PTD 2011 Judgments

2011 P T D (Trib.) 2205

[Customs Appellate Tribunal, Karachi]

Before Muhammad Arif Moton, Member Judicial-II and Muhammad Arshad, Member (Technical-II)

Messrs A.S. STEEL, KARACHI and another

Versus

COLLECTOR OF CUSTOM (APPEALS), KARACHI

Customs Appeals Nos. K-236 of 2008 and K-1168 of 2010, (Old No. K-235 of 2008), decided on 22nd February, 2011.

Customs Act (IV of 1969)---

----Ss. 25, 79, 168, 179, 181 & 194-A---S. R.O. 487(I)/2007, dated 9-6-2007---Determination of value of imported goods---Misdeclaration of description of goods---Confiscation of goods---Option to pay fine in lieu of confiscated goods---Importers declared imported goods as "Silicon Electrical Sheet" under PCT heading 7225.1900 leviable to zero per cent customs duty in terms of S. 79(1) of Customs Act, 1969---Scrutiny report revealed altogether different items as "Electrolytic Tin Plate" classified under PCT heading 7210.1210 liable to 20% customs duty---Additional Collector of Customs, passed order-in-original for confiscation of offending goods with an option to the importers to redeem the goods on payment of leviable duties and taxes as well as redemption fine of 50% of the offending values of the goods and also imposed penalty of Rs.100,000 upon the. importers---Said order-in-­original had been upheld by Collector (Appeals)---Validity---Present was a clear cut case of misdeclaration of description, where 'Electrolytic Tin Plate' in secondary quality was declared as 'Silicon Electric Sheet'---Option given to the importers in order-in-original to redeem the goods on payment of all leviable duty and taxes as well as redemption fine of 50% of offending value .of goods, was against the provisions of the relevant S.R.O. 487(1)/2007 dated 9-6-2007---Redemption fine was to be worked out with reference to the duty and taxes attempted to be evaded and not the duty and taxes leviable on the whole consignment---Adjudicating officer could not order outright confiscation with an option to redeem the goods against 100%, fine of value of the consignment---Redemption fine was to be imposed on customs value and would be over and above the customs duties, other taxes and penalties imposed under relevant law---Customs value for the purpose of imposition of redemption fine was not the value declared or ascertained in terms of S.25 of Customs Act, 1969 but was the amount of duty and other taxes involved in respect of offending goods as incorporated in S.179 of the Act---Appellate Tribunal ordered, in circumstances, that redemption fine could be worked out in respect of duties and taxes attempted to be evaded; or more appropriately on the amount of duty and taxes leviable on the offending goods---Orders passed by the forums below were modified by appellate Tribunal to that extent in circumstances.

Messrs Weave and Knit (Pvt.) Ltd., Karachi v. Additional Collector of Customs (Adjudication) Karachi 2004 PTD 2981 rel.

Asim Munir Bajwa for Appellant.

Ghulam Yasin, Appraising Officer for Respondent.

Date of hearing: 7th February, 2011.

2011 P T D (Trib.) 2033

[Customs Appellate Tribunal, Peshawar Bench]

Before Sher Nawaz, Member (Technical)

MUHAMMAD FAROOQ

Versus

COLLECTOR OF CUSTOMS (APFEAt PESHAWAR and 3 others

Appeal No. Cus.362/PB of 2010, decided on 31st March, 2011.

Customs Act (IV of 1969)---

---Ss. 2(s), 16, 32, 139, 16(1)(8)(89), 167, 168, 171 & 194-A---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Smuggling---Confiscation of goods---Additional Collector of Customs vide his order-in-original ordered outright confiscation of the seized goods---Said order was upheld by Collector of Customs (Appeals)--Goods in question were left unattended in the arrival Hall of the Airport and were taken into custody by the Staff posted there---Violation of S.2(s) of Customs Act, 1969 relating to smuggling would have been made only if the owner of the goods had made an attempt to cross the customs control by misusing the facility under green channel operation while leaving the customs area; and was apprehended by the Customs Staff; or the goods were seized beyond the Customs Control---Nothing as such having been reported, attempt to evade the duty and taxes on part of the appellant could be substantiated---Goods were brought through the notified route; and till such time that the owner had not attempted to breach the Customs Control, he could not be charged for violation of S.2(s) of Customs Act, 1969-7-Goods were in the control of customs and it would have only been possible, if the Customs Staff had connived with appellant in removal of the goods and violation of the relevant provisions of law---No such thing was available on the record showing that the Customs Staff was in connivance with the owner of the goods---Notice under S.171 of Customs Act, 1969 was not served upon the owner---No declaration was made by the appellant in terms of S.139 of the Customs Act, 1969 and no opportunity was provided to him to make a declaration---Violation of Ss.32(1), 16 & 2(s) of Customs Act, 1969 could not be substantiated by the authorities---Order-in-appeal and order-in-original were set aside by the tribunal and appellant/owner of goods was allowed to get release the same on payment of fine equivalent to 30% of the assessable value. of the seized goods.?

Irshad Ahmad Durrani for Appellant.

Aziz-ur-Rehman, D.S., Sher Ahmad Khan, Inspector and Syed Asifullah, Inspector for Respondents.

Date of hearing: 30th March, 2011.

2011 P T D (Trib.) 2114

[Customs, Appellate Tribunal Peshawar]

Before Sher Nawaz (Member Technical) and Gulab Shah Afridi, Member (Judicial)

COLLECTOR CUSTOMS, PESHAWAR

Versus

COLLECTOR CUSTOMS (APPEALS), PESHAWAR and another

Appeal No. Cus.17/PB of 2011, decided on 16th May, 2011.

(a) Customs Act (IV of 1969)---

----Ss. 174-A, 179(1), 32(3-A) & 2(b)---S.R.O. 371(I)/2002 dated 15-6-2002---Appeal to Appellate Tribunal---Appeal by the Deputy Collector of Customs---Validity---Deputy Collector of Customs was neither an aggrieved officer of Customs nor an appropriate Officer under 5.194-A of the Customs Act, 1969---Notification issued under S.2(b) of the Customs Act, 1969 did not notify said official as an appropriate officer of customs under subsection (1) of S.194-A of the Customs Act, 1969 and the show-cause notice was issued and the case was adjudicated upon by him in terms of S.179(1) of the Customs Act, 1969---Appeals purported to have been filed by the Collector as the nomenclature of the petitioner appears a Collector of Customs but not signed or verified by him instead were signed or verified either by a Deputy Collector or Assistant Collector of Customs would also be deemed not to have been filed in accordance with law---Record demonstrated that no such authorization in writing was obtained from the Collector of Customs while filing the appeal.

2006 PTD (Trib.) 1466 and 2006 SCMR 129 rel.

(b) Customs Act (IV of 1969)---

---Ss. 32(3A) & 2(b)---S.R.O. 371(I)/2002 dated 15-6-2002---S.R.O.565(I)/2006 dated 5-6-2006---False statement, error, etc.---Audit---Importer contended that customs staff who conducted the audit in terms of subsection (3A) of S.32 of the Customs Act, 1969 were not Appropriate Officers under the law in terms of S.2(b) of the Customs Act, 1969 and Notification No. S.R.O. 371(I)/2002 dated 15-6-2002; and to become the Appropriate Officer of Customs under S.2(b) of the Customs Act, 1969, the officers of Customs as defined under S.3 of the Customs Act, 1969 had to be assigned the functions for which they were appropriate officers of Customs-Department contended that audit of the unit was conducted upon a direction received from the Federal Board of Revenue and in compliance of the orders issued by the Deputy Collector of Customs with the concurrence of the Collector of Customs---Validity---Department could not produce the orders of the Board under which specific directions were conveyed by the Board to carry out the audit of the unit in respect of the imports made by them in terms of Notification No. S.R.O.565(I)/2006 dated 5-6-2006---Action of the Department for carrying out such audit should have been supported by law, which the department had failed to point out.

2006 SCMR 129 ref.

(c) Customs Act (IV of 1969)---

----Ss. 32(3A), 19, 156(1)(14)(10A)---S.R.O. 565(I)/2006 dated 5-6-2006---False statement, error, etc.---Jurisdiction of Collector of Customs to get the records, audit and stocks verified---Validity---Collector of Customs had no authority and jurisdiction to get the records of the importer-cum-manufacturer particularly when the Board had not issued any clear-cut orders empowering the Collector of Customs, to conduct the audit of the records of the manufacturer and to verify its records and when no imports had been effected within jurisdiction of the Collector of Customs---Even if the powers of conducting of audit of the importer-cum-manufacturer were assumed under the Notification No. S.R.O. 565(I)/2006 dated 5-6-2006, the Collector should have forwarded the Audit Report to the concerned Collectorate for legal action under the relevant provisions of law from where the clearance of the imported goods had been made and where record of clearance of imported goods was maintained and proper debit, credit of goods cleared was made against the authorized quantity---Initiation of action by the Department under subsection (3A) of S.32 of the Customs Act, 1969 read with Cl. (14) of S.156(1) of the Customs Act, 1969 was quite illegal because Notification No. S.R.O. 565(I)/2006 dated 5-6-2006 was issued in terms of S.19 of the Customs Act, 1969 and any violation of any of the conditions prescribed there-under were cognizable under Cl. (10A) of S.156(1) of the Customs Act, 1969 was out of question and uncalled for.

(d) Customs Act (IV of 1969)---

----Ss.179 (1), 32(3A) & 4---S.R.O. 371(I)/2002 dated 15-6-2002---Power of adjudication---Duties under normal course---Quasi judicial powers---Monetory limits---First Appellate Authority had held that Deputy Collector of Customs was not competent to adjudicate the case because as per show-cause notice, the duty and taxes were more than Rs.55 lac which exceeded the powers entrusted to him under S.179(1) of the Customs Act, 1969---Department contended that Superintendent/ Principal Appraiser were competent to issue notice under subsection (3) of S.32 of the Customs Act, 1969 and S.4 of the Customs Act, 1969 authorized the Deputy Collector of Customs to exercise all powers and discharge all duties conferred upon any officer subordinate to him; and show-cause notice issued by the senior officer and its adjudication was in accordance with law---Validity---Provisions of S.4 of the Customs Act, 1969 were applicable where there were peculiar and compelling circumstances and where the duties assigned under the Customs Act, 1969 to the words "any officer subordinate to him", appearing in the said section of law authorized the Deputy Collector of Customs to assume the duties which were being performed by him under normal course but the Deputy Collector of Customs could not assume the quasi judicial powers and jurisdiction to which they were entitled under S.179(1) of the Customs Act, 1969 or Notification No. S.R.O. 371(I)/2002 dated 15-6-2002 because while performing their duties as quasi judicial authorities they could not be termed as subordinate to the higher officers and they were quite independent in performing their official duties as adjudicating officers---Importer was not confronted to Audit Report prepared by the audit team and the show-cause notice was issued on the basis of audit report and no contravention report was submitted to the adjudicating authority---Concerned authorities must take care of such irregularities to avoid repetition in future---Appeal filed by the Collector of Customs was rejected being without any merit and Order-in-Appeal was upheld by the Appellate Tribunal.

Muhammad Hussain Superintendent Customs and Azizur Rehman, Deputy Superintendent Customs for Appellant.

Pir Alam Shah, Consultant for Respondents.

Date of hearing: 7th April, 2011.

2011 P T D (Trib.) 2139

[Customs, Appellate Tribunal, Peshawar]

Before Gulab Shah Afridi, Member (Judicial)

Messrs SHIRKAT KHUSHBAKHT SULTAN LTD. and another

Versus

COLLECTOR OF CUSTOMS, PESHAWAR and another

Appeal No. Cus.263/PB of 2010, decided on 22nd February, 2011.

Customs Act (IV of 1969)---

----Ss. 128, 129, 156(1)(9), (43)(64)(90), 194-A & 195---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Seizure and confiscation of goods---Staff of Customs examined the container loaded with goods "Agricultural Diesel Engine Parts ", and considered said goods to be "Interchangeable Auto Parts ", which was banned in Afghan Transit Trade vide notification dated 10-4-2004---Goods were seized for violation of Ss.128 & 129 of Customs Act, 1969 and were confiscated---Additional Collector Customs, setting aside confiscation order, ordered unconditional release of the said goods to its rightful owner vide order-­in-original---Collector Customs recalled case for re-examination under S.195 of Customs Act, 1969 and setting aside order-in-original, ordered outright confiscation of the seized transit consignment vide order-in­-appeal---Seizing Officer could not produce any concrete evidence/proof on file to prove that the confiscated goods were "Interchangeable Parts" and affirmed that consignment of similar parts was allowed in transit to Afghanistan---Case file was examined by the Collector twice before seizure, but no order for examination by the recognized expert was passed Collector Customs had exercised its power under S.195 of Customs Act, 1969 not on the basis of available record, but on the basis of post adjudication opinion, which was collected on his directions---Said expert opinion was also inconsistent with its previous report which it had issued regarding an identical consignment---Technical appraiser had also opined in favour of the appellant---In absence of any illegality and impropriety in the order-in-original same was restored and order by Collector Customs under S.195 of Customs Act, 1969 was set aside.

2009 PTD 246; 2009 PTD 467; 2008 PTD 1916 and 2009 PTD 1463 ref.

Danish Ali Qazi for Appellants.

Naseer Khan, Deputy Superintendent Customs and Fazal Mehmood, Inspector Customs for Respondents.

Date or nearing: 25th January, 2011.

2011 P T D (Trib.) 2863

[Customs Appellate Tribunal, Peshawar]

Before Sher Nawaz, Member (Technical)

COLLECTOR OF CUSTOMS, MCC, PESHAWAR

Versus

COLLECTOR OF CUSTOMS (APPEALS), MCC, PESHAWAR and another

Appeal No. Cus.20/PB of 2001, decided on 3rd May, 2011.

Customs Act (IV of 1969)---

----S.37---Customs General Order No.12 of 2002 dated 15-6-2002, Chapter XII, Paragraphs 47 & 49---Export Policy Order, 2005, S.8(1)(a)---Ministry of Commerce letter No. 16(1)/2005-E.1, dated 17-8-2007---S.R.O. 415(I)/2001 dated 18-8-2001---S.R.O. 787(1)/2005 dated 6-8-2005---S.R.O. 840(1)/2006 dated 17-8-2006---Drawback on goods used in the manufacture of goods exported---Limitation---Condonation of delay---Repayment claims of customs duty on account of export of cement to Afghanistan---Rebate claims were rejected with the observation that the same were filed after expiry of limitation period i.e. 210 days and failed to come up with cogent reasons of delay in filing these claims and to justify that the delay was beyond their control---Exporter contended that, due to law and order situation of Afghanistan they were unable to produce the Original Afghan Customs Clearance Documents, which were the requirement of the department at that time and the issue was taken up by the Ministry of Commerce, who clarified that the attested copies of the Afghan Customs Clearance Documents will be accepted and they will get the same verified from Afghan Customs and delay in filing of rebate claims was genuine and was required to be condoned by the customs authorities---Delay in filing the rebate claims was condoned by the First Appellate Authority and Collectorate was directed to sanction the rebate claims filed by the exporter as per direction of the Ministry of Commerce---Validity---Department had not taken into consideration Ministry of Commerce's instructions---Claims of rebate filed by the exporter should have been considered in the light of such instructions and action should have been taken subsequently, provided they had failed to produce the verified documents from the respective quarters---Appeal was barred by period of nineteen days and no request for condonation of delay had been filed by the Department---Appellate Tribunal did not intervene in the order of First Appellate Authority and appeal of the Department was rejected being without any merit.

Collector of Customs, Peshawar v. Messrs Bilour Enterprises Customs Reference No.83 of 2010 distinguished.

Aziz-ur-Rehman, D.S. for Appellant.

Danish Ali Qazi and Waheed Ahmad, Account Officer for Respondents.

Date of hearing: 24th May, 2011.

2011 PT D (Trib.) 2881

[Customs Appellate Tribunal, Peshawar]

Before Gulab Shah Afridi, Member (Judicial) and Sher Nawaz, Member (Technical)

Messrs SADAQAT & BROTHERS, PESHAWAR

Versus

DEPUTY COLLECTOR OF CUSTOMS, PESHAWAR and 2 others

Appeal No. Cus.242/PB of 2001, decided on 8th July, 2011.

Customs Act (IV of 1969)---

----Ss. 194-A, 193, 25-D, 25 & 80---Valuation---Review---Review application filed before the Directorate General of Customs Valuation was rejected---Appeal against such order was filed before Collector of Customs (Appeals), who returned the appeal with the direction to file an appeal before Customs Appellate Tribunal---Department contended that instructions by Collector (Appeals) were administrative in nature and were not appealable---Validity---Case had been decided by the Director General of Customs Valuation in terms of S.25-D of the Customs Act, 1969, but directions to the appellants to file appeal before the Appellate Tribunal was not correct as at the time of issuance of such directions, S.194-A of the Customs Act, 1969; was not amended and at that time valuation advice, ruling issued by the Director Valuation were appealable before Director General of Valuation---Orders of the Director General Valuation however, were not appealable before the Appellate Tribunal and such order had been made appeal-able before Appellate Tribunal by virtue of amendment in S.194-A of the Customs Act, 1969, through Finance Act, 2010---Similarly, at the time of issuance of review order, present order was not appealable before the Appellate Tribunal---Provisional assessment having been finalized, Director General Valuation had correctly advised the appellant that assessment order had attained finality and was appealable under S.193 of the Customs Act, 1969---Assessment having been completed by the Assistant Collector of Customs in terms of S.80 of the Customs Act, 1969, appellants should have filed appeal before Collector (Appeals), which they did , but the orders/instructions issued by the Collector (Appeals) were not proper and relevant and according to spirit of S.193 of the Customs Act, 1969---Appellants had not been properly heard and the case of final assessment had not been considered; and requirements of natural justice had not been fulfilled---Case was referred back to the Collector (Appeals) by the Appellate Tribunal with directions to give the appellants an opportunity for proper hearing and decide the case pertaining to final assessment on the merits of the case.

Customs Appeal No. Cus.88/PB of 2008 ref.

Isaac Ali Qazi for Appellant.

Hussain Muhammad, Superintendent and Naseer Khan, D.S. for Respondents.

Date of hearing: 15th June, 2011.

2011 P T D (Trib.) 22

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Judicial (Member-II)

Messrs H.H. BROTHERS, LAHORE

Versus

COLLECTOR OF CUSTOMS, SALES TAX & CENTRAL EXCISE (APPEALS), KARACHI

Customs Appeal No.K-170 of 2008, decided on 14th May, 2010.

Customs Act (IV of 1869)---

---Ss. 25, 32, 79, 80, 156, 194-A & 205---Customs Rules, 2001, R.437---Misdeclaration of imported goods---Confiscation of goods---Importer imported goods and filed declaration electronically---Importer determined his liability of payment of applicable duty and taxes and sought clearance under S.79(1) of Customs Act, 1969---Importer was found guilty of misdeclaration of weight of the goods---Contravention report alleged that importer had misdeclared the weight of the goods deliberately and wilfully to defraud the Government of legitimate revenue also by suppressing the actual value---Additional Collector passed order-in-original in which offending goods were confiscated in terms of clauses (14) & (14-A) of S.156(1) of Customs Act, 1969---Collector (Appeals) having affirmed judgment of Additional Collector, importer had filed appeal to Appellate Tribunal---Authorities only got one container weighed---Had they got another container weighed, the weight would have been in accordance with shipped weight---When discrepancy was visible front the declaration, it would have been appropriate for the officials of the Collectorate to call for the documents under R.437 of Customs Rules, 2001, which also formed a declaration of the importer---Documents not only included the goods declaration, but also included invoices, packing list and bill of lading---Upon receipt of scanned documents, if discrepancy was confirmed, it was to be treated as a procedural lapse and a bona fide mistake, instead of branding it misdeclaration for invoking S.32 of Customs Act, 1969---As per relevant statute an amendment should have been allowed by the competent officer under S.205 of the Customs Act, 1969---Department had failed to discharge the onus of establishing that prices declared by importer were not correct--No misdeclaration of weight or value having been committed by importer, impugned orders were set aside by Appellate Tribunal.?

Messrs Nishat Mills Ltd., v. Superintendent of Central Excise Circle-II PLD 1989 SC 222; Superior Textile Mills Ltd., v. FOP 2000 PTD 399; Messrs Arjun Salt Chemical v. UC Gharo 1982 SCMR 522; 1986 MLD 190; 2002 PTD 2957; 2004 PTD 38; 2005 PTD (Trio.) 617; 2006 PTD 909; 2008 PTD 1250; Messrs Kamran Industries v. The Collector of Customs, Exports PLD 1996 Kar. 68; Latif Brother v. Deputy Collector of Customs 1992 SCMR 1083, Eastern Rice Syndicate v. C.B.R. 1959 SC (Pak.) 364; The Collector, Central Excise and Land Customs, Chittagong v. Imdad Ali 1969 SCMR 708 ; Karachi Bulk Storage and Terminal (Pvt.) Ltd., v. Controller of Customs (Valuation) Karachi and others 2004 PTD 2592; PLD 1989 SC 222; 2000 PTD 399 and 2008 SCMR 438 rel.

Nadeem Ahmed Mirza for Appellant.

Shahid Dasti A.O. for Respondent.

2011 P T D (Trib.) 43

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II)

Messrs ABDUL WAHID & CO.

Versus

ASSISTANT COLLECTOR OF CUSTOMS, KARACHI

Customs Appeal No.K-118 of 2008, decided on 5th April, 2010.

(a) Customs Act (IV of 1969)---

----S. 25---Determination of customs value of goods---Transaction value--Normal value---Concept---Concept of transaction value under World Trade Organization regime was quite different from the concept of normal value under Brussels Definition of value, the former being based on real/actual value of the goods and the latter advocating notional value---Each and every transaction had to be treated separately though within the parameters laid down in S.25 of the Customs Act, 1969 and the relevant Customs Rules made thereunder.

(b) Customs Act (IV of 1969)---

----S. 25---Determination of customs value of goods---Onus of proof---Onus of proving that the declared transaction value was dubious, tainted or colourable lies on the Customs Authorities.

(c) Customs Act (IV of 1969)---

----S. 25---Determination of customs value of goods---Parameters/ criteria regarding assessment---Parameters/criteria with regard to assessment/fixation of values in terms of S.25 of the Customs Act, 1969 ought to be strictly adhered to by the customs administration.

Rehan Umer's case 2006 PTD 909 rel.

(d) Act (IV of 1969)---

----S. 25---Determination of customs value of goods---Proof---Commercial invoice, pro forma invoice, letter of credit and correspondence through normal banking channels were privileged customs/commercial documents and to bring a charge of under-valuation against the taxpayer, the customs authorities need to prove the falsity of these documents with cogent evidence---Under the aegis of real concept of value the taxpayer was under obligation to discharge evidential or persuasive burden of proof by producing the aforesaid documents before the customs authorities in the first instance and the customs in their turn were obliged to discharge the legal burden or the ultimate burden of proof by negating the documents put forth by the taxpayer with concrete proof with rebutting evidence.

(e) Customs Act (IV of 1969)---

----S. 25(7)---Determination of customs value of goods---Deductive method---Proof---Sales tax invoices were also a key document, instrumental and helpful in determining the assessable value of goods where secondary method i.e. Deductive Method under S.25(7) of the Customs Act, 1969 was empowered.

(f) Customs Act (IV of 1969)---

----S. 25---Determination of customs value of goods---Distinct directives to follow the guidelines for determination of value under S.25 of the Customs Act, 1969.

Rehan Umer's case 2006 PTD 909 clouted.

(g) Customs Act (IV of 1969)---

----S. 25---Determination of customs value of goods---Procedural and substantive illegalities committed by the customs authorities in violation of fixed parameters during determination of value under S.25 of the Customs Act, 1969 detailed.

(h) Customs Act (IV of 1969)---

----S. 25(7)---Determination of customs value of goods---Resort to Deductive Method without exhausting. primary method---Validity---Department had not followed the parameters by not following the sequential order thereby exhausting primary method or secondary method without bringing in writing- any evidence of higher value on record---Customs value of similar/identical imports which were compared with the declared transaction value of the subject goods in Customs Act, 1969 at the time of filing of Goods Declaration by the appellant magically disappeared from the data base/repository of the Department and under the garb of under-invoicing even exercise in terms of subsections (5) & (6) of S.25 of the Customs Act, 1969 was not undertaken and resort was made to Deductive Method under subsection (7) of S.25 of the Customs Act, 1969---Department was estopped by their own statement which was unambiguous and unqualified that evidential value of identical or similar goods were not on record for comparison with the declared transaction value---Customs/commercial documents submitted by the Department had neither been negated nor rebutted with any cogent evidence or enquiry from the concerned quarters---No counter affidavits had been filed by the Department to neutralize or extinguish the claim of the importer or his supplier or verification by Government of exporter country or attestation by Consulate of said country in respect of transaction value---Filing of counter affidavit was essential to controvert the assertion of the incumbent---Directives of High Court had not been followed by the Department giving rise to a number of deviations involving glaring mandatory violations tantamounting to substantive illegalities/ infirmities which were floating on the surface of the assessment order.

1986 CLC 1408; 1993 SCMR 662; 1991 MLD 1243; 1989 Crl.J 631 and Civil Petitions Nos.287 to 530 of 2005 rel.

(i) Administration of justice---

----If the statute requires a particular act to be done in a particular manner then the act must be performed in that manner alone and all other manners of doing that act would be not permissible under the law.

1989 Crl.J 631 and Civil Petitions Nos.287 to 530 of 2005 rel.

(j) Customs Act (IV of 1969)---

----S. 25(7)---Customs Rules, 2002, R.107(a)---Determination of customs value of goods---Deductive method---Market enquiry---Undated quotations---Validity---Deductive method for determining assessable value in terms of subsection (7) of S. 25 of the Customs Act, 1969 stated that if the customs value of the imported goods could not be determined under subsection (6) of S.25 of the Customs Act, 1969, same shall subject to Rules be determined on the basis of customs value of the imported goods or identical or similar goods relying upon the unit price at which such imported goods were also sold in the aggregate quantity at or about the time importation of the goods being valued to person, who were not related to the person from whom they buy such goods, subject to certain specified deductions---Deductive method was primarily a work back method based on the Analytical Basis of Valuation prevalent under defunct/erstwhile concept of Normal Price or Notional Value under Brussels' Definition of Value (BDV)---Market inquiry to be conducted by the customs functionaries was to be restricted/based on the parameters that goods employed for determination of the customs value should comprise the impugned imported goods or identical/similar imported goods which were sold in Pakistan in the same state that the inquiry should be based on the unit price at which impugned imported goods or identical or similar imported goods were sold in the greatest aggregate quantity and that the words at or about the time of importation of goods being valued denoted 90 days valuation data in terms of S.25(1) of the Customs Act, 1969 read with R.107(a) of the Customs Rules, 2002-Amongst others the above two ingredients in respect of the imported goods to be so valued one relating to the quantity and the other relating to the period during which the impugned imported goods or identical or similar goods were sold in the maximum aggregate quantity had been visibly and patently flouted by the customs officers---Undated quotations representing local sale price of single quantity/price in the domestic retail market illustrate the irresponsible, indifferent and criminally careless attitude of the customs field officers who were supposed to be the experts in their field---Market enquiry conducted by the customs officers was patently in absolute contradiction with the provisions of relevant subsection (7) of S.25 of the Customs Act, 1969 and was null and void ab initio.

(k) Customs Act (IV of 1969)---

----S. 25(7)---Determination of customs value of goods---Market enquiry---Adoption of deductive method without exhausting primary and secondary methods---Validity---Stakeholders or their representatives did not participate in the market inquiry conducted by the department from the local market from where three (3) undated quotations of single quantity of the item were procured by them---Main argument of the importer for not participating in the market enquiry conducted by the customs authorities put emphasis on the fact that the customs authorities did not exhaust the primary and secondary methods under subsections (1) to (6) of S. 25 of the Customs Act,1969 and without bringing any evidence in writing on record jumped to subsection (7) of S.25 of the Customs Act, 1969 which was not permissible under the law---Even otherwise such a market inquiry which was conducted behind the back of the importer and the concerned association had no evidentiary value in the eyes of law.

1985 CLC 1781 and 2002 PTD 2957 rel.

(l) Customs Act (IV of 1969)---

---Ss. 25-D, 193 & 194---Review of the value determined---Jurisdiction of Appellate Tribunal---Department contended that value determined by appropriate officer of customs could not be challenged before any court unless review was filed before Director General, Customs Valuation---Validity---Appellant had preferred appeal by exercising his legislative right before Customs Appellate Tribunal, under 5.194 of the Customs Act, 1969 against order-in-appeal passed by the Collector (Appeals) under S.193 of the Customs Act, 1969-Customs Appellate Tribunal had jurisdiction to entertain, hear and decide said appeal filed with it against order of Collector (Appeals) in terns of S.194 of the Custom Act, 1969.

Spl. Ref. Appln. No.35 of 2009 rel.

(m) Customs Act (IV of 1969)---

----Ss. 25(7)(a), 25-C, 32, 32A, 80 & 202A---Customs Rules, 2001, Chapter-IX, Rr. 107, 107(a) 110, 111, 117, 118, 121 & 125---S.R.O.No.917(I)/2001, dated 11-11-2004---Federal Board of Revenue letter C. No. 1(19)SjValj2004, dated 19-1-2005---Customs General Order 12/2002 Para. 78---Constitution of Pakistan 1973, Art. 25---Determination of customs value of goods---Valuation of goods in violation of mandatory provisions---Undated quotations---Customs authorities while determining the assessable value of the goods in terms of the directives of the High Court had indulged into a number of violations of the mandatory provisions enumerated in the relevant S.25 of the Customs Act, 1969 read with Customs Rules 2002 and Para 78 of CGO 12 of 2002 by not following sequential order and also by not bringing on record the evidence regarding exhausting primary and secondary methods under subsections (1) to (6) of Customs Act, 1969---Besides the provisions enumerated in Cl. (a) subsection (7) of S. 25 of the Customs Act, 1969 had also not been followed in respect of quantity and time period while obtaining the quotations from the local market---Quotations were undated representing prices of single piece of the item and it was not even indicated as to during which year said weird undated quotations were obtained and by whom---Market enquiry as per record had been conducted without the participation of the principal, stakeholders viz. the importer/appellant and the concerned association which had been deprecated and held to be ab initio void---No evidence of higher value through a visible exercise had been brought on record or intimated to the importer/Appellant---Rejection of value without production of evidence was inadmissible and of no legal significance---Following of sequential order, as mandatorily required in the relevant subsection (10) of S.25 of Customs Act, 1969 had not been followed and resort to Deductive Method under subsection (7) of S.25 of the Customs Act, 1969 had been made---Non sales tax paid quotations relied upon by the customs authorities would negate the observations of Director General Valuation in a similar case regarding the necessity of production of sales tax paid invoices by the importers while putting their cases for determination of value before hint---Appellate Tribunal declined to appreciate the failure of the customs authorities to give any weightage to the production of sales tax paid invoices of the imported goods by the importer/appellant as well as his offer in terms of S. 25-C of the Customs Act, 1969 for acquisition of his consignment @ C & F price plus 5% margin of profit while determining the assessable value--Assessment order was based upon the proceedings which were infested with patent illegalities and which were held to be null and void---Assessment order as well as the order of the Collector (Appeals) based on such proceedings were also ab inito null and void and were set aside by the Appellate Tribunal.

Rehan Umer's case 2006 PTD 909; 1985 CLC 1781; 2002 PTD 2957; 2002 PTD 1464; 2004 PTD 2592; 2007 PTD 1858; 2006 PTD 232; 2006 PTD 2551; 2006 PTD 2807; 2007 PTD 2632; 2008 PTD 1760 and 2008 PTD 1494 rel.

Messrs Super Industries (Pvt.) Ltd. v. Central Board of Revenue and others 2002 PTD 955 ref.

Daniyal Muzaffar for Appellant.

Ghulam Yasin, A.O. for Respondent.

2011 P T D (Trib.) 79

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II)

Messrs FAZAL ELLAHI Prop. of Trading King, Karachi

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, KARACHI and another Customs

Appeal No.K-630 of 2009, decided on 9th August, 2010.

(a) Customs Act (IV of 1969)---

---Ss. 32, 32-A, 131 & 194-A---Making wrong self-assessment and deliberate misdeclaration---Exporter who electronically filed goods declaration, determined his liability for payment of regular duty as 0% and sought clearance under S.131(1) of Customs Act, 1969 through self assessment under PCT heading---Said declaration was marked for checking/examination and its checking revealed that exporter had deliberately made wrong self-assessment and made deliberate misstatement and found exporter guilty of offence under S.32 of Customs Act, 1969---Point for consideration was, whether citing of a wrong PCT heading in respect of classification of exported goods would constitute an act of misdeclaration within the ambit of mischief of S.32 of Customs Act, 1969---Additional Collector had failed to consider that determination of PCT heading was the sole function of the Customs Officers and exporter/importer only would assist the customs in citing PCT heading of the goods---Request of the exporter could be accepted or rejected by the competent Authority, but it was not a punishable offence under any of the provisions of Customs Act, 1969 or notification issued thereunder-Citation of a particular PCT heading in the Bill of Entry would not amount to misdeclaration---Allegations under S.32(1)(2) of the Customs Act, 1969, in circumstances were unwarranted---Correct goods declaration was filed by the exporter` and there was no false statement or any collusion with the officer of the customs---Exporter in circumstances, did not misdeclare any material particular which could attract the mischief of S.32 of the Customs Act, 1969 for levelling the allegation of misdeclaration---Even otherwise, if there was two or more interpretations of the provision pertaining to levy of tax on account of anomaly/ambiguity, the one favourable to the taxpayer could be adopted.

2007 PTD 1804; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala 2008 PTD 60; Messrs Hanif Strawboard Factory v. Additional Collector (Adjudication) Customs, Sales Tax and Central Excise Gujranwala 2008 PTD 578; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others 2009 PTD 762; Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore and 2 others 2009 PTD (Trib.) 1263; Leo Enterprises v. President of Pakistan and others 2009 PTD 1978; Haji Noor-ul-Haq v. Collector of Customs and others 1998 MLD 650; Syed Muhammad Razi v. Collector of Customs (Appraisement) Karachi and 2 others 2003 PTD 2821; Kamran Industries v. The Collector of Customs Exports PLD 1996 Kar. 68; Monno Industries Ltd. v. Government of Pakistan PET. D-199 of 1984; Collector v. Central India Board Products 1987 (29) E.L.T. 259; Collector of C.E. v. Chemphar Drugs 1987 (40) E.L.T., 276 (SC); Central Cotton Mills Ltd. v. Collector 1992 CLC 841; Hindustan Electro Graphites Ltd. v. U.O.I. 1990 (50) ELT 15 M.P.; Metro' Tryres Ltd. v. Collector 1994 (74) ELT 964; Ballarpur Industries Ltd. v. U.O.I. 1994 (74) ELT 795 (Del); Northern Plastics Ltd. v. Collector 1998 (101) ELT 549 (SC); Ibrahim Textile Mills Limited v. F.O.P. PLD 1989 Lah. 47; Central Board of Revenue v. Jalil Sheep Casing Co. 1987 SCMR 630; Government of Pakistan v. Quetta Textile Mills Civil Appeal No. 860-K/90; 2003 PTD (Trib.) 293; Abbassi Steel Industries Ltd. v. Collector of Customs 1989 CLC 1463; Crescent Pak Industries (Pvt.) Limited v. Government of Pakistan 1990 PTD 29; Messrs English Biscuit Manufacturers Ltd. v. The Assistant Collector, Central Excises and Land Customs, Landhi Division, Karachi 1991 PTD 178; Kohinoor Textile v. Federation of Pakistan 2002 PTD 121; Messrs Nadeem Electronics (Pvt.) Ltd. v. Collector of Customs, Central Excise and Sales Tax 1999 PTD 1912; Cape Brandy Syndicate v. I.R. (1921) 1 KB 76; Canadian Eagle Oil Co. Ltd. v. The King 27 TC 205; Hirjina & Co. (Pakistan) Ltd., Karachi v. Commissioner of Sales Tax 1971 PTD 200; Muhammad Amir Khan v. Controller of Estate Duty, Government of Pakistan PLD 1962 SC 335; A. Ghafoor v. The State PLD 1965 Quetta 10; Messrs Hashwani Hotels Limited. v. Government of Pakistan and 5 others 2004 PTD 901; Bechu Bai F.E. Dinshaw, Karachi v. Commissioner of Income Tax 1967 PTD 170; S.G. Mercantile Corporation (Pvt.) Ltd. v. Commissioner Income Tax, Calcutta (1972) 83 ITR 700; Commission of Income Tax Madras v. The Madras Cricket Club (1934) 11 ITR 209; Bellygunge Bank Ltd. Calcutta v. Commissioner of Income Tax Bengal (1946) 14 ITR 409; The Commercial Properties Ltd. v. The Commissioner of Income Tax, Bengal (1928) 3 ITR 23, Additional Commissioner of Income Tax, Bihar v. Lawlys Enterprises (Pvt..) Ltd. (1975) 100 ITR 369; Commissioner of Income Tax, Lucknow v. Chandra Agro (Pvt.) Ltd. (1979) 117 ITR 251; Commissioner of Income Tax, Poona v. Alpana Talkies (1983) 139 ITR 1055; Messrs Mehran Associates Ltd. v. The Commissioner of Income Tax, Karachi 1993 SCMR 274; Messrs Zaman Cement Company (Pvt.) Ltd. v. C.B.R. 2002 SCMR 312; Pakistan v. Messrs Muhammad Saleem PLD 1995 SC 396; Messrs Gatron Industries Ltd v. Pakistan 1990 SCMR 1072; Pakistan v. Messrs Azhar Brothers Ltd., 1990 SCMR 1059; Commissioner v. Makhdoom Syed Hussain Shah 1975 SCMR 352; Collector v. Messrs Novartis Pakistan Ltd. 2002 PTD 976; Messrs M.Y. Electronics 1998 SCMR 1404; Messrs Elahi Cotton Mills Ltd. v. Pakistan PLD 1997 SC 582; Messrs Sandalbar Enterprises v. C.B.R. PLD 1997 SC 334; Messrs Flying Craft Paper Ltd. v. C.B.R. 1997 SCMR 1874: Government of Pakistan v. Village Development Organization 2005 SCMR 492; State Cement Corporation v. Government of Pakistan C.A. No.43 of 1999; 2005 SCMR 728; 2007 PTD 1656; 2008 PTD 1227; 2007 PTD 117 and 1999 SCMR 1881 ref.

(b) Constitution of Pakistan---

----Art. 25---Discrimination---Scope---Facility allowed to some one and denied to other was discrimination; it would militate against the principles enshrined in Art.25 of the Constitution and violate the principle of equality before law.

2005 SCMR 492; 2002 SCMR 312; PLD 1995 SC 396; 1990 SCMR 1072; 1990 SCMR 1059; 1975 SCMR 352; 2002 PTD 976; 1998 SCMR 1404; PLD 1997 SC 582; PLD 1997 SC 334 and 1997 SCMR 1874 ref.

Nadeem Ahmed Mirza for Appellant.

Shahid Dasti Appraiser for Respondent.

2011 P T D (Trib.) 110

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member Judicial-II

Messrs AGP (PVT.) LTD.

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, KARACHI

Customs Appeal No.K-366 of 2009, decided on 24th October, 2009.

(a) Customs Act (IV of 1969)---

----First Sched.---Customs General Order No.12 of 2002 dated 15-6-2002, Chapter-II---Import tariff---Issuance of Classification Ruling---Methodology---Classification Centre was established to decide "classification disputes" as and when referred to it by the aggrieved adversaries---Said Centre was to be headed by an Additional Collector and was authority to co-opt representatives from other Collectorates and bodies on case to case basis and it may also call specialists and experts for expert opinion in determining the classification of any item---Centre was required to invite the importer or his representative for discussion and presentation of documents or information during the meetings of the Classification Committee in the said Centre--Classification, so determined by the Committee, was to be finally approved (or otherwise) by the Collector and such an approved classification had to be communicated in writing to the importer and all other Customs Collectorates within 10 days of such approval by the Collector---In case Classification Centre failed to decide the specific classification issue, the matter had to be referred to the Federal Board of Revenue for decision or for onward reference to the World Customs Organization (WCO) at Brussels for deciding the classification dispute---While paragraph 3 of the Customs General Order No. 12 of 2002 dated 15-6-200 provides PCT classification of various specified goods, the NOTE appended to paragraph 2 thereof states that "the classification ruling so issued by the Centre will be widely circulated in the form of a public notice amongst the trade, industry and Customs organization in the country."

(b) Customs Act (IV of 1969)---

----First Sched.---Customs General Order No.12 of 2002 dated 15-6-2002, Chapter-II---Import tariff---Classification Rulings---Public notices---Letter of Collector or Deputy Collector was treated as Classification Rulings by the Additional Collector---Validity---By no stretch of imagination, the Collector's letter or the Deputy Collector's letter could be considered to be a classification ruling about the imported product registered as drug under the Drugs Act, 1976---Neither the departmental representative produced any Public Notice/ C.G.O. contained classification ruling about the Importer's goods nor there was anything on record to show that the Federal Board of Revenue ever issued a Classification Ruling in the form of C.G.O. or that any Collector issued any Public Notice in pursuance of the said letter---On the other hand, on receipt of the Department's reference, the Classification Centre neither associated the importer (the appellant) nor did it examine the literature of the importer's goods---Even the Additional Collector's reference about the goods was never placed before the Classification Committee and, for reasons best known to the Additional Collector, he never re-submitted the classification dispute before the said Center after making up the deficiencies in his reference although he was advised to. do so, if necessary, in the Deputy Collector's letter----Collector's letter and/or the Deputy Collector (Appraisement-II) 's letter did not qualify to be termed a Classification Ruling in terms of Chapter-II of C.G.O. No. 12 of 2002 dated 15-6-2002 and the Additional Collector erred in treating these letters as Classification Ruling applicable for the importer's goods.

(c) Customs Act (IV of 1969)---

----First Sched.---Customs General Order No.12 of 2002 dated 15-6-2002, Chapter-II---Import tariff---Classifications---Past history---Classifications in deviation of past history---Validity---Appellant/ importer demonstrated that the Customs officers had been continuously and uninterruptedly assessing, classifying and clearing the goods (registered in favour of the appellant under the Drugs Act, 1976 under the Ministry of Health) under PCT heading 30.04 as medicaments containing vitamins---Such classification under PCT heading 30.04 was even not changed or disturbed in the year 2003 and onwards---Customs officers should have given due credence to it and compliance of the provisions of paragraph 74 of C.G.O. No. 12 of 2002 dated 15-6-2002 should not have been departed from the existing and established long-standing practice of classification of goods under PCT heading 30.04 until and unless said classification was changed through a Public Notice/C. G.O. issued after fully compiling with the provisions of Chapter-II of the C.G.O. No. 12 of 2002 dated 15-6-2002---Aspect of adherence to the existing practice was honoured and protected---Importer was legally entitled to the benefits of past practice in the assessment of his goods in terms of paragraph 74 of C.G.O. No.12 of 2002 dated 15-6-2002 till such time that a Public Notice/C. G.O. was issued changing or disturbing prospectively the PCT heading 30.04 classification of goods after satisfying the procedures outlined Chapter-II of the said C.G.O. No. 12 of 2002, dated 15-6-2002.

Messrs Dada Soap Factory Ltd. v. Pakistan and 2 other PLD 1984 Kar. 302; 1970 SC 453; PLD 1984 Kar. 302; 1989 SCMR 353; 2002 PTD 955; 2004 PTD 2516; 2008 PTD 1974 and Messrs Marine Food Industries (Pvt.) Ltd. v. The Deputy Collector, MCC, PaCCS, Karachi Customs Appeal No.K-9 of 2009 13 ref.

(d) Customs Act (IV of 1969)---

----S. 223---Customs General Order No.12 of 2002 dated 15-6-2002, Chapter-II---Officers of customs to follow Board's orders, etc.---Non­compliance---Non-compliance of provisions of Customs General Order by the Customs officers attracts the, provisions of S.223 of the Customs Act, 1969.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss. 162 & 148---Customs Act (IV of 1969), Ss.18, 32, 78, 80, 83, 104, 179 & 202---Recovery of tax from the person front whom tax was not collected or deducted---Import---Escaped assessments of advance income tax---Notice for recovery of income tax by the Customs authorities---Importer contended that while the Customs was empowered to collect advance income tax on imports under section 148 of the Income Tax Ordinance, 2001, they (Customs) were not empowered to demand or recover the not-collected or short-collected or escaped assessment of such advance income tax, because S. 162 of the Income Tax Ordinance, 1979 authorized only the Commissioner of Income Tax to recover the amount of advance income tax not collected under S.148 of the Income Tax Ordinance, 1979---Validity---Provisions of S. 148 of the Income Tax Ordinance, 1979 were very clear and empowered the Customs to collect advance tax from the importer in the same manner and. at the same time as the customs duty payable in respect of import and the provisions of the Customs Act, 1969, in so far as relevant, shall apply to collection of such advance tax---Provisions of S.32 (relating to determination of short-levy, etc.), S.179 (relating to adjudication, whether on account of short/non-levy or otherwise) and S.202 (relating to recovery of government dues) of the Customs Act, 1969, were distinct as against the levy and collection procedure outlined in Ss.18, 79, 80, 83, 85, 104 of the Customs Act, 1969---Procedure for recovery of escaped assessment of advance tax was given in S.162 of the Income Tax Ordinance, 1979 which authorizes the Commissioner of Income Tax (and not the Customs officers) to determine and recover such short-levies and/or non-levies---Even provisions of S.161(2) of the Income Tax Ordinance, 1979, as claimed by the Department, authorized the Customs to recover the escaped assessments (short­-levy/non-levy) of advance tax only in the event of the Commissioner of Income Tax determining or recovering this liability from the Customs officers in terms of S.161(1) of the Income Tax Ordinance, 1979---Department was not authorized to determine, adjudicate, demand or recover the amount of advance tax short-levied, if any---At best, the Department could inform the concerned Commissioner of Income Tax about such non-levy/short-levy, if any, for determination and recovery on merits under S.162 of the Income Tax Ordinance, 1979.

Appeal Case No.187/CU/IB of 2008 rel.

(f) Sales Tax Act (VII of 1990)---

----S.13---S. R.O. 555(I)/2002, dated 23-8-2002---Exemption---Import of ''medicines---PCT headings 30.04 and 21.06---Exemption from sales tax on substances registered as "drugs" irrespective of PCT headings--Importers claimed about classification of goods under PCT heading 30.04, all substances registered as "drugs" under the Drugs Act, 1976, were eligible to exemption from the whole of sales tax under S.R.O. 555(I)/2002 dated 23-8-2002---Customs authorities claimed that only such drugs were exempt from sales tax under S.R.O. 555(I)/2002 dated 23-8-2002 as were medicaments classifiable under PCT Chapter 30 (including heading 30.04) and that imported goods (in the present case) being classifiable under PCT heading 21.06, shall not be eligible to exemption from sales tax even if these were registered as a "drug" under the Drugs Act, 1976---Validity---Provisions of notification No. S.R.O. 555(I)/2002 dated 23-8-2002 were unambiguously clear and in unequivocal terms extend the benefits of sales tax exemption to the "substances" registered as drugs under the Drugs Act, 1976, and the "medicaments" as were classifiable under any heading of Chapter 30 of the Pakistan Customs Tariff (PCT), except for the exclusions mentioned in the said notification---Use of word "substances" (without reference to headings of PCT) and also of the word "medicaments" (with reference to Chapter 30 of the PCT), in the said notification, made it abundantly clear that subject to the exclusions mentioned in that notification, the benefits of sales tax exemption were available to all substances (irrespective of PCT headings) if registered as drugs under the Drugs Act, 1976 and also to all medicaments (irrespective of the registration under the Drugs Act, 1976, or not) classifiable under Chapter 30 of the PCT---Customs authorities had misread and misinterpreted the sales tax exemption notification No. S.R.O. 555(I)/2002---Appellant's goods, irrespective of its PCT Classification, was entitled to the benefits of the sales tax exemption notification in view of the undisputed fact that it was registered as a drug under the Drugs Act, 1976.

(g) Customs Act (IV of 1969)---

----First Sched.---Import tariff---H.S. Code 30.04---Medicaments---Explanatory Notes to H.S. Code 30.04 showed that the medicaments (even if containing vitamins) were covered by the heading 30.04 provided that these were put up in measured doses in the form of tablets, ampoules, capsules, etc., and ready for taking as single doses, whether in bulk or otherwise; that these had therapeutic (curative) or prophylactic (preventive) uses; and that these were presented in packings for retail sale with appropriate indications (in any language) by label, literature or otherwise, about the disease or conditions for which they were to be used, method of use or application, statement of doses, etc.

(h) Customs Act (IV of 1969)---

----First Sched.---Import tariff---Medicines---PCT heading 3004.5090---PCT heading 2106.9090---Determination of---In view of PCSIR test report, the medical specialist's certificates, the certificate from the Department of Pharmacology, the precedent contained in the Tribunal's judgment, the printed literature of said medicine showed its U.S.P. ingredients, its indications and its therapeutic and prophylactic uses and its dosage, Appellate Tribunal held that the medicine in question satisfied the conditions of the Explanatory Notes to World Customs Organization's H.S. Code 30.04 and its sub-head (World Customs Organization's 3004.50 and PCT 3004.5090) read with Rules 1, 3 and 4 of its General interpretative Rules---PCT heading 3004.5090 no doubt was more specific as compared to PCT heading 2106.9090 and also appeared later in numerical order as against PCT heading 2106.9090 and was to be preferred over the residuary and general PCT heading 2106.9090---Imported goods in the present case could not be classified in any other PCT heading merely on the basis of the Collector (Appraisement)'s letter sent to Federal Board of Revenue, in relation to multivitamin dietary supplements in general terms---Said goods were to be treated as falling under PCT heading 3004.5090.

PLD 1990 Kar. 412; 1998 MLD 650; PTCL 2003 CL 716; Crescent Sugar Mills v. C.B.R. and others PLD 1982 Lah. 1 and 2008 PTD 60 ref.

(i) Customs Act (IV of 1969)---

----S. 179(3)---Power of adjudication---Limitation---Show-cause notice was issued on 21-2-2008---Provisions of S.179(3) of the Customs Act, 1969, required that the case should be adjudicated within a period of 90 days front. the date of Show Cause Notice---Said period of 90 days expired on 21-5-2008---Neither the Order-in-Original spoke of any approval of extension by the Collector in the adjudication period nor the departmental representative, who possessed the relevant adjudication file at the time of hearing, could show any such extension by the Collector---Order-in-Original showed that final hearing was concluded on 10-5-2008 but the order was made on 17-8-2008 and issued on 19-9-2008---Departmental representative merely stated that the adjudication got delayed because the adjudicating officer was waiting for reply from the Ministry of Health---Such plea, besides being not a justifiable or legal reason for the delay or for not obtaining approval of extension from the Collector, was in clear contradiction to the Customs authorities' claim that the Ministry of Health had no lawful role or authority to decide PCT Classification issues---Order-in-Original (order passed on 17-8-2008 and issued on 19-9-2008) was manifestly time-barred with reference to the date of show-cause notice (i.e. 21-2-2008) as not reasoned, valid and lawful extension in terms of the proviso to S.179(3) of the Customs Act, 1969 had been produced by the Customs authorities---Limitation period for adjudication was mandatory in nature and not directory one and that "once limitation had started to run and had come to an end, the assessee had acquired a vested right of escapement of assessment by lapse same time"---Where the adjudication decision was time-barred, same became unlawful and void on the ground of being time-barred.

2009 PTD 762; 2008 PTD 60; 2007 SCMR 1095 2007 PTD 1495; 2003 PTD 1797; 2003 PTD 1354; 2003 PTD (Trib.) 1361 and 2002 MLD 180 rel.

S.M. Kazimi, Consultant for Appellant.

Tariq Aziz, A.O. for Respondent.

2011 PTD (Trib.) 174

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mher Muhammad Arif Sargana, Member (Judicial)

Messrs GLOBAL TRADERS, MULTAN

Versus

ASSISTANT DIRECTOR, INTELLIGENCE AND INVESTIGATION, F.B.R., MULTAN and 2 others

C.A. No.43/LB of 2010, decided on 3rd May, 2010.

Customs Act (IV of 1969)---

----Ss. 32, 162, 163, 168 & 194-A---Charge of misdeclaration---Seizure of goods---Additional Collector (Adjudication) had dropped all other charges against the appellant, except the charge under S.32 of Customs Act, 1969---Appeal filed by the appellant before Collector of Customs (Appeals) had been dismissed---Appellant had contended that the staff of the Directorate had no authority to take any action under S.32 of Customs Act, 1969 as no powers under the said provisions of law were entrusted to them by the Federal Board of Revenue---Validity---Procedure had been prescribed under Ss.162 & 163 of the Customs Act, 1969 for conducting raid, carrying out search and making seizure of the goods---No enabling provision had authorized any official of the Directorate to visit any private premises and detain or seize goods lying there; such official should either obtain search warrant from the Judicial Magistrate under S.162 of the Customs Act, 1969; and if there was any urgency as well as the danger of removal of goods, he should prepare a statement containing grounds of his belief---In the present case neither any search warrant was obtained under S.162 of the Customs Act, 1969, nor the mandatory requirement laid down under S.163 of the said Act was fulfilled---Raid/visit, search, seizure of the goods and all subsequent proceedings were illegal and of no legal effect---Initial action of conducting raid, carrying out search and seizure being illegal, entire subsequent action including issuance of seizure report, show-cause notice, subsequent proceedings, would be illegal and void---There being no evidence to establish that the consignment was got cleared by misdeclaring the description by the appellant, impugned order in original as well order in appeal, were set aside.

Messrs Haji Ismael and Company v. Customs Excise Tribunal Karachi Bench and another SBLR 2008 Sindh 1699; Messrs Sunny Traders through Proprietor v. Federation of Pakistan Revenue Division (Through Secretary) and 4 others 2006 PTD 281; Collector of Customs (Preventive) and 2 others v. Muhammad Mahfooz PLD 1991 SC 630; Shaukat Hussain v. Zulfiqar Ahmed and 2 others PLD 1971 Lah. 13; Shuja-ud-Din and 15 others v. Assistant Collector of Customs Karachi and 3 others 1984 CLC 2615; Collector of Customs v. Muhammad Akram PLD 1999 Pesh. 33; Haji Muhammad Jalal v. Ejaz Ahmed Bajwa, Assistant Director FIA State Bank Circle Lahore and 3 others 2000 MLD 837; Collector of Sales Tax and others v. Messrs Food Consultant (Pvt.) Ltd., and an other 2007 PTD (SC) 2356; Chairman Central Board of Revenue and others v. Messrs Had Cotton Mills Ltd., Burewala 2007 SCMR 1039 and Aziz Ullah v. The State PLD 1981 Kar. 250 ref.

Malik Muhammad Arshad for Appellant.

Munir Ahmad, I.O. for Respondents.

Date of hearing: 12th April, 2010.

2011 P T D (Trib.) 198

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mher Muhammad Arif Sargana, Member (Judicial)

Messrs AHMAD TRADERS, MULTAN

Versus

ASSISTANT DIRECTOR, INTELLIGENCE AND INVESTIGATION, F.B.R., MULTAN and 2 others

C.A. No.32/LB of 2010, decided on 3rd May, 2010.

Customs Act (IV of 1969)---

----Ss. 32, 156(1)(89), 162, 163, 168 & 194-A---Misdeclaration---Smuggling---Seizure and confiscation of goods---Three enterprises allegedly imported a huge quantity of petroleum liquid under the garb of residue of petroleum by misdeclaring its description, classification and weight etc.---Additional Collector (Adjudication), vide order outrightly confiscated the seized goods under S.156(1)(89) of the Customs Act, 1969; and imposed penalty---Show-cause notice and orders passed by the forum below clearly alleged that the goods were imported by misdeclaring description thereof, whereas the confiscation of said goods had been made on the charge of smuggling, which had not been established by the prosecution---Show-cause notice, had nowhere alleged that goods in question were smuggled by any of the parties; it would be unfair, in circumstances, to maintain the outright confiscation of the goods seized from the premises of the appellant--Neither the seized drums nor any other item contained marking of any foreign country, presuming seized item as foreign origin, in circumstances, would not be correct---Laboratory report of goods in question was neither received nor placed on record by the department--Both the orders of the forums below had been passed in haste as no one bothered even to ascertain the actual description of the goods---Forums below 'Mould have waited the result of the laboratory to ascertain the actual description of the goods---Department, in circumstances, had failed to establish that the seized goods were smuggled one; and that same were not locally procured as claimed by the appellant---Impugned order in original as well as order in appeal, were set aside, in circumstances.

Malik Muhammad Arshad for Appellant.

Munir Ahmad, I.O. for Respondent.

Date of hearing: 12th April, 2010.

2011 P T D (Trib.) 878

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Sher Nawaz, Member (Technical)

AHMAD KHAN

Versus

COLLECTOR OF CUSTOMS, (APPEALS), PESHAWAR and 3 others

Appeal No. Cus.10/PB of 2011, decided on 28th February, 2011.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 17, 168, 171 & 194-A---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---Seizure and confiscation of vehicle---Vehicle in question was detained on information that a non-duty paid/smuggled Toyota Hilux SURF, would be smuggled vehicle was intercepted and was detained under S.17 of the Customs Act, 1969 for further verification---Vehicle was seized under S.168 of Customs Act, 1969 for violation of Ss.2(s) & 16 of Customs Act, 1969 and S.3(1) of Imports and Exports (Control) Act, 1950---On adjudication of the matter, Additional Collector of Customs, vide his order-in-original released the vehicle on payment of leviable duty/taxes---Being aggrieved of said order, appellant filed appeal before the Collector of Customs (Appeals), who in his order-in-appeal, upheld the order-in­original and appellant had filed appeal before Appellate Tribunal---Vehicle in question was auctioned/disposed of by the Collectorate of Customs, who had confirmed the disposal of vehicle having chassis as per Registration Book, and was registered with the Excise Authority on the basis of same documents; who confirmed the registration number and other particulars of the vehicle---Initially the vehicle was disposed off as Pick up' having chassis number but subsequently, after registration, the shape of body of vehicle was changed and it was made asSURF' instead of Toyota Pick-up by making some changes in the shape of vehicle---It was not clear as to what major changes had been made in the seized vehicle; it was also not clear whether technically any change existed in between the Double Cabin Pick-up and SURF apart from its shape---For making some changes, except of replacement of Engine, no law was available which required the owner of the vehicle to report either to Customs or to the Registration Authority about any change---Once it was established and proved that the chassis of the vehicle was the same as was cleared from the Customs and registered with Authority, it was proved that vehicle was legally imported/cleared from customs and registered on the basis of customs documents---Order-in-appeal was set aside and vehicle was ordered to be released unconditionally to its rightful owner.

Irshad Ahmad Durrani for Appellant.

Aziz-ur-Rehman, D; S. for Respondents.

Date of hearing: 22nd February, 2011.

2011 P T D (Trib.) 987

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member Judicial-II and Muhammad Arshad, Member (Technical-II)

Messrs UNIQUE WIRE INDUSTRIES, KARACHI

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, KARACHI and another

Customs Appeal No.K-628 of 2009, decided on 24th February, 2011.

Customs Act (IV of 1969)---

---Ss. 25, 26, 32, 79, 80, 156, 181 & 194-A---Customs Rules, 2001, Rr.107, 110, 117, 118 & 437---Determination of customs value of imported goods---Misdeclaration of value of goods---Imposition of penalty---Appellant after determination of tax liability with regard to imported goods on its own, filed goods declaration and sought clearance thereof under S.79(1) of Customs Act, 1969---After scrutiny it was found that appellant had misdeclared the actual value of goods and had filed false and forged documents---Appellant was charge-sheeted and Adjudicating Officer found that charge against the appellant had been proved and imposed penalty upon the appellant, who filed appeal, which having been rejected by Collector of appellant had filed appeal before Appellate Tribunal---Appellant had submitted all the respective documents about the price negotiated and re-negotiated with the acceptance of the seller of goods in question and filed goods declaration---Since the revised price, which was actually paid having been duly accepted by the Shipper, said revised price would constitute the transaction value under S.25(1) of Customs Act, 1969 unless the transmitted invoice was proved to be false or bogus---No such malpractice having been established in the case, price actually paid by the appellant was accepted to be transaction value under S.25(1) of Customs Act, 1969---On principle and as per law, the prices of the consignment imported against letter of credit, were to be termed as transaction value---Retrieval of the invoice from the container of the said consignment, further substantiated the transaction value, which needed not to be disturbed---Complete import documents along with clarification of said fact, placed on record neither were denied by the respondent authority nor the veracity of said documents had been challenged---Declared value of the appellant was compatible with the transaction values of identical/similar goods---Stance of the appellant further stood substantiated from the opinion of Collector of Customs---Since there could be more than one transaction value for the identical/similar goods, it was not necessary to enhance the value of the identical goods on record---Department had not been able to bring on record any cogent evidence or documents of contemporaneous imports of other importers importing the identical goods on the value equivalent or more titan the appellant proving that the declared re-negotiated transaction value of the appellant was suppressed/under-declared---In the absence of such evidence, the enhancement of the value to the level of the highest of transaction value for identical/similar goods on record, was not necessitated---Appellant had been discriminated by way of preparation of contravention report and subsequently through issuance of show-cause notice and passing of order-in-original---Order­-in-original was based upon proceeding which was infested with patent illegalities and which were held to be null and void ab initio---Orders passed by forums below based on such proceedings, were also ab initio null and void and were set aside, in circumstances.

[Case-law referred].

Nadeem Ahmed Mirza, Consultant for Appellant.

Ghulam Yasin, Appraising Officer for Respondent.

2011 P T D (Trib.) 1024

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Sher Nawaz, Member (Technical)

AFRASAY AB

Versus

COLLECTOR OF CUSTOMS (APPEALS), PESHAWAR and another

Appeal No. Cus.334/PB of 2010, decided on 24th December, 2010.

Customs Act (IV of 1969)---

----Ss. 2(s), 15, 16, 156(1)(9), (90) & 194-A---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---Federal Excise Act (VII of 2005), Ss.26 & 27---Seizure and confiscation of goods---Staff of Customs Anti-Smuggling Unit, on prior information, intercepted a bus and recovered Pakistan made classic cigarettes (fake)----Occupant of bus having failed to produce any proof with regard to legal import or lawful possession of said goods, same was seized under S.15(a) of Customs Act, 1969---On adjudication of the matter, the Deputy Collector of Customs vide order-in-original ordered outright confiscation of the seized goods in terms of S.156(1)(9) & (90) of the Customs Act, 1969---Said order having been upheld impugned order-in-­original, appellant had filed appeal before Appellate Tribunal---Seizure report indicated that Pak made classic cigarettes (fake) were recovered from the possession of the appellant, who was travelling in the bus in question---Plea of representative of the department was that cigarettes were fake Pakistan Brand, manufactured outside the country and were brought clandestinely inside the country without payment of duty and taxes---Said representative could not produce any evidence in proof of his plea---Seizure report and the recovery memo had clearly shown that the goods were Pak made classic cigarettes (fake) recovered from 'the bus, were manufactured inside the country and were being taken to other parts of the country for consumption---Since the department could not produce any evidence with regard to importation or exportation, provisions of S.2(s) and S.15 of Customs Act, 1969 could not be invoked---Such was neither a case of smuggling nor the case of import/export---Case was adjudicated by the Customs Officer, who was not competent to adjudicate the same---Appeal was also disposed of by an officer not of competent jurisdiction---Impugned orders were set aside and seized goods were allowed to be released, in circumstances.

PTCL 2010 St. 1007 ref.

Ajoon Khan for Appellant.

Yahya Jan, Superintendent and Aziz-ur-Rehman, D.S. for Respondents.

Date of hearing: 13th December, 2010.

2011 P T D (Trib.) 1032

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member Judicial-II and Muhammad Arshad, Member Technical-II

Messrs SHAMIM TIN MERCHANT, KARACHI and others

Versus

COLLECTOR (APPEALS), COLLECTORATE OF CUSTOMS, FEDERAL EXCISE AND SALES TAX, KARACHI and others

Customs Appeals Nos. K-164 to K-166, K-452 to K-534, K-540 to K-544, K-1112 to K-1115 and K-1118 of 2010, decided on 21st February, 2011.

Customs Act (VI of 1969)---

----Ss.25-A, 25-D, 32, 32A, 80, 179 & 195-B---Powers to determine the customs value---Valuation rulings of 2008---HS Code 7210---Clearance of imported Steel Sheet of secondary quality on a lower value without application of valuation ruling---Due to non-applicability of valuation ruling, duty was found to have been short levied and such duty was held to be recoverable---Importers contended that S.32(3A) of the Customs Act, 1969 was purely penal in nature and if S.32 of the Customs Act, 1969 regarding misdeclaration was not applicable then how S.32A of the Customs Act, 1969 could be applied; that transactions were past and closed where assessment had been completed in terms of S.80 of the Customs Act, 1969; that goods were examined by shed staff before made out of charge; that S.25(A) of the Customs Act, 1969 was deleted through Finance Act, 2007-08 and proceedings based upon S.25(A) of the Customs Act, 1969 were ab initio null and void; that period of limitation could not be extended once the period of limitation expired; that Orders of forums below were not speaking orders and had not addressed all the points and issues agitated and that three different valuation rulings issued were unlawful being issued in violation of provisions of S.25 of the Customs Act, 1969 without exhausting primary and secondary methods in a sequential manner---Validity---Issue raised by the appellants/importers in respect of invoking of provisions of Ss.32(3A) and 25A of the Customs Act, 1969, limitation period etc., hit at the very basis of adjudication and appellate orders needed serious scrutiny and consideration by the officer of original jurisdiction by going through the case records as well as rival submissions put forth by the departmental officer---Orders passed by the forums below were set aside and the cases were remanded to the adjudicating authority for de novo consideration on merits after giving a patient hearing to the appellants and after a careful study of the arguments put forth by the appellants and the departmental officers and documents on record through a well speaking and well reasoned order.

Afzal Awan for Appellant (in Customs Appeals Nos.K-164 to 166 of 2010).

Haji Yousuf, Consultant for Appellant (in Customs Appeals Nos.K-540 to 544 of 2010 and 452 to 534 of 2010).

Asim Munir Bajwa for Appellant (in Customs Appeals Nos.K-1112 to 1115 and 1118 of 2010).

Abdul Wabeed A.C. (Appraisement) Ghulam Yasin Appraising Officer for Respondent.

2011 P T D (Trib.) 1146

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Mown, Member (Judicial-II)

Messrs KAKA TRADERS, KARACHI

Versus

ADDITIONAL DIRECTOR, KARACHI and another

Custom Appeal No. K-671 of 2009, decided on 26th February, 2011.

(a) Customs Act (IV of 1969)---

----S. 215---Service of order, decision, etc.---Show-cause notice/order­-in-original was to be issued/passed, and served as per wordings of S.215 of Customs Act, 1969---Copy of consignment had not been placed on record by department for the confirmation that appellant or his official did acknowledge the same, which was basic requirement for the word "served "---Show-cause notice or order-in-original was not served on the appellant thereby rendering the order-in-original and subsequent order-in-appeal ab initio null and void as those were passed without fulfilling the mandatory requirements of law pertaining to 'service' as per wording of S. 215 of the Customs Act, 1969.

PLD 1989 Kar. 518(2); 2002 UC 506 and 2006 PTD 1207 ref.

(b) Customs Act (IV of 1969)---

----Ss. 32, 79, 80 & 194-A---Customs Rules, 2001, Rr.433 & 438---Assessment of duty---Misdeclaration---Scope---Determination of P.C.T. Heading was the sole function of customs officer under S. 80 of Customs Act, 1969 read with R.438 of Customs Rules, 2001---Importer/Clearing Agent only would assist the customs by citing the P.C.T. Heading of the goods; at the best citation of P.C.T. Heading could be called a claim for assessment of duty and taxes, which meant a request, which could be accepted or rejected by the competent authority; but same was not a punishable offence under any of the provisions of the Customs Act, 1969 or notifications issued thereunder---Citation of a particular P.C.T. Heading in the G.D., either transmitted electronically would not amount to misdeclaration within the meaning of S.32 of the Customs Act, 1969---Correct goods declaration was filed by the appellant with correct description of goods, in the present case, which was undisputed---No false statement or any collusion with the officer of the customs was on record---Matter being of classification of goods, no case could be made out under the provisions of S.32 of the Customs Act, 1969---Wrong classification of heading would not constitute an offence within the framework of S.32 of the Customs Act, 1969---Positive assertion of facts was a pre-requisite for bringing charges of misdeclaration against the taxpayer---If the wisdom of the Customs Authorities for invoking S.32 of Customs Act, 1969, in case of incorrect citing of P.C.T. Heading was acceded to, no responsibility would devolve upon the hierarchy of the Customs officials to levy and assess the duty according to law---Provisions of Ss. 79 & PO of Customs Act, 1969 in such a state of mind would become redundant---Show-cause notice in the present case, in circumstances was unlawful, rendering same and subsequent orders by the department as ab initio null and void.

Messrs Darbar Impex v. Central Board of Revenue 198.9 ALD 518(2); Central Board of Revenue v. Messrs Darbar Impex, 2002 UC 506; Sheikh Rashid Ahmed and another v. The Assistant Collector Special Recovery Cell, Collectorate of Customs (Exports) Karachi and 4 others 2006 PTD 1207; Superior Textile Mills Ltd. v. FOP 2000 PTD 399; Messrs Arjun Salt Chemical v. UC Gharo 1982 SCMR 522; Director Directorate General of Intelligence and Investigation and others v. Al-Faiz Industries (Pvt.) Ltd. and others PTCL 2008 CL 337; Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184; Omer and Company v. Controller of Customs, (Valuation) 1992 ALD 449; Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax 2004 PTD 624; Ali Muhammad v. Hussain Buksh and others PLD 1976 SC 514; Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others PLD 2001 SC 514; Messrs Super Asia Muhammad Din Sons, (Pvt.) Ltd., v. Collector of Sales Tax Gujranwala 2008 PTD' 60; Messrs Hanif Strawboard Factory v. Additional. Collector (Adjudication) Customs Sales Tax and Central Excise Gujranwala 2008 PTD 578; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others 2009 PTD 762; Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore and 2 others 2009 PTD (Trib.) 1263; Leo Enterprises v. President of Pakistan and others 2009 PTD 1978; Monno Industries Ltd. v. Govt. of Pakistan PET. D-199/1984; Collector v. Central India Board Products 1987 (29) ELT 259; Collector of C.E. v. Chemphar Drugs 1987 (40) ELT 276 (SC); Central Cotton Mills Ltd. v. Collector 1992 CLC 841; Hindustan Electro Graphites Ltd. v. U.O.I. 1990 (50) ELT 15 M.P.; Metro Tyres Ltd. v. Collector 1994 (74) ELT 964; Ballarpur Industries Ltd. v. U.O.I. 1994 (74) ELT 795 (Del); Northern Plastics Ltd. v. Collector 1998 (101) ELT 549 (SC); Ibrhaim Textile Mills Ltd., v. F.O.P. PLD 1989 Lah. 47; Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630 and Government of Pakistan v. Quetta Textile Mills Civil Appeal No.860-K/90 decided by the Supreme Court 25-2-1992 ref.

(c) Customs Act (IV of 1969)---

----Ss. 193 & 193-A---Appeal to Collector---Period of decision---Provisions of subsection (3) of S.193-A of Customs Act, 1969, required that appeal should be decided within a period of 90 days, from the date of filing of appeal or within further extended period, which could not be more than 90 days by the Collector of Customs (Appeals), with reasons to be recorded---Where initial period of 90 days had expired, without any extension, the order-in-appeal had become barred by limitation rendering all the original adjudication and subsequent proceedings ab initio null and void.

