' MUHAMMAD MUJEEBULLAH SIDDIQUI, J.-The facts giving rise to this appeal are that the appellant is a multinational Pharmaceutical Company, engaged in manufacture of drugs/medicines. They are the manufacturers of an antacid with the trade mark "ENO". Admittedly it is registered as a drug by the Ministry of Health under the Drugs Act, 1976. The appellants are claiming exemption from payment of sales tax which was being allowed up to the year 1996-97. On 10-2-1999, Additional Collector, Sales Tax East Karachi, served a show-cause notice on the appellant which reads as follows:-- Dated 10-2-1999 SHOW-CAUSE NOTICE ' Whereas it has been reported by the Deputy Superintendent, RRA, Cell Sales Tax (East), Karachi that Messrs Beecham Pak (Pvt.) Ltd. Karachi, for the year, 1996-97, it is reported by the visiting audit.
Revenue Receipt Party that the concerned unit was supplying Eno Fruit Salt without payment of Sales Tax, treating them as exempted under Item No,37 of the Sixth Schedule of the Sales ' Tax Act, 1990 which was held under observation by audit on following grounds:-- ' The goods "Eno Fruit Salt" cannot be admitted as drug, on account of its causal usage for temporary relief.
' In view of the above facts, it appears that the supply of Eno Fruit Salt was liable to sales tax 18% from July, 96 to March, 97 and 12.5% from April, 97 to till date. The Audit party calculated the recoverable amount of sales tax amounting to Rs,65,53,148 (up to April, 1998), which is liable to be recovered from Messrs Beecham Pakistan (Pvt.) who have violated the provisions of sections 3, 6, 7, 14, 15, 22, 23 and 26 of the Sales Tax Act, 1990 and the Govt. Has sustained a loss of sales tax amounting to Rs,65,53,148 (from July, 1996 to April, 1998) which is liable to be recovered from them along with the due additional tax (calculate at the time of payment of principal amount of sales tax) under sections 34 and 36 of the Sales Tax Act, 1990. They may be penalized under section 33 ibid for the violation of aforementioned provision of the Sales Tax Act, 1990.
' Thus Messrs Beecham (Pvt.) Ltd., Karachi violated the provision of sections 3, 6, 7, 14, 15, 22, 23 and 26 of the Sales Tax Act, 1990 and due to this omission, Govt. Sustained a loss of sales tax amounting to Rs,65,53,148 (from July, 1996 to April, 1998) which is liable to be recovered from them along with the due additional tax (calculate at the time of payment of principal amount of sales tax) under sections 34 and 36 of the Sales Tax Act, 1990. They may be penalized under section 33 ibid for the violation of aforementioned provision of the Sales Tax Act, 1990.
' Messrs Beecham Pak (Pvt.) Ltd., Karachi are therefore called upon to show cause in writing within Seven days of the receipt of this notice as to why action for contravention of the aforesaid provisions of law should not be taken against them under section 33 of the Sales Tax Act, 1990."
2. The appellant submitted the explanation and ultimately the matter was heard and the order-in- original, dated 4-2-2000 (issued on 8-2-2000) was passed by the Additional Collector-II, Sales Tax
(East) Karachi, holding that the ENO Fruit Salt, having been registered under the Drugs Act, 1976, enjoyed exemption from the payment of Sales Tax and the show-cause notice was vacated. The order is reproduced below: --
' Brief facts of the case are that it was reported by the Deputy Superintendent, RRA, Cell Sales Tax (East), Karachi that Messrs Beecham Pak (Pvt.) Ltd., Karachi, for the year, 1996-97, it is reported by the visiting Audit Revenue Receipt Party that the concerned unit was supplying Eno Fruit Salt without payment of Sales Tax, treating them as exempted under Item No,37 of the Sixth Schedule of the Sales Tax Act, 1990 which was held under observation by audit on following grounds:-- ' The goods "Eno Fruit Salt" cannot not be admitted as drug, on account of its causal usage for temporary relief.
2. In view of the above facts, it appears that the supply of Eno Fruit Salt was liable to Sales Tax a 18% from July, 96 to March, 97 and @ 12.5% from April, 97 to till date. The Audit party calculated the recoverable amount of sales tax amounting to Rs,65,53,148 (up to April, 98), which is liable to be recovered from Messrs. Beecham. Pakistan (Pvt.) who have violated the provisions of sections 3, 6, 7, 14, 15, 22, 23 and 26 of the Sales Tax Act, 1990 and the Govt. Has sustained a loss of sales tax amounting to Rs,65,53,148 (from July, 1996 to April, 1998) which is liable to- be recovered from them along with the due additional tax (calculate at the time of payment of principal amount Of sales tax) under sections 34 and 36 of the Sales Tax Act, 1990. They may be penalized under section 33 ibid for the violation of aforementioned provision of the Sales Tax Act, 1990.
