MR. MUHAMMAD ASLAM, MEMBER TECHNICAL.-(1). This appeal has emanated against order in appeal No. 993/97, dated 15.08.1998 passed by the Collector (Appeals) Central Zone, Lahore.
2. Background of the case is that the Deputy Collector of Sales Tax, Lahore received an information that M/s. Indesign (Pvt.) Ltd. 65-Main Boulevard, Gulberg-II, Lahore, owners of the show room of wooden furniture, were indulging in the evasion of sales tax. The staff of the Collectorate of Sales Tax Lahore visited the premises of the said unit on 08.03.95 and recorded the statement of one Mr. Muhammad Aslam, the Attorney, who was present which revealed that M/s. Indesign Private Limited were working in the capacity of a private limited company and that they had paid sales tax amounting to Rs. 60,000/- during the year 1993-94. It was stated by the said Attorney that the company was not dealing in the business of furniture since October, 1994 and that one Mrs. Ghazala Rehman, a Director of M/s. Indesign (Pvt.) Ltd., was doing furniture business under the name and style of Indesign Interior as sole Proprietor in the same premises.
3. As M/s. Indesign Pvt. Ltd. Failed to produce the requisite copy of registration certificate, the option exercised by them and the treasury challans authenticating payment of sales tax for the last five years, the authorities concerned approached the department of Income Tax and obtained therefrom the following information pertaining to the sales declared by them:- Financial Year Sales declared 1988- 89 51,85,250 1989- 90 48,57,843 1990- 91 64,92,627 1991- 92 65,40,465 1992- 93 61,18,248 1993- 94 57,11,920 1994- 95 Return not due
4. As M/s. Indesign Private Ltd. Had not paid the tax due from them amounting to Rs. 44,58,166/- nor they applied for registration as required under the relevant provisions of law, they were alleged to have contravened the provisions of Section 3, 6, 14, 15, 22, 23 and 26 of the Sales Tax Act, 1990 read with the provision of SRO 641(I)/89, dated 17.06.89 and SRO 857(I)/94, dated 20.09.1994. There were, therefore, called upon to show cause as to why sales tax amounting to Rs. 44,58,166/- alongwith additional tax and surcharge should not be recovered from them under Section 34 and 36 of the Sales Tax Act, 1990 and why penal action should not be taken against them under Section 33 ibid.
5. The learned Deputy Collector who adjudicated the case held that the allegations levelled against the appellants in the show cause notice had been proved beyond doubt. He therefore, directed them to pay sales tax amounting to Rs. 44,58,166/- leviable on the taxable supply of furniture made by them during the year 1989-90 to 1993-94 alongwith additional sales tax and surcharge and also imposed a penalty of Rs. 89,16,332/- on them under Section 33(2) of Sales Tax Act, 1990.
6. The learned Collector (Appeals) too confirmed the aforesaid liabilities and refused to interfere with the orders already passed.
7. While pleading the case of the appellants before the Tribunal, learned counsel, Mr. Zaheer Ahmed Khan strongly contended that the lower Forums had proceeded against his clients in an arbitrary and whimsical fashion and that no one down below ever bothered to know the actual facts or understand the case in proper perspective. The learned counsel placed on record treasury challans showing payment of the requisite amounts of sales tax of Rs. 2,70,000/- for the year 1989- 90 to 1993-94 and also furnished copies of the correspondence exchanged with the department of sales tax which showed that the appellants had applied in time for registration to the concerned authorities who unfortunately, kept sleeping in the matter.
8. The learned DR was confronted with the aforesaid documentary evidence and was asked to confirm as to whether the appellants applied to the department for registration and also whether they had been regularly making payment of the sales tax due from. Them under the fixed capacity system. The learned DR stated at the bar that the documents furnished by the appellants were authentic and that all through the appellants had been discharging their liabilities on a regular basis. When asked as to why these facts were not verified before issuing the show cause notice or passing a quasi judicial order, the learned DR stated that at different occasions the appellants were either not traceable or they did not extend co-operation as is normally expected from the assessees.
9. We have seen the case record thoroughly, heard both sides in detail and addressed ourselves to the relevant provisions of law. It is clear beyond doubt that the case made out by the department suffers from palpable legal and factual infirmities and that, from no stretch of imagination, it can stand the test of judicial scrutiny. As the appellants had been making payment of taxes due from them regularly and they also applied to the department in time for registration, it was unfair on the part of the concerned authorities to proceed against them on the basis of some information received from the department of income tax and determine huge liabilities, which to say the least, are nothing but nullity in the eye of law.
10. In view of the above, we set aside the orders passed by the lower Forums and accept the appeal. It is expected that the authorities concerned would avoid recurrence of such unfortunate situations in future for such an action on the part of government functionaries acts as a big