1999 SCMR 1881.; 2007 PTD 117; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v, Collector of Sales Tax Gujranwala and another 2008 PTD 60; 2006 PTD 340; PTCL 2005 CL 841; 1998 MLD 650; 2005 PTD (Trib.) 2898; 2004 PTD 369; 2005 PTD 23; 2007 PTD 2092; 2009 PTD 609; 2008 PTD 578; 2009 PTD (Trib.) 1263; 2009 PTD 762; 2010 PTD (Trib.) 23; 2010 PTD (Trib.) 81; 2010 PTD (Trib.) 1146; 2010 PTD (Trib.) 1469; 2010 PTD (Trib.) 1631; 2010 PTD (Trib.) 1636 and 2010 PTD (Trib.) 2117 ref.

Nadeem Ahmed Mirza Consultant for Appellant.

Sikandar Ali Junejo for Respondent.

2011 P T D (Trib.) 1615

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Khalid Nasim, Member (Technical)

Messrs AUTOMOBILE CORPORATION OF PAKISTAN (PVT) LTD and 2 others

Versus

COLLECTOR OF CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), PESHAWAR and 3 others

Appeal No.Cus.200/PB of 2010, decided on 13th July, 2010.

Customs Act (IV of 1969)---

----Ss. 32, 156(1)(10-a)(14), 168 & 194-A---S.R.O. 358(I)/2002, dated 15-6-2002---S.R.O. 576(I)/2006, dated 5-6-2006---Seizure and confiscation of vehicle---Misdeclaration---Appeal---Deputy Collector of Customs Anti-Smuggling Division vide his order-in-original ordered outright confiscation of seized vehicle in favour of the State---Said order-in-original was upheld by Collector of Customs---Validity---At the time of seizure of the vehicle, appellants produced all the documents relating to its import and subsequent sale---Import of vehicle was as 'defence store' and there was no restriction on 'defence store' for the subsequent sales thereof---Vehicle was imported under notification No.S.R.O. 358(I)/2002 dated 15-6-2002 and it did not contain any conditionality---Subsequent S.R.O. 576(I)/2006 dated 5-6-2006, which was for the privileged organizations on which the sale permission was required, was totally irrelevant for the 'defence store'---Import and subsequent sale of vehicle in question was prior to the issuance of said subsequent notification---Vehicle in question which had been imported and sold as per law, was ordered to be released to the rightful owner.

Isaac Ali Qazi for Appellants.

Pir Zaheer-ud-Din, Superintendent for Respondents.

Date of hearing: 13th July, 2010.

2011 P T D (Trib.) 1695

[Customs Appellate Tribunal, Peshawar]

Before Gulab Shah Afridi, Member (Judicial)

Messrs NAIAMY INTERNATIONAL IMPORTS/EXPORTS, PESHAWAR CANTT.

Versus

COLLECTOR OF CUSTOMS (APPEALS), PESHAWAR and 2 others

Appeal No. Cus. 397/PB of 2009, decided on 2nd April, 2011.

Federal Excise Act (VII of 2005)---

----Ss.12 (3), 3 & 14---Customs Act (IV of 1969), Ss.25 & 32(3-A)---Sales Tax Act (VII of 1990), Ss. 3 & 36(2)---Customs General Order 12 of 2002---S.R.O. 371(I)/2002 dated 15-6-2001---C.B.R. letter No.3(2)TRA-1/10 dated 16-4-2010---Determination of value for the purposes of duty---Incorrect application of assessable value for excise duty---Calculation was inbuilt in "one custom system" and calculation was done by the system on the basis of already incorporated formula---Omission resulted in short realization of duty/taxes---Recovery---Importer contended that determination of Duty Taxes was the duty of Pakistan Revenue Automation Limited and for any wrong or error done by the Pakistan Revenue Automation Limited, if any, the importer could not be held responsible to bear the consequences---Validity---Held, it was a fault of the "one custom system", responsibility for which definitely lay upon the department as the same was under the use and control of them, they were required to be vigilant for operating the said system and importer could not be held liable for the alleged short payment of government dues---Department had not yet confirmed that under which provision of Federal Excise Act the duty was chargeable, which otherwise rendered the show-cause notice into a futile exercise and waste of time---Show-cause notice as well as Order-in-Original passed against the importer being contradictory and vague in itself was not sustainable under law, as the law required credible grounds for impregnating a stance forwarded with a purpose to implement certain sections of law on the basis of equal treatment emanating from the natural course of justice which the principle of law to be considered for the recovery of short levied duties was "that all are equal before law whether citizen or State"---Importer had no intention to deprive the State from its legitimate revenue and was not liable for any act or error, misconstruction, inadvertence or omission, which took place due to the loophole and imperfection of the "one customs system"---Order-in-Original and Order-in-Appeal did not stand the thrust of actual and prime course of justice and both were set aside by the Appellate Tribunal.

2004 PTD 868; 2003 PTD 1257; 2005 PTD 480; 2003 PTD 1797; PLD 1971 SC 124; Messrs Kamran Industries v. Collector Customs (Exports) Karachi and 4 others PLD 1996 Kar. 68 and 2003 CLC 702 ref.

1992 SCMR 1898 rel.

Irshad Ahmad Durrani and Amir Bilal for Appellants.

Naseer Khan and Fazlur Rehman, Deputy Superintendents Customs for Respondents.

Date of hearing: 14th December, 2010.

2011 P T D (Trib.) 1936

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Member (Judicial)

Messrs UMAR USMAN AND SONS, MULTAN

Versus

SUPERINTENDENT, DIRECTORATE OF INTELLIGENCE AND INVESTIGATION, F.B.R., MULTAN and 2 others

C.A. No.140/LB of 2010, decided on 9th September, 2010.

(a) Customs Act (IV of 1969)---

----S. 3E---S.R.O. 486(I)/2007 dated 9-6-2007---Powers and functions of the Directorates, etc---Post clearance audit---Jurisdictions of Directorate of Intelligence and Investigation Federal Board of Revenue for examining the record of an importer after period of almost four years---Officer of Directorate could stop the goods, which were smuggled and they could demand the documents thereof at the spot and for the purpose of verification they could hold the goods and take them into their custody--- Charter of the Functions of the Directorate General provides that customs could detain and examine the goods---In the present case goods had already been assessed and cleared during the period 2005 and examining the documents of such imports in the year, 2009 (after four years) amounted to post clearance audit for which the Directorate had no jurisdiction---S.R.O. 486(I)/2007 dated 9-6-2007 clearly restrained the Directorate of Intelligence and Investigation to prevent smuggling and performance of preventive operations relating to smuggling and evasion of duty through clandestine removal of dutiable goods, misdeclaration and valuation fraud etc. whereas in the present case the staff of the Department allegedly examined the record of the importer after the period of four years after the assessment had been finalized by the competent authority and the goods had been released---Under the provisions of S.3E of the Customs Act, 1969 read with S.R.O. 486(I)/2007 dated 9-6-2007 the Directorate had no jurisdiction to examine the documents of the goods imported as back as four years.

Shahzad Ahmad Corporation v. Federation of Pakistan 2005 PTD 23 and Syed Muhammad Razi v. Collector of Customs 2003 PTD 2821 rel.

(b) Customs Act (IV of 1969)---

----Ss. 32, 16, 80, 2(a) & 156(1),(9),(10A),(14)---S.R.O. 456(I)/2004 dated 12-6-2004---S.R.O. 453(I)/2004 dated 12-6-2004---False statement, error, etc.---Wrong mentioning of S.R.O. on the goods declaration---Misdeclaration---Contention of Department that wrong mentioning of S.R.O. on the goods declaration for availing the concession in customs duty was covered within the meaning of "mis-declaration" was not convincing as the same concession was admittedly available to the importer at the time of import under the said S.R.O. 456(I)/2004, whereas the importer mentioned the S.R.O. as 453(I)/2004 and goods declaration was examined and assessed by the Customs staff at the port---Assessing Officer was an adjudicating authority within the meaning of S.2(a) of the Customs Act, 1969 and it was the duty of the Assessing Officer to apply the correct law for granting relief---No allegation was on record with regard to mis-declaration of the description of the goods, quantity of the goods, classification of the goods and the value of the goods on the goods declaration and nothing had been mentioned regarding the false statement made by the importer, which were the necessary and mandatory ingredients of the show-cause notice under S.32 of the Customs Act, 1969---Both S.R.Os. gave concession in customs duty to the manufacturers of different goods and items of First Schedule of the Customs Act, 1969 that is to say that the said S.R.Os. gave exemption to the manufacturers of certain goods ,on the import of raw material from so much of customs duty leviable under First Schedule to the Customs Act, 1969 as in excess of the rates specified in the said S.R.Os.---Importer had admitted the manufacturing facility and Collector issued the certificate to the importer relating to the goods declarations and it was mentioned in the certificate that the importer firm was a manufacturer of clutch, gear, accelerator wires, wheel spoke, wheel spoke nipple etc.,---No violation of the rules and conditions mentioned in S.R.O. were committed---Same concession of customs duty was available to some items like raw material, components and sub-components etc. to the manufacturers of different parts and importer was admittedly a manufacturer of clutch wire, gear wires etc. and the same concession available to the importer---No revenue loss was caused to the Government exchequer and such like mistake did not at all attract the penal action under S.36 of the Customs Act, 1969 because such mistake had nothing to do with misdeclaration as to quantity description and specification of an item---Notice issued under S.32 of the Customs Act, 1969 was illegal on the face of it ---Section 32 of the Customs Act, 1969 did not cover every untrue declaration having nothing to do with evasion of Customs Duty or other charges but such statement must indicate an attempt to defraud public revenues---Appeal of the importer was accepted and the orders in original as well as in appeal were set aside by the Appellate Tribunal.

PLD 2003 Lah. 421; Messrs A.S. International v. Collector of Customs Lahore and 2009 PTD 281 and 2009 PTD 467 rel.

2002 PTD 889 ref.

Mian Abdul Basit for Appellant.

Ahmad Kamal, D.R. for Respondent.

Date of hearing: 6th September, 2010.

2011 P T D (Trib.) 2211

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Member (Judicial)

Messrs NOVELTY TRADERS, MULTAN and others

Versus

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE, MULTAN and others

C.As. Nos.117/LB to 120/LB of 2010, decided on 8th September, 2010.

(a) Customs Act (IV of 1969)---

----S.25(1)---Determination of customs value of goods---PTC Heading 5907.0019---PTC Heading 5907.0090---PTC Heading 5907,9000--Textile Coated Fabrics---Imitation suede---Under invoicing---Reopening of case on the basis of valuation---Consignments of Textile Coated Fabrics were imported at 'M' which were reportedly grossly under invoiced---Value of goods declared on bill of entry was US$ 1.6 per kg, but the correct value was US$ 3.00 per kg on which it was being assessed at 'K' and appellants were directed to pay short paid duties and taxes---Validity---GD was filed by declaring PTC heading 5907.0019 and the same was confirmed by the two laboratories of the Customs Department---Department had commercial invoice along with supporting documents in which the value of goods imported was mentioned and customs department by accepting the declared value on the basis of computer data and according to that consignment under same PTC heading 5907.0019 was declared at US$ 1.45 per Kg from 'L'---Department otherwise had made no effort to get check the veracity of the documents presented by the importer from concerned foreign suppliers---In absence of any allegation mis-declaration and especially in the presence of computer data for the clearance of same goods at US$ 1.45 per Kg, the value declared by the appellant was acceptable as being transactional value under S.25(1) of the Customs Act, 1969---PCT code had been allotted to the things/articles according to the nomenclature and specification of the goods so it was quite obvious that the PTC heading 5907.0019 was quite different from the goods under PTC heading 5907.0090 and the goods covered under PTC heading 5907.9000---Appeals were accepted and the Order-in-Original as well as order in appeal was set aside by the Appellate Tribunal. [pp. 2213, 2215) A & D

Messrs A.S. International v. Collector of Customs Lahore Writ Petition No.8400 of 2008; 2009 PTD 281; 2009 PTD 467; Messrs Nishat Mills Ltd. v. Collectorate of Customs Karachi 2006 PTD 2726 rel.

(b) Customs Act (IV of 1969)---

----S.25---Determination of customs value of goods---Valuation---Reopening of case---Case for want of valuation could not be reopened unless the declaration with regard to physical description of goods, quantity, weight and classification was found incorrect.

Messrs A.S. International v. Collector of Customs Lahore Writ Petition No.8400 of 2008; 2009 PTD 281 and 2009 PTD 467 rel.

(c) Administration of justice---

----Acts required to be done in a specific manner should be done in the same manner or should not be done at all.?

Mian Abdul Basit for Appellant.

Ahmad Kiamal, D.R. for Respondent.

Date of hearing: 6th September, 2010.

2011 P T D (Trib.) 2404

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Ch. Imran Masood, Member (Judicial-I) and Muhammad Arif Moton, Member (Judicial-II)

Messrs SHAHID INDUSTRY, D.H.A., LAHORE

Versus

COLLECTOR (APPEALS), COLLECTORATE OF CUSTOMS (APPEALS), KARACHI and another

Customs Appeal No.K-914 of 2010, decided on 23rd April, 2011.

Customs Act (IV 'of 1969)---

----Ss. 32, 27-A, 79, 156(1)(14) & 194-A---Misdeclaration---Import of "Re-rollable Thick Plate over size" comprising of two items, classifiable under PCT heading 7204.4910 attracting 0% customs duty and PCT heading .7207.2090, attracting 5% customs duty respectively---Examination report revealed that imported goods were "Hot Roll Plates of Secondary quality of various sizes", classifiable under PCT heading 7111.1410, attracting 20% customs duty, contrary to "Re-Rollable Thick Plates over size "---Importer was alleged to have defrauded the national exchequer and he was found guilty of an offence of misdeclaration in terms of S.32(1)(2) of Customs Act, 1969, punishable under clause (14) of S.156(1) of Customs Act, 1969---Validity---Charge of misdeclaration, could not be legally levelled against the importer since he had filed the goods declaration with the Customs Authority in terms of $.79(1) of the Customs Act, 1969---Importer at the very outset through his application, himself requested for first appraisement in terms of S.79(1) of the Customs Act, 1969 and also for denaturing/de­shaping of the consignment of scrap, if found to be otherwise after 100% examination by Customs authorities---Assistant Collector Customs assisted by the Law Officer, could not controvert the importer's stance that a request was made by the importer in terms of S.79(1) of the Customs Act, 1969 for the first appraisement; and denaturing/mutilation under S.27-A of the Customs Act, 1969 before filing of goods declaration; and Deputy Collector of Customs, had duly accepted the importer's request---Option for first appraisement for the determination of correct description of PCT heading, quantity of goods having been offered, Importer would not be charged for mis­declaration under S.32 of the Customs Act, 1969---Allegation of mis' declaration against the importer, in circumstances, was misconceived and was quashed---Orders passed by the forums below were set aside---Goods could be delivery to the importer after scrapping in his presence.

2003 PTD 2090; Messrs Muhammad Razi v. Collector Customs (Appraisement) 2003 PTD 2821; Messrs Shaheen Enterprises v. Additional Collector 2005 PTD (Trib.) 1321;2005 PTD (Trib.) 1826; 1984 MLD 562; PLD 1989 Lah. 47; Collector of Customs (Exports) and another v. Messrs R.A. Hosiery Works 2007 SCMR 1881; Kamran Industries v. The Collector of Customs (Exports), Karachi and 4 others PLD 1996 Kar. 68; Messrs Al-Hamd Edible Oil Limited and others v. Collector of Customs and others, 2003 PTD 552; State v. Hardcastle PLD 1967 SC 101; Sikandar and Brothers v. Government of Pakistan PLD 1986 Kar. 3783; Finest Corporation v. Collector of Customs PLD 1990 Kar. 338; 2010 PTD 826; Antarctic Industries v. Collector of Customs 1999 (108) ELT 496 Tri Del. Commissioner of Customs v. Garg Steel 2006 113 ECC 165; 2001 SCMR 838 and 2008 PTD 1482 ref.

Messrs Akhtar Hussain v. Collector Appeals Karachi 2003 PTD 2090; 2003 PTD 2821, 2005 PTD (Trib.) 1826; 2005 PTD 1949'; 2006 PTD 2053; 2009 PCr.LJ 50; PLD 1973 Kar. 659; 2010 SBLR 120(sic); 2008 PTD 1589; Messrs A.R. Autos v. Secretary Revenue Division, F.B.R., Islamabad and another 2011 PTD 183; PLD 1953 Lah. 433; 1993 SCMR 274; PLD 1964 SC 113; AIR 1943 Madras 733; PLD 1984 Kar. 345 and 1996 SCMR 1470 rel.

Shamshad Younus and Syed Sabih Ahmed for Appellants.

Ali Waheed Khan Assistant Collector and M. Farooq Khan (L.O.) for Respondent.

Dates of hearing: '23rd February and 11th April, 2011.

2011 P T D (Trib.) 2480

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II) and Muhammad Arshad, Member (Technical-II)

Messrs MALIK VETRO DESIGNI and 25 others

Versus

COLLECTOR OF CUSTOMS (APPEALS), KARACHI and 3 others

Customs Appeals Nos.K-638 to K-659, K-724 to K-727 of 2010, decided on 30th November, 2010.

(a) Customs Act (IV of 1969)---

----Ss. 25-A & 25(1)---Customs Rules 2001, R.107 (a)---Action where declared value is less than the value determined---Valuation Ruling---Issuance of valuation ruling beyond period of 90 days prior to 1st July 2009---Validity---Valuation ruling issued in terms of S.25-A of the Customs Act, 1969 prior to the amendment in S.25-A of the Customs Act, 1969 vide Finance Act, 2009-2010 had validity of (90) days in terms of provisions of parent S.25(1) of the Customs Act, 1969 read with R.107(a) of the Customs Rules, 2001---Fact regarding life of Valuation Ruling was generally incorporated by the Directorate General Customs Valuation in the Valuation Ruling which was the correct legal position regarding the validity of the period of Valuation Ruling and had also been ratified by the amendment carried out by the legislature in S.25-A of the Customs Act, 1969 through Finance Act, 2009-10---Validity of the Valuation Ruling in respect of assessed Customs Value of goods imported after the insertion of the amendment determined under S.25-A of the Customs Act, 1969 shall be applicable until and unless revised or rescinded by the competent authority---Question "whether Valuation Ruling issued in terms of S.25-A of the Customs Act, 1969'prior to 1st July 2009 was valid beyond period of (90) days in terms of the provisions of S.25(1) read with R.107(a) of the Customs Rules, 2001" was answered in negative.

Messrs Shahzad Ahmed Corporation v. Federation of Pakistan. 2005 PTD 23 ref.

(b) Customs Act (IV of 1969)---

----S.25-A---Action where declared value is less than the value determined---Valuation Ruling---Application of Valuation Ruling to consignment which was cleared prior to its issuance through acceptance of its transaction values---Validity---Though the Valuation Rulings were issued under a mandate awarded by the Legislature under S.25-A .of the Customs Act, 1969' yet the modus operandi generally adopted by the Directorate General of Valuation was not very transparent, proper and according to criteria laid down inasmuch as that the exercise and worksheets for the determination of the values were not brought on record---All stakeholders were not fully associated and investigation was halfheartedly conducted---If Valuation Rulings were not followed at the time of earlier appraisement, same be not used against an importer whose consignments had already been appraised---Valuation Rulings. could not be considered as valid documents for cancellation of an appraised assessment---Opening of an appraisement for the purposes of revaluation of an earlier estimate or adopted figure would require "reason to believe" and not "reason to suspect"---Question "whether Valuation Ruling can be applied to consignments which were cleared prior to their issuance through acceptance of their transaction values" was answered in negative.

Messrs S.T. Enterprises v. Federation of Pakistan 2009 PTD 467 and 2009 PTD 281 rel.

(c) Customs Act (IV of 1969)---

---Ss. 25(7)(9) & 25-A--Value of imported and exported goods---Fall back method--Application of---Director of Customs Valuation while exercising his powers under S.25-A of the Customs Act, 1969 applied Fall Back Method in terms of S.25(9) of the Customs Act, 1969 by stating that determination of value of the goods under the earlier primary and secondary methods was not possible due to divergent reasons---Validity---No visible exercise was conducted or brought on record which could show the efforts on behalf of the Directorate General of Customs Valuation for exhausting all the earlier primary and secondary methods---Was not understandable and did not appeal to common sense that values of the same goods which could not earlier be determined in terms of Deductive Method under S.25(7) of the Customs Act, 1969 and were determined under Fall Back Method under S.25(9) of the Customs Act, 1969 could again be determined under S.25(7) of the Customs Act, 1969---Fall Back Method was to be applied in those cases where customs value of the imported goods could not be determined under subsections (1), (5), (6), (7) & (8) of S.25 of the Customs Act, 1969 and shall be determined on the basis of value derived from among the methods of valuation set out in subsections (1), (5), (6) and (8) of S.25 of the Customs Act, 1969, that when applied in a flexible manner to the extent necessary to arrive at a customs value---Indifferent attitude of the officers of Directorate General of Customs Valuation in the case, was arbitrary, capricious and whimsical; authority entrusted to them had been exercised in a wanton, haphazard and unlawful manner through a policy of convenience on pick and choose basis and in violation of the directives of the superior judicial fora---Customs values arrived at through such an unlawful exercise was ab intio null and void.

Collector of Customs Port Muhammad Bin Qasim v. Messrs Zymotic Diagnostic International, Faisalabad 2007 PTD 2623 and Rehan Umar v. Collector of Customs, Karachi and 2 others 200.6 PTD 909 rel.

(d) Customs Act (IV of 1969)---

----S. 25(7)(a)---Value of imported and exported goods-Market inquiry---Deductive method for determining assessable value in terms of subsection (7) of S.25 of the Customs Act, 1969 advocates that if the customs value of the imported goods could not be determined under subsection (6) of S.25 of the Customs Act, 1969 same shall be subject to be determined on the basis of customs value of the imported goods or identical or similar goods relying upon the unit price at which such imported goods were also sold in the aggregate quantity at or about the time of importation of the goods being valued to persons who were not related to the person from whom they buy such goods subject to certain specified deductions---Two ingredients, one relating to quantity and other relating to period during which imported goods or identical or similar goods were sold in the maximum aggregate quantity had been visibly and patently flouted by the Department---Market enquiry conducted by the officer was in absolute contradiction with the provisions of S.25(7) of the Customs Act, 1969 and was null and void ab initio.

(e) Customs Act (IV of 1969)---

----S. 25---Value of imported and exported goods---Deductive method was primarily a work back method based on the analytical basis of valuation prevalent under defunct/erstwhile concept of normal price or notional value under Brussels' Definition of Value (BDV).

(f) Customs Act (IV of 1969)---

---S. 25---Customs Rules, 2001, R.107 (a)---Value of imported and exported goods---Market inquiry---Parameters of.

(g) Customs Act (IV of 1969)---

----Ss.32(2)(3) & 81---Untrue statement, error, etc.---Provisional assessment completed---Insurance of notice for misdeclaration--Validity---Customs authorities had no jurisdiction to issue a notice for mis-declaration, in a matter, where provisional assessment had been made under S.81 of the Customs Act, 1969, during the course of which the question of mis-declaration could have been raised and considered--Provisions of subsections (2) and (3) of S.32 of the Customs Act, 1969 would be attracted only when a final assessment had been made either wrongly or erroneously---Where goods were provisionally released under S.81 of the Customs Act, 1969, the Customs. Department could have issued a notice under S.81 of the Customs Act, 1969 for any discrepancy which was found in the case subject to the period of limitation prescribed by S.81 of the Customs Act, 1969.

Abdul Aziz Ayoob v. Assistant Collector PLD 1990 Kar. 378 and Hassan Trading Company v. Central Board of Revenue, Islamabad 2004 PTD 1979 rel.

(h) Customs Act (IV of 1969)---

----Preamble---Show-cause notice---Digest of judgments of superior courts on show-cause notice recorded.

(i) Customs Act (IV of 1969)---

----S.32(3) & (3A)---Untrue statement, error, etc.---Show-cause notice--Material particulars including subsections (3) and (3A) of S.32 of the Customs Act, 1969 had not been mentioned in the show-cause notice and adjudication had been done and demands created under these subsections in the order-in-original---Show-cause notices were defective and deficient---Question "whether show-cause notice issued were effective and deficient and ab initio null and void in material particulars for want of non-mentioning of subsections (3) and (3A) of S.32 of the Customs Act, 1969" was answered in affirmative by the Appellate Tribunal.

D.G. Khan Cement Co. Ltd., Lahore v. Collector of Customs, Sales Tax and Central Excise Multan 2003 PTD 1797; Crystic Resins (India) (Pvt.) Ltd. Faridabad v. Collector of Central Excise, New Delhi 1985 (19) ELT 285; The Calcutta Manufacturing Co. Ltd. v. The Assistant Collector of Customs 1984 ECR 645 and Messrs, Kalman Industries v. Collector of Customs PLD 1996 Kar. 68 and Poona Bottling Co. v. U.O.I. 1981 ELT 389 rel.

(j) Customs Act (IV of 1969)---

----Ss.32(1)(2), 32(3)(3A) & 180(a)---Untrue statement, error, etc.--Show-cause notice was issued under subsections (1) and (2) of S.32 of the Customs Act, 1969---Adjudication of such show-cause notice under different subsection (3) of S.32 of the Customs Act, 1969 and S.32(3A) of the Customs Act, 1969, not mentioned in the show-cause notice in terms of S.180(d) of the Customs Act, 1969---Validity---Show-cause notices were issued under subsections (1) & (2) of S. 32 of the Customs Act, 1969 and S. 32A of the Customs Act, 1969---While adjudicating such show-cause notices and creating demands altogether different subsections namely (3) and (3A) of S.32 of the Customs Act, 1969 were relied upon by the officer of original jurisdiction---Section 180(a) of the Customs Act, 1969 laid down the mandatory requirement for mentioning the grounds on which the competent authority proposes to take action against the incumbent---Principle that the legal and factual material particulars must be brought to the notice of the party was also one of the conditions of principles of natural justice---Order-in-original was patently beyond scope of show-cause notice, and was not a case of technical discrepancy or procedural lapse which was a curable lacuna; such was a substantive illegality for want of non-observance of a mandatory statutory requirement and emphasized upon for complete compliance by the adjudicating authorities and would vitiate all the proceedings on which the superstructure was built by different quasi-judicial and judicial authorities.

Collector Central Excise and Land Customs and others v. Rahim Din 1987 SCMR 1840 and Messrs Exide Pakistan Ltd. Karachi v. Deputy Collector of Customs and others 2005 PTD 1449 rel.

(k) Customs Act (IV of 1969)---

----Ss. 80, 83, 195 & 179---Assessment of customs duty---Clearance for home-consumption---Issuance of show-cause notice under S.179 of the Customs Act, 1969 after assessment under Ss. 80 and 83 of the Customs Act, 1969---Validity-Issuance .of show-cause notice and adjudication by officers of original jurisdiction in place of re-opening of case by Federal Board of Revenue or Collector under S.195 of the Customs Act, 1969 were in violation of the maxim "expressum facit cessare taciturn "---Order-in-Original issued by the Assistant Collector/Deputy Collector were unlawful, illegal without jurisdiction and coram non judice---Order of the First Appellate Authority based on such orders was also ab initio illegal and void.

E.A. Avan's case PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 rel.

(l) Customs Act (IV of 1969)---

----Preamble---If the doing of a thing is made lawful in a particular manner then doing of that thing in conflict with the manner prescribed will be unlawful.

E.A. Avail's case PLD 1964 SC 536 rel.

(m) Administration of justice---

----If the law had prescribed method for doing of a thing in a particular manner, such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing, in a manner other than provided by law would not be permitted.

2001 SCMR 838 and 2003 SCMR 1505 rel.

(n) Customs Act (IV of 1969)---

----Preamble---Non-speaking, non judicial and perfunctory orders based on non-reading/misreading of the documents on record---Reading of order-in-original and order-in-appeal showed that these were not speaking orders in which all issues raised had not been discussed and dealt with properly---Such orders would be deemed to be without jurisdiction in which the competent authorities had not discussed questions of fact and questions of law addressed by the taxpayer - Portion of order-in-original incorporated in order-in-appeal contained inherent legal infirmities, deficiencies and substantive illegalities---Certain interpretations incorporated in order-in-appeal were also in direct contradiction with the judgments of superior judicial fora---Order, which was not a speaking order and devoid of reasons was not sustainable in law.

1994 CLC 2181; 2005 YLR 1019, 2007 PTD 2500, 2004 PTD 1973, 2005 YLR 1719, 2003 PTD 777, 2003 PTD (Trib.) 2369, 2002 MLD 357, 1983 CLC 2882, 2005 PTD 2519, 2005 PTD 1189, PLD 1995 SC (Pak.) 272; PLD 1970 SC 158; PLD 1970 SC 173 and 1984 SCMR 1014 rel.

(o) Customs Act (IV of 1969)---

----Preamble---Authority exercising statutory powers of appeal and revision affecting valuable rights of the parties, act in quasi judicial if not judicial capacity, and it must pass a speaking order duly supported by reasoning showing due application to facts and law applicable while disposing of the case---Orders lacking such criteria were declared to be without lawful authority and of no legal effect and beyond jurisdiction and coram non judice.

1994 CLC 2181 rel.

(p) General Clauses Act (X of 1897)---

---S.24-A---Judicial order---Ingredients---Judicial order must be a speaking order manifesting by itself that the Court has applied its judicial mind to the issues and the points of controversy invoked in the causes.

(q) Appeal (civil)---

----When the reasons would not be forthcoming, the appellate court would be deprived of the views of the subordinate court.

(r) Customs Act (IV of 1969)---

----S. 193---Appeal to Collector (Appeals)---Order or decision---Words `order or decision' are not circumscribed by any specified form or format---Order passed by an appropriate officer of Customs at the time of release was an order in terms of S.193 of the Customs Act, 1969.

Noor Muhammad v. Member Judicial, B.O.R. PLD 1986 Lah. 237; Shaikh Muhammad Saeed and Co. v. Deputy Collector PTCL 1997 CL 206 and Secretary of State v. Mask and Co. AIR 1940 PC 105 rel.

(s) Customs Act (IV of 1969)---

----Ss. 193, 195, 79 & 80---Appeal to Collector (Appeals)---Right of appeal---Past and closed transaction---Goods imported had been assessed by competent officers exercising powers under S.79 read with S.80 of the Customs Act, 1969---Assessment order became final order after the lapse of period for filing an appeal against the said order---Such right of appeal had not been given to Customs authorities in terms of S.193 of the Customs Act, 1969 in order to reopen a past and closed transaction, the only recourse available was to initiate action within the framework of S.195 of the Customs Act, 1969.

(t) Customs Act (IV of 1969)---

----S.195---Power of Board or Collector of Customs to pass certain orders---Assessment orders were appealable---Where an appeal had not been filed, the matter was to be reopened by a competent and authorized officer under S.195 of the Customs Act, 1969 and failure to do so would render the initiated proceedings as being illegal and not warranted by law.

(u) Customs Act (IV of 1969)---

----S.193---Appeal to Collector. (Appeals)---No appeal was filed against order-in-original---Issuance of show-cause notice---Validity---Once an order is passed which attains finality, the same could not be subject to a show-cause notice again, considering that no appeal or revision is filed against the first order.

Smith Kline French v. Pakistan (unreported) rel.

(v) Customs Act (IV of 1969)---

----S.195---Power of Board or Collector of Customs to pass certain orders---Order of Assessing Officer could only be reopened by the Collector under S.195 of the Customs Act, 1969 to examine the record of any proceedings conducted under the Customs Act, 1969 for the purposes and satisfying himself as to the legality or the propriety of the order passed by the Assessing Officer---Customs authorities instead of reopening an already finalized case initiated adjudication proceedings through issuance of show-cause notice and adjudication of the" whole matter afresh---Such action was not admissible.

(w) Words and Phrases---

----"Illegal"-Connotation---Word "illegal" means unlawful in and of itself and not because of some extraneous circumstances e.g. a contract to assassinate a public official.

(x) Words and Phrases---

----Improper---Definition---Word "improper" has been defined as not suitable; unfit; not suited to the character, time and place, not in accordance with fact, truth, or right procedure and not in accord with propriety, modesty, good taste, or good manners.

(y) Customs Act (IV of 1969)---

----S.195---Power of Board or ,Collector of Customs to pass certain orders---Scope---Revisional powers conferred vide S.195 of the Customs Act, 1969 did not authorize an officer to examine issue not falling within the scope of the terms "legality" and "propriety"---Powers under S.195 of the Customs Act, 1969 were limited, compared to an appeal before a competent authority.

(z) Customs Act (IV of 1969)---

----Ss.83 & 195---Clearance for home-consumption---Setting aside an order of clearance made under S.83 of the Customs Act, 1969 was a type of order which could be revised by the revisional authority under S.195 of the Customs Act, 1969 for the simple reason, that such an order of clearance was subject to the satisfaction of the officer of customs which must be arrived at fairly and not arbitrarily.

East Jamunia Co. (Pvt.) Ltd. Calcutta v. Collector of Customs, Calcutta 1978 ECR 790 rel.

(aa) Review---

----Scope---Conditions---Courts usually review an order to ensure that a public body (i) has not made an error of law (ii) has considered all the relevant facts, and not taken into account any irrelevant facts (iii) has acted for a purpose expressly or impliedly authorized by statute (iv) has not acted in a way that is so unreasonable, that no reasonable public body would act in that way and (v) that the public body has observed statutory procedural requirements of the principles of natural justice or procedural fairness.

Council of Civil Service Union v. Minister for the Civil Service (1985) AC 374 and 410 rel.

(bb) Customs Act (IV of 1969)---

----Ss.80 & 195---Assessment of duty---Where goods were cleared by customs officer after physical verification under S.80 of the Customs Act, 1969, in such cases goods could not be confiscated except in pursuance of orders passed under S.195 of the Customs Act, 1969.

Union of India v. Popular Dechem 1987 [ELT 63] rel.

(cc) Customs Act (IV of 1969)---

----S. 83---Clearance for home-consumption---Order of adjudication---Bill of entry cleared for home consumption on order of an Appraiser and countersigned by the Assistant Collector constitutes an order of adjudication.

1982 ELT 43 (Del) and Writ Petitions Nos.5296, 5297 and 5654 of 1979 rel.

(dd) Customs Act (IV of 1969)---

----Ss. 193, 79, 80 & 83---Appeal to Collector (Appeals)---Aggrieved person---Under the provisions of Customs Act, 1969 any order passed in terms of S.79 read with Ss.80 and 83 of the Customs Act, 1969 was appealable in terms of S.193 of the Customs Act, 1969 to Collector (Appeals) by the aggrieved person which of course did not include the Customs Officers.

(ee) Customs Act (IV of 1969)---

----Ss.79(1), 80; 83, 193 & 179---Entry for home-consumption or warehousing---For first appraisement, the assessments were finalized by the Customs Officers through assessment orders in terms of Ss.80 and 83 of the Customs Act, 1969---Such order if issued against the taxpayer could have been assailed by the taxpayer in terms of S.193 of the Customs Act, 1969 with the Collector (Appeals)---Since officers of Customs had no right to assail these orders in terms of S.193 of the Customs Act, 1969 there was a course defined by the legislature in S.195 of the Customs Act, 1969 for reopening such cases where the legality or propriety of any decision or order passed by subordinate officer was in question---Said officers, in the present case, scrutinized the customs/commercial documents presented by the taxpayer to them and after exercising their authority expertise and wisdom allowed the clearance of these consignments to the taxpayer/importer---Customs authorities at belated stage were not allowed to take a complete U-turn and start adjudication of past and closed transaction through issuance of show-cause notice and adjudication orders under S.179 of the Customs Act, 1969 when a lawful course had been prescritred by the Legislature in S.195 Of the Customs Act, 1969 for reopening of such decisions or orders whereby Federal Board of Revenue or Collector of jurisdiction could call for and examine the record of any proceedings under the Customs Act, 1969 for the purpose of satisfying as to their legality or propriety.

(ff) Customs Act (IV of 1969)---

----Ss.32 & 195---Untrue statement, error? etc.---Order or decision passed or taken by the subordinate officer could only be corrected in revisional power and not under S.32 of the Customs Act, 1969 since the Collector or the Federal Board of Revenue exercises their revisional powers or correctional jurisdiction in. terms of S.195 of the Customs Act, 1969.

(gg) Customs Act (IV of 1969)---

----S.32---Untrue statement, error, etc.---Evidence---For adjudication of a case through issuance of show-cause notice, the proof of mis?declaration had to be prima facie present in the first instance if allegation of mis-declaration was to be levelled against the taxpayer in terms of S.32 of the Customs Act, 1969 through issuance of show-cause notice by the officer of original jurisdiction.

(hh) Customs Act (IV of 1969)---

----S.32---Untrue statement, error, etc.---When the consignments were released on the basis of commercial documents and physical examination by the examining and Assessing Officers, the charges subsequently levelled as against the importer/taxpayer under S.32 of the Customs Act, 1969 were unsubstantiated once the goods had left the customs/Port area.

2008 PTD 1968 rel.

(ii) Customs Act (IV of 1969)---

----Preamble---Past and closed transaction---After clearance of goods and remand of consignment from customs area, customs authorities were functus officio to reopen the case again as it becomes a past and closed transaction.

(jj) Customs Act (IV of 1969)---

----S.32(2)---Untrue statement, error, etc.---Mis-declaration---Collusion of Customs Authorities---Action against the importer but not against the Customs officers---Discrimination---Even if it was taken under S.32(2) of the Customs Act, 1969, which relates to mis-declaration with the collusion of Customs Authorities then there was nothing on record that whether the department had initiated any disciplinary proceedings against the alleged customs officers simultaneously along with the importer/taxpayer---In absence of departmental proceedings against the delinquent officers, who were in collusion with the importer/taxpayer in evading the Government duty, the proceedings conducted only against the importer/taxpayer could not be said to be a penal action under S.3.2(2) of the Customs Act, 1969, but would be considered as discriminatory action taken only against the importer.

2008 PTD 1968.rel.

(kk) Customs Act (IV of 1969)---

----Preamble---Past and closed transaction---Once a consignment is out of charge after due consideration of relevant facts it becomes a past and closed transaction.

2009 PTD 467 rel.

(ll) Sales Tax---

----Refund---Re-opening of Sales Tax Refund claim---Once the disputed claims were scrutinized by the competent authority and after being satisfied with the legality and propriety the same were sanctioned, that could not be reopened by the same authority as those were a past and closed transaction---Show-cause notice issued was incompetent and beyond jurisdiction.

Customs Appeal No.K-2352 of 1999 and PLD 1971 SC 197 rel.

(mm) Customs Act (IV of 1969)---

----S.195---Power of Board or Collector of Customs to pass certain orders---Illegal assessment order---If the assessment order passed by the Assessing Officer was not legal, it could only be challenged and reopened by the revisional authority i.e. Collector of Customs or Federal Board of Revenue in terms of S.195 of the Customs Act, 1969--Such was an assessment order for all legal and practical purposes where goods had been released after examination and assessment of duties and taxes by the competent officers of the Customs and was a past and closed transaction---Neither confiscation nor imposition of penalty was a determinative criterion or a condition precedent to stamp an order under law, as an order appealable---Question that "whether cases in which assessments have been finalized under Ss. 79(1) & 80 of the Customs Act, 1969 and goods made out of charge under S.83 of the Customs Act, 1969 can be adjudicated upon in terms of S.179 of the Customs Act, 1969 after issuance of the show-cause notice" was answered in negative.

Raunaq Ali's case PLD 1973 SC 236 and Ajay Exports v. Collector of Customs 1986 ELT (26) 8731 rel.

(nn) Customs Act (IV of 1969)---

----S.179 (3)---Power of adjudication---Limitation---Show-cause notice was issued on 8-10-2009---Date shown on order-in-original was 1-2-2010---Courier booking date was 17-2-2010 and order was delivered to the taxpayer on 18-2-2010---Case should be adjudicated within a period of 120 days from the date of show-cause notice---Period of 120 days expired on 5-2-2010 and order-in-original was barred by 12 days-Order-in-original did not speak of any approval or any extension by Collector during adjudication period---Order-in-original had been dated 1-2-2010 to mislead the authorities regarding expiry of' the stipulated period of 120 days from the date of show-cause notice which expired on 5-2-2010---Tune period in such cases was to be calculated prom the booking date of' the documents with the courier---Order-in?original had been issued beyond the stipulated limit of 120 days and was manifestly time barred with reference to the date of show-cause notice which was 8-10-2009 as no reason valid and lawful extension in terms of proviso to S.179(3) of the Customs Act, 1969 had been produced---Limitation period for adjudication in terms of S.179(3) of the Customs Act, 1969 was mandatory in nature and not a directory one and that "once limitation had started to run and had come to an end the assessee had acquired a vested right of escapement of assessment by lapse of time".

2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 60; 2008 PTD 578 and 2009 PTD 762 rel.

1995 SCMR 1881 ref.

Pervaiz Iqbal Kasi for Appellants.

Agha Saeed Ahmed Deputy Director Valuation, Ghulam Yasin Appraising Officer and Abdul Rasheed, I.O. for Respondents.

Date of hearing: 3rd November, 2010.

2011 P T D (Trib.) 2525

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mher Muhammad Arif Sargana, Member (Judicial)

Messrs UNITED TRACKS SYSTEM (PVT.) LIMITED, LAHORE

Versus

COLLECTOR, CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), LAHORE and another

C.A. No.1390/LB of 2008, decided on 7th December, 2009.

(a) Customs Act (IV of 1969)--

----Ss.32 & 25---Untrue statement, error, etc.---Post clearance audit---Allegation was that importer and his Clearing Agent had deliberately got clearance of imported Vehicle Tracking System in the garb' of Anti Theft System (Car Alarm System) by mis-declaring description, classification and value of the same and had deprived the exchequer of its legitimate revenue and were directed to pay customs duty and penalties---Validity---Once the consignment was out of charge, it became past and closed transaction, so far as its value was concerned--Since it was a final assessment, invoking of S.32 of Customs Act, 1969 was not legal because, had there been any irregularity in the assessment, the matter should have been examined by the competent authority under S.195 of the Customs Act, 1969---In case of final assessment no show cause notice could be issued unless the earlier assessment order was set aside by re-opening the case by the competent authority because the Assessing Officer was also an Adjudicating Authority in terms of S.2(a) of the Customs Act, 1969---Appeal was accepted and order-in-original as well as order-in-appeal' were set aside by the Appellate Tribunal.

PTCL 2007 CL 469; 2006 PTD 2237; 2007 PTD 523; 2007 SCMR 1357 = 2007 PTD 1858 and 2004 PTD 2993 ref.

Pak Suzuki Motors Co. Ltd. through Senior General Manager (Corporate Playing and Logistic) Karachi's case 2006 PTD 2237; 2003 PTD 2090; Syed Muhammad Razi's case 2002 PTD 2821; Messrs Sunny Traders v. Federation of Pakistan 2009 PTD 281 rel.

(b) Customs Act (IV of 1969)---

----S.25(5)---Value of imported and exported goods---Transaction value of identical goods----1f in applying the provisions of subsection (5) of S.25. of the Customs Act, 1969, there were two or more transactions, values of identical goods that met all the requirements of subsection (5) and clauses (b), (d) (e) & (f) of subsection (13) of S.25 of the Customs Act, 1969, the customs value of the imported goods shall be the lowest transaction value and not the higher transaction value in terms of Cl. (d) of subsection (5) of S.25 of the Customs Act, 1969.

Muhammad Farooq Sheikh for Appellant.

Muhammad Iftikhar, Appraiser for Respondent.

Date of hearing: 2nd November, 2009.

2011 PTD (Trib.) 2557

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II)

Messrs WAWA GARMENTS INDUSTRIES (PVT.) LTD., KARACHI

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, KARACHI and an others

Customs Appeal No. K-293 of 2009, decided on 15th February, 2011.

(a) Customs Act (IV of 1969)---

----S.180---Show cause notice---Defective and deficient---Legality of---Show cause notice did not contain specific allegations and was silent in respect of contravention of relevant provisions of Customs Act, 1969 and penal clauses attracted thereto---Such show cause notice and all subsequent proceedings including order-in-original and order-in-­appeal based on such defective and deficient show cause notice were unlawful, illegal and coram non judice.

2001 SCMR 838 and 2005 PTD 580 rel.

(b) Customs Act (IV of 1969)---

----S.179'---Adjudication---Speaking order---Order-in-original and order-in-appeal issued by the adjudicating and appellate authorities showed that these were not speaking orders in which all issues raised by the appellant had been discussed and dealt with properly---Such orders were deemed to be without jurisdiction in which the competent authorities had not discussed questions of facts and questions of law addressed by the taxpayer.

1994 CLC 2181 rel.

2005 YLR 1019; 2007 PTD 2500; 2004 PTD 1973; 2005 YLR 1719; 2003 PTD 777; 2003 PTD (Trib.) 2369; 2002 MLD 357; 1983 CLC 2882 and 2005 PTD 2519 ref.

(c) Customs Act (IV of 1969)---

----S. 179---Adjudication---Non-speaking order---Legality of---Authorities exercising statutory powers of appeal and revision affecting valuable rights of the parties act in a quasi judicial if not, judicial capacity and it must pass a speaking order duly supported by reasoning showing due application to facts and law applicable while disposing of the case before it---Orders lacking such criteria were without lawful authority and of no legal effect, beyond jurisdiction and coram non judice.

1994 CLC 2181 rel.

(d) General Clauses Act (X of 1897)---

----S.24-A---Judicial Order---Judicial order must be a speaking order manifesting by itself that the court had applied its judicial mind to the issues and the points of controversy involved in the causes---When the reasons would not be forthcoming, the Appellate Court would be deprived of the views of the subordinate Court---Order which was not a speaking order and devoid of reasons was not sustainable in law for being in contravention of law.

PLD 1995 SC (Pak.) 272; PLD 1970 SC 158; PLD 1970 SC 173 and 1984 SCMR 1014 ref.

(e) Customs Act (IV of 1969)---

----Ss.179, 3 & 4---Customs General Order 12/2002 dated 15-6-2002, Para.47---Power of adjudication---Jurisdiction of monitory limit---Show cause notice was issued by the Additional Collector despite the fact that amount under dispute fell under the domain of Assistant Collector---Validity---Action of executive functionaries were to be restricted to specific spheres permitted by the statute---If the opinion "that an officer of customs appointed under S.3 of the Customs Act, 1969 was competent to exercise all powers and functions of an officer subordinate to him under S.4 of the Customs Act, 1969", the hierarchy of distribution of jurisdiction explicitly provided by S.179 of the Customs Act, 1969 and para..47 of Customs General Order 12/2002 dated 15-6-2002 shall be rendered redundant; and consequent result would be total anarchy where the superior officers would be making all efforts to exercise the adjudication powers clearly conferred by law upon their subordinates---Additional Collector was not empowered to issue show cause notice and pass order-in-original which would amount to usurpation of powers and consequently the entire proceedings followed, would become illegal and nullity in law being coram non judice.

Major Syed Walayat Shah v. Muzzafar Khan and 2 others PLD 1971 SC 184; Omer and Company v. Controller of Customs, (Valuation) 1992 ALD 449; AAA Steel Mills Ltd., v. Collector of Sales Tax and Central Excise, Collectorate of Sales Tax 2004 PTD 624; Ali 'Muhammad v. Hussain Bukhsh and others PLD 1976 SC 514; Land Acquisition Collector, Noshehra and others v. Sarfaraz Khan and others PLD 2001 SC 514; H.M. Abdullah v. Collector of Customs (Appeals) No.1048 of 1999; Collector of Customs and another v. Abdul Razzak PLD 1996 Kar. 451; Collector of Customs (Appraisement) v. H.M. Abdullah and another 2004 PTD 2993; Yousuf Enterprises v. The Collector 2005 PTD 21; Pakistan Dry Battery Manufacturers Association v. Federation of Pakistan 2006 PTD 674; 2005 PTD 67; 2005 PTD 86; Collector of Customs (Export) v. Bilal International Customs Appeal No.K-322 of 2003; Muhammad Farooq and Sons v. The Collector of Customs, Sales Tax and Central Excise (Appeals) Karachi-II, Appeal No.K-1281 of 2005; Collector of Customs, (Valuation) and another v. Messrs Karachi Bulk Storage and Terminal Ltd. 2007 SCMR 1357 = 2007; PTD 1858; Messrs Shafique and Company v. Assistant Collector of Customs and. 2. others 2008 PTD 1481; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala 2008 PTD 60; Messrs Hanif Strawboard Factory v. Additional Collector (Adjudication) Customs, Sales Tax and Central Excise Gujranwala 2008 PTD 578; Chittaranjan Cotton Mills Ltd., v. Staff Union PLD 1971 SC 197; Raunaq Ali's case PLD 1973 SC 236 and PLD 1976 SC 37 ref.

2004 CLD 373; Khalid Qureshi v. UBL 2001 SCMR 103; East West Steamship v. Queen Land Insurance PLD 1963 SC 663; 1984 CLC 1517; PLD 1995 Kar. 587; Assistant Director v. B.R. Herman Mohata Ltd. PLD 1992 SC 485 and Central Insurance v. C.B.R. 1993 SCMR 1232 rel.

(f) Interpretation of statutes---

----Where there is a conflict between special and general provisions of law, the special provisions shall prevail.

2004 CLD 373 rel.

(g) Interpretation of statutes---

---Courts could supply construction with a view to avoid absurdity.

Khalid Qureshi v. UBL 2001 SCMR 103 rel.

(h) Customs Act (IV of 1969)---

---S.179(4)---Customs General Order 12/2002 dated 15-6-2002, para.47--Power of adjudication---View that S.4 and S.179 of the Customs Act, 1969 occupied the same fields would result in redundancy in respect of powers conferred under S.179 of the Customs Act, 1969 and para 47 of Customs General Order 12/2002 dated 15-6-2002.

(i) Interpretation of statutes---

----Redundancy is to be avoided in respect of any provision of the statute.

East West Steamship v. Queen Land Insurance PLD 1963 SC 663 rel.

(j) Interpretation of statutes---

----Where there is a conflict between two provisions of a statute, the later provision prevails.

1984 CLC 1517 rel.

(k) Jurisdiction---

----Law favours actions of the authorities to be confined to their own spheres of jurisdiction conferred by the statute---Action taken by a State functionary beyond the ambit of his jurisdiction is a nullity.

PLD 1995 Kar. 587 rel.

(l) Customs Act (IV of 1969)---

----S.223---Officers of Customs to follow Board's orders, etc.---Judicial functions---Section 233 of the Customs Act, 1969 could not be employed so as to interfere with the judicial or quasi judicial functionaries---Power of Central Board of Revenue as to prescribe guidelines were not relevant for the exercise of judicial functions.

Assistant Director v. B.R. Herman Mohata Ltd. PLD 1992 SC 485 rel.

(m) Customs Act (IV of 1969)--

----Ss.3, 4 & 179---Central Board of Revenue did not figure in the hierarchy of the officers provided in the statute for the purpose of assessment and adjudication; and the directions of the Central Board of Revenue to reopen the assessment was without jurisdiction and the adjudication officer was to apply its own mind.

(n) Customs Act (IV of 1969)---

----S.25(15)---Customs Rules, 2001, Chap. IX, (Rr.107 to 125)---Value of imported and exported goods---Fixation of value of exported goods by the Additional Collector---Validity---Provisions of S.25(15) of the Customs Act, 1969 specified that the Customs value of any exported goods shall be the value at the prescribed time, on a sale in open market of the country of exportation for the country to which the goods were consigned---Said section and even S.25A of the Customs Act, 1969 nowhere stated that the value of the exported goods could be fixed by Additional Collector---Fixing of value through a Circular was violative of S.25(14) and S.25A of the Customs Act, 1969 and Chapter IX of Customs Rules, 2001 because the Act and Rules did not empower the Additional Collector to fix values of either imported or exported goods--Act of issuance of Circular fixing the price was in absence of legal mandate and was tantamount to transgression of authority and forced construction of law---Courts depreciate such unilateral and arbitrary determination of export values which render the valuation of the subject goods fixed as a nullity in the eyes of law---Orders were unlawful, illegal, coram non judice and issued without jurisdiction and based on deficient and defective show cause notice and in contravention of the judgments of superior judicial fora which explicitly depreciated the fixing of value of the exported goods through administrative circulars in the absence of availability of legal sanction in the Act and Rules---Orders were set aside and appeal was allowed by the Appellate Tribunal.

H.M. Abdullah v. Collector of Customs (Appeals), Customs Appeal No.1048 of 1999; The Collector of Customs and another v. Abdul Razzak PLD 1996 Kar. 451; Collector of Customs (Appraisement) v. H.M. Abdullah and another 2004 PTD 2993; Yousuf Enterprises v. The Collector 2005 PTD 21; Pakistan Dry Battery Manufacturers Association v. Federation of Pakistan 2006 PTD 674; Messrs Sohrab Global Marketing (Pvt.) Ltd.; 2005 PTD 67 and Messrs Punjab Arms Co., Lahore v. Deputy Collector of Customs and 4 others 2005 PTD 86 rel.

(o) Customs Act (IV of 1969)---

----S.193A (3)---Procedure in appeal---Limitation for deciding appeal---Appeal was filed on 9-6-2008---First Appellate Authority passed order on 4-3-2009---Provisions of subsection (3) of S.193A of the Customs Act, 1969 required that the appeal should be decided within a period of 90 days from the date of filing of appeal or within further extended period not exceeding 90 days by the Collector Customs (Appeals) with reasons to be recorded---Initial period of 90 days expired on 7-9-2008 whereas the entire stipulated period of 180 days expired on 06-12-2008 rendering the order-in-appeal barred by limitation period unlawful and void.

Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala 2008 PTD 60; Messrs Hanif Strawboard Factory v. Additional Collector (Adjudication) Customs, Sales Tax and Central Excise Gujranwala 2008 PTD 578; 2006 PTD 340; Complainant No.958-L of 2005; 1998 MLD 650; 2004 PTD (Trib.) 2898; 2004 PTD 369; 2005 PTD 23; 2007 PTD 2092; 2008 PTD 609; 2009 PTD (Trib.) 1263; 2009 PTD 762; 2010 PTD (Trib.) 23; 2010 PTD (Trib.) 81; 2010 PTD (Trib.). 1146; 2010 PTD (Trib.) 1469; 2010 PTD (Trib.) 1631; 2010 PTD (Trib.) 1636 and 2010 PTD (Trib.) 2117 rel.

Nadeem Ahmed Mirza for Appellant.

Hyder Pirwani for Respondent.

Date of hearing: 5th January, 2011.

2011 PTD (Trib.) 2624

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II) and Muhammad Arshad, Member (Technical)

Messrs H.H. BROTHERS, LAHORE

Versus

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE (APPEALS), KARACHI

Customs Appeal No.K-273 of 2008, decided on 8th April, 2011.

(a) Customs Act (IV of 1969)---

----S.25(1)---Customs Rules, 2001, Rr.109(2) & 437---Customs General Order 12 of 2002, Para 78---Valuation of imported and exported goods--Declared value to be the transaction value---Burden of proof--Importer in the column of GD stating clearly that the import was without L/C, discharged the burden of proof laid down upon him under S.25(1) of the Customs Act, 1969 and R.109 of the Customs Rules,' 2001---For disputing the said value, it was mandated upon the Department to transmit the message under sub-rule (2) of R.109 of Chapter-IX and 437 of sub-chapter-III of Chapter XXI of Customs Rules, 2001 to the importer for transmitting/scanning additional documents for substantiating his declared value---No such exercise was undertaken either by the Appraiser, Principal Appraiser and Collector of Customs as no copy of the transmitted view message had been placed on record by the Collector of Customs to discharge the burden shifted on to the Department---No decision was communicated with grounds as enunciated in sub-rule (3) of R.109 of the Customs Rules, 2001 thus confirming that no cause or reason was available with the Department for disputing the value and the said fact further stood proved front the fact that no evidential invoice as directed in Para 78 of Customs General Order 12/2002 of the period expressed in R.107(a) of the Customs Rules, 2001 was placed before the Appellate Tribunal--Department failed to discharge the onus of establishing that the price declared by the importer of the imported goods was not the transaction value within the meaning of S.25(1) of the Customs Act, 1969.

2005 PTD (Trib.) 617; Messrs Mughal Tobacco Limited v. Collector of Customs 1986 MLD 790; Messrs Kamran Industries v. The Collector of Customs, Exports and 4 others PLD 1996 Karachi 68; Collector of Customs Port Muhammad Bin Qasim v. Zymotic Diagnostic International, Faisalabad 2008. SCMR 438; Collector of Customs (Valuation) and another v. Karachi Bulk Storage and Terminal Ltd. 2007 SCMR 1357 = 2007 PTD 1858; Customs Appeal No. K-249 of 2000/13372;' Customs Appeal No. K-35 of 2002; Customs Appeal No.K-1670 of 2001; Customs Appeal No.K-1281 of 2005; 2006 PTD 909; 2002 PTD 2957; 1992 SCMR 1083 and 2008 PTD 1250 rel.

(b) Customs Act (IV of 1969)---

----S.25(1)---Valuation of imported and exported goods---Provisions of law were to be followed in sequential manner---Provision of S.25 of the Customs Act, 1969 were to be followed in sequential manner bearing certain exceptional cases where massive group under invoicing was rampant---Resort to subsequent methods was not permissible without . exhausting the sequence indicated in S.25 of the Customs Act, 1969 as It would annihilate and terminate the spirit and essence of the transaction value which in the first instance had to be established as colourable and tainted---Mere insertion of word "may" or "may not" in place of "are required to" in subsection (15) of S.25 of the Customs Act, 1969 through Finance Ordinance, 2007 did not give unbridled and unfettered authority to customs administration to play havoc with the Provisions of S.25 of the Customs Act, 1969 thereby making them in-effective and redundant---Discretion had to be exercised within limits based on reason, rational and fair play---Legislature specifically provided in subsection (10) of S.25 of the Customs Act, 1969 that subsections (1), (5), (6), (7), (8), (9) defined how the customs value of the imported goods was to be determined by the Customs Methods of customs valuation were normally required to be applied in a sequential order except reversal of the order of subsections (7) (8) at the importers, request, if so agreed by the Collector of Customs--Different methods of valuation provided in S.25 of the Customs Act, 1969 and Customs Rules, 2001 were required to be applied in a sequential order, and without visible exercise reflected on record no resort could be made to secondary method of valuation---Evidence available of like contemporaneous imports on record and also produced by the importer in the present case, had been ignored, no visible exercise brought on record or communicated to the importer and assessable value arrived at by ignoring the sequential manner, which confirmed that assessment order was passed arbitrarily and unilaterally under prohibited method enunciated in R.110 of Customs Rules, 2001.

Messrs Toyo International Motorcycle v. Federation of Pakistan 3 others 2008 PTD 1494 rel.

(c) Customs Act (IV of 1969)---

----S.25(1)---Valuation of imported and exported goods---Procedure.

(d) Customs Act (IV of 1969)---

---- S. 25(6)(7)---Valuation of imported and exported goods---Simultaneous invocation of two methods of valuation---Validity---Deductive Method for determining assessable value in terms of subsection (7) of S.25 of the Customs Act, 1969 showed that if the customs value of the imported goods could not be determined under subsections (6) of S.25 of the Customs Act, 1969 that should be subject to Rules be determined on the basis of Customs Value of the imported goods of similar goods relying upon unit price at which such imported goods were also sold in aggregate quantity at or about the time of importation of goods being valued to persons who were not related to person from whom they buy such goods subject to certain specified deductions---Deductive Method was primarily a work back method based on Analytical Basis of Valuation prevalent under the defunct/ erstwhile concept of Normal Price or Notional Value under Brussels Definition of Value.

(e) Customs Act (IV of 1969)---

----S.25 (1)---Customs Rules, 2001, R.107 (a)---Valuation of imported .and exported goods---Market inquiry---Parameters---Market inquiry was to be restricted / based on the parameters that goods employed for determination of the customs value should comprise of the imported goods or identical / similar imported goods which were sold in Pakistan in the same state; that the inquiry should be based on the unit price at which imported goods or identical or similar imported goods were sold in the greatest aggregate quantity and that the words at or about the time of importation of goods being valued denotes 90 days valuation data in terms of S.25(1) of the Customs Act, 1969 read with R.107(a) of the Customs Rules, 2001.

(f) Customs Act (IV of 1969)---

----S.25(6)(7)---Valuation of imported and exported goods---Simultaneous invocation of two methods of valuation---Validity---Assessment made simultaneously on similar/identical goods' transaction value under subsection (6) of the S.25 of the Customs Act, 1969 and Deductive Method of Value under subsection (7) of the S.25 of the Customs Act, 1969, being distinctive from each other, rendered such assessment contradictory to the provisions of subsections (6) and (7) of the S.25 of the Customs Act, 1969 and assessment so made was null and void ab-initio.

(g) Customs Act (IV of 1969)---

----S.25(5)(d)---Customs Rules, 2001, Rr.117 & 118---Valuation of imported and exported goods---Declared transaction value was in conformity with cl. (d) of subsection (5) of S.25 of the Customs Act, 1969---Declared value of the importer was to be adjudged in the light of transaction value of identical / similar goods expressed in sub-section (5) of S.25 of the Customs Act, 1969 read with Rr.117 & 118 of the Customs Rules, 2001---In the present case, veracity of copies of GDs supplied by the importer, had not been challenged by the Department and opinion of Collector of Customs read with copy of data supported the position that lowest declared transaction value of the identical imported goods ranged between US$0.561/kg to 0.847/kg which had been enhanced to US$. 1/kg to US$ 1.10/kg without Producing evidence of physical/similar goods---Was not necessary to enhance the value of identical goods on record in terms of CI. (d) of subsection (5) of S.25 of the Customs Act, 1969 which was also applicable mutatis mutandis to subsection (6) of S.25 of the Customs Act, 1969---Department had not brought on record any cogent evidence or documents in terms of (90) days valuation data which could prove the declared transaction value of the goods tainted or colorable---Lower transaction value for the goods in absence of such evidence particularly when similar goods had been released by the Department during the relevant period did not necessitate the enhancement of value to the level of highest of transaction value for similar / identical goods on record.

(h) Customs Act (IV of 1969)---

----Ss.25-D, 80, 193 & 194A---Review of the value determined Assessment of value was admittedly made under S.80 of the Customs Act, 1969, against which an appeal lies under Ss.193 and 194A of the Customs Act, 1969---Departmental contention that importer should approach the Director General (Valuation) for review of the assessed value for revision of the value was not tenable---Where values were fixed through issuance of valuation rulings in terms of S.25-A of the Customs Act, 1969, by the Collector of Customs or Director of Customs Valuation the same could be challenged through a review under the provisions of S.25-D of the Customs Act, 1969.

Sun Traders v. Deputy Collector of Customs, Faisalabad and 4 others 2008 PTD 1594 and 2010 PTD 1293 rel.

(i) Customs Act (IV of 1969)---

----S.25---Customs Rules, 2001, Rr.107(a) & 110---Constitution of Pakistan, Arts.4 & 25---Valuation of imported and exported goods---Discrimination---Identical / similar goods were cleared through the application of Cl. (d) of subsections (5) & (6) of S.25 of the Customs Act, 1969 and Rr.117 & 118 of the Customs Rules, 2001 on the basis of data of import maintained under R.110 of the Customs Rules, 2001 of the period given in R.107 (a) of the Customs, Rules, 2001 without any hindrance and without recourse to Deductive Method of Valuation under subsection (7) of S.25 of the Customs Act, 1969---No power existed to target incidence of tax in such a way that similarly placed person be dealt not only similarity, but discriminatingly---Facility allowed to someone and denied to other is discrimination---Treatment given to the importer against the principles enshrined in Art. 25 of the Constitution violated the settled principles of law---Assessment order was based upon proceedings which were infested with patent illegalities and as such were null and void---Assessment order as well as order of First Appellate Authority based on such proceedings were also ab initio null and void and were set aside by the Appellate Tribunal and appeal was allowed.

2005 SCMR 492; 2010 SCMR 431; 1990 SCMR 1959; 2002 SCMR 312; 2002 PTD 976; 2007 PTD 361 and 2009 PTD 1501 rel.

Nadeem Ahmed Mirza for Appellant.

Ghulam Yasin, Appraiser for Respondent.

Date of hearing: 5th April, 2011.

2011 P T D (Trib.) 2725

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Muhammad Arif Moton, Member (Judicial-II) and Muhammad Arshad, Member (Technical-II)

Messrs CHINA INTERNATIONAL WATER AND ELECTRIC CORPORATION, ISLAMABAD and another

Versus

DEPUTY COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF APPRAISEMENT, KARACHI and others

Customs Appeals Nos.K-680, K-683 and K-684 of 2010, decided on 19th January, 2011.

(a) Customs Act (IV of 1969)---

----S.25(1)---Valuation of imported and exported goods---Show-cause notice---No show-cause notice had been issued to the importers by the Adjudicating Authority while finalizing their declared value in terms of S.25 of the Customs Act, 1969---Issuance of show cause notice was a mandatory requirement for adjudicating officer while adjudicating the issue---Non-issuance of such notice was in violation of principles of natural justice---Importers having not been afforded any opportunity to put any meaningful defense at the time of hearing, order-in-original issued by the Deputy Collector of Customs was ab initio, null and void and the structure build upon such order had no legal value.

PLD 1964 SC 536; 2003 SCMR 1505; 2006 SCMR 129; Pakistan v. Public at Large PLD 1987 SC 304; University of Dhaka v. Zakir Ahmed PLD 1965 SC 90; 1994 SCMR 2232; M.D. The Bank of Punjab v. Syed Shahzad Hussain 2006 SCMR 1023; Sir Edward Snelson's case PLD 1961 SC 237; Fazal-ur-Reham's case PLD 1964 SC 410; Zakir Ahmed's case PLD 1965 SC 90 and Pakistan Crome Mine's case 1983 SCMR 1208 rel.

(b) Customs Act (IV of 1969)---

----S.25---Customs Rules, 2001, R.107 (a)---Valuation of imported and exported goods---Valuation data for enhancement of declared price in terms of S.25 of the Customs Act, 1969 read with R.107(a) of the Customs Rules, 2001 was not brought on record by two forums below as well as before the Appellate Tribunal by the Department---No visible exercise had been conducted and brought on record to show that all methods of determination of transaction value had been exhausted in the manner laid down in S.25 of the Customs Act, 1969---Simply mentioning the position that in view of peculiar nature of the goods, resort had been made to Fall Back Method did not suffice the requirements laid down in that respect---Reasons had to be recorded in writing with admissible evidence by the officer of Revenue in the first instance---Enhancement of transaction value of the importer without any supporting data in the form of evidential invoices of contemporaneous imports pertaining to ninety days valuation data was arbitrary and unlawful and against the settled law.

(2004) 163 ELT 289 (SC); 2002 PTD 2957; 2005 PTD 21; 2004 PTD 2993; 2006 PTD 1876; 2006 PTD 232; 2007 SCMR 1357 = 2007 PTD 1858; 2008 PTD 1250 and 2009 SCMR 438 rel.

(c) Customs Act (IV of 1969)---

----S.25---Valuation of imported and exported goods---Enquiry for enhancement of value without knowledge, of the party and behind the importer---Validity---Colossal enhancement of declared transaction value---Enquiry conducted by the officer of Revenue was without knowledge of importer, without making them party and behind their back---Such investigation / enquiry was unlawful and coram non judice---Order which was passed against the importer particularly based on such enquiry behind the back of the importer/appellant without giving him opportunity to look into it and rebut was unlawful and against the principles of natural justice and equity.

Messrs Farooq International v. Chief Controller Imports and Exports and 4 others 1985 CLC 1781; S.M. Abdullah and Sons v. Government of Pakistan and others 1986 MLD 1508; Aamjad Atta Muhammad v. Deputy Collector of Customs 1994 CLC 1797 and Messrs Muhammad Farooq v. Muhammad Mubeen Akhtar, Inspector of Customs, Custom House, Multan 2004 PCr.LJ 1958 rel.

(d) Customs Act (IV of 1969)---

----S.25---Valuation of imported and exported goods---Comparison of value---Officers of the Revenue had compared the value of imported machinery with previously imported machinery which were neither identical nor similar but completely dissimilar in terms of their age, specification and usage---Year of manufacture, size, gross tonnage, net tonnage', capacity and purpose of the previously imported machinery were totally different from the specifications for the imported one--- - Price of other machinery was far higher than the prices of subject item in the international market and even otherwise dependent upon a number of other factors---Reference in respect of such items was answered in the negative by Appellate Tribunal.

(e) Customs Act (IV of 1969)---

----S.25(9)---S:R.O. 450(I)/2001, dated 18-6-2001---Customs Rules, 2001, Rr. 121 & 217---Valuation of imported and exported goods---Application of Fall Back Method---Procedure---Fall Back Method would come to the rescue of customs authorities where it was not possible to determine the value on the basis of six methods earlier incorporated under various subsections of S.25 of the Customs Act, 1969---Special Rules were issued for determination of value as well as duty for goods temporarily imported---Section 25(9) of the Customs Act, 1969 provided that if the customs values of the imported goods could not be determined under S.25(1), (5), (6), (7) and (8) of the Customs Act, 1969, then subject to Rules, it shall be determined on the basis of value derived from among the methods of valuation set out in the said provisions to be applied in the flexible manner to the extent necessary to arrive at a customs value---Value of imported goods be determined under S.25(9) of the Customs Act, 1969 as far as possible, basing the same on the previously determined customs value of identical goods assessed within ninety days---Reasonable flexibility was admissible for reliance on imports of identical/similar goods within ninety days' valuation data as well as identical and similar goods of other origins---Fall Back Method could only be resorted to if evidential invoices could be shown to form reasonable basis for adopting said method---Such evidential invoices either of identical or similar goods, whether of the same origin or not, to be relied upon by 'the department in support of higher valuation must be contemporaneous---In order to determine the customs value under Residuary Rules it must be shown by the customs authorities that the prices indicated in the invoices relied upon by them could form reasonable. basis with due adjustment---Objections regarding year of manufacture, age, period of actual usage; specifications etc. of item (machinery) raised by the importer need to be taken into consideration and suitably replied to by the adjudicating officer---Contemporaneity was the key factor, the basic criterion, and the main yardstick for invoking Fall Back Method as envisaged in subsection (9) of S.25 of the Customs Act, 1969 read with R.121 of the Customs Rules; 2001.

PLD 1992 SC 485; 1985 CLC 1.781; Aggarwal Distributors (Pvt.) Ltd.'s case 2000 (117) E.L.T. 49; Collector of Customs Port Muhammad Bin Qasim v. Messrs Zymotic Diagnostic International 2007 PTD 2623 and Rehan Umar v. Collector of Customs, Karachi and 2 others 2006 PTD 909 ref.

Premier Auto Industries v. Commissioner of Income Tax 1998 (104) E.L.T. 770; Commissioner of Customs (Gen) Mumbai v. Abdullah Koyloth SCI 29 October, 10; 6 (2007) 6 SCC 273 and 7(2005) 3 SCC 265 rel.

(f) Customs Act (IV of 1969)---

----S.25---Customs Valuation Rules 1988, R.1OA---Valuation of imported and exported goods---Internet prices---Scope---Prices obtained through internet were not relevant since they pertain to goods of different specifications---Even otherwise prices obtained from Internet were not negotiated prices and were not supported by any independent evidence of contemporaneous physical imports---Evidentiary value of Internet quotation and / or offer could not be equated with that of Telex or Fax message---Internet was a medium through which prices were offered to one and all---Level of transaction was the only parameter which would make a price offered for retail different from the price offered for wholesale---Collector proceeded to reject invoice value of goods under R.10A of the Customs Valuation Rules, 1988 and finding that the correct value could not be determined under Rr. 5, 6, 6A, 7 and 7A of the Valuation Rules, 1988, after recording that the notice had not questioned that the goods being compared and in actual import were different; question "whether prices of similar goods procured by the Revenue on Internet were a valid piece of evidence for determination of Customs assessed value in terms of S.25 of the Customs Act, 1969" was answered in the negative by the Appellate Tribunal.