3. Thus Messrs Beecham (Pvt.) Ltd. Karachi violated the provision of sections 3, 6, 7, 14, 15, 22, 23 and 26 of the Sales Tax Act, 1990 and due to this omission, Government sustained a loss of sales tax amounting to Rs, 65,53,148 (from July, 1996 to April, 1998) which is liable to be recovered from them along with the due additional tax (calculate at the time of payment of principal amount of sales tax) under sections 34 and 36 of the Sales Tax Act, 1990. They may be penalized under section 33 ibid for the violation of aforementioned provision of the Sales Tax Act, 1990.
4. A show-cause notice C. No, 16(06)cont/Tech/STE/Beecham/09/ 2103, dated 1-2-1999 was issued in this case reply, dated 23-2-1999 through their consultant Sattar Sillat as under:--
(1) That the basis of issuance of the show-cause notice is the allegation that the goods "Eno Fruit Salt" cannot be admitted as drug on account of its casual usages for temporary relief vide para. 2 of the show-cause notice.
(2) That before any reply to the show-cause notice can be submitted and the matter can be argued you are requested to kindly disclose the basis and/or details/further particulars of the allegations with the copies of the documents for the conclusion of the casual usage of temporary relief resulting in non-admission as drug of the goods "Eno Fruit Salt".
' It may not be out of place to point out that the authorities exercising quasi-judicial functions in adjudications should observe the principle of natural justice and thus give proper opportunity to the concerned party to rebut the evidence obtained behind the back which is only possible if the ex parte evidence obtained is disclosed and copies whereof supplied to the concerned party.
' Your attention is also invited to the C.G.O. No, 10/74 issued by the Central Board of Revenue whereby the authorities exercising Quasi-Judicial functions are directed to observe the principle of natural justice that is the maxim of "audi alteram partem" with further directions to supply the evidence to the party. Reliance is also placed on subsection 2 of section 1 of Qanun-e-Shahadat Order, 1984 by virtue of which provisions of Qanun-e-Shahadat, 1984 is made applicable to the authority exercising quasi-judicial powers which includes Sales Tax Authorities.
' In the meantime the hearing in the above matter may kindly be adjourned to a date after the above particulars/documents/copies are issued/supplied.
5. Departmental Officer submitted their parawise comments which are reproduced as under:-- ' Para-1 The defendants wrongly registered (Eno Fruit Salt) under the Drugs Act 1976. The products is not a medicine but reliever, which does not come under S.No, 37(Now S. No,13) of Sixth Schedule of Sales Tax Act, 1990.
' Para-2 Eno is hereby prescribed by the physician for relief of abdomen diseases. People take Eno Fruit Salt just to have temporary relief from chest burning and gastric trouble.
' Para-3 Registration of Eno Fruit Salt as medicine under Drugs Act, 1976 was basically wrong because it was not medicament but simple reliever.
' Para-4 The example of Aspirin quoted by the learned Advocate is not tenable because Eno Fruit Salt is not properties in properties to that of Aspirin. Aspirin is no doubt a medicament.
' Para-5. The plea of the learned Advocate is lame and do not prevail. The product comes within tax net because it does not enjoy exemption under the relevant provisions of the Sixth Schedule to the Sales Tax Act, 1990.
' Para-6. It is immaterial to say that the product is registered with the Ministry of Health for two decades or any longer period. Registration of a product with an authority does not mean that the manufacturer is entitled for tax relief on the grounds it was registered.
' Para-7 Product does not enjoy exemption either under section 13 of Sales Tax Act, 1990 or any Notification specific or general issued later on or in pursuance of provisions of Sixth Schedule to the Act General Remarks.
' Sales Tax Act, 1990 is not. Governed by the Drugs Act, 1976. The provisions of either Acts are independent for purpose they were evolved. Sales Tax Act, 1990 is taxing statute. It is wrong -^''to say that product should enjoy exemption from payment of sales tax because it is registered with Ministry of Health Government of Pakistan. In the end it is most respectfully prayed that the product may kindly be brought under tax net, because it is reliever not the medicament.
