respondents. In consistency with the order passed by this Court referred to above, this petition is disposed of in the above terms without the issuance of notices to the respondents. The petitioner is directed to appear and argue its case before respondent No. 2 without seeking any adjournment as and when the appeal is fixed."[Emphasis added].
22. Perusal of the said concluding paragraph clearly shows that this Court intended to provide the Petitioner Company a stopgap measure in view of the constraint placed on the Commissioner- Appeals/Respondent No. 3 by virtue of Section 33 (1A) of FED Act whereby the Commissioner- Appeals/Respondent No. 3 is only empowered to give a stay order for a maximum of thirty days which was due to expire shortly in the Petitioner Company's case. In case the interpretation sought by the Respondents is accepted there appears to be no raison d'etre for the temporary relief of seven days granted by this Court after the Commissioner-Appeals/Respondent No. 3's Order-in- Appeal. If the intention was for the seven days' period to commence on the date of the Order-in- Appeal regardless of its communication to the Petitioner, the Court would have simply restrained the Respondents from taking coercive measures till passing of Order-in-Appeal by the Commissioner-Appeals/Respondent No. 3 in respect of the Petitioner Company's Appeal pending before it. The fact that the Court went to the extent of granting seven days after passage of such Order only makes sense if the intention of the Court was to allow the Petitioner Company seven days reprieve after obtaining knowledge of the Commissioner-Appeals/Respondent No. 3's Order- in-Appeal. The reason why knowledge is imperative also becomes apparent in the discussion pertaining to the Petitioner Company's next argument.
23. However, before moving to the next argument, I must first settle the controversy regarding the date of communication of the Order-in-Original to the Petitioner. It was denied by the Respondents that the Order-in-Appeal of the Commissioner-Appeals/Respondent No. 3 was communicated to the Petitioner Company on 13.09.2017 as alleged by the Petitioner Company but no proof of communication of such order on any other date has been shown by the Respondents. In fact what was submitted is that the Petitioner Company was aware of the Order-in-Appeal of the Commissioner-Appeals/Respondent No. 3 as the Petitioner Company was represented by the counsel. However, upon disposal of the appeal, the Commissioner-Appeals/Respondent No. 3 is required to communicate the order passed by him to the appellant under Rule 48(8) of the FED Rules, 2005. The learned counsel for the Respondents argued that this requirement of communication is only for purposes of filing the appeal before the Appellate Tribunal/Respondent No. 2 as the sixty days' period provided for appeal under Section 34 of the FED Act, 2005 commences from the date of receipt of the order. Be that as it may, the important thing is that there is a statutory duty cast upon the Commissioner-Appeals/Respondent No. 3 to communicate its order to the appellant despite which the Respondents have been unable to establish the date of such communication through documentary evidence. Moreover, the date of communication of the Commissioner-Appeals/Respondent No. 3's Order-inAppeal stated in the Petitioner Company's Appeal before the Appellate Tribunal/Respondent No. 2 is also 13.09.2017 whereas the learned counsel for the Respondents failed to show any evidence that such date has been denied by the Respondents before the Appellate Tribunal/Respondent No. 2.
24. In view of the above, I am satisfied that there is no disputed question of fact regarding the date of communication of the Order-in-Appeal upon the Petitioner Company which was 13.09.2017 in which case the seven day period allowed by this Court vide Stay Order was to expire on 20.09.2017.
Therefore, the issuance of the Impugned Recovery Notice and the recovery made pursuant thereto on the said date from the Petitioner Company's bank account was in violation of the Stay Order passed by this Court. ii. No notice upon the Petitioner Company prior to the Impugned Recovery Notice
25. The learned counsel for the Petitioner Company argued that even otherwise no notice was served upon the Petitioner Company which is a must prior to coercive recovery in light of case law particularly in view of the fact that the Petitioner Company's Appeal before the Commissioner- Appeals/Respondent No. 3 had been pending for four months.