Aggarwal Distributors (Pvt.) Ltd.'s case 2000 (117) E.L.T. 49; Laxmi Colour Lab. v. Collector of Customs 1992 (62) E.L.T. 613; Overseas International v. CC (2000) 127 ELT 599; Print International v. CC 2001 (137) ELT 184 (T); Collector of Customs v. Nippon Bearing (P.) Ltd. 1991 (55) E.L.T. 68 and 1997 (90) E.L.T. A183 rel.

(g) Customs Act (IV of 1969)---

----Ss.25 & 81---Valuation of imported and exported goods---Comparison of old and used secondhand machinery with non-identical old and used secondhand machinery for valuation purposes---Validity---Comparison of second hand machinery was legally permissible only with the identical old machinery---Secondhand machines or equipments were not comparable to one another for the purpose of valuation unless the condition of the machine manufacturer, age, usage and extent of period of which the machine had been used were shown to be identical.

Commissioner of Customs, Mumbai v. J.K. Industries Ltd. E.L.T. 2002 (137) 1286; Collector of Customs Lahore v. A.A. International Lahore 2000 PTD (Trib.) 1584 and Assistant Collector of Customs Dry Port Lahore v. Nagina Engineering Works Gujranwala 2004 PTD (Trib.) 2438 rel.

(h) Customs Act (IV of 1969)---

----S.25---Valuation of imported and exported goods---Determination of value without physical examination by a machinery Appraiser would make the assessment arbitrary and against the settled parameters/ criteria.

Assistant Collector of Customs Dry Port Lahore v. Nagina Engineering Works Gujranwala 2004 PTD (Trib.) 2438 rel.

(i) Customs Act (IV of 1969)---

----Ss.25(11) & 26---Valuation of imported and exported goods---Burden of proof---Section 25(11) of the Customs Act, 1969 merely provided for the right of the customs administration to requisition certain documents---Such was also available to the customs officer in terms of S.26 of the Customs Act, 1969---Burden of proof was on the customs administration---Under S.156(2) read with S.187 of the Customs Act, 1969, the burden initially lay on the importer who had in the first instance, to discharge the initial or the persuasive burden of proof and once the importer had been able to convince the court or Tribunal to the degree where the forum was satisfied with the explanation or documents produced, the burden of proof would shift on to the prosecution.

Messrs Kamran Industrie's case PLD 1996 Kar. 68; 1969 SCMR 708; 1986 MLD 790; 1988 MLD 2420; 1988 MLD 2507; 1988 Kar. 99; 1989 CLC 1639; 1989 MLD 1451; 1990 ALD 125; 1990 CLC 834; 1990 ALD 138; 1993 CLC 1838; 1998 (75) ECR (SC); AIT 2008 SC 124; 2002 PTD 2957; 2004 PTD (Trib.) 2898 and 2004 PTD 2592 rel.

(j) Customs Act (IV of 1969)---

----S.25---Valuation of imported and exported goods---Speaking order--Order-in-original and order-in-appeal showed that those were not speaking orders in which all issues raised by the importer had been discussed and dealt with properly---Such orders were without jurisdiction in as the competent authorities had not discussed questions of law and fact addressed by the taxpayer.

Commissioner of Customs, Mumbai v. J.K. Industries Ltd. E.L.T. 2002 (137) 1286 rel.

(k) Administration of justice---

----Speaking order---Principles---Authority exercising statutory powers of appeal and revision affecting valuable rights of the parties act as quasi judicial authority---Such authority must pass a speaking order duly supported by reasoning showing due application of mind to facts and law applicable---Orders lacking such criteria were declared to be without lawful authority and of no legal effect and hence beyond jurisdiction and coram non juidce.

1994 CLC 2181 rel.

(l) Customs Act (IV of 1969)---

----S.25---Valuation of imported and exported goods---Non-speaking order---Order-in-original did not address all the issues of facts and law raised by the importer before the adjudicating officer---Arguments put forth before adjudicating officer in respect of non-issuance of show cause notice and non observance of the modus operandi incorporated in S.25 of the Customs Act, 1969 for determination of assessed customs value had been brought on record through a visible exercise---Order-in?-appeal simply confirmed the order-in-original stating that the different methods of valuation incorporated in S.25 of the Customs Act, 1969 including the Fall Back Method had been followed as per law to arrive at the customs assessed value of the subject goods---Failure to apply, judicial mind and address all the issues raised by the importer by both the lower forums portrayed the position which was in violation and derogation of settled law.

2004 PTD 1973; 2005 YLR 1719; 2003 PTD 777; 2003 PTD (Trib.) 2369; 2002 MLD 357; 1983 CLC 2882; 2005 PTD 2519 and 2005 PTD 1189 rel.

(m) General Clauses Act (X of 1897---

----S.24-A---Speaking order---Judicial order must be a speaking order manifesting by itself that the court had applied its judicial mind to the issues and the points of controversy invoked in the cause---When the reasons would not be forthcoming, the Appellate Court would be deprived of the views of the subordinate court---Order which was not a speaking order and devoid of reasons was not sustainable in law being in contravention of settled law.

PLD 1995 SC (Pak) 272; PLD 1970 SC 158; PLD 1970 SC 173 and 1984 SCMR 1014 rel.

(n) Customs Act (IV of 1969)---

----S.25---Valuation of imported and exported goods---Irregularities and violation of law in assessment of value---Customs authorities had indulged into violation of mandatory provisions enumerated in the relevant statutes and settled law---Principles of natural justice necessitating the issuance of show cause notice to the importer for inflicting a colossal pecuniary burden had been overlooked---Whole proceedings were devoid of reasoning and legal substance, rather were based on assumptions, presumptions, conjectures and surmises---Such gross injustice and palpable inequity had precipitated due to existence of wide and unfettered powers in the Customs Authorities who made it a handle of financial strangulation of taxpayers by arbitrary and whimsical of authority alien to judicial process---Internet prices not duly supported by invoices contemporaneous evidential imports had been relied upon for enhancement of the declared transaction values---Customs authorities, in between the period of more than five months at their disposal, after the provisional release of the goods, never felt the need of associating the taxpayer or their counsel during the process of investigation and enquiry for determining the value of the goods---Basic principle which governed the determination of assessed value on the basis of internet prices and Fall Back Method lay in contemporaneity of the evidential imports and the same had been flouted by the department which made the whole exercise of enhancement of the declared transaction values unlawful, illegal and ab initio null and void---Orders passed by the forums below were set aside, by the Appellate Tribunal in circumstances and appeals were allowed.

Pervaiz Iqbal Kasi for Appellant (in Customs Appeal No.680 of 2010).

Arshad Warsi and Afaq Ahmed for Appellants (in Appeals Nos.683 to 684 of 2010).

Ali Waheed Khan Assistant Collector and Noor Elahi A.O. for Respondent.

Date of hearing: 3rd November, 2010.

2011 P T D (Trib.) 2783

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Hanif Tahir, Member (Judicial)

Messrs SUFI WEAVING INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF CUSTOMS, FEDERAL EXCISE AND SALES TAX (APPEALS), FAISALABAD and others

Sales Tax Appeal No. 929/LB of 2009, decided on 29th October, 2009.

(a) Sales Tax Act (VII of 1990)---

----S. 46--Appeal to Appellate Tribunal---Limitation---Appeal was objected to on the ground that same was time-barred by almost 20 months and could not be entertained in view of the specific legal provisions of S.46 of Sales Tax Act, 1990---Impugned order which had been passed in an arbitrary manner, was illegal, void and liable to be set aside---Validity---No limitation would run against an illegal and void order---As impugned appellate order of the Collector, suffered from a lot of illegalities and improprieties, it was void, defective and illegal, therefore, the point of time-limitation would not arise against the same.

1996 SCMR 856; 2001 SCMR 1822; 2005 SCMR 69; 2002 PTD 87 (H.C. Kar.) and 1998 PTD 2012 rel.

(b) Sales Tax Act (VII of 1990)---

----Ss. 10(4), 11(2), 46, 66 & 73---Refund claim---Entitlement---Refund claim was rejected on the abnormal tax profile, raised by STARR (Sales Tax Automatic Refund Repository) Computer System---Validity---Terms of "abnormal tax profile' was generated by the STARR System having no legal backing by the Sales Tax Act, 1990---No legislative enactment, no contravention of relevant laws or notification issued thereunder or any specific instruction issued by Federal Board of Revenue on the subject was alleged in the show-cause notice---Subsequent orders were passed merely on the assumptions and presumption which was not warranted under law---Appellant made genuine purchases from the alleged units having normal/operative status and payments against those transactions, were also made through banking channel as required under S.73 of Sales Tax Act, 1990---Refund claim had been rejected on the charges which were beyond the Sales Tax Laws Rejection of refused was not admissible and assessee was entitled to the same in circumstances.

2004 PTD 868; 2000 PTD 3765; 1993 SCMR 274 and 2002 PTD 2457 rel.

(c) Sales Tax Act (VII of 1990)---

----Ss. 10, 11 & 66---Refund claim---Entitlement---Refund claim was rejected on the charge of duplicate invoice issued by the supplier unit to different persons against a single transaction---Departmental representative, objected that documents in question were not attested/ verified from the respective Collectorate of the alleged supplier as required under Standing order issued by the Collector of Sales Tax---Validity---Appellant's refund of sales tax for period in question had been rejected under Standing Order for want of attestation/verification of supportive documents submitted under the relevant Sales Tax Refund Rules for processing of their claim; otherwise, all supportive documents required under the said Refund Rules were provided, but same were not considered by adjudicating authority as well as Appellate Authority who sought for attestation and verification thereof---Such verification or attestation was neither required under the Sales Tax Act, 1990 nor under subordinate law i.e. Sales Tax Refund Rules---Standing Order being an executive order could not overrule the provisions of both substantive laws and subordinate laws---Flea of appellant/assessee was accepted and refund was allowed---Impugned adjudication order, as well as first appellate order, were set aside and show-cause notice issued to the appellant, war vacated, in circumstances.

2006 PTD 1412 rel.

Khubaib Ahmad for Appellant.

Khawar Mansoor for Respondents.

Date of hearing: 29th October, 2009.

2011 P T D (Trib.) 2799

[Customs, Federal Excise and Sales Tax Appellate Tribunal]

Before Gulab Shah Afridi, Member (Judicial)

Messrs KHYBER TEA & FOOD COMPANY, PESHAWAR

Versus

COLLECTOR OF CUSTOMS (APPEALS), PESHAWAR and 3 others

Appeal Cus. 358/PB of 2010, decided on 23rd July, 2011.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 156(1)(8)(89), 157, 168 & 194-A---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Seizure and confiscation of goods on allegation of smuggling---Customs Anti-Smuggling Unit, intercepted a truck from which foreign origin Welding Electrodes and Black Tea was recovered---Both goods as well the truck were formally seized under S.168 of the Customs Act, 1969 for violation of Ss.2(s), 16 & 157 of Customs Act, 1969 punishable under S. 156(1)(8)(89) of the Act--Record had established that appellant company, was doing business of Black Tea and was duly registered with Sales Tax Department, Income Tax Department, Chamber of Commerce and Pakistan Tea Association, and appellant maintained all the relevant record as required under the law---Appellant produced the documents in shape of Sales Tax Invoice along with Goods Declaration and according to said documents, appellants had paid Sales Tax and had also produced all lawful import purchase documents of the seized consignment---Said import documents were not disputed---Once Goods Declaration and other documents were produced during adjudication before the Assistant Collector, with regard to seized goods, said goods could not be declared as smuggled goods and documents irrelevant---Allegation in the show-cause notice that appellant company was using irrelevant import/purchase documents, was not proved; and the documents which were produced during adjudication; were tallying with seized consignment---Contents of seizure report incorporated in the show-cause notice containing incorrect facts, had no legal sanctity---Once the goods were imported into the country for home consumption; and the import documents were produced, then the provisions of law mentioned in the show-cause notice, were not applicable---By producing documents as prescribed under 5.187 of the Customs Act, 1969, appellant had discharged his liability---Both order-in-original as well as order-in-appeal, were set aside and seized goods were ordered to be restored to the lawful owner.

1983 PCr.LJ 1351; 2003 PTD 2118; 2008 PTD (Trib.) 36 and 2005 PTD (Trib.) 135 rel.

Syed Pir Alam Shah, Consultant along with and Atiq Rehman for Appellants.

Naseer Khan, Deputy Superintendent Customs for Respondents.

Date of hearing: 24th May, 2011.

2011 PTD 1162

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SANA TRADERS, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No.59/ISD/ST(06)/138 of 2010, decided on 13th March, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10, 66 & 67---Sales Tax Rules, 2006, R:28---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---S.R.O. 394(I)/2009, dated 21-5-2009---Rejection of refused claim---Complainant made zero-rated export in tax period July and October 2008 and claimed input adjustment/refund for month of July 2008 and for the month of October, 2008---Sales Tax Department informed the complainant that refund claim for the month of July was under process, while for the month of October 2008 which was received after lapse of 120 days was barred by time under R.28 of Sales Tax Rules, 2006---Complainant applied for condonation of delay, but Sales Tax Authorities instead of condoning the time limit of only 26 days, issued a show-cause notice for rejection of the claim, despite the fact that Sales Tax Authorities had the necessary enabling power to condone the delay up to one year vide S.R.O.394(I)/2009 dated 21-5-2009---Complainant's claims had been ineptly handled by the Sales Tax Authorities---Besides, firstly advising the complainant in writing to file application for condonation of delay and then issuing a show-cause notice for rejecting the claim on account of being time barred, was illegal---Issuing a show-cause notice for rejecting a claim for non-verification of deposit of Sales Tax without confronting the buyers and the suppliers, both of whom were available for joint verification, spoke of high-handedness on the part of Authorities---All such acts of omission or commission constituted maladministration as defined under S.2(3)(I) & (II) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made by the Ombudsman to the effect that verification of payment and deposit of Sales Tax in Government Treasury be undertaken within 15 days; and the refund claim for tax period October, 2008 decided within 15 days that refund claim for July 2008 which was stated to be under process be decided within a period of seven day; and that compliance be reported within 30 days.?

Messrs Pfizer Laboratories v. Federation of Pakistan reported vide PTCL 1998 CL 354 ref.

Yasin Tahir, Senior Advisor, Dealing Officer.

Saqib Siddeq, ITP. Authorized Representative.

Anwar Zeb, Deputy Commissioner Sales Tax RTO, Islamabad, Departmental Representative.

2011 PTD 1166

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs LUCKY CEMENT LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.250/Khi/Customs(73)/754/2009, decided on 17th March, 2010.

Customs Act (IV of 1969)---

----Ss. 156(1)(i), 195 & 219--Customs Rules, 2001, Rr.389 & 391---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2)(b) & 10(4)---Failure to place commercial invoice and packing list of imported goods inside the container---Imposition of penalty---Under provisions of R.389 of Customs Rules, 2001, importer was bound to ensure placement of commercial invoice and packing list of imported goods therein, but at the time of customs examination same were not found therein---Penalty of Rs.5,000 was imposed on the complainant/importer under the provisions of S.156(1)(i) of the Customs Act, 1969---Validity---Complainant while establishing the letter of credit, specifically advised the supplier to place commercial invoice/and packing list inside the container, but the supplier/exporter failed to fulfil his legal obligation and violated a condition of Letter of Credit---Complainant/importer could be punished for violation of Rules only if connivance was established in that regard between the overseas exporter and the Pakistani importer---Ombudsman recommended that Revenue Division direct the concerned authorities to recall the order of imposition of penalty in terms of S.195 of the Customs Act, 1969; and decide the matter afresh within 30 days providing opportunity of hearing to the complainant to enable him to present evidence in support of his innocence and that compliance report be furnished within 10 days thereafter.

M. Afzal Awan, Authorized Representative.

Syed Imran Bukhari, Department Representative.

Saeed Akhtar, Dealing Officer.

2011 PTD 1170

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Syed TAHIR HAIDER

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD Complaint

No.132/ISD/ST(11)/667 of 2010, decided on 6th July, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 33 & 45-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i)(ii), 9 & 10---Inclusion the complainant in the list of non filers of sales tax return---Complainant was required to file sales tax return on quarterly basis as per Para 2(d), Chapter V of Special Procedure Rules, 2007, which he did regularly---Regardless of that the complainant was included in the list of non filers of the return and was imposed a penalty of Rs.5,000 for non filing of Sales Tax Return for one month---Complainant had prayed that imposition of penalty under S.33 of Sales Tax Act, 1990 be declared as null and void---Chief Commissioner admitted the mistake of including the complainant in the list of non-filers for relevant month--Commissioner informed the complainant that Commissioner (Enforcement) had been informed for re-opening of the case under S.45-A of Sales Tax Act, 1990 for withdrawal of the penalty, mistakenly imposed on the complainant---No fool proof mechanism was available to separate monthly non filers from quarterly non-filers--Non-service of show-cause notice, for which Departmental Representative had no plausible explanation and ex parte clamping of penalty, reflected gross neglect, inefficiency, arbitrariness and injustice---Such acts of omission and commission tantamounted to maladministration under S.2(3)(i) & (ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to the Federal Board of Revenue to direct Chief Commissioner to confirm withdrawal of penalty illegally imposed on the complainant within 15 days; to issue a letter of apology to the complainant; to direct PRAL to put in place a fool proof mechanism to avoid such systemic cases of gross maladministration, and to report compliance within 30 days.?

Yasin Tahir, Senior Advisor Dealing Officer.

Khurram Shahzad Warraich, Authorized Representative.

Naveed Mukhtar, IR (RTO), Islamabad and Mr. Shafqat Mahmaod, Auditor Sales Tax (RTO), Islamabad, Departmental Representative.

2011 P T D 1175

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SHAKEEL CONSTRUCTION COMPANY through Masood Ahmed Abbasi, Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 88/KH/IT (23)/469/2010, decided on 14th July, 2010.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 12, 122(5-A), 124, 153 & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Amendment of assessment---Complainant being a sole proprietary enterprise was engaged in transporting hard waste and garbage---Complainant was being assessed to tax as a service provider and transporter of goods---Additional Commissioner, initiating suo motu action under S.122(5-A) of Income Tax Ordinance, 2001, categorized complainant's receipts as of a contractor---Additional Commissioner, had failed to explain as to how the complainant could be treated as a contractor covered by clause 'C' of subsection(1) of S.153 of Income Tax Ordinance, 2001, when he was actually covered by the exception provided in said clause---Order of Additional Commissioner was arbitrary and unlawful, tantamounting to maladministration in terms of S.2(3)(i) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to direct the Chief Commissioner to take action under S.122-A of Income Tax Ordinance, 2001 as per law and issue refund due within 21 days; to ask the Additional Commissioner, to explain within 15 days as to why disciplinary action could not be recommended against him; and also whether he would like to be heard in person; to examine the desirability how an order set aside by the Commissioner (Appeals), was re-opened under S.122(5-A) of Income Tax Ordinance, 2001 by Additional Commissioner, an officer junior to the Commissioner (Appeals) and to report compliance within 30 days. ?

Mumtaz Ahmed, Advisor, Dealing Officer.

Masood Ahmed Abbasi, Authorized Representative.

Muhammad Saeed Nashir Additional Commissioner (IRS), Departmental Representative.

2011 P T D 1178

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

NAVEED ILYAS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.315/LHR/IT(261)/566/2010, decided on 14th July, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 122(5-A) & 122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 16---Arbitrary assessment---Complainant was placed in Presumptive Tax Regime until tax year 2006---Status of complainant was changed to that of a. manufacturer/supplier of automotive parts in the year 2007---Department did not accept said change and rejected complainant's refund claim---Departmental action under S.122(5-A) of Income Tax Ordinance, 2001 was not only arbitrary, but also vindictive in nature---As the Additional Commissioner passed the order under S.122(5-A) of Income Tax Ordinance, 2001 without pointing out any patent error in the earlier order under S.120 of Income Tax Ordinance, 2001, it was evident that certain departmental functionaries had made up their mind at an early stage in the case to obstruct refund claim---Such order being unlawful and arbitrary, should have been vacated under S.122-A of the Income Tax Ordinance, 2001---Complainant had contested the arbitrary treatment meted out to him by the department insofar as his status as manufacturer/supplier, had been rejected when he was duly registered with Federal Board of Revenue as a manufacturer---Such arbitrary and unlawful treatment amounted to maladministration as defined in S.2(3)(ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to direct the Chief Commissioner to ensure action as per law under S.122-A of Income Tax Ordinance, 2001 to correct the wrong done to the complainant within 21 days; to direct the officials for unlawful and arbitrary conduct in the case, after the matter had already been duly decided by Federal. Tax Ombudsman, to explain within 15 days as to why action under S.16 of the Income Tax, Ordinance 2000 could not be initiated against them; and also whether they would like to be heard in person and to submit compliance report within 30 days.

Muhammad Munir Qureshi, Advisor, Dealing Officer.

Aamir Naveed, Authorized Representative.

Azmat Elahi Ghuman, DCIR, Departmental Representative.

INDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---This complaint is against alleged arbitrary assessment made under section 122(5A) of the Income Tax Ordinance, 2001 (hereinafter the Ordinance).??????

1. Until Tax Year 2006, the Complainant was placed in Presumptive Tax Regime (PTR) being a "Trader" in automotive parts. In Tax Year 2007, his status changed to that of a manufacturer/supplier of automotive parts. This change in status was duly reflected in the Complainant's Return of income for the year. However, the Department did not accept it, and rejected Complainant's refund claim amounting to Rs.92,192, 3. The Complainant preferred a complaint before the Federal Tax Ombudsman (C.No.338-L/2009) which was disposed of on 17-10-2009. It was recommended that refund due be paid to the Complainant. The Department argued before the FTO that Complainant's case was under examination for possible audit and hence payment of refund had been deferred. This was rejected by the FTO with the observation that likely selection of case for audit did not absolve the respondents from issuing refund.

2. The FTO's Findings/Decision in the complaint were contested before him in a Review Application filed by the Deptt. As the Review was rejected, payment of refund was made to the Complainant. In the meanwhile, the proceedings initiated earlier for selection for audit also came to a naught. However, an order under section 122(5A) of the Ordinance was passed on 1-3-2010 in which it was held that the Complainant had not been able to establish that he was a manufacturer/supplier, and as a consequence a tax demand of Rs.92,191 was raised against the Complainant thereby reversing the refund allowed earlier.

3. It is the Complainant's contention that the order amended under section 122(5A) of the Ordinance for tax year, 2007 is arbitrary and vindictive. According to him, the Complainant is a manufacturer/supplier of auto parts duly registered with the Sales Tax Department of the F.B.R. vide Registration No.0302843200555, that can be verified on the F.B.R. website.

4. When confronted, the Department submitted a reply that amended order under section 122(5A) was in accordance with law, and so the Departmental order could not be contested before the FTO because of the bar laid down in section 9(2)(b) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000.

5. The ambient circumstances in this case strongly suggest that the Departmental action under section 122(5A) is not only arbitrary but also vindictive in nature. When the complaint was filed in FTO office, the Deptt. claimed that audit proceedings were being considered against the Complainant. However, finding no proper grounds for selection for audit, the Additional Commissioner under section 122(5A) amended the order deemed to have been passed under section 120, holding it erroneous and prejudicial to the interest of revenue. As the Additional Commissioner passed the order under section 122(5A) without pointing out any patent error in the earlier order under section 120, it is evident that certain Departmental functionaries had made up their mind at an early stage in the case to obstruct Complainant's refund claim. Such order being unlawful and arbitrary should have been vacated by the Commissioner under section 122A of the Ordinance.

Findings:

1. The Complainant has contested the arbitrary treatment meted out to him by the Deptt. insofar as his status as manufacturer/supplier has been rejected when he was duly registered with the F.B.R. as a manufacturer. Such arbitrary and unlawful treatment amounts to maladministration as defined in section 2(3)(ii) of the FTO Ordinance.

Recommendations:

1. F.B.R. to direct the Chief Commissioner to -

(i)???????? ensure action as per law under section 122A to correct the wrong done to the Complainant within 21 days;

2011 PTD 1181

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs ANM TRADING COMPANY through Messrs Nadeem & Company, Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-46/Khi/Cust (26)/333/2010, decided on 7th July, 2010.

Customs Act (IV of 1969)---

----Ss. 25-D & 81(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Revision of determined value---Provisional determination of liability---Issue involved in the complaint was whether, or not final determination of the provisional assessment was made under S.81(1) of Customs Act, 1969 within the prescribed time limit of six months, extendable by 90 days under S.81(2) of Customs Act, 1969---Final determination was made and communicated to the complainants within time---If the complainants would invoke the provisions of S.25-D of the Customs Act, 1969 and file a review application., the time taken by the Director General to dispose of the review had got nothing to do with the limitation provided under S.81 of Customs Act, 1969---Review filed, having not been pursued by the representative of the complainants had become infructuous--Final determination of value/assessment was held to have been made and communicated within time limit prescribed under S.81(2) of Customs Act, 1969---No violation of time limit prescribed under S.81(2) of Customs Act, 1969 was involved in the case, in circumstances---Order accordingly.

Justice (Retd.) Muhammad Nadir Khan, Advisor, Dealing Officer.

Nadeem Ahmed Mirza, Consultant, Authorized Representative.

Muhammad Raza, Deputy Collector Customs (Appraisement), Departmental Representative.

2011 P T D 1189

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs HAMDAM PAPER PRODUCTS (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 174/KHI/ST(48)/751 of 2010, decided on 8th July, 2010.

Sales Tax Rules, 2001---

----R. 12---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Blocking a company's name---Complainant, a registered Sales Taxpayer, was aggrieved by unlawful harsh action of blocking his company's name without jurisdiction---No show-cause notice was issued to the complainant, no order of Federal Board of Revenue was issued and no procedure undertaken or adopted in the light of R.12 of Sales Tax Rules, 2001, Chief Commissioner Office 'though had taken steps to correct the maladministration involved, but such patently wrong actions should not have been done in the first place---Blocking and de-blocking at times was being done without adopting proper procedure---Recommendations were made to Federal Board of Revenue to write a letter of apology to the complainant to direct the Chief Commissioner to conduct a fact finding inquiry in the matter and proper counter measures to avoid such systemic issues in future; to ensure de-blocking of the entity within 7 days; to complete implementation of recommendations within 15 days failing which contempt proceedings would be initiated against the concerned officials in whose jurisdiction the issues fell and to report compliance within 30 days.

Mumtaz Ahmed, Advisor, Dealing Officer.

Aqeel Ahmed and Muhammad Hussain, Authorized Representative.

Jawad Hussain Memon, A.C., Departmental Representative.

2011 P T D 1192

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs RIAZ SAJJAD POLYPROPYLENE (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No.164/LHR/ST(07)/281/2010, decided on 25th June, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 37-A(4), 38, 66 & 67---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Delay in sanction of refund---Sales Tax Staff visited the premises of the complainants and taking action in terms of S.38 of Sales Tax Act, 1990 took into custody all the available Sales Tax record, books of account and related documents; and a criminal case was registered against the Directors of the complainant's company for evasion of Sales Tax---High Court under its constitutional jurisdiction declared action of the department illegal, void ab initio and directed the department to. return all seized documents, record, account books and other material to the complainants; and also not to use the record, account books and other material against the complainants in adjudication proceedings---Complainants approached the department for refund of Rs.6 million already paid by them, but same was not refunded---Non-return of documents etc. taken into custody by the department; and non-refund of Rs. 6 million after the department had lost its appeal in the Supreme Court against judgment of High Court and neglecting to respond to complainants' repeated reminders, tantamount to maladministration in terms of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to direct the Chief Commissioner to return the seized record of the complainants; decide the refund/compen?sation claim on merit in the light of the decision of the High Court within 21 days; and report compliance within 30 days. ?

Saeed Akhtar, Advisor, Dealing Office.

Ch. Abdul Ghafoor, ITP and M. Imran Rashid, Authorized Representative.

Muhammad Asif, DCIR, Departmental Representative.

2011 PTD 1196

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Sh. ZAFAR ABBAS and 4 others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint's Nos.275-279/LHR-IT(233-237)492-496/2010, decided on 28th June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120-A & 214-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Rejection of declaration---Complaints had arisen out of the departmental rejection of declaration filed belatedly by the complainants relating to the scheme for payment of Investment Tax in respect of undisclosed income--Complainants had deposited Investment Tax in time, but declarations on the prescribed forms were not submitted within the stipulated time, but were filed with delay of 33 days---Departmental Representative could not show that late filing of declaration by the complainants had any bearing on the revenue---Contention that no provision existed in the scheme to issue show-cause notice to the late filers of the declaration, was against the principles of natural justice---Federal Board of Revenue could have condoned the delay in filing declaration under S.214-A of Income Tax Ordinance, 2001---Plea of the complainants was rejected without providing them opportunity of hearing---Department, in circumstances, had acted in an arbitrary manner which amounted to maladministration as defined in S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to provide opportunity of hearing to the complainants; and decide their case keeping in view the President's decision in complaint No.1069-2007 on merit within 30 days and to report compliance within 45 days.

2002 PTD 549 and 2002 PTD 608 ref.

Muhammad Munir Qureshi, Dealing Officer.

Rana Munir Hussain, Advocate, Authorized Representative.

Abbas Ahmed Mir, DCIR, Departmental Representative.

2011 PTD 1201

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SYED BROTHERS, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.267/Khi/Customs(82)/793 of 2009,, decided on 31st March, 3010.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 168 & 195---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9, 10 & 16---Delay in release of seized goods---Staff of Directorate General, seized 3751 tyres of different sizes under S.168 of Customs Act, 1969 for violation of Ss.2(s) and 16 of the Customs Act, 1969---Show-cause notice was issued to the complainant---Adjudication Officer in his order-in-­original, vacated show-cause notice and released seized goods/tyres---Complainant approached Directorate of Customs Intelligence and Investigation vide letters for release of seized goods in the light of order-in-original, but goods were not released---Collector re-opened the order-in-original under the provisions of S.195 of the Customs Act, 1969, more than six months after issuance of order-in-original---Arbitrary actions of cust.ims, clearly had shown its mala fide and also tantamount to prejudicing determination of a matter pending before the Federal Tax Ombudsman---Recommendations were made to Federal Board of Revenue to call for the record of the case, examine it and pass appropriate order for the cancellation of reopening of order-in-­original; and subsequent show-cause notice for confiscation of complainant's goods issued by the Collector; to direct Collector Customs (Preventive) to explain within 15 days as to why action under S.16 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 for trying to prejudice the determination of a matter pending before the Federal Tax Ombudsman, could not be initiated against him and compliance report to be furnished within 20 days.

2009 PTD 1463 ref.

Saeed Akhtar, Advisor, Dealing Officer.

M. Afzal Awan, Complainant's Representative.

Samiul Haq, Deputy Director and Mushtaq Ali Shahani, D.C., Departmental Representative.

2011 P T D 1205

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs AMIR MUHAMMAD and another, Peshawar

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Petition No.22 of 2009 and Complaint No.1 of 2009, decided on 9th February, 2010.

(a) Establishment of Office of-the Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss.14(8) & 10(3)---Powers of the Federal Tax Ombudsman--Review-Close of complaint for non-prosecution-Review application for reconsideration of decision---Review application was admitted by the Federal Tax Ombudsman for investigation under S.10(3) read with S.14(8) of the Establishment of Office of the Federal Tax Ombudsman Ordinance (XXXV of 2000).

(b) Customs Act (IV of 1969)---

----Ss.168, 171, 216 & 217---Establishment of Office of the Federal Tax Ombudsman Ordinance (XXXV of 2000)---Seizure of things liable to confiscation----Inspector Customs Anti-smuggling intercepted the vehicle on the suspicion of smuggling---Sales tax invoices issued by the supplier were shown and it was contended that goods were not being smuggled from non-tariff area but were being legitimately transported from his business premises under proper documentation in terms of sales tax invoices---Documentary evidence provided by the owner on the spot was rejected and goods were seized along with the vehicle and the recovery memos. were issued for the seizure of goods and vehicle---Validity---Complainants were involved by the Customs Anti-smuggling staff in a false case of smuggling for corrupt motives---"Information" was also concocted after the event to lend credence to the falsehood involved in the case---Allegation of corrupt motives behind such seizure stood established---Customs supervisory management not reviewing such cases and indulgence of Customs staff in such acts with impunity was highly undesirable as such acts of commission and omission constituted maladministration of a serious nature under S.2(3)(i) and (ii) of the Establishment of Office of the Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that Federal Board of revenue to fix responsibility and proceed against the Customs officials responsible for the misconduct and maladministration in the case that concerned Inspector of Customs Anti-smuggling; be asked to show cause within 15 days as to why a compensation of Rs.50,000 may not be awarded to the driver of the vehicle for his loss of business, as admissible under S.22 of the Establishment of Office of the Federal Tax Ombudsman Ordinance, 2000; that in order to obviate the chances of false information and false informers, suitable checks and balances be incorporated in the Reward Rules of Federal Board of Revenue and that the findings in the present case be widely circulated to warn the potential wrong-doers against commission of such blatant acts of abuse of power, high-handedness and dishonesty.

Yasir Tahir, Senior Advisor, Dealing Officer.

Amir Muhammad and Fazal Elahi, Authorized Representative.

M. Jamil, Law Officer Customs and Zafar Ali, Inspector Customs, Departmental Representative.

2011 PTD 1214

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs PACK-N-MOVE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.280/Khi/Cust(124)/1081 of 2010, decided on 25th October, 2010.

Customs Act (IV of 1969)---

----Ss. 32, 32-A & 156(1)(14)(14-A)(45)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i), 9 & 10---Misdeclaration and fiscal fraud---Imposition of penalty---Complainant/Customs Clearing and Forwarding Agent, had complained that Additional Collector through ex parte orders-in-original imposed penalty of Rs.1,50,000 on him without serving upon him any show-cause notice and affording him opportunity of hearing---Importer had filed three G.Ds. through complainant, who was Clearing Agent of the importer---Importer claimed on the basis of exemption certificate, exemption of duty and taxes, which certificates, on scrutiny were found to be false and forged---Show-cause notices were issued to the importer---Importer alone was charged and the complainant was not alleged to be involved in the crime---Besides the complainant was not called upon to submit reply to the show-cause notice issued to the importer---When the complainant was not made party and was not called upon to furnish reply, his adjudication was against the principles of justice---Orders-in-original did not specify any role played by the complainant in preparation of forged documents---Nothing was on the record to show that complainant was benefited---Imposition of penalty on complainant in terms of S.156(1)(14)(14-A) & (45) of the Customs Act, 1969, was improper, unjust and contrary to law, rules and regulations---Without affording opportunity of hearing to the complainant and without specifying his role in the offences alleged to have been committed, the imposition of fine/penalty on him tantamounted to maladministration as defined in Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Ombudsman recommended that Federal Board of Revenue would ensure that the Collector of Customs, exercising powers under S.195 of Customs Act, 1969 would examine the legality and propriety of the proceedings conducted by Additional Collector; and report compliance, within 30 days.

2002 YLR 2651; 2003 PTD 795 and 2003 PTD (Trib.) 2264 ref.

Justice (Retd.) M. Nadir Khan, Advisor, Dealing Officer Abdul Qadir Syed, Authorized Representative.

Naveed Abbas, Assistant Collector, Departmental Representative.

2011 P T D 1222

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs GADOON TEXTILE MILLS, SAWABI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.240 of 2010, decided on 5th May, 2010.

Customs Act (IV of 1969)---

----Ss. 33 & 202---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i), 9 & 10---Deduction of amount despite refund claim of huge amount was pending with Customs---Complaint had been directed against Inland Revenue and Customs Authorities alleging that Inland Revenue on the direction of Customs Authorities had deducted amount, despite refund claim of the complainant was pending with Customs---Contention of the complainant was that Customs Authorities should have sanctioned refund claim of the complainants and then deduct amount to settle recovery action---Claim of the complainant was correct---Inordinately delaying settlement of refund claims of a taxpayer and coercing recoveries of government duties from him, was discriminatory, unfair and unjust besides, being contrary to the well established concepts of equity and good governance---Federal Board of Revenue was recommended to decide on merits the. refund claim of complainant with customs within fifteen days; to issue a Policy directive to the field formations to simultaneously settle the pending refund claims of taxpayers and deduct the recoverables, if any from the sanctioned amount of refund before resorting to coercive measures for recovery of government dues from the same tax-payers and compliance be reported within twenty days.

?

Yasin Tahir, Senior Advisor Dealing Officer.

Ishtiaq Ahmad Authorized Representative.

Dr. Noman Khan, DC (Customs) and Saleem-ur-Rehman, DC (IR) Departmental Representative.

2011 P T D 1225

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs PORT QASIM AUTHORITY, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.31JKH1/IT(08)/190 of 2010, decided on 10th April, 2010.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 53, 54, 55 &,122(5-A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i), 9 & 10---Creating fictitious demand of amount despite availability of tax exemption---Complainant had prayed that Federal Board of Revenue and Chief Commissioner be directed to cancel erroneous order passed under S.122(5-A) of Income Tax Ordinance, 2001 on the ground that though tax exemption was available to the complainants for relevant year, a fictitious demand of amount had been wrongly created by invoking inapplicable provisions of Income Tax Ordinance, 2001---Acts of omission and commission by the Departmental Officials, indicated their arbitrariness and unlawful behaviour---Such conduct of Departmental Officers also showed their tendency to involve the taxpayer in protracted and unwarranted litigation---Arbitrary, oppressive and Perverse conduct of the officials of the department had been established in the case, which tantamounted to maladministration under S.2(3)(i) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to the Federal Board of Revenue to report compliance of Federal Tax Ombudsman's earlier recommendations in complaint within 7 days; to adopt transparent measures to eliminate mala fide practice in blocking issuance of large refunds, in particular; to conduct enquiry and initiate appropriate disciplinary action against officials responsible for mala fide, biased and arbitrary conduct in the case and compliance report be sent on first recommendation within 10 days and on second and third within 45 days.

Mumtaz Ahmad, Advisor Dealing Officer..

G. Abbas Karjatwala, F.C.A, Authorized Representative.

Mrs. Seema Jabeen, Additional Commissioner, Departmental Representative.

2011 P T D 1228

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

ABDUL WAHEED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.107/LHRICUS(05)/206/2010, decided on 14th April, . 2010.

Customs Act (IV of 1969)---

---Ss. 168, 169 & 181---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10---Request for release of confiscated vehicle on payment of leviable duties and taxes equal to 5% of the reserved price---Rejection of request---Vehicle was imported free of duties and taxes by the Consulate General of foreign country which vehicle was sold in the market after obtaining permission from the Ministry of Foreign Affairs---After registration, the vehicle finally reached in the hands of the complainant/owner, from whom it was seized by Customs Authorities for non-payment of leviable duties and taxes and was ordered outright confiscation by order-in-original of Deputy Collector Customs---Appeal filed by the complainant against order-in-original was accepted by Collector (Appeals) who allowed release of vehicle on payment of leviable duties and taxes---Complainant feeling aggrieved with order-in-appeal had filed complaint mainly on the ground that vehicle in question being five years old, demanding huge amount of duties and taxes on the same was unfair---Practice followed by the Customs Authorities in confiscating vehicles from the last buyer or forcing him to pay applicable taxes/duties, was arbitrary, unjust and unlawful---First purchaser was solely responsible for non payments of duties/taxes due, unless it was established that the subsequent purchasers acted in connivance with him--Recommendations were made to Federal Board of Revenue to allow complainant being, prima facie, an innocent buyer, to use the vehicle on the basis of any security instrument of 'Superdari'; and in the meanwhile find out the first buyer/actual evader of taxes for realizing applicable duties/taxes; to amend the relevant S.R.O. (Notification) making it obligatory for the Ministry of Foreign Affairs, not to issue the permission letter to sell the imported duty-free vehicles to foreign missions, unless the applicable duties/taxes had been duly paid by then; to issue instruction to Motor Vehicle Registration Authorities in Pakistan not to register any vehicle for the first time without obtaining credible proof of payment of applicable duties/taxes, and to report compliance within 90 days.

Saeed Akhtar, Advisor, Dealing Officer.

Abdul Waheed (himself) Authorized Representative.

Muhammad Tahir (DC) Mahmood Ahmad Khan Principal Appraiser Departmental Representatives.

2011 PTD 1237

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs DURRANI TRADERS, QUETTA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.248/KHI/CUS(72)/743 of 2009, decided on 13th March, 2010.

Customs Act (IV of 1969)---

----Ss. 21, 35 & 41---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i)(b)(d)(ii), 9 & 10---Denial of claim of duty drawback on exported goods---Complainants exported 43 consignments of Vegetable Ghee and filed duty drawback claims in respect of 30 consignments with complete documents---Customs had declined to sanction those drawback claims on the ground that exported Vegetable Ghee was of substandard quality---Complainants filed appeal against order-in-original whereby claim of the complainant was rejected---Collector Customs (Appeals) accepted appeal of the complainants against order-in-original and claim of the complainants was accepted up to Supreme Court---When the fate of said 30 claims finally settled in favour of the complainant, they filed remaining 13 claims out of 93 consignments which had been exported by them during that period---Customs rejected said claim of 13 consignments on account of late filing of the said claims which according to the customs constituted violation of S.21 of the Customs Act, 1969---After allowing the claim of duty drawback to the complainant in 30 similar cases refusal of claims of duty drawback in respect of remaining 13 cases, was mala fide---Deputy Collector Customs had admitted that prima facie the claim of the complainant, if not hit by time limitation, seemed to be correct---Explanation of the complainants for long delay in filing 13 claims after the legal battle about 30 claims filed earlier, was compelling and plausible---Besides, there was no justification for withholding of an exporter's money on the mere ground of time limitation, when he had a plausible explanation for the delay in filing the drawback claim---Customs should have properly appreciated the circumstances of the case and condoned the delay---Failure of Customs Authorities to do so and rejection of complainant's claims on mere ground of time limitation, would constitute maladministration under S.2(3)(i)(b)&(d)(ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000--Recommendation were made to the Federal Board of Revenue to the effect that; order-in-original and order-in-appeal be set aside; delay involved in filing 13 claims be condoned; Customs Authorities be directed to dispose of 13 duty drawback claims as per law and procedure within 15 days and compliance be reported within 30 days.

Messrs Pfizer Laboratories v. The Federation of Pakistan PLD 1998 SC 64 ref.

Justice. (Retd.) Muhammad Nadir Khan Advisor Incharge, Quetta Dealing Officer.

Naseebullah Khan Achakzai Authorized Representative.

Shahid Abbasi Deputy Collector Customs, HQ Mohabat Khan Mandokhail AC Customs Departmental Representative.

2011 P T D 1242

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SULTEX INDUSTRIES

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.233-KHI/Cus(70)/708 of 2009, decided on 17th March, 2010.

Customs Rules, 2001---

----Rr. 455 to 460---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Delay in payment of duty draw back claims---Complainant was aggrieved and dissatisfied with alleged discriminatory treatment and delay in payment of duty draw back claims---When export rebate was provided as incentive to the exporters to remain competitive, delay of 2 to 3 years in payment to Federal Board of Revenue/Collectorates, would undermine the spirit of scheme---Claimant was given priority or attention only when he either would file a writ or a complaint---Delay, inattention and inefficiency in handling the matter of Duty Draw was maladministration---Ombudsman recommended that Federal Board of Revenue would direct the Chief Collector to settle complainant's claim as per law within 30 days; to form a Committee of relevant officials of Collectorates of exports to evolve workable strategy to address the systemic issues of unacceptable levels of delay in processing of claims; to settled all pending refund claims, as per law, within three months and to submit a monthly progress report to Federal Tax Ombudsman Secretariat.

Mumtaz Ahmad Advisor, Dealing Officer.

Naeemuddin Consultant, Authorized Representative.

Salamat Ali, Deputy Collector (PaCCS) Departmental Representative.

2011 PTD 1245

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SAITA (PAKISTAN) (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.70/Khi/Customs(38)/402/2010, decided on 11th August, 2010.

Customs Act (IV of 1969)---

----S. 33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 16---Denial to refund duty and other taxes collected by customs on re-import of machinery after its repair abroad---Complainant sought refund of duty and other taxes collected by the customs on re-import of machinery after its repair abroad---Machinery in question became faulty and required immediate repair at the cost of the company; it was exported back temporarily and again re-imported---Customs Authority again imposed duty and other taxes ignoring the fact that due duty and taxes were already paid on said machinery---Machinery being urgently required, complainant paid duty and taxes under protest---Complainant submitted refund application, but to no avail---Complainant alleged that the Customs authorities had arbitrarily taxed the machinery twice and also delayed refund due---Departmental Representation did not dispute that value of machinery was not chargeable to customs duty and taxes on re-import as it had already been charged at the time of earlier import---Customs had failed to levy duty and taxes correctly on re-import of repaired machinery despite protest by the complainant---Adjudicating Officer had mishandled the refund claim which was clearly admissible to the extent of the difference between the amount payable on the cost of repairs and amount actually charged on the entire value of the re-imported machinery---Failure, inefficiency, neglect and manipulation on part of Customs, amounted to maladministration as defined under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made that Federal Board of Revenue would direct the Chief Collector Customs to revisit impugned order-in-original; to ask Deputy Collector Customs to show cause within 15 days as to why he could not be proceeded against under S.16 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 as well as the relevant disciplinary Rules; to refund the amount of customs and taxes in excess of what was chargeable on (he cost actually incurred on repairs, instead of the declared value of re-imported machinery, after getting evidence of actual cost of repairs from the complainant and to report compliance within 30 days.?

Justice (Retd.) Muhammad Nadir Khan, Advisor, Dealing Officer.

S.M. Saghir, Manager (Admn) Authorized Representative.

Syed Imran Bokhari, Deputy Collector Customs Departmental Representative.

2011 PTD 1254

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs MONDAY BABA, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.110/Khi/Cus(54)/521/2010, decided on 12th August, 2010.

Customs Act (IV of 1969)---

----Ss. 19-A, 33 & 81---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2, 9 & 10---Refusal to refund the amount--- Consignment imported by the complainant, despite having been released under S.81 of Customs Act, 1969, was intercepted by staff of the Directorate of Intelligence and Investigation on the plea that the value of goods was misdeclared---Case was accordingly adjudicated and vide order-in-original additional amount of duty and taxes with 100% fine and penalty, were imposed on the complainant---Appellate Tribunal set aside order-in-original and complaint on basis of decision of Appellate Tribunal---Said decision of Appellate Tribunal was upheld up to the Supreme Court---Complainant filed a refund claim, but Customs department did not process claim of the complainant---Complainant had filed ,complaint to Federal Tax Ombudsman contending that he was entitled for refund of the additional amounts of import duties and taxes received by the department---Complainant had also contended that proceedings initiated against him under S.19-A of Customs Act, 1969 were illegal as said section could not be applied retrospectively---Keeping the refund application undecided for the period from 2003 to 2006 without any stay order, had constituted maladministration---Calling upon the complainant after seven to eight years of the import and sale of the goods to supply the passing of incidence related information, was a difficult proposition---Responsibility for delay and ensuing difficulty, entirely devolved on the customs---Inattention, inaptitude and delay in handling the case, tantamounted to maladministration---Ombudsman recommended to the Federal Board of Revenue to initiate disciplinary proceedings against the Departmental Officials who sat idly for years and failed to ask the complainant to produce the relevant evidence concerning whether or not the incidence of duties and taxes had been passed in to the consumers; and to report compliance within 30 days.

Fecto Belarus Tractor v. Government of Pakistan PLD 2005 SC 605 ref.

Justice (Retd.) Muhammad Nadir Khan, Advisor, Dealing Officer.

Zia-ul-Hassan Authorized Representative.

Syed Imran Bukhari, Deputy Collector and Noor Elahi, Appraiser Departmental Representative.

2011 PTD 1260

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

ASLAM PERVAIZ

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.143//ISD/ST(12)/728 of 2010, decided on 11th August, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 66 & 67---Sales Tax Rules, 2006, R.12---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2, 9 & 10---Unlawful blocking of refunds---Complaint was directed mainly for unlawful blocking of refunds on Sale Tax invoices and suspension of Sales Tax Registration before audit and without providing opportunity of hearing to the complainant---Departmental Representative when was asked to explain the legality and propriety of blocking the refund, explained that Sales Tax record of the complainant was checked and certain discrepancies were found therein; and that on the basis of said discrepancies Collector deemed it appropriate to block adjustment/ refund against Sales Tax invoices issued by the complainant under R.12 of Sales Tax Rules, 2006---Validity---Blocking of refunds and suspension of registration, was not uniformly done in all cases suspected of similar irregularities, which amounted to discrimination between different taxpayers while dealing with identical issues---Suspending the registration without appropriate orders of the Collector Sales Tax under R.I2 of Sales Tax Rules, 2006 was a worse kind of maladministration and not rectifying such an injustice once it was brought to the notice of the competent authorities was even worse----Suspension of the complainant's registration, without Collector's order under R.12 of the Sales Tax Rules, 2006, was illegal---Blocking of refunds against the supplies made by the complainant without proving that the invoices were false; tantamounted to mis-exercise of powers by the Collector Sales Tax and covered under maladministration as defined under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Ombudsman recommended to Federal Board of Revenue to revisit the suspension of Sales Tax registration of the complainant to deblock the input adjustment against the Sales Tax invoices issued by the complainant; to finalize the inquiry into the allegations of bribery against the auditor as alleged by the complainant and to report compliance of recommendations within 15 days.?

Yasin Tahir, Senior Adviser, Dealing Officer.

Syed Tauqeer Bokhari and Aslam Pervaiz, Complainant Authorized Representatives.

Sardar Zafar Mahmood Khan Addl. Commissioner, LTU, Islamad Ehsan Utah, Assistant Commissioner, LTU, Islamabad and Syed Imran Shah, SO (Legal) LTU Islamabad Departmental Representatives.

2011 PTD 1266

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs MALIK PAPER MART, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos.462-K to 469 of 2009, decided on 12th January, 2010.

Customs Act (IV of 1969)---

----S. 156(1)---Customs Rules, 2001, Rr.96(2)(d)(e), 102, 103 & 419---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i), 9 & 10---Complaint by importers against illegal charges by Shipping Companies---Complainant had alleged that Shipping Companies/Shipping Agents were recovering illegal charges from the importers and unjustifiably and undesirably increasing the cost of doing import business to the detriment of the country's international trade---Collector of Customs being the Licensing Authority of the Shipping Agents, had failed to discharge his statutory obligations by ignoring the misconduct of Shipping Agents involved in coercive recovery of illegal, irrational and excessive charges---Customs authorities was obliged to regulate the conduct of Shipping Agents licensed by them under the Customs Act, 1969 and the relevant Licensing Rules---Not only penal action could be taken under S.156(1) of Customs Act, 1969. but also the license of the Shipping Agent, found guilty of any misconduct under the rules, could be suspended or cancelled---Removing difficulties for import and export business was a primary obligation of the Customs authorities---Problems of overcharging, double charging and unlawful charging which had assumed alarming proportions could not be left unattended---Collector of Customs (Preventive) being the Licensing Authority was the appropriate forum for dealing with complaints against Shipping Agents, for which he had been empowered in the law and rules---Ombudsman recommended to Federal Board of Revenue to direct Collector of Customs (Preventive) to effectively regulate and control the conduct of Shipping Agents to the effect that (a) Chief Collector of Customs would examine, in consultation with the stakeholders, problems of unlawful and unreasonable charges and coercive collection by the Shipping Agents; (b) study the situation obtaining in countries like Singapore, Malaysia etc. with regard to those charges and modes of collection thereof; (c) formulate appropriate recommendations for necessary amendments in the Licensing Rules; (d) Incorporate appropriate clauses in the terms and conditions of licences; (e) recommend to the Government to incorporate appropriate and specific provisions in the Customs Act, 1969 in order to beef up the specific and general deterrence against the impugned malpractices of Shipping Agents.?

Syed Barkat Ali Bukhari, Consultant, Dealing Advisor.

Noor Muhammad, Authorized Representative.

Sanaullah Abro, Deputy Collector, Departmental Representative.

FINDING S/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---Complaint No. 462-K/2009 was fixed for hearing on 3-9-2009. Seven other complaints of identical nature were also pending with numbers C-463-K/2009, C-464-K/2009, C-465-K/2009, C-466-K/ 2009, C-467-K/2009, C-468-K/2009 and C-469-K/2009. It was mutually agreed by both the Authorized Representatives (AR) of the complainants (Mr. Noor Muhammad) and the Departmental Representative (DR) of the respondents (Mr. Sanaullah Abro, Deputy Collector Customs) that they had no objection if all the complaints were jointly decided as the issues in these complaints were the same.

1. Brief facts of the representative Complaint No. 462-K of 2009 filed by Malik Paper Mart, Karachi through Mr. Noor Muhammad are that Shipping Companies/Shipping Agents mentioned below were recovering illegal charges from the importers and thus unjustifiably and undesirably increasing the cost of doing import, business to the detriment of the country's international, trade:

| | | | --- | --- | | (i) GAC Pakistan (Pvt.) Ltd. | (ii) Portlink Intl. Services | | (iii) United Marine Agencies | ?(iv) Riazeda (Pvt.) Ltd. (Pvt.) Ltd. | | (v) MSC Agency (Pvt.) Ltd. | (vi) Insurvey Pakistan (Pvt.) Ltd. | | (vii) Seacon Private Limited | (viii) Delta Transport (Pvt.) Ltd. | | (ix) Delta Shipping (Pvt.) Ltd. | (x) APL |

1. It is also alleged that the Collector of Customs (Preventive), Custom House, Karachi being the Licensing Authority of the Shipping Agents has failed to discharge his statutory obligations by ignoring the misconduct of the Shipping Agents involved in coercive recovery of illegal, irrational and excessive charges. It is prayed that the Shipping Agents be made to refund the excessive/illegal charges collected from the petitioners. Besides, the Collector of Customs (Preventive) should take action under clause 1 of subsection (1) of section 156 of the Customs Act, 1969 against the Shipping Agents who have indulged in the aforesaid malpractices.

2. In their reply dated 4-8-2009, the Customs authorities maintain that the matters of fixation of rates for services or excess charges by the Shipping Agents fall in the jurisdiction of Shipping Rates Advisory Board (SRAB) constituted on 6-2-2001 by the Ministry of Communication. It is also stated that if the two contractual parties i.e. the importer and the Shipping Agent have any dispute regarding their contractual obligations, they could approach the courts of law to settle such issues. It is further proposed that while making a contract with their suppliers, the importers may get all charges including destination charges mentioned in the bills of lading, so that the Shipping Agents cannot demand any undue charges from the importers.

3. During hearing, it was stated by Mr. Noor Muhammad, the AR, that the aforesaid Complaints basically related to the misconduct of the Shipping Lines/Shipping Agents. According to him, it is laid down in Rule 419 of Customs Rules, 2001, that Shipping Companies shall issue delivery orders to the importers against bills of lading as have been filed by them. Moreover, according to the definition given in Hague Rules, 'Freight' includes all charges payable to the carrier in accordance with the "Applicable Tariff" and the "Bill of Lading". Therefore the Carrier/Shipping Company is not entitled to collect "Terminal Handling Charges" especially because the carriers' responsibility ceases with discharge of goods at the port. The AR also stated that the Shipping Agents extort collection of delivery charges which is unjustified and unlawful because the Shipping Companies bring the goods for delivery to the consignees, and so all such charges are already included in the agreed freight charges. Shipping Lines/Shipping Agents are therefore, under contractual obligation to issue delivery orders of the goods without extorting any further charges while issuing the delivery orders. He also contended that since the Karachi Port Trust (KPT) collected "wharfage' for providing basic facilities for handling of cargo/containers in Karachi Port, therefore, 'Terminal Handling Charges' collected by Shipping Lines/Shipping Agents was also unwarranted.

4. The AR further stated that some Shipping Agents were also collecting import collection charges which have been declared unlawful by' the Customs authorities themselves and their Order-in-Original was upheld by the Collector of Customs (Appeal) with the observations that money collected under dubious heads is an offence within the meaning of Rule 103 of Customs Rules 2001. It is also observed in the Order-in-Appeal that any parallel proceedings in a civil court were no bar against the proceedings by the competent Customs authorities to carry out the purposes of the Customs Act, 1969.

5. The Departmental Representative, Mr. Sanaullah Abro, Deputy Collector Customs, stated that Terminal Handling Charges were collected by Terminal Operators such as PICT, KICT and not by the Shipping Companies or Shipping Agents. The Terminal Operators are licensees of KPT. The charges were collected against the services of handling cargo at the seaport in the specified areas leased out by KPT to the Terminal Operators. The Customs Authorities could not take cognizance of these charges as these were not levied under the customs law. The matter should rather be taken up with the Shipping Agents Advisory Board (SRAB). He further argued that 'Delivery Order Charges' were collected by the Shipping Agents against what they claimed were their services provided to the importers. The practice was that if it was written on a bill of lading that all charges were paid, then the Shipping Agent was not entitled to receive the aforesaid delivery order charges. On import collection charges, the DR stated that pursuant to the Recommendations by the honourable FTO in Complaint No.205 of 2008, the Customs Authorities had issued a show-cause notice to the Shipping Agents and after hearing them the case was decided against the Shipping Agents. This adjudication order was upheld in the first appeal before Collector Customs (Appeal). However, the Shipping Agents had challenged this decision in the Customs Appellate Tribunal inter alia on the ground that the Licensing Authority and the Appellate Authority had exceeded their jurisdiction by entering into a private dispute between the importers and the Shipping Agent.

6. The DR also stated that the Customs Licensing Authority was not authorized under any provision of the Customs Act, 1969 and the Rules made thereunder to determine the genuineness of any charges being collected by the Shipping Agents against the services rendered by them. He further argued that Rule 419 of the Customs Rule, 2001 was not related with the determination of charges and rates. Therefore, cognizance of any matter relating to such charges could not be taken under the customs law as these charges fell under the jurisdiction of the Shipping Rates Advisory Board (SRAB) specially constituted by the Government for this purpose. He however, admitted that Customs Authorities being the Licensing Authority for Shipping Agents could take cognizance in case of violation of any provision of the Customs Law and the Customs Rules, 2001.

7. In rebuttal thereof, Mr. Noor Muhammad, AR, stated that it was not correct that only Terminal Operators charged Terminal Handling Charges; Shipping Agents were also collecting Terminal Handling Charges. According to him, neither the Terminal Operators were entitled to collect Terminal Handling Charges, nor the Shipping Agents provided any service to the importers after discharge of the goods except issuing the delivery order, which was in fact their contractual obligation. He accepted that SRAB was constituted to regulate the port-related charges, including checking of illegal extortions. But the establishment of SRAB was challenged under the Constitutional Petition No.2486 of 2003 dated 12-4-2003 on the ground that the provisions of Pakistan Merchant Shipping Ordinance were not applicable to foreign Shipping Lines. Thus SRAB could not take-off and became non-functional ab initio. The AR further clarified that it was not necessary to get "All Charges Included" specifically written on the bills of lading as the definition of 'Freight' already covered it. He also stated that the Shipping Agents plea before the Customs Appellate Tribunal about exceeding of jurisdiction by the Licensing Authority and the Collector (Appeals) was not relevant because the Customs Appellate Tribunal, Karachi, had yet to give its judgment on this issue. He therefore contended that a mere plea before a quasi-judicial forum could not be adopted as an established rule. He suggested that the Customs Department being the Licensing Authority should not shirk its statutory responsibilities. It should rather be ensured that the Shipping Agents did not exceed the terms and conditions of their contracts and agreements with business community in terms of bills of lading, etc.

8. On a query, it was clarified by the parties that SRAB had not yet issued any Shipping Agents Rules to regulate the impugned charges. Only the Customs Agents Licensing Rules, 2001 as substituted in 2009 vide S.R.O.498(I)/2009 dated 13-6-2009 were in the field. The DR however informed that the issue was of national importance and thus it was under discussion at National Trade Corridor as well as by the Ministries of Shipping and Communication and the Planning Commission. Mr. Noor Muhammad, AR, contended that the Revenue Division/Customs Department being the Licensing Authority for Shipping Agent should control the illegal actions of the Shipping Agents in the interest of the country's business and industry.

9. The complaint has been considered in the FTO Secretariat in the light of the oral and written submissions of the parties. The issue proper is whether or not the Licensing Authority (Collector Customs) is empowered under the law to take cognisance of allegations of misconduct involved in overcharging, excessive charging and extortion of unlawful charges from the business community by his licensees namely the Shipping Agents. The argument of the DR that the Customs Authorities have nothing to do with the impugned charges because these are not fixed under the Customs Act, 1969 or the Rules made thereunder is not tenable as the complaint is about the misconduct of the customs licensees who unlawfully and unjustifiably increase the cost of doing import business by coercively collecting excessive charges which hurts the international trade of the country.

10. The DR's contention that the matter falls lit the jurisdiction of SRAB is also of no legal consequence because SRAB did not take off. Even if SRAB was fully functional, it would not absolve the Licensing Authority of its independent responsibilities to regulate the conduct of licensees under the Customs Act, 1969 and the Licensing Rules. It would also be pertinent to mention that one of the main grounds of the Shipping Lines which filed the aforesaid Constitutional Petition in the High Court of Sindh against the establishment of SRAB is that the Customs Collector, being the Licensing Authority, already had the requisite regulatory role. The aforesaid Shipping Lines have, therefore, contended that establishment of another regulatory authority was not desirable. The relevant para of their "Grounds" in the aforesaid Constitutional Petition is reproduced below:--

"Grounds

(14) That the Shipping Lines including the petitioner are already regulated under the Customs Act, 1969 (Specifically the Custom House Agency License Procedure) which is in line with the International Port and Shipping Practices, and further registration/regulation by Shipping Lines through respondent No_03 (SRAB) or any other Government Department will result in malpractices and bureaucratic hurdles. Therefore, it is submitted that the respondent No.03 (SRAB) should not be used for regulating the pricing mechanism in. violation of international norms and practices as envisaged under the WTO and NTTFC."

1. This contention of the Shipping Lines in the Constitutional Petition before Sindh High Court clearly indicates that they believe that the regulatory role assigned to SRAB already fell in the jurisdiction of the Collector Customs in his capacity as the Licensing Authority. The Hon'ble FTO has also decided Complaints.Nos.752 of 2007 and 205 of 2008 recommending that since the Shipping Agencies worked under the licence of the Collector of Customs (Preventive), it was the responsibility of the customs authorities to take notice of the avoidable difficulties faced by the importers and their agents and redress their genuine grievances.

2. In pursuance of the FTO's findings and the recommendations in Complaint No.205-K/2008 dated 28-5-2008, the Customs authorities did take cognisance of allegations of misconduct against Messrs Mega Trans Pakistan (Pvt.) Limited and the Customs decision has withstood the legal scrutiny at the first appeal stage. Filing of second appeal in that case by the Shipping Agents does not detract anything from the aforesaid position unless the decisions of the Collector Customs and the Collector Appeals are reversed by the higher judicial fora.

3. In view of the foregoing, there appears little doubt about Customs authorities obligation of regulate the conduct of the Shipping Agents licensed by them under the Customs Act, 1969 and the relevant Licensing Rules. Not only penal action could be taken under clause No.1 in the Table of Offences and Penalties under subsection (1) of section 156 of the Customs Act 1969 the license of the Shipping Agent found guilty of any misconduct under the Rules could also be suspended or cancelled. Besides, if the system of impugned charges is found to involve elements of extortion or coercion as alleged by the complainants, it would be the primary obligation of the Licensing Authority to bring such an illegality to the' notice of the Government for necessary remedial action, including any amendment in law/rules. It may not be out of place to mention that trade facilitation is internationally recognized to be a core function of the Customs authorities, in addition to their revenue collection and regulatory functions. Therefore, removing difficulties for import and export business is a primary obligation of the Customs authorities. The Customs Licensing Rules make this obligation of Customs authorities more specific and pronounced in respect of their agents and licensees.

4. The argument of the DR that since the impugned charges are not levied under the Customs Act, 1969, the Customs Department cannot take cognizance of the disputes arising out of collection of such charges is not well-founded. The point at issue is not the levy of lawful charges, it is about the levy of unlawful and excessive charges and coercive collection thereof by the Shipping Agents who are indeed licensed by the Customs Department. Don't the Customs authorities normally attend to the importers'/exporters' complaints of overcharging or coercive collection of service fees by the Clearing Agents, who are the Customs Licensees under the same Rules as are the Shipping Agents?

5. A critical question is that if the Licensing Authority is not empowered to regulate the conduct and discipline of its licensees, who else is there to regulate them under the law? The licences given by Collector Customs are certainly not meant for free lancing. The Licensing Rules provide for regulation of the conduct and monitoring of discipline of the licensees by the Licensing Authority. The service charges and fees have to be transparent and lawful. Their collection also cannot be allowed to be excessive or coercive. Indeed, it is the fundamental obligation of the Licensing Authority to evaluate, monitor, correct and rectify the conduct and performance of its licensees in all respects involving illegality. That is precisely why the Licensing Rules include regulation of their conduct and performance of the licensees.

6. The DR's argument that no enabling powers are available to the Licensing Authority under the Customs Act, 1969 to discipline the misconduct of the Shipping Agents is also factually incorrect. The Licensing Rules clearly and sufficiently empower the Licensing Authority to refuse to renew the licence of a delinquent licensee under Rules 96(2)(d) and (e) and suspend or revoke the license under Rules 102(1)(g)(b) and (o) of Licensing Rules, 2009. In case of revocation of a license under Sub-Rules (1) of Rule 102, the Licensing Authority can forefeit the security deposit of the licensee in accordance with Sub-Rules (2) of Rule 102 of the Licensing Rules. Besides, serial 1 in the Table of Offences and Penalties under section 156(1) of the Customs Act, 1969 also empowers the Customs authorities to punish offences in cases where no specific penalty has been provided elsewhere for contravention of any rules made under the aforesaid Act.

7. In the backdrop of this clear and specific legal empowerment to regulate the conduct of the licensees, as also the serious nature of the alleged misconduct of the Shipping Agents, the Customs authorities definitely need to institutionalize their oversight function including by constituting a Stakeholders' Advisory Committee on permanent basis to oversee the misconduct of its licensees and for removal of any genuine difficulties of the business community. Such an Advisory Committee may comprise the representatives of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Karachi Chamber of Commerce and Industry, Dryports, Shipping Agents, Clearing Agents, Terminal Operators and Freight Forwarders, besides senior Customs and KPT officials. This arrangement needs to be put in place with the mandate, inter alia, to assist the Licensing Authority to effectively monitor, evaluate and discipline the conduct of business by the Shipping Agents. The proposed Advisory Committee was also be tasked to undertake comparative studies of similar charges being paid on regional and international basis to suggest rationalization of the extent and structure of such charges, besides suggesting a credible mechanism of redressal of individual complaints. Moreover, the proposed Advisory Committee should be specifically mandated to recommend necessary changes in the law and the rules to effectively prevent and control the alleged malpractices.

Findings

1. The foregoing facts reveal that the problem of overcharging, double charging and unlawful charging has, over time, assumed alarming proportions. The complaints of extortion are also mounting. The problem also cannot be left unattended because of its serious implications in terms of cost of doing import and export business. The Collector of Customs (Preventive) being the Licensing Authority is the appropriate forum for dealing with conduct-related complaints against customs licensees i.e. the Shipping Agents for which he has been empowered in the law and the rules. He needs to exercise his jurisdiction effectively to redress these complaints efficiently. Omission to discharge such responsibilities constitutes maladministration as defined under sections 2(3)(i) and (ii) of the FTO Ordinance, 2001.??????????

Recommendations

1. Based on the foregoing facts and findings, it is recommended that in eight identical Complaints (i.e. C-462-K/2009, C-463-K/2009, C-464-K/2009, C-465-K/2009, C-466-K/2009, C-467-K/2009, C-468-K/ 2009, C-469-K/2009), the Federal Board of Revenue to direct--

(i)???????? Collector of Customs (Preventive) being the Licensing Authority to effectively regulate and control the conduct and discipline-related complaints of individual businessmen against the Shipping Agents for which the Collector has ,been duly empowered under the law and the rules;

(ii)??????? Chief Collector of Customs (South) to-

(a)?? examine, in consultation with the stakeholders, the fast accumulating systemic problems of unlawful and unreasonable charges and coercive collection thereof by the Shipping Agents for finding sustainable solutions;

(b)? study the situation obtaining in countries like Singapore, Malaysia, etc. with regard to these charges and modes of collection thereof to bench mark the practices of Shipping Agents in Pakistan;

(c)?? formulate appropriate recommendations for necessary amendments in the Licensing Rules in order to effectively protect the import and export business of the country;

(d)? incorporate appropriate clauses in the terms and conditions of licences, specifically mentioning unlawful or excessive charges and coercive collection thereof as a serious offence under the Licensing Rules; and

(e)?? recommend to the Government to incorporate appropriate and specific provisions in the Customs Act, 1969, in order to beef up the specific and general deterrence against the impugned malpractices of the Shipping Agents.

2011 PTD 1281

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs GHAZI-BAROTHA CONTRACTORS, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.175/ISD/CUS/(20)/662 of 2009, decided on 2nd March, 2010.

Customs Act (IV of 1969)---

----S. 33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10---Denial of refund claim---Complainants imported several consignments of machinery, equipment, spare parts and construction materials---Under the benefit of concessional duties and taxes vide notification, subsequent to clearance of those consignments Federal Government granted total exemption of import duties and taxes with retrospective effect---Complainants accordingly submitted refund claims to the Customs authorities---Complainants kept on pursuing the refund claims from 1997 till 2005 but to no avail---In spite of the contract specific retrospectivity of the exemption granted by the Government and in spite of the fact that refund claims were initially filed with original documents in time and Board of Revenue had condoned the time limitation, Assistant Collector of Customs rejected the claims by order-in-original---Second appeal of the complainants was accepted by Customs Appellate Tribunal---Despite the judgment of Customs Appellate Tribunal, Customs Authorities failed to sanction any of the refund claims---Customs Authorities had grossly mishandled the case for the last over twelve years, which was worst form of maladministration on the part of Customs---Entire case being a tell-tale of mischief repeated over and over again, it was recommended that Federal Board of Revenue direct the Collector of Customs to get refund claims of the complainant processed and sanctioned in accordance with decision of Appellate Tribunal within a Period of 30 days; to launch an investigation into the numerous acts of omission and commission on the part of Customs; to proceed against the officers found guilty of maladministration/misstatement of facts in the case and case be included as a case study in the training module of Customs Training Institutions.?

Yasin Tahir, Senior Advisor, Dealing Officer.

Nauman Rafique, Resident Representative and Ali Akhtar Shah, Executive Engineer, WAPDA, Authorized Representatives.

Imran Chaudhary, DC Customs, Departmental Representative.?

INDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---Messrs Ghazi-Barotha Contractors (GBC) complained of delay of twelve (12) years by Islamabad Customs in deciding' their refund claims for Rs.11.98 million against 135 import Bills of Entry.

1. Brief facts of the case are that Messrs Ghazi-Barotha Contractors (GBC), a joint venture of four companies belonging to Italy, Germany and Pakistan being contractors of WAPDA had imported several consignments of machinery, equipment, spare parts and construction materials under Contract Nos.C-01 and C-02 (Barrage and Power Channel Construction for Ghazi Barotha Hydro Power Project) during 1996-1997 under the benefit of confessional duties and taxes vide S.R.O. 429(I)195, dated 30-5-1995 and S.R.O. 560(1)/96, dated 1-7-1996. Subsequent to clearance of these consignments, the Federal Government granted total exemption of import duties and taxes with retrospective effect vide S.R.O. 149(I)/97 dated 5-3-1997 and S.R.O. 150(I)/97 dated 5-3-1997. The complainants accordingly submitted 135 refund claims to the Customs authorities at Air Freight Unit (AFU), Islamabad in 1997. The complainants kept on pursuing the refund claims from 1997 till 2005 but to no avail. In 2005 i.e. after seven years of filing the claims, the complainants along with representatives of WAPDA held a meeting with Collector Customs Rawalpindi who informed that their claims .were not traceable in the Air Freight Unit. Although the Complainants showed receipts of refund claims issued by Customs authorities at AFU Islamabad, yet the refund claims could not be traced. Consequently, the complainants were asked to file all the 135 claims afresh, in the year 2005 which they accordingly did. In 2007, they again met the Collector of Customs, who informed that 41 of the duplicate claims were again missing. The complainants once again filed 41 missing claims.