6. Hearing in this were fixed on 23-2-1999, 9-3-1999, 1-4-1999, 20-4-1999, 24-4-1999, 8-5-1999, 24- 5-1999, 21-8-1999, 15-9-1999 and 2-10-1999.
7. I have gone through the record of the case as well as written as verbal submission of both the parties and observed that the instant case has been instituted on the observation of the revenue receipt audit against the respondent's product "Eno- Fruit Salt" which in their opinion cannot be treated as drug. On account of its casual usage for temporary relief. As such in the opinion of revenue receipt.Audit, "Eno Fruit Salt" does not fall in under item-37 of Sixth Schedule to the Sales Tax Act, 1990 thus falling outside the exemption regime and thereby liable to tax. The respondent on the other hand has taken the plea that the Ministry of Health, Government of Pakistan, vide Registration. Certificate No, 180, dated 17-4-1976 and as such falls under the Items No,37 of the Sixth Schedule to the Sales Tax Act, 1990. They also stated that main ingredient of Eno Fruit Salt's are Fruit Salt, Sodium bicarbonate, Acid tartrate, Sodium bitartrate and Sodium tartrate. This product is used for treatment of inter alia, indigestion, constipation and flatulence in human beings. They have also made a reference to section 3(g) of the Drugs Act, 1976, wherein the definition of a drug include all substance or mixtures of substances that are manufactured, sold, stored, offered for sale or represented for internal or external use in the treatment, mitigate, prevention or diagnosis of disease, an abnormal physical state or the symptoms thereof in human beings or the restoration, correction or medication of organic functions in human beings.
' The respondent have also rebutted dr rationale of the detecting agency that if a substance is taken as casual.Usage for temporary relief the same cannot be treated as a drug. They argued that the medicine aspirin is intended for casual usage to provide temporary relief but the same is a drug registered under Drugs Act and therefore, enjoys exemption from sales tax. They also contended that there are very few drugs, which are being sold in market, which provide permanent relief therefore if the rationale of the detecting agency is accepted, then most of the drugs which are being sold in market will fall out of the exemption regime. The reply of the respondent was sent to the revenue receipt audit for offering objections and comments but it is regretfully observed that no reply has been received from their end. In order to verify whether Eno Fruit Salt was actually registered as a "Drug" under the Drugs Act, 1976 the undersigned made a reference to the Director/ Controller, Ministry of Health, Islamabad, who confirmed vide their , letter, dated 7-1-2000 that Eno Fruit Salt was registered under the Drugs Act, 1976 in 1976.
' Considering all aspects of the case including the allegations contained in the show-cause notice and the written reply of the respondent, I am of the clear opinion that Eno Fruit Salt .Having been registered under the Drugs Act. 1976 falls within the Item No, 37 of the then Sixth Schedule of the Sales Tax Act, 1990 and therefore .Stands exempt from the payment of sales tax. Show-cause notice is hereby vacated.
3. Again on 22-6-2001 a letter was received from Senior Auditor, Audit Div-I, in the Office of Assistant Collector Sales Tax and Central Excise (East) Karachi, inter alia containing the following observations:-- "Eno Fruit Salt" Taxable Supplies "Eno fruit salt" does not fall under Sixth Schedule of Sales Tax Act, 1990 due to non-classification of it's self and its substances. Under any of the headings of Chapter 30 of the First Schedule of Customs Act, 1969 (in of 1969). Thus wise "Eno Fruit Salt" is the taxable supply and you did contra the provisions in terms of sections 3, 6, 7, 23 and 26 of the Sales Tax Act, 1990. Therefore, the requisite amount of Sales Tax due in respect of Eno Fruit Salt Rs, 2,58,55,399 along with additional tax of Rs, 61,633,530 may be recovered under sections 36 and 34 of Sales Tax Act, 1990. A detail working is enclosed as Annex A."
