AJMAL MIAN, J.-Since the above three petitions involve a common question of law, we intend to dispose of these petitions by this common judgment.
"(1) To declare that the Notification, Exhibited 'A-10' is without lawful authority of no legal effect and is incapable of being applied to the facts of the petition and given retrospective effect.
(2) To declare that the acquired legal rights in terms of exemption of Sales Tax, as a result of deprivations, losses caused to the petitioner could not be withdrawn, rescinded or made ineffective.
(3) To declare that the impugned order passed by the respondent No. 1 Exh. A-II is without jurisdiction and ab initio defective and void, and all further proceedings and orders are invalid.
(4) To declare that the petitioner is not liable to Sales Tax.
(5) To order that until the decision of this petition the recovery proceed--ings before the Tax Authorities be stayed for which a separate applica--petition is being filed.
(6) To award cost and any other relief which may be considered proper and expedient in the event and the circumstances of the case."
2. The relevant facts leading to the filing of the above petitions are that the petitioners have been carrying on business as makers and spoolers of thread balls. It seems that on the basis of Circular No. C-16(43)-ST/51, dated 16-8-1951 and C. No. 9(7)-S'T/56, dated 13-6-1958 (hereinafter referred to as the notification) the petitioner claimed exemption from the payment of sales tax. It also seems that as the matter of fact the Sales Tax Officer under Annexure A-6, to each of the petitions allowed the refund of the sales tax for the years 1964-65, 1965-66, 1966-67. It is the case of the petitioner that in respect of first two financial years the actual refund was made, whereas in respect of the third year referred to hereinabove the order was passed but no refund was made. It further seems that Martial Law Regulation No. 32 (hereinafter referred to as the M. L. R.) came into force in April, 1969, whereby declaration for excess incomes for the period specified therein i.e. Years 1960-61 to 1968-69 were required to be filed by 16th June, 1969. The petitioner in pursuance of the M. L. R. Filed a declaration and declared excess income as Rs. 2,05,884 for the above period. The above declaration was scrutinized by a committee constituted under the M. L. R. And by consent of the petitioner it was disposed of by raising the amount to Rs. 2.55,643. It also seems that on 30th March, 1970, the Central Board of Revenue issued Circular No. 9'68) ST/T-2/62, dated 30th March, 1970, (Annexure A-10, to the petition) clarifying that the thread was not exempt from the payment of sales tax. On, the basis of the above circular, it appears that respondent - -No. 1 initiated the proceedings for the years 1964-65,1965-66; 1966-67, and assessed the sales tux amounting to Rs.
27,628, Rs. 1,822 and Rs. 40,411. Respectively. It also seems that against the above assessment - orders, the petitioners filed departmental appeals, which were dismissed on 14-9-1972.- After that references were filed in the High Court, which were- withdrawn according to the learned counsel for the petitioner, as the petitioner, wanted to prosecute the above petitions, which were filed on 26-1-1973. The petitioners have impugned the above assessment orders in respect of the sags tax for the aforesaid financial years in the present petitions.
3. (a) In support of the above petitions. Mr. Muhammad Naseem, learned counsel for the petitioners has invited our attention to paragraphs 2, 4 and 5 of Circular No. 1/69 and has urged that since the three years period in question was covered by the declaration filed under the M. L. R. Which was disposed of by the competent authority in the aforesaid terms, the respondent Department was not justified in initiating the proceedings for assessing sales tax for the above three years period and the impugned orders are without jurisdiction. To fortify his above submissions, he has referred to the case of Commissioner of Sales Tax, Lahore v. Standard Leather Works ((1979) 39 Taxation 236), the case of Commissioner of Sales Tax, Lahore v. Standard Leather Works (1980 PTD 300), and the case of Commissioner of Sales Tax v. Crescent Pak Soap and Oil Mills Ltd. (1982 PTD 1).
(b) On the other hand, Mr. Hyder A.I Pirzada has urged that since the petitioners had themselves filed the sales tax returns in pursuance of the circular dated 30-3-1970 and had not raised any objection before the Sales Tax Officers or the appellate sales tax authority, the' petitioner are estopped from raising this plea in these petitions. In support of his above submission he has referred to the case of Ghulam Mohiuddin v. Chief Settlement Commissioner and 2 others (PLD 1964 SC 829), the case of Mumtaz Industries v. Sales Tax Officer (PLD 1976 Lah. 703).