2. In spite of the contract specific retrospectivity of the exemption granted by the Government to the import of goods under reference, and in spite of the fact that 135 claims were initially filed with original documents in time and the F.B.R. had condoned the time limitation vide their letter No.1/26/Macls/95-PI dated 30-7-1997, the Assistant Collector of Customs, AFU, Islamabad rejected the claims through Order-in-Original No.20 of 2007 dated 31-10-2007.

3. Feeling aggrieved, the complainants appealed this order before Collector Appeals. He too rejected the appeal through his OrderNo.144 of 2008 dated 26-2-2008.

4. The complainants then filed second appeal before the Customs Appellate Tribunal, which accepted the appeal of the complainants with the following observations:

"We have heard both the parties and perused the record of the case at length. The appellants have produced receipts/documents showing the deposit of refund claims with the office of Additional Collector, AFU, Islamabad Airport, Islamabad which has not been denied by the respondents. The impugned order is set aside and the respondents are directed to sanction the refund claims, if legally admissible, on the basis of photocopies of the Bills of Entry provided the amount of Customs duties and other taxes sought refunds tallies with the entries in cash register and other records of the respondents maintained for official purposes. The respondents shall make payment of refund claims within sixty days of the receipt of this order or receipt of the requisite documents from the appellants/WAPDA, whichever is later."

1. In spite of the aforesaid judgment dated 23-9-2008, the Customs authorities failed to sanction any of the refund claims. Thus the matter got inordinately delayed once again. After waiting for a period of over one year and wasting a number of visits to the AFU and the Model Customs Collectorate, Islamabad, the complainants filed the subject complaint in the FTO Secretariat in October, 2009.

2. The FTO Secretariat sought a reply of the allegations in the aforesaid complaint from the Islamabad Customs through the Revenue Division/F.B.R. In their reply, the Customs authorities submitted that the Appellate Tribunal Islamabad had directed the Customs to sanction the refund claims, if otherwise legally admissible on the basis of photocopies of the Bills of Entry, provided the amount of Customs duties and other taxes sought for refund', tallied with the entries of dash register and other records maintained by the Collectorate for official purposes. The record was sent to the Treasury Officer for verification of the credit. The Customs Treasury Officer vide his Letter No. Acctts Try/C. Verification/3/7/6534 dated 17-6-2009 reported that it was not possible for their branch to tally the record with scroll with Cash Nos. as the relevant documents were not legible. This fact was explained by the Treasury Officer to the representatives of the complainants. Subsequently the complainant returned the documents, after rectification in June, 2009. The Treasury Officer vide his letter dated 17-6-2009 has so far verified the record in respect of 30 Bills of Entry. Subsequently, it was explained to the complainant to produce requisite record to the Treasury Officer.

3. On 20-8-2009, the Complainants requested to settle the issue of refund by making adjustment against any liability of WAPDA as, according to complainants, WAPDA would be the beneficiary of refund. The Customs accordingly obtained details of arrears of WAPDA computerised data warehouse of PRAL. Moreover, details of arrears of WAPDA were required from Recovery Sections of other Collectorates. The complainants were also asked to provide NOC from WAPDA regarding adjustment of arrears. Another meeting dated 5-11-2009 was convened in the office of Additional Collector Customs AFU wherein the complainant promised to provide complete, legible record to Treasury Section without further delay, so that the issue could be resolved.

4. Parties were heard in the FTO Secretariat on 17-11-2009. Mr. Imran Chaudhary, Deputy Collector, appeared on behalf of the Islamabad Customs. Mr. Nauman Rafique, Resident Representative of the Messrs GBC accompanied by Mr. Ali Akhtar Shah, Executive Engineer WAPDA also attended the hearing. DR, Mr. Imran Chaudhary, stated that most of the hurdles in sanctioning the refund claims had been removed and that they had already completed the formalities in respect of 69 claims in accordance with the decision of the Appellate Tribunal. He expected that these claims would be sanctioned within another fortnight or so. He promised that the remaining 66 claims would be processed, verified and sanctioned by 20-12-2009.

5. On 20-12-2009 the position of the sanction and payment of 69 already processed claims and the present status of the remaining 66 claims was checked by FTO Secretariat from the DR. On that day, surprisingly, he reported nil progress. When asked why the Customs could not keep their word of settling the claims by 20-12-2009, he blamed the Resident Representative of Messrs GBC for changing his position in the case, which had, according to him, created some problems. As this stalemate was undesirable, the parties were called for hearing on 31-12-2009. During hearing, the Resident Representative of Messrs GBC and the Executive Engineer, WAPDA confirmed that they had not at all changed their position in the case. It was rather Islamabad Customs which was again creating problems about the liability of WAPDA towards the Customs Department by treating the liabilities of distribution companies as the liabilities of WAPDA. The Executive Engineer WAPDA clarified that those companies were not part of WAPDA, therefore, their liabilities of Customs duties could not be treated as the liabilities of WAPDA. After discussion, it was agreed by the DR as well as the representative of complainants and WAPDA that only those liabilities will be taken for adjustment of refund as pertained to WAPDA itself. Any dues from the distribution companies not belonging to WAPDA would not be treated as- the liabilities of WAPDA.

6. This unnecessary misunderstanding now out of way, the DR promised to settle the refund claims by 25-1-2010. The position was again checked from the DR on 26-1-2010. He informed that they had not yet received any intimation from other Collectorates about the Customs dues recoverable from WAPDA. Therefore, the refund claims of the Complainants were still pending unsettled. He however, admitted that Messrs GBC had confirmed on behalf of WAPDA that there were no Customs liabilities on WAPDA. The DR further informed that he would put up the file to the Collector for a decision on the 69 verified claims. He, however, stated that Messrs GBC were not interested in the remaining 66 refund claims. This position was not understandable why a beneficiary of refund would decline to exercise his right to refund. Accordingly the position was checked up from the Resident Representative of Messrs GBC. He denied having declined to pursue the 66 claims under reference. He rather confirmed that they were very keen to have their refund claims sanctioned entirely at the earliest.

Findings

1. The forgoing facts amply prove that the Customs authorities have grossly mishandled this case for the last over twelve years, initially by misplacement of all original claims and again 41 of the duplicate claims; the rubber stamping of an apparently unmaintainble rejection order issued by the Assistant Collector Customs by the Collector Appeals; non-implementation of the decision of the Appellate Tribunal in favour of the complainants for frivolous reasons; and the misstatement of facts by DR in the FTO Secretariat. These are all acts of a worst form of maladministration on the part of Customs. The entire case is a tell-tale of mischief repeated over and over and again.

Recommendations

1. In view of the foregoing findings, it is recommended that F.B.R. to--

(i)???????? direct the Collector Customs, MCC, Islamabad to get the 135 refund claims processed and sanctioned in accordance with the decision of the Appellate Tribunal within a period of 30 days;

(ii)??????? launch an investigation into the numerous acts of omission and commission on the part of Islamabad Customs;

(iii)?????? proceed against the officers found guilty of maladministration/misstatement of facts in this case, including the DR; and

20l1 PTD 1286

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs D.S. MOTORS and 2 others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.328/Khi/Customs(137)1221, Complaint No.329/Khi/ Customs (138)1222 and Compliant No.340/Khi/Customs (143)1270 of 2010, decided on 21st December, 2010.

Customs Act (IV of 1969)---

----Ss. 25 & 25-D---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2, 9 & 10---Issuance of valuation advice---Complainants had impugned issuance of valuation advice under S.25(9) of Customs Act, 1969, contending that said valuation advice was issued in violation of provisions of S.25 of the Customs Act, 1969---Representative of the complainant had contended that complainants were Original Equipment Manufacturer brand Motorcycles manufacturers---Same brand of Motorcycles were manufactured by a number of companies throughout the country,- but valuation advice was issued only for Hyderabad Collectorate, which clearly reflected discriminatory treatment towards the manufacturers of Hyderabad---Department did not dispute the fact that the said brand of Motorcycles were being manufactured throughout the country---Plea of Departmental Representatives that department had already taken steps for issuance of valuation ruling for motorcycle parts, reflected that department was itself mindful that issuance of valuation advice only for Hyderabad Collectors was improper and to have a uniform policy throughout the country, a valuation ruling applicable to all the manufacturers needed to be issued---As the motorcycles were being manufactured throughout the country, department could not treat the manufacturers of Hyderabad differently than the rest of the motorcycle manufacturer of the same brand in the country---Federal Board of Revenue was directed to order the Hyderabad Collectorate not to apply the discriminatory Valuation Advice; and pending issuance of valuation ruling, assessment be made as per law having regard to the assessment of similar goods being made in other Collectorates; Director Valuation to expedite the issuance of valuation ruling, concerning motorcycle parts of brand in accordance with law; and compliance be reported within 30 days.

Justice (Retd.) M. Nadir Khan, Advisor, Dealing Officer.

Afzal Await, Authorized Representative.

Iftikhar Ahmed, Additional, Director and Moin Akhtar, Assistant Director, Departmental Representatives.

2041 P T D 1293

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs PEARL INTERNATIONAL (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-537-K of 2009,' decided on 23rd December, 2009.

Customs Act (IV of 1969)---

---Ss. 19, 20, 21 & 33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10---Non-sanctioning of supplementary rebate claims---Complaint had been filed by the complainant against Model Collectorate of Customs for non-sanctioning of its supplementary rebate claims pertaining to years 1991 to 1994 despite a number of reminders---Complainant had been continuously persuading the customs authorities for sanctioning of said rebate, but without any success---Inordinate delay, inattention and ineptitude on the part of the department had brought the case of the complainant within the ambit of serious maladministration---Supplementary rebate claims filed in the year 1996 remained in oblivion of inattention despite the directions issued by the Federal Board of Revenue, till the filing of the complaint before Federal Tax Ombudsman---Ombudsman recommended Federal Board of Revenue to direct the Collector, Model Collectorate of Customs, Export to ensure that the remaining problems in that case were resolved and rebates due issued and delivered to the complainant; to issue speaking orders in respect of any claims not accepted, within fifteen days of receipt of the recommendations; to fix responsibility and proceed under relevant Efficiency and Discipline Rules against officials, who sat over the claims for years, despite repeated directions issued by the Board, under intimation of Federal Tax Ombudsman Secretariat; to ask the defaulter officials to explain why appropriate compensation under S.22 of Federal Tax Ombudsman Ordinance, 2000, could not be awarded to the complainant and also, if they would wish to be heard in person, and to report compliance within 60 days.

Naseer Ahmed Malik, Authorized Representative.

Rashid Jamil, Asstt: Collector, Departmental Representative.

Syed Barkat Ali Bukhari, Dealing Officer.

2011 PTD 1296

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SPEL FUJIYA LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No.10 of 2009 in Complaint No.1620-L of 2008, decided on 31st December, 2009.

Income Tax Ordinance (XLIX of 2001)---

----S. 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10---Refund claim---Complaint against non-compliance of direction to grant refund claim---Federal Tax Ombudsman had decided/recommended that department should issue as per law the refund claim of the complainant for tax year in respect of each I.T.-30 Form or order determination of refund of the complainant---Department filed review petition against said decision/ recommendation praying that impugned recommendation be reviewed and its operation stayed---Recommendations in the complaint had been made after due consideration and with conscious mind while dealing with all the objections and pleas raised by department and no error or omission was apparent on the face of record---Negligence and arbitrariness in the discharge of duties and responsibilities on the part of department stood established---Department did not process the case on merit and had delayed the disposal of refund claim of the complainant---Allegation of maladministration of department, was established---Review petition by the department being devoid of merits was rejected making recommendation that officers responsible for defiance of show-cause notice, be identified and directed to show-cause within 21 days as to why proceedings of contempt may not be initiated against them under provisions of S.16 of Establishment of Office of Federal Tax, Ombudsman Ordinance, 2000 and that compliance be reported within 21 days from the receipt of recommendation by the Secretary Revenue Division.

2004 PTD 2915 ref.

Haji Ahmad, Advisor, Dealing Officer.

Waheed Shahzad Butt, Authorized Representative.

Munim Sultan, Advocate/LA Javed Shahryar, Additional Commissioner, Ms. Samia Ijaz, DCIT, Ms. Sairah Bano, DCIT, Babar Chohan DCIT, Ali Mansoor ACIT, Adnan Khan ACIT, Ehsanur Rehman Sh., Departmental Representative.

2011 PTD 1300

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Syed HABIB NOOR and another

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.32/KHI/CUST(20)/192 of 2010, decided on 11th May, 2010.

Customs Act (IV of 1.969)---

----Ss. 2(s), 16, 157(2) & 168---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Seizure and confiscation of goods---Deputy Collector of Customs (Preventive) passed order-in-original, whereby the motorcycle parts as well as the vehicle were confiscated with option to the owner to redeem the vehicle on payment of redemption fine 50% value of the vehicle---Appeal against said order-in-original was dismissed by Collector (Appeals)---Appellate Tribunal set aside both order-in-original as well as order-in-appeal---Complaints after decision of Appellate Tribunal passed in their favour, approached Collector of Customs for release of seized goods and refund of redemption fine, but their request had been refused on the ground that the Appellate Tribunal in its order did not direct release of seized motorcycle parts---Claim of refund of redemption fine was turned down treating the same as time-barred---Despite passing second order by Appellate Tribunal, the department continued with the auction proceedings and finally, the motorcycle parts were auctioned--Department had failed to advance any plausible excuse for withholding of the redemption fine for a period of more than. two and half years after passing of the order by the Appellate Tribunal and refund to complainants---Assertion that refund claim was time-barred, lacked any legal footing---After passing of the order by Appellate Tribunal, withholding of refund of redemption fine paid by the complainants and auction of motorcycle parts, by the customs, were acts having no legal authority---Complainants were entitled to refund of the redemption fine and to receive the value of motorcycle---Recommendations were made to Federal Board of Revenue to direct relevant officials to explain as to why compensation amount be not awarded to the complainants in exercise of the powers under S.22(1) of the Establishment of Federal Tax Ombudsman Ordinance, 2000 to conduct inquiry to identify the officials/officers who in violation of order of the Appellate Tribunal withheld the refund of redemption fine and auctioned the motorcycle parts; and initiate disciplinary action against them under applicable rules; to refund redemption fine received from complainants within 7 days; officials responsible for unlawful withholding the redemption fine for over two years, be directed to explain as to why compensation could not be recovered from them and compliance be reported to the office within 45 days.?

Justice (Retd.) Muhammad Nadir Khan, Advisor (Incharge), Dealing Officer.

Asim Bajwa, Authorized Representative.

Mushtaq Shaherri, Deputy Collector MCC Preventive, Karachi Departmental Representative.

2011 PTD 1339

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs GEOFMAN PHARMACEUTICALS, KARACHI

Versus

SECRETARY, REVENUE DIVISION; ISLAMABAD

Complaint No.218/Khi/Cus9107)/894 of 2010, decided on 21st September, 2010.

Customs Act (IV of 1969)---

----Ss. 19-A, 33 & 195-C---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Rejection of refund claim---Complainant was a manufacturer of drugs and medicines, including various I. V. solutions sold in LDPE Packing locally. manufactured by the complainant using imported Pharmaceutical Grade LDPE Granules---Said LDPE Granules were exempt from payment of sales tax, but despite that department charged sales tax from July 2001 to March 2006---Complainant had filed 41 refund claims, but same had been rejected, on two grounds; firstly, that the certificate issued by the Chartered Accountant was not a sufficient document for confirmation, whether or not the incidence of tax was passed to the end consumer, according to the department, for the said purpose audit report and certification of import documents by Chartered Accountant were also required; and secondly that the claim of the complainant was time-barred under S.33 of the Customs Act, 1969---Record did not indicate that the department ever asked the complainant to submit additional evidence i.e. audit report and certificate of import documents by Chartered Accountant to prove that the incidence of tax was not passed on to the end consumer---At the time of issuance of letter of rejection of the claim, applicability of S.19-A of the Customs Act, 1969 for claims relating to period prior to insertion of said provision was not considered---Complainant was admittedly not confronted with the issue of limitation; and the claims of the complainant was rejected by issuance of letter which could not be termed as an order to enable the complainant to file appeal/review---Refection of refund claim of the complainant, constituted mal­administration under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to direct the Collector to withdraw the Deputy Collector's letter in exercise of his power under S.195(1) of the Customs Act, 1969 treating the claim of refund as pending; to direct that the pending claim of refund be decided in accordance with law within 21 days after affording opportunity of hearing to the complainant; and to report compliance with 7 days thereafter.

2005 PTD 2286 and Fecto Belarus Tractors Ltd. v. Government of Pakistan 2005 PLD 605 ref.

Justice (Retd.) M. Nadir Khan, Advisor, Dealing Officer. Mushtaq Kazmi, Consultant, Authorized Representative.

Ms. Shalra Khan, Deputy Collector, Departmental Representative.

2011 PTD 1344

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs ADMJEE ENTERPRISES, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.205/Khi/CUS(103)815 of 2010, decided on 21st September, 2010.

Customs Act (IV of 1969)---

----Ss. 35, 40 & 41---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10, 11, 12 & 16---Withholding rebate claim/duty drawback claims---Grievance of the complainant was that its 84 rebate claims/duty drawback claims, relating to years 2007 and 2008 were withheld by the department without any cogent reason or justification---Nothing was on record to show that prior to filing of complaint, any objection memo or documents or call notice was issued to the claimant---After receiving of notice of the complainant, the department issued notices to the complainant for submission of documents---Delayed notice, itself reflected that it was a failed attempt to create an excuse for delay in processing of the claims---Subsequently without receiving of any document from the complainant, all pending claims, except 14 had been cleared which, in circumstances, were withheld without any just and cogent reason, which not only tantamounted to maladministration, but also to defiance of recommendations of Federal Tax Ombudsman which could attract action under Ss.12 & 16 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to direct the Collector to settle the complainant's pending rebate claims as per law within 15 days; to fix responsibility of non-compliance of findings/recommendations of Federal Tax Ombudsman, and direct the concerned officials to show cause why action under Ss.12/16 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, should not be taken against them; and to report compliance within 30 days.

Justice (Retd.) Muhammad Nadir Khan, Advisor, Dealing Officer.

Naeem Uddin, Consultant, Authorized Representative.

Salamat Ali, Deputy Collector Customs, Departmental Representative.

2011 P T D 1347

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs FAISAL TEXTILE, INDUSTRIES (PVT.) LTD.GUJRANWALA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.482/LHR/ST(63)/864 of 2010, decided on 20th September, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 4, 10 & 66---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Delay in filing refund claim---Rejection of application for condonation of delay---Complainant was registered as a manufacturer whose products being zero-rated, were not chargeable to output tax---Input tax paid by the complainant being refundable, he had filed refund claim---Refund claim filed by the complainant was tale by 3 days, he filed application for condonation of said delay, but his application was rejected---Federal Board of Revenue vide notification dated 11-12-2007 had empowered the Collector to allow extension of time on filing of refund claim for relevant period---Federal Tax Ombudsman Secretariat, in identical complaints had also recommended condonation of delay, which was duly complied with by Federal Board of Revenue, but the complainant in the present case had been discriminated---No appealable order regarding rejection of refund claim on grounds of limitation was issued by the department---Federal Board of Revenue having allowed condonation of delay in a number of identical cases, treatment given to the complainant was unjust, unfair and discriminatory which tantamounted to maladministration in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to condone delay involved in filing of refund claim; to direct the concerned officials to decided the pending refund claim in accordance with law within 30 days, after providing opportunity of hearing to the complainant and to report compliance within 7 days thereafter.

Saleem Haji Rehmat Dada Karachi v. CIT Karachi 2003 PTD 593 and Messrs Pfizer Laboratories Ltd., v. The Federation of Pakistan PLD 1998 SC 64 ref.

Saeed Akhtar, Advisor, Dealing Officer.

Muhammad Arif Butt, ITP, Authorized Representative. Muhammad Anwar, DCIR, Departmental Representative.

2011 P T D 1368

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs LATIF TEXTILE MILLS (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 165/KHI/ST(46)/742 of 2010, decided on 10th October, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10 & 66---Sales Tax Registration Rules, 2006, Rr.26 & 28---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Refund claim, deferment of---Complainant was carrying on business as a registered company engaged in export of Textile items---Complaint received certain amount of claim, whereas payment of balance amount was deferred---Department had contended that. complainant filed claim, but failed to provide taxable consumption of raw material, thus claim could not be processed in absence of taxable consumption in stock statement and that subsequently when stock consumption statement was supplied by representative of the complainant, some of the cases were processed, while remaining claims would be processed after the complete stock statement would be provided---Officials concerned had proceeded with part claims during the pendency of the complaint, which had shown that said documents were in their possession; and it was on account of negligence, inefficiency and ineptitude of officials concerned that matter could not be processed within statutory time limit---Recommendations were made to Federal Board of Revenue to direct the Chief Commissioner, Regional Tax Office to ensure finalization of the case of the refund claim as per law and to report compliance within 30 days.

Muhammad Bashir and another v. Province of Punjab through Collector of District Gujrat 2003 SCMR page 83 and Khalil Cotton Factory, Multan v. Income Tax Office, E-Circle, Multan 1979 PTD 429 ref.

Justice (Retd.) Mrs. Qaiser Iqbal, Advisor, Dealing Officer.

M. Afzal Awan and Imran Iqbal, Authorized Representative.

Akhtar Hussain Qureshi Deputy Superintendent, Departmental Representative.

2011 P T D 1371

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SABA POWER COMPANY (PVT.) LTD., ISALAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.149/Isd/IT(128)/790/2010, decided on 2nd September, 2010.

Sales Tax Registration Rules, 2006---

----Rr. 5, 7 & 8---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Complaint had been directed against order of shifting of jurisdiction of complainant company from Islamabad to Lahore; it was claimed that complainant company was registered with Securities and Exchange Commission of Pakistan since 1999 at Islamabad address; and it had all along been assessed to Income Tax at Islamabad---Sales Tax Registration of the company was also shifted on request of the complainant from Lahore to Islamabad in the year 2005---Despite the company's 16 years of registration with the Sales Tax Authorities of Islamabad, Chief Commissioner Islamabad misled the Federal Board of Revenue to unilaterally and arbitrarily shift the company's jurisdiction to Lahore in violation of the Sales Tax Registration Rules, 2006 and without providing opportunity of hearing to the affected company before taking such a decision---Discretion, if any, available under the Sales Tax Registration Rules, 2006 was to be exercised according to some pre-determined parameters forestalling the chances of arbitrariness, wilfulness, injustice and decisions contrary to the bona fide interests of the affected parties---Departmental Representative, had admitted that no such parameters had been framed to exercise the said discretion---LTU Islamabad, in circumstances had unjustifiably, unreasonably and arbitrarily shifted the complainant company to the jurisdiction of LTU Lahore in mis-exercise of their authority and in violation not only of the basic right of the complainant to be heard before taking any such drastic action, but also in violation of R.5(a) of the Sales Tax Registration Rules, 2006---Recommendations were made to Federal Board of Revenue to take steps to restore the jurisdiction of the complainant's company to LTU Islamabad; to suitably structure, the system of making changes of address etc. in the registration of a person, in such a way that while requesting the required changes, a copy of the application for change of particulars, was also forwarded to the LTU or RTO concerned; to structure the use of discretion, if any, under the Rules of Sales Tax Registration and to report compliance within 30 days.

Yasin Tahir, Senior Advisor, Dealing Officer.

Muhammad Zaheer, Tax Consultant, Authorized Representative.

Sardar Zafar Mahmood, Addl. Commissioner LTU, Islamabad, Syed Imran Shah, Staff Officer to Commissioner (Legal), LTU, Islamabad, Departmental Representative.

2011 P T D 1386

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

PUNJAB PRIVATIZATION BOARD, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.490//LHR/IT(411)874/2010, decided on 15th September, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 161 & 236-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i)(a), 9 & 10---Charge of advance tax on sale of property---Department raised tax demand amounting to Rs.52,277,542 against the complainant under S.161 of the Income Tax Ordinance, 2001 for failure to pay withholding tax under S.236-A of Income Tax Ordinance, 2001 at the time of sale of property---Section 236-A of Income Tax Ordinance, 2001, as per enactment introduced through Finance Act, 2009, referred to sale of confiscated or attached property or goods---Complainant could not be denied benefit that could have accrued to him as the charge in S.236-A of Income Tax Ordinance, 2001 through Finance Act, 2010 was prospective in its application---Department failed to associate the complainant in the assessment proceedings, which lapse was fatal to the assessment made---Maxim "audi alteram partem" was required to be read into every statute and was fundamental to ensuing procedural transparency---Demand of Advance Tax from the complainant under S.236-A of Income Tax Ordinance, 2001, was neither in accordance with the statutory stipulation, nor had it been raised by the department in a manner that conformed to requirements of "due process" which, in circumstances, tantamounted to mal-administration as defined in S.2(3)(i)(a) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to direct the Chief Commissioner to take up matter in exercise of his revisionary jurisdiction under S.122-B of Income Tax Ordinance, 2001 and issue a fresh order, after affording proper opportunity of hearing to the complainant and to report compliance within 30 days.

PLD 2004 441; PLD 1982 Lah. 1; PLD 2008 SC 663; 2005 SCMR 1841 and 2005 SCMR 678 ref.

(b) Interpretation of statutes---

----Standard rule of interpretation of statutes was to adopt the meaning suggested by a plain reading of the text of the statute.

Muhammad Munir Qureshi Advisor, Dealing Officer.

Tipu Sultan, ITP Authorized Representative.

Khurram Ali Qadri, DCIR Departmental Representative.

2011 P T D 1391

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SITARA PEROXIDE LIMITED, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.160/Khi/Customs(79)/690/2010, decided on 2nd September, 2010.

Customs Act (IV of 1969)---

----S. 33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Denial of refund claim---Demand notice issued by the department to the complainant for payment of customs duty and taxes, was challenged by the complainant in constitutional petition---High Court directed the complainant to deposit the amount which was invested in Special Saving Certificates, which certificates would not be released to the Customs till disposal of first appeal or 15th June, 2009, which was earlier---Appeal filed by the complainant was allowed by the Appellate Tribunal, whereby refund claim of the complainant was allowed---Complainant after decision of Appellate Tribunal approached Customs for refund of the amount, but to no avail---Complainant had prayed for issuance of direction to the Customs for releasing the held up Special Saving Certificates, and also for suitable action against the Customs for maladministration---Customs had contended that refund claim of the complainant could not be allowed and certificates could not be released to him as Customs had filed reference in the High Court---Reference application was filed by the Customs a day before filing complaint by the complainant---No order had been passed by the High Court about suspension or stay of order of Appellate Tribunal; Department itself had not filed any such application---Pendency of reference application would have no bearing on the investigation by Federal Tax Ombudsman on the complaint filed on the issues restricted to maladministration only---Order/judgment of Tribunal which had attained finality, was to be implemented, unless same was stayed or suspended---Withholding of amount in absence of any order to withhold refund of Special Saving Certificates, would constitute maladministration---Refusal by the Customs to implement the judgment of the Appellate Tribunal on sole ground of filing of Customs Reference before High Court, was unreasonable and invalid---Such act of the customs would tantamount to maladminsitration---Recommendations were made to Federal Board of Revenue to return the Special Saving Certificates to the complainant within the 15 days; to fix responsibility of maladministration in illegally withholding of said certificates and proceed against those found responsible under the relevant Disciplinary Rules and to report compliance within 30 days.

2005 PTD 1825; 2007 CLC 304 and 2008 PTD 1921 ref.

Justice (Retd.) M. Nadir Khan, Advisor, Dealing Officer.

Malik Ehsan Mehmood, Authorized Representative.

Syed Fawad Ali Shah, Deputy Collector Customs, Departmental Representative.

2011 P T D 1396

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD KHALID RANDHAWA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.129/Ist/IT(110)/569/2010, decided on 2nd August, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 15, 68(2), 74, 132(5), 155(1)(2), 169(1), 170(4) & 171(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Denial of refund claim---Rental income---Representative of complainant had stated that refund applications were filed with returns of 3 years, but no response was made by department, which amounted to maladministration under S.2(3) of Establishment of Federal Tax Ombudsman Ordinance, 2000; that neither refund was issued nor any order under S.170(4) of Income Tax Ordinance, 2001 was passed by the department within prescribed time and prayed that department be directed to issue refund with compensation---Contention of representative of the complainant that tax chargeable on property income was required to be paid for one financial year and advance tax deducted for succeeding years created the complainant's right to compensation, appeared to carry weight---Depriving taxpayer of his money, before it was due, would entitle him to compensation---Natural justice demanded that S.171(1) of the Income Tax Ordinance, 2001, which permitted payment of compensation at prescribed rate on delayed payment of refund, be equally applied on tax deducted in advance---Department's failure to rectify assessment on the basis of appellate decisions for two assessment years, displayed gross negligence in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to pay, as per law, interest/compensation on advance tax, deducted on rental income for tax years 2006 to 2008; to direct the Chief Commissioner to rectify the assessments for assessment years 1994-95 and 2000-01 and issue refund/compensation due as per law, within 21 days and to report compliance within 30 days.

Sardar Irshad Shaheen, Advisor, Dealing Officer.

Tariq Rashid, FCA, Authorized Representative.

Anwar Zeb, DCIR and Malik Muhammad Sarwar, Officer Inland Revenue, Departmental Representative.

2011 P T D 1406

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

ASIF SIDDIQ

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.206/Isd/Cus(23)/785 of 2009, decided on 31st March, 2010.

Customs Act (IV of 1969)---

----Ss. 25, 44, 48 & 216---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10---Complaint case---Allegation of maladministration and embezzlement of imported goods---Submission of the complainant was that he established two letters of credit for import of 60-M Ton Urea Formaldehyde and 60-M Tons of Glazing Powder from China---Complainant received information regarding arrival of goods---Complainant checked up the whereabouts of his consignments and he was informed that goods had already been cleared by the consignees/Clearing and Forwarding Agents and goods were transported to address of one who was brother-in-law of the complainant---Complainant had implicated a number of persons and agencies, public and private in the complaint of maladministration and embezzlement---As the jurisdiction of the Federal Tax Ombudsman extended only to the maladministration of tax employees, investigation was focused on alleged maladministration of the Customs func-tionaries---Submissions of the parties and the witnesses raised a number of questions and complainant was confronted with questions related to him---As to lack of anxiety of complainant to retire Bank documents to clear his goods earlier, complainant simply stated that he thought he would clear the consignments after reopening of Dry Port after winter season---Such explanation was not plausible---Facts of the case had established that a big fraud had been perpetrated by brother-in-law of the complainant---Conduct of the complainant had spoken volumes about his active connivance with his brother-in-law, because without his nod, the suppliers in China could not change the mode of transport and name of the consignees---Complainant's failure to protest against those violations of his contract and the L.C's, by the shippers in China betrayed his complicity---Such a fraud could not have happened without the connivance of brother-in-law of the complainant and collusion of the customs and Dry Port Authorities---Ombudsman recommended that Federal Board of Revenue, to conduct thorough investigation into the case in co-ordination with the concerned agencies and persons listed in the complaint; to examine the legality and propriety of the practice of clearing consignments without necessary documents; and to fix responsibility for those found guilty of alleged maladministration/fraud in the case and proceed against them as per law/rules.?

?????? Yasin Tahir, Senior Advisor, Dealing Officer.

?????? Syed Aun Muhammad, Barrister, Authorized Representative.

?????? Faiz Ali, Deputy Collector Customs and Ejaz Gilani, Deputy Superintendent, Customs, Departmental Representatives.

2011 P T D 1414

[Federal Tax Ombudsman]

Before Justice (Retd.) Munir A. Shaikh, Federal Tax Ombudsman

Messrs SPEL FUJIYA LTD. through Principal Officer

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and 2 others

Complaint No.1620-L of 2008, decided on 26th November, 2008.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170 & 221---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10---Refund claim---Rectification of mistake---Complainant/taxpayer stated that he submitted a number of letters/reminders for disposal of his refund claim, but the authorities had taken no action---Complainant had contended that such inaction on the part of the authorities, would amount to maladministration and requested that necessary direction regarding issuance of refund along with compensation be issued---From documents produced by the complainant, it transpired that the Taxation Officer had determined refund for relevant tax year on the basis of relevant documents---Case being old, the complainant could not be held solely responsible for non-production of original relevant documents, which were allegedly submitted to the Taxation Officer---Authorities had not given any explanation for absence of relevant record on the basis of which IT. 30 Forms were issued and had failed to mention that any effort was made to search the relevant papers from the file of the department which showed that assessment records had not been properly maintained---Ombudsman recommended that authorities should issue as per law the refund claim of the complainant for tax years in respect of each IT.30 Form or order determining the refund of the complainant and compliance to be reported within 30 days from the date of receipt of present findings.

Muhammad Sirjees Nagi, Advisor, Dealing Officer.

Waheed Shehazad Butt for the Complainant.

Samia Ijaz (DCIT) and Ali Mansoor ACIT for Respondents.

2011 P T D 1416

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SALEEM TEXTILE, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.14/KHI/ST(03)/91/2010, decided on 11th May, 2010.

Sales Tax Act (VII of 1990)---

----S. 10---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10(3)---Complaint against Sales Tax Department for non-settlement of deferred Sales Tax claim which had arisen due to zero-rated exports---Representative of the complainant had asserted that firm was suffering financially due to non-sanctioning of refund; and that the department by not following the provisions of law had indulged in maladministration---Objection raised by the department with regard to jurisdiction on the point of time in filing the complaint was overruled and time limitation was waived under S.10(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 as the complainant firm had been consistently following its claims, but no formal speaking order accepting or rejecting the claim had been passed by the department---Delay and non-responsiveness on the part of the department was found in attending to the claims of the complainant---Charges in jurisdiction or switch over to the STARR, was no justification to delay matters for years, when law provided for the fixed time frame to settle the claims---If refund was held to be not due after careful consideration for any reason, speaking appealable order should have been passed within time prescribed for the purpose---No meaningful efforts were made during the period, delay, inattention and inefficiency on the part of functionaries was evidently established---Recommendations were made to Federal Board of Revenue to direct Chief Commissioner to co-ordinate efforts of all concerned to settle the claims due as per law within 21 days; to issue directions to streamline the procedure to handle the pending claims expeditiously; to ensure that all Sales Tax claims filed before 31st December, 2009, were disposed of by 31st August, 2010 at the latest and to report compliance within 30 days in respect to first two recommendations and 120 days with respect to the third one.

Mumtaz Ahmed, Advisor, Dealing Officer.

Ahmed Ali Soomro, OIR and Dr. Zulfiqar Mir, Addl. Commissioner, Departmental Representatives.

Rashid Ahmed, Authorized Representative.

2011 P T D 1425

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

FARAZ SHEIKH

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.264/Khi/Customs(114)/1006 of 2010, decided on 25th October, 2010.

Customs Act (IV of 1969)---

----Ss. 2(s), 157, 168 & 195---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 22---Seizure and confiscation of goods---Complainant purchased artificial jewellery from open market at 'L' against proper sale receipts/cash memos. but same was seized on arrival at 'H' alleging that same was of foreign origin and that the complainant failed to produce documents about legal import of the same---Department admitted that the complainant had produced valid copies of sales receipts issued by suppliers at 'L'---No evidence were brought on record by the department to prove that seized goods were of foreign origin and were smuggled into the country---If any violation of law was committed, same was committed by the supplier from whom the goods were purchased in open market by the complainant---Seizure and confiscation of non-barred goods, purchased from open market and being transported within the country, was illegal, unless it was proved that same were smuggled---Complainant who was bona fide purchaser and a local trader, could not be held guilty for wrong, if any, committed by the suppliers of the goods against whom no action was taken by the department---Seizure and confiscation of artificial jewellery purchased from local market and transported within the country, was against law---Recommendations were made that Federal Board of Revenue to ensure that the wrong committed by the officials of the department was rectified, exercising powers under S.195 of the Customs Act, 1969; to direct the relevant officials to explain as to why compensation could not be recovered from them under S.22(1) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 to compensate the complainant for wrongful detention of goods for more than 6 months causing him inconvenience and monetary loss and compliance be reported within 30 days.

1995 SCMR 387 and 1996 PLD 68 ref.

Justice (Retd) M. Nadir Khan, Advisor, Dealing Officer.

Aqeel Ahmed, Authorized Representative.

Abdul Rehman Rindh, Deputy Collector, Departmental Representative.

2011 P T D 1429

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MUHAMMAD JAMEEL and others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.182/Lhr/ST(09)/301/2010, to Complaint No.186/Lhr/ ST(13)/305/2010 and Complaint No.188/Lhr/ST(15)/307/2010 to Compliant No.198/Lhr/ST(25)/317/2010, decided on 7th May, 2010.

Sales Tax Act (VII of 1969)---

----S. 10---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10---Delay in sanction of refund of Sales Tax---Complainants purchased different lots of standing trees in open auction from the Forest Department and Divisional Forest Officer acting on behalf of Revenue Division collected sales tax from the complainants---Complainants impugned recovery of sales tax contending that it was contrary to law and instruction of the Federal Board of Revenue issued vide letter dated 10-9-2003, whereunder it was clarified that trees were exempt from levy of sales tax---Complainants, had lodged complaint against delay in the sanction of Sales Tax Refund, which was illegally recovered from them and had submitted that if any delay occurred in filing of claims of refund, same might be condoned in view of particular circumstances involving recovery of sales tax on exempt goods---Appropriate course for the Revenue Division and Federal Board of Revenue was to effectively circulate the information among all the Forest Officers that sale and purchase of standing trees/live trees was not chargeable to sales tax in order to forestall the chances of repetition of malpractice of collecting Sales Tax on auction of trees by the Forest Officers---Recommendations were made that Federal Board of Revenue to direct the concerned officials to sanction due refund as per law within 30 days by condoning any delay involved in filing the refund claims; to effectively circulate the non-taxability of live/standing trees and plants and take other appropriate measures to forestall the chances of the malpractice of collecting Sales Tax on trees by the Forest Officers; to ensure that in other similar cases where sales tax had been charged on standing trees/live trees despite Federal Board of Revenue's clarification, the same be refunded to the persons who paid it within 60 days and to report compliance of within 45 days/75 days respectively.

Messrs Saleem Haji Rehmat Ullah Dada Karachi v. CIT Karachi 2003 PTD 593 ref.

Saeed Akhtar, Advisor, Dealing Officer.

Malik Amir Mahmood Joya, Authorized Representative.

M. Talib Hassan, Deputy Collector, Departmental Representative.

2011 P T D 1553

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs GERRY DNATA (PVT.) LTD.

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.185/ISD/CUS(21)/727/2009, decided on 25th March, 2010.

Customs Act (IV of 1969)---

----Ss. 19 & 33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Exemption and refund claim---Mal administration---Complainant who imported ground handling equipment in 1998 claimed exemption which was refused on the ground that the goods were imported in second hand condition which was not permissible---Appellate Tribunal decided the case in favour of the complainant vide order-in-appeal, but refund due on the basis of said decision had not been paid by the customs in spite of lapse over two years despite several requests by the complainant---Authorities, instead of taking effective action had handled the matter in an inefficient and irresponsible manner and also in violation of the time limitation, which had constituted mal administration---Refund claim of the complainant had been inordinately delayed just for want of confirmation of refund and input adjustment by Sales Tax Authorities---Case presented a glaring example of gross inefficiency on the part of the Customs and Sales Tax Authorities which constituted mal administration---Recommendations were made to the Federal Board of Revenue to direct R.T.O. to verify within 7 days, whether or not the complainant had made any input adjustment in the case; customs at Airfreight Unit to decide the case in the light of the Appellate Tribunal's decision within 7 days about input adjustment; responsibility of non-implementation of Appellate Tribunal's decision, be fixed and the Customs and Sales Tax functionaries responsible for mal administration proceeded against under the relevant disciplinary rules; Deputy Collector Customs responsible for issuing unjustifiable call notices resulting in representative of complainant's uncalled for visit be called upon to show-cause within 15 days as to why the expenditure incurred by said representative on travelling, boarding and lodging, may not be recovered from him; a list of similarly delayed cases be prepared and necessary steps put in place to dispose of all such cases within three months; regular and meaningful monitoring of delayed cases be done by Member (Legal) with monthly progress reports submitted to Federal Tax Ombudsman Secretariat; complainant be included as a case study in the training module of Training Directorates under Revenue Division and compliance of first two recommendations be reported within 21 days and compliance of rest of the recommendations be reported within 90 days.

Yasin Tahir, Senior Advisor Dealing Officer.

Farhat Nawaz Lodhi, Authorized Representative.

Saqif Saeed, D.C. Departmental Representative.

2011 P T D 1583

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SYED BROTHERS

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.264/Khi/Customs(82)/793/2009, decided on 31st March, 2010.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 168 & 195---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10, 11 & 16---Delay in releasing seized goods---Staff of Directorate-General of Intelligence and Investigation seized Tyres of different sizes under provisions of S.168 of the Customs Act, 1969 for violation of Ss.2(s) & 16 of the Customs Act, 1969---Show-cause notice was issued to the complainant who was running a private warehouse for storing goods of private parties on rental basis---Adjudication Officer in his order-in-original, ordered vacation of show-cause notice and release of seized Tyres, but said Tyres were not released---Collector of Customs reopened the adjudication order under S.195 of the Customs Act, 1969, six months after the issuance of order-in-original, and show-cause notice was issued when complaint was already pending investigation in the Federal Tax Ombudsman Secretariat---Complainant requested the Customs several times for implementation of order-in-original but no action was taken on said repeated reminders which was tantamount to mal administration---Highhandedness of dealing by Customs Officials was also evident from the fact that the case had been instituted against the Godown Operator and not the owners of impugned goods/Tyres---Collector reopended the order-in-original on asking of Customs Intelligence, despite complainant had filed the complaint before the Federal Tax Ombudsman, which was in the knowledge of the Collector---Said arbitrary action had shown mala fide on the part of customs and was tantamount to prejudicing determination of a matter pending before the Federal Tax Ombudmsan---Recommendations were made to the Federal Board of Revenue to call for the record of the case, examine same and pass appropriate order for cancellation of reopening order-in-original and subsequent show-cause notice issued by the Collector; to direct Collector Customs (Preventive) to explain within 15 days as to why action under S.16 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 for trying to prejudice the determination of a matter pending before Federal Tax Ombudsman, may not be initiated against him and to report compliance within 20 days.

2009 PTD 1463 ref.

Saeed Akhtar Advisor Dealing Officer.

Afzal Awan, for the Complainant.

Samiul Haq, Deputy Director and Musthaq Ali Shahani, D.C Departmental Representative.

2011 P T D 1590

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs AUTOMOBILE CORPORATION OF PAKISTAN (PVT.) LTD.

Versus

THE SECRETARY REVENUE DIVISION ISLAMABAD

Complaint No.28/ISD/CUS(05)/213/2011, decided on 14th April, 2011.

Customs Act (IV of 1969)---

----S. 168---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Seizure and confiscation of vehicle---Vehicle imported by the complainant was seized and confiscated by Customs Anti-Smuggling Unit vide order-in-original---Appeal filed by the complainant against order-in-original having been rejected by the Collector, complainant filed second appeal before Appellate Tribunal, which was accepted and Appellate Tribunal, directed Customs authorities to release vehicle in question---Despite said direction of the Appellate Tribunal, authorities not only failed to release the vehicle, but also threatened the complainant with seizure of the other vehicle of the complainant as well---Tribunal while passing judgment in favour of the complainant had observed that vehicle in question had been imported and sold by the complainant as per law---Non-release of vehicle in question without any stay order of the High Court, against the Appellate Tribunal's judgment in favour of the complainant, was unlawful, arbitrary and offensive, which was tantamount to maladministration---Recommendations, were made to Federal Board of Revenue, to ensure implementation of judgment of the Appellate Tribunal forthwith and release the vehicle to its lawful owner without any further delay; to investigate as to why the Federal Board of Revenue Officials were repeating maladministration again and again by refusing to implement orders/judgments of Appellate fora, without any stay order of superior fora, and make effective arrangements to forestall the chances of repetition of any such violation in future; and to report compliance, within 21 days.

Yasin Tahir, Senior Advisor Dealing Officer.

Danish Ali Qazi Authorized Representative.

Rashid Habib, DC, MCC, Peshawar Departmental Representative.

2011 P T D 1606

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

SIRAJUDDIN KHALID

Versus

THE SECRETARY REVENUE DIVISION ISLAMABAD

Complaint No.523-L/2009, decided on 13th March, 2010.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(5-A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Amendment of assessment---Income Tax assessment for assessment year 2002-2003 was finalized by Income Tax Authorities under repealed Income Tax Ordinance, 1979---Consequent to enactment of Finance Act, 2003, Income Tax Authorities sought to amend said assessment by recourse to the provisions of S.122(5-A) of Income Tax Ordinance, 2001---Said amendment was contested by the complainant on the ground that as S.122(5-A) was inserted later on by Finance Act, 2003, it was required by law to be applied 'prospectively' and not retrospectively to amend complainant's Income Tax assessment, which had already been finalized under the repealed Ordinance---Complainant filed constitutional petition, which was accepted by High Court holding that subsection (5-A) of S.122 of Income Tax Ordinance, 2001 was not retrospective in its operation---Said decision of High Court was followed in the large number of similar cases---Department's effort to re-open the already completed income tax assessment failed---Federal Board of Revenue, instead of accepting plain and simple decision of High Court, which was prima facie correct beyond any shadow of doubt, filed appeal before the Supreme Court, which appeal also failed as Supreme Court maintained order of High Court---Contention of complainant was that by choosing to file appeal before the Supreme Court against judgment of High Court, concerned Tax Officials had made a wrong decision involving avoidable wastage of time, effort and scarce financial resources---Existing system of screening requests for filing references or appeals to superior fora by Federal Board of Revenue, needed a comprehensive review---Many references/appeals/ petitions before higher fora were pushed by officers who believed that passing the buck would absolve them of any liability---Such "Save Your Skin Strategy" was indeed a major cause of lot of avoidable legal battle---Recommendations were made that legal wing of Federal Board of Revenue, should have teams of professional Tax Lawyers of exceptional competence and highest integrity to scrutinize all cases recommended for appeals; that Board should lay down detailed criteria that would make it possible to rigorously evaluate the legality and propriety of filing departmental appeals in individual cases; that criteria laid down in that regard be included in the training modules of the Training Institutes under the Board; that success or failure of references and appeals before Superior Courts be regularly monitored and officials routinely seeking to file such appeals be strictly disciplined and that mind set of the dealing officers to pass the buck, needed to be changed in the interest of better tax administration and compliance report was directed to be submitted within three months.

Muhammad Munir Qureshi, Advisor, Dealing Officer.

Sirajuddin Khalid, Authorized Representative.

Ms. Saima Ejaz, DCIT Departmental Representative.

2011 P T D 1611

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

MEHFOOZ ALI

Versus

SECRETARY REVENUE DIVISION ISLAMABAD

Complaint No.266/KHI/IT(110)797/09, decided on 31st March, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 12 & 149---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Tax on salary---Complainant salaried person, had stated that in addition to salary he also received 18% of his Provident Fund Balance as income from the trust---12.5% investment income was taken as exempt; and balance was made part of salary in terms of S.12(2)(e)(iv) and S.149 of Income Tax Ordinance, 2001; and same was subjected to withholding tax---Due to addition of Provident Fund income, salary income got increased attracting higher bracket of tax rate---Complainant had pointed out that in his case tax had been adjusted at about 11%, which was much higher than average rate of tax at about 4%---Complainant had prayed that tax amount be either deducted from salary so that Provident Fund was not reduced or it be deducted from Provident Fund Balance at an average rate of tax---Complainant had further claimed that Public Corporation, like PIAC and PNSC etc. were giving different treatment to the income received by the employees from recognized Provident Funds Trust and there appeared to be a confusion among various organizations on the treatment of such income received by their employees---Point raised by the complainant, appeared to be a systemic issue which needed to be addressed by the Federal Board of Revenue to allay confusion and discrimination in the matter and also in the interest of justice/equity---Higher rate of tax, arbitrarily attributed to profit of Provident Fund amount for deduction from the Provident Fund, appeared unjustified---Recommendations were made to Federal Board of Revenue to clarify, whether Pak Steel, was correctly applying rate of higher tax on the taxable profit received by its employees on their Provident Fund Balance, or should the taxable profit from Provident Fund be treated as "Income from other sources" in the interest of equity and justice; to clarify, whether income allocable to an employee from recognized Provident Fund on fixed percentage basis, could be taken as 'Profit on debit/interest'; and could be subjected to threshold under clause 3(b) of Part 1 of Sixth Schedule; and if so, whether under that clause "interest" needed to be so defined as to include any fixed return received by an employee on investment of his balance in Provident Fund maintained by a recognized Trust and to monitor the correct application of law regarding deduction of tax on Provident Fund Balance of employees of various organizations for a uniform treatment and compliance be reported within 60 days.

Mumtaz Ahmad, Advisor Dealing Officer.

Mehfooz Ali, Complainant Authorized Representative.

Syed Shahid Hussain, DC (IR), Shahid Ahmed Khan, Tax Manager-Pakistan Steel and Ahmed Khalid Baloch for Departmental Representative.

2011 P T D 1618

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs LUCKY TEXTILE MILLS through Manager Imports

Versus

SECRETARY REVENUE DIVISION ISLAMABAD

Complaint No.260/Khi/Customs(79)/783/2009, decided on 30th March, 2010.

Customs Act (IV of 1969)---

----Ss. 19 & 20---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Availing benefit of exemption of duties and taxes---Delay in the release of Indemnity Bond---Maladministration---Complainant installed the imported machinery and obtained Installation certificates from Assistant Collector Customs and Central Excise within one year from the date of importation of machinery in accordance with law---Complainant in accordance with the provisions of concessionary notification, submitted fourteen Indemnity Bonds to the authorities to be discharged on production of Installation Certificates from the Assistant Collector, Customs and Central Excise---Required Installation Certificates were produced by the complainant, but the Indemnity Bonds were not discharged by the authorities despite repeated reminders---Inattention and delay in the discharge of duties and responsibilities was established beyond any doubt which was tantamount to mal administration---Recommendations were issued to Revenue Division to direct the concerned officials to decide the pending issue of release of Indemnity Bonds in accordance with law within a period of 15 days; to initiate departmental action against those found responsible for the gross mal administration involved in the case and to report compliance within 7 days thereafter.

Saeed Akhtar, Advisor Dealing Officer.

M. Afzal Awan, Authorized Representative.

Wahid Bux Shaikh, AC Departmental Representative.

2011 P T D 1621

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SANA TRADERS, ISLAMABAD

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complainant No.59/ISD/ST(06)/138 of 2010, decided on 13th March, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10, 66 & 67---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Refund claim---Complainant made zero-rated export and claimed input adjustment/refund---Refund claims were submitted by the complainant with required supporting documents, but despite that Sales Tax Authorities did not sanction the refunds---Non-deposit of Sales Tax by the suppliers was a systemic problem for which taxpayers unduly suffered---If the suppliers would fail to prove the deposit of Sales Tax in Government treasury they should be made to deposit that amount and thereafter the refund claim be paid to the complainant---Complainant's claim of refund had been ineptly handled by the Sales Tax Authorities---Besides, firstly advising them in writing to the application for condonation of delay, and then issuing a show-cause notice for rejecting the claim on account of time bar, was illegal---Issuing a show-cause notice for rejecting a claim for non-verification of deposit of Sales Tax without confronting the buyers and the suppliers both of whom were available for verification, spoke of high-handedness on the part of authorities---All those acts and omission or commission constituted maladministration---Recommendations were made to the effect that verification of payment and deposit of Sales Tax in government treasury be undertaken within 15 days; and the refund claim for tax period decided within 15 days thereafter; refund claim, which was stated to be under process be decided within a period of 7 days and compliance be reported within 30 days.

Yasin Tahir, Senior Advisor Dealing Officer.

Saqib Siddeq, ITP Authorized Representative.

Anwar Zeb, Deputy Commissioner Sales Tax RTO Islamabad Departmental Representative.

2011 P T D 1626

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SULTEX INDUSTRIES

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Compliant No.233-KHI/Cust(70)/708/2009, \dated 5-11-2009, decided on 17th March, 2010

Customs Act (IV of 1969)---

----S. 35---Customs Rules, 2001, Rr.455 to 460---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Delay in payment of duty drawback claim---Maladministration---Complainant was aggrieved and dissatisfied with alleged discriminatory treatment due to intransigent attitude of Customs Authorities for delay in payment of duty drawback claims filed in terms of Rr.455 to 460 of Customs Rules, 2001---Systemic issues were creating financial difficulties for exporters---When export rebate was provided as incentive to the exporters to remain competitive, delay of 2 to 3 years in payment by Collectorates, would undermine the spirit of the scene---Besides, a claimant was given priority or attention only when he either filed a writ, or a complaint with Federal Tax Ombudsman Office---Inattention and inefficiency in handling the matter of duty draw back was maladminstration---Recommendations were made to Federal Board of Revenue, to direct Chief Collector, to settle the complainant's claims as per law within 30 days; to form a Committee of relevant officials of Collectorates of Exports to evolve workable strategy to address the systemic issue of unacceptable levels of delay in processing of claims; to settle all 150,000 pending refund claims as per law, within three months and to submit a monthly progress report to the Federal Tax Ombudsman Secretariat.

Mumtaz Ahmad, Advisor, Dealing Officer.

Naeemuddin, Consultant Authorized Representative.

Salamat Ali, Deputy Collector (PaCCS) Departmental Representative.

2011 P T D 1630

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs CRESCENT ART FABRICS (PVT.) LTD. LAHORE

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.430/LHR/CUS(15/736 of 2010, decided on 28th October, 2010.

Customs Act (IV of 1969)---

----S. 25---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Determination of customs value of imported goods---Complainant who imported a consignment of 'Polyurethane Resin' claimed applicability of PCT heading '3909.5000' attracting Customs Duty at 5%, Sales Tax at 0%, Income Tax at 1% and Federal Excise Duty at 0%---Customs Authorities, on the other hand determined that PCT heading '3208.9090' was applicable in the light of test report attracting Customs Duty at 20%, Sales Tax at 16%, Income Tax at 3% and Federal Excise Duty at 1%---Complainant cleared the goods on payment of leviable duties and taxes under protest as determined by the department, but agitated the matter---Plea of Departmental Representative was that issue of classification of Polyurethane Resin had already been decided by the "World Customs Organization (WCO)" under PCT heading '3208.9090'---Contention of Representative of the complainant was that customs had been allowing clearance of said goods under PCT heading 3909.5000 even after issuance of 'WCO' ruling and that in that way the complainant was being discriminated against other importers---Said imported chemical, in the past, was classified on the basis of percentage of volatile contents of the medium (organic solvent) in which it was dissolved---If said chemical was imported in a medium of more than 50% volatile organic solvent, it was classified under PCT heading 3208.9090 and if the percentage of volatile organic solvent was less than 50%, then it was classified under PCT heading 3909.5000---According to technical literature the percentage of volatile organic solvent in the consignment was 30-35% and correct classification of imported goods was under PCT heading 3909.5000 as claimed by the complainant---Maladministration in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 having been established against department, recommendations were made to Federal Board of Revenue to direct the concerned officials to refer the matter to PCSIR Laboratory, as the result of the Customs Laboratory appeared to be contrary to its earlier findings, the technical literature on the product, the explanatory rules to HS Code, WCO classification and Federal Board of Revenue's Ruling on the subject; to constitute a committee for the determination of correct classification of the imported goods; to ensure that classification of imported goods, was done in a consistent manner, including in the complainant's case and to report compliance within 30 days.

Saeed Akhtar, Adviser, Dealing Officer.

Anwar Elahi, Director, Authorized Representative.

Syed Jawad Ali Shah, D.C., Departmental Representative.

2011 P T D 1638

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs AL-HAMRA TRADING COMPANY

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.315/Khi/Customs(135)/1195 of 2010, decided on 12th November, 2010.

Customs Act (IV of 1969)---

----Ss. 25, 80, 81, 168, 216 & 217---Customs Rules, 2001, R.389---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Determination of customs value of goods---Mis-declaration---Confiscation of goods---Maladministration---Complainant, imported a consignment declared as "Yellow Sulphur clay" under H.S. Code 2503.0000---Department disputed the declaration and classified the substance as "Sulphur Powder 99.9% pure (Midas SP.25) covered by H.S. Code 2802.0010---Complainant was issued show-cause on charge of mis-declaration and vide order-in-original the goods were confiscated---On filing appeal by the complainant against order-in-original, Collector (Appeals), accepting appeal remitted the redemption fine and ordered the goods to be released on the basis of the declared value---Complainant filed complaint with the plea that the consignment was firstly detained on the charge of violation of R.389 of the Customs Rules, 2001 and then penalty was imposed on him---Validity---In absence of report from laboratory issuance of show-cause notice to the complainant on the charge of mis-declaration, on the basis of examination report, was absolutely not just---Adjudicating Officer neither supplied the evidence to the complainant nor mentioned it in order-in-original---When sample of substances was referred to the Laboratory, issuance of show-cause and adjudication without availability of any evidence or report from the Laboratory, was departure from the established principles and procedure---Provisions of S.81 of Customs Act, 1969, in such a situation, could be applied to avert delay in release of goods and avoid port and container charges and also to save the complainant from any loss on account of detention of goods---Department could not be absolved of the liability on the ground that action taken in good faith was protected under Ss.216 & 217 of the Customs Act, 1969 and that it did not constitute maladministration---Colourful exercise of powers without any valid justification, could not be termed as bona fide---Adjudicating Officer having resorted to acts of commission and omission amounting to maladministration, recommendations were made to Federal Board of Revenue to direct the Adjudicating Officer to furnish explanation, within 15 days, as to why the loss caused to the complainant could not be recovered from him in addition to appropriate compensation and cost under S.22 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000; to direct to arrange for refund of demurrage and container charges to the complainant and to report compliance within 21 days.

Justice (Retd.) M. Nadir Khan, Advisor Dealing Officer.

Muneeruddin, Authorized Representative.

Muhammad Ashfaq, Deputy Collector, Departmental Representative.

2011 P T D 1647

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs IMPEX COLOUR LABORATORIES, NOWSHERA

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.186/ISD/ST(17)/1249/2010, decided on 13th March, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 11, 13, 14, 21 & 36---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Exemption, claim for---De-registration---Maladministration---Complainant obtained voluntary registration in 1994 under Sales Tax Act, 1990---Subsequently when Government changed the threshold by increasing the limit of turnover, complainant felt that it qualified for exemption as its turnover was below the threshold of increased taxable limit---Complainant applied for deregistration, but no action was taken by the department on the application despite issuance of reminders---Complainant closed its business---Alleging maladministration for delay and inattention to de-registration application, complainant had moved complaint---Neglect in dealing with de-registration application filed by the complainant from 1999 to 2004 and issuing adjudication order after the expiry of the prescribed period of 120 days, clearly involved maladministration---Failure to de-register in accordance with the provisions of S.21 of Sales Tax Act, 1990, struck at the very root of the matter---Allegation of maladministration having stood proved against the department, recommendation was made to Federal Board of Revenue to ensure that action on de-registration application should be taken without delay and de-registration issued as per law from the date it was due, within 21 days.

PLD 2001 SC 340; 2003 SCMR 318 and PLD 2002 SC 491 ref.

Yasin Tahir, Senior Advisor, Dealing Officer.

Zafar Ali Khan, Complainant, Authorized Representative.

Dost Muhammad, AC IR and Sharifullah, Law Officer, RTO, Peshawar, Departmental Representatives.

2011 P T D 1651

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

INAMULLAH

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complainant No.197/ISD/CUS(12)/1331/2010, decided on 26th March, 2011.

Customs Act (IV of 1969)---

----Ss. 30, 156(1) (10-A) & 168---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i)(a) & (b)(ii), 9, 10 & 11---S.R.O. 576(I)/2006 dated 5-6-2006---Seizure and confiscation of vehicle---Redemption on payment of leviable duty and taxes---Maladministration---Complainant purchased an old and used vehicle from one who had purchased it in auction---Vehicle which was transferred in the name of the complainant, was seized by Customs Staff on the ground that it was not duty paid vehicle---Redemption of vehicle was allowed on payment of leviable duty and taxes under S.R.O. 576(I)/2006 dated 5-6-2006 and redemption fine at 20% of the value---Representative of department did not dispute the lawful import of the vehicle and accepted that complainant and the driver were innocent in the matter; and that the seller of the vehicle was responsible for disposal of vehicle without obtaining the requisite NOC and payment of duty and taxes---Charging duty and other taxes at the rates prevailing in the year 2010, instead of date of disposal, was unlawful besides being unjust and unfair---Redemption fine imposed on the complainant and the driver of the vehicle instead of the importers who were responsibles for paying duty and taxes due, was also unfair and unjust---Non-mentioning of the specific category of offence for imposition of redemption fine also involved neglect and inefficiency of the department---Such acts of omission and commission of Customs Collectorate, were tantamount to maladministration---Recommendations were made to the Federal Board of Revenue to direct the Customs Authorities to assess the amount of duty and other taxes at the rate prevailing at the time of disposal of the vehicle; to reopen the order-in-original to examine the legality and propriety of imposing the burden of redemption fine on the complainant and the driver who appeared to be totally innocent in the matter; to make the seller exclusively responsible to pay the leviable amount of duty, taxes etc. as per law and to report compliance within 30 days.

Yasin Tahir, Senior Advisor Dealing Officer.

Abeer Muhammad, Authorized Representative.

Dr. Ahsan Khan, Deputy Collector Model Customs Collectorate, Peshawar, Departmental Representative.

2011 P T D 1658

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs PESHAWAR ELECTRIC SUPPLY COMPANY (PVT.) LTD., PESHAWAR

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No. 170/ISD/ST(15)/1014 of 2010, decided on 28th March, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 11(2), 33(5), 34(1), 36(3) & 74---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Disallowing input adjustment---Maladministration---Complainant company alleged maladministration on part of Chief Commissioner and Additional Commissioner (Audit Division) Regional Tax Office for arbitrarily disallowing input adjustment by the complainant, vide order-in-original---Maladministration had also been alleged on account of number of other acts of omission and commission including unlawful extension; and non-intimation of time limitation, back-dating and delayed dispatch of order-in-original, non-existence of the designation of Additional Commissioner in the Sales Tax Act, 1990, and for alleged discriminatory treatment etc.---Methodology adopted by Regional Tax Office for calculating inadmissible input adjustment could not be maintained being arbitrary and discriminatory---Provincially Administrated Tribal Areas' situation had also to be factored that Sales Tax was not payable in said area---Other elements such as non-payment due to extreme law and order situation in the service area of Peshawar Electric Supply Company, also needed to be examined for a Policy decision by Federal Board of Revenue---Disallowing line losses/distribution losses to the extent of 33.20% as determined being manifestly discriminatory and unlawful was tantamount to maladministration---Recommendations were made to Federal Board of Revenue to reopen the impugned order-in-original in exercise of its power under S.45-A of Sales Tax Act, 1990 and decide the matter afresh, as per law and practice; to take effective measures to ensure standard treatment of such mundane issues across Pakistan and to report compliance within 30 days.

Yasin Tahir, Senior Advisor Dealing Officer.

H.A. Shirazi and Iqbal Saeed Khattak, Assistant Manager Accounts (PESCO), Authorized Representative.

Barrister Syed Muddassir Amir, Harron Khattak, Audit Officer, RTO Peshawar and Sharifullah, Law Officer, RTO Peshawar, Departmental Representatives.

2011 P T D 1666

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs T.F. PIPES, ISLAMABAD

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Compliant No.178/Isd/IT/(149)/1130 of 2010, decided on 25th October, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 60-A & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Charging Workers' Welfare Fund---Non-issuance of refund claim---Complainant had alleged that action of department charging Workers' Welfare Fund for the year was unlawful displaying gross maladministration in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Complainant had prayed that department be directed to vacate the unlawful order and issue refund with compensation---Departmental Representative did not disagree with representation of the complainant and conceded that Workers' Welfare Fund was not chargeable in complainant's case---Departmental Representative agreed to the complainant's refund claim---Both parties agreed to assist each other to sort out the issue of verification of payments and refundable amount---Departmental Representative had conceded that unlawful orders of rectification needed to be revised by invoking provisions of S.122-A or 221 of the Income Tax Ordinance, 2001---Unlawful orders passed for charging Workers' Welfare Funds, even after appellate decision and delay in issuance of refund, was tantamount to maladminstration in terms of S.2(3)(1)(ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to the Federal Board of Revenue to ensure that refund due was issued with admissible compensation as per law after modifying orders under S.122-A/221 of the Income Tax Ordinance, 2001 within 21 days and to report compliance within 7 days thereafter.

Sardar Irshad Shaheen, Advisor, Dealing Officer.

Altaf Muhammad Khan, ITP and Salim Ahmad, Deputy Manager (Finance), Authorized Representative.

Fawad Hyder, IRO, RTO Islamabad, Departmental Representative.

2011 P T D 1672

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

WAHEED SHAHZAD BUTT

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.719/LHR/IT(594)/1258 of 2010, decided on 25th April, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114 & 153---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Defects in the electronic Income Tax Return---Complainant, a practising Advocate, in public interest complaint, had taken the issue of defects in the electronic Income Tax Return and contended that in the case of taxpayer providing services, such as Lawyers, Architects, Accountants, Doctors, etc. the electronic Income Tax Return I.T.2 (Return of Total Income/Statement of Final Taxation), provided misleading information to taxpayers---As a sequel to the amendments made in S.153 of Income Tax Ordinance, 2001, through Finance Act, 2009, all Professional income arising from rendering service became liable to be treated as regular income in Tax year 2010---Previous electronic Return Form for the year 2010 under-stated the tax payable by service-sector-taxpayer thereby resulting in loss to Revenue---Federal Board of Revenue had not devised any mechanism to recoup the revenue in service-sector-returns, filed up to October, 2010---Electronic Return placed on the Federal Board of Revenue Web Portal, prima facie, appeared to be defective, failing to report tax payable correctly in the normal course; one had to resort to various improvisations to get correct results; and it was not realistic to assume that such improvisations were within easy grasp of ordinary taxpayers with little or no technical background---Failure to design an electronic return that reported tax payable correctly in the case of taxpayers deriving professional income from service rendered, was indicative of its inefficiency and was tantamount to maladministration under S.2(3) of Establishment of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to ensure that apparent defects in the electronic return placed on the Federal Board of Revenue Web Portal, were removed so that tax payable was correctly worked out when all the fields were filled out; to issue appropriate instructions for retrieval of any revenue lost in Service Sector Returns filed upto October, 2010 and to submit compliance report within 15 days.

Muhammad Munir Qureshi, Advisor, Dealing Officer.

Waheed Shahzad Butt, Authorized Representative.

Mujahid Naeem, Manager (Automation) PRAL and Khurram Ali Qadri, DCIR, Departmental Representatives.

2011 P T D 1676

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

HASSAN EHSAN COTTON GINNER

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.538/LHR/I.Tax(455)960/2010, decided on 21st September, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 153 & 161---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Non-payment of withholding tax on supplies---Maladministration---Complainant, a cotton ginner, supplied cotton lint to various textile mills; and though income tax was withheld at source against payments made to the complainant/supplier, deduction certificates for tax so deducted at source and challans for deposit of the deducted tax in treasury were not issued to the complainant---Complainant was treated as defaulter with regard to payment of withholding tax at source on supplies made by the complainant in the assessment years under reference---Under the law, withholding agents (in the present case, textile mills that had received supplies of cotton lint from the complainant) had primary responsibility of withholding tax at source at the time of making payment to suppliers and to deposit the tax so withheld in treasury within the time laid down in the statute---Tax deduction certificate and copy of challan was then issued to the supplier---Primary evidence with regard to tax withheld at source and its subsequent deposit in the treasury, in circumstances, lay with the withholding agent and it was his responsibility to make available that evidence to the department to enable it to record the tax deducted in the relevant collection statements---Department which was required to monitor proper compliance of withholding tax law by withholding agent, had produced no evidence to establish that any attempt was made to query Textile Mills receiving the supplies of cotton lint from the complainant/supplier with regard to tax withheld at source and its subsequent deposit in the treasury---Such was a glaring lapse on the part of the department---Central Board of Revenue's letter dated 6-6-2000 had clarified that tax required to be withheld at source when payment was made to the cotton ginners, could not be demanded second time by the department---Preliminary objection raised by the department that Federal Tax Ombudsman had no jurisdiction to take up and investigate the complaint as it pertained to determination of tax liability for which alternate legal remedy was available to the complainant, was misconceived as resolution of the complainant's grievance did not involve interpretation of law, but proper compliance with statutory provisions by the department---Department had raised tax demand against the complainant in a manner that was "contrary to law" which amounted to maladministration as defined in S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to the Federal Board of Revenue to direct the Chief Commissioner to invoke his revisional jurisdiction under S.122-B of the Income Tax Ordinance, 2001 and take remedial action, as per law to vacate the illegal demand raised against the complainant, within 21 days and to submit compliance report within 7 days thereafter.

Muhammad Munir Qureshi, Advisor, Dealing Officer.

Sh. Ghulam Asghar, Authorized Representative.

Dr. Athar Ishaq, DCIR, Departmental Representative.

2011 P T D 1685

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs GHAZI BAROTHA CONTRACTORS

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.39/Ist/IT(35)/42/2010, decided on 31st May, 2010.

Income Tax Ordinance (XLIX of 2001)---

----S. 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Refund claim---Complainants two non-resident contractors, were aggrieved by non-issuance of Income Tax Refunds, even after the appellate decisions of the Higher Judicial fora and alleged that such arbitrary and unjust practices on part of the department tantamounted to gross maladministration under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Representative of the complainant prayed that action be taken against concerned officials on account of said gross injustice and maladministration; and that the department be directed to issue refund with compensation due to the complainants---Dismal picture of arbitrary conduct by the departmental functionaries was evident in the case---Concerned Tax Officials had acted in an oppressive, unreasonable and unlawful manner; they had not only indulged in prolonged, purposeless litigation, but had also resorted to arbitrary tactics of creating illegal demand on the pretext of different defaults and penalties which were time and again declared unlawful by the Appellate Authorities---Such a behaviour not only tended to shatter confidence of foreign investors, but had also wasted time and energy of the department; and unnecessarily created the right of the taxpayer for compensation on the delayed issuance of refund due---Arbitrary, unreasonable, oppressive, biased and unlawful conduct of the concerned Tax Officials was established in the case---Recommendations were made to Federal Board of Revenue to direct the Chief Commissioner to issue refund/compensation due as per law within 30 days and to report compliance within 45 days.

Sardar Irshad Shaheen, Advisor, Dealing Officer.

Nauman Rafique, FCA and Ali Akhtar, Senior Engineer and Director, WAPDA, Authorized Representative.

Shaukat Mahmood, Additional Commissioner, Zafar Iqbal, Additional Commissioner IR, Asif Haider Orakazai, Additional Commissioner, Muhammad Asif, DCIR, Mohsin Khan, DCIR, Zaheer Qureshi, DCIR, Islam-ur-Rehman, SOIR, Zia Ahmed Butt, SO IR, LTU Islamabad and Salahuddin, FTO/DPU, Peshawar, Departmental Representatives.