4. The detailed working contained in the annexures showed that the sales-tax alleged to be due was for the period from October, 1996 to April, 2001. The appellant in reply to the letter referred to above, pointed out that an earlier show-cause notice, dated 10-2-1999 was issued on the same point and the issue was decided in his favour vide order in-original, dated 8-2-2000. It was contended that the order still holds the field. However, on 17-10-2001, another show-cause notice was issued to the appellant stating as follows:-- "They are not paying sales tax on one of their products 'Eno Fruit Salt'. As "Eno Fruit Salt" does not fall under Sixth Schedule of Sales Tax Act, 1990 due to non-classification under any of the headings of Chapter 30 of the "First Schedule" of the Customs Act, 1969 (IV of 1969), the product is taxable. They have thus contravened the provisions of the sections 3, 6, 7, 13, 23 and 26 of the Sales Tax Act, 1990, and the sales tax due in respect of "Eno Fruit Salt" amounting to Rs,25,855,399, (detail of sales tax intimated by the unit) from October, 1996 to April, 2001 is recoverable under section 36 along with additional tax under section 34 of Sales Tax Act, 1990 besides other penal action as specified under section 33 of the Sales Tax Act, 1990."
5. In reply to the show-cause notice, the appellant reiterated that the issue already stands decided vide order-in-original, dated 8-2-2000 and therefore, the show-cause notice, was required to be withdrawn. The learned Collector Adjudication, finally passed order-in-original on 31-1-2002 holding that the Eno Fruit Salt was a taxable supply and did not enjoy exemption, as it does not fall in Sixth Schedule to the Sales Tax Act. The tax, was not paid and was recoverable along with the additional tax under sections 36 and 34 of the Sales Tax Act. A penalty equivalent to 30% of the amount of tax was also imposed under section 33(4)(c) of the Sales Tax Act.
6. The appellant preferred appeal before learned Customs, Excise and Sales Tax Appellate Tribunal and vide impugned order, dated 25-3-2004, it was held the 'Eno' Fruit Salt did not enjoy exemption under Entry No,13 of the Sixth Schedule to the Sales Tax Act, 1990 (corresponding to Entry No,37 before substitution of the Sixth Schedule by Finance Act, 1998), while dismissing appeal on the issue under consideration, the learned Member of the Tribunal observed that the appellant took plea that neither any tax was paid on Eno nor the department made any effort to collect the same and therefore, they were entitled to benefit under section 65 of the Sales Tax Act, 1990, and they were at liberty to make an application under the said provisions of law to the appropriate officer who shall examine the same and decide it in accordance with the law.
7. Being still dissatisfied, the appellant preferred this appeal. The following questions of law were found emanating from the order of the Tribunal:-- "(1) Whether the impugned orders are bad in law as the same disregard the exemption from sales tax granted to all drugs registered under the Drugs Act, 1976?
(2) Whether the department could re-agitate a matter which had been decided against it vide Order-in-Original No,9 of 2000, and wherefrom no appeal had been preferred?
(3) Whether the Tribunal erred by holding that the Appellant's product was not classifiable as a 'drug' corresponding with any of the headings of Chapter 30 of the First Schedule of the Customs Act, 1969 in view of the heading 30.03 and the fact that the explanatory notes corresponding thereto specifically. Included "salts and concentrates obtained by evaporating natural mineral waters" and the same covered the Appellant's said registered drug?"
8. We have heard Mr. Qazi Faez Isa, learned counsel for the appellant and Mr. Abdul Saeed Khan Ghori, learned counsel for the respondent.
9. The questions Nos.1 and 3 pertain to the merits while question No,2 is in respect of jurisdiction. The learned Advocates have addressed arguments on all the three questions of laW but first we would like to consider the question No,2, as it pertains to jurisdiction and if it is found that the second round of proceedings are not warranted in law and are without jurisdiction, the questions Nos.1 and 3 would not be required to be answered as all the proceedings without jurisdiction are ab initio, null and void.
10. Dealing with the question No,2, Mr. Qazi Faez Isa, has contended that, the admitted position is, that on 10-2-1999, show-cause notice was issued raising the same issues for the period from July, 1996 to February, 1999, and after full deliberation, the Adjudicating Officer held that the Eno Fruit Salt enjoyed exemption from payment of sates-tax and the show-cause notice was vacated. The Sales Tax Department did not prefer any appeal and the Collector or Board did not exercise suo motu revisional jurisdiction to consider the legality or propriety of the order passed by Additional Collector Adjudication. Consequently, the order passed by the Additional Collector Adjudication became final having binding effect on the Sales Tax Department. He urged that once the finding on an issue given by the adjudicating authority became final, it cannot be re-agitated again and again as it would be manifestly against the principles of justice and fair play. The learned counsel for the appellant has submitted that this fact was brought to the notice of Senior Auditor, in reply to his letter, dated 22-6-2001, to the notice of Collector Adjudication, in reply to his show-cause notice, dated 17-10-2001 and to the notice of learned Members of Customs, Excise and Sales Tax Appellate Tribunal, which is evident, from the Memo. Of Appeal submitted before the Tribunal, but all the authorities, below have very conveniently ignored this fact and have reiterated the departmental plea which was raised in the first notice, dated 10-2-1999 and was repelled in the order-in-original, dated 4-2-2000. The learned counsel has vehemently argued that in the circumstances, the entire subsequent proceedings commencing with the issuance of letter, dated 22-6-2001 and issuance of second show-cause notice, dated 17-10-2001 are bad in law. He has pointed out that the second show-cause notice giving rise to this appeal pertains to the period from October, 1996 to April, 2001.