26. He relied, inter alia, upon an unreported Judgment of this Court passed in Oracle Systems Pakistan (Private) Limited v. Pakistan through the Secretary Revenue & Ex Officio Chairman Federal Board of Revenue FBR, Islamabad, etc., W.P.No. 3876/2021. In such case too recovery of FED was sought on account of franchise services and royalty on technical services similar to the instant case. The petitioner in the said case impugned the attachment of its bank accounts and recovery therefrom upon dismissal of its appeal by the Commissioner-Appeals/Respondent No. 3 as being without prior notice. This Court took note of the fact that the means by which FED can be recovered is provided in the Rule 60 of the FED Rules, 2005. It bears mention that sub-section 3 of Section 60 provides that the procedure laid down in the STR, 2005 regarding recovery shall, mutatis mutandis, be followed for the purpose of recovery of arrears of FED. Presently it is the STR, 2006 that are in force and effect which include Rule 71, where under recovery action may be initiated on expiry of thirty days from the date on which the government dues are adjudged. Such recovery action includes attachment of bank accounts. This Court in the said Judgment held as follows:- "5. ............Rule 60 ibid or any other provision under the Federal Excise Rules, 2005 does not prescribe any expiry of period or issuance of notice, but Rule 71(1) provides for lapse of thirty (30) days period after adjudication of the liability. The liability was adjudged through Order-in-Original dated 23.11.2020, but was also subject matter of challenge. The matter was pending for almost about 11 months, hence the propriety demanded that before taking the penal measures for recovery of the liability notice should have been served through registered Post or courier in the manner envisaged. [Emphasis added].
27. Let us examine Rule 71 of the STR, 2006 reproduced herein below: "71. Initiation of recovery action.--(l) On expiry of thirty days from the date on which the Government dues are adjudged, the referring authority shall deduct the amount from any money owing to the person from whom such amount is recoverable and which may be at the disposal or in the control of such officer.
(2) In case the Government dues are not fully recovered under sub-rule (1); the referring authority may,--
(a) serve a notice to the Sales Tax, Customs, Federal Excise and Income Tax officers in the Form as set out in STR-16 to deduct the Government dues from any money owing to the defaulter which may be under their control; and a copy of such notice shall be endorsed to the defaulter;
(b) require by notice in writing, any person or organization who holds, or may subsequently hold, any money for or on account of the defaulter, to pay to such officer the amount specified in the notice;
(c) require, by notice in writing, the customs officers to stop the clearance of any goods imported by the defaulter; and
(d) attach the Bank accounts of the defaulter: Provided that either before or after the initiation of recovery proceedings, the Collector may, if so requested by the person concerned, recover the dues in such installments as he may deem proper: Provided further that in case a registered person pays the amount of tax less than the due tax as indicated in his return, the referring authority may directly proceed to recover the short-paid amount by attachment of the Bank accounts of the defaulter or through stoppage of clearances from the business premises, as provided in the following rule, after serving a notice for payment of the short-paid amount in three days."[Emphasis added].
28. Sub-rule (1) of Rule 71 ibid provides thirty days from the date on which the Government dues are adjudged before allowing the referring authority (defined in Rule 2(1)(xlv) of the STR, 2006, as any officer not below the rank of assistant collector recovering government dues) to deduct the amount from any money owing to the person from whom such Government dues are recoverable and which may be at the disposal or in the control of the referring authority. Under sub-rule (2) thereof alternate methods of recovery are provided which may be resorted to only in case the Government dues are not fully recovered under sub-rule (1) including attachment of bank accounts of the defaulter. The first proviso stipulates that either before or after initiating recovery proceedings the dues may be recovered in installments if so requested by the concerned person.
29. The scheme of law that emerges from the above analysis is that upon disposal of appeal the Commissioner-Appeals/Respondent No. 3 is obligated to communicate his order to the appellant pursuant to Rule 48(8) of the FED Rules, 2005 as discussed herein above and that the sixty day period for filing of appeal before the Appellate Tribunal/Respondent No. 2 commences from the receipt of such order. Insofar as recovery is concerned, the learned counsel for the Respondents rightly pointed out that no recovery proceedings may be initiated for thirty days after the Government dues are adjudged not from the date of communication of the Commissioner- Appeals/Respondent No. 3's Order-inAppeal. However, the said period of time which allows the assessee to discharge the liability without the need for the referring authority to resort to coercive measures would become meaningless if no notice of demand pursuant to the adjudication of Government dues is served upon him. Indeed coercive measures would be unjustified without giving the assesse the opportunity to satisfy the demand. Obviously the taxpayer would not have the chance to satisfy the demand unless he has knowledge that the appeal filed by him has been dismissed by the Commissioner-Appeals/Respondent No. 3. Furthermore, the facility of requesting payment in installments before initiation of recovery proceedings as provided under the first proviso to sub-rule (2) of Rule 71 would also not be available to the defaulter unless he had been put on notice. These provisions clearly indicate that the assessee must have notice prior to initiation of recovery proceedings.