2011 P T D 1692

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs RIAZ TEXTILE MILLS LTD., KARACHI

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.42/KHI/CUS(25)/256 of 2010, decided on 17th June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 159, 160 & 161---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---S.R.O. 567(I)/2008, dated 11-6-2008---Recovery of income tax despite exemption from withholding Income tax---S.R.O. 567(I)/2008 dated 11-6-2008 provided exemption from withholding income tax at 1% on import of cotton falling under H.S. Code 52.01---Subsequently under the Finance Act, 2008, said H.S. Code 52.01 was omitted and as a result, the import of cotton became liable to payment of income tax at 1%---Said S.R.O. dated 11-6-2008 not only remained on the Federal Board of Revenue Website for about one year, but the Commissioner Income Tax issued clarification to the Collector of Customs that said S.R.O. was still valid---Despite that recovery notice was issued to the complainant for non-payment of income tax at import stage and department was pursuing recovery of 1% of income tax, short paid on the import of cotton---As the payment of 1% income tax on import of cotton was not made by the importers/complainants due to the confusion created by the Commissioner's clarification, no wilful or deliberate misdeclaration could be attributed to the complainants---So far as the subsequent discharge of liability or accumulation of refund were concerned, these aspects need looking into by the Federal Board of Revenue as per law---Issuance of wrong clarification by the Commissioner Income Tax that S.R.O. in question had exempted cotton from the levy of withholding income tax at import stage, had constituted maladministration in terms of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 and no mala fide could be attributed to the complainants for non-payment of withholding income tax at import stage---Recommendations were made to Federal Board of Revenue to examine the legality and propriety of the order-in-original and order-in-appeal in view of the complainants' contention that their entire tax liability as per the relevant return of income for the relevant year, had already been duly discharged, and take appropriate action as per law; fix responsibility and take action for non-withdrawal of S.R.O. in question from website on the date of promulgation of Finance Act, 2008 and also incorrect clarification and to report compliance within 30 days.

Mumtaz Ahmad, Advisor, Dealing Officer.

Afzal Awan, Authorized Representative.

Irfan Tariq, DC, PaCCS Group-III Departmental Representative.

2011 P T D 2064

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SABA POWER COMPANY (PVT.) LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.164/ISD/ST(14)/863 of 2010, decided on 27th October, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10, 66 & 67---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9, 10 & 11---Refund claim---Complainant, an independent Power Producer, company registered with Securities and Exchange Commission since year 1994 had alleged that functionaries of "Large Taxpayer's Unit (LTU)" had failed to issue System Generated Acknowledgment of receipt of its Sales Tax refund claim; that functionaries had failed to decide its claim within the time limit of 45 days as prescribed by S.10(1) of Sales Tax Act, 1990; that a different application of the complainant company for revision of some Sales Tax Returns was not decided by 'LTU' despite extensions in time limit were thrice obtained from Federal Board of Revenue---Validity---Handling of the complainant's refund claim and revision application showed that the dealing officials of 'LTU' acted neither efficiently nor in a taxpayer friendly manner---Initiation of Investigative Audit, did not justify non-acknowledgment of receipt of refund claim---Prima facie, bureaucratic indifference, as also insensitivity and oppressive handling of taxpayer's affairs, seemed to be rampant in the case---Complainant was made to obtain extension from Federal Board of Revenue not once, but three times---Failing to settle the issue of revision of returns, even after three extensions also indicated wider aspects of tax maladministration than mere inefficiency or indifference---Extreme oppressiveness, highhandedness and arbitrariness, apparent on the part of 'LTU' was tantamount to maladministration---Recommendations were made to Federal Board of Revenue to fix responsibility for the gross maladministration involved in the case; and initiate necessary departmental proceedings against those found at fault; ensure that technical faults in the Computer system effecting taxpayers' across the country, were promptly attended to in days and not months; to expedite acknowledgment of refund claims under reference and decision thereon as well as on the revision application as per law and to report compliance within 30 days.

Yasin Tahir, Senior Advisor Dealing Officer.

Muhammad Zaheer, Senior Manager Tax Authorized Representative.

M. Imran Shah, Staff Officer (CIR) Departmental Representative.

2011 PTD 2197

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs ART WEAVERS, ATTOCK

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.5/ISD/ST(01)/42/2011 to 12/ISD/ST(08)/49/2011, dated 17-4-2011, decided on 17th January, 2011.

Sales Tax Act (VII of 1990)---

----S. 36---Refund Rules, 2002, R.7(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 8, 9, 10 & 11---Recovery of tax---Refund claim---Maladministration---Complainant filed eight complaints alleging maladministration due to illegality involved in issuing show-cause notice and order-in-original without reference to relevant provisions of Sales Tax Act, 1990; excessive delay; time bar of show-cause notice; and double taxation---Main issues involved in the complaints were; whether the Federal Tax Ombudsman had the jurisdiction in the matter; whether show-cause notices were time-barred and were null and void in the eyes of law; whether delay was involved in deciding the refund claim---As complaints involved serious allegations constituting maladministration as defined in S.2(3)(i)(a)(b) & (ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, Federal Tax Ombudsman had the jurisdiction in the matter---Deliberate act of claiming refund against fake/filing invoices, was not based on proper inquiry/audit as required under R.7(3) of Refund Rules, 2002---No justification existed for attributing any deliberate act to the complainant---Such inquiry was all the more necessary because S.36 of Sales Tax Act, 1990 contained two categories of violations i.e. deliberate and inadvertent---Facts in the complaints under reference had revealed gross inefficiency, in-competence, oppressiveness, highhandedness and unreasonable attitude on the part of Tax Officials, which constituted maladministration as defined by S.2(3)(i)(a) and (b) and (ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Show-cause notices were not maintainable being time-barred---Recommendations were made to Federal Board of Revenue to the effect; to set aside the orders-in-­original and orders-in-appeal in complaints as same were based on time-barred show-cause notices; to provide opportunity to the complainant to produce documentary evidence of genuineness of supplies; to ensure that, after satisfactory proof, the deferred amounts were paid and already paid amounts regularized as per law; to identify the staff responsible for excessive delay and non-observance of time limitations in those cases and take/initiate deterrent action against the defaulters; to include present complaints as case study in the training modules for capacity building of Sales Tax Officials; and report compliance within 30 days.

Yasin Tahir, Senior Advisor, Dealing Officer.

Faraz Fazal, Consultant Authorized Representative.

Nazia Zeb, Dy. Commissioner, Said Munaf, Dy. Commissioner, Amir Sultan, Law Officer and Faisal Shehzad, Auditor Departmental Representatives.

2011 PTD 2336

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

HAMID ASHRAF, Proprietor H.A. Construction, Lahore

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.245/LHR/IT(212)502 of 2011, decided on 9th July, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5), 122(5A) & 170(4)---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000); S.2(3)---Amendment of assessment---Fixed tax regime---Normal tax regime---Refund---Department accepted decision of First Appellate Authority and did not file second appeal; and also gave appeal effect, to the order of First Appellate Authority, citing resultant refund---Department instead of issuing refund, invoked provisions of S.122(5) of the Income Tax Ordinance, 2001 with a view to arbitrarily amend the deemed assessment, and thereby offset, in whole or in part, the refund claims---Taxpayer contended that notwithstanding the oppressive resort to provisions of Ss.122(5) and 122(5A) of the Income Tax Ordinance, 2001, the Department was duty bound to first settle the refund claim that the Department had itself created, as per appeal. effect, and then proceed with the amendments, if deemed necessary---Validity---Department `expected' to raise demand of tax against the complainant in the proceedings initiated under Ss.122(5) and 122(5A) of the Income Tax Ordinance, 2001 which could not be legally made a basis to deny settlement of refund claims---Under the law, settlement of pending refund claims had priority, and once said claims were settled, other proceedings could continue, provided of course, those were otherwise justified. under the law---Delay and arbitrariness apparent in issuance of refund, and non implementation of Commissioner's (Appeals) Order tantamounted to maladministration under S.2(3) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000--Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Chief Commissioner to issue refund/compensation due, as per law, within 21 days.

2009 PTD 1500 ref.

Khalid Mehmood v. C.B.R. No. 135 of 2004 FTO Law dated 7-5-2005 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 170(4) & 122---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000), S.2 (3)---Refund---Withholding of refund---First settlement of refund claim---No provision exited in the Income Tax Ordinance, 2001 which empowers the Department to unreasonably withhold refund---Under S.170 of the Income Tax Ordinance, 2001, the satisfaction of the Departmental authority examining the refund claim was necessary to the extent that documentary evidence having a direct bearing on refund claim was in order---Such documentary evidence includes tax payment challans, deduction certificates and other relevant documentation like electricity bills, utilities bills, bank certificates, etc.---If said documents were found to be in order, then the claimed refund could not be withheld---Other matters having a possible bearing on the quantum of income assessed, like variations in Gross Profit rate, sale rate, apparent discrepancies in sales and capital shown on different documents, etc., were to be disposed of separately through an order other than an order under S.170(4) of the Income Tax Ordinance, 2001---Before starting said other, separate, assessment proceedings, the Department was bound under the law to first settle the refund claim.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss.170, 120(1) & 122(3)---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000), S.2 (3)---Refund---When deemed assessment under S.120(1) of the Income Tax Ordinance, 2001 or assessment under S.122(3) of the Income Tax Ordinance, 2001 stood finalized, the refunds could not be withheld.

2010 PTD (Trib.) 519 rel.

(d) Income Tax-s-

----Business, nature of---Manufacturer and service provider---Construction work---Sales tax registration certificate showed the complainant as a manufacturer and service provider and reference as made by Sales Tax audit in their audit report was only a recognition of the complainant's `capacity' for doing construction work---Sales tax authorities did not . refer to any construction work in which the complainant was actually involved and sales tax audit was initiated on 5-12-2008 and was concluded on 19-09-2009 whereas the period under reference in which the refund claim arose was from tax year 2004 to Tax year 2008---When Sales Tax audit authorities came to the manufacturing premises, the relevant period in which the refund claim arose had already expired---Departmental reliance on the Sales Tax audit report to conclude that construction work was a principal activity of the complainant in the tax years 2004 to 2008 was wholly misplaced.

(e) Income Tax Ordinance (XLIX of 2001)---

----S.170---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000), S.2(3)---Refund---Proceedings to dispose of a pending refund claim---Assessment proceedings---Discrepancies between income tax and sales tax returns---Difference was fully reconciled and explained to the Departmental authorities-Explanation was found to be plausible as in depth appraisal of any alleged discrepancy was not called for, these being not assessment proceedings but proceedings to dispose of a pending refund claim.

Muhammad Munir Qureshi Advisor Dealing Officer.

Nasir Jamil Khan, ACA Authorized Representative.

Muhammad Irfan Raza, Addl: CIR Departmental Representative.?

INDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE (FEDERAL TAX OMBUDSMAN).---This complaint is against non-issuance of refund.

1. The complainant, a manufacturer cum supplier and service provider, claimed refund amounting to Rs.22,534,196, Rs.48,099,416, Rs.81,055,850, Rs.91,005,491, Rs.31,424,558, for Tax Years 2004 to 2008, on 18-3-2010 (revised), 30-9-2005, 30-9-2006, 29-9-2007, 16-11-2008 respectively. The refund arose on account of excess deduction of income tax at source.

2. The complainant states that the Deptt on 23-9-2010 rejected the complainant's refund claims in their entirety on the ground that as he was engaged in the "execution of contracts", the tax deducted at source constituted full and final discharge of his tax liability under the law.'

3. The complainant contested the Departmental action and filed appeals before the Commissioner (Appeals) Zone-III, Lahore. The Commissioner (Appeals) heard and decided the appeals on 15-2-2011. According to the Complainant, the Commissioner (Appeals) cancelled the order dated 23-9-2010 passed under section 170(4) of Income Tax Ordinance, 2001 (the Ordinance), holding that the reasons cited by the Deptt for rejecting the complainant's refund claims were wholly misconceived, arbitrary, and not maintainable.

4. The Deptt accepted the Commissioner's (Appeal) decision, and did not file second appeal before the Appellate Tribunal. The Deptt also gave appeal effect, vide order dated 28-2-2011, to the order of the Commissioner (Appeals) citing resultant refund of Rs.274.116 million for Tax Years 2004 to 2008 as pending.

5. However, rather than issuing refund that the Deptt had itself determined in the appeal effect order, the Deptt, on 9-4-2011, without any justification, invoked the provisions of section 122(5A) of the. Ordinance. Equally unjustifiably, on 3-5-2011, the Deptt invoked provisions of section 122(5) of the Ordinance, with a view to arbitrarily 21 amend the deemed assessments, and thereby offset, in whole or in part, the refund claims for the cited years.

6. It is the Complainant's contention that notwithstanding the oppressive resort to the provisions of sections 122(5) and 122(5A), the Deptt was duty bound to first settle the refund claim that the Deptt had itself created, as per appeal effect, and then proceed with the amendments under sections 122(5) and 122(5A), if deemed necessary.

7. The complainant goes on to state that discriminatory nature of the Departmental actions was evident from the fact that other taxpayers, placed similarly as the complainant, were accorded different treatment. While they were placed in the normal tax regime, (NTR), he was singled out for oppressive treatment that was not permissible in law, and that clearly constituted maladministration under section 2(3) of the FTO Ordinance. The complainant cited a number of comparable cases of manufacturer cum suppliers and service providers, including Interwood Mobel (Pvt.) Ltd. (NTN 1316337), Immaj Holdings (Pvt.) Ltd. NTN 1692523; Ad-King (NTN 0666809), Flex-o-Sign's (NTN 1320725), and Workman (NTN 0893479).

8. When confronted, the Deptt filed a reply dated 8-06-2011, maintaining that the Deptt had gone in second appeal against the order of the Commissioner (Appeals), which was pending decision before the Appellate Tribunal. The Deptt contended that the Complainant's refund claim was wholly misconceived as he was correctly placed in the fixed tax regime (FTR). However, this contention was soon superseded by a second reply dated 11-6-2011, claiming that no second appeal had been filed against the order of the Commissioner (Appeals) and the Departmental intimation to the FTO Office regarding filing of a second appeal before the Appellate Tribunal was an inadvertent mistake. The Deptt claimed that the Complainant's refund claims were pending in the Deptt and were being processed according to law. It was further submitted that:

(i)???????? in Tax Years 2004 to 2008 as the complainant derived income through 'execution of contracts' that included contracts involving construction and renovation of commercial and residential buildings, he was placed in the FTR not NTR;

(ii)??????? in the complainant's own financial statement for Tax Year 2008, the principal activity was cited as construction and renovation of residential and commercial buildings, and also in the notes appended to the statement, mobilization advances were shown to have been received against construction contracts;

(iii)?????? the Commissioner (Appeals) had cancelled the order passed under section 170(4) on technical grounds that refund claims for Tax Years 2004 to 2008 were rejected through a single consolidated order, and not disposed of through separate orders for each Tax Year;.

(iv)?????? the refund claims of the complainant had not been finally rejected by the Deptt and were still under examination, following adjudication by the Commissioner (Appeals);

(v)??????? as the complainant had been placed in FTR in terms of the provisions of section 153(6) of the Ordinance, refund of tax deducted at source was barred under the law (section 169 of the Ordinance);

(vi)?????? the complainant had not been able to prove his case although necessary opportunity envisaged in law had been given to him;

(vii)????? the invocation of the provisions of sections 122(5). and 122(5A) of the Ordinance was in accordance with. law and based on merits o4 the case, as substantial discrepancies existed between the sales declared in the income tax returns and sales disclosed in the sales tax returns. The capital shown in the wealth statement and the balance sheet also differed by a huge margin;

(viii)????? there was no bar to invoking the provisions of sections 122(5) and 122(5A) without first settling pending refund claims under section 170;

(ix)?????? the complainant had not come before the Hon'ble FTO with clean hands as accounts prepared for bank purposes were different from those presented before the sales tax authorities;

(x)??????? refund was claimed as an afterthought in the revised returns filed by the complainant and was not so claimed in the original returns. Furthermore, the original revised return for Tax Year 2008 was not available on record and only a copy thereof was placed on the complainant's assessment file and its authenticity was not confirmed by the Departmental authorities concerned;

(xi)?????? the charge of maladministration levelled against the Deptt by the complainant was denied.

1. During the course of hearing, the Deptt was specifically directed to make a comparison with the five, statedly, similar cases referred to by the complainant. The details of the treatment accorded by the Deptt in the five cases are as follows:--

| | | | | | | | --- | --- | --- | --- | --- | --- | | S. No. | NTN/Status | Nature of Business | Tax years | Deptt'al Treatment | Remarks | | 1 | Interwood Mobel (Pvt.) Ltd. (NTN 34-01- 1316337) | Manufacture and sale of furniture, (retail and supplies), rendering of services, and execution of contracts. | 2008, 2009 and 2010 | Entire Income of Taxpayer placed in the Normal Tax Regime except for export proceeds that fall under FTR. All assessments finalized under section 120 except. for Tax Year 2004. | Refund adjustments have been made by the Deptt in all years cited. No amendment of declared income in Tax years 2008 to 2010. Amendment made only in Tax Year 2004 and not contested by taxpayer. | | 2 | Immaj Holdings Pvt. Ltd. (NTN 1692523) | Horticulture, upgrading, maintenance and development services in DHA Lahore under contract. | Tax years 2004 to 2007 | Returns assessed under section 120 and later amended under section 122(5) on the ground that execution of contract was involved that fell under FTR whereas taxpayers contention was that he was a service provider only and should be placed in NTR. | Taxpayer's appeals accepted by Commissioner (Appeals) and the ITAT. A writ petition filed ' by taxpayer was also successful and refund was issued to the taxpayer on the orders of the Lahore High Court. | | 3. | Ad-King (NTN 0666809) | Outdoor publicity and advertisement services including erection and maintenance of self manufactured hoardings/sign boards | | Returns assessed under section 120 and later amended under section 122(5) on the ground that execution of contract was involved that fell under FTR whereas tax- payers contention was that he was a service provider Only and be placed in NTR. | Taxpayer's appeals accepted by Commissioner (Appeals) and the ITAT. Deptt'al reference against ITAT order pending in Lahore High Court. - | | 4. | Flex-o- Signs (NTN 1320725) | Manufacture and sale/ supply of hoardings and sign boards and rendering of advertisement services | Tax years 2005 and 2006 | Returns assessment under section 120 and later amended under section 122(5) on the ground that execution of contract was involved that fell under FTR whereas taxpayers contention was that he was a service provider only and should be placed in NTR. | Taxpayer's appeals accepted by Commissioner (Appeals) and the ITAT. Deptt filed reference against ITAT order before LHC which was pending. Complaint filed before Hon'ble FTO against non issuance of refund. Complaint accepted and Deptt directed to issue refund (C.D. No.1824-L/2008). Refund has since been issued. | | 5 | Workman (NTN , 0893479-7) | Manufacture and supply of furniture under contract | Tax Years 2007 to 2010 | Statements of Final Taxation filed. | FTR case. In 2007 services already in FTR; from 2009, non corporate manufacturing/supply also in FTR. |

1. The Deptt did not cite any distinguishing feature of significance between the complainant's and the case cited at Serial. No. 01, in particular, except that in the Interwood case, the services were placed in NTR since it was a private limited company whereas the Complainant, being an individual, did not enjoy this advantage. The assertion of the Deptt was not found correct as distinction between a company and an individual business was made through the Finance Act, 2008, by amending section 153(6A) of the Ordinance, whereas the complainant's cases pertained to period prior to aforesaid amendment. The complainant was therefore entitled to same treatment as meted to Messrs Interwood Mobel (Pvt.) Ltd. At the same time, there is a great deal in common between the two both, are large scale manufacturers/suppliers of furniture; both also render services. However, tax treatment in the two cases is quite different. While Interwood is placed in the NTR, the Complainant is sought to be placed in the FTR - notwithstanding the Commissioner's (Appeals) ruling against the Deptt.

2. As regard cases at Serial Nos. 2, 3 and 4, there are strong commonalities between the complainant's case and the cited cases as they all render services and supply self-manufactured items (hoardings/ signboards Serials Nos. 3 and 4). The main point of difference that the Deptt seeks to emphasize between the complainant's case and the cited cases is that the nature of the complainant's contractual arrangements is different from others; the complainant's contracts specifically included construction/renovation work. The Deptt also points out that the Sales Tax audit had brought out the fact that the complainant was engaged in construction work.

3. So far as the WORKMAN case is concerned, its non-corporate services are placed in FTR, from Tax Year 2007. Similarly, from Tax Year 2009, non-corporate manufacturing and supply is also placed in FTR. However,' as the Complainant's refund claims are for Tax Years 2004 to 2008, in the Workman case, the operational period commences from Tax Year 2007. The commonality between the two is thus limited.

4. The AR submitted that it was his right under the law to revise Returns of Income for Tax Years 2004 and 2008 filed earlier, as there were valid grounds for their revision. He explained that Return for Tax Year 2004 was revised on 18-3-2010 to claim refund at Rs.22,534,196 as against refund of Rs.18,685,191 claimed in the original Return. This revision was made on the basis of certificate of withholding tax deduction under Rule 42. It was not correct for the Deptt to say that refund was not claimed in the original Return for Tax Year 2004. As regards Return for Tax Year 2008, its revision was made to claim adjustment of tax deducted at source on self-manufactured supplies only.

5. The Departmental contention that the revised Return for Tax Year 2008 was dubious and its authenticity remained in doubt was vehemently denied by the complainant. The complainant contended that the first dealing officer (Ms. Sehar Aftab Butt, ACIR) specifically requisitioned the entire record from the CIR IP and fully satisfied herself with regard to its completeness and authenticity and raised no objection whatsoever in that regard.

6. The successor ACIR (Ms. Beenish Iftikhar), though initially raised questions with regard to the revised Return filed for Tax Year 2008, but in the final show-cause notice that she issued, before passing order under section 170(4), there was no mention of any issue regarding the revised Return for Tax Year 2008. Rather, she found fault only with the Return for Tax Year 2004, on the ground that no official stamp was affixed thereto.

7. The AR argued that the Deptt did not contest the findings of the Commissioner (Appeals), and gave appeal effect thereby confirming his order. If the Deptt truly believed that revised Returns for Tax Years 2004 and 2008 were 'dubious,' then the Deptt ought to have filed second appeal before the Appellate Tribunal.

8. As regards the alleged discrepancies in the sales figures in the income tax Returns and the sales tax Returns and the quantum of capital disclosed in the wealth statements and- the balance sheets, the complainant submitted that there was nothing in the documentation submitted that could not be plausibly explained/reconciled. But the Departmental authorities could not start assessment proceedings in the garb of disposing of a refund claim.

9. With regard to his status under income tax law, the complainant asserted that the Lahore High Court in judgment cited as 2009 PTD 1500 had held that all services, professional or otherwise, were held to be chargeable under general tax provisions and not under FTR. This was in response to the Departmental contention during the complaint case proceedings that services rendered other than professional services fell under FTR. While on this issue, the complainant gave the following bifurcation of work done by him in the assessment years 2004 to 2008:--

| | | | | | | | --- | --- | --- | --- | --- | --- | | | 2004 (Rs.) | 2005 (Rs.) | 2006 (Rs.) | 2007 (Rs.) | 2008 (Rs.) | | Supplies of Self Manufactured Goods | 435,797,916 | 849,687,170 | 1,304,815,775 | 1,695,352,034 | 922,066,638 | | Services | 87;683,064 | 176,133,390 | 280,044,877 | 223,986,847 | 110,136,024 | | Grand Total | 523,480,980 | 1,025,820,560 | 1,584,860,652 | 1,919,338,881 | 1,7,202,662 |

The above bifurcation supports the complainant's contention that in the Tax Years 2004 to 2008 he was primarily a manufacturer cum supplier.

1. After hearing both sides, it is clear that there is no provision in the Ordinance that empowers the Deptt to unreasonably withhold refund. Under section 170, the satisfaction of the Departmental authority examining the refund claim is necessary to the extent that documentary evidence having a direct bearing on refund claim is in order. Such documentary evidence includes tax payment challans, deduction certificates and other relevant documentation like electricity bills, utilities bills, bank certificates, etc. If these documents are found to be in order, then the claimed refund cannot be withheld. As regards other matters having a possible bearing on the quantum of income assessed, like variations in GP rate, sale rate, apparent discrepancies in sales and capital shown on different documents, etc., these are to be disposed of separately through an order other than an order under section 170(4)' However, before starting these other, separate, assessment proceedings, the Deptt is bound under the law to first settle the refund claim.

2. Moreover, as deemed assessments under section 120(1) for Tax Years 2005 to 2007, and under section 122(3) for Tax .Years 2004 and 2008 stood finalized in this case, the refunds could not be withheld as per the Appellate Tribunal's judgment in 2010 PTD (Trib.) 519:--

"Where refund is created by the Commissioner himself as a result of an order under section 120 of the Income Tax Ordinance, 2001, then, in terms of section 170(3) of the.I.T. Ordinance, it was the legal obligation of the Commissioner to issue refund, suo motu, and if the Commissioner failed to do so' within 90 days of the refund becoming due, then section 171 of the Income Tax Ordinance will come into play."

1. The Departmental reference to the sales tax audit report of 19-9-2009 also needs a mention here. The Deptt seeks to establish that construction work was a principal feature of the work done by the complainant during Tax Years 2004-2008. First of all, the Sales Tax Registration Certificate No. 03-09-9403-010-19 dated 7-2-2001 shows the complainant as a MANUFACTURER and SERVICE PROVIDER. According to the complainant, the reference as mile by Sales Tax audit in their audit report was only a recognition of the complainant's 'capacity' for doing construction work. The Sales Tax authorities did not refer to any construction work in which the complainant was actually involved. The complainant also pointed out that the Sales Tax audit was initiated on 5-12-2008 and was concluded on 19-9-2009 whereas the period under reference in which the refund claims arose was from Tax Year 2004 to Tax Year 2008. In other words, when the Sales Tax audit authorities came to the complainant's manufacturing premises, the relevant period in which the refund claims arose had already expired. That being so, the Departmental reliance on the Sales Tax audit report to conclude that construction work was a principal activity of the complainant in the Tax Years 2004 to 2008 was wholly misplaced.

2. As regards the alleged discrepancies between income tax and sales tax returns, the AR contended that the so-called difference was fully reconciled and explained to the Departmental authorities vide letter H-1/Tax/2010/991 of September 6, 2010. The explanation was found to be plausible as in depth appraisal of any alleged discrepancy was not called for at this juncture, these being not assessment proceedings but proceedings to dispose of a pending refund claim.

3. Similarly, in the case of mobilization advance statedly relevant to construction contracts referred to in the notes appended to the Financial Statement, the AR explained that the accounts of the complainant's proprietory business were prepared on cash basis for income tax purposes, as required under the law. These accounts were, however, converted into accrual-based accounts so as to meet requirements of the State Bank's prudential regulations. He categorically denied any nexus with construction work, as such, in the relevant period. Nor was any evidence whatsoever iii this regard placed on record by the Deptt. The four contracts entered into with Wand Telecom and the work orders with Bank Alfalah when considered in the context of itemized BOQs and ex-factory commercial invoices of self manufactured goods, along with delivery challans, bank statements and independent certification of the work done and other related documents, it was clear that, prime facie, the mobilization advance was not in relation to any construction contract.

4. As regards Departmental reference to construction work allegedly done by the Complainant for Sialkot International Airport Ltd. (SIAL), the AR explained that here too the complainant rendered professional, specialized contractual services that did not involve construction work of any kind. The record examined during the complaint proceedings supports the complainant's viewpoint and no adverse inference could therefore be drawn with regard to services provided by the complainant to SIAL.

5. In a decision by the Hon'ble President of Pakistan (No.135 of 2004 FTO Law dated 7-5-2005, Mr. Khalid Mehmood v. C.B.R.) disposing of a representation filed by the Deptt against the Hon'ble Federal Tax Ombudsman's recommendations in Complaint No 1643-L of 2003, it was held that:-

"The State cannot hold citizens' money except under the authority of law. There is no law that the State can hold a citizen's money on the ground that his liability is likely to arise in future."

1. That the Deptt 'expected' to raise demand of tax against the complainant in the proceedings initiated under sections 122(5) and 122(5A) of the Ordinance could not be legally made a basis to deny settlement of refund claims for Tax Years 2004 to 2008. Under the law, settlement of pending refund claims had priority, and once these claims were settled any other proceedings could continue, provided of course those were otherwise justified under the law.

Findings:

1. The delay and arbitrariness apparent in issuance of refund, and non-implementation of Commissioner's (Appeals) order dated 15-2-2011, is tantamount to maladministration under section 2(3) of the FTO Ordinance.

Recommendations:

1. F.B.R. to direct the Chief Commissioner to--,

2011 PTD 2381

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

IMDAD HUSSAIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.39/ISD/CUS(10)498 of 2011, decided on 22nd July, 2011.

Customs Act (IV of 1969)---

----S. 18---S. R. O. 506(1)/1988 dated 26-6-1988---S.R.O. 577(1)/2006 dated 5-6-2006---S. R. O. 576(1)/2006 dated 5-6-2006---Goods dutiable---Assessment of duty and taxes---Vehicle was initially imported free of duty and taxes---Sale of such vehicle-Customs authorities were approached for assessment of duty and taxes and issuance of NOC on the basis of sale permission issued by the Ministry of Foreign Affairs---Vehicle was assessed to duty and taxes on 5-9-2007---NOC was issued after payment of leviable duty and taxes---Sale permission was turned out to be fake---Vehicle was seized---Appellate Tribunal remitted the redemption fine and ordered its release on payment of leviable amount duty/taxes vide judgment dated 14-2-2010---While determining the short levied amount of duty and taxes, the customs calculated the value, duty/taxes on the basis of exchange rate prevailing on 21-12-2010 instead of assessment made previously as on 5-9-2007---Complainant contended that duty and taxes had already been assessed and paid on the basis of value determined by the Customs with reference to the sale in the local market i.e. 5-9-2007 and only question involved was a short-assessment of amount of duty and taxes on account of change of category and level of concession due to fake sale permission in the name of diplomat, there was no justification either of seizure of vehicle or for changing the date of assessment from 5-7-2009, when the vehicle was sold in the local market, on 21-12-2010 which had no relationship in the matter except for that the complainant had on that day made an application for release of the vehicle in pursuance of the Appellate Tribunal's judgment; and the application could not be construed to be the consent for changing the crucial date for assessment of value; and determination of short-levied amount of duty/taxes with reference to 21-12-2010 after over three years of the date of sale of the vehicle in the local market on 5-9-2007, was against the rules, arbitrary, oppressive, unreasonable and unlawful-Validity-Customs made error in re-determining the value and applying the rates of exchange, duty and other taxes with reference to 21-12-2010 after the Appellate Tribunal's judgment, rather than 05-09-2007 when the vehicle was sold in the local market and the leviable duties and taxes were originally assessed and paid due to fake sale permission---Present was not a case of smuggling or unlawful import of a vehicle but a fraudulent change of level of concession at the time of sale of the vehicle in the local market; it would have been fair to demand the amount of short-levy caused by manipulation of higher level of concession on the same basis of the date of sale of vehicle in the local market i.e. 5-9-2007 rather changing the date of re-assessment to 21-12-2010---Provisions of S.R.O. 576(1)/2006 dated 5-6-2006 did not warrant levy of exchange rate or duty and taxes other than those applicable on the date of sale of vehicle in the local market which was 5-9-2007---No progress had been made after 2008 as the real culprits and their accomplices in the Customs department had yet to be brought to book---Maladministration of the Customs authorities was established---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Customs to re-determine the short-levied amount, as per law, on the basis of the date of the vehicle's sale in the local market i.e. 5-9-2007, as per provisions of S.R.O. 576(1)/2006; dated 5-6-2006; to release the vehicle to the complainant on payment of the short-levied amount, if any, worked out on the basis of the above and direct the Directorate General I & I to bring the investigation to its logical conclusion by apprehending the culprits and bringing them to justice.

2008 PTD 1482 and 2007 PTD 1630 ref.

Yasin Tghir, Senior Advisor Dealing Officer.

Imdad Hussain for the Complainant.

Mazhar Rauf,??? Deputy Superintendent Departmental Representative.

2011 PTD 2401

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SARAJ DIN & SONS, LAHORE and another

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints No.205/Khi/Customs(87)484 and 206/Khi/Customs(88)485 of 2011, decided on 12th May, 2011.

Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S.2(3)---Maladministration---Inaction, delay and negligence on the part of Collector (Appeals) to decide appeals against\Order-in-Original passed by the Deputy Collector Customs---Collector (Appeals) submitted that appeals were under objection as the complainant did net furnish the required court fee, and the appeals were also time-barred---Collector (Appeals) was unable to explain as to what precluded him from passing a proper order; and pleaded that his office did not inform him about appeals being pending without any action; and assured that 'action in accordance with law would be initiated without any further delay; and appeals would be disposed of within 30 days in accordance with law, after affording opportunity to the complainant---Appeals filed were left unattended for over 08 months, which spoke of delay, inattention and negligence on the part of Collector (Appeals), hearing, the AR submitted that grievance of the complainants was about inaction, delay and negligence on the part of Collector (Appeals) to decide their appeals against the orders-in-original dated 3-4-2010 passed by Deputy Collector Customs, in pursuance of the Findings/ Recommendations 'of the Hon'ble FTO. tantamountting to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Collector (Appeals) to dispose of appeals filed by the complainants within 30 days in accordance with law, after affording opportunity of hearing to the complainant.

Justice (R.) M. Nadir Khan, Advisor Dealing Officer. Ms. Dilharam Shaheen Authorized Representative.

Naveed Abbas, AC Collector Departmental Representative.

2011 P T D 2427

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs SAEED SHINWARI LTD., AFGHANISTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.32/ISD/Cus(08)/301 of 2011, decided on 19th July, 2011.

(a) Customs. Act (IV of 1969)---

----Ss.32, 129 & 156(1)(14)(64)---Afghan Transit Trade Agreement, 1965---Public Notice No.16/2000(A) dated 30-09-2000---Untrue statement, error, etc. ---Afghan Transit Trade Invoices were filed declaring the goods ails white paper'---On physical examination, goods were found to bectarette paper' meant for use in manufacturing of cigarettes, not white% paper meant for writing purposes---Description of cigarette paper wags declared in GDs and omission in Afghan Transit Trade Invoices constituted an offence in terms of S.32 and S.129 of the Customs Act, 1969, punishable under Cls.(14) and (64) of S.156(1) of the Customs' Act, 1969---Validity---Contention of Department that omission disqualified the goods for transit was not maintainable---Customs at the Port had explained that "these consignments were not subject to examination by the selectivity criteria of the computer system at the port of entry, but, 'all the consignments were examined at the port of exit"-Such explanation was not plausible because, while allowing transit, GDs and Afghan Transit Trade Invoices were simultaneously filed in accordance with the requirements of Public Notice No.16/2000(A) dated 30-9-2000---Data entry operator was required to feed all the particulars of the GDs and Afghan Transit Trade Invoices, and make the required corrections, if any---In case of discrepancy, the documents were returned to the Clearing Agent for necessary corrections---Appraisement staff in the Customs House and the Customs examination staff at the port were similarly required to identify discrepancies, if any---Failure of the Customs at the Port to identify the discrepancy involved in the material particulars of transit goods through all stages of Customs process reflected neglect and inefficiency on their part.

Writ Petition No.443 of 2000 rel.

(b) Customs Act (IV of 1969)---

----Ss.32, 129 & 156(1)(14)(64)---Afghan Transit Trade Agreement, 1965---Untrue statement, error, etc.---Cigarette paper---Omission of such paper in the Afghan Transit Trade Invoices but declared in GDs---Detention of goods by the Customs Authorities with the perception that there was no cigarette industry in Afghanistan to justify import of cigarette paper---Validity---Notwithstanding the fact that evidence supporting existence or otherwise of cigarette industry in Afghanistan was a mixed question---Collector's action to detain cigarette paper was un-maintainable and inconsistent with the practice in Customs House---Detention of cigarette paper was unlawful unless it was excluded from the scope of Afghan Transit through a Gazette Notification---Instructions of Federal Board of Revenue and. Ministry of Commerce endorsing Collector's suggestion not to allow transit of cigarette paper could not be lawfully pressed into service---Maladministration on the part of Customs was established---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct Collector Customs to allow transit of the goods after getting the description in the Afghan Transit Trade Invoices appropriately amended; to call upon the Clearing Agent to show cause why action should not be taken against him for the omission of description of cigarette paper in Afghan Transit Trade Invoices and to initiate disciplinary action against the relevant Customs staff at the Port and boarder for their negligence and inefficiency.

Writ Petition No.1681 of 1998 rel.

Yasin Tahir, Senior Advisor Dealing Officer.

Ishtiaq Ahmad Authorized Representative.

Zubair Shah, DC Customs, Peshawar Departmental Representative.

2011 PTD 2455

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

SHABBIR AHMAD SUMRA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.196/LHR/IT(166)406 of 2011, decided on 22nd July, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.170 & 171---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000), S.2 (3)---C.B.R. Circular No.15 of 1997 dated 6-11-1997---Refund---Retrenchment from service under golden handshake scheme---Pretext, loss of assessment record---Refund claim was not processed by the Department on the ground that returns and other records were not available and inference was drawn that the complainant had not filed returns---Validity---Complainant had approached concerned officials several times after the announcement of the apex court judgment for its implementation and payment of resultant refund and compensation due to him but there was no response---In case any document was required by the Department to dispose of refund claim, the same should have been formally requisitioned by issuing notice to the complainant---No notice was issued and the Department seeked to further delay matters on the pretext of loss of complainant's assessment record---Application filed by the complainant seeking payment of refund and compensation cite the complainant's National Tax Number which showed that the complainant was indeed borne on the Departmental record as a taxpayer and Department should have taken action to implement the judgment of apex court and issued any refund found due to the complainant as a result of income tax deducted at source on lump sum payment of golden handshake amount---Delay in issuance of refund was tantamount to maladministration---Delay also created the complainant's right to receive compensation under S.171 of the Act---Federal Tax Ombudsman recommended Federal Board of Revenue to direct the Chief Commissioner to issue refund due /compensation due, as per law, within 21 days.

2006 PTD 2277 rel.

(b) Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S.2(3)-Maladministration---Loss of assessment record-Non?-availability of complainant's assessment record in the Department was a serious lapse on the part of Departmental officials concerned as being custodian of all taxpayer's records; it was the Department's responsibility to keep the record in safe custody and ensure its integrity---Evidently, the Department had failed to discharge its responsibility in that regard, and such a lapse was tantamount to maladministration.

Muhammad Munir Qureshi, Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

Saleem Akhtar, DCIR Departmental Representative.

2011 PTD 2462

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs TELECOM ENGINEERING AND CONSULTANCY HOUSE (PVT.) LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 55/ISD/ST(18)/664 of 2011, decided on 29th July, 2011.

Sales Tax Act (VII of 1990)---

----S.3---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000), S.2 (3)---Scope of tax---Mal­administration---Income from providing and rendering of consultancy services---Taxpayer contended that Assistant Commissioner deliberately and wilfully issued a show-cause notice for levy of sales tax on the income derived from providing and rendering of consultancy services which were otherwise not falling in the ambit of Sales Tax Act, 1990; and .detailed reply along with specimen of invoices for providing consultancy services were submitted, but the Assistant Commissioner dismissed the reply without seeking any additional information or providing adequate opportunity of hearing just to create frivolous and arbitrary demand to meet the revenue targets of Federal Board of Revenue---Taxpayers who had produced relevant records requested that Departmental Representative may examine the records before advancing arguments---Validity---After thorough examination of record, Departmental Representative was willing to rectify the order-in-­original, provided the complainant supplied photocopies of invoices of consultancy services---Order-in-original was evidently arbitrary, oppressive, and passed without applying proper care and due diligence, which tantamounted to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue (i) direct the concerned Commissioner, to call for the record and rectify the impugned order-in-­original under S.45A of the Sales Tax Act, 1990 (ii) issue instructions through a Sales Tax General Order that declarations made in the Income Tax Returns shall not be made basis for assessment of Sales Tax unless the registered person is provided a reasonable opportunity of hearing and the advance income withheld duly shown in the Income Tax Return is accounted for.

Muhammad Ramzan Bhatti Dealing Officer.

M. Mansoor Saeed, AR and Farman Ali, GM (TEA CH) Authorized Representative.

M. Ali Khan, ACIR and Ghulam Hussain, IRAO Departmental Representative.

2011 P T D 2476

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

AZIM KHAN MARWAT, SECRETARY GENERAL PAKISTAN LIBRARY ASSOCIATION, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.36/Isd/IT(14)/490 of 2011, decided on 19th July, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Second Sched., Part-III, CI. (2)---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000), S.2(3)---National Education Policy 2000---Education letter OM No.F-17(2)R-2006-32 dated 12-2-2009---Sindh Government S.R.O. No.S(HE-II) LIB-49/96 dated 12-9-2009---Accountant General Punjab letter No.DAG/PRs/HM-4046 dated 18-I-2011---Reduction in tax liability---Refusal to grant 75% rebate in tax to the librarians which was admissible to full time teachers and researchers---Validity---Librarians in Provinces of Sindh and Punjab were availing the concession of 75% rebate in their income tax liability on the basis of letters/circulars of Education Departments and the office of Accountant General, Punjab---First Appellate Authority had also accepted the contention of librarians that they were entitled to the claimed rebate of 75% on the basis, of Tribunal's judgment---No evidence had been produced by the Department to show that orders of First Appellate Authority or that of Appellate Tribunal had been got annulled by any superior judicial fora---Declining the request of the complainant by the Federal Board of Revenue for allowing 75% rebate in income tax liability was, prima facie, discriminatory in view of fact that orders passed by First Appellate Authority and Appellate Tribunal still hold the field and the librarians in Punjab and Sind were availing the benefit of 75%. rebate in their income tax liability---Such tantamounted to maladministration--Federal Tax Ombudsman recommended Federal Board of Revenue to address the issue of evident discrimination in allowing 75% rebate to librarians all over Pakistan within 21 days.

Income Tax Appellate Tribunal's Judgment Bearing Nos.420 and 421/LV of 2009 decided on 21-12-2009 rel.

Usman Khalid Mirza, Advisor and Muhammad Ramzan Bhatti Dealing Officers.

Azim Khan Marwat Mrs. Binte Zehra, Secretary, Islamabad Colleges Librarians and Muhammad Zulgarnain Akhtar, Librarian, Iqra University, Islamabad Authorized Representatives.

Aftab Ahmad, Chief ITP Inland Revenue, Tax Policy, F.B.R. Departmental Representative.

2011 P T D 2533

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

WAHEED SHAHZAD BUTT, ADVOCATE

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.97/ISD/SUO-MOTU(03)/957 of 2011, decided on 21st June, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111(1), 206 & Second Sched., Part-IV, Cl. (45-A) [as substituted by S.R.O. 333(1)/2011, dated 2-5-2011]--F.B.R. Circular No.6 of 2011 dated 18-6-2011---F.B.R, Circular No.8 of 2011 dated 21-7-2011---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Suo motu notice of a private complaint taken by Federal Tax Ombudsman---S.R.O. 333(1)/2011, dated 2-5-2011 giving immunity to five (5) specified categories of sales tax zero-rated taxpayers from provisions of S. 111(1) of Income Tax Ordinance, 2001---Complainant's pleas that such S.R.O. read with Circular No.6 of 2011, dated 18-6-2011 was discriminatory against honest taxpayers paying taxes regularly as Federal Board of Revenue was not competent to extend scope of such immunity to provisions of S. 111(1)(b) and (c) of Income Tax Ordinance, 2001---Board's plea was that such S.R.O. was issued with a view to expand base of sales tax---Validity---Board admitted that its intention in issuing such Circular No. 6 of 2011 was not to extend its scope to provisions of S. 111(1)(a) and (c) of Income Tax Ordinance, 2001---Board through another Circular No. 8 of 2011, dated 21-7-2011 while rescinding such Circular No. 6 of 2011 had addressed grievances of complaint regarding such S.R.O.---Circular No. 6 of 2011 was illegal, thus, its issuance would tantamount to maladministration under S. 2(3) of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Ombudsman directed Board to ensure vetting of Circular under S.206 of Income Tax Ordinance, 2001 from Ministry of Law before its issuance, and set up a committee of experts with specified time for providing feed-back to prevent issuance of Circular amenable to routine mis-use and mis­interpretation.

Muhammad Ramzan Bhatti, Advisor for Dealing Officer.

Waheed Shahzad Butt for the Complainant.

Aftab Ahmad, Chief (ITP), and Muhammad Imtiaz, Secy. (WHT) for Departmental Representatives.

2011 PTD 2816

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

Messrs OMERJEE VAMRA, KARACHI and 27 others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint Nos.284-311/Khi/Cust(117-144)738-765 of 2011.

Customs Act (IV of 1969)---

----Ss. 25-A, 25-D, 80, 81, 155E & 155Q---Customs Rules, 2001, R.107(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 10(3)---Delay and inaction in finalization of provisional assessment order---Objection about jurisdiction of Federal Tax Ombudsman, on the ground that the electronic message about final determination of value was appealable; and the matter involving assessment of duty and taxes, being outside the jurisdiction of Federal Tax Ombudsman, were not relevant as the complainants had neither challenged the electronic message nor the assessment of duty and taxes---No dispute existed between the complainants and the department that the imported goods were provisionally assessed under S.81 of Customs Act, 1969, despite the presence of applicable valuation ruling dated---Such was done on the insistence of the complainants that the value fixed under that valuation ruling, were much higher than the actual transaction values; and the Directorate General (Valuation) was already considering the request of the complainants for downward revision of the value order---Directorate General (Valuation), rejected the plea of the complainants to finalize the provisionally assessed value under the newly issued valuation ruling, and instead directed the complainants to approach Assessing Officer for issuance of final assessment order under S.80 of Customs Act; 1969---Representative body of the complainants approached the Director General (Valuation) for downward revision of customs value fixed under the valuation ruling but Director General (Value) rejected review application under S.25-D of Customs Act, 1969, for giving retrospective effect to valuation ruling unjustly---Interim order issued in favour of the complainants, had created vested interest to the complainants which could not have' been justly ignored at the time of issuance of subsequent valuation ruling---Issuance of said valuation ruling by Directorate General (Valuation) without applying the same to the impugned goods allowed provisional release; and rejected the review application, ignoring altogether the interim order, being arbitrary, unjust and unreasonable, was tantamount to maladministration under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Ombudsman recommended the FBR to direct the Director General (Valuation) to extend the application of Value Ruling to the impugned goods released provisionally under S.81 of the Customs Act, 1969 within 21 days; and report compliance within 30 days.

CIT v. Olympia Watch Co. 1987 PTD 739 ref. Justice (R) M. Nadir Khan, Advisor Dealing Officer.

Sattar Silat and Tanveer Ahmed, Importer Authorized Representative.

Muhammad Tahir, Director (Valuation), Abdul Hayee Sheikh, Deputy Director (Valuation) and Naveed Abbas Memon, Assistant Collector (PaCCS), Departmental Representatives.

2011 P T D (Trib.) 162

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member

S.T.A. No.555/LB of 2009, decided on 20th July, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss.2(37), 2(14), 6, 7, 8, 8A, 22, 33(1), 34(c) & 73---Tax fraud--Input tax---Show-cause notice on the ground that refund was received on invoices issued by the black-listed units---Appellant contended that supplier was black-listed on 30-8-2007 while the refund related to the year 2004---Validity---At the time of making supplies to the appellant, the supplier in question was alive and doing business---Any default or flaw on the part of appellant could not be taken into consideration to burden the appellant with the incidence of taxation and use as pretext to refuse the claim of refund---Even otherwise at the time of issuance of show-cause notice, the name of the supplier stood removed from the list of blacklisted persons---Letter of the department whereby name of the supplier was deleted from the black-listed persons, there was no allegation with regard to tax due and only reason which weighed with the department for declaring it black-listed was that its name was not found on the given address---Such anomaly was resolved subsequently and upon verification of the premises, the registered person/supplier was very much found on the given business address---Adjudication order as well as order-in-original passed by the authorities below were set aside by the appellate tribunal and the show-cause notice issued was cancelled and the appeal was accepted.

(b) Sales Tax Act (VII of 1990)---

----S.21(2)---De-registration, black-listing and suspension of registration---Procedure explained by Appellate Tribunal.

Akram Nizami for Appellant.

None for the Respondent.

2011 P T D (Trib.) 187

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member

I.T.As. Nos.1367-A/IB and 1227/IB of 2004, decided on 7th April, 2005.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 122, 121 & 120---Income Tax Ordinance (XXXI of 1979), Ss.59, 59A, 62, 63 & 65---Amendment of assessment---Assessment order treated to be issued under S.120 or issued under S.121 of the Income Tax Ordinance, 2001 or under Ss. 59, 59A, 62, 63 & 65 of the Income Tax Ordinance, 1979 could be amended before the substitution and insertion of subsections (5) and (5A) of S.122 of the 'Income Tax Ordinance, 2001 through Finance Ordinance, 2003.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.122---Amendment of assessment---Definite information---Assessing Officer could amend an order 'under subsection (1) of S.122 of the Income Tax Ordinance, 2001 on the basis of definite information regarding concealment of income.

I.T.A. No.739/IB of 2003 not relevant.

(c) Income Tax Ordinance (XLIX of 2001)---

----S. 122(1)---Amendment of assessment---Definite information--Information of survey team---Information available with the Taxation Officer did not constitute definite information regarding concealment of income sufficient to take action under S.122(1) of the Income Tax Ordinance, 2001---Genuineness of the agreement alleged to have been made by the assessee before the survey team was found to be doubtful and it could not be considered as definite information sufficient to establish the concealment of income.

(d) Income Tax Ordinance (XLIX of 2001)---

----S.122(1)-Amendment of assessment---Definite information---Estimation of sales survey team---Assessing Officer was not justified to consider the estimation of sales by the survey team as definite information of concealment.

(e) Income Tax Ordinance (XLIX of 2001)---

----S.122(1)---Amendment of assessment---Definite information---Assessment order could not be amended under S.122 (1) of the Income Tax Ordinance, 2001 on the basis of information the existence of which had not been undoubtedly established.

(f) Income Tax Ordinance (XLIX of 2001)---

----S.122(1)---Income Tax Ordinance (XXXI of 1979), Ss.65 & 66A---Amendment of assessment---Assessing Officer could not de novo re-assess the total income under S.122 (1) of the Income Tax Ordinance, 2001---Condition laid down in subsections (5) and (5A) for taking action under subsection (1) of S.122 of the Income Tax Ordinance, 2001 were almost the same as required for initiation of the proceedings under Ss.65 and 66A of the Income Tax Ordinance, 1979.

(g) Income Tax Ordinance (XLIX of 2001)---

----S.122(1)---Income Tax Ordinance (XXXI of 1979), Ss.65 & 66A---Amendment of assessment---Framing of fresh assessment by reopening the assessment already framed as was provided under Ss.65 & 66A of the Income Tax Ordinance, 1979 had not been provided under the Income Tax Ordinance, 2001---Under the provision of 5.122 of the Income Tax Ordinance, 2001, the scope of amendment of assessment order already passed had been widened to also include the concealed income which was previously covered under separate provision i.e. Ss.65 and 66-A of the Income Tax Ordinance, 1979.

(h) Income Tax Ordinance (XLIX of 2001)---

----S.122 (1)---Income Tax Ordinance (XXXI of 1979), Ss.65 & 66A--Amendment of assessment---Unlike the provisions of reopening and reassessment provided under Ss.65 & 66A of the Income Tax Ordinance, 1979 the amendment under S.122 of the Income Tax Ordinance, 2001 was restricted to the extent of making the alterations and additions in the existing order-Although the exercise of powers to made alteration and additions rests on the discretion of the Commissioner under the provisions of subsection (I) of S.122 of the Income Tax Ordinance, 2001 but at the same time the exercise of such power was subject to certain conditions as laid down in subsections (5) and (5A) of S.122 of the Income Tax Ordinance, 2001.

(i) Income Tax Ordinance (XLIX of 2001)---

----Ss.209 & 210---Income Tax Ordinance (XXXI of 1979), Ss.65 & 66A-Jurisdiction of the authorities to pass the order under the various provisions of Income Tax Ordinance, 2001 and Income Tax Ordinance, 1979---Distinction---Unlike the Income Tax Ordinance, 1979 under the law of Income Tax Ordinance, 2001 the amendment of any kind in the existing assessment order could be made by the same authority having the power of assessment under the provisions of Income Tax Ordinance, 2001 for the obvious reason of original authority having the power of assessment under the Income Tax Ordinance, 2001 being the senior officer of the rank of Commissioner in the hierarchy of the Income Tax Authorities---Such power of Commissioner could only be exercised by an Officer on behalf of Commissioner specially conferred upon him under the provisions of subsection 2 of S.209 of the Income Tax Ordinance, 2001 or delegated to hint by the Commissioner under S. 210 of the Income Tax Ordinance, 2001---Provisions of S.66A of Income Tax Ordinance, 1979 could be invoked only by an Inspecting Additional Commissioner or by a Commissioner in case the original assessment order was passed by an Inspecting Additional Commissioner---Similarly for invoking the provisions of S.65 of the Income Tax Ordinance, 1979 the approval of Inspecting Additional Commissioner was required, whereas there was no concept of obtaining any approval by an assessing authority from a higher authority for passing an order under the provisions of Income Tax Ordinance, 2001.

(j) Income Tax Ordinance (XLIX of 2001)---

----S.122(1)-Income Tax Ordinance (XXXI of 1979), Ss.19 & 20(1)(a)---Amendment of assessment---Property income---Proration of rental income instead of allowing vacancy allowance---Validity---Assessing Officer instead of allowing vacancy allowance on the basis of grass annual letting value, prorated the income for the period of 70 days by allowing deduction only under Cl.(a) of subsection (1) of S.20 of the Income Tax Ordinance, 1979---Method of calculation adopted by the Assessing Officer was not in accordance with the provisions of Ss.19 & 20 of the Income Tax Ordinance, 1979---Amended order passed under S.122(1) by the Taxation Officer on the basis of non-declaration of property income was also not maintainable---order passed under S.122(1) of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal in circumstances.

Yasmeen Sardar for Appellant.

Amjad Khan Khattak, D.R. for Respondent.

2011 P T D (Trib.) 218

[Income Tax Appellate Tribunal of Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Mahmood Ahmed Malik, Accountant Member

I.T.A. No.498/IB of 2004, decided on 19th March, 2005.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss.63, 56 & 61---Best judgment assessment---Framing of 'ex parte assessment without issuance of notice under S.61 of the Income Tax Ordinance, 1979---Validity---Ex parte assessment could only be made if, there was default of a notice issued under S.56 or S.61 of the Income Tax Ordinance, 1979 and could not be made until the said notice had been issued to the assessee---Issuance of notice under S.61 of the Income Tax Ordinance, 1979 before framing of assessment under S.62 or 63 of the Income Tax Ordinance, 1979 was an essential requirement without issuance of which the assessment framed was not maintainable in law---Assessment framed without complying with the mandatory provisions of sections of law which was necessary to be followed would be rendered illegal and liable to be annulled---Assessment framed without issuance of a notice under S.61 of the Income Tax Ordinance, 1979 was also rendered illegal for the reason that the provisions even if being procedural were of substantive in nature because penal action was provided in the Income Tax Ordinance, 1979 for its non-compliance-In addition to framing of an ex parte assessment a person was also liable for imposition of penalty under S.110 of the Income Tax Ordinance, 1979 as well as prosecution under S.117 of the Income Tax Ordinance, 1979 in case of default of a notice issued under S.61 of Income Tax Ordinance, 1979---Assessment framed without issuance of notice to assessee required under the provision of S.61 of the Income Tax Ordinance, 1979 being mandatory in nature was not maintainable in law and was annulled by the Appellate Tribunal as neither any proof of notice issued under S.61 of the Income Tax Ordinance, 1979 was available nor any such notice appeared to have been issued as per record available with the Department.

2000 PTD 2872; 1960 PTD 727 and 1987 PTD (Trib.) 335 rel.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss.63, 135 & 61---Best judgment assessment---Gain on sale of property and agricultural land---Addition of said gain with service of notice under S.61 of the Income Tax Ordinance, 1979---Validity---No evidence was available on record with regard to issuance of notice under S. 61 as well as the carrying-out proceedings under Ss.135/63 of the Income Tax Ordinance, 1979---Assessment order passed under Ss.63/135 of the Income Tax Ordinance, 1979 was not maintainable in law and was annulled by the Appellate Tribunal---Sole evidence-provided by the Department in proof of carrying out of assessment proceedings under S.135 was a copy of notice under S.62 of the Income Tax Ordinance, 1979 available on assessment record the service of which upon the assessee was also not established---Dispatch register and DCR of the Circle were not produced by the Department despite specific directions and opportunities provided for by Tribunal---All such facts created doubt about the carrying out of proceedings and framing of reassessment under S.135 of the Income Tax Ordinance, 1979---Benefit of doubt went in favour of the assessee---Assessment was also not maintainable on the point of limitation---Order of First Appellate Authority was modified and it was held by the Tribunal that the assessment framed under Ss. 63/135 of the Income Tax Ordinance, 1979 in respect of the issues raised through present appeal was not maintainable in law and was annulled with direction that while computing income of the assessee gain on sale of property and agricultural land should not be added to the income of the assessee.

2000 PTD 2872; 1960 PTD 727 and (1960) 2 Tax (III-474) = 1960 PTD 727 rel.

Muhammad Aslam Anwar for Appellant.

Muhammad Ali Shah, D.R. for Respondent.

2011 P T D (Trib.) 262

[Income Tax Appellate Tribunal of Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Mahmood Ahmed Malik, Accountant Member

I.T.As. Nos. 623/IB to 628/IB of 2003, decided on 6th November, 2004.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 13(1), 61, 62, & 65---Addition---Setting aside of---Income from sale of land/plots to individual customers---Assessee contended that addition should have been deleted by the First Appellate Authority instead of having been set aside as the same was made without confronting under S.62 of the Income Tax Ordinance, 1979---Validity--Statutory notices under S.61 of the Income Tax Ordinance, 1979 were issued on different occasions and each time the hearing was adjourned on the request of the assessee--Assessments reopened under S.65 of the Income Tax Ordinance, 1979 were barred by limitation of time on 30-6-2001---Assessee filed returns and reply to notices issued under Ss.62 and 13(1) of the Income Tax Ordinance, 1979 on 25-6-2001 and further reply was also filed on 26-6-2001 when there was hardly any time left with the Assessing Officer to issue any further notice---BY filing of returns along with details of income and wealth statements as well as reconciliation of wealth at such time, it was made impossible for the Assessing Officer by the assessee to issue any further notice on the basis of return/details filed on 25-6-2001 and 26-6-2001---Assessing Officer could not be expected to do an act which could not possibly be done---Irrespective of the justification for seeking adjournments by the assessee he could not be allowed to avail the benefit of the situation arising for the reasons the causes of which were attributable to assessee---If the Assessing Officer could not confront the assessee on the issue of assessment under the head "income from sale of land/plots" after filing of return along with details of such income on last dates because of time limitation he was himself responsible for such delay---One could not be allowed to avail benefit of his own mistake---Contention that assessments should be annulled instead of setting aside the issue for the reason that he was not provided with the opportunity of being heard through issuance of notice under S.62 of the Income Tax Ordinance, 1979 confronting him on the issue after filing of returns on 25-6-2001 was not acceptable---Ass'essee being a contributory party to the alleged default, by filing the returns and details on the last date not leaving any opportunity for the Assessing Officer to issue any further notice was not entitled to claim any benefit on the basis of the same.

(b) Income Tax Ordinance (XXXI of 1979)---

---S. 62---Assessment on production of accounts, evidence etc.---Income from sale of inherited land---Claim of exemption---Assessment of income by the Assessing Officer, claimed to be exempt, without confronting the assessee under S.62 of the Income Tax Ordinance, 1979---Setting aside of assessment by the First Appellate Authority instead of annulment---Validity---Assessee declared receipts/income which was claimed as not chargeable to tax---In case of claim of exemption under the fiscal law the onus was upon the assessee to substantiate his claim---Assessee when filed returns claiming exemption in respect of the receipts income declared by him, he was obliged to file evidence in support of the claim---For not producing any evidence in support of the claim of the exemption the Assessing Officer could reject the claim for not having been substantiated---Opportunity of providing evidence in support of the claim regarding sale of inherited land having already been provided by the First Appellate Authority, there remained no cause of grievance to the assessee---Under the provision of S.62 of the Income Tax Ordinance, 1979.a notice in writing pointing out defects in the books of accounts was required to be issued where account books were maintained and produced before the assessing officer---No statutory provision existed for issuance of any notice under S.62 of the Income Tax Ordinance, 1979 in case where no books of accounts were produced---Opportunity of being heard was to be provided to the assessee before making any decision against him---Assessee failed to substantiate his claim of exemption in respect of income from sale of inherited land, the Assessing Officer could reject the claim---Before such rejection the assessee should have been confronted on the issue by the Assessing Officer; however this being not a mandatory provision did not render the act as ab initio void and the defect being of a remedial nature stood cured with the decision of First Appellate Authority whereby the assessee had been provided with the opportunity of being heard---Order of First Appellate Authority whereby he had set aside the assessments on the issue of income assessed under the head "income from sale of land/plots to individual customer" was maintained by the Appellate Tribunal.

1971 SCMR 681; PLD 2002 SC Pak 408; 2003 PTD (Trib.) 1956; (2000) 82 Tax 215 (H.C. India); 1985 PTD (Trib.) 178; 1999 PTD (Trib.) 3892; 1993 PTD (Trib.) 266 and 2003 PTD (Trib.) 242 distinguished.

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss.13(1) & 62---Addition---Sale of land/plots to individual customers---Observation regarding careless of Assessing Officer---Assessee declared the amount of receipts as income from sale of inherited land---Assessing Officer had taken the same figure as taxable income treating the sale of land as business activities---Same figure of receipts declared by the assessee as receipts from sale of inherited land were adopted by the Assessing Officer as his income from business of sale of property without working out the income in a proper manner---Total sale receipts could not be adopted as business income without deducting the cost of sales since he had not added the amounts under the provisions of S.13(1) of the Income Tax Ordinance, 1979.

(d) Income Tax Ordinance (XXXI of 1979)---

----S. 62---Assessment on production of accounts, evidence etc.---Sale of land---Assessment of income---Setting aside of assessment by the First Appellate Authority---Assessing Officer on the basis of evidence available with him assessed the income---Assessee contended before the First Appellate Authority that he had not made any profit from the sale of land---Since the issue raised needed further verification of fact and since the assessee's appeals on this ground were not proved, the setting aside of the assessment on the issue for de novo assessment after ascertaining the fact was held to be justified and maintained by the Appellate Tribunal.

(e) Income-tax---

----Add back---Accommodation allowance---Taxability of---Assessee received the accommodation allowance as Member of Provincial Assembly---Assessing Officer treated the amount as house rent allowance and after allowing up to the 45% of the basic salary, the balance amount was added to the taxable salary---First Appellate Authority confirmed the treatment with the observation that the assessee for similar treatment for the next assessment year did not contest the same---Validity---Reason given by the First Appellate Authority was not plausible one and without any justified basis---One could not be deprived of a legal right merely for the reason that he had not availed the same at some other occasion, even if, he was otherwise legally entitled for the same---Contention of the assessee that the amount received was not house rent allowance but charges to meet the expenses for accommodation during the Assembly session needed further verification of fact and of further discussion regarding the applicability of relevant provision of law---Order of First Appellate Authority on the issue was vacated and assessments were set aside and remanded to the Assessing Officer for de novo decision and after taking into consideration the contention of the assessee and relevant provision of law.

(f) Income Tax Ordinance (XXXI of 1979)---

----Ss.13(1) & 65---Addition---Investment in purchase of land---Assessee contended that additions should have been deleted instead of having been set aside by the First Appellate Authority as the additions were made without issuance of notice under S.13(1) of the Income Tax Ordinance, 1979---Validity---Contention of the assessee was not found to be correct because as mentioned in assessment order, a notice under S.13(1) of the Income Tax Ordinance, 1979 was issued on 7-5-2001 wherein he was required to explain the sources of investment made in purchase of land which was sold---Assessee had also filed replies/explanation on 25-6-2001 and 26-6-2001 as reproduced in the assessment order---Assessee's contention that Assessing Officer had not issued notice under S.13(1) of the Income Tax Ordinance, 1979 after filing of return under S.65 of the Income Tax Ordinance, 1979 and wealth statement on 25-6-2001, was devoid of force---Assessee had already been confronted under S.13(1) of the Income Tax Ordinance, 1979 on the basis of information that he made the said investment in the purchase of property which was sold---Requirements of S.13(1) of the Income Tax Ordinance, 1979 whereby he was required to be provided with the opportunity to file explanation regarding sources of investment having been fulfilled---No legal infirmity in the assessment order on the issued was found---Order of First Appellate Authority whereby the assessment had been set aside on the issue of addition under S.13(1) of the Income Tax Ordinance, 1979 was not interfered with by the Appellate Tribunal.

(g) Income Tax Ordinance (XXXI of 1979)---

----S.13(1)(aa)---Addition---Assessee contended that addition should have been deleted instead of setting aside because the assessee had explained the source of investment made in purchase of asset as per reconciliation of wealth---Assessee, at the time of heaving, raised another objection that the addition was liable to be deleted on the ground that amount added was different from the one confronted to explain to the assessee through notice under S.13(1)(aa) of the Income Tax Ordinance, 1979---Validity---As per explanation filed on 26-6-2001, it was informed by the assessee that the actual of 1/2 share was Rs.66,31,200 and not Rs.43,26,098---Contention that assessee was not confronted with the amount of Rs.66,31,200 after filing the reply/explanation rendered the addition illegal was not acceptable---Under the provision of S.13 of the Income Tax Ordinance, 1979 the assessee was to be provided with the opportunity to explain the sources of investment which was provided and also availed by him---Assessee had himself offered the explanation with regard to investment of Rs.66,31,200 and could not take the plea that the opportunity was not provided to him for explaining the source of investment when he had himself offered the explanation for Rs.66,31,200---Even otherwise, assessee filed his reply/explanation to the notice issued under S.13(1) of the Income Tax Ordinance, 1979 at the time when there was hardly any time left with the Assessing Officer to issue any further notice---Assessee could not be allowed to avail the benefit of situation created by himself --- Order of First Appellate Authority was held to be justified in the circumstances.

(h) Income Tax Ordinance (XXXI of 1979)---

----S.13(1)(aa)---Addition---Accretion in wealth---Setting aside of addition---Contention of the assessee was that accretion in wealth stood reconciled with the revised wealth statement; and amount of accretion pertained to the previous year, which could not be added to the income of the assessee for the year under consideration---Validity---Plea of the assessee was not accepted by the Assessing Officer for the reason that the assessment for the assessment year 1998-99 already stood completed as such the revised wealth statement filed for the relevant year i.e. as on 30-6-1998 was not acceptable---No legal infirmity in the order of First Appellate Authority to set aside the assessment was found because issue involved relating to period of investment and sources of investment required the verification of facts---Adequate relief already stood provided to the assessee by the order of First Appellate Authority whereby the assessment on the issue had been set aside for verification and ascertainment of fact.

Muhammad Aslam Anwar and Masoom Akhtar, FCA for Appellant.

Dr. Muhammad Iqbal, D.R. for Respondent.

2011 P T D (Trib.) 321

[Income Tax Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Abdul Rauf, Accountant Member

C.I.T./W.T., GUJRANWALA ZONE, GUJRANWALA

Versus

Dr. AKMAL HUSSAIN

I.T.A. sNos.1197/LB, to 1199/LB of 2007, decided on 3rd October, 2009.

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 122---Income Tax Rules, 2002, First Sched., Part-II---Amendment of assessment---Non-issuance of notice---Effect---First Appellate Authority vacated the order passed by the Taxation Officer as the Taxation Officer had not issued prescribed notice under S.122 of the Income Tax Ordinance, 2001---Non-issuance of notice rendered the proceedings initiated on the basis thereof as illegal and not sustainable under the law.

2001 PTD 1633 and 2006 PTD (Trib.) 429 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.122---Amendment of assessment---Amendment of assessment without approval from Commissioner of Income Tax---Validity---Taxation Officer had amended the assessment under S.122(1) of the Income Tax Ordinance, 2001 without obtaining necessary approval from the concerned Commissioner of Income Tax---Neither such fact had been mentioned anywhere in the body of amended assessment order nor had been described in the assessment record or the order sheet entries or anywhere in the order itself---Taxation Officer, in circumstances, had assumed jurisdiction under S.122 (1) of the Income Tax Ordinance, 2001 without lawful authority.

2006 PTD 2607 (Trib.) rel.

(c) Income Tax Ordinance (XLIX of 2001)---

---S.122---Amendment of assessment---Amendment of assessment on the basis of material already available on record---Validity---Assessing Officer had amended the deemed assessment on the basis of material already available on record and no fresh information/documents had come into the possession of the department---No justification was available to amend the already completed assessment under S.122 of the Income Tax Ordinance, 2001.

2003 PTD 1093 rel.

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 122--Amendment of assessment---Conditions for---Provision of subsection (5) of S.122 of the Income Tax Ordinance, 2001 stipulate three conditions for issuance of notice i.e. if any income chargeable to tax had escaped assessment, or total income had been under-assessed, or assessed at too low a rate or had been subject of excessive relief or refund, or any amount under a head of income had been misclassified.

(e) Income Tax Ordinance (XLIX of 2001)---

----S.122---Amendment of assessment---Issuance of notice not fulfilling the requisite preconditions---Effect---Notice sent by the Taxation Officer under S.122 of the Income Tax Ordinance, 2001 did not fulfil the requisite preconditions as mentioned in S.122(5) of the Income Tax Ordinance, 2001, which rendered the entire proceedings as illegal and void ab initio.

1997 PTD 47 rel.

(f) Income Tax Ordinance (XLIX of 2001)---

----Ss.176 & 122(9)---Notice to obtain information or evidence---Amendment of assessment---Combined notice under S.122(9) of the Income Tax Ordinance, 2001 and no notice had been sent under S.176 of the Income Tax Ordinance, 2001 which was an essential pre-requisite for proceedings under S.122 of the Income Tax Ordinance, 2001---Taxation Officer had amended the assessment by issuing combined notice under S.122(9) of the Income Tax Ordinance, 2001---Assessment framed in pursuance of a combined notice under S.122 of the Income Tax Ordinance, 2001 suffered front legal infirmity and was not sustainable in the eyes of law.

1987 PTD (Trib.) 1914; 1998 PTD (Trib.) 973 and I.T.A. Nos.1690 and 1691 vide order, dated 15-12-2003 rel.

(g) Income Tax Ordinance (XLIX of 2001)---

----S. 111(1)(b)---Unexplained income or assets---Year of discovery---Notice under S.111(1)(b) of the Income Tax Ordinance, 2001 was dated 17-5-2007 seeking its compliance by 26-5-2007---Amount was discovered in the year 2007 and immediately preceding financial year was 2006, so the addition, if any, could only legally be made in the year 2006 instead of relevant tax year as was required under S.111(2) of the Income Tax Ordinance, 2001---Taxation Officer was legally obliged if so required to take cognizance of the matter in the year 2006 and not for the year in which he had made the addition.

(h) Income Tax Ordinance (XLIX of 2001)---

----Ss.111 (1)(b) & 122---Unexplained income or assets---Taxation Officer had amended the assessment on the basis of material already available on record, without issuing statutory notice in accordance with law under 5.122 of the Income Tax Ordinance, 2001 and additions made under S.111(1)((b) of the Income Tax Ordinance, 2001 without confronting the taxpayer---First Appellate Authority rightly vacated the amended assessment order of the Taxation Officer---Order of First Appellate Authority was upheld by the Appellate Tribunal.

(i) Income Tax Ordinance (XLIX of 2001)---

----Ss.111 (1)(b) & 122--Unexplained income or assets---Addition---Accretion in wealth--- Opportunity of being heard---Addition on account of unexplained income under S.111(1)(b) of the Income Tax Ordinance, 2001 was correctly made in the tax year, 2006 which was the immediate preceding financial year in which unexplained income was discovered---Addition was made in pursuance of notice issued under S.111(1)(b) of the Income Tax Ordinance, 2001 as recorded in the amended assessment order passed under S.122(1) of the Income Tax Ordinance, 2001---Taxation Officer fully complied with the requirements of natural justice by affording the taxpayer adequate opportunity to submit explanation with regard to the sources of accretion in wealth---Where the taxpayer failed to respond, Taxation Officer was fully justified to make addition and there was no legal infirmity vis-a-vis the addition under S.111(1)(b) of the Income Tax Ordinance, 2001.