The period from October, 1996 to January, 1999 is common in both the show-cause notices. The learned counsel has maintained that the entire subsequent proceedings are without jurisdiction and the' learned Tribunal has seriously erred in ignoring the fact that the department could not re- agitate a matter which was already decided against the department and had attained finality.
11. Mr. Ghori, learned counsel for the respondent has submitted arguments on merits but he is not able to show us any reason as to how the department can by-pass the order-in-original passed by the Additional Collector Adjudication after it attained finality. The learned counsel has no option but to concede that no appeal was preferred against the first order-in-original passed by the learned Collector Adjudicatiop on 4-2-2000, although the Sales Tax Department could file the appeal against the said order.
12. We have given our anxious consideration to the facts and circumstances of the case and the contentions raised by the learned Advocates for the parties. For the purpose of answer to question No,2, the facts are admitted and we need not to dilate on it in any detail. It is admitted fact that the order dated 4-2-2000 (issued on 8-2-2000) competently paSsed by the Additional Collector-II, deciding the same issue as agitated in the second show-cause notice and after a full-fledged hearing and deliberation it was decided that the Eno Fruit Salt enjoyed exemption from the payment of sales tax. The order was open to appeal under. Section 45 (as it stood before substitution by Finance Act, 2000) and was subject to suo motu revision by the Board. Neither any appeal was preferred by the Sales Tax Department assailing the findings nor any revisional proceeding were initiated. The effect was that the order passed by the Additional Collector Adjudication, attained finality having binding effect on the Sales Tax Department. Re-agitating of same issue by the Sales Tax Department is against all the principles of administration of justice and fair play. This course of action cannot be allowed because, firstly, it is against the principlts of the administration of justice; secondly, it is discriminatory in nature, as any order passed in adjudication not assailed in appeal by an assessee, is always treated to be final and the same principle should be applicable to the Department; thirdly, it militates against the principles applicable to the tax matters, that the issues once settled and accepted by the Department shall not be allowed to be deviated, because it will create uncertainty which has always been deprecated and disapproved by the superior Courts, Legislature as well as the Board itself. Fourthly, in the present case, the issue stands decided by an adjudicating order. The Legislature has gone A by enacting section 65 in the Sales Tax Act, 1990 to the extent of recognizing practice which is result of inadvertence. The learned Tribunal is also aware of this provision, which has been referred in the concluding part of the impugned order; fifthly, a vested right has been created in favour of appellant with the order of the Adjudicating Authority, which cannot be taken away by executive branch of the Sales Tax Department by initiating fresh proceedings on the same point.
13. For the foregoing reasons, it is held that the Sales ' Tax Department could not reagitate a matter which has been decided against it vide Order-in-Original No, 9 of 2000. The said order could be assailed in appellate or revisional proceedings which were not initiated and therefore, it holds the field and in the presence .Of the earlier order dated 4-2-2000, another order contrary to the said order cannot be allowed to hold the field for the simple reason that two contrary orders cannot exist at one and at the same time. All the subsequent proceedings commencing with the issuance of letter dated 22-6-2001 issued by the Senior Auditor and further proceedings on the basis of second show-cause notice dated 17-10-2001 are without jurisdiction and void ab initio. The question No,2 is answered in negative.
14. In-view of the finding that the subsequent proceedings initiated with the issuance of second show-cause notice, .Dated 17-10-2001, are without jurisdiction, null and void ab initio, the questions Nos.1 and 3 are not required to be answered:
15. A copy of this judgment be sent to the Appellate Tribunal who shall pass necessary orders modifying their finding, to dispose of the case in conformity with this judgment as required under section 47(5) of the Sales Tax Act, 1990. The appeal stands disposed of accordingly.
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