30. It is now well settled that the obligations of the State and all its functionaries to act in a just, fair, and reasonable manner as required under Section 24-A of the General Clauses Act is to be read into every statute. The principles of natural justice are equally well settled. Reference may be made to Pakistan LNG Limited (Supra). It would indeed neither be just nor fair or reasonable for the Respondents to delay compliance of the requirement of Rule 48(8) of the FED Rules, 2005 for thirty days and to take coercive action under Rule 71 of the STR, 2006 without notice by claiming there is no requirement to communicate the Order-in-Appeal for purposes of initiating recovery proceedings. As articulated by my learned brother, Mr. Justice Babar Sattar in Pakistan LNG Limited (Supra) "while the State is within its right to collect the tax due from citizens, it is under an obligation to inform the citizens of the tax due as well as the date by which such liability is to be discharged, failing which the State could resort to use of coercive means for recovery."
31. The Lahore High Court in the case of Quaid e Azam Thermal Private Limited versus FBR, 2020 PTD 165 while discussing Rule 71 of STR, 2006 has held that: "6. Under the law, it is mandatory for any referring authority to first provide thirty days to such person against whom the dues are 'adjudged' to pay the tax amount due. Only after expiry of said period, the referring authority can deduct the amount from any money owing to the person from whom such amount is recoverable and which may be at the disposal or in the control of such officer. The department can only serve a notice under Rule 71(2) of the Rules of 2006 after the expiry of mandatory period prescribed under Rule 71 (1) ibid. Without observing the mandatory requirements provided in law, the recovery proceedings are not tenable. For ease of reference, Rule 71(1) of the Rules of 2006 is reproduced hereunder:- "71. Initiation of recovery action.-- (1) On expiry of thirty days from the date on which the Government dues are adjudged, the referring authority shall deduct the amount from any money owing to the person from whom such amount is recoverable and which may be at the disposal or in the control of such officer."
7. The question arises as to whether time prescribed in Rule 71(1) ibid would also be granted after the decision of first appellate authority, especially when remedy of second appeal before an independent forum i.e. Appellate Tribunal is still available to petitioner. In the instant case, assessment order was passed on 11.01.2018, whereby respondents created a demand of Rs.986,088,811/- along with default surcharge and penalty. Petitioner's appeal was rejected by CIR (Appeals) on 27.03.2019 and on the very next day i.e. 28.03.2019, respondent No.2 issued notice with direction to attach petitioner's bank accounts and remit the amount in favour of respondent No.3 under banking instruments. The impugned notice is reproduced hereunder:- ......
8. The above notice shows that neither any order of first appellate authority i.e. Commissioner Inland Revenue (Appeals) has been referred nor its copy was directly sent to petitioner asking it to deposit the amount due, at least within a reasonable time. There is also no mention of any previous notice given to petitioner after passing of the assessment order. In the given circumstances, petitioner was entitled to be given thirty days to satisfy the demand and only thereafter, impugned coercive measure of deduction of amount from bank accounts of petitioner could be initiated.
9. The law requires that the determined recoverable amount should be made known to the taxpayer by service (communication) of assessment or appellate order, as the case may be and description of the said order, date of service and amount recoverable under it, should reflect in the notices for demand, including notice under the afore-referred provisions of law. It is further supported from Articles 10A and 19A of the Constitution, which guarantee that necessary information be disclosed and a fair opportunity be given to a person being subjected to coercive measures under the relevant provisions of law." [Emphasis added].