(j) Income Tax Ordinance (XLIX of 2001)---

----Ss.111 (1)(b) & 176---Unexplained income or assets---Addition---Accretion in wealth---Accretion not commensurate with income declared from year to year---Notice under S.176 of the Income Tax Ordinance, 2001 was to be issued to call for information, evidence record etc. relevant to the tax leviable under the Income Tax Ordinance, 2001----In the present case, no information or record was required to be called---Taxpayer owed an explanation with reference to the accretion in wealth because the said accretion did not find support from his record in the sense that accretion was not commensurate with the income declared from year to year---Taxpayer was asked to explain the sources of accretion in wealth but he did not come up with any explanation---Taxation Officer made the addition under S.111(1)(b) of the Income Tax Ordinance, 2001, which appeared to be more than justified, in circumstances.

(k) Income Tax Ordinance (XLIX of 2001)---

---Ss. 122 & 111(1)(b)---Amendment of assessment---Definite information---Accretion in wealth---Nothing on record to substantiate the accretion in wealth constituted 'definite information'---Accretion in wealth was not supported by record of the taxpayer i.e. income declared from year to year which by itself was a definite information' warranting action under S.122(1) of the Income Tax Ordinance, 2001---Order passed by the Taxation Officer under S.122(1) of the Income Tax Ordinance, 2001 was based upon sound legal footing in terms of availability ofdefinite information'---Scrutiny of wealth statements warranted amendment of assessment under S.122 of the Income Tax Ordinance, 2001 because, prima facie, there was nothing on record to substantiate the accretion in wealth---Taxation Officer was fully justified to amend the assessment under S.122(1) of the Income Tax Ordinance, 2001 to the extent of Tax Year 2006 as 'definite information' in terms of S.122(5) of the Income Tax Ordinance, 2001 was available---Order of Taxation Officer passed under S.122(1)(b) of the Income Tax Ordinance, 2001 did not suffer from any legal infirmity, which was restored by the Appellate Tribunal---Order of First Appellate Authority pertaining to tax year, 2006 was vacated.

(l) Income Tax Ordinance (XLIV of 2001)---

----Ss.210 & 122---Delegation---Further approval from Commissioner---Scope---Taxation Officer having discharged his duty under the authority delegated to him by the Commissioner under S.210 of the Income Tax Ordinance, 2001, there was no need to seek further approval from Commissioner for proceeding to amend the assessment under S.122(1) of the Income Tax Ordinance, 2001.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Kh. Khalid Feroze, FCA for Respondent.

2011 P T D (Trib.) 508

[Income Tax Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Jawaid Masood Tahir Bhatti, Judicial Member and Shahid Azam Khan, Accountant Member

Messrs MARRIOT WORLDWIDE CORPORATION, KARACHI

Versus

TAXATION OFFICER, CIRCLE C-8, COMPANIES-I, KARACHI

I.T.As. Nos.1472/KB to 1475/KB of 2004, 348/KB and 1681/KB of 2005, decided on 14th May, 2008.

Per Shahid Azam Khan, Accountant Member.---[Minority view].

Income Tax Ordinance (XXXI of 1979)---

----Ss.12(5), 80AA, 62 & 55---Avoidance of Double Taxation and Prevention of Fiscal Evasion between Pakistan and United States of America, Art.-III---Income deemed to accrue or arise in Pakistan---Fee for technical services--Reimbursement of marketing cost and reservation cost---Receipts were declared on account of reimbursement of marketing cost and reservation cost and claimed the same to be exempt from levy of tax---Assessing Officer confronted the assessee that claim of reimbursement of marketing cost under Article-III of the Pak-US treaty was not exempt from tax as the same was fee for technical services taxable in Pakistan under S.80-AA of the Income Tax Ordinance, 1979---Grounds for such objection was that agreement executed between the parties showed fixed percentage of gross room revenue (Hotel) receipts for reimbursement of cost as services, such as marketing, use of reservation system and property management system and were not exempt---Validity---Expenses actually incurred in the performance of certain duties and assessee at no stage of the assessment and appeal proceedings had produced any evidence that the expenses were actually incurred during the relevant accounting year and evidence had also not been produced to establish actual billing of expenses---Fact was that such claims had arisen only by virtue of agreement between the parties as a certain percentage of room reservation receipts and amounts had not been claimed by the assessee on actual re imbursement basis---Assessee had also not produced any evidence regarding any direct benefit accruing to the contracting party for the amounts claimed as exempt---Assessing Officer had based his conclusions on the basis of terms of agreement and charged the amounts to tax as fee for technical services---There could be no other evidence except the agreement itself to examine the nature of such receipts---Order of First Appellate Authority was declared fully justified in upholding the assessment or re-assessment orders.

2007 PTD (Trib.) 1550; 1979 PTD (Trib.) 44; 1999 PTD (Trib.) 3362; 142 ITR 493; 237 ITR 190; (2004) 91 ITR 133; 202 ITR 1014; 1983 PTD 300; 185 ITR 70; 138 ITR 326; 49 ITR 137; 41 ITR 615; 160 ITR 243; 178 ITR 496; 135 ITR 522; 156 ITR 275; 177 ITR 299; 1999 PTD 4144; 1994 SCMR 222 = 1994 PTD 174 and 1996 PTD (Trib.) 100 ref.

Income Tax Ordinance (XXXI of 1979)---

----Ss.80-AA, 143B, 12(5) & 62---Avoidance of Double Taxation and Prevention of Fiscal Evasion between Pakistan and United States of America, Art.-III---Tax on income of non-residents from fees for technical service---Normal assessment---Deemed assessment---Receipts declared as exempt on account of reimbursement of marketing cost and reservation cost were charged to tax under the provisions of S.80AA of the Income Tax Ordinance, 1979 as fee for technical services---Assessee contended that when the provisions of normal income were applied the provisions of presumptive income were not applied; that where the provisions of presumptive income were applied those of normal income were not applied; that department had applied both the provisions in single order; that department though had passed the order under normal law but had applied the provisions of S.80AA of the Income Tax Ordinance, 1979 which was nullity in the eyes of law; and that if the department wished to proceed against the assessee under provisions of S.80AA read with S.12(5) of the Income Tax Ordinance, 1979 then the department should have asked the assessee to file statement under S.143B of the Income Tax Ordinance, 1979--Validity---Assessee filed returns of income under S.55 of the Income Tax Ordinance, 1979 and the legal course available to the Assessing Officer was to proceed under S.62 of the Income Tax Ordinance, 1979---It was only during the proceedings under S.62 of the Income Tax Ordinance, 1979 that it revealed on Assessing Officer that the amounts were chargeable to tax under S.80AA of the Income Tax Ordinance, 1979 as fee for technical services---Contentions of the assessee were repelled by the Appellate Tribunal since the assessee had not filed any statement under S.143B of the Income Tax Ordinance, 1979---No legal infirmity in the orders of Assessing Officer having been found appeal was dismissed being devoid of merit.

1999 PTD 3362 and 2004 PTD 2051 ref.

Per Jawaid Masood Tahir Bhatti Judicial Member, disagreeing with Shahid Azam Khan, Accountant Member--- [Majority view]

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss.80-AA, 143B, 12(5) & 62---Avoidance of Double Taxation and Prevention of Fiscal Evasion between Pakistan and United States of America, Article-III---Fee for Technical Services---Reimbursement of marketing cost and reservation cost---Receipts were declared on account of reimbursement of marketing cost and reservation cost and claimed same to be exempt from levy of tax---Assessing Officer confronted the assessee that claim of reimbursement of marketing cost under Article- III of the Pak-US treaty was not exempt from tax as the same was fee' for technical services taxable in Pakistan under S.80-AA of the Income Tax Ordinance, 1979---Grounds for such objection was given that agreement executed between the parties showed fixed percentage of gross room revenue (Hotel) receipts for reimbursement of cost as services such as marketing, use of reservation system and property management system and the same was not exempted---Validity---Term `fee' for technical services envisaged a consideration for rendering technical and managerial services---Assessee had neither rendered any managerial nor technical services for which they had received the amount---Contracting party had simply reimbursed its fair and equitable share according to the terms of agreement to assessee---Department had not brought on record any justification to make out a case that such amount received by the assessee was in fact received by it by way of rendering any technical or managerial services which onus squarely lay on the shoulders of department---First Appellate Authority totally missed that the amounts reimbursed by the contracting party to assessee was neither for rendering any managerial nor technical services---Amounts reimbursed were nothing but fair and equitable share reimbursed---Assessing Officer had also failed to justify the basis for taxing the amount reimbursed, giving the amount at a certain percentage was nothing but a mere mode/mechanism to calculate the amount which would neither change the nature of the payment nor would make an amount chargeable to tax which otherwise was not chargeable---Amounts reimbursed could not be considered as fee for technical and managerial services and was not liable to tax and addition made in all the years needs to be deleted---Amount reimbursed by the contracting party to the assessee could not be treated as fee for technical services and was exempt under Article-III of the Agreement for Avoidance of Double Taxation between Pakistan and USA.

2007 PTD (Trib.) 1550 rel.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss.80-AA, 143B, 12(5) & 62---Avoidance of Double Taxation and Prevention of Fiscal Evasion 'between Pakistan and United States of America, Article-III---Tax on income of non-residents from fees for technical service---Normal assessment---Deemed assessment---Receipts declared as exempt on account of reimbursement of marketing cost and reservation cost were charged to tax under the provisions of S.80AA of the Income Tax Ordinance, 1979 as fee for technical services---Assessee contended that when the provisions of normal income were applied, the provisions of presumptive income were not applicable and where the provisions of presumptive income were applied, those of normal income were not applicable that department had applied both the provisions in single order; and department though had passed the order under normal law but had applied the provisions of S.80AA of the Income Tax Ordinance, 1979 which was nullity in the eyes of law; and that if the department wished to proceed against the assessee under provisions of S.80AA read with section 12(5) of the Income Tax Ordinance, 1979 then the department should have asked the assessee to file statement under S.143B of the Income Tax Ordinance, 1979---Validity---Assessee had claimed exemption from tax on the reimbursement of marketing and reservation cost and that could only be done by filing a return of income which was the correct course of action---Statement under S.143B of the Income Tax Ordinance, 1979 was required to be filed in those cases where income was subject to Presumptive Tax Regime as provided under Ss.80B, 80C, 8000, 80A, 80AA of the Income Tax Ordinance, 1979---Since reimbursement was claimed as exempt, the assessee was not legally required to file statement under S.143B of the Income Tax Ordinance, 1979 and had the assessee filed the statement, Assessing Officer would have impliedly accepted the taxability of the amounts reimbursed as fee for technical services'---Assessing Officer had no jurisdiction to proceed under normal law while assessing the income under S.80-AA of the Income Tax Ordinance, 1979; it was the responsibility of the department to call for the filing of statement under S.143B of the Income Tax Ordinance, 1979, if he was of the opinion that the amount claimed by the assessee fell under the provisions of S.80-AA of the Income Tax Ordinance, 1979.

1999 PTD 3362 and 2004 PTD 2051 rel.

(c) Income-tax---

----Administration of justice---Application of correct law---Court was bound to apply correct law whether claim had been made by the concerned parties or not.

PLD 1963 SC 382; PLD 1963 SC 564 and 1980 SCMR 469 rel.

Per Khawaja Farooq Saeed, Chairperson agreeing with Javaid Masood Tahir Bhatti, Judicial Member

(d) Income Tax Appellate Tribunal---

----Difference of opinion---Referee Member has to remain within the paramaeters proposed and questions or issues referred by the other Members for the reason of their respective difference of opinion with each other.

1990 PTD 787 rel.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss.12 (5), 80AA, 62 & 55---Avoidance of Double Taxation and Prevention of Fiscal Evasion between Pakistan and United States of America, Article-III---Income deemed to accrue or arise in Pakistan---Fee for technical services---Reimbursement of marketing cost and reservation cost (Hotel)---Receipts were declared on account of reimbursement of marketing cost and reservation cost and claimed it to be exempt from levy of tax---Assessing Officer confronted the assessee that claim of reimbursement of marketing cost under Article-III of the Pak-US treaty was not exempt from tax as the same was `fee' for technical services taxable in Pakistan under S.80-AA of the Income Tax Ordinance, 1979 for the reason that agreement executed between the parties showed fixed percentage of gross room revenue (Hotel) receipts for reimbursement of cost as services such as marketing, use of reservation system and property management system and the same was taxed---Validity---Relationship of the two parties did not involve any use of technology or trade mark and there was no benefit of technology involved---Services definitely were provided by use of computerized reservation system etc. of the Hotel but the independent and main integrated job undertaking by the assessee-company was rendering of services which basically was a sort of advertisement and subsequent booking of the clients were covered within the sales promotion-Re­imbursement to assessee on account of marketing cost and reservation cost was not 'fee from technical services' and S.12(5) of the Income Tax Ordinance, 1979 was not applicable on the facts of the case.

Irfan Saadat Khan and Arshad Siraj for Appellant.

Basharat Qureshi, D.R. for Respondent.

2011 PTD (Trib.) 20

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Abdul Rauf, Accountant Member

COLLECTOR OF SALES TAX, FAISALABAD

Versus

Messrs SUN RISE FOOD INDUSTRY, FAISALABAD

S.T.A. No.100/LB of 2009, decided on 11th May, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 8 & 46---Disallowance of input tax---Registered person produced evidence regarding the admissibility of adjustment of input tax and on its basis the Adjudicating Officer accepted the claim of registered person excepting an amount which was held to be inadmissible being in excess of 20% of input tax claimed on the value of the exports---Adjudicating Officer, for making the said disallowance, relied upon an agreement executed between the Collector of Sales Tax and Association, whereby it was agreed that the consumption of packing material would be restricted up to 20% of total value of exports---On filing appeal by the registered person Collector (Appeals) directed to allow the adjustment of input tax as the claim of registered person was based on consumption of packing material in exports---Department had filed appeal against judgment of Collector (Appeals)---Contention of department was that agreement executed between the Collector and Association was binding upon the contracting parties---Plea of department was that the claim of input adjustment being in excess of 20% limit had been rightly disallowed by the Assistant Collector---Representative of the registered person on the other hand had contended that the Agreement (with Association) relied upon by the Assistant Collector was not of binding nature because it was not reduced into a statutory instrument---Appellate Tribunal, in circumstances, directed the concerned officer to allow the adjustment of input tax to the registered person because same could not be denied on the basis of agreement which was not enforceable under the law. ?

Messrs Crescent Re-rolling Mills GST's case 2005 CL 73; Messrs Mehmood and Co. v. Assistant Collector Sales Tax Lahore and others 2005 PTD 72 and 2007 PTD 47 ref.

Syed Nadeem Hassan, D.R. for Appellant.

Khubaib Ahmad for Respondent.

2011 PTD (Trib.) 36

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member

Messrs AFTAB SOAP FACTORY (PVT.) LTD., FAISALABAD

Versus

C.I.T., R.T.O., FAISALABAD

M.A. Additional Ground No.100/LB of 2010, decided on 12th August, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss. 36 & 46---Appeal---Additional grounds for appeal---Appellant had taken additional grounds for appeal to the effect, that impugned adjudication order was hit by time limitation in terms of proviso to subsection (3) of S.36 of Sales Tax Act, 1990; and that in the absence of any charge-sheet and proper statement of allegation regarding "Collusion of deliberate act", the impugned show-cause notice was illegal, void and without jurisdiction under S.36(1) of Sales Tax Act, 1990---Representative of the appellant had argued that since the grounds takers were purely of legal nature, those could be allowed to be agitated during the course of arguments---Validity---No doubt the appellant had not taken the ground sought to be argued for additional grounds, but his application in that respect merited acceptance---Appellant was permitted to agitate the ground mentioned in application---Principles.

2006 SCMR 1630; 2006 SCMR 783; 2000 PTD 359; 2009 PTD (Trib.) 1136 and Haji Mehr Din v. Commissioner of Income Tax 2002 PTD 541 ref.

(b) Administration of justice---

----Rules of procedure were meant to advance the cause of administration of justice than to thwart same---Technicalities should never undermine the advancement of purpose for which judicial or quasi-judicial forums were established by law---Every kind of such technicality could even be ignored if directly or indirectly it would hinder the process of justice or due relief to which a party was found entitled to---Mere technicalities should not be allowed to defeat the ends of justice and a departure could justifiably be made if required by .the circumstances of the case.

Manager, Jammu and Kashmir State Property in Pakistan v. Khuda Yar and another PLD 1975 SC 678 ref.

(c) Interpretation of statutes---

----Rules of a court of judicial forum---Interpretation---Principles---Place of Rules in a judicial system was more to provide strength and support rather to demolish or destruct it---While interpreting the rules of a court or a judicial forum it was all the more necessary that those should be seen in the perspective of the purpose or the reason for the creation of the forum and to advance its effectiveness---Interpretation of the rules of a court or judicial forum was totally different from the rules by which the administrative wings of the State proceed to curb crime, regulate the conduct of a particular relationship between the citizens or ensure peace, tranquillity, enjoyment of civil liberties etc.---Rules of a court or a judicial forum must have only one aim i.e. that the person seeking justice must be facilitated---Rules of court or procedure should not be used against person seeking justice, unless he was contumacious and attempted to employ them against his adversary or to destroy the credibility of the forum itself.

Khubaib Ahmad for Appellant.

Nemo for Respondent.

2011 P T D (Trib.) 168

[Inland Revenue Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Abdul Raul; Accountant Member

CIR LTU-ISLAMABAD

Versus

Messrs RASTGAR ENGINEERING CO. (PVT.), ISLAMABAD

I.T.As. Nos. 709/IB to 711/IB of 2010, decided on 6th August, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 113, 154 & 169---Determination of minimum tax on aggregate sale proceed of local sales and export sales---Assessee company while calculating its tax liability under S.113 of Income Tax Ordinance, 2001, clubbed export sales with the local sales and worked out minimum tax on combined turnover---Taxation Officer taking contrary view proceeded to determine the minimum tax under S.113 of the Income Tax Ordinance, 2001 on local sales only, whereas export sales were held to be taxable separately---On filing appeal against judgment of the Taxation Officer, Commissioner Income Tax (Appeals) found that the minimum tax under S.113 of the Income Tax Ordinance, 2001 was payable with aggregate turnover, which included both presumptive and non presumptive sales--Validity---Appellate Tribunal upheld findings of Appellate Authority (Commissioner) holding that for the purpose of calculation of minimum tax under S.113 of Income Tax Ordinance, 2001 turnover from all sources, would mean aggregate turnover from all sources and would include both presumptive and non-presumptive sales.

2009 PTD 1707 and Mushtaq Textile Mills Limited v. Karachi Metropolitan Corporation 1994 CLC 1516 ref.

(b) Interpretation of statutes---

----Fiscal statute---Prospectivity--Enactment creating liability/obligation against the taxpayer was a substantive law, which would always be prospective in its application.

M. Ishfaq Ahmed D.R. for Appellant.

Muhammad Imran ACMA for Respondent.

2011 P T D (Trib.) 184

[Inland Revenue Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member

I.T.A. No.564/IB of 2010; decided on 1st June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.182, 114 & 120---Offences and penalties---Late filing of return---Declaration of loss and claim of refund---Levy of penalty---Validity---Penalty had been imposed as a result of non-compliance of provisions of S.114 of the Income Tax Ordinance, 2001 i.e. not filing of return within the prescribed time; such was a default in view of provisions of S.114 of the Income Tax Ordinance, 2001, which situation was covered under S.182(1) of the Income Tax Ordinance, 2001---Penalty for such default had been prescribed in Sub-Cl. (i) of S.182(1) of the Income Tax Ordinance, 2001 which clause had specified that the penalty should be imposed on the basis of the tax payable, whereas no tax had become payable even on assessment---Restriction imposed on calculation of penalty was one tenth of one per cent, of tax payable and maximum limit was 25% of the tax payable---Inevitability, the base point was the tax payable, resultantly second part of clause (i) came into operation only when initial calculation of penalty had been made on the basis of tax payable---For imposing the penalty for default under S.114 of the Income Tax Ordinance, 2001, the pre-requisite was the tax payable by such assessee---Fulfilment of basic ingredient of "tax payable" was a condition precedent for levying the penalty---Tax statutes were not to be interpreted strictly and were to be followed as per its language without stretching the meanings of the same---Had the intent of statute to impose the penalty in a situation like the present case, its linkage with tax payable would not have been expressed---Such interpretation was further strengthened from the provisions of S.182(1) of the Income Tax Ordinance, 2001 wherein for imposition, of penalty, linkage had been expressed with the tax payable---In the matter of taxation, literal approach had to be followed provided that it did not lead to manifest absurdity---Penalty for default of S. 114 of the Income Tax Ordinance, 2001 only became leviable when there was a "tax payable" but when no tax had been imposed on the Taxpayer, levy of penalty was not justified---No error or infirmity having been found in the order of First Appellate Authority, same was upheld and maintained by the Appellate Tribunal and departmental appeal being devoid of any merit was dismissed.

Sardar Zafar Mehmood, D.R. for Appellant.

Khalid Mehmood, FCA for Respondent.

2011 P T D (Trib.) 212

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwa, Judicial Member and Abdul Rauf, Accountant Member

Messrs CHAUDHRY BROTHERS COTTON INDUSTRIES, BAHAWALPUR

Versus

COLLECTOR (APPEALS) (REFUND), CUSTOMS, SALES TAX AND FEDERAL EXCISE, MULTAN

M.A.(Cond.) No.149/LB of 2010 and S.T.A. No.86/LB of 2009, decided on 14th September, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss. 66 & 46---Sales Tax Refund Rules, 2006, R.28---Refund claim---Limitation---Rejection of claim---Appeal---Appellant filed refund claim accrued to him on account of excess Input Tax paid by him along with electricity bills---Said claim was rejected by Deputy Collector (Refund) holding same to be barred by time---Rejection order having been upheld by Collector (Appeals), appellant had filed appeal before Appellate Tribunal---Appellant, under R.28 of Sales Tax Refund Rules, 2006 was required to furnish data on the prescribed software along with the supportive documents within sixty days of filing of return, said data however was filed by the appellant eighteen days after the expiry of time limit---Effect---Appellant had to adhere to and comply with certain parameters in order to be entitled to refund claim---Appellant having failed to adhere to conditions as laid down in R.28 of Sales Tax Refund Rules, 2006, his claim had rightly been rejected by authorities and rejection order could not be interfered with and same was maintained.

(1987) 56 Tax 130 (S.C. Ind.); 2002 PTD 549; 2002 PTD 506 and Pfizer Laboratory Ltd. v. Federation of Pakistan PLD 1998 SC 64 ref.

(b) Administration of justice---

----Justice should not be sacrificed at the altar of technicalities.

Khadim Hussain Maitla, ITP for Appellant.

Nemo for Respondent.

2011 P T D (Trib.) 228

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Abdul Rauf, Accountant Member

Messrs ASKARI CEMENT LIMITED, WAH

Versus

COLLECTOR CENTRAL EXCISE, RAWALPINDI

F.E.A. No.62/CE/IB of 2009, decided on 4th October, 2010.

Central Excise Act (I of 1944)---

----Ss. 3, 3-B, 4 & 36---Determination of value for the purpose of levy of excise duty---Failure to pay duty on the basis of retail price charged from the general body of consumers---Additional duty and imposition of penalty---Reference to High Court---Authority in its report alleged that appellant company was not paying central excise duty on the basis of retail price charged from the general body of consumers---Report had suggested that appellant be directed to make payment of short paid duty being the differential amount between the retail price paid by the general body of consumers and the contracted price---Adjudicating Officer in order-in-original found that appellant was liable to pay differential excise duty along with additional duty and penalty was also imposed on the appellant---Appellate Tribunal had upheld order-in­-original passed by Adjudicating Officer and on reference/appeal to High Court, High Court remanded case to the Tribunal---Issue of declared retail price was considered by the hierarchy of the officers of the department and it was after a long process of deliberation that Assistant Collector communicated approval and acceptance of the declared retail price by the competent Authority---Such communication of acceptance by itself constituted an order which could not be reviewed or revoked, unless the department was in possession of some definite information regarding the evasion of excise duty through concealment/ suppression of facts---No such allegation was levelled either in show-cause notice issued to the appellant or in order-in-original---As soon as acceptance of declared retail price was communicated to the appellant, the transaction regarding the supply of goods became past and closed transaction from. the end of the department which could not be interfered with by Departmental Officers on flimsy grounds---Retail price earlier accepted by the department, could not be discarded for the purpose of charging excise duty---Department was directed to charge 'excise duty on the retail price accordingly.

Crescent Textile Limited Lyalpur v. C.B.R. 1980 SCMR 773; Premier Tobacco Industries v. Deputy Collector of Central Excise 1989 CLC 2045; Souvenir Tobacco Company Ltd. 1989 CLC 1134 and PLD 1990 SC 68 ref.

Tahir Razzaq, F.C.A. and Shaukat Ali Meo, Manager Tax for Appellants.

Imran Shah, D.R. for Respondent.

2011 PT D (Trib.) 257

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Ikram Ullah Ghauri, Accountant Member

C.I.T. (LEGAL) RTO, RAWALPINDI

Versus

SHARIF HUSSAIN

I.T.As. Nos.47/IB and 38/IB of 2010, decided on 2nd November, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.115, 114, 120 & 122---Persons not required to furnish a return of income---Statement was filed under S.115 of the Income Tax Ordinance, 2001; and was modified under S.122 of the Income Tax Ordinance, 2001 on the basis of definite information---First Appellate Authority found that statement filed under S.115 of the Income Tax Ordinance, 2001 was neither a return nor there was any concept of deemed assessment order hence there was no question of subsequent modification---Validity---Provision of S.122 of the Income Tax Ordinance, 2001 deals with amendment of an assessment order treated as issued under S.120 or issued under S.121. of the Income Tax Ordinance, 2001---Legislature treated the statement as an assessment under S.120 of the Income Tax Ordinance, 2001 in continuation of treating the statement under S.115 of the Income Tax Ordinance, 2001 as a substitute of return under S.114 of the Income Tax Ordinance, 2001---Statement was a return and the consequence of assessment under S.120 of the Income Tax Ordinance, 2001 in respect of return under S.114 of the Income Tax Ordinance,, 2001 should follow in respect of statement under S.115 of the Income Tax Ordinance, 2001---Statement having been declared as substitute of return all subsequent treatments and benefits on its submission shall apply mutatis mutandis on the statements also---Order of First Appellate Authority to such extent was cancelled by the Appellate Tribunal and the matter was remanded to First Appellate Authority for deciding the other issues which had not been adjudicated upon as the appeal had been decided on technical grounds.

2003 PTD 739 and 2006 PTD 734 (H.C. Sindh) distinguished.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.169(3), 114, 115, 120 & 122---Tax collected or deducted as a final tax---Return of income---Amendment of assessment---Filing of statement was equal' to assessment---Scope---Section 169 of the Income Tax Ordinance, 2001 declared tax collected or deducted as final tax in certain situations; and withholding tax charged on the provisions mentioned therein to be as final discharge; it did not protect any other source of income of the assessee which was not covered by the said transaction; which means that the other provisions of the Income Tax Ordinance still remained intact---Under such scheme of law some sources of income had been put under presumptive tax regime and had been declared as final discharge---Law makers through insertion of the words "an assessment shall be treated to have been made under S.120 and" had declared the filing of the statement, equal to an assessment---Said phrase read with complete remaining section i.e. "the person shall not be required to furnish a return of income under S.114 for the year" had made the statement a substitute of the return under S.114 of the Income Tax Ordinance, 2001---Such assessment was treated to have been made under S. 120 of the Income Tax Ordinance, 2001.?

(c) Income-tax---

---'Discovery'---'Information'--- Connotation---Date on which the matter came to the knowledge of the department to be as information---'Discovery' was different from information' orcoming to knowledge'---Information may come to the knowledge of person by mouth or any other source but 'discovery' could only be established when information was supported by reasonable evidence---Some evidence that leads to the reason to believe of the existence of the some undisclosed asset or income leads to `discovery'.?

2003 PTD 739 disagreed.

I.T.As. Nos. 756 and 757/LB/2009 rel.

Ziaullah Khan, D.R. for Appellant.

Muhammad Iqbal for Respondent.

2011 P T D (Trib.) 284

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmed, Judicial Member and Shahnaz Rafique, Accountant Member

COLLECTOR OF CUSTOMS, SALES TAX AND FEDERAL EXCISE, MULTAN

Versus

Messrs MEHR DASTGIR LEATHER AND FOOTWEAR, MULTAN

S.T.A. No.1647/LB of 2009, decided on 2nd November, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10, 33(2)(cc) & 46---Adjustment of input tax and refund claim---Assessee claimed adjustment of input tax and claimed refund on the strength of input invoices issued by the blacklisted supplier for relevant period---Deputy Collector (Adjudication) issued a show-cause notice to the assessee raising various objections therein and on the basis of those objections vide his order-in-original initiated the proceedings against the assessee and not only rejected the claim of refund, but also imposed penalty in terms of S.33(2)(cc) of Sales Tax Act, 1990---Collector (Appeals) set aside order-in-original---Validity---Representative of the department, could not produce any further tangible or material evidence to rebut the findings of the Collector (Appeals)---Proceedings were initiated against the assessee on the basis of whims, surmises and conjunctures---Impugned order in further appeal before the Tribunal was only to drag the assessee into another chain of litigation---Collector (Appeals) had rightly decided the case in favour of the assessee after thorough examination of the facts of the case---Impugned order being not suffering from any factual or legal infirmity, order passed by the Collector (Appeals) was upheld and departmental appeal was dismissed.

Dr. Sheryar, D.R. for Appellant.

Shoaib Ahmed Sheikh for Respondent.

2011 P T D (Trib.) 286

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

C.I.R. (LEGAL), LTU, ISLAMABAD

Versus

Messrs AL GHURAIR GIGA PAKISTAN (PVT.) LTD.

I.T.As. Nos.562/IB, 563/IB and 813/IB of 2010, decided on 25th November, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 56, 57(iii), 21 & 39---Set off of losses---Other income---Set-off of other income against expenses---Assessing Officer observed that loss could only be determined after adjustment of expenses towards business revenue---Validity---Main contention of revenue was that there was no business revenue earned by the assessee yet, the expenses claimed could not be said as admissible deduction identified under S.21 of the Income Tax Ordinance, 2001---If there was no income earned and expenses were made at the primitive stage, same would constitute as negative income---According to revenue, expenditure would disqualify for deduction only if no income results from such expenditure in a particular assessment year, but if there was some income, small or meagre, the expenditure would be eligible for deduction---Expenditure which was otherwise a proper expenditure could not cease to be such merely because there was no receipt of income---Whatever was a proper outgoing by way of expenditure must be debited irrespective of whether there was receipt of income or not--- Such was the plain requirement of proper accounting and the interpretation S.57(iii) of the Income Tax Ordinance, 2001 could not be any different---Deduction of the expenditure could not be held to be conditional upon the making or earning of the income---Business loss was rightly computed by the taxpayer and was available for set off against income from other sources under S.56 of the Income Tax Ordinance, 2001 with balance business loss to be carried forward for adjustment against income from business of future periods in terms of S.57 of the Income Tax Ordinance, 2001---Department also failed to rebut that exchange gain was unrealized---First Appellate Authority had rightly directed the Taxation Officer to allow credit of tax payments by way of deductions under various section of the Income Tax Ordinance, 2001---No exception was available to the order passed by the First Appellate Authority which was upheld and maintained by the Appellate Tribunal.

Lord Thankerton in Hughes v. Bank of New Zealand (1938) 6 ITR 636, 644 (HL); Madras High Court in Appa Rao v. CIT (1962) 46 ITR 511; Muhammad Ghouse v. CIT (1963) 49 ITR 127 (Mad); The Bombay High Court in Ormerods (India) Pvt. Ltd. v. CIT (1959) 36 ITR 329; The Allahabad High Court in Chhail Behari Lai v. CIT (1960) 39 ITR 696; The Madhya Pradesh High Court in CIT v. Dr. Fida Hussain G. Abbasi (1969)_ 71 ITR 314; the Kerala High Court in M.N. Ramaswamy Iyer v. CIT (1909) 71 ITR 218 and The Orissa. High Court in CIT v. Gopal Ch. Patnaik (1978) 111 ITR 86 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 21---Admissibility of expenses---Requirements---For computation of income under a stipulated head of income during a tax year, earning of income during that tax year was not an essential requirement for admissibility of expenses incurred under the provisions of the Income Tax Ordinance, 2001---Only requirement for admissibility of an expense incurred was its incurrence 'wholly and exclusively for the purpose of business' subject to inadmissible deductions identified under S.21 of the Income Tax Ordinance, 2001---Deduction was allowable to the assessee in respect of administrative, selling and financial expenses, as these expenditures were admittedly incurred `wholly and exclusively for the purpose of business' despite the fact that the assessee did not generate any revenue during the relevant periods---Classification of expenses as 'unallocated' did not find support from the existing scheme of taxation.

(c) Income-tax---

----Pre-commencement expenditure---Definition---Pre-commencement expenditure was defined to include cost of feasibility studies, construction of prototypes, trial production activities and exclude depreciation, initial allowance, amortization and expense incurred for acquisition of land.

(d) Income Tax Ordinance (XLIX of 2001)---

----S.21---Admissibility of expenses---Pre-commencement expenditure---Business activities of assessee were in operation during the periods under consideration and the expenses claimed in any case were not classifiable as 'pre-commencement expenditure' owing to their nature---Considering the classification of claimed expenses as 'unallocated' may arguably render such expenditure as 'lost' and not claimable at all which was completely against the spirit of the law owing to the fact that expenses were incurred 'wholly and exclusively for the purposes of business'.

Sardar Zafar Mehmood, D.R. for Appellant.

Faisal Banday, FCA for Respondent.

2011 P T D (Trib.) 293

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Abdul Rauf, Accountant Member

Messrs NESPAK FOUNDATION, LAHORE

Versus

C.I.T., LEGAL DIVISION, R.T.O., LAHORE

I.T.As. Nos.369/LB, 295/LB, 1485/LB to 1488/LB of 2009, decided on 30th June, 2010.

(a) Income Tax Ordinance (XLIX of 2001)--

----S.80 (2)(b)(v), First Sched., Part-I, Division-II, Paragraph (ii)---"Person"-Cooperative society---Status of---First Appellate Authority directed the Assessing Officer to assign the status of association of person to. the taxpayer for the purpose of rate of tax---Department contended that as per S.80(2)(b)(v) of the Income Tax Ordinance, 2001 a cooperative society had been included within the definition of a company and as such Taxation Officer had valid reasons to charge tax on the income of the taxpayer at the rate applicable to a company---Attention was drawn to Paragraph (ii) of Division-II of Part-I of the First Schedule to the Income Tax Ordinance, 2001 wherein it was provided that the income of a finance society, a cooperative society and any other society was to be charged to tax at rate applicable to a company or an individual whichever was beneficial to the taxpayer---Department contended that by virtue of S.80(2)(b)(v) of the Income Tax Ordinance, 2001, a cooperative society was specifically included within the ambit of a company and consequently the rate of tax provided in the Paragraph (ii) of Division-II of Part-I of the First Schedule to the Income Tax Ordinance, 2001 was no longer applicable to its income---Validity---Notwithstanding the fact that a cooperative society had been clothed with the status of a company as per S.80(2)(b)(v) of the Income Tax Ordinance, 2001, its income was proposed to be taxed at a relatively lower rate in order to ensure the growth and expansion of the Cooperative 'Societies---No conflict existed between S.80(2) of the Income Tax Ordinance, 1979 and Paragraph (ii) of Division-II of Part-I of the First Schedule to the Income Tax Ordinance, 2001, and both the provisions were applicable simultaneously---No legal infirmity was found in the order of the First Appellate Authority as far as direction regarding charging of tax as per Paragraph (ii) of Division-II of Part-I of the First Schedule to the Income Tax Ordinance, 2001 was concerned.?

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 153(1)(c)-Payments for goods and services---Execution of contract---Work sublet to various sub-contractors---Assessment of receipts received by the assessee for execution of work under a contract ' under Presumptive Tax Regime---Contention was that although contract was executed by the assessee, but it had confined itself only to the rendering of supervisory services and the entire work had been sublet to various sub-contractors who submitted regular bills to the assessee-company for the work done by them; and at the time of making payment to sub-contractors the assessee-company deducted tax from their bills under S.153(1)(c) of the Income Tax Ordinance, 2001, which constituted final discharge of liability in their cases---Department contended that in view of agreement between assessee and the authorities receipts were to be treated as contractual income and assessed under Presumptive Tax Regime under S.153(6) of the Income Tax Ordinance, 2001---Validity---Assertion that assessee had sub-let the entire work to various sub-contractors and tax was also being regularly deducted from the payments made to them under S.153 of the Income Tax Ordinance, 2001 and deposited in State Exchequer could not be brushed aside casually---Interest of revenue were being adequately safeguarded by the assessee by way of compliance with the provisions of S.153(1)(c) of the Income Tax Ordinance, 2001 vis-a-vis the payments made to sub-contractors---Taxation Officer and the First Appellate Authority were not justified in treating the receipts of the assessee as income from the execution of contracts assessable under Presumptive Tax Regime because assessment of receipts under Presumptive Tax Regime in the hands of assessee-company would result in double taxation, first in the hands of assessee and then in the hands of sub-contractors which was not countenanced by law---Orders of the authorities below were vacated and it was directed that the consultancy services fee be assessed as normal law income of the assessee.?

(c) Income-tax---

----Nature of receipts---Determination---In order to ascertain the nature of a receipt/income the substance of the transaction from which it emanates is of prime importance rather than the mere form.?

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 169(2)(b)---Tax collected or deducted as a final tax---Proration of administrative and general expenses---Payments made to sub-contractors and sub-consultants were treated as income of assessee under Presumptive Tax Regime and held to be inadmissible deductions from its income in view of S.169(2)(b) of the Income Tax Ordinance, 2001---Balance expenses were prorated between the presumptive rind normal law income on the basis of ratio of quantum of receipts assessable under the respective tax regimes---Assessee contended that Taxation Officer was not justified in treating the receipts as contractual income because the assessee had not executed the contract itself; and entire work was sublet to different contractors and 90% of the amount was passed on to them in consideration of work done by them whereas the assessee's share was only a amount of about 10% for rendering supervisory services---Validity---Nature of transactions between the assessee and authorities was to be determined with reference to the substance rather than the exterior of the transaction---Proration of administrative and general expenses between the Presumptive Tax Regime income and normal law income was also not sustainable---Appellate Tribunal directed that all the administrative and general expenses be treated as having been claimed by the assessee against normal law income in the audited statements of accounts.?

(e) Income Tax Ordinance (XLIX of 2001)--

----Ss.21(c) & 155---Admissibility of expenses----Payment of rent---Non-deduction of tax---Admittedly, no tax had been deducted from payments and expense was not held to be an admissible deduction under S.21(c) of the Income Tax Ordinance, 2001---Assessee contended that it was engaged in multiple business dealing with the landlord for which regular exchange of amount took place between the two; and the amount was adjusted in these inter company transactions and actual payment of cash was not made on this account; and that under S.155 of the Income Tax Ordinance, 2001 deduction of tax was to be made at the time of actual payment and in absence of actual payment the provisions of withholding tax were not applicable---Revenue contended that amount of rent was liable to withholding tax because the assessee being a prescribed person, was legally obliged to deduct tax under S.155 of the Income Tax Ordinance, 2001---Validity---Actual delivery of amount was not the only mode of payment; even passing of a debit entry in the books of account amounted to payment---While making adjustment in books of accounts by way of passing debit entries the assessee was legally obliged to reduce the amount of debit by the amount of withholding tax because the amounted of expense recorded in the books of accounts through a debit entry amounts to making payment---Assessee, having failed to discharge its legal obligation of withholding tax was bound to suffer the consequence as laid down in S.21(c) of the Income Tax Ordinance, 2001---Disallowance having been made in accordance with the provisions of S.21(c) of the Income Tax Ordinance, 2001 was upheld by the Appellate Tribunal. ?

(f) Income Tax Ordinance (XLIX of 2001)---

----S. 21(k)---Disallowance of excess perquisites---Amount of excess perquisites had been worked out with reference to consolidated figure of emoluments of all the employees rather than on the basis of identification of excess payment of perquisites and allowances on case to case basis---Taxation Officer was required to identify the amount of excess allowances and perquisites in the case of each employee and then make the addition of the aggregate excess amount so identified to the income of the assessee---Such exercise was not done during the course of assessment and an easy way of calculating excess perquisites was found by taking the figures representing the sum total of the payments made to the employees under various heads---Such way of calculating the excess perquisites was not in accordance with law and not sustainable---Assessment was set aside on the point by the Appellate Tribunal and case was remanded to Taxation Officer for examination and determination of the excess amount of perquisites in the light of observations made in the order of the Tribunal.?

Muhammad Tahir, D.R. for Appellant.

Ch. M. Ismail, I.T.P. and Ch. Wasim Ismail for Respondent.

2011 P T D (Trib.) 317

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

TEHSIL MUNICIPAL ADMINISTRATION, BHAKKAR

Versus

C.I.R. (APPEALS), R.T.O., FAISALABAD

I.T.A. No.956/IB of 2010, decided on 3rd December, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 153(1)(c) & 161---Payments for goods and services---Failure to pay tax collected or deducted---Assessee in default---Tehsil Municipal Administration---District Government---Appeal barred by limitation---Assessee, Tehsil Municipal Administration, was obligated to deduct tax from payments released to Citizen Community Boards for development projects but failed to discharge its statutory responsibility---Taxpayer was treated as 'taxpayer in default' for not discharging legal obligation to deduct and deposit tax into Government Treasury---Assessment was passed requiring the taxpayer to deposit such amount---Taxpayer contended that funds had been allocated by the District Government but the said Government failed to deduct/recover withholding tax---Assessing Officer instead of seeking an explanation from the concerned EDO, raised an irrational demand against the taxpayer for non-deduction of withholding tax on account of Citizen Community Boards to whom funds had been released by the District Government--Validity--Withholding tax on payments made to Citizen Community Boards was not deducted by the taxpayer and it was well established that the taxpayer violated the provisions of S.153(1) of the Income Tax Ordinance, 2001---Further contention was that demand should have been enforced against the EDO, District Government rather than the Tehsil Municipal Administration--Validity---In the aftermath of dissolution of elected Tehsil Administration, the Tehsils in Punjab were no longer separate administrative and financial entities---Tehsil Municipal Administration headed by an Administrator appointed by the provincial government was pretty much part of the district administration and functions under the administrative control of the DCO---Any tax liability was an internal affair of the district administration of which Tehsil Municipal Administration was a component---District as well as the Tehsil Municipal Administration receive their respective financial allocations or funding directly from the provincial government, hence de novo initiation of the process of recovery of withholding tax from the EDO would be meaningless---Taxpayer could not produce any evidence that the Citizen Community Boards in :question were registered with the district government---At one stage, the taxpayer even stated that the recovery of withholding tax had already been effected from Tehsil Municipal Administration---Appeal was in sequential even on merit---Even otherwise First Appellate Authority had rightly dismissed the appeal being beyond the clock because no plausible reason for condonation of delay was furnished by the taxpayer---Appellate Tribunal did not interfere with the order in appeal decided on the question of law involving limitation of time---Order of First Appellate Authority was affirmed by the Appellate Tribunal.?

Bilal Ahmed for Taxpayer.

Zia Ullah Khan, D.R. for Department.

2011 P T D (Trib.) 329

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khalid Waheed Ahmed and Syed Masood ul Hassan Shah, Judicial Members and Syed Aqeel Zafar ul Hasan, Accountant Member

I.T.As. Nos.1495/KB to 1497/KB of 2002, decided on 27th January, 2005.

(a) Income Tax Ordinance (XXXI of 1979)---

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Limitation---Rectification of order---Calculation of limitation period ---For initiation of proceedings under S.66-A of the Income Tax Ordinance, 1979 , the limitation period was to be reckoned from the date of the relevant order, wherein the issue under consideration had been discussed and decided---Contention of Departmental Representative that the limitation period was to be counted from the date of the rectification order whereby only the credit of the tax paid was allowed and no change was made in the assessment order itself was repelled---Order passed under S.66-A of the Income Tax Ordinance, 1979 was vacated by the Appellate Tribunal having been passed after the expiry of limitation and the original assessment framed under S. 62 of the Income Tax Ordinance-stood restored.

(b) Income Tax Ordinance (XXXI of 1979)---

----Third Sched., R.8 (5)(j) & S. 66-A---Regulations of Mines and Oilfields and Mineral Development (Government Control) Act (XXIV of 1948), Ss.2, 3B & 4---Mining Concession Rules 1986---Petroleum Concession Agreement, Art. XIII, Para 13.2---Petroleum Policy, 1994---C. B. R. Circular No. 7 of 1981 dated 6-7-1981---Computation of depreciation allowance---Sale proceeds---Assessee, a sub-contractor--Nature of exploration work for the purposes of production of petroleum---Carrying out of survey which may be made through any method, was an essential part of the process for discovery and production of petroleum---Work of survey was carried out under a contract---Copy of contract between Pakistan Oilfields and the assessee company was produced by the assessee and it was contended that the agreement with the other companies were executed on the similar lines---Claim of the assessee that the geophysical survey through seismic reflection method was performed by the assessee under a contract with the different oil companies was found to be correct though the assessee company itself had not entered into any contract with the Government of Pakistan for exploration and production of petroleum in Pakistan---Benefit of Third Schedule R.8(5)(j) of Income Tax Ordinance, 1979 was not available to the assessee circumstances.

(c) Income Tax Ordinance (XXXI of 1979)---

----Third Sched., R.8, (5)(j & S.66-A---Regulations of Mines and Oilfields and Mineral Development (Government Control) Act (XXIV of 1948), Ss.2, 3B & 4---Mining Concession Rules 1986---Petroleum Concession Agreement, Art, XIII, Para 13.2---Petroleum Policy, 1994---C.B.R. Circular No.7 of 1981 dated 6-7-1981---Computation of depreciation allowance---Sale proceeds---Assessee a sub-contractor---Claim of benefit of concession---Validity---Benefits as per R.8(5)(j) of the Third Schedule to the Income Tax Ordinance, 1979 was available only to the original contractors who had been granted licence for exploration and production of the petroleum in Pakistan and was not available to their contractors or sub-contractors---Assessee not being the original contractor but a contractor of the licence, company was not entitled to the benefits of the said clause.

I.T.A. No. 1447 and 1432/KB of 2001 rel.

(d) Income Tax Ordinance (XXXI of 1979)---

----Third Sched., R.8 (5)(j) & S.166-A---Regulations of Mines and Oilfields and Mineral Development (Government Control) Act (XXIV of 1948), S.2, 3B & 4---Mining Concession Rules 986---Petroleum Concession Agreement, Art. XIII, Para 13.2--Petroleum Policy, 1994---C.B.R. Circular No.7 of 1981 dated 6-7-1981---Computation of depreciation allowance---Sale proceeds---Benefits of R.8(5)(j) of the Third Schedule to the Income Tax Ordinance, 1979 were not available to the contractors and sub-contractors of the licensee company granted licence for exploration and production of petroleum in Pakistan.

(e) Income Tax Ordinance (XXXI of 1979)---

----S. 66-A---Regulations of Mines and Oilfields and Mineral Development (Government Control) Act (XXIV of 1948), S.2, 3B & 4---Mining Concession Rules, 1986---Petroleum Concession Agreement, Art. XIII, Para 13.2---Petroleum Policy, 1994---C.B.R. Circular No.7 of 1981 dated 6-7-1981---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Sub-contractors of licensee company---Exemption from levy of tax on re-export of equipment---Exemption from payment of tax was available to contractors and sub-contractors of the licensee companies from payment of tax on re-export of equipment imported by them---Word `tax' used in Para 13.2 of Art. XIII of the Concession Agreement also include the income tax---Concession agreement executed by the President of Pakistan in pursuance of the provisions of the Regulations of Mines and Oilfields and Mineral Development (Government Control) Act, 1948 being specific in nature would prevail upon the provision of Income Tax Ordinance, 1979 being general in nature---No tax could be charged on the re-export of equipment used in Pakistan for the exploration and production of petroleum in view of the provisions of concession agreement executed by the President of Pakistan with the oil companies in pursuance of the rules framed under the provision of Act, 1948---No addition shall be made to the income by making enhancement in the value of equipment re-exported either on account of adding back of depreciation or otherwise---Order of Inspecting Additional Commissioner under S.66A of the Income Tax Ordinance, 1979 was not maintainable and Inspecting Additional Commissioner was not justified to initiate the proceedings under S.66-A of the Income Tax Ordinance, 1979 because the assessments framed were not prejudicial to the interest of revenue on account of the findings that no tax was leviable on re-export of the equipment used in Pakistan for exploration and production of petroleum---Order of Inspecting Additional Commissioner was vacated and the original assessments stood restored by the Appellate Tribunal.

Khalid Majid, F.C.A. for Appellant.

Muhammad Tahir Khan, D.R. for Respondent.

2011 P T D (Trib.) 352

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

Messrs FAUJI FERTILIZER COMPANY LTD.

Versus

C.I.R. (LEGAL DIVISION) L.T.O., ISLAMABAD

I.T.As. Nos.689/IB and 686/IB of 2010, decided on 29th September, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.5, 4, 8, 39, 80, 94(3), 150, 2(19)(f), 2(42), 2(63), 122(5A) & First Sched., Part-I, Division-II & III---C.B.R. Circular No.3 of 2009 dated 17-7-2009---C.B.R. Circular No. 5 of 2008 dated 5-7-2008---Tax on dividends---Rate of tax---Assessee contended that dividend income which had been received front resident companies was subject to tax under S.5 read with S.94(2) of the Income Tax Ordinance, 2001 whereas the same was charged to tax under S.39 of the Income Tax Ordinance, 2001 as income from other sources @ 35%---Validity---Legislature, in S.5 of the Income Tax Ordinance, 2001 had used the word "person" which as per Cl.(42) of S.2 of the Income Tax Ordinance, 2001 read with S.80 of the Income Tax Ordinance, 2001 included a company as well---Under S.5 of the Income Tax Ordinance, 2001, dividend received from a company was subject to tax @ 10% and the word `company' referred to dividend received form resident company as well as non-resident company---In case of inconsistency between S.5 and S.94(3) of the Income Tax Ordinance, 2001, S.5 being a charging section would prevail---Dividend income received by the company/assessee from resident companies was subject to tax @ 10%---Order of First Appellate Authority was confirmed by the Appellate Tribunal whereby demand raised by Additional Commissioner on dividend income was deleted.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 94(2) & 5---Taxation of companies-Principles-Dividend income---Under S.94(2) of the Income Tax Ordinance, 2001 dividend paid by resident company shall be taxable in accordance with S.5 of the Income Tax Ordinance, 2001 whereas under S.94 (2) of the Income Tax Ordinance, 2001 dividend paid by a non-resident company shall be chargeable to tax under the head "Income from business" or "Income from other source ".

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 4(5), 5 & 8---Tax on taxable income---Dividend income---Section 4(5) of the Income Tax Ordinance, 2001 provided that dividend income was subject to tax as provided in S.5 of the Income Tax Ordinance, 2001 whereas S.8 of the Income Tax Ordinance, 2001 dealt with computation of taxable income---Legislature having used the words "Income" referred to in subsection (4) shall be subject to tax as provided for in Ss. 5, 6 or 7 and shall not be included in computation of taxable income in accordance with S.8 of the Income Tax Ordinance, 2001---Legislature had also used the words "this section shall not be applied to any income received by a person in the tax year subject to tax under Ss. 5, and 7" in subsection (5) of S.39 of the Income Tax Ordinance, 2001, in other words S.5 and not S.8 was the charging section.

(d) Income Tax Ordinance (XLIX of 2001)---

---Ss. 5 & 8---C.B.R. Circular No.3 of 2009, dated 17-7-2009---C.B.R. Circular No. 5 of 2008 dated 5-7-2008---C.B.R. Circular letter dated 16-2-2010 and 16-4-2010---Tax on dividends---Dividend received from company was till covered under S.5 of the Income Tax Ordinance, 1979 after amendment in S.8 of the Income Tax Ordinance, 2001 through Finance Act, 2007 supported through circulars of the Federal Board of Revenue.

(e) Income Tax Ordinance (XLIX of 2001)---

----Ss. 5 & 19(2)---Tax on dividends---Legislature had included dividend paid by non-resident company subject to tax in S.5 of the Income Tax Ordinance, 2001 inserting the words in subsection (1) "or treated as dividend under clause 19 of section 2" whereas under Cl.(19) of S.2 of the Income Tax Ordinance, 2001 remittance of after tax profit of a branch of foreign company was included in the definition of `dividend income' through Finance Act, 2008 which supported the view that dividend received by companies was covered under S.5 of the Income Tax Ordinance, 2001 and subject to tax @ 10%.

(f) Interpretation of statutes---

----Fiscal statute---Provisions related to tax are to be strictly construed in favour of the taxpayer---If there be any substantial doubt same was to be resolved in favour of taxpayer.

1996 SCMR 1470 rel.

(g) Income Tax Ordinance (XXXI of 1979)---

----S. 30---Income Tax Ordinance (XLIX of 2001), Ss.5 & 8---Income from other sources---Dividend income---Dividend income even chargeable to tax under the head "income from other sources" was subject to tax at reduced rate of taxation.

1996 PTD 276 rel.

(h) Interpretation of statutes---

----Fiscal Statute---Taxation of income at reduced rate is a beneficial provision of law which is to interpreted liberally.

PLD 1997 SC 700 = 1997 PTD 1693 rel.

(i) Income Tax Ordinance (XLIX of 2001)---

----S.124(5)---Assessment giving effect to an order---Exchange loss---Exchange loss was notional loss which could not be claimed as a deduction---Exchange loss was admissible on realized basis, however, due to peculiar circumstances, the company/assessee had not claimed the said exchange loss in tax year 2009 and Additional Commissioner had also not allowed the same in subsequent tax year---To allow the same in tax year, 2008 would be in the interest of justice---Appellate Tribunal had allowed exchange loss on mercantile system of accounting duly followed by the taxpayer and accepted by the Department in the past---Assessee's appeal was accepted on the issue and addition made by the Additional Commissioner was deleted and order passed by the First Appellate Authority was modified to that extent by the Appellate Tribunal.

2008 PTD (Trib.) 1040 rel.

(j) Income Tax Ordinance (XLIX of 2001)---

----S. 122(5A)---Amendment of assessment---Assumption of juris­diction---Assessment as erroneous insofar as prejudicial to interest of revenue---Additional Commissioner was well within his jurisdiction where he considered any assessment as erroneous insofar as prejudicial to interest of revenue.

2001 PTD (Trib.) 2919 ref.

Shahid Iqbal, L.A. for Appellant.

M. Rashid Qureshi, FCA for Respondent.

2011 P T D (Trib.) 366

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Amjad Ikram Ali, Accountant Member and Jawaid Masood Tahir Bhatti Judicial Member

Messrs ALI RAZA TEXTILE (PVT.) LTD., LAHORE

Versus

C.I.T., R.T.O., LAHORE

I.T.A. No.861/LB of 2009, decided on 18th December, 2009.

Per Khawaja Farooq Saeed, Chairperson

(a) Income Tax Ordinance (XXXI of 1979)---

----S.62(1), proviso---Assessment on production of accounts, evidence etc.---Confrontation through order-sheet entry---Validity---Non-­issuance of notice made the assessment as illegal---Even if one presumed that the assessee was confronted through order-sheet same still did not fulfil the requirement of issuance of a notice under proviso to S.62(1) of the Income Tax Ordinance, 1979---Said proviso had very clearly mentioned about issuance of notice and confrontation on order-sheet, could not be considered as its substitute---Non-issuance of specific notice was not being denied by the Department, proceedings were cancelled by the Appellate Tribunal.

2007 PTD (Trib.) 345; 2006 PTD (Trib.) 2179; 2003 PTD (Trib.) 2157; 2001 PTD (Trib.) 1480 and 2001 PTD (Trib.) 2938 rel.

Per Amjid Ikram Ali, Accountant Member.---[Minority view].

2003 PTD (Trib.) 2157; 2007 PTD (Trib.) 345 and 2004 PTD 441 ref.

Per Javaid Masood Tahir Bhatti, Judicial Member agreeing with Khawaja Farooq Saeed, Chairperson

(b) Income Tax Ordinance (XXXI of 1979)---

----S.62(1), proviso---Assessment on production of accounts, evidence etc.---Confrontation through order-sheet entry---Validity---Even if one presumed that the assessee was confronted through order sheet, same still did not fulfil the requirement of issuance of notice under proviso of S.62(1) of the Income Tax Ordinance, 1979---Proviso to S.62 had specifically mentioned about the issuance of notice and the confrontation on the order-sheet could not be considered as its substitute---Where the assessee furnished books of accounts, the accounts could not be rejected without confronting in writing through notice under S.62(1) of the Income Tax Ordinance, 1979---Notice under S.62(1) of the Income Tax Ordinance, 1979 through order sheet's entry would tantamount to no notice under S.62(1) of the Income Tax Ordinance, 1979 being mandatory requirement of law---Assessment order was cancelled and appeal filed by the assessee was allowed by the Appellate Tribunal.

(c) Income Tax Ordinance (XXXI of 1979)---

---S.62(1), proviso---Assessment on production of accounts, evidence etc.---Legal issues could be raised at any stage of the proceedings---In the present the case mandatory provision of law had been violated by the Taxation Officer which could not be cured through subsequent proceedings---Appeal of assessee was allowed.

Rana Munir Hussain for Appellant.

Ch. Karamat Ullah, D.R. for Respondent.

2011 P T D (Trib.) 372

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Abdul Rauf, Accountant Member

C.I.R. (LEGAL DIVISION) LTU, ISLAMABAD

Versus

Messrs AHMED ENTERPRISES, ISLAMABAD

I.T.As. Nos.593/IB and 594/IB of 2001, decided on 3rd August, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.177 & 122(1)---Audit---Construction of plazas---Sale of shops, offices and flats---Declared sales were not supported by attested registered sale-deeds---Estimation of sales on the basis of two agreements executed between the purchasers and the assessee---Validity---Actual sale price was discovered by the Taxation Officer through sale agreement executed between the purchaser and the assessee---When Taxation Officer discovered the actual sale price, the taxpayer tried to extricate itself by pleading that the purchasers had purchased the offices from third parties with whom the assessee had no concern---Plea of the taxpayer was belied by the fact that the names of such purchasers/customers were disclosed in the lists of buyers submitted by the taxpayer itself---Taxpayer had not only been persisting in non-compliance but also producing only those documents which suited its interest of getting away with assessments of its own choice---Taxpayer did not approach the taxation officer with clean hands as it did not deliberately produce the pertinent information before the taxation officer including bank statements and schedule of payments according to which the customers made payments to it for the purchase of offices and flats---Taxation Officer successfully proved under-statement in the disclosed sale price from the taxpayer's own record and details filed during the course of audit proceedings---Estimate of sales was upheld by the Appellate Tribunal in circumstances.

(b) Income Tax Ordinance (XLIX of 2001)---

---Ss. 122(9) & 177---Amendment of assessment---Cost of construction ---Taxation Officer issued another notice under S.122(9) of the Income Tax Ordinance, 2001 whereby the taxpayer was confronted with "appropriate addition" out of cost of construction on the ground that the declared cost was not open to verification---Taxpayer submitted that there was no justification to change the earlier stance and confront the taxpayer with an altogether new basis of addition and that too when the taxpayer had successfully proved that its declared cost of construction was more than reasonable, being favourably comparable with the rates provided by the Public Works Department of Pakistan---Explanation was not accepted by the taxation officer because in the absence of relevant supporting record the declared cost of construction was not considered as reliable and additions was made of being 20% of the declared cost of construction---Validity---Cost of construction had been curtailed by the taxation officer in a very clumsy manner which smacked of lack of propriety and professionalism---When the taxpayer successfully demonstrated that the declared rates of construction compared favourable with the rates of the Pak PWD which the taxation officer had himself considered to be reasonable, there remained no justification for him to take a somersault and come up with a new basis for curtailment of cost of construction---Such type of arbitrary and whimsical treatment had never been looked upon with favour by the hierarchy of the courts, being absolutely discordant with the norms of justice and fair play---Amounts of additions had also been worked out in a very careless manner because the additions did not represent 20% of declared cost of construction---Additions made out of cost of sales was ordered to be deleted by the Appellate Tribunal.

(c) Income-tax---

----Change of opinion---Explanation---Principle of "change of opinion" relates to the "order" and not the notice because during the course of interaction between the taxpayer and the taxation officer information/ details and record etc. were provided in different phases and consideration thereof may prompt the taxation officer to change of his opinion depending upon the situation of the case---When audit proceedings culminate into an order, the findings recorded by the taxation officer on different aspects of the case could not be reviewed by him or an officer succeeding him because change of "opinion" about a fact or a finding already recorded in the assessment order was not permissible.

2006 PTD 1617 rel.

(d) Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(9) & 177---Amendment of assessment---Cost of construction---Change of opinion---Addition---Taxation officer changed his stance about the declared cost of construction which he was fully authorized to do provided the change was the outcome of convincing and plausible reason---Change in stance by the taxation officer before finalization of assessment though permissible, was not based upon valid reasons---Addition made to the income of the taxpayer on account of reduction in cost of construction had been ordered to be deleted by the Appellate Tribunal.

(e) Income-tax---

----Profit & loss expenses---Addition was made on account of un­verifiability---Taxpayer admittedly did not produce pertinent record which had resulted in the rejection of its declared version---However, under some heads the disallowance was excessive which was curtailed and the rest of add backs appeared to be reasonable and were confirmed by the Appellate Tribunal.

Muhammad Ishfaq Ahmed, D.R. for Appellant.

Zahid Hussain, ACMA for Respondent.

2011 P T D (Trib.) 382

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Muhammad Iqbal Khan, Accountant Member

COMMISSIONER LEGAL DIVISION, KARACHI

Versus

Messrs MERCK (PRIVATE) LIMITED, KARACHI

I.T.As. Nos.180/KB to 184/KB of 2010, decided on 8th August, 2010.

(a) Income Tax Ordinance (XLIX of 2001)--

----Ss. 156---Prizes and winnings---Prize offered by companies for promotion of sales---Sales promotion expenses---Levy of tax on the claimed sales incentives and sales promotion expenditures on the ground that withholding tax @ 20% under provisions of S.156 of the income Tax Ordinance, 2001 was not deducted---Assessee explained that nature of expenses on sale promotion were quarterly cycle meeting, annual sales conference, training expenses, institution service charges, promotional literature gimmicks, advertisement, trade incentives and customers club; and expenses incurred under such heads were not covered under the definition of "prizes and winnings"---Validity---Taxation Officer could not determine exact nature of certain expenses as allegedly details/evidence in support of such expenses were not provided to him---While applying the law certain expenditures like quarterly cycle meeting, annual sales conference, training expenses, advertisement in medical journals needs reconsideration to find out from details and natures of these expenses whether they come within the meanings of prize---Order of First Appellate Authority was annulled by the Appellate Tribunal and case was remanded to Taxation Officer for de novo proceedings keeping in view findings of Appellate Tribunal after affording reasonable opportunity of being heard to taxpayer.

Calcutta High Court CIT v. Santosh Agencies 78 ITR 210 and (2004) 141 Taxman 615 (Kai.) distinguished.

PLD 2001 SC 111; Commissioner LTU v. Epla Laboratories (Pvt.) Ltd. Karachi I.T.A. No. 73/KB/2010 dated 28-5-2010; 2002 PTD 1 (SC Pak.); and Commissioner LTU v. Messrs Wazir Ali Industries Ltd. ITA No.273/KB/2010, dated 15-6-2010 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 156 & 149---Prizes and winnings---Prize for promotion of sales---Sales incentive expenses---Levy of tax for non-deduction of withholding tax---Assessee contended that sales incentives were paid to employees of the company for their motivation and tax was deducted under S.149 of the Income Tax Ordinance, 2001; and said expenditure did not come under the ambit of provisions of S.156 of the Income Tax Ordinance, 2001---Validity---Appellate Tribunal did not agree with the contention of the taxpayer that sales incentive was a business tool used to motivate employees for sales promotions and these were chargeable under the head `salary' and tax was deductible under S.149 of the Income Tax Ordinance, 2001--- Sales incentives were covered under the definition of "prize for promotion of sales" therefore they will be dealt with under provisions of S.156 of the Income Tax Ordinance, 2001 for withholding tax.

(c) Interpretation of Statutes---

----Fiscal statute---While interpreting fiscal statute, no undue advantage can be taken on the basis of far-fetched or scholarly interpretation of the statute.

2002 SCMR 738 rel.

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 156---Prizes and winnings---Word "Prize"---Meaning--Dictionary meaning of word "prize" is a reward offered to the person or won by person in competition through contest or by chance---"Prize" is a reward or compensation granted in the recognition of excellence---Meaning given to the word "prize" in the dictionaries cover a reward won by chance or offered for some achievement in normal course of some good performance.

Balck's Law Dictionary and Chambers Dictionary (New Edition) ref.

(e) Income Tax Ordinance (XLIX of 2001)---

----S.156---Prizes and winnings---Prize---Meaning--- "Prize" can only be won by chance and is distinguishable from a "bet" or "wager"; things even taken by force or seizure are included in definition of "prize"---Such meanings of the word "Prize" totally discards the impression that "prize" can only be won by chance---Interpretation by First Appellate Authority that prize can be won by chance is totally misplaced keeping in view the meaning of the word "prize" in the law dictionaries.

(f) Income Tax Ordinance (XLIX of 2001)---

----S.156---Prizes and winnings--- "Lottery" and "Prizes"-Distinction-"Lottery" and "Prize" were altogether different things---Essentially lottery is by chance and "prize" is by chance or offered for some achievement in the normal course of some good performance.

(g) Income Tax Ordinance (XLIX of 2001)---

----S.156---Prizes and winnings---Prize on sale promotion to employee of company etc.---Sales promotion expenses---Public at large---First Appellate Authority observed that no person from the public at large was a party to the scheme, as the sales promotion scheme was extended only to the retailers, distributors, doctors and employees of the company---Held, Provisions of S.156 of the Income Tax Ordinance, 2001 did not impose any restriction on prize on sales promotion whether to the public at large or to the retailers, distributors, doctors or employees of the company.

(h) Interpretation of statutes---

----Borrowing the meaning attached to words and phrases used in one statute, while interpreting another statute required cure.

(1975) 32 Tax 273 rel.

(i) Income Tax Ordinance (XLIX of 2001)---

----S.156---Prizes and winnings---Sales promotion expenses---Free extra units were given to retailers not at the time of supply/sales which could have been termed as sales discount, but these free extra units were given when certain targets were achieved by the retailers---Sales incentives to employees was also based on achieving certain targets and they clearly fell in the definition of "prize" offered for promotion of sales.

(j) Interpretation of statutes---

----When there was specific provision for any issue in the statute, that issue could not be dealt with under the general provisions of the statute.

2001 PTD 19; 1991 PTD (Trib.) 2004; 2003 PTD 1309 (H.C.) and 2005 PTD 1047 (H.C.) rel.

(k) Income Tax Ordinance (XLIX of 2001)---

----S. 156---Prizes and winnings---"Prize offered by the companies for promotion of sales "--Sales promotion expenses----Tax year 2003 and 2004---Levy of tax for non-deduction of withholding tax---Validity---Words "prize offered by the companies for promotion of sales" were inserted through Finance Act 2003 w.e.f. 1st July, 2003 whereas the company's accounting period ended on 31st December, 2002 and 2003 respectively for corresponding tax years 2003 and 2004, the provisions of S.156 of the Income Tax Ordinance, 2001 being not retrospective in nature, would not be applicable for tax year 2003 and half of the tax year 2004 ---Case was remanded on the specific issue to the Taxation Officer to re-calculate the withholding tax under provisions of S.156 of the Income Tax Ordinance, 2001 for the said period which was covered by law after affording reasonable opportunity of being heard to the taxpayer.

(l) Income Tax Ordinance (XLIX of 2001)---

----S. 156---Prizes and winnings---Sales promotion expenses---Charge of tax @ 20% for non-deduction of withholding tax in spite of acceptance that withholding tax was less than 20%---First Appellate Authority observed that Taxation Officer was not justified in imposing/charging of tax @ 20% on the expenses which he excluded from the provisions of S.156 of the Income Tax Ordinance, 2001, and admitted the fact that the rate of withholding tax was less than 20% on such expenses, but proceeded to charge tax on the pretext that due to non-filing of details, the tax was charged @ 20%; and directed that no recovery of tax on said expenses was to be made @ 20% per centum and the charged tax on the same was deleted---Validity---Such approach of First Appellate Authority was not approved by the Appellate Tribunal to uphold any action of the Taxation Officer merely on the ground that Taxation Officer himself had agreed to such action.

(m) Income-tax---

----Orders in contravention of mandatory provisions of law were a nullity.

2000 PTD 2407 rel.

(n) Administration of justice---

---Authorities seized of the matter were supposed to apply correct law to meet the ends of justice.

2005 PTD 480 rel.

Dr. Muhammad Ali, D.R. for Appellant.

Amin Malik, FCA for Respondent.

2011 P T D (Trib.) 401

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmed, Judicial Member and Shahnaz Rafique, Accountant Member

Messrs MEHAR DASTGIR LEATHER AND FOOTWEAR INDUSTRIES, MULTAN

Versus

COLLECTOR OF CUSTOMS SALES TAX AND FEDERAL EXCISE and 3 others

S.T.A. No.1024/LB of 2009, decided on 2nd November, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 7, 8, 10, 11, 33, 46 & 73---Sales Tax Refund Rules, 2002, Rr.4, 8 & 9---Refund claim---Assistant Collector, on filing refund claim, issued show-cause notice to assessee under Ss.10(4) & 11(2) of the Sales Tax Act, 1990 to the assessee alleging therein many discrepancies/irregularities---Deputy Collector after hearing divergent views found the claim of refund not admissible---Appeal by the assessee against order of Deputy Collector had also been rejected by the Collector (Appeals)----Validity---According to R.8(1) of Sales Tax Refund Rules, 2001, if any refund claim or part thereof was found not genuine and not admissible under the law, notice was to be issued to the assessee within fourteen days, whereas show-cause notice, in the present case, had been issued after the lapse of about 3 years, which was time-barred---If the law required to do certain thing as per the statute book, that should be followed in its letter and spirit---Act of the officer which was contradictory or had been done out of the way to cross the Rules and Regulations, would not have any legal support---Where the show-cause notice was void, illegal being tinge-barred, all the proceedings initiated by authorities against the assessee, were futile exercise and would not have any legal consequence in the eye of law--- Impugned orders were set aside and Deputy Collector (Refund) was directed to sanction refund of the assessee in accordance with law.

Shoaib Ahmed Sheikh for Appellant.

Dr. Sheryar, D.R. for Respondent.