4. It will be pertinent to take up the above objection of Mr: Pirzada before dealing with the above contention of the learned counsel for the petitioners,
(i) In the above Supreme Court case reported in PLD 1964 SC 829, the facts were that the appellant in spite of having the knowledge that a second revision petition was filed before the Chief Settlement Commissioner did not object before the Settlement Commissioner to the exercising of his review power. It was held that "the principle upon which the writ is refused in such cases is not that jurisdiction has been conferred on the tribunal concerned by waiver and acquiescence but that even though the impugned order is without jurisdiction the person seeking to have it quashed should not be granted that discretionary relief as lit had stood by and allowed the tribunal to usurp a jurisdiction which it did not possess knowing that the tribunal concerned was committing such an illegality in consequence of something done by that person". However, the appeal filed by the appellant was allowed as he had not only challenged the order of the Settlement Commissioner passed in exercise of his review power but had also impugned another order passed in revision.
(ii) As regard the second case, it may be observed that a D. B. Of the Lahore High Court observed that the objection as to the authority of the Assistant Sales Tax Officer to make the sales tax assessm ent was not" at alt raised at any stage before the sales tax authorities and that it was first time raised before the High Court in a writ petition and that it cannot be entertained as it would also necessitate an inquiry into the fact as to whether or not the Assistant Safes Tax Officer had been authorised in this behalf or not.
5. On the other hand, Mr. Muhammad Nasim has referred to the case of Nagina Silk Mill, Lyallpur v.
Income-tax Officer, Lyallpur and another (PLD 1963 SC 322), and the case of Chief Secretary, Government of Punjab v. Commissioner of Income-tax, Lahore Zone, Lahore (PLD 1976 Lah. 258).
(i) In the above first case the Supreme Court of Pakistan observed that "in cases of absence or excess of jurisdiction or where the impugned order suffers from illegality on the face of the record, a certiorari may be granted even though the right of statutory appeal has not been availed of.
While repelling the contention as to the non-raising of the question of jurisdiction before Income- tax Authorities, the Supreme Court remarked as follows: "A preliminary objection has been taken by the learned counsel for the respondent, Mr. Abdul Haq, that as the point of jurisdiction had not been raised before the departmental authorities, the writ petitions were not entertainable by the High Court on that ground. Learned counsel contended that the Act provided a complete Code in respect of Income-tax matters and the assessee was confined to remedies available thereunder by way of appeal or revision. Any point of law involved in the case could also be adjudicated upon by the High Court on a reference made under section 66 of the Act. In support of his position learned counsel relied on a Privy Council Judgment as Raleigh Investment Company, Limited v. Governor-General-ire-Council. In that case, the appellant had instituted a suit in the High Court at Calcutta in its ordinary original civil jurisdiction, claiming a declaration that certain provisions of the Act, which authorized the assessment and charging to tax of a non-resident, in respect of dividends declared or paid outside British India but not brought into British India, were ultra vires of the 'legislative powers of the Federal Legislature and that the assessm ent made on toe appellant was, therefore, illegal and wrongful. An injunction was asked for restraining the making of future assessments in respect of such dividends and for re-payment of the tax paid. It was held that while in form, the relief claimed did not profess to modify or set aide the assessm ent, in substance, the suit was directed exclusively to a modification of the assessment and was barred by section 67 of the Indian Income-tax Act, which provided that no suit shall be brought in any civil Court to set aside or modify any assessment made under the Act. It was observed by their Lordships of the Privy Council that effective and appropriate machinery was provided by the Act itself for the review of any assessment on grounds of law, including the question whether a provision of the Act was ultra vires, and it was in that setting that section 67 had to be construed. The phrase "assessment made under this Act" in section 67 meant an assessm ent finding its origin in an activity of the assessing officer, acting as such. The circumstance that he had taken into account an ultra vices provision of the Act was, is that view, immaterial in determining whether the assessment was made under the Act."
(ii) In the above second cited case a division bench of the Lahore High Court permitted the respondent to raise the question of jurisdiction even after the arguments were concluded and the case was reserved for judgment.