32. I tend to agree with the said pronouncement. While communication of the Order-in-Original to the taxpayer is an independent requirement under Rule 48(8) of the FED Rules, 2005 notice to the taxpayer demanding the adjudged dues which would give him the option to pay the amount adjudged or to request payment in installments is also necessary prior to initiating recovery proceedings as stipulated in Rule 71 of the STR, 2006. Since no demand notice was served upon the Petitioner Company prior to the issuance of the Impugned Recovery Notice the same is not sustainable at law. iii. Recovery proceedings should not be initiated till a decision has come from an independent forum
33. In fact the Petitioner Company's counsel argued that recovery proceedings should not be initiated till a decision has come from an independent forum i.e. Appellate Tribunal of Appeal/Respondent No. 2 for which purpose the law provides sixty days limitation period under 34 of the FED Act, 2005.
34. This Court in Oracle Systems Pakistan (Private) Limited (Supra) held that: "6. Even otherwise, over a period of time, the Courts have developed the jurisprudence that before affecting tax recovery there has to be adjudication by one independent forum and that being Appellate Tribunal Inland Revenue. ...............
On the touchstone of the above case law it was appropriate that respondents ought to have waited for the outcome of the decision in the Appellate Tribunal before adopting coercive measures for recovery. Needless to observe that the referred jurisprudence developed over a period of time is not to frustrate the mechanism provided under the law for effecting recovery prior to the decision by the Appellate (Tribunal) Inland Revenue, however, is to be followed only where the tax liability is not disputed but where the tax liability is disputed and is the subject matter of appeals in various fora up until the Appellate Tribunal. The principles laid down in judgment in paragraph 6 supra should be adhered.
[Emphasis added].
35. Reference may also be made to Quaid e Azam Thermal Private Limited (Supra) wherein the Lahore High Court went to the extent of holding that the assesse ought to be given a reasonable time to approach the Appellate Tribunal/Respondent No. 2 as follows: "10. The assessee has not been given reasonable time to approach the higher forum i.e. Appellate Tribunal and if such process is allowed, the remedy of appeal before said independent forum, provided under the Statute, will become redundant. Such course is not only harsh but also unreasonable. Normally, the superior courts suspend the recovery proceedings / coercive measures unless the order creating such demand has undergone the scrutiny of at least one independent forum, which in this case is the Appellate Tribunal before which an appeal was to be filed by the petitioner. Reference is made to the cases of Sun-Rise Bottling Company and Messrs Huawei Technologies Pakistan supra."[Emphasis added].
36. Indeed sub-section (1) of Section 37 of the FED Act, 2005 mandates that a person desirous of appealing against an order passed in relation to the duty demanded or penalty imposed shall pending the appeal deposit the FED demanded unless such deposit is dispensed with by the Appellate Tribunal/Respondent No. 2 subject to conditions as it may deemed fit. Under sub-section
(3) of Section 37 ibid the Appellate Tribunal/Respondent No. 2 may direct that pending appeal payment of the FED demanded etc. may be made in installments. According to the proviso thereto the appellant need not apply for stay where he has already deposited 15% of the liability. All these provisions of law would become redundant if the FED demanded has already been recovered by the Respondents by adopting coercive measures.
37. Therefore, without prejudice to the discussion contained hereinabove in respect of the Petitioner Company's arguments No. (i) and (ii), it must be acknowledged that by now it is fairly well settled by various High Courts that coercive measures are not ordinarily adopted for recovery of disputed liability till the decision by an independent forum outside the department which is the Appellate Tribunal as held in Pakistan Oil Fields Ltd. through Authorised Attorney and General Manager Vs. Federation of Pakistan through Secretary Revenue and 2 others, 2016 PTD 1590. The evolution of the case law in this regard has already been discussed in Pakistan LNG Limited (Supra) as follows: "7. The principles of natural justice are also well settled. It was held by superior Courts even prior to the introduction of Article 10-A within the Constitution that to be treaded in accordance with principles of natural justice is to be regarded as a fundamental right of a citizen. The principles of natural justice are understood to include the right of a citizen to a hearing and the right to be heard by an impartial Tribunal. The independence of judiciary is recognized as a salient feature of the Constitution and the right to access to justice includes the right to have one's civil entitlements and obligations adjudicated by a Tribunal or Court that is a neutral arbiter of the law.