2011 PTD (Trib.) 405

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson

Messrs JEEA TEXTILES (PVT.) LTD., FAISALABAD

Versus

COLLECTOR, SALES TAX AND FEDERAL EXCISE, FAISALABAD and others

S.T.A. No.497/LB of 2009, decided on 18th October, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 7, 10, 11, 33, 45 & 46---Refund claim---Value addition---Scope---Revenue, on claiming refund of relevant tax period, issued a show-cause notice to the assessee alleging many discrepancies/ irregularities in the application besides informing the assessee as to why input tax/refund may not be rejected in terms of S.11(2) of the, Sales Tax Act, 1990 and penal action taken under S.33(11)(a)(c) of the Act---Assistant Collector, on basis of said show-cause notice rejected version of assessee and refused to grant input tax refund---Collector (Appeals), though granted partial relief to the assessee, but claim of refund to the extent of certain amount was rejected and to that extent order-in-original passed by Assistant Collector, was upheld---Validity---No evidence in fact was available in the show-cause notice with regard to objection that the input tax paid had not been deposited as no audit of the supplier was undertaken---Percentage determined for value addition for creating demand also was without any cogent reason---No addition could be made in the value on estimate basis---Action of the department being against the express provision of the Sales Tax Act, 1990 fixation of value addition was against law---However objection of the Revenue, included some particular observations---Some of the invokes had been considered as fake under S.7(2)(i) of the Sales Tax Act, 1990---Objection with regard to transfer of goods was also raised--Taking in view legal objections as well as the fact that the claim with regard to some of the claimed supplies, was doubtful, order was cancelled by the Tribunal with direction to issue a fresh and clear show-cause notice.?

Messrs Inam packages, Lahore v. Appellate Tribunal Custom House 2007 PTD 2265; 2003 SCMR 1505; 1998 PTD (Trib.) 3478 and 1999 PTD 4147 ref.

Shoaib Ahmad Sheikh for Appellant.

Ghulam Mujtaba Bhatti, D.R. for Respondent.

2011 P T D (Trib.) 408

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Farooq Shah, Judicial Member and Muhammad Iqbal Khan, Accountant Member

Messrs KAY CHEMIST, KARACHI

Versus

COLLECTOR OF CUSTOMS, CENTRAL EXCISE AND SALES TAX (APPEAL), KARACHI-III

S.T.As. Nos. 30/KB of 2009 and 300/KB of 2004, decided on 5th August, 2010.

(a) Central Excise Rules, 1944---

----R.197---Authorized officers to have free access to premises, equipment, stocks and accounts relating to excisable goods and excisable services---Raid and inspection---Raid of the taxpayer's both premises conducted by two teams each consisting of twelve staff members of the Director Intelligence and Investigation (Customs, Excise and Sales Tax) upon alleged information of manufacturing of excisable goods could in no way be termed as mere an inspection---Such exercise of raid and seizure could not be stretched to mean a mere inspection under the provisions of R.197 of the Central Excise Rules, 1944---The way the staff entered into the premises of the taxpayer, the statement recorded and the goods and record resumed was out and out a raid because an inspection was by eye, search by hands and that inspection would not allow the uncovering of anything not visible merely by walking around the premises in the absence of clear judicial ruling.

2004 PTD 1731 rel.

(b) Central Excise Rules, 1944---

----R.10---Recovery of duty short-levied or erroneously refunded, etc.---Non-mention of sub-rule in the show-cause notice---Taxpayer's contention was that notice did not mention sub-rules of R.10 of the Central Excise Rule, 1944 and the show-cause notice was a vague, patently illegal and without lawful authority---Contention was repelled the Appellate Tribunal on the ground that particulars of sub-rules of R.10 of the Central Excise Rules, 1944 were provided therein and it was held that the show-cause notice was not vague or illegal.

(c) Limitation---

----Question of limitation was not a mere technicality but a matter of compliance of substantive law as vested rights were created in favour of the other party which right might not be taken away from him lightly.

(d) Central Excise Act (I of 1944)---

----S. 35-B---Appeal to Appellate Tribunal---Appeal without an application for condonation of delay---Limitation---Starting point---Limitation starts running from the date of knowledge where an order/judgment was not conveyed to a party for either reason.

2003 PTD 2657; 2002 PTD 399; 1987 PTD (Trib.) 54; 1985 CLC 1072; PLD 1970 SC 558; 1988 SCMR 1256; 1997 SCMR 860; PLD 1991 SC 400 and 2002 PTD 39 ref.

2006 PTD (Trib.) 1466 rel.

(e) Customs Act (IV of 1969)---

----S. 35-B---Appeal to Appellate Tribunal---Filing of appeal by incompetent person---Taxpayer contended that departmental appeal was filed by incompetent person as the nomenclature of the appellant as per title of the appeal was the Collector and it was only the Collector who could sign and verify the memo of appeal and no other person could sign or verify the same; and since the appeal was without required verification or a supporting affidavit the same was incompetent---Validity---Person who filed appeal must sign it---No other person except the appellant could sign an appeal until and unless the appeal had been filed under express authority of the appellant in favour of his attorney---Assistant Collector Enforcement and Collector might be an aggrieved person but the appeal must have been filed by hint as attorney of the Collector, the appellant---Appeal which was admittedly without verification or a supporting affidavit, was incompetently filed.

2006 PTD (Trib.) 1466 rel.

(f) Central Excise Act (I of 1944)---

----S.34B---S.R.O.543(I)/75 dated 8-5-1975---Filing of appeal by a person not aggrieved'---Taxpayer contended that Collector (Appeals) could not hear and decide an appeal, incompetently filed by the Director General of Intelligence and Investigation (Customs and Excise), under S.34B of the Central Excise Act, 1944 as the Director Intelligence and Investigation (Customs and Excise) was not a Central Excise Officer aggrieved by the order-in-original; and for filing an appeal under S.34B of the Central Excise Act, 1944 the appellant must be anaggrieved party'; and since no power under S.34B of the Central Excise Act, 1944 vested in the Director Intelligence and Investigation (Customs and Excise) under S.R.O.543(I)/75 dated 8-5-1975, the Director Intelligence and Investigation (Customs and Excise), could not competently file the appeal to the Collector as he was not an aggrieved party---Validity---Director Intelligence and Investigation (Customs and Excise) was not an `aggrieved party' and he could not file an appeal---First appeal having been filed by an incompetent person, the Collector (Appeals) could not dwell upon the appeal to pass order in appeal against the order-in-original---Order of adjudicating authority had attained finality---On merits also the department had failed in making out a case of manufacturing of excisable goods i.e. cosmetics, either at sales office of the taxpayer---Order-in-­original was maintained and the departmental appeal was dismissed by Appellate Tribunal---Appeal of the taxpayer was allowed and the order of Collector (Appeals) was set aside and the order of adjudicating authority was held to be in field in circumstances.

2006 PTD (Trib.) 1466; 2005 PTD 2987; 2004 PTD 1957 and 2004 PTD Trib. 2425 rel.

(g) Central Excise Act (I of 1944)---

----S.18---Sales Tax Act (VII of 1990), Ss.38, 40 & 40A---Criminal Procedure Code (V of 1898), 96, 103 & 165---Central Excise Rules, 1944, Rr.197, 120, 126 & 226---S. R. O.574(I)/2002 dated 31-8-2002-S.R.O. 543(I)/75 dated 8-5-1975---CEGO No.1 of 2003---STGO 9 of 1999---Searches and arrest how to be made---Raid and Inspection---Raid without a search warrant or statement---Validity---Raid conducted by the detecting agency of the premises of the taxpayer was un­authorized and illegal and it could not be termed as mere inspection under R.197 of the Central Excise Rules, 1944---Power of free access as contemplated under R.197 of the Central Excise Rules, 1944 were limited to the inspection of building, the plant, the machinery and the stocks, and the accounts and checking of record etc; but only for the purposes of testing the accuracy of any return submitted under these rules, or of informing himself as to any particulars regarding which information was required for the purposes of the Act or the Rules---Bare reading of R.197 of the Central Excise Rules, 1944. did not give an impression that it conferred the appropriate officer with the powers of raid, search and seizure---Power of search and seizure had been provided under R.201 of the Central Excise Rules, 1944 read with S.18 of the Central Excise Act, 1944 which provided that all searches made under this Act or Rules thereunder and all arrests made under this Act should be carried out in accordance with the provisions of Criminal Procedure Code, 1898, relating respectively to searches and arrests made under that Code---Neither the detecting agency had obtained a warrant of search from the Magistrate nor any apprehension of removal of goods was recorded by them---Action of detecting agency were specifically intended and designed to probe, investigate and discover the presumed illegal tax avoidance for which the goods, record and accounts were seized---Said acts could not be termed as routine inspection but were akin to raid and investigation into a criminal matter or an offence---Free access to any property did not mean search and seizure for the purposes of collection of evidence against a taxpayer---Object could only be achieved by observing the provision of Ss.96, 103 and 165 of the Code of Criminal Procedure, 1898---Where provisions of Central Excise Act, Central Excise Rules and the Sales Tax 'Act, relating to search and seizure were not followed, power exercised by the detecting agency was illegal and all the proceedings conducted on the basis of such illegal raid were also illegal.

AIR 1960 SC 210; PLD 1991 SC 630; 2003 PTD 1034; 2004 PTD 1731; 1999 PCr.LJ 1546; PLD 1997 SC 408; 1997 PCr.LJ 603; PLD 1996 SC 574; 2007 PTD 2356; PLD 1968 Kar. 599; PLD 1969 SC 153; PLD 1977 Lath 318 and 2003 PTD 2037 ref.

Irshad-ur-Rehman for Appellant (in S.T. No.30 of 2009).

Syed Aftab Hussain, D.R. for Respondent (in S.T. No.300-KB of 2009).

Syed Aftab Hussain D.R. for Appellant (in S.T. No.30-KB of 2004).

Irshad-ur-Rehman for Respondent (in S.T. No. 300-KB of 2004).

2011 P T D (Trib.) 424

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

COLLECTOR OF SALES TAX, FAISALABAD

Versus

MIAN GHOUS BUX (PVT.) LTD., FAISALABAD

S.T.A. No.725/LB of 2009, decided on 2nd August, 2010.

(a) Sales Tax Act (VII of 1990)---

----S.45-B---Consolidated order---Adjudicating Officer had passed the order in one and in the end in the concluding para. had written that "this order-in-original will also apply mutatis mutandis to other 160 cases"---Validity---Such tendency of adjudicating the case at the original assessment level was not in accordance with law---Every case had its own facts and circumstances and separate order for each case should be made by the adjudicating authority.

(b) Sales Tax Act (VII of 1990)---

----S.45B---Appeal---Consolidated order---Order of the Collector was in the matter of one taxpayer and through such consolidated order 19 other matters were decided---Appellate authority decided the issue on the legal footings; and decided the appeals through consolidated order---Validity---Held, there was no justification for passing the original orders in so many cases through one single order.

(c) Sales Tax Act (VII of 1990)---

----S.10(4), 11(2), 7, 8 & 26---Sales Tax Rules, 2006, R.28---S.R.O. 1204(I)/2007 dated 11-12-2007---Refund of input tax---Filing of refund claim---Limitation---Registered parson had made zero-rated exports and had filed refund claims which were rejected being time barred---First Appellate Authority allowed the registered person to file claim as the Federal Board of Revenue had facilitated the claimant to furnish refund claims pertaining to tax period July, 2006 to September, 2007 up to 31-1-2008 on the prescribed software along with the supportive documents under R.28 of the Sales Tax Rules, 2006---Order of First Appellate Authority was upheld by the Appellate Tribunal and appeal filed by the department was dismissed.

Adnan Ahmed Khan, D.R. for Appellant.

Nemo for Respondent.

2011 P T D (Trib.) 429

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member and Amjad Ikram Ali, Accountant Member

COLLECTORATE OF SALES TAX AND FEDERAL EXCISE, FAISALABAD

Versus

Messrs ZAHEER SOAP FACTORY, FAISALABAD

S.T.A. No.1374/LB of 2009, decided on 30th July, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss.46 (1) & 32(2)---Appeal to Appellate Tribunal---Filing of appeal by Assistant Collector---Maintainability of appeal was questioned on the ground that Assistant Collector was not authorized under S.46(1) of the Sales Tax Act, 1990 to file the appeal---Validity---Word 'Sales Tax Department' had been used in S.46 of the Sales Tax Act, 1990 and Assistant Collector Sales Tax was not "Sales Tax Department" because the individual officer could not be called a department---Officer serving in a Department was not Department unless he had a representative capacity--.Department was a unit or a branch of Government either Federal or Provincial under political control of Minister or Secretary of the State or the Chairman of the Board---Sales Tax Department was the Revenue Division or the Central Board of Revenue and the Assistant Collector had no power under S.46(1) of the Sales Tax Act, 1990 to prefer an appeal before Appellate Tribunal against any order passed by the Additional Collector (Adjudication)---Departmental Representative failed to produce the record showing general delegation of power notification or authorization of Assistant Collector of Sales Tax to file the appeal---Assistant Collector Sales Tax had neither been delegated the power nor was authorized to file appeal on behalf of Sales Tax Department---Assistant Collector, at the relevant time thus was not competent to file appeal on behalf of the Sales Tax Department--Appeal having been filed by unauthorized person was not maintainable in view of the provisions of S.46 of the Sales Tax Act, 1990 as it stood at the relevant time.

Muhammad Rashid Bhatti v. KDA Secretary PLD 1986 Kar. 130; 2007 PTD (Trib.) 2494; Sales Tax Appeal No.L-686 of 2004; Haji Abdul Jan and others v. The State (2003) SCMR 1063 and State through Advocate General Sindh v. Hanif Ahmad and others 1994 SCMR 749 rel.

(b) Sales Tax Act (VII of 1990)---

----S.46(1)---Appeal to Appellate Tribunal---Filing of appeal by Deputy Collector---Maintainability---Officer could not be called `department' of the Government; they were merely functionaries appointed to exercise the powers as provided under the law, rules or regulations with a view to carry out the policy object and priorities as laid down by the department---Officer serving in a department was not a Department and could not have a representative capacity---Department was unit or branch of government, either federal or provincial under the political control of Minister or Secretary of the State or the Chairman of the Board---Deputy Collector could not be treated as a department and the appeal filed by him was not maintainable within the frame work of S.46 of the Sales Tax Act, 1990.

Muhammad Rashid Bhatti v. KDA Secretary PLD 1986 Kar. 130; 2007 PTD (Trib.) 2494 and Sales Tax Appeal No.L-686 of 2004 rel.

(c) Sales Tax Act (VII of 1990)---

----Ss.46(1)---Appeal to Appellate Tribunal---Aggrieved person---Filing of appeal by Assistant Collector---Maintainability---Departmental Representative contended that S.46(1) allowed the aggrieved person including Sales Tax Department to file appeal and the Assistant Collector Sales Tax was an aggrieved person'; and even if Sales Tax Department had not filed an appeal the Assistant Collector Sales Tax was competent to file appeal---Validity---Expression 'aggrieved person' and 'the Sales Tax Department' used in S.46(1) of the Sales Tax Act, 1990 were significant---Expressionaggrieved person' denotes a person who had got a legal grievance i.e. a person was wrongfully deprived of anything to which he was legally entitled and not merely a person who suffered some sort of disappointment---Assistant Collector Sales Tax could not be termed to be an 'aggrieved party'; he might have been disappointed for the reason that a proceeding initiated on his initiative had failed; but he had not suffered any personal injury---Expression 'aggrieved party' and the 'the Seder Tax Department' were used and if term 'aggrieved party' was referable to any Officer of Sales Tax then the expression 'the Sales Tax Department' would be redundant and the redundancy could not be attributed to the legislation---Right of appeal was not an inherent right but a statutory right---Legislation had confined the right of appeal on the Sales Tax Department and had not left the right of filing appeal at the discretion of the Assistant Collector of Sales Tax---Contention that Assistant Collector Sales Tax fell within the definition of `aggrieved person' and was competent to file an appeal was misconceived.

Black's Law Dictionary ref.

Director Directorate General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 rel.

(d) Customs Act (IV of 1969)---

----S. 196---Statement of case to High Court---When S.196 of the Customs Act, 1969 required filing of an appeal by the Collector then it could be filed only by the Collector and none else---Appeal filed by the Director were deemed to be absolutely illegal, incompetent and not maintainable---Appeals purported to have been filed by the Collector, as the nomenclature of the petitioner appeared as `Collector of Customs', but not signed and verified by him and instead were signed or verified either by Deputy Collector or Assistant Collector of Customs, would be deemed not to have been filed in accordance with law.

Haji Abdullah Jan and others v. The State 2003 SCMR 1063 and State through Advocate General Sindh v. Hanif Ahmad and others 1994 SCMR 749 rel.

(e) Sales Tax Act (VII of 1990)---

----S.46(1)---Appeal to Appellate Tribunal---Nomenclature of the petition---Signing and verification---Appeals in which the nomenclature of the appellant had been mentioned as Collector of Customs could not be deemed to have been filed illegally or contrary to law on the ground of not having been signed and verified by the Collector---Contention that such was merely an irregularity which could be rectified by allowing the Collector to sign the appeals, did not appear to carry weight---When the doing of a thing is made lawful in a particular manner then doing of that thing in conflict with the manner prescribed would be unlawful.

State through Advocate General Sindh v. Hanif Ahmad and others 1994 SCMR 749 rel.

Karamat Chaudhry, D.R. for Appellant.

Khubaib Ahmad for Respondent.

2011 P T D (Trib.) 454

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs IHSAN YOUSUF TEXTILES (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.1886/LB of 2009, decided on 20th October, 2010.

Sales Tax Act (VII of 1990)---

----Ss.45 (2) & 36---Power of adjudication---Limitation---Taxpayer contended that order-in-original passed beyond 180 days from the date of show-cause notice was nullity in the eye of law---Department contended that no extension after expiry of 90 days was obtained but limitation to pass the order-in-original dated 30-12-2006 was extended by subsection (2) of S.45 of the Sales Tax Act, 1990 unto 31st December, 2006---Validity---Language of subsection (2) of S.45 of the Sales Tax Act, 1990 was non obstante in nature which extended the period of limitation till 31st December, 2006 of only those cases which were pending for adjudication on 30th June, 2006---Admittedly limitation of 90 days had expired on 20th June, 2006---Adjudicating officer had lost its power to adjudicate, the case was not pending adjudication on 30th June, 2006---Subsection (2) to S.45 of the Sales Tax Act, 1990 was not applicable in the case---Order-in-Original passed on 30-12-2006 on a show-cause notice issued on 20th March, 2006 was time barred.

Super Asia Muhammad Din Sons (Pvt.) Ltd's., case 2008 PTD 60 rel.

Khubaib Ahmed for Appellant.

Tahir Tanveer, D.R. for Respondent.

2011 P T D (Trib.) 456

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs COSY INTERNATIONAL (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX (RTO), FAISALABAD and another

S.T.A. No.566/LB of 2009, decided on 4th October, 2010.

(a) Sales Tax Act (VII of 1990)---

---Ss. 11 (2) & 45B---Sales Tax Rules, 2006, R. 37---Assessment of tax---Opportunity of being heard---Admittedly, adjudicating authority had decided the case on ex parte basis without providing the appellant-registered person with any opportunity of being heard which was not only against norms of natural justice but also contrary to provisions of Sales Tax Act, 1990---Principle of ""audi alteram partem i.e. No body should be condemned unheard" had not been observed---Maxim (audi alteram partem) should be deemed to be a part of every statute by express words or by necessary implication in the statute---No court should adjudicate upon a right of party who was not before it or to whom no notice was given' and an ex parte order would be no order in eye of law---Maxim audi alteram partem was a universally established principle of natural justice which was applicable to both judicial and non judicial proceedings---Orders of lower fora being illegal were set aside and case was remanded back to the authority having jurisdiction with directions to provide the appellant an ample opportunity of being heard and to pass a fresh and speaking order after examining supporting documents to be produced by the taxpayer--Registered person was directed to appear before the adjudicating authority with one month form receipt of the order, 'who shall issue process refund within 60 days from the day of submission of supportive documents.

Mirza Aslam Beg and another v. Saghir Iqbal PLD 1988 SC 24 rel.

(b) Administration of justice---

----Opportunity of being heard---No order affecting rights of a person should be passed without providing him opportunity of being' heard.

Messrs Siemens Pakistan Engineering Company Ltd. v. Pakistan and others 1999 PTD 1358 rel.

(c) Sales Tax---

----Void order---Limitation---A person against whom any action warranted under law was not properly heard to confront the charges levelled against him and he was not properly undergone by due process of adjudication as consciously enacted by legislation in various laws particularly in fiscal statutes, any order passed subsequent to such would be a illegal and void order and no time limitation would run against it.

2005 SCMR 69; 2007 SCMR 729 and S.T.A. No. 171/LB/2009, dated 16-4-2010 rel.

Khubaib Ahmed for Appellant.

Mrs. Fozia Fakhar, D.R. for Respondent.

2011 P T D (Trib.) 460

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

Messrs MADINA TRADERS, KAMOKE

Versus

COLLECTOR OF SALES TAX, LAHORE

S.T.A. No.1501/LB of 2009, decided on 17th September, 2010.

(a) Sales Tax Act (VII of 1990)---

----S. 45B---Appeal---Concerned taxpayer/appellant who was subject of the order-in-original had not been made party in appeal before the First Appellate Authority---Original first appeal, held, was in itself infructuous---Appeal was dismissed.

2003 GST Cl. 13 rel.

(b) Sales Tax Act (VII of 1990)---

----Ss. 45B, 2(46)(b)(e), 33 & 34---Sales Tax General Order No.9 of 1999---Sales Tax General Order No. 11 of 1999, dated 2-10-1999--Appeal-Suo motu review---Condonation of delay---First Appellate Authority once holding on 15-12-2003 that appeal was not entertainable had suo motu reviewed its judgment by 'allowing condonation of delay on the ground that the copy of the order-in-original was not received in the department despite the fact that the demand notice dated 21-5-2003 had been issued by the Deputy Collector against the same order-in-­original---Order in appeal was vacated by Appellate Tribunal, having been passed without any legal footing and the appeal of taxpayer was allowed.

Ayaz Ahmad, FCA/A.R. for Appellant.

Shahid-ul-Hassan Chatta, D.R. for Respondent.

2011 P T D (Trib.) 467

[Inland Revenue Appellate Tribunal of Pakistan]

Before Raja Lehrassab Khan, Judicial Member

Messrs INTERLOOP (PVT.) LIMITED, FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.1054/LB of 2009, decided on 30th September, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss. 45 & 11(2)---Power of Adjudication---Assessment of tax---Refund---Taxpayer contended that Order-in-Original for rejection of taxpayer's refund claim amounting to Rs.20,70,907 had illegally been passed by the Assistant Collector (Refund) under S.11(2) of the Sales Tax Act, 1990, as the Assistant Collector was not lawfully empowered to adjudicate the cases falling under S.11(2) of the Sales Tax Act, 1990 being beyond the pecuniary limit of one million rupees as specified under Cl. (iii) of Sub-S. (1) of S.45 of the Sales Tax Act, 1990---Validity---Assistant Collector had transgressed his jurisdiction and. powers of adjudicating by issuing show-cause notice upon which consequent proceedings were initiated for rejection of refund which was beyond the threshold limit of Rs. 10,00,000 as admittedly, the amount of refund involved was Rs.20,70,907---Under S.45(1)(ii) of the Sales Tax Act, 1990, it was the Deputy Collector who should have issued the show-cause notice and to pass consequent order---Order-in-Original passed by Assistant Collector (Refund) was illegal and without any lawful jurisdiction---Power vested in an authority could only be exercised by that authority and by none-else---Exercise of that authority by any other, would be without jurisdiction---Original passed by the Assistant Collector and upheld by the Collector was also not sus­tainable in the eyes of law---Orders of the authorities below being suffering from grave legal infirmities, were declared to be illegal and without jurisdiction and were vacated by the Appellate Tribunal.

S.T.A. No.2728/LB of 2009, dated 3-6-2010; S.T.A. No.1007/LB of 2009, dated 18-9-2010; 2010 PTD (Trib.) 1636; 2001 SCMR 1822; 2010 PTD 465 and 2008 SCMR 240 rel.

(b) Administration of Justice---

----Any question of law which goes to the root of the case can be raised for the first time even before highest appellate forum.

2006 SCMR 783 and PLD 1965 SC 90 rel.

Khubaib Ahmad for Appellant.

Syed Mehmood Jafri, D.R. for Respondent.

2011 P T D (Trib.) 473

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Muhammad Saeed, Accountant Member

COMMISSIONER OF INCOME TAX, HYDERABAD

Versus

Messrs NEW MALIK GOODS, HYDERABAD

I.T.As. Nos. 525/KB to 527/KB of 2007, decided on 15th June; 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.170(4), 115(4), 114(6) & 153(1)(b)---Refund---Services---Revision of return---Department had contended that taxpayer had filed statement under S.115(4) of the Income Tax Ordinance, 2001 and subsequently revised the return under S.114(6) of the Income Tax Ordinance,, 2001 with the same source of income, which was not permissible under the law and the Taxation Officer had rightly rejected the claim of refund as applied by the taxpayer---Validity---First Appellate Authority had rightly found the order of the Taxation Officer rejecting the refund application was not sustainable in the eyes of law as nature of services was established and the tax deducted under S.153(1)(b) and (c) of the Income Tax Ordinance, 2001 was also adjustable w.e.f. 1-7-2002---No exception could be taken to the observation of First Appellate Authority that Taxation Officer had failed to serve the order within time and without allowing opportunity of being heard to the taxpayer---Return filed by the taxpayer were an assessment in terms of S.120 of the Income Tax Ordinance, 2001 and excess deduction, if any shall be liable to be refunded to the taxpayer---Appeals of the department were dismissed by the Appellate Tribunal.

I.T.As. Nos.181 and 182/KB of 2007; I.T.A. Nos. 1285 and 1286/KB/2006; 2009 PTD (Trib.) 173; 2008 PTD (Trib.) 1897; I.T.As. Nos.134 to 136/IP of 2009; 2010 PTD (Trib.) 927; 2008 PTD (Trib.) 332 and 2006 PTD (Trib.) 1936 rel.

Asim Siddiqui, D.R. for Appellant.

A.S. Jafry for Respondent.

2011 P T D (Trib.) 483

[Inland Revenue Appellate Tribunal of Pakistan]

Before Raja Lehrassab Khan, Judicial Member

Messrs NIAGRA MILLS (PVT.) LIMITED, FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.As. Nos.1167/LB, 1168/LB, 1198/LB and 1042/LB of 2009, decided on 28th September, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss.10(4) & 11---S.R.O. 555(I)/2006 dated 5-6-2006---S.R.O. 575(I)/2002 dated 31-8-2002---S.R.O. 485(I)/2004 dated 12-6-2004---Refund of input tax---Zero rated supplies of textile goods---Claim of refund for the period October, 2001, January, 2002, April, 2002 and April, 2005---Rejection of refund on the ground of abnormal tax profile---Validity---Term 'abnormal tax profile', was generated by the Sales Tax Automated Refund Repository Computer System having no legal backing by the Sales Tax Act, 1990 or any legislative enactment or even any written directive from the Federal Board of Revenue for rejection of refund on such objection---Refund claims in the present case, pertained to the periods which were not subject to scrutiny under Sales Tax Automated Refund Repository as the same was made applicable w.e.f. 1st July, 2006--Refund should have been scrutinized under Sales Tax Refund Rules, 2002 and not under Sales Tax Automated Refund Repository System which was introduced for the first time in Sales Tax Rules, 2004---Rejection of refund claims filed against invoices issued prior to 1st July 2006 on the objections pointed out by the Sales Tax Automated Refund Repository Computer System was illegal and void ab initio.

2007 PTD (Trib.) 2456; 2002 PTD 2457; PTCL 2000 CL 196(sic); 1993 SCMR 274; Messrs A.T. Fabrics Faisalabad v. Collector Sales Tax, Faisalabad 2010 PTD Trib. 1636 and Sales Tax v. Messrs Saleem Textile Company, Faisalabad S.T.A. No. 191/LB of 2008 dated 9-6-2008 rel.

(b) Sales Tax Act (VII of 1990)---

---Ss. 66 & 10 (4)---Claim of refund---Limitation---Claim of refund of input tax on zero rated supplies of textile goods---Rejection of refund on the ground of being time barred under S.66 of the Sales Tax Act, 1990---Validity---Denial of refund of input tax incurred in connection with zero-rated supplies merely on technical plea amounted to impede exports with the burden of sales tax which was not only contrary to the statutory provisions but also against the norms of justice---Refund of input tax was a substantive right of a registered person, consciously created by the legislation, which could not be taken away merely on some technicalities and procedural lapse---Orders of the authorities below were proved to be void ab initio, the question of limitation would not arise.

2007 PTD (Trib.) 728; PLD 1998 SC 64; 2007 SCMR 729; 2005 SC MR 69 and 1996 SCMR 856 rel.

(c) Sales Tax Act (VII of 1990)---

----Ss.10 (4) & 8(1) (a)---S.R.O. 578(I)/1998 dated 5-6-1998---S.R.O. 490(I)/2004, dated 12-6-2004---Tax periods October, 2001, January, 2002, April, 2002 and April, 2005--Refund of input tax---Rejection of input tax refund on purchase of High Speed Diesel---Validity---Taxpayer used diesel for production of taxable supplies and had claimed input tax on purchase of High Speed Diesel in terms of S.8(1)(a) of the Sales Tax Act, 1990, which allowed the company to deduct input tax paid on goods used or to be used for any purpose of manufacture or production of taxable goods---Refund claims for the periods were rejected on the basis of S.R.O. 578(I)/1998 dated 5-6-1998, whereas the said S.R.O. was rescinded through S.R.O. 490(I)/2004, dated 12-6-2004, therefore, rejection of refund on account of High Speed Diesel was illegal and unjustified as the later notification was remedial and curative in nature and the same was to apply to the refund claims---Orders of authorities below suffering from grave legal infirmities were vacated and set aside by the Appellate Tribunal.

2010 PTD 1717 HC Kar. 2005 SCMR 492; 1993 SCMR 73; 2002 PTD 2959 and S.T.A. Nos. 257-261/LB/2009, dated 23-7-2010 rel.

Kubaib Ahmad for Appellant.

Syed Mehmood Jafri, D.R. for Respondent.

2011 P T D (Trib.) 491

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

Messrs MEDIA TIMES (PVT.) LIMITED, LAHORE

Versus

COLLECTOR OF SALES TAX, LAHORE

S.T.A. No.668/LB of 2009, decided on 22nd September, 2010.

Sales Tax Act (VII of 1990)---

----Ss.13, Sixth Sched., S.No.21---S.R.O. 389(I)/2001 dated 18-6-2001, item No.170---S.R.O.510(I)/2003 dated 7-6-2003---Exemption---Waste and scrap of paper or paperboard---Out of date/period newsprint, newspapers, journals, periodicals and books etc.---Exemption claimed by the taxpayer as allowed by the adjudicating authority had been declared unlawful by the First Appellate Authority on the ground that waste and scrap of paper and paperboard fell within the ambit of `taxable goods'---Validity---In item No.32 of the Sixth Schedule of the Sales Tax Act, 1990, the exemption under S.13 of the Sales Tax Act, 1990 was for newsprint, newspapers, journals, periodicals and books but excluding the directories---Newsprint, newspapers, journals, periodicals and books etc. could not be treated to be scrap or wastepaper---Even if the newspapers were not of the same date or of a current period, their contents had the academic value and they continue to be the newspapers and the mere fact that they were out of date that did not take away the news element/academic value there from---Only the directories had been excluded by the Legislature intentionally but all the other items mentioned under Entry No.32 of the Sixth Schedule of the Sales Tax Act, 1990 came within the meanings of newspapers though not carrying news of contemporary period and the exemption provided under S.13 of the Sales Tax Act, 1990 was allowable and would not be liable to sales tax---Order of First Appellate Authority was set aside by the Appellate Tribunal and appeal was allowed.

2002 PTD 654 and Oxford Dictionary ref. AIR 1991 SC 354 rel.

Miss Amina Warsi for Appellant.

Muhammad Jamil Bhatti, D.R. for Respondent.

2011 P T D (Trib.) 505

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

COMMISSIONER INLAND REVENUE, RTO, MULTAN

Versus

MUHAMMAD SIDDIQ TEXTILE MILLS, BUREWALA

M.A. No.245/LB of 2010 in S.T.A. No.1484/LB of 2009, decided on 4th August, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 130(8) & 130(8AA)---Appeal to Appellate Tribunal---Miscellaneous application on the ground that order did not reflect any statutory Regulatory Order which may indicate that the Member of the Tribunal was empowered to decide the case as the case involved revenue amounting to Rs.6,132 million and that Member sitting singly, dispose of any case where the amount of tax or penalty involved did not exceed five million rupee; and the order was erroneously passed and being coram non judice was of no legal effect---Validity---Partial modification of office Circular dated 12-12-2009 and in exercise of powers vested under S.130(8AA) of the Income Tax Ordinance, 2001 the Chairman of Appellate Tribunal had duly authorized all the Single Benches constituted in Appellate Tribunal Inland Revenue to hear and dispose of all the cases under the Income Tax Ordinance, 2001 where assessed income did not exceed to ten million rupees---No error/mistake in the order of Appellate Tribunal existed and same had rightly been passed.

2007 SCMR 459 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 131(2)(d) & 131(4)---Appeal to the Appellate Tribunal---Condonation of delay---Under S.131(4) of the Income Tax Ordinance, 2001, Appellate Tribunal may upon an application, in writing, admit the appeal after the expiration of the period specified in S.131(2)(d) of the Income Tax Ordinance, 2001, if it is satisfied that the person appealing was prevented by sufficient cause for filing the appeal within that period---No separate application for condonation of delay giving specific reason that the department was prevented by sufficient cause from filing the appeal, had been given---Application for condonation of delay was dismissed by the Appellate Tribunal.

Adnan Ahmad Khan, D.R. for Applicant.

Nemo for Respondent.

2011 P T D (Trib.) 543

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

COLLECTOR OF SALES TAX, FAISALABAD

Versus

Messrs SHAMSHAD TEXTILE MILLS (PVT.) LIMITED, FAISALABAD

S.T.A. No.1192/LB of 2009, decided on 23rd September, 2010.

Sales Tax Act (VII of 1990)---

---S. 10---Sales Tax Rules, 2006, R.28---S.R.O. 1204(I)/2007 dated 11-12-2007---Refund of input tax---Filing of refund claim---Limitation---Appeal was filed by the Department on the ground that taxpayer had failed to file the refund claim along with supporting documents within the prescribed time without any reason thus the claim did not stand admissible---Validity---Appeal was rejected by the Appellate Tribunal holding that refund could not be refused on account of limitation---Principles.

2001 SCMR 1806; 2001 PTD 2383; PLD 2001 SC 600 = 2001 PTD 1486; PTCL 2003 CL 289; PLD 1998 SC 64; 2008 PTD (Trib.) 370; 2010 PTD (Trib.) 449 and 2010 PTD (Trib.) 768 rel.

M. Jamil Bhatti, D.R. for Appellant.

Khubaib Ahmed, Advocate/A.R. for Respondent.

2011 P T D (Trib.) 553

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

Mst. NASEEM AKHTAR, FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, RTO, FAISALABAD

I.T.A. No.231/LB of 2010, decided on 30th July, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5), 111 & 177---Income Tax Ordinance (XXXI of 1979), Ss.62 &13---Contract Act (IX of 1872), Ss.10 & 11---C.B.R. Circular No.7 of 2007---Amendment of assessment---Audit---Agreement---Construction of plaza---Valuation---Assessee contended that attention was drawn towards Agreement for construction of Plaza, all correspondence and notices issued under 5.62/13 of the Income Tax Ordinance, 1979 by the then Taxation Officer along with replies during assessment proceeding for assessment years 2001-2002 and 2002-2003 but the same were ignored; and Taxation Officer (Audit) arbitrarily disbelieved the genuine agreement arrived at between the owner of Plaza and the contractor, executed with free and fair consent of the parties---Further, construction rates were applied on the basis of construction rate supplied by PWD vide their letter dated 15-11-2007, whereas proceedings under S.177(4) of the Income Tax Ordinance, 2001 were started on 10-7-2009; and it could not be said that this "definite information" was acquired front Audit---Validity---Taxation Officer, in order for the assessment year 2002-2003, had accepted the version of the taxpayer including the rate of construction and had observed that the investment was declared in Tax Year 2003 and in Tax Year 2004 and no adverse inference was drawn---Notice regarding the same property were issued under S.13(1)(d) of the Income Tax Ordinance, 1979 from assessment year 2001-2002 to Tax year 2004, for which the proceedings were dropped---Assessee had declared the total cost of construction of Plaza as on 30-6-2005 at Rs.83,00,000 and the Taxation Officer had assessed the cost of construction at Rs.85,66,370---Taxation Officer had not given any contractor's profit which according to taxpayer was 20%---Regarding construction, the affidavit of the contractor had also been furnished and there was no justification for not accepting the affidavit and agreement---Plaza on the basis of which the case of the taxpayer had been reopened was completed before 30-6-2003 and part of which was rented out on 19-6-2003---Rates applied by the Taxation Officer for the tax year 2004 to 2007 were not relevant---First Appellate Authority had reduced the cost of construction but he had not considered the fact that on behalf of the assessee, an affidavit of the contractor and the agreement had been furnished which had not been rebutted by the Taxation Officer, which should have been accepted---Department could not change the nature of contract intended by the parties under the pretext that a fiscal law in this behalf was different---No justification' existed for addition made by the Taxation Officer---Order of First Appellate Authority was vacated and order passed by the Taxation Officer was cancelled---Appeal of the taxpayer was allowed by the Appellate Tribunal.?

1991 PTD 488 and 2005 PTD (Trib.) 745 rel.

Ch. Bashir, Advocate/A.R. for Appellant.

Adnan Ahmad Khan, D.R. for Respondent.

2011 P T D (Trib.) 565

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and Zarina N. Zaidi, Accountant Member

COMMISSIONER, LEGAL DIVISION, RTO, HYDERABAD

Versus

Messrs LATIF NIAZI EDUCATIONAL SOCIETY, HYDERABAD

I.T.As. Nos.286/KB and 287/KB of 2010, decided on 9th December, 2010.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 80(2)(b)(v), 113, 122(5A) & Second Sched, Cl. (92)---Amendment of assessment---Exemption---Society registered under Societies Registration Act, 1860---Status---Taxpayer was society registered under Societies Registration Act, 1860, was a non-profit organization imparting deduction on no profit no-gain basis---Taxation Officer treated the taxpayer within the definition of a `company' on the' ground that taxpayer had filed its return of income of return claiming exemption under Cl. 92 of the Second Schedule to the Income Tax Ordinance, 2001 and passed an ex parte order and charged minimum tax under S.113 of the Income Tax Ordinance, 2001---First Appellate Authority annulled the order by holding that the taxpayer being an educational society, did not fall within the definition of 'company' and that the definition of 'company' made exclusion of societies registered under Societies Registration Act, 1860: and that society was not established under the specific Act---Validity---Order of First Appellate Authority, annulling that of the Taxation Officer, was based on correct interpretation of provisions of law and had been passed by applying judicious mind after going through the facts of the case and keeping in view the settled law---Order of First Appellate was upheld by the Appellate Tribunal.

1998 PTD 2017; CIT v. Messrs Engineering Cooperative Housing Society Lahore 2000 PTD 388 and CIT v. Messrs Spring Field Secondary School Karachi 2003 PTD 1264 rel.

Mrs. Shah Bani, G.M. Khan, D.R. for Appellant.

A. S. Jafri for Respondent.

2011 P T D (Trib.) 590

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khalid Siddiqui, Accountant Member

CIR, LD, RTO, HYDERABAD

Versus

HASSAN MASOOD BAIG, HYDERABAD

I.T.A. No.122/KB of 2010, decided on 2nd August, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----S.122(5)---Amendment of assessment---Assessee an association of persons was selected for audit---Association of persons purchased property wherein huge investment was involved, which had been invested by the members of association of persons---Proceedings in case of association of persons were dropped while in the case of members initiated through selection of their cases for audit---Proceedings initiated culminated in amendment of an assessment under S.122(5) of the Income Tax Ordinance, 2001 by making addition under S.111(1)(b) of the Income Tax Ordinance, 2001---Addition was deleted by the First Appellate Authority being against the principle of quid pro quo---Validity---Subsection (5) of S.122 of the Income Tax Ordinance, 2001 was not a provision to provide amendment of assessment order; it only sets out the criteria under which an officer could amend an assessment by invoking the provisions of subsections (1) and (4) of S.122 of the Income Tax Ordinance, 2001---Subsection (5) of S.122 of the Income Tax Ordinance, 2001 did not constitute a legal authority to amend an assessment---Assessment could only be amended by an officer either under subsections (1) and (4) of (5A) of S.122 of the Income Tax Ordinance, 2001---Action of Assessing Officer to amend the assessment order by invoking the provision of S.122(5) of the Income Tax Ordinance, 2001' was ab initio, void and illegal and not sustainable in the eyes of law---Admittedly Assessing Officer was assigned only to conduct audit proceedings and after such submission there remained no legal or moral justification on the part of Assessing Officer to amend the assessment that too for the tax yeas 2008 for which he had no mandate and had not issued any show-cause notice to amend the assessment---Order of Assessing Officer was annulled by the Appellate Tribunal being without jurisdiction, void ab initio and illegal.

ST No.215/KB/2001 dated 14-6-2006 (cited as STAT 0487(2006) COST 404 (Trib) S.Tax rel.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss.122 (5A), 122(1), 122(4), 120 & 114---Amendment of assess­ment---Jurisdiction of Assessing Officers to amend the assessment---Amendment of assessment by an Assessing Officer other than Additional Commissioner of Income Tax could either be made under S.122(1) or 122(4) of the Income Tax Ordinance, 2001 whereas an Additional Commissioner could amend an assessment under S.122(5A) of the Income Tax Ordinance, 2001 provided the original assessment order was erroneous so far as it was prejudicial to the interest of revenue---Subsection (3) of S.122 of the Income Tax Ordinance, 2001 authorized a taxpayer to amend the assessment in its own case finalized under S.120 of the Income Tax Ordinance, 2001 by way of revising the return filed under S.114 of the Income Tax Ordinance, 2001---No other provision in S.122 of the Income Tax Ordinance, 2001 existed under which an assessment could be amended by a Taxation Officer.

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 122(5)---Amendment of assessments---Tax year 2004---Order of Assessing Officer showed that taxpayer's income affairs for tax year 2004 were taken up for audit and the amendment had been made in the order of tax year 2008 without issuance of show-cause notice in respect of that year---Order of Assessing Officer did not show that he was delegated powers to amend assessment for the tax year 2008---Action of Assessing Officer to amend the assessment order for tax year 2008 was without jurisdiction and patently illegal.

Tauqeer Ahmed D.R. for Appellant.

A. S. Jafferi for Respondent.

2011 P T D (Trib.) 619

[Inland Revenue Appellate Tribunal of Pakistan]

Before Chaudhry Muhammad Ishaq, Member (Judicial) and Ms. Shahnaz Rafique, Member (Accountant)

Messrs EN EM ENTERPRISES

Versus

ADDITIONAL COLLECTOR OF SALES TAX AND CENTRAL EXCISE, (ADJUDICATION), LAHORE

S.T.A. No.46/LB of 2009 and M.A. (Addl.) No.114/LB of 2010, decided on 11th June, 2010.

(a) Sales Tax Act (VII of 1990)---

----S.11(4)---Assessment of tax---Limitation---Section 114(4) of the Sales Tax Act, 1990 provides a period of 45 days for the completion of assessment proceedings by the concerned officer of the sales tax empowered in this behalf---Provision of S.114(4) is mandatory---Once limitation provided by law expires, the assessee acquires a vested right of escapement of assessment and no extension could revive the period already over--Period in the present case, had expired on 5-8-2006 and 19-9-2006--Order passed under S.11 of the Sales Tax Act, 1990 was without jurisdiction and of no legal effect as no proceedings were then pending on 1st July, 2006.

Messrs Super Asia v. Collector 2008 PTD 60; Messrs Hanif Straw Board v. Additional Collector 2008 PTD 578; Messrs Tanvir Weaving Mills v. Dy. Collector, Sales Tax 2009 PTD 762 and 2009 PTD 1978 rel.

(b) Sales Tax Act (VII of 1990)---

----Ss.11(2), 36 & 45---Assessment of tax---Monitory limitation---Taxpayer submitted that amount of tax involved was Rs.13,559,984 whereas the Deputy Collector was competent to issue show cause only where the amount of tax involved did not exceed Rs.2.5 million; and the Deputy Collector (Adjudication) was not competent to issue the show-cause notice; and subsequent proceedings were null and void---Validity---Plea of the taxpayer appeared to have been accepted by the Department inasmuch as the appeal filed was transferred from the Deputy Collector (Adjudication) to the Additional Collector for the reason that the sales tax involved in the case was Rs.13.559 million which fell in the competence of the Additional Collector (Adjudication) in line with S.45 of the Sales Tax Act, 1990---Such admission on the part of Revenue was sufficient to dislodge the notice which was not issued by the competent authority---All subsequent proceedings taken thereon shall be null and void in the eyes of law---Notice issued by an incompetent person could not be given a fresh life simply because the subsequent proceedings could not attain validity in view of ab initio inherent defect of jurisdiction---Plea of the taxpayer was accepted by the Appellate Tribunal and the Order-in-Original was declared as being unjustified.

2003 CLC 1064 rel.

(c) Sales Tax Act (VII of 1990)---

----Ss.13(2) & 34(A)---S.R.O. 524(I)/2008 dated 11-6-2008---Exemption---Amnesty---Tax payer contended that Government exempted the amount of sales tax, default surcharge and penalty payable in respect of the taxable supplies made prior to 11-6-2008---Validity---Taxpayer had got registration shortly before the issuance of S.R.O. 524(I)/2008 dated 11-6-2008 and amnesty provisions were fully attracted in the ease---Levy of sales tax and penalties was totally unwarranted and was withdrawn.

2006 PTD 336 rel.

Hussain Ahmad Shirazi for Appellant.

Noman Malik, D.R. for Respondent.

2011 P T D (Trib.) 633

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson

Messrs YOUSAF SUGAR MILLS

Versus

COLLECTOR SALES TAX AND FEDERAL EXCISE, LTU, LAHORE

S.T.A. No.815/LB of 2009, decided on 28th June, 2010.

(a) Sales Tax Act (VII of 1990)---

----S. 7---Determination of tax liability---Affixation of registration number of supplier on invoices at later stage---Rejection of invoice on the objection which was not subject matter at the time of issuance of show-cause notice or passing the order-in-original---Claim of input tax adjustment was allowed but subsequently on an audit made by DRRA, taxpayer was confronted with thirteen purchase invoices objecting that the registration number was not obtaining on the same and demand including default surcharge and penalty was created---First Appellate Authority found that purpose of S.7 of the Sales Tax Act, 1990 was to determine the legality of the claim of input tax; and even otherwise required registration number having duly been affixed at a later stage there was no reason for not accepting the same---First Appellate Authority, however, allowed only twelve of the said invoices while rejected one by raising another objection which was not subject matter at the time of issuance of show-cause notice or passing the order-in-­original---Validity---At the time of issuance of show-cause notice no other discrepancy was found by the department except nonmentioning of the registration number which had subsequently been added----Collector (Appeals) while dealing with an appeal filed by the taxpayer had no jurisdiction to discover any new defect in the proceedings; he had neither any revisional authority nor any other issue was before him for discussion he was dealing with the appeal of the taxpayer in which the only issue to be adjudicated by him was whether non-mentioning of the registration number on the invoices was fatal and whether subsequent pasting of the same In the said invoices cure the lacunae or not---Collector (Appeals) by accepting twelve other invoices had made him functus officio and had impliedly held that the lacunae in invoice was curable; and should have ended the matter there and "ten---Collector (Appeals) had come to the conclusion that the invoices had been validated after certification by the concerned suppliers---No other discrepancy in the invoice either was found and the same should also have been placed at par with the other twelve invoices---Such action was disapproved by the Appellate Tribunal and the orders of the two officers below to such extent were also directed to be made at par with other twelve invoices.

1997 SCMR 1840 ref.

(b) Sales Tax Act (VII of 1990)---

----S.25---Access to record, documents, etc.---Audit by DRRA---Validity---Case of the department stood on the audit conducted by DRRA, a body which had no existence so far as the Sales Tax Law was concerned---DRRA had no authority to check the private record of a taxpayer as it was beyond its scope and jurisdiction.

1987 SCMR 1840; 2010 PTD 1355 and 2008 PTD (Trib.) 261 ref.

Hussain Ahmad Shirazi for Appellant.

Dr. Ishtiaq Ahmad, D.R. (LTU) for Respondent.

2011 P T D (Trib.) 653

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

Messrs CRESCENT TEXTILE MILLS LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.1273/LB of 2009, decided on 11th December, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss. 10(4), 11(2), 4, 7, 8(1), 26 & 73--Refund of input tax---Rejection of refund claim due to "non production of sales tax return or computer profile" of the supplier---Validity---Sales Tax Act, 1990 or the Rules did not obligate a registered buyer to produce sales tax returns or computer profile of his supplier---Rejection or deferment of a refund claim by the sales tax administration on the pleas that a registered person being an element of the supply chain jointly shares the responsibility of production of sales tax return or computer profile of the supplier, was without any rationale and legal force---If a refund claim was supported by an evidence of buyer's compliance of Ss.7 & 8 read with S.73 of the Sales Tax Act, 1990 the refund claim should not be denied by the department---Most sale and purchase transactions take place between a supplier and buyer at arms length as they did not know each other by face or met before and buying and selling transactions take place on telephone---If all the conditions set forth under Ss.7, 8 and 73 of the Sales Tax Act, 1990 were fulfilled; the input claim qualifies to be refunded to the claimant---If for any reason the registered supplier fails to file his tax return under S.26 of the Sales Tax Act, 1990 or his record of purchases vis-a-vis sales were not entered in the Sales Tax Automated Refund Repository System by the Pakistan Revenue Automation Limited, the registered buyer should not suffer for the fault of the delinquent supplier---Sometimes fault lies only with the PRAL who fails to enter necessary data in Sales Tax Automated Refund Repository and some times wrong data is entered by the staff of Pakistan Revenue Automation Limited---Rejection of refund claim or its deferment due to delinquent conduct of some one else, was not fair.

(b) Sales Tax Act (VII of 1990)---

----Ss.10(4), 11(2), 4, 7, 8(1), 26 & 73---Refund of input tax---Rejection of refund claim due to "input claim exceeding declared output"---Validity---Rejection of refund on the ground that input claim exceeds output was valid---Refund was to be paid after scrutiny of the sales and purchase summaries of his supplier issued to all of his clients and that too subject to verification by the Sales Tax Automated Refund Repository System---In case the invoices issued by the supplier were in excess of the input claimed, none of the claimant shall be paid refund irrespective of sales tax paid by the refund claimant---Due to logical perception the refund could only be sanctioned which did not exceed declared output or in other words that an amount of sales tax which had not been credited into treasury---Mandatory on the part of the refund claimant to reconcile such situation with the refund sanctioning authority.

(c) Sales Tax Act (VII of 1990)---

----Ss. 10(4), 11(2), 4, 7, 8(1), 26 & 73---Refund of input tax---Rejection of refund claim on the allegation of "non filing of return by the supplier"---Validity---No provision of Sales Tax Act, 1990 or the Refund Rules authorizes rejection of refund claim due to non filing of sales tax return by the supplier---Report of non fling of the sales tax returns by the taxpayer in the system might be due to several reasons including non-entry of data by the Pakistan Revenue Automation Limited or denial of taxpayers of access to the system due to technical hardware problems---Section 11(1) of the Sales Tax Act, 1990 will come into play to force the non-filer to file tax return---Rejection of refund claim of a bona fide refund claimant and setting free the "non-filer" was an act of arbitrariness---Emphasis should be placed on prompt action by the tax administration under S.11(1) of the Sales Tax Act, 1990 and to take corrective measure instead of penalizing the refund claimant for the fault of others.

(d) Sales Tax Act (VII of 1990)---

----Ss. 10(4), 11(2), 4, 7, 8(1), 26 & 73---Sales Tax Rules, 2006, R.12(5)---Refund of input tax---Rejection of refund claim on the allegation of "registration suspension"---Validity---Under R.12(5) of the Sales Tax Rules, 2006, during the period of suspension of registration the invoices issued by such registered person shall not be entertained for the purpose of sales tax refund or input tax credit claimed against the invoices issued by him, whether prior or after such blacklisting---Collector (now Commissioner) was competent to suspend the registration of the taxpayer if he contravenes any provisions of the Sales Tax Act or Sales Tax Rules---If a taxpayer carries out his business quite in accordance with the provisions of Sales Tax Act, 1990 for twelve consecutive months and later on contravenes any provisions of the Act in the succeeding months, all of his transactions shall be deemed to be invalid for the purpose of refund---Provision of Sales Tax Rules was clearly unfair and unlawful as it penalizes a registered person retrospectively---Such arrangement was inconsistent with law---Law provides that an unintentional mistake could not undo a bona fide act done in a tax period---Appellate Tribunal observed that Amendment made in Sales Tax Rules, 2006 needed to be reviewed by the federal Board of Revenue.

(e) Sales Tax Act (VII of 1990)---

----Ss. 21(2) & 7(2)---De-registration, blacklisting and suspension of registration---Rejection of refund claim on the allegation of "registration suspension" Validity---Under S.21(2) of the Sales Tax Act, 1990, the Commissioner was empowered to blacklist or suspend the registration of a registered person on the charges of issuance of fake invoices and claiming tax fraud---Tax administration had not made any arrangement to inform the public about the suspension of registration or blacklisting of a taxpayer---Section 7(2) of the Sales Tax Act, 1990 made a registered person entitled to claim refund if he holds a tax invoice and the payment was made through banking channel--Refund sanctioning authority was bound to ensure that all the conditions of the checklist were fulfilled and initiate prompt action in tax fraud cases and fake invoices---Suspension of registration or blacklisting of a registered supplier had no nexus with the refund claimant in circumstances and refund could not be denied for the reason that a supplier was blacklisted---Nothing should come out from government exchequer which had not been deposited into but at the same time the government's status was that of guarantor---If a person had paid sales tax but his supplier had not paid the same into government treasury, the refund claimant had also to suffer a bit due to selecting an unfair person to transact---Appellate Tribunal proposed to Federal Board of Revenue to go for legislation if considered appropriate that in such situation government should immediately proceed to recover from delinquent and pay the refund claimant---If the government fails to do so, within a period of two or three years, then government will pay to the refund claimant from his own pocket because refund claim was a peanut qua the volume of government exchequer---Being guarantor of the system, government had to fulfil its responsibilities; on the one hand this will help to eliminate fake or forged invoice and on the other it will provide mandate to proceed against the persons committing tax fraud and accelerating the pace of transparent refunds.

(f) Sales Tax Act (VII of 1990)---

---Ss. 10(4), 11(2), 4, 7, 8(1), 26 & 73---Sale Tax Standing Order No.3 of 2006 dated 2-11-2006---Refund of input tax---Rejection of refund claim on the allegation of "scrutiny for verification of input tax"---Validity---Refund claimant was only confined to submission of all record necessary for sanction and payment of refund before the sanctioning authority with supporting evidence---Scope of scrutiny of invoices for verification of input tax was limited to a ascertain time frame of 90 days prescribed under the law---General Order, Instruction, Ruling of the Board could not override provisions of law---Refund was not only kept pending for more than one year but also. linked with the conditions as laid in the General Order, and to ask the refund claimant to have the suppliers invoices verified by the tax administration was arbitrary--Registered person, should not be burdened with unnecessary exercises---Such controversial practice of the sales tax administration draws it legality from a Standing Order No.3 of 2006 dated 2-11-2006 which made it obligatory for the refund claimant to produce invoices duly verified by the Collector of Sales Tax having jurisdiction of the supplier---Such was very cumbersome for the refund claimant to get the invoices verified from his suppliers scattered in different cities of the country---Rejection of refund claim, in circumstances, had no legs to stand---Appellate Tribunal observed that department itself was to use government facilities to verify, if find the paper bogus and stern penal action should be taken.

(g) Sales Tax Act (Vii of 1990)---

----Ss. 10(4), 11(2), 4, 7, 8(1), 26 & 73---Refund of input tax---Rejection of refund claim on the basis of "invoices required verification "---Validity---Tax administration was bound to verify me invoices in the chain of supply prior to sanction and payment of refund---Failure of administration to accomplish the task within the prescribed time limit and procedure brings misfortune for a refund claimant---Such delay leads to financial restraints of a tax payer in export oriented refund claims and deprivation of foreign exchange for the State---Rejection/deferment was not supported by any provisions of Sales Tax Act, 1990 or Rules.

(h) Sales Tax Act (VII of 1990)---

----Ss. 10(4), 11(2), 4, 7, 8(1), 26 & 73---Refund of input tax---Rejection of refund claim on the basis of "wrong tax period"-Validity-Under S.7 of the Sales Tax Act, 1990 a registered person was entitled to claim input tax adjustment/refund on the invoices of preceding twelve 'tax period---Refund claim was lodged within tax period and due to a defective software of Pakistan Revenue Automation Limited such objections were regular feature---Such objections could be removed on fresh replication from Sales Tax Automated Refund Repository System or could be overruled by manual verification of tax invoices and record ---Claim of refund against a tax invoice covering twelve preceding period was admissible and could not be disregarded.

(i) Sales Tax Act (VII of 1990)---

----Ss. 10(4) & 7---Refund of input tax---File should not be buried after refusing refund on the plea of lack of verification after period of limitation---Within statutory period for granting refund some amount of refund was refused due to certain verification which could not possibly be made within time limit but departmental officer should not bury the file and continue to complete verification; so that up to forums of appeal things should become crystal clear to answer claimant in yes or no---Practice by the Appellate forums that cases were again remanded for wastage of precious time---Appellate Tribunal proposed to Federal Board of Revenue; if finds appropriate to issue direction to field staff to complete verification and not to bury the file after refusing on the Plea of lack of verification.

M. Akram Nizami for Appellant.

Faisal Asghar, D.R. for Respondent.

2011 P T D (Trib.) 677

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

Messrs FATIMA FAZAL TEXTILE MILLS (PVT.) LTD., ISLAMABAD

Versus

CIR (A), LTU, ISLAMABAD

S.T.As. Nos.51/I.B to 54/IB of 2010, decided on 30th September, 2010.

(a) Sales Tax Act (VII of 1990)---

----S. 36(2)---Recovery of tax not levied or short-levied or erroneously refunded---Payment of refund---Issuance of show-cause notice---Limitation---Issuance of show-cause notice after about five years from the payment of refund amount on the basis of audit report from Post Refund Audit Division pointing out number of discrepancies in the refund which had been sanctioned and paid to the taxpayer---Validity-According to S.36(2) of the Sales Tax Act, 1990, the Deputy Collector issues show-cause notice after the period of three years---If notice was treated to be a valid notice under subsection (2) of S.36 of the Sales Tax Act, 1990, still it was beyond the prescribed period of limitation of three years---Show-cause notice having been issued after the prescribed period of three years, superstructure built on the same was to be struck down---First Appellate Authority had presumed collusion but no action had been taken against officers issuing refund---To stretch the limitation of five years without taking any action against the departmental officers would not be logical---Where there was merely a contravention and not the fraud, limitation could not be extended to five years---Orders passed by both the forums below were vacated and the appeals of the registered person were accepted on the point of limitation and other issues were not adjudicated upon.

(b) Sales Tax Act (VII of 1990)---

----S. 36(2)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Mandatory requirement---Phrase "shall be served with a notice within three years of the relevant date" conveys the intention of legislature that show-cause notice and issuance of the same, within three years, was a mandatory requirement---Term "shall" used in subsection (2) of S.36 of the Sales Tax Act, 1990 made the compliance of provision of law mandatory and there was no escape to it---When a period was provided by a special statute, then any proceedings for actions taken under the provisions of special statute had to be taken within the stipulated period.

(c) Sales Tax Act (VII of 1990)---

----S. 36(1)(2)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Two periods of limitation had been provided under S.36 of the Sales Tax Act, 1990 for issuance of show-cause notice---Under subsection (1) of S.36 of the Sales Tax Act, 1990, the period of limitation was five years and the cases in which this period was applicable were those where the taxpayer had either colluded with somebody for such short payment or had made some deliberate acts or omissions for short payment of the tax---Department had been given a longer period of limitation i.e. five years so that such a person should not go escort free---Under subsection (2) of S.36 of the Sales Tax Act, 1990, the period of limitation for issuance of show-cause notice was restricted to three years only---Under said subsection, the grounds available for issuance of show-cause notice were inadvertence, error or some misconstruction on the part of the taxpayer meaning thereby that it was due to some innocent act of the taxpayer that the tax was either not paid or short paid---Legislature restricted its limitation to three years as covered under subsection' (1) of S.36 of the Sales Tax Act, 1990---Analysis of the two subsections showed authority that which had to issue such a show-cause notice, will have to make out a case in the show-cause notice itself as to under which provision the case fell and will also have to incorporate the grounds and reasons in the show-cause notice very clearly and explicitly so that it could be ascertained whether the show-cause notice issued fell under sub-section (1) or (2) of S.36 of the Sales Tax Act, 1990---Failure to do so by the authority issuing show-cause notice would render the show-cause notice invalid and illegal and the show-cause notice could not be said to be a show-cause notice under subsection (1) or (2) of S.36 of the Sales Tax Act, 1990.

Shaukat Ali Qureshi for Appellant.

Ghulam Hasnan, D.R. for Respondent.

2011 P T D (Trib.) 693

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Masood Ali Jamshid, Accountant Member

I.T.As. Nos.73/LB and 74/LB of 2010, decided on 4th August, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 122(5)---Amendment of assessment---Valuation of plot---Addition---Assessee filed wealth statement along with affidavit of her husband, who was an existing assessee stating that he had sufficient funds to purchase the said plot in her name---Evidence of payment to seller through a pay order was also provided along with agreement to sell stating the facts---After lapse of six and a half months, taxation officer issued notice under S.176 of the Income Tax Ordinance, 2001 to seller for cross verification---Seller stated the higher price of the plot than the taxpayer(purchaser)---However, neither evidence for the said payment received from the taxpayer or an agreement between the seller and the taxpayer was placed on record nor affidavit in support thereof was filed---Validity---No corroborative evidence had been produced to substantiate that the consideration paid by the taxpayer was more than as stated by the seller---There was no nexus between the statement of the seller and the evidence produced by the taxpayer---Addition was held to be illegal and without justification and penalty levied was also deleted being levied in a haste and also without substantiating mens rea which was an integral ingredient for initiation of penalty proceedings.

2006 PTD (Trib.) 2662 and 2005 PTD 1 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 111(2)---Unexplained income or assets---Date of discovery as envisaged in S.111(2) of the Income Tax Ordinance, 2001 clearly meant that the date on which it was confronted to the person against whom the said information was going to be used---Discovery was made on 4-3-2009 which fell into tax year 2008 and not tax year 2007.

I.T.As. Nos.756 and 757/LB/2009 rel.

Naveed A. Andrabi for Appellant.

Manzoor Hussain Shad, D.R. for Respondent.

2011 P T D (Trib.) 703

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member

Messrs SWEETY TEXTILES (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX AND FEDERAL EXCISE, FAISALABAD

S.T.As. Nos.2150/LB and 2151/LB of 2009, decided on 7th January, 2011.

Sales Tax Act (VII of 1990)---

----Ss.11(2), 2(14), 4, 7, 8(1), 10 & 26---Sales Tax Refund Rules, 2006---Assessment of tax---Refund of input tax---Refund claim was deferred with the observation that certain discrepancies like invoice required verification; duplicate, MR No. & Date mismatched; exceeded declared input and wrong tax period did not exist---Taxpayer contended that objections raised by the Sales Tax Automated Refund Repository system were not sufficient grounds for rejecting sales tax refund and it was the responsibility of the Sales Tax Department to audit and recover the sales' tax from the defaulters; and documents in respect of refund claim were submitted but the same were not considered by the concerned authorities---Validity---On the issue of verification of documents, Appellate Tribunal agreed with the taxpayer---Taxpayer requested that the case be remanded to the concerned Deputy Commissioner Inland Revenue for re-prossessing of the case---Departmental Representative had shown no reservation if the case was remanded to the concerned officer for afresh proceedings---Orders of authorities below were declared to be illegal, void and without lawful authority---Case was remanded for processing of refunds claim afresh in the light of documentary evidences available with the taxpayer with the direction that proper opportunity to the taxpayer as envisaged under the law be accorded-Taxpayer was also directed to cooperate with the department in de now proceedings.

Asad Ali Malkana for Appellant.

None for Respondent.

2011 P T D (Trib.) 705

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Shahnaz Rafique, Accountant Member

I.T.A. No.697/LB of 2010, decided on 3rd August, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.18, 122(5A) & 153(1)(c)---Income from business---Assessee contended that receipt in dispute could only be taxed under Presumptive Tax Regime, otherwise it was a capital receipt not chargeable to tax under S.18 of the Income Tax Ordinance, 2001---Validity---In original notice under S.122(5A) of the Income Tax Ordinance, 2001, the sole ground for revision was that receipt did not fall under S.153(1)(c) of the Income Tax Ordinance, 2001 because only construction of building and installation of plant and machinery were covered in the said provision---However, in the second show-cause notice after more than four years an altogether different stance was taken---Section 18 of the Income Tax Ordinance, 2001 was applied in taxing the amount, whereas it was specifically conveyed in the second notice that the said section was not applicable---Taxpayer had consistent stance from the beginning that amount was capital receipt, not chargeable to tax under S.18 of the Income Tax Ordinance, 2001, but liable to tax under presumptive tax regime that made no distinction between capital or revenue receipt.

Gadoon Textile Mills and 814 others' case 1997 SCMR 641; PLD 1978 Kar. 1047 = 1978 PTD 328; 2001 PTD 2829; 2006 PTD 2291; 2003 PTD (Trib.) 2321; (1964) 9 Tax 38 (Trib.); I.T.As. Nos.393 and 270/KB/2010 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.122(5A)---Amendment of assessments---Deviation in passing order from the grounds mentioned in show-cause notice(s) was violative of law---Order of the adjudication being ultimately based on a ground which was not mentioned in the show-cause notice, order was palpably illegal and void on the face of it.

The Collector Central Excise and Land Customs and others v. Rahim Din 1987 SCMR 1840 rel.

(c) Income Tax Ordinance (XLIX of 2001)---

---Ss. 122 (5A), 18 & 37---Amendment of assessment---Various notices--Fishing inquiries---Since department issued various notices under S.122 (5) of the Income Tax Ordinances, 2001 on different grounds and kept on going for enquiries, the proceedings under S.122(5A) of the Income Tax Ordinance, 2001 were void---Fishing inquiries were not allowed while exercising provisional jurisdiction and S.122(5A) of the Income Tax Ordinance, 2001 is not maintainable if based on surmises and conjectures---Allegations levelled for invoking S.122(5A) of the Income Tax Ordinance, 2001 were changed in the very second notice issued after more than four years of the original show-cause notice---In the second notice it was conveyed that S.37 of the Income Tax Ordinance, 2001 was applicable and cases cited for non-taxation of capital receipt were not relevant---Department admitted that amount was capital in nature, but taxable as capital gains Amount was taxed as "revenue" receipt chargeable under S.18 of the Income Tax Ordinance, 2001.

2008 PTD (Trib.) 1491 and I.T.A. No.1210/LB of 2006 rel.

(d) Income Tax Ordinance (XLIX of 2001)---

---S.122 (5A)---Amendment of assessment--- "Definite information"-Final adjudication on a point different from the one mentioned in original notice and second notice was violation of law which proved that allegations regarding being erroneous and prejudicial to the interest of revenue were based on surmises and conjectures---For the purpose of provisional jurisdiction, the allegation should be definitive and supported by evidence---Officer changed the very nature of allegation in second notice issued under S.122(5A) of the Income Tax Ordinance, 2001 and then passed the order other than on the ground mentioned therein---Initiation of proceedings under S.122(5A) of the Income Tax Ordinance, 2001 on a particular ground and its conclusion on a different ground that was never confronted could not be lawful.

The Collector Central Excise and Land Customs and others v. Rahim Din 1987 SCMR 1840 rel.

(e) Income Tax Ordinance (XLIX of 2001)---

----S.122 (5A)---Amendment of assessment---Conscious application of mind---Assessment could not be amended under S.122(5A) of the Income Tax Ordinance, 2001 without conscious application of mind by Commissioner himself---Such is a legal obligation imposed on the Commissioner by law itself---If legislature imposes a personal obligation on an authority then the same authority was required to discharge that legal obligation---Obligation could not be passed op to any body else.

MA(AG) No.221/LB/09 in I.T.A. No.1019/LB/08 dated 9-5-2009; 2007 PTD (Trib.) 1226 and 2005 PTD (Trib.) 344 rel.

(f) Income Tax Ordinance (XLIX of 2001)---

----S.122 (5A)---Amendment of assessment---Exercise of jurisdiction---Proceedings under S.122 (5A) of the Income Tax Ordinance, 2001 are revisional in nature and the revisional jurisdiction could not be exercised by same person let alone by subordinate authorities.

CIT v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 = 2009 PTD 1392 and Sandal Engineer (Pvt.) Ltd. v. IAC 2001 PTD 1467 rel.

(g)Income Tax Ordinance (XLIX of 2001)---

----S.122 (5A)---Amendment of assessment---Where a statute directs that certain acts shall be done by specified person; their performance by any other person is impliedly prohibited---Any authority vested with the power or discretion was duty bound to exercise the same by himself by applying his independent' mind not influenced by extraneous consideration---Said Authority should neither accept any dictation nor delegate his authority to any other person---Violation of rules would render the decision illegal---Department had admitted that at no stage of the proceedings, the Commissioner applied his independent consideration to adjudge that original order was erroneous and prejudicial to the interest of revenue---On this account also order under S.122(5A) of the Income Tax Ordinance, 2001 was not sustainable in law---Since proceedings under S.122(5A) of the Income Tax Ordinance, 2001 were declared void ab initio and the order passed was unlawful on the face of it, Appellate Tribunal did not adjudicate the grounds on merit regarding chargeability of the receipt---Order passed under S.122(5A) of the Income Tax Ordinance, 2001 was declared to be null and void.

Messrs Gadoon Textile Mills and 814 others v. WAPDA and others 1997 SCMR 641 rel.

Gadoon Textile Mills and 814 others' 1997 SCMR 641; PLD 1978 Kar. 1047 = 1978 PTD 328; 2001 PTD 2829; 2006 PTD 2291; 2003 PTD (Trib.) 2321; (1964) 9 Tax 38 (Trib.); I.T.As. Nos.393 and 270/KB of 2010 ref.

(h) Income Tax Ordinance (XLIX of 2001)---

----S.122 (5A)---Amendment of assessment---Receipts on termination of agency rights---Question whether the amount received on termination of agency rights, was a capital or revenue receipts, the taxpayer had prime facie a very strong case in his favour---Since Appellate Tribunal adjudicated the appeal on legal plane, the said issue was not dilated upon from that angle.

Ikram ul Haq for Appellant.

Muhammad Tahir, D.R. for Respondent.

2011 P T D (Trib.) 717

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member

Messrs HABIB JUTE MILLS LTD.., KHUSHAB

Versus

COLLECTOR OF SALES TAX AND FEDERAL EXCISE, FAISALABAD

S.T.A. No.1263/LB of 2009, decided on 14th January, 2011.

Sales Tax Act (VII of 1990)---

---Ss. 11(2), 2(14), 4, 7, 8(1), 10 & 26---Sales Tax Refund Rules, 2006---Assessment of tax---Refund of input tax---Documents of refund---Appeal was disallowed by the First Appellate Authority on the ground that documents pertaining to refund claim were not produced at the time of hearing as the same were misplaced by the registered person during the shifting of office record---Claim was disallowed and the taxpayer was technically knocked down---Registered person traced out the genuine documents and contended that there could not be any doubt regarding veracity/authenticity of the same; and had no remedy except to file the appeal for redressal of grievance---Validity---Department contended that registered person had not produced relevant requisite documents at the stage of adjudication proceedings, the claim of refund had rightly been rejected---Validity---Registered person had requested that the case be remanded for re-prossessing of the same to Assistant Collector to submit relevant documents and prove the genuineness of the refund claim which was misplaced during the shifting of office---Department Representative had shown no reservation if the case was remanded to the concerned' officer for afresh proceedings---Orders of both the authorities below were declared to be illegal, void and without lawful authority---Case was remanded for processing of the claim afresh in the light of documentary evidence available with the registered person---Registered person was directed to submit all the relevant documents before the adjudicating authority in support of his refund claim; and proper opportunity be accorded as envisaged under the law.