6. In our view if the levy of the impugned sales tax is without jurisdic--petition, the mere fact that the petitioner had not raised this plea before the Sales Tax Authorities would not make it the legal nor it would constitute an estoppel or an acquiescence as admittedly in the sales tax returns filed by the petitioners they showed their liability as nil. Furthermore, the Court will be reluctant to non- suit a petitioner in case of illegal recovery of tax on the ground that he failed to raise such a plea before the authority concerned particularly when such recovery is patently illegal. In the instant case, it is an admitted position that the petitioners had filed a declaration under the M. L. R. For the period, which covers the three years' period in question. The above declaration was scrutinized by the Committee under the M. L. R. As pointed out hereinabove and it was disposed of by consent of the petitioners by raising the amount to Rs. 2,55,643, in place of Rs.2,05,884.
It may be advantageous to reproduce herein below para. 5 of the aforesaid Circular No. M. L. R. No. 1/69, which reads as follows: "5(a) Where a tax-payer has filed a return/revised return or a consoli--dated statement showing his income correctly, it would be taken to include all the income earned by him from all sources including suppression of income as also taxes and duties evaded if any, such as Customs and Central Excise Duty, Sales Tax, Estate Duty, etc. Proceedings for the recovery of Customs, Central Excise Duty, Sales Tax Op., evaded would not be started or re-opened, as the case may be, against such persons for the relevant period except that revaluation proceedings pending with the customs authorities or any proceedings pending with the Central Excise authorities on 16th April, 1969, would not be affected. Similarly, assessments under the Sales Tax, the Estate Duty, Wealth-tax and Gift-tax Acts which have already been finalized would not be re-opened but pending assessm ents will be finalized under these Acts on the basis of the information supplied by the assessee or available from his declaration. No action what--soever will however be taken against the assessee for having submitted earlier incorrect returns under these Acts. This is of course on the assumption that all income or gains from such suppression or evasion of taxes and duties have been included in the revised returns or the consolidated statements of the tax-payer.
(6) Income-tax and Sales tax deducted at source or collected from customers to which provisions of section 18(10) of the Income-tax Act 1922, and section 30-A of the Sales Tax Act, 1951, are applicable should not be included in the 'excess income' as it is payable separately under the provisions mentioned above. It should' be deposited in the Government treasury and a note to this effect given in the return."
It may be noticed that a declaration under the M. L. R. Was not only to cover the evasion of Income- tax but also sales tax and other taxes and, therefore, the declaration filed by the petitioner for the aforesaid period had covered the evasion of all taxes including of that sales tax. Admittedly the Department on the basis of the Board of Revenue Circular dated 30-3-1970 referred to hereinabove initiated the present proceedings after the declaration was finalized. This point has been the subject-matter of judicial pronouncement in the three cases cited by the learned counsel for the petitioner referred to hereinabove in para. 3(a)
(i) In the first case a division bench of the Lahore High Court while . Dealing with the question, "whether on the facts and in the circumstances of the case, the tribunal was justified in holding that the assessee's sales tax returns should be accepted in view of the Board's Circular No. M. L. R. 1 of 1969 as amended by Circular No. M. L. R. 3 of 1959", gave its answer in the affirmative.
(ii) The second case relied upon by Mr. Muhammad. Nasim is as order passed by the Supreme Court of Pakistan while refusing leave to appeal against the aforesaid judgment of the Division Bench reported in (1979) 39 Taxation 56.
(iii) Whereas in the third case a division bench of this Court recorded its answer in the affirmative while dealing with the following question:- "Whether on the facts and in the circumstances of the case the Income-tax Tribunal was justified to hold that the assessee's declaration under M. L. R. 32 covered also such taxes and duties as were evaded on account of misinterpretation of a provision of law and that the departmental appeal in such circumstances would, therefore, dismissed."
7. In view of the above clear legal position, namely, that an asses who bad filed a declaration under the M. L. R. Which was accepted or disposed of by consent by increasing the amount, cannot be made liable to pay further income-tax or sales tax for the period covered by the declaration, we are constrained to hold that the impugned orders are without jurisdiction and, therefore, we allow the above three petitions and declare that the impugned orders are without lawful authority and of no legal consequence. In the circumstances of the case, there will be no order as to costs.