The importance of these rights was formally recognized when Article 10 A of the Constitution was introduced in the Constitution by the 18th Constitutional Amendment to afford a textual basis to such rights. The right to access justice and the role of an independent adjudicatory Tribunal to uphold such right was emphasized by the august Supreme Court in significant detail in Mehram Ali and others v. Federation of Pakistan and others (PLD 1998 SC 1445).
8. It was held by the Full Bench of the learned Sindh High Court in M/s Pak-Saudi Fertilizers Limited v. Federation of Pakistan and others (2002 PTD Karachi 679), in relation to the Income Tax Ordinance, 1979, that, "while the disputes in the shape of appeals are pending, no coercive actions are to be taken." In this case the department was found to have pressed for recoveries after passing assessment order with tremendous haste, by freezing the bank accounts of the taxpayer and drawing funds therefrom, in a fact pattern similar to that in the instant matter. The learned Sindh High Court observed that determination of amount due from the taxpayer remained to be made by an appellate forum it was consequently held that recovery proceedings initiated by the tax department, "and adoption of coercive measures through notices under Section 92 of the Ordinance freezing of the bank accounts of the petitioner," were without lawful authority in view of pending appeals/disputes. And that, "till disposal of the appeals by the department hierarchies up to the Income Tax Appellate Tribunal the respondents are restrained from adopting any coercive measures towards recoveries." The question of the right of a taxpayer to have his fiscal obligations adjudicated by an independent forum outside the hierarchy of FBR has also been settled in Brothers Textile Mills Limited v. Federation of Pakistan through Secretary and 03 others (2003 PTD Lahore 2834), wherein the learned Lahore High Court held that the taxpayer was entitled to interim relief till such time that the demand generated by the tax department was adjudicated by one appellate forum. Again in Z.N. Exports Private Limited v. Collector of Sales Tax (2003 PTD Lahore 1746) the learned Lahore High Court held that, "in all fairness, equity and justice, an assessee should not be forced to pay a demand created by a Revenue Authority unless the order creating such demand has undergone the scrutiny of at least one independent forum,". While identifying the Tribunal as such forum, it was held that, "before a recovery created by an impugned order by a Departmental Authority can be effected, an assessee, appellant must be heard by a forum outside the departmental hierarchy." These precedents were then explained by the learned Lahore High Court in Sun-Rise Bottling Company Private Limited through Chief Executive v. Federation of Pakistan and 4 others (2006 PTD Lahore 535) where the question before the Court was whether a recovery could be affected when injunction granted by the Tribunal had expired after six months under Section 46(4) of the Sales Tax Act, 1990. Relying on the law laid down in Mehram Ali, the learned Lahore High Court reiterated that an essential feature of the fundamental right of access to justice was the determination of a grievance by an independent forum while reiterating the law laid down in Z.N. Exports Private Limited. In Commissioner of Income Tax and others v. Messrs Media Network and others (2006 PTD SC 2502) the august Supreme Court explained that the right to natural justice could not be disregarded and that to uphold such right "it might suffice if reasonable opportunity of hearing is granted to a person before an adverse action or decision is taken against him."[Emphasis added].
Alternate Remedy
38. It was contended by the Respondents' counsel that the instant Writ is not maintainable due to the availability of alternate remedy i.e. that refund may be claimed. In my opinion, claiming refund if and when the Appellate Tribunal/Respondent No. 2 decides in favour of the taxpayer is not an adequate or efficacious remedy where the taxpayer has been deprived of his property without due process of law which is a violation of his fundamental right as enshrined in Article 24 of the Constitution of the Islamic Republic of Pakistan, 1973.
39. For the foregoing reasons, the instant Petition is allowed and the Impugned Recovery Notice and recovery pursuant thereto is declared to be unlawful and of no legal effect. Consequently, the obtaining of pay orders by the Deputy Commissioner/Respondent No. 5 from the Petitioner Company's Bank is also declared to be unlawful and the Deputy Commissioner/Respondent No. 5 is directed to ensure that the amount recovered from Petitioner Company's Bank is reimbursed to the Petitioner Company forthwith.