Muhammad Yousaf Khan for Appellant.

Miss Sumaira Umer, D.R. for Respondent.

2011 PTD (Trib.) 719

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Shahnaz Rafique, Accountant Member

I.T.As. Nos.1018/LB and 1020/LB of 2010, decided on 30th July, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 184(2)(a), 122(5) & 111---Penalty for concealment of income---Amendment of assessment---Definite information---Audit of sales tax---During audit proceedings, it was found that sales of the company were diverted to undisclosed joint accounts of the Directors of the company--Assessment was amended with the view that company's sales had been diverted to the joint accounts of Directors which resulted additions in the declared income---Taxpayer contended that there was no nexus whatsoever between the amount lying in the bank accounts of Directors and the sales receipts of the taxpayer and also the fact that requisite ingredients especially availability of definite information' was altogether missing---Department contended that joint accounts of the Directors were in fact benami accounts of the company in which company's suppressed/undisclosed sales had been deposited; and S.122(5) of the Income Tax Ordinance, 2001 was rightly invoked and resultant amended order passed was quite in consonance with law---Validity---Not only the department did not involve the Directors in the amended proceedings but strangely enough they were not asked with regard to the source of the deposits lying in their accounts---With regard to the amounts appearing in the present accounts of Directors per se, the correct course was that a notice under S.111 of the Income Tax Ordinance, 2001 should have been issued to Directors in order to seek an explanation with regard to the credit entries in the bank accounts of the Directors to ascertain the nature and source of such entries---Failing which, by initiating proceedings under S.111 of the Income Tax Ordinance, 2001, addition as per law could have been made---Revenue failed to establish any nexus between the sales receipts made by the taxpayer and the money deposited in the Directors bank accounts, the same could not be treated asdefinite information'---Amended assessment was liable to be cancelled and additions were directed to be deleted.

1986 PTD 37 and (1989) 59 Tax 112 (H.C. Lah.) rel.

1997 PTD 1485 (S.C. Pak); 2003 PTD 1885 and 1997 PTD (Trib.) 2037 ref.

Ahmed, I.T.P. for Appellant.

Muhammad Tahir, D.R. for Respondent.

2011 P T D (Trib.) 726

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member

Messrs COSY INTERNATIONAL (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX (RTO), FAISALABAD

S.T.A. No.913/LB of 2009, decided on 6th January, 2011.

(a) Sales Tax Act (VII of 1990)---

----S. 11(4)---Assessment of tax---No opportunity of being heard---Time barred appeal---Registered person contended that adjudication proceedings carried out on his back were in flagrant disregard of law in as much as the order was passed on ex parte basis without providing any opportunity of being heard which was not only against the provisions of Sales Tax Act, 1990 but also against the norms of natural justice; and order passed by the adjudicating authority on ex parte basis was an illegal and void order therefore question of time limitation would not arise against it; and dismissal of appeal by the First Appellate Authority on account of time limitation was also unjustified---Validity---Since the adjudicating authority decided the case on ex parte basis without providing with any opportunity of hearing and registered person was deprived of his precious right of being heard, such act violated not only principles of natural justice but was in contravention of mandatory provisions of law which vitiated all the proceedings conducted on the back of registered person---No time limit would run against the order of adjudicating authority---Both the orders of authorities below were declared to be illegal, void and without lawful authority and the case was remanded to adjudicating authority having jurisdiction with directions to provide an ample opportunity of being heard and to pass a fresh and speaking order---Registered person was directed to submit all the relevant documents before adjudicating authority in support of his refund claim.

1994 SCMR 2232; 2009 PTD 1507 and 1999 PTD 1358 ref.

1987 SCMR 1543; 2007 SCMR 834; 2007 SCMR 729 and 2007 SCMR 262 rel.

(b) Sales Tax Act (VII of 1990)---

----S. 11(4)---Assessment of tax---Opportunity of being heard---Case was decided by the adjudicating authority on ex parte basis without providing the registered person with any opportunity of hearing which was not only against the provisions of Sales Tax Act, 1990 but also against the norms of natural justice as the principle of "Audi Alteram Partem i.e. No body should be condemned unheard" had not been observed.

(c) Sales Tax---

----Opportunity of being heard---Expeditious disposal of case---No order affecting the rights of a person should be passed without providing him an opportunity of being heard---One should not be condemned unheard---Expeditious disposal of case was appreciable but it should not happen at the expense of justice---Court must take proper care to afford proper opportunity and should not give any impression of undue haste or rush up, such disposal will be at the expense of their fair name.

(d) Sales Tax---

----Opportunity of being heard---Fundamental right---Right of personal hearing to a person against whom an adverse order was to be made was to be equated with fundamental right and an adverse order made without affording him an opportunity of personal hearing was to be treated as an illegal and void order---Such principle was always deemed to be embedded in the statute and even if there was no such specific or express provision, it would be deemed to be one of the parts of the statute because no adverse action could be taken against a person without providing right of hearing to him.

1994 SCMR 2232; 2009 PTD 1507 and 1999 PTD 1358 ref.

Khubaib Ahmed for Appellant.

Nemo for Respondent.

2011 P T D (Trib.) 731

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

COLLECTOR OF SALES TAX, FAISALABAD

Versus

Messrs SUN RISE FOOD INDUSTRY, FAISALABAD

S.T.A. No.1752/LB of 2009, decided on 11th December, 2010.

Sales Tax Act (VII of 1990)---

----S. 11(2)---Assessment of tax---Agreement---Claim of input tax was restricted to the extent of 20% of the value of exported goods and disallow the balance---First Appellate Authority's direction to allow adjustment of input tax as claim of registered person was based on consumption of packing material in exports---Department contended that the agreement was executed between the Collector and Association of Confectionery voluntarily and was binding upon the .contracting parties; and claim of input adjustment, being in excess of 20% limit had been rightly disallowed---Registered person contended that agreement relied upon was not of binding nature because it was not reduced into a statutory instrument---Validity---Appellate Tribunal dismissed the appeal of the department; and directed the concerned officer to allow the adjustment of input tax to the registered person because the same could not be denied on the basis of an agreement which was enforceable under the law.

Messrs Crescent Re-rolling Mills's case 2005 PTD 2436; Messrs Mehmood and Co. v. Assistant Collector Sales Tax Lahore and others 2005 PTD 72 and 2007 PTD 47 rel.

Faisal Asghar, D.R. for Appellant.

Khubaib Ahmad for Respondent.

2011 P T D (Trib.) 733

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Amjad Ikram Ali, Accountant Member

I.T.As. Nos.470/LB and 471/LB of 2009, decided on 30th December, 2009.

(a) Income Tax Ordinance, (XLIX of 2001)---

----Ss. 161, 265 & 21(1)---C. B. R: Circular No.27 of 1991 dated 24-8-1991---Failure to pay tax collected or deducted---Truck freight---Payment of---Taxpayer was confronted on the ground that no deduction of tax was made on payment of truck freight and taxpayer was personally liable for paying the defaulted amount- of tax on the ground that "ledger account and supporting documentary evidence did not prove both the stipulations i.e. (i) the vehicle/truck/tanker was owned by an individual and (ii) the vehicle should have been engaged for a single journey during the whole year had not been satisfied---Taxpayer contended that invocation of provisions of &.161/205 of the Income Tax Ordinance, 2001 on payments of truck freight was uncalled for and unjustified because of specifically exclusion from tax deduction as per wording of proviso to S.21(1) of the Income Tax Ordinance, 2001---Validity---Section 21(1) of the Income Tax Ordinance, 2001 dealt with non-admissibility of expenditure on which deduction had not been made---Action, under S.161/205 of the Income Tax Ordinance, 2001 had nothing to do with the action under S.21(1) of the Income Tax Ordinance, 2001 read with its proviso---Section 21(1) of the Income Tax Ordinance, 2001 provides that expenditure incurred on freight charges which in aggregate exceeds Rs.50,000 and payment had not been made through banking channel shall not be treated as inadmissible expenditure---Liability created under Ss.161/205 of the Income Tax Ordinance, 2001 was upheld by the Appellate Tribunal.

2008 PTD 1227 not relevant.

2002 PTD 1 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 161 & 205---S.R.O. 586(I)/91 dated 30-6-1991---Failure to pay tax collected or deducted---Purchases below taxable limits---Taxpayer argued that payments regarding store. purchases and repair maintenance were below taxable limits i.e. Rs.10,000 for services and Rs.25,000 for supplies and were not liable to action under S.161 of the Income Tax Ordinance, 2001---Taxpayer had not realized that the Taxation Officer had already excluded below taxable limits purchases from action under S.161 of the Income Tax Ordinance, 2001---Taxation Officer had only subjected payments made to associated parties and said parties did not have exemption certificates---Action under S.161 of the Income Tax Ordinance, 2001 was maintained by the Appellate Tribunal--Action under S.205 of the Income Tax Ordinance, 2001 was also not interfered to the extent that action under S.161 of the Income Tax Ordinance, 2001 had been maintained.

M. Iqbal Kh. for Appellant.

Muhammad Asif, D.R. for Respondent.

2011 P T D (Trib.) 738

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member

Messrs BISMILLAH FABRICS, FAISALABAD

Versus

COLLECTOR OF SALES TAX (RTO), FAISALABAD

M.A. (Cond.) No. 140/LB of 2010 and S.T.A. No.816/LB of 2009, decided on 6th January, 2011.

(a) Sales Tax Act (VII of 1990)---

---Ss. 46 & 11(2)---Appeal to Appellate Tribunal---Sales Tax Refund Rules, 2002---Limitation---Show-cause notice for rejection of refund claim was issued on the objections of "invoice summary not submitted and no sales to claimant shown in summary" while the refund claim was rejected being not satisfied with the documents and order was passed on the ground of "abnormal tax profile "---Objection of office was that appeal against such order was time barred by 182 days--Taxpayer contended that since order of First Appellate Authority was illegal, void and defective therefore, no time limit would against it-Validity-Decision of First Appellate Authority clearly contravened the settled principles of justice and spirit of law, the same was illegal and devoid of lawful authority---Appeal was not rejected by the Appellate Tribunal because of a procedural or technical lapse as the cases should be decided on merits instead of on technical grounds---Bar of limitation would not apply and delay in filing of appeal was condoned in the peculiar circumstances.

1996 SCMR 856; 2007 SCMR 729 and 2007 SCMR 262 rel.

(b) Sales Tax Act (VII of 1990)---

----S. 11(2)---Assessment of tax---Taxpayer was confronted with the charges of "invoice summary not submitted and no sales to claimant shown in summary" in the show-cause notice whereas order of adjudicating authority as well as First Appellate Authority provided rejection of refund on the charge of "abnormal tax profile" Validity-Allegations against the registered person were that invoice summary was not submitted and no sales to claimant was shown in summary which primarily mentioned in the show-cause notice while at the time of passing orders, adjudicating authority as well as First Appellate Authority deviated from the allegations` and rejected the refund claim on the ground of abnormal tax profile which was not only illegal but also beyond the scope, stance and contents of the show-cause notice---Charge which was not framed in the show-cause notice could not be adjudged through an adjudication order---Orders were not sustainable as charge or controversy of abnormal tax profile was not part of the show-cause notice---Adjudicating authority as well as First Appellate Authority neither ascertained the facts nor made any inquiry or issued a show-cause notice in order to adjudicate an issue which was not before them as a part of show-cause notice---No body should be a judge of its own cause---In absence of any notice regarding disputed issue, the authorities were not competent to pass an order---Such principle is applicable to courts, Tribunals, Authorities having jurisdiction to determine judicially, the rights of citizens---Adjudicating authority as well as First Appellate Authority had decided an issue which was not sub judice before them as part of statement of allegations conveyed to the taxpayer and by giving a decision on the same they acted beyond their jurisdiction to pass a finding 'on such issue---Orders suffered from procedural and legal impropriety, as a cause for which no show-cause notice was given by the department was adjudicated by them in flagrant violation of the existing provisions of law---Held, authorities below had no jurisdiction to decide an issue which was not sub judice before them---Orders of authorities below were set aside by Appellate Tribunal being illegal and without lawful authority and appeal of registered person was accepted.

The Collector Central Excise and Land Customs others v. Rahim Din 1987 SCMR 1840 and 2010 PTD (Trib.) 451 rel.

Khubaib Ahmed for Appellant.

Nemo for Respondent.

2011 P T D (Trib.) 744

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Masood Ali Jamshed, Accountant Member

C.I.T. LEGAL DIVISION, RTO, LAHORE

Versus

MUHAMMAD MUNIR CHAUDHRY

I.T.A. No.1139/LB of 2008, decided on 8th August, 2009.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.170(4) & 127---Refund---Limitation---Rejection of refund application as illegal for being hit by limitation-Taxpayer contended that refusal of refund order was time barred for having been passed after 45 days as stipulated in S.170(4) of the Income Tax Ordinance, 2001---Appeal was accepted by the First Appellate Authority on the ground of limitation, holding the order for refusal of refund as time barred---Department contended that omission under subsection (4) to S.170 of the Income Tax Ordinance, 2001 was appealable under sub-S.(5)-Validity-Consequence of failure to pass order under sub-section (4) of S.170 of the Income Tax Ordinance, 2001 within the specified period of 45 days was provided in Cl. (b) of subsection (5) to S.170 of the Income Tax Ordinance, 2001, whereby a cause of action arises in favour of the taxpayer and the taxpayer being aggrieved of the inaction on the part of Commissioner could prefer an appeal under Part-III of Chapter X---Section 127 of the Income Tax Ordinance, 2001 provided first appeal before Commissioner of Income Tax (Appeals) to the taxpayer against any order passed by a Commissioner or a Taxation Officer under sections mentioned therein---Section 170, inter alia, was one of the sections provided in S.127 of the Income Tax Ordinance, 2001---Person aggrieved of an order or of omission to pass order under subsection (4) of 5:170 of the Income Tax Ordinance, 2001 could prefer an appeal before Commissioner (Appeals) under S.127 of the Income Tax Ordinance, 2001---Order of First Appellate Authority was set aside by the Appellate Tribunal to the extent of interpretation of S.170(4) of the Income Tax Ordinance, 2001 on limitation---Case was remanded back to First Appellate Authority with direction to decide the appeal on merits and in accordance with law.

Messrs Flopetrol International, SA, Islamabad and 51 others v. The C.B.R. and 2 others 1994 PTD 1370 and 2007 PTD (Trib.) 1780 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 170(5)(2) & 127-Refund-lithe contention that "since no order was passed under subsection (4) of S.170 of the Income Tax Ordinance, 2001, appeal would not lie under S.127 of the Income Tax Ordinance, 2001" was accepted, it would render Cl. (2) of sub-section (5) to S.170 of the Income Tax Ordinance, 2001 as redundant.

Messrs Flopetrol International, SA, Islamabad and 51 others v. The C.B.R. and 2 others 1994 PTD 1370 rel.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.170(4)---Refund---Inaction/default by the Commissioner under subsection (4) of S.170 of the Income Tax Ordinance, 2001 amounted to refusal of refund and the Commissioner (Appeals) should treat such inaction as refusal order passed by the Commissioner---After entertaining appeal on inaction within 45 days, the First Appellate Authority may proceed on to determine the refund, if any amount was found in excess of the amount chargeable to tax as per law and as provided under S.170 of the Income Tax Ordinance, 2001.

M. Tahir, D.R. for Appellant.

Iqbal Anwar Mehdi ITP for Respondent.

2011 P T D (Trib.) 748

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

Messrs GOOD LUCK TRADING COMPANY, RAWALPINDI

Versus

CIR, RTO, RAWALPINDI

MA(R) No.142/IB of 2010, decided on 11th January, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 221 & 2(38A)---Rectification of mistake---Miscellaneous application---Taxation Officer and Deputy Commissioner of Inland Revenue---Jurisdiction---Appellate Tribunal had mentioned in its order that Taxation Officer had rightly treated the taxpayer as the industrial undertaking and charged the workers welfare fund---Taxpayer in miscellaneous appellate had contended that notice under S.221 was issued by Deputy Commissioner Inland Revenue, assessment was recorded by Deputy Commissioner Inland Revenue and not by Taxation Officer as concluded by the Appellate Tribunal; that S.2(38A) of the Income Tax Ordinance, 2001 was inserted through Finance (Amendment) Ordinance, 2009 which expired after 4 months, as the same was not approved by the National Assembly; and the order recorded by the Deputy Commissioner Inland Revenue after four months was not legal and was without jurisdiction and that when a statute came to an automatic end by efflux of time, no prosecution for acts done during the continuance of expired statute could commence after the date of its expiry because that would amount to the enforcement of a dead statute---Validity---In concluding paragraph of order of Appellate Tribunal it was mentioned that Taxation Officer issued notice, again Taxation Officer rightly treated the taxpayer as industrial undertaking, charged workers welfare fund while fact of the matter was that notice as well as assessment was made by Deputy Commissioner Inland Revenue whose authority did not find mention in Workers Welfare Ordinance, 1971---Mistake was floating from surface of record---Due to such mistake issue of jurisdiction could not be answered properly---Order was passed without jurisdiction---By amending Income Tax Ordinance, 2001, at the time of inserting S.2(38A) through Finance (Amendment) Ordinance, 2009, Worker Welfare Fund Ordinance, 1971 was also to be amended accordingly; but it was not done---Fate of order of Taxation Officer had changed and levy of worker welfare fund through rectification was held by the Tribunal to be without jurisdiction, null and void.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.2(65)---Taxation Officer---Deputy Commissioner Inland Revenue---Jurisdiction..--Section 2(65) of the Income Tax Ordinance, 2001 was omitted by Finance (Amendment) Ordinance, 2009 resultantly, Taxation Officer was not included as authority of Deputy Commissioner Inland Revenue---Issuing notice and subsequently passing order by the Taxation Officer was without any juris­diction---Order was held to be void ab initio being without jurisdiction.

M. Suleman, ITP for Appellant.

Ziaullah Khan, D.R. for Respondent.

2011 P T D (Trib.) 751

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

CIR, (LEGAL), RTO, ISLAMABAD

Versus

Messrs COMPETITIVENESS SUPPORT FUND, ISLAMABAD

I.T.A. No.759(IB) of 2010, decided on 4th November, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss.2 (48), 127, Sixth Sched., Part-I & Rr.14 (/), 2(1)(e)---Income Tax Rules, 2002, R.94---Recognised provident fund---Appeal--Jurisdiction---Commissioner of Inland Revenue (Appeals) vacated the order of Commissioner (Legal) declaring that the application for approval of provident fund fulfilled the criteria laid down in Part-I of Sixth Schedule of the .Income Tax Ordinance, 2001; and his rectification application also failed---Department contended that jurisdiction of First Appellate Authority ,was specified in Para 4 of S.127 of the Income Tax Ordinance, 2001 and was limited to sections mentioned therein; and First Appellate Authority had no jurisdiction in matters falling under S.2(48) of the Income Tax Ordinance, 2001 read with R.94 of the Income Tax Rules, 2002, being outside the ambit of his specified jurisdiction---Assessee contended that R.94 of the Income Tax Rules, 2002 designated Federal Board of Revenue as well as the Commissioner (Appeal), being the appellate authority in case of non-recognition or withdrawal of recognition of provident because the form of appeal appended to R.94 of the Income Tax Rules, 2002 envisaged restitute of concurrent authority of appeal in the Federal Board of Revenue/Commissioner of Appeals; and First Appellate Authority rightly exercised its jurisdiction because R.94 of the Income Tax Rules, 2002 vested the appellate authority in him; and assessee was victim of red tapism of Regional Tax Offices, which was refusing to give effect the decision of First Appellate Authority regarding recognition of his provident fund---Validity---Neither S.127 of the Income Tax Ordinance, 2001 nor Cl.12 of Part-I of Sixth Schedule to the Income Tax Ordinance, 2001 nor R.94 of the Income Tax Rules, 2002 vested appellate authority in the office of First Appellate Authority in cases falling outside his specified jurisdiction---In the presence of provisions of substantive law, the First Appellate Authority could not lawfully assume jurisdiction of the issue in question merely because the form of application appended to R.94 of the Income Tax Rules, 2002 mentioned the word "Commissioner (Appeals)" alongside the Central Board of Revenue---If the text of R.94 of the Income Tax Rules, 2002 did not mention Commissioner of appeals, its mention in the form of appeal might have been a typographical omission or mistake---From the text of R.94 of the Income Tax Rules, 2002 and Cl.12 Part 1 of Sixth Schedule to the Income Tax Ordinance, 2001, it followed that the recognition or non-recognition of provident fund had been treated as a administrative matter and the appellate forum for a matter flowing from Sub-R. (1) of R.12 of Part-I of Sixth Schedule to the Income Tax Ordinance, 2001 had been stated to be the Federal Board of Revenue---Another defect in Order-in-Appeal was that adjudication authority was assumed by the First Appellate Authority, without having issued a show cause notice ignoring that the starting point of an adjudication proceedings was a show cause notice which was never issued---Any adjudication proceeding could not commence without a show cause notice---First Appellate Authority did not have jurisdiction to pass an appellate order in the case---Order of First Appellate Authority was set aside by the Appellate Tribunal being without jurisdiction with the remarks that assessee might approach the Federal Board of Revenue for remedy.?

Naveed Mukhtar, D.R. for Appellant.

Imram-ul-Haq, A.C.A. for Respondent.

2011 P T D (Trib.) 756

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Masood Ali Jamshed, Accountant Member

EDUCATIONAL EXCELLENCE LTD., LAHORE and others

Versus

CIT, CIRCLE 13-CO, ZONE-II, LAHORE

I.T.As. Nos.373/LB, 374/LB, 446/LB and 447/LB of 2005, decided on 30th July, 2009.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss.62 & 32(3)---Assessment on production of accounts, evidence, etc.---'Deferred advance fee'---Addition---Deletion of---Revenue assailed the order for deleting addition made under the head 'deferred advance fee' and for curtailing the addition made under another head 'miscellaneous expenses' on the ground that there was no provision for deferment of income to subsequent accounting year; and assessee had employed Mercantile System of Accounting, the receipt could be taxed only in the year it was received---Assessee submitted that receipts in fact were an advance fee received for the next period because their semesters start from the next year's month---Validity---Appellate Tribunal repelled departmental point of view that income received in a particular year could not be deferred to be taxed in the following year---First Appellate Authority had given a very pragmatic answer while observing that it was a simple question of revenue recognition of a particular payment, receipt of which at a particular point of time was not disputed by the parties---Explanation of the assessee was more convincing that the expenses relatable to those receipts fell in the following accounting period; and the receipts were to be taxed proportionately in the following accounting period---Section 32 of the Income Tax Ordinance, 1979 provided that to employ a particular method of accounting strictly was not a rule of thumb rather it envisaged in subsection of S.32---Central Board of Revenue could prescribe, for a particular class of business, profession or person, the manner in which payments of commercial nature should be made or commercial transactions be recorded---Intention of legislature appeared to work out a correct and just income, profit and gains---Legislature had given adequate powers to Deputy Commissioner, in S.32(3) of the Income Tax Ordinance, 1979---Deputy Commissioner was authorized when, in his opinion, the assessee was not regularly employing a particular method of accounting and the income, profits and gains could not be properly deducted thereform, he may compute the same `on such basis and in such manner' as he thought fit---Assessing Officer should have invoked the provision of law to recognize the receipt of advance fee in a requested accounting period---Order of First Appellate Authority was maintained by Appellate Tribunal in circumstances.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 62---Qanun-e-Shahadat (10 of 1984), Art. 117---C.B.R. Circular No.11 of 1993 dated 7-7-1993---Assessment on production of accounts, evidence, etc.---Profit and loss expenses---Addition---Burden of proof---Defective show-cause notice---Assessee argued on defects in notice under S.62 of the Income Tax Ordinance, 1979, Claiming that the assessee was not confronted on specific issues before rejecting the books of accounts and making additions in the claimed profit and loss expenses---Validity---Mere submission of 120 files of books of account, in evidence without specifically pointing out the supportive documents for each claim was not sufficient discharge of burden of proof by assessee---On production of huge record, the assessing authority was expected to relate each evidence with the relevant claim and then find out defects---Conversely, the assessing authority avoided such a cumbersome exercise and preferred to raise vague objections/defects while disagreeing with the books of accounts---Weakness on the part of department, was exploited in appeals urging the flaws in exercise of jurisdiction by assessing authority---Merely placing books of accounts, consisting of 120 files, without identifying the evidence for each claim, the assessee could not sufficiently discharge the burden of proof for the expenses claimed, therefore, the onus did not shift on the department/Assessing Officer---Assessing Officer's bald disagreement with the books of accounts was also disapproved---Since the lapses were made by both, the department as well as assessee, the assessment order and order of First Appellate Authority, to the extent of add backs of expenses under the head `profit and loss account' were set aside and to such extent case was remanded to the Assessing Officer with the direction to assessee to produce books of accounts with specific co-relation of each evidence with the claimed expenses and Assessing Officer was directed to undertake the proceeding strictly in accordance with law and pass a speaking order with reasons.

Shahroom International (Pvt.) Ltd. v. Deputy Commissioner 2006 PTD 2654 and Mugal Technical Industries (Pvt.) Ltd. v. CIT 1996 PTD 263 distinguished.

CIT v. Messrs Smith Kline and French of Pakistan 1991 PTD 999; Talat Hussain v. Rado Builders Developers 2009 YLR 414; Mst. Safia v. Mst. Bibi and 14 others 2005 MLD 646; Mst. Azim Bibi v. Rashida Begum and others 2008 CLC 258 and Khalil-ur-Rehman and others v. Mst. Vakeelan and another PLD 2006 Kar. 267 rel.

(c) Income Tax Ordinance (XXXI of 1979)---

----Second Sched., Cl. (86)---Companies Ordinance (XLVII of 1984), S.42---Exemption---Educational institution---Ground of exemption was raised for the first time before. First Appellate Authority and exemption was not claimed in the returns---Raising such ground at belated stage was an afterthought---Exemption not claimed in return could not be allowed at appellate stage or during the assessment proceeding---Even on merits, assessee had nowhere asserted that it was not meant for gaining profits---Had the company been incorporated for promotion of the education and intended not to distribute profits amongst its members/shareholders, it should have got itself registered under S.42 of the Companies Ordinance, 1984---Purpose of educational promotion alone was not enough granting exemption---Non-distribution of profits and to apply its profits solely for promotion of the education was sine qua non for claiming and granting exemption under Cl. (86) of the Second Schedule to the Income Tax Ordinance, 1979---Appeal of the assessee was dismissed by Appellate Tribunal.

(d) Income Tax Ordinance (XXXI of 1979)---

----S.62---General Clauses Act (X of 1897), S.24-A---Assessment on production of accounts, evidence, etc.---Procedure of assessment--Principles of natural justice---Section 62 of the Income Tax Ordinance, 1979 first enjoins a duty upon the Assessing Officer to assess total income and determine tax payable by considering the evidence on record an evidence produced in support of the return, secondly, the Assessing Officer, before disagreeing with the books of account produced, shall identify the defects in the books of account through a notice, to give an opportunity to the assessee to explain his point of view on the identified defects and thirdly, it was incumbent upon the Assessing Officer to record the explanation and basis of computation of total income, in the assessment order---Principles of natural justice were ensured which, even otherwise, were to be read in every statute by dint of S.24-A of the General Clauses Act, 1897---Section 24-A of the General Clauses Act, 1897 casts responsibility on authorities to exercise power reasonably, fairly and justly by giving reasons for the order---Violation of the principles of natural justice, normally, calls for the annulment of the order---Specific mention of the principles of natural justice in a provision of law, for completion of any proceedings, made it mandatory and departure wherefrom should result in quashing of the proceedings and the consequential order too.

(e) Income Tax Ordinance (XXXI of 1979)---

----S. 62---Qanun-e-Shahadat (10 of 1984), Art. 1(2)---Onus of proof--Under Article 1(2) of Qanun-e-Shahadat, 1984, it is applicable to the quasi judicial proceedings under Income Tax Ordinance, 1979 therefore, the declarations, including claim of expenses, in the return were to be supported by evidence---Onus to prove that a part of receipt was not taxable under a particular provision of law was on the assessee.

CIT v. Messrs Smnith Klline and French of Pakistan 1991 PTD 99 rel.

(f) Qanun-e-Shahadat (10 of 1984)---

----Art.117---Burden of proof---One who assets existence of a fact must prove that the fact exists.

(g) Income Tax---

----Burden of proof-No one can be benefited for weakness of other and he has to prove on the basis of his own evidence.

(h) Income Tax---

---Proof---Onus---Shifting of---Scope---Onus shifts on the other side only when the burden of proof is sufficiently discharged.

Tatat Hussain v. Rado Builders Developers 2009 YLR 414; Mst. Safia v. Mst. Bibi and 14 others 2005 MLD 646; Mst. Azim Bibi v. Rashida Begum and others 2008 CLC 258 and Khalil-Ur-Rehman and others v. Mst. Vakeelan and another PLD 2006 Kar. 267 rel.

Muhammad Tahir, D.R. for Appellant.

Ch. Anwar-ul-Haq for Respondent.

2011 P T D (Trib.) 767

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member

Messrs MAZHAR EYE CLINIC, RAWALPINDI

Versus

CIR, LTU, RAWALPINDI

MA(R) No.145/IB of 2010, decided on 24th December, 2010.

Income Tax Ordinance (XLIX of 2001)---

---S.221---Rectification of mistake---Miscellaneous application---Appellate Tribunal in its order had observed that "Regional Commissioner of Income Tax had informed assessee that its case had not been selected for audit while case of assessee itself, did not qualify for self assessment because declared tax liability was not higher by 10% as compared to tax assessed for previous year"---Assessee contended that Regional Commissioner of Income Tax had not communicated that case did not qualify for self assessment; and there was no objection regarding the assessee's tax liability being not higher by 10% as compared to tax assessed for previous year while communicating the intention to select the case for audit; and exclusion from Self Assessment Scheme was not timely communicated and the deemed order was already held field after which the order passed under S.62 of the Income Tax Ordinance, 1979 was illegal and void ab initio; and observation of Appellate Tribunal that "exclusion from Self-Assessment Scheme was timely communicated" was erroneous and contrary to facts and documents/papers on record---Validity---Selection of case and non selection of case was on an entirely different premise---Question that case of assessee did not qualify for self assessment because declared tax liability was not higher by 10% was not an issue at the time of selection of case; it was not matter of discrepancies, technical issue and deficiency of documents---Basic gist and fundamental theme of Self-Assessment Scheme was to deposit higher tax by 10% than the last assessed and if it was not deposited then. it was not the case of Self-Assessment Scheme what to talk of picking out the case from Self-Assessment Scheme---Even deletion of sentence "Exclusion from Self-Assessment Scheme was timely communicated" did not change the fate of the case---Admittedly the assessee had not paid higher tax by 10% than the last assessed---From the very inception, it was not the case of `Self-Assessment Scheme'---Miscellaneous application filed by the assessee was dismissed by the Appellate Tribunal.

Waseem Ahmed Siddique, C.A. for Appellant.

Ziaullah Khan, D.R. for Respondent.

2011 P T D (Trib.) 770

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs AL-KISSAN SIZING INDUSTRIES, FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.1903/LB of 2009, decided on 16th January, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss.33(3)(c) & 2(5)---S.R.O. 525(I)/2006 dated 6-6-2006---Offences and penalties---Imposition of penalty for non-submission of invoice summary along with returns in violation of S.2(5) of the Sales Tax Act, 1990--Taxpayer contended that facts of the case were never discussed in Order-in-Original which in fact was passed against another taxpayer and appellant's/taxpayer's name was included by observing that the order would apply mutatis mutandis to appellant's/taxpayer's case as well---Validity---Caption of the order-in-original suggested that it was only against `A' and name of fen other registered persons were included, with one sentence's. explanation that the order shall also

apply to other registered persons, having identical nature---In circumstances, all registered persons were proceeded ex parte, without any detail or reason of proceeding them in absentia---Order-in-original was not speaking order qua the taxpayer, as facts or allegations/charges relating to the taxpayer were not discussed therein---Order-in-­original was vacated by the Appellate Tribunal to the extent of taxpayer only and the Order-in-Appeal was also cancelled for ignoring such a glaring defect in time Order-in-Original---Department could initiate fresh proceedings if limitation was available under the Sales Tax laws.

Fasih-ud-Din Khan's case 2010 SCMR 77/8 rel.

(b) Sales Tax---

----Order/decision---Ingredients: Findings of fact both direct and inferential; statement of principles of law applicable to the legal terms discussed by the facts and judgment passed on the combined effect of the said ingredients.

Fasih-ud-Din Khan's case 2010 SCMR 1778 rel.

Mian Masood Ishaque for Appellant.

Azmat Elahi Ghuman, D.R. (RTO) for Respondent.

2011 P T D (Trib.) 773

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

CIR, PESHAWAR

Versus

Messrs WAHEED HAFIZ GHEE INDUSTRY, HATTAR

S.T.As. Nos.147/IB to 155/IB of 2010, decided on 2nd February, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss.10, 7, 8, 26 & 73---Refund of input tax---Rejection of refund claim due to "non production of sales tax return or computer profile" of the supplier---Validity---Sales Tax Act, 1990 or the rules made there-under did not obligate a registered buyer to produce sales tax returns or computer profile of his supplier---Rejection or deferment of a refund claim on the ,plea that a registered person being an element of the supply chain jointly shared the responsibility of production of sales tax return or computer profile of the supplier, was without any rational and legal force---If a refund claim was supported by an evidence of buyer's compliance of Ss.7 & 8 read with S.73 of the Sales Tax Act, 1990 the refund claim should not be denied---Most sale and purchase transactions take place between a supplier and buyer at arms length as they did not know each other by face or met before---Buying and selling transactions take place on telephone---If all the conditions set forth under Ss. 7, 8 and 73 of the Sales. Tax Act, 1990 were fulfilled; the input claim qualified to be refunded to the claimant---If for any reason the registered supplier failed to file his tax return under S.26 of the Sales Tax Act, 1990 or his record of purchases vis-a-vis sales were not entered in the Sales Tax Automated Refund Repository system by the Pakistan Revenue Automation Limited, the registered buyer should not suffer for the fault of the delinquent supplier---Sometimes fault lay only with the Pakistan Revenue Automation Limited who had failed to enter necessary data in Sales Tax Automated Refund Repository and sometimes wrong data was entered by the staff of Pakistan Revenue Automation Limited---Rejection of refund claim or its deferment due to delinquent conduct of some one else, was not fair.

Sales Tax Appeal No.ST-141/PB of 2006 ref.

(b) Sales Tax Act (VII of 1990)---

----S. 10---Refund of input tax---Input claim exceeding declared output---Rejection of refund---Validity---Rejection of refund claim on the ground that input claim exceeded output was valid---However, refund was to be paid after scrutiny of the sales and purchase summaries of supplier issued to all of his clients and that too subject to verification by the Sales Tax Automated Refund Repository system---If invoices issued by supplier were in excess of input claimed, none of the claimant should be paid refund irrespective of sales tax paid by the refund claimant---Due to logical perception the refund could only be sanctioned which did not exceed declared outputs or in other words that an amount of sales tax which had not been credited into treasury---It was mandatory on the part of refund claimant to reconcile such situation with the refund sanctioning authority.?

(c) Sales Tax Act (VII of 1990---

----Ss.10 & 11---Refund of input tax---Rejection of refund claim on the allegation of "non-filer"-Validity---No provision of Sales Tax Act, 1990 or refund rules authorized rejection of refund claim due to non-filing of sales tax return by the supplier---Report of non filing of sales tax returns by the tax payer in the system may be due to several reasons including non-entry of data by the Pakistan Revenue Automation Limited or denial of tax payers of access to the system due to technical hardware problems---Section 11(1) of the Sales Tax Act, 1990 would come into play to force the non filer to file tax return---Rejection of refund claim of a bona fide refund claimant and setting free the "non filer" was an act of arbitrariness of its kind---Emphasis should be placed on prompt action by the tax administration under S.11(1) of the Sales Tax Act, 1990 and to take corrective measure instead of penalizing the refund claimant for the fault of others.?

(d) Sales Tax Act (VII of 1990)---

----S.10---Standing Order No.03/2006 dated 2-11-2006---Refund of input tax---Rejection of refund claim on. the allegation of "scrutiny for verification of input tax"---Refund claimant was confined to submission of all record necessary for sanction and payment of refund before sanctioning authority with supporting evidence---Scope of scrutiny of invoices for verification of input tax was limited to a certain time frame of 90 days prescribed under the law---General Order Instruction, Ruling of the Board could not override enacted provisions of law---Keeping pending refund for more than one year and linking the same with the conditions laid down in General Order and asking the refund claimant to have the suppliers invoices verified by the tax administration was arbitrary---Registered person should not be burdened with un-necessary exercises---Controversial practice of sales tax administration drew it legality from a Standing Order No.03 of 2006 dated 2-11-2006 which made it obligatory for the refund claimant to produce invoices duly verified by the Collector of Sales Tax having jurisdiction of the supplier---Such was very cumbersome for the refund claimant to get the invoices' verified from his suppliers scattered in different cities of the country---Rejection of refund claim on such ground had no legs to stand---Department itself use government facilities to verify, if found bogus, stern penal action should be taken.

(e) Sales Tax Act (VII of 1990)---

----S.10---Refund of input tax---Rejection/deferment of refund claim on the basis of "invoices required verification "---Validity---Tax administration was duty bound to verify the invoices in the chain of - supply prior to sanction and payment of refund---Failure of department to accomplish the task within the prescribed time limit and procedure brought misfortune for a refund claimant---Such delay led to financial restraints of a tax payer in export oriented refund claims and deprivation of foreign exchange for the State---Such rejection deferment was not supported by any provisions of Sales Tax Act, 1990 or Rules made thereunder.?

(f) Sales Tax Act (VII of 1990)---

----S.10---Refund of input tax---Refusing refund due to lack of verification within stipulated period---Validity---Within statutory period for granting refund, some amount of refund was refused due to certain verifications which could not possibly be made within such time limit but departmental officer, should not bury the file and continue to complete verification so that up to forums of appeal 'things should become crystal clear to answer claimant in yes' orno'---Practice by Appellate forums that cases were again remanded for verification of facts was very cumbersome .resulting in wastage of a lot previous time---Tribunal proposed that Federal Board of Revenue; if' find appropriate, to issue direction to field staff to complete verification and not to bury the file after refusing on the plea of lack of verification.?

(g) Sales Tax Act (VII of 1990)---

----S.45-B(3)---Appeal---Department contended that First Appellate Authority should have decided the appeal on merits or could hold further inquiry if deemed necessary but the remand of case was not permissible---Validity---Under S.45-B(3) of the Sales Tax Act, 1990, the First Appellate Authority was not competent to remand the case---While deciding an appeal, First Appellate Authority may conduct such further enquiry as may be necessary and in this connection he may call for a report from any quarter including the Deputy Collector (Refunds)---Impugned judgment could not sustain in. circumstances which was set aside by the Appellate Tribunal with the direction that appeals should be deemed pending and decided afresh in accordance with law---First Appellate Authority, in case of ambiguity and others verification could seek services of concerned officers---Aggrieved be answered in Yes' orNo' in entirety---Registered person should not knock the doors of different forums repeatedly through remand.

Ali Gohar DR for Appellant.

Sayed Tauqeer Bukhrai, for Respondent.

2011 P T D (Trib.) 784

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Masood Ali Jamshed, Accountant Member

C.I.T. LEGAL, RTO, FAISALABAD

Versus

NIAZ MUHAMMAD

I.T.A. No.45/LB of 2009, decided on 11th August, 2009.

(a) Income Tax Ordinance (XLIX of 2001)---

----S.170---Refund---Jurisdiction---Taxation Officer, while proceeding under' S.170 of the Income Tax Ordinance, 1979 embarked on an inquiry into the commercial status of the tax payer; and rejected the claim of refund by determining the commercial status of the taxpayer as supplier instead of manufacturer on the ground that it was mandatory to verify the claimed status of being a manufacturer by the taxpayer---Validity---Taxation Officer or Commissioner had no jurisdiction to probe an issue which had attained the status of an assessment order by operation of law under S.120 or 115 read with S.169(3) of the Income Tax Ordinance, 2001---Commissioner could neither disturb an assessment taken to have been made under S.120 of the Income Tax Ordinance, 2001 nor could he withhold/reject the refund on the basis of his opinion that such assessment was defective or needed amendment under the relevant provision of Income Tax Ordinance, 2001---Order of Taxation Officer determining the commercial status of the taxpayer as supplier in place of manufacturer, being without lawful authority was void---Appeal filed by the Department was dismissed and order of First Appellate Authority was upheld by the Appellate Tribunal.

(2007) 96 Tax 108 (Trib.) (sic) and Rahmatullah and others v. Saleh Khan and others 2007 SCMR 729 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.170---Refund---Procedure of refund, jurisdiction and limitations.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.170---Refund---Void order---Limitation---Limitation cannot run against a void order.

Rahmatullah and others v. Saleh Khan and others 2007 SCMR 729 rel.

Dr. Shahab, D.R. for Appellant.

None for Respondent.

2011 P T D (Trib.) 788

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Shahnaz Rafique, Accountant Member

S.T.As. Nos.2099/LB to 2102/LB of 2009, decided on 29th July, 2010.

(a) Sales Tax Act (VII of 1990)---

----S.45-B---Appeal---Taxpayer. contended that First Appellate Authority erred in law while taking up the appeal despite the fact that initially the proceedings were initiated by her while she was posted as Additional Collector Adjudication and the order passed by the First Appellate Authority was liable to be set aside on this score only---Validity---First Appellate Authority was not within her jurisdiction to take up the cases about which she was instrumental in commencing the proceedings by issuing show-cause notice---At the time of issuing show-cause notice the First Appellate Authority had already shown her mind and the factum of bias which was very much present, could not be ruled out---Courts were to give reasonable assurance of honesty and impartiality which was also missing in the case---Justice should not only be done but it should be seen to be done---Appeal was accepted and Appellate Tribunal set aside the orders as well as order-in-original---Since appeals were decided on legal ground, the grounds taken by the appellant was not dilated upon.

PLD 1999 SC 1126 and 1980 PTD 406 rel.

(b) Administration of justice---

----Nobody could be judged in his own cause.

PLD 1999 SC 1126 rel.

(c) Administration of justice---

----"Due process of law" ---Ingredients.

Waseem Ahmed Malik for Appellant.

Muhammad Tahir, D.R. for Respondent.

2011 P T D (Trib.) 791

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member

Messrs COLLECTOR OF SALES TAX, MULTAN

Versus

Messrs MUGHEES TEXTILE, MULTAN

S.T.A. No.1878/LB of 2009, decided on 7th January, 2011.

Sales Tax Act (VII of 1990)---

----Ss.38, 2(14), 2(37), 7(1), 7(2)(I), 8(1)(D), 1021(2), 25, 26(1), 33, 36(1), 37A & 73---Sales Tax Refund Rules, 2002---Sales Tax Rules (2004), (2005) and (2006), Chapter-V---General Order No.3 of 2005 dated 12-6-2004, Part-III, Cl, "N" S.No.30 to 33---Authorized officers to have access to premises, stocks, accounts and records---Department alleged that refund was asked on the basis of invoices issued by the suspected/blacklisted units/suppliers and refund was erroneously sanctioned as the registered person/appellant claimed the same refund fraudulently on the basis of fake purchase invoices---Registered person contended that refund claimed related during the tax period from August, 2002 to January, 2004 while the units were blacklisted in 2007 while the adjudication order was passed on 10-9-2007; and there was no violation of any section of the Sales Tax Act, 1990 at the time of sale/purchase of goods between the registered person and blacklisted units---Validity---Period involved in the show-cause notice related to the year August, 2002 to January, 2004 and during the period the suppliers were operative-Suppliers/units was subsequently blacklisted in the year, 2007 after more than three years' span and order of blacklisting should not be operative retrospectively--First Appellate Authority, relying upon the reported and unreported judgments of courts of the country as well as the Appellate Tribunal, had passed the well reasoned, sound footings and justified order---No error or lacuna in the order having been found, order was maintained by the Appellate Tribunal.

2005 SCMR 492; 2010 PTD (Trib.) 163; 2010 PTD (Trib.) 1675; STA No.1796/LB/2009 and Messrs Ellahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 ref.

Nemo for Appellant.

Mimi Abdul Basit for Respondent.

2011 P T D (Trib.) 795

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Khalid Siddiqui, Accountant Member

S.T.A. No.11/IB of 2009, decided on 29th June, 2010.

(a) Sales Tax Act (VII of 1990)---

----S. 2(46) & 3---Value of supply---Transportation, loading and unloading charges---Taxability---Department contended that transportation charges collected by the transport company should be a part of value of supply and assessment of tax should be on the value inclusive_ of transportation charges---Validity---Business of taxpayer was only trade of cement---Providing (payment on behalf of purchaser to transport company) of transportation was not in furtherance of the business of. the taxpayer---Taxpayer was providing an additional service which was neither a 'goods' nor a profit making venture---Service was not covered within the definition of `supply'---Tax was on disposal of goods while a 'service' was neither a 'goods' nor it could call a disposal---Claim of the assessee that there was no charge on transportation under the Sales Tax Act, 1990 was accepted---First Appellate Authority had rightly decided the issue in favour of the taxpayer and there was no error or infirmity in the order passed by the First Appellate Authority---Order of First Appellate Authority was maintained by the Appellate Tribunal and appeal of the department being devoid of any merit was dismissed.

Collector Customs Central Excise and Sales Tax Karachi (West) v. Novartis Pakistan Ltd. 2002 PTD 976 ref.

(b) Sales Tax Act (VII of 1990)---

----S. 2(46)---Value of supply---Term 'supply' includes sales, lease or other "disposition of goods in furtherance of business"---If any of the ingredients mentioned in the definition were missing, it would not become a supply and for that matter taxable supply.'

(c) Sales Tax Act (VII of 1990)---

----S. 2(46)---Value of supply---Definition---Explanation--- Definition being inclusive could cover more items---Thing which required strict application of the provisions of law was that the said supply should be the disposition of goods and in furtherance of a business which meant that it shall include goods which were sold in continuation of the business being carried on by the taxpayer.

(d) Sales Tax---

----Business---Meaning---Term "business" has not been defined in the Sales Tax Act, 1990---Settled meaning of the said expression is that in order to be construed as "business" the activity must be recurring, for profit motive and must be in the nature of trade, commerce or manufacture.

(e) Sales Tax---

----"In furtherance of business "---Transportation charges---Term "in furtherance of business" and the business separately would not cover providing of additional facility like transportation charges paid---"Furtherance" is a term which if used in separately would not cover providing of additional facility like transportation charges paid---Furtherance is term which if used in the present form, would restrict only to the activities attached to the main track and the aspects directly connected thereof.

(f) Sales Tax---

----"Furtherance "---Meanings--- "Furtherance" means continuity with the main activities having direct nexus but would not include activities which did not have attachment or were not a part of the main process reason being that the term was to be read as a whole which is "in furtherance of the business".

Sajid Raza Mirza, Sr. Auditor and Ziaullah Khan, D.R. for Appellant.

Fakliar Mehmood Chanda and Muhammad Faazil Butt for Respondent.

2011 P T D (Trib.) 801

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member

Messrs CRESCENT COTTON PRODUCTS, FAISALABAD

Versus

COLLECTOR OF SALES TAX AND FEDERAL EXCISE, FAISALABAD

S.T.A. No.2109/LB of 2009, decided on 7th January, 2011.

Sales Tax Act (VII of 1990)---

----Ss.10 (4), 11(2), 8(1), 7, 4, 2(14), 22, 23, 26, 33(11) (c) & 73---Sales Tax Rules, 2006, R.37---Standing Order No. 3 of 2006 dated 2-11-2006---Refund of input tax---Rejection of refund on the grounds that input tax claimed related to the invoices issued by a supplier whose registration was suspended; that supplier was non filer of the sales tax return and, that input tax claimed by the taxpayer exceeded the out put tax of supplier---Taxpayer contended that he had paid input tax to the suppliers in accordance with S.73 of the Sales Tax Act, 1990 whereas the responsibility of the suppliers was to deposit input tax into the Government treasury who were registered with the Sales Tax Authorities and evidence in the form of suppliers sales tax returns, supply registers were duly submitted---Validity---Suppliers of the taxpayer were "Commercial Importers" who were filing their sales tax returns on quarterly basis and the objection of the non filers could not be raised against the taxpayer for disallowance of the input tax---Transaction was made with the suppliers and sales invoices were properly issued under S.23 of the Sales Tax Act, 1990 and sales tax records were maintained under S.22 of the Sales Tax Act, 1990---Orders of the authorities below were declared to be illegal void and without lawful authority and case was remanded to adjudicating authority having jurisdiction with directions to provide an ample opportunity of being heard and to pass a fresh speaking order--Reregistered person was directed to submit all the relevant documents before adjudicating authority in support of refund claim.

Basit Sameer; ACA for Appellant.

Maqsood Ahmad, ACA for Respondent.

2011 P T D (Trib.) 804

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Abdul Rauf Accountant Member

Messrs F.S. CORPORATION, LAHORE

Versus

COLLECTOR OF SALES TAX, LAHORE

S.T.A. No.6/LB of 2009, decided on 9th April, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss.2(37)---Tax fraud---Burden of proof-Amount was given credit in the account of supplier but the same amount was returned back in the account maintained by the taxpayer/purchaser---Taxpayer did not reply sufficiently on the transaction of returning back the amount, including tax---Adjudicating Officer, being dissatisfied, proceeded to pass the order-in-original and held the amount of sales tax as recoverable along with default surcharge and penalty---First Appellate Authority found that the invoice issued by the blacklisted supplier was fake---Validity---Revenue Authorities probed the matter and got hold of an unexplained transaction---Since amount transferred in account of taxpayer was the same, which reflected the disputed invoice, the, taxpayer was asked, through show-cause notice to explain its position---Initial burden of proof had been discharged by Revenue Authorities, when taxpayer was confronted with evidence that the transaction was not genuine---Unexplained transaction of transferring the amount equal to the amount involved in the disputed invoice, led to a reasonable belief that the transaction was fake as same amount was returned back apparently without lawful excuse--Taxpayer should have explained the nature of such transaction from their accounts, to dispel the impression and allegation of dishonesty and fraud---Transaction remained unexplained even before the Appellate Tribunal---Initial burden having been discharged by the Revenue Authorities at the time of issuing show-cause notice, burden to prove, under S.2(37) of the Sales Tax Act, 1990 was on the taxpayer that transaction of transferring amount in their account, was with lawful excuse, in a bona fide cause of business and in compliance with the provisions of Sales Tax Act, 1990 and rules made thereunder---Taxpayer failed to discharge his burden, appeal was dismissed by the Appellate Tribunal.

2004 PTD 868 and Al-Hilal Motor's case 2004 PTD 868 ref.

(b) Sales Tax Act (VII of 1990)---

----S.2(37)---Tax fraud---Burden of proof---In order to attract the provisions of S.2 (37) of the Sales Tax Act, 190, the initial burden lies on the Department to show some material that registered person, knowingly, dishonestly and fraudulently and without lawful excuse has done any act or has caused to be done or has omitted to take any action or has caused the omission in contravention of duties or obligation imposed under the Sales Tax Act, 1990---Once such burden is discharged by the department, only then, the burden is shifted on the registered person to establish that the act was done with a lawful excuse and without any dishonest intention.

Al-Hilal Motor's case 2004 PTD 686 rel.

Waseem Ahmad for Appellant.

Ghulam Mujtba Bhatti, D.R. for Respondent.

2011 P T D (Trib.) 808

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Abdul Rauf Accountant Member

Messrs PAKISTAN WATER AND POWER DEVELOPMENT AUTHORITY (WAPDA), LAHORE

Versus

C.I.R., LARGE TAXPAYERS UNIT, LAHORE and 2 others

S.T.A. No.1197/LB of 2009, decided on 7th October, 2010.

(a) Sales Tax Act (VII of 1990)---

---Ss.45B (3)---Appeal---Remand of case for de novo consideration---Case was sent back for reappraisal of facts and fresh determination of demand by the First Appellate Authority---Validity---Present was a case of remand for de novo consideration of demand which was not found to be sustainable by the First Appellate Authority---In view of mandatory prohibition contained in S.45B(3) of the Sales Tax Act, 1990 from remanding the case for de novo consideration, such remand order was manifestly without jurisdiction---Even otherwise, there was no justification for remand of case and shifting the burden of proof to show that the transactions referred to in show-cause notice were chargeable to Sales Tax from Revenue on to the taxpayer which was violative of the authoritative rulings by hierarchy of the courts---Besides, remand would indirectly nullify the prescribed limitations provided under the law and as such remand for de novo consideration was not only unlawful but also unjustified as de nova consideration of the remanded issues would entail cumbersome rounds of litigation on questions of law not open to two opinions---Since show-cause notice spelled out no allegation and details of primary facts which were sine qua non to attract the charge, there was no justification to prolong, protracted litigation at the cost and inconvenience of the taxpayer, particularly when the statutory provisions had expressly prohibited such remand---First Appellate Authority acted illegally in remanding the case for de novo consideration.

Abdul Rauf and others v. Abdul Hameed Khan and others PLD 1965 SC 671; 1991 SCMR 2374 = 1991 PTD 999; 1996 SCMR 1470; 2008 PTD 1563; 2004 PTD 868; 2005 PTD 480 (SC Pak.); PLD 1989 Lah. 47; 1992 SCMR 1898; 1992 SCMR 710; 2004 PTD (Trib.) 2026; 1987 SCMR 571; 2008 PTD (Trib.) 541; PLD 1989 Lah. 47; Black's Law Dictionaky; 1993 PTD 332 (Lah. HC) and 2005 SCMR 1713 ref.

(b) Sales Tax Act (VII of 1990)---

----S. 3---Scope of tax---Levy of sales tax on supply of fixed assets--Validity---Show-cause notice did neither specify the fixed assets allegedly supplied nor the time of supply---Taxpayer explained that it was inter-departmental adjustment and not a supply---Reply was not considered and the audit objection was, mechanically repeated and reproduced in the show-cause notice while the onus to show that the transaction was chargeable to tax was squarely on the Department---Vague show-cause notice failed to meet the foundational legal requirements and demand of sales tax not being sustainable was set aside by the Appellate Tribunal.

(c) Sales Tax Act (VII of 1990)---

----Ss. 8(1))d) & 8A---Tax credit not allowed---Claim of input tax on purchases from de-registered/suspected/closed units---Validity---Without a specific allegation that input tax invoices were fake in terms of S.8(1)(d) of the Sales Tax Act, 1990 or that the parties which issued such invoices had been deregistered before the issuance of the invoices, the claim could not be disallowed---No such allegation was specified in the show-cause notice---Section 8A of the Sales Tax Act, 1990 was enacted and made part of the statute with effect from 1-7-2006 and was not retrospectively applicable---Observation of First Appellate Authority that the taxpayer could not escape its obligation under the principle of "vicarious liability" was contrary to the language of S. 8A of the Sales Tax Act, 1990---Show-cause notice was silent about the particulars of the suppliers---Notice did not specify as to whether the said units were only suspected or deregistered---Majority of the parties were found active taxpayers on Federal Board of Revenue portal entitled to issue invoices---Non-specification of material particulars incurring disentitlement of adjustment of input tax vitiated the proceedings---Illegally remanded demand was set aside by the Appellate Tribunal.

PLD 1990 SC 68 (SC Pak.) rel.

(d) Sales Tax Act (VII of 1990)---

----S. 45B (3)---Appeal----Remand of case for de novo consideration---Excess claim of input tax---When the auditors had dropped the allegation in the Reconciliation Report and the First Appellate Authority had also accepted the same, the remand not being sustainable was set aside by the Appellate Tribunal.

(e) Sales Tax Act (VII of 1990)---

---S. 3---Scope of tax---Service charges---Taxation---Validity---Total of various service receipts and income items, having no nexus with the charge of Sales Tax, were subjected to Sales Tax on the basis of unwarranted presumptions---Service receipts and income items like commission on TV licence fee, tender fee, liquidation charges were ex-facie not chargeable to Sales Tax.

(f) Sales Tax Act (VII of 1990)---

---S.25(1)---Access to record, documents, etc.---Audit to be based on prescribed record---Sales Tax Officer were allowed access to record other than prescribed record under S.25(1) of the Sales Tax Act, 1990, only to discover omission of any item chargeable to Sales Tax in the prescribed record; otherwise as a rule the audit was to be based on the prescribed record in terms of S.25(3) of the Sales Tax Act, 1990---Since initial burden to show that taxpayer suppressed items chargeable to tax was on revenue, the burden could not be shifted on to the taxpayer to prove that every thing it did was not chargeable to tax.

2004 PTD 868 rel.

(g) Sales Tax Act (VII of 1990)---

----S. 3--Scope of tax---Supply of immovable property was expressly excluded from the domain of taxation and it could not be subjected to tax on far-fetched interpretations.

1993 SCMR 1523 and CLC 162 2006 1 rel.

Shiekhoo Sugar Mills Ltd. and others v. Government of Pakistan and others 2001 SCMR 1376 = 2001 PTD 2097 and Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd. Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 distinguished.

(h) Sales Tax Act (VII of 1990)---

----S.3---Scope of tax---Immovable property---Construction of immovable property even for its supply was not a taxable activity under the Sales Tax Act, 1990 and the charge of Sales Tax was confined to supply of goods only.

2006 CLC 162 rel.

(i) Sales Tax---

----Immovable property, not being goods was out of the purview of taxation by the Federation.

(j) Sales Tax Act (VII of 1990)---

----S. 3---Scope of tax---Charge of tax could not be extended by straining the language of statute.

(k) Sales Tax Act (VII of 1990)---

----S. 2(33)---Constitution of Pakistan, Art.142(c)---Supply---Other disposition---Stretched interpretation---Taxation of immovable property---Appellate Tribunal did not approve the stretched academic arguments advanced by the First Appellate Authority regarding other disposition under S.2 (33) of the Sales Tax Act, 1990, because supply of immovable property had been expressly excluded from the fiscal domain of Federation under Art. 142(c) of the Constitution---First Appellate Authority impliedly accepted the contention that supply of immovable property was not taxable, but, instead of setting aside the demand he unjustifiably remanded the case with a view to developing a new case of adjudication regarding admissibility of presumed input tax on goods used in the development of immovable infrastructure---First Appellate Authority acted illegally to make a new case of adjudication, as it was not the case of Revenue as per show-cause notice---Order based on an allegation not mentioned in the show-cause notice was palpably illegal and void---Demand raised being void was set aside accordingly by the Appellate Tribunal.

1987 SCMR 1840 rel.

(l) Sales Tax Act (VII of 1990)---

----Ss.7, 8(1)(a) & 23---S.R.O. 490(I)/2004 dated 12-6-2004---Determination of tax liability---Inadmissible input tax---Demand based on vague and inchoate allegations and in flagrant violation of principles of natural justice was set aside by the Appellate Tribunal.

1999 PTD 1892 rel.

(m) Sales Tax Act (VII of 1990)---

----S. 26--Return---Filing of consolidated return---Taxpayer filing consolidated Sales Tax Return in respect of all of its entities---Department was not justified to presume double adjustment of input tax in absence of any return filed by an entity of the taxpayer --- Demand based on surmises and conjectures was not sustainable and was set aside by the Appellate Tribunal.

(n) Sales Tax Act (VII of 1990)---

---S. 7---Determination of tax liability---Non payment of output tax---Registered person provided proof of payment which was inclusive of demand---No justification to raise further demand without any basis---Demand based on suspicion and without any evidence being illegal was set aside by the Appellate Tribunal.

(o) Sales Tax Act (VII of 1990)---

---S.11---Assessment of tax---Inadmissible input tax pointed out vide third party verification-Statement without cross-examination--Statements made by third parties, without their cross-examination by the taxpayer, were not admissible evidence---Assertion on behalf of taxpayer that payments were made through crossed cheques to the parties and opportunity had been given to cross-examine them, the Department would have uncovered concealment in cases of third parties---Statements of third parties having been accepted without providing the taxpayer an opportunity to cross-examine them, these statements were not admissible as evidence---Demand was not raised in accordance with law and remand thereof by the First Appellate Authority was illegal and unjustified---Demand in question was set aside by the Appellate Tribunal in circumstances.

1990 PTD (Trib.) 747 rel.

Mian Ashiq Hussain for Appellant.

Muhammad Asif Hashmi for Respondent.

2011 P T D (Trib.) 834

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Abdul Rauf Accountant Member

Messrs CHEMTEX (PVT.), FAISALABAD

Versus

C.I.T.(LEGAL), RTO, FAISALABAD

I.T.As. Nos.610/LB to 612/LB of 2009, decided on 6th April, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

---Ss.127 & 205---Appeal to the Commissioner (Appeals)---Appeal against order under S.205 of the Income Tax Ordinance, 2001 was dismissed by the First Appellate Authority by holding that the same was incompetent before him, because S.205 was not mentioned, at the relevant time, in the provisions contained in S.127 of the Income Tax Ordinance, 2001---Validity---Appeal under S.127 of the Income Tax Ordinance, 2001 was not restricted to the sections specifically mentioned in subsection therein and it was envisaged that an order (i) having the effect of enhancing the assessment, or (ii) reducing a refund, or (iii) otherwise increasing the liability of person, could be challenged in appeal before the First Appellate Authority---Legislature had used the word "or" instead of the word "and" in the provision which made it disjunctive and operateable independently from other part of the provision---Order which had the effect of reducing a refund could also be challenged and an order which though may not have effect of enhancing the assessment or reducing a refund but otherwise increased liability of a person could also be challenged under the provisions of the S.127 of the Income Tax Ordinance, 2001---Words "otherwise increasing the liability of the person" had a wider connotation and the increase in liability could be in any form i.e. as tax, penalty or additional tax---Narrow interpretation made by First Appellate Authority was not sustainable being against the expressed provisions of S.127(1) of the Income Tax Ordinance, 2001---Order passed by the First Appellate Authority was held to be against the provisions of law, the same was vacated by the Appellate Tribunal---Appeal filed by the taxpayer before First Appellate Authority shall deem to be pending and First Appellate Authority was directed to decide the same on merit.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 127 & 205---Appeal to the Commissioner (Appeals)---Insertion of S.205 in subsection (1) of S.127 of the Income Tax Ordinance, 2001 through Finance Act, 2009 was clarificatory in nature.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 205 & 127---Additional tax---Appealable order---Order under S.205 of the Income Tax Ordinance, 2001 was appealable before the First Appellate Authority even before the insertion of S.205 in subsection (1) to S.127 of the Income Tax Ordinance, 2001 by Finance Act, 2009 and the insertion was clarificatory in nature.

(d) Interpretation of statutes---

----No provision of law could be interpreted in isolation rather a collective and harmonious construction of law was required.

Nemo for Appellant.

Muhammad Asif Hashmi, L.A. for Respondent.

2011 P T D (Trib.) 838

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member

Messrs J.K. SONS (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.476/LB of 2009, decided on 19th January, 2011.

Sales Tax Act (VII of 1990)---

----SS. 10(4), 11(2), 2(14), 4, 7, 8, 26, 73 & 33(11)(a)(c)---S.R.O. 575(I)/2002 dated 31-8-2002---Refund of input tax---Refund was deferred due to discrepancies such as "unit did not exist", "exceeds declared output" and "invalid registration status"---Taxpayer stated that he had paid sales tax through cross cheque and supply register and return-cum-payment challan were submitted wherein it was found that the sales tax against the declared output was deposited; and it was the responsibility of the suppliers to deposit sales tax into Government treasury who were registered with the Sales Tax Department---Validity---Orders of the authorities below were declared to be illegal, void and without lawful authority and the case was remanded to adjudicating authority having jurisdiction with directions to provide an ample opportunity of being heard on the issue of verification of documents and to pass a fresh and speaking order---Registered person was directed to submit all the 'relevant documents before the adjudicating authority in support of his refund claim.

Arshad Javed for Appellant.

Miss Sumaira Umer, D.R. for Respondent.

2011 P T D (Trib.) 840

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Abdul Rauf, Accountant Member

C.I.T., LEGAL DIVISION, LTU, LAHORE

Versus

Messrs AUTOMOTIVE COMPONENTS LTD., LAHORE

I.T.A. No.1484/LB of 2009, decided on 12th March, 2010.

Income Tax Ordinance (XLIX OF 2001)---

----Ss. 221, 182(3) & 165---Rectification of mistake---Application for rectification of ex parte order imposing penalty on default of filing withholding statements---Acknowledgment receipts were filed---Application was rejected on the ground that at the time of passing penalty order the statements produced were neither part of record nor were produced by the taxpayer despite proper service of notice---First Appellate Authority found that rejection of application under S.221 of the Income Tax Ordinance, 2001 was not sustainable in the eye of law---Department contended that statements should have been filed during penalty proceeding, which could not be taken as part of record now, for the purpose of rectification---Taxpayer contended that statements were filed on 30-6-2006, acknowledgment of which was produced; and Taxation Officer could not have refused the rectification without verifying the acknowledgement of filing statements---Penalty order was passed on 23-10-2008, whereas the statements were filed in June, 2006, the same should have been taken as part of record for the purpose of rectification---Validity---Taxation Officer was duty bound to consult the relevant record to determine whether statements produced were filed on the date given in the acknowledgement receipts or not---If the filing of statements was found genuine, its absence from the record before Taxation Officer, during penalty proceedings, was beyond control of the taxpayer---Taxpayer could not have been penalized for any lacuna in system of the department due to which a document duly filed in June, 2006 had not become part of the case record till December, 2008---Expression mistake floating or apparent from record' could not be narrowly interpreted---Document duly filed became part of the record for the purpose of rectification and for all other judicial purposes, on the date it was duly filed---Appellate Tribunal concurred with finding of First Appellate Authority that rejection of rectification was not maintainable in the eye of law---Taxation Officer was directed to give effect to the evidence produced in rectification order, after confirming the veracity of the acknowledgments---Appellate Tribunal directed that application for rectification be taken to be pending and the Taxation Officer should pass a speaking order.?

1991 SCC 869 ref.

Imtiaz Ahmed, D.R. for Appellant.

Asif Hashmi for Respondent.

2011 P T D (Trib.) 843

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Muhammad Asghar Paswal, Judicial Member

Messrs DAWOOD EXPORTS (PVT.) LTD.

Versus

C.I.R., R.T.O., FAISALABAD

S.T.A. No.665/LB of 2009, decided on 8th February, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 8, 10, 4, 7 & 26---S.R.O. 490(I)/2004 dated 12-6-2004---Tax credit not allowed--- During process of refund claim an amount of Rs.152,863 was deferred for violation of S.8(1) of the Sales Tax Act, 1990 and exceeding declared output etc.---Registered person was charged with violation .of the provisions of Sales Tax Act, 1990 on account of such irregularities/omissions---Contentions of registered person were that claim of appellant did not exceed output tax declared by the alleged suppliers, the refund sanctioning authority as well as the Collector (Appeals) did not consider the facts and passed the impugned order; that payments against the alleged goods had also been transacted through banking channel as provided under S. 73 of the Act and since, refund of sales tax claimed against invoices of the alleged suppliers did not exceed output tax declared by them in their monthly sales tax returns, supply registers and summary statements for period in question therefore, its rejection was illegal and unlawful; that appellant also produced the copies of sales tax returns, supply registers and summary statements for perusal.; that since input tax paid on building materials pertaining to July, 2005 was not hit by S.R.O.490(I)/2004 dated 12-6-2004 and no such item was given in the negative list of goods given thereunder, the same being admissible and bona fide may be ordered to be allowed; that the claim did not exceed output tax declared by the alleged suppliers; and that registered person was entitled to claim adjustment of input tax against cement and tiles during period in question and there was no restriction in that regard under S. 8 of the Sales Tax Act, 1990---Validity---Examination of sales tax returns, supply registers and summary statements revealed that refund of sales tax claimed against invoices of alleged suppliers did not exceed output tax---Orders passed by the authorities below were set aside by Tribunal and the Revenue was directed to allow the refund in accordance with the relevant provisions of law.

Messrs Eastern Spinning Mills Ltd., Lahore S.T.A. No.718/LB/1999 and S.T.A. No.695/LB/1999 rel.

Khubaib Ahmad for Appellant.

None for Respondent.

2011 P T D (Trib.) 845

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Abdul Rauf, Accountant Member

C.I.R., LEGAL DIVISION, LTU, LAHORE

Versus

Messrs DAWOOD LAWRANCEPUR LTD., LAHORE

I.T.As. Nos.406/LB to 408/LB, 481/LB to 483/LB of 2009, decided on 1st February, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.57A & 2(1A)---Companies Ordinance (XL VII of 1984), Ss.284 & 287---Setting off of business loss consequent to amalgamation---Industrial undertaking---Assessing Officer had observed that by insertion of words "or company owning and managing industrial undertaking" through Finance Act, 2005, the benefit of set-off of business losses in consequence of amalgamation could not be availed by the taxpayer company in respect of losses of amalgamating companies assessed up to 30-6-200, because industrial undertakings were given the option of amalgamation w.e.f. 1-7-2005 i.e. the tax year 2006 and prior to that only banking companies or non-banking financial institutions or insurance companies could go for amalgamation and enjoy benefits flowing therefrom---Claim of brought forwarded losses was rejected by placing reliance upon S.57-A of the Income Tax Ordinance, 2001---First Appellate Authority found that even if the benefit of adjustment of losses of the amalgamating companies which managed and run industrial undertakings against the income of the amalgamated company which also owned and run an industrial undertaking was not available up to 30th June, 2005, the said benefit could not be denied on account of judgment of High Court, which had approved the scheme of amalgamation under Ss.284 and 287 of the Companies Ordinance, 1984---Validity---Right to carry forward the assessed losses of the amalgamating companies and adjustment thereof against the income of the amalgamated company was no longer available because of specific prohibition contained in S.57A of the Income Tax Ordinance, 2001---Judgment of High Court was delivered in the light of Ss.284 and 287 of the Companies Ordinance, 1984 without taking into consideration the provisions of S.57-A of the Income Tax Ordinance, 2001---Order of High Court did not have the effect of nullifying the impact of provisions of S.57-A of the Income Tax Ordinance, 2001---In the presence of S.57-A of the Income Tax Ordinance, 2001, the amalgamated company was not entitled to adjustment of brought forward losses of amalgamating companies---Order of First Appellate Authority was vacated and that of Taxation Officer was restored on the point of adjustment of brought forward losses of the amalgamating companies.?

1996 Tax 244 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 67, 120(1) & 122(5A)/122(4)--- Income Tax Rules, 2002, R.13---Apportionment of deductions---Presumptive Tax Regime/dividend income---Apportionment of expenses on the basis of S. 67 of the Income Tax Ordinance, 2001 read with R.13 of the Income Tax Rules, 2002---Assessee contended that keeping in view the number of transactions involved, it was very safe to assume that neither dealings in shares of public limited companies nor dividend income entailed full swing business activity; that Assessing Officer resorted to formula for apportionment of expenses laid down in R.13(3) of the Income Tax Rules, 2002 in a casual way without realizing that the said rule was subordinate to S. 67 of the Income Tax Ordinance, 2001 which provided for apportionment of expenses "on reasonable basis taking account of the relative nature and size of the activities" to which the expense related; that pre-condition laid down in S.67 of the Income Tax Ordinance, 2001 was not borne in mind while resorting to formula laid down in Sub-R. (3) of R.13 of the Income Tax Rule, 2002; and that certificate issued by the Chartered Accountant regarding allocation of expenses as specified in Sub-R.(5) of R.13 of the Income Tax Rules, 2002 was discarded---Validity---Matter had not been properly thrashed out in accordance with the letter and spirit of S.67 of the Income Tax Ordinance, 2001, read with R.13 of the Income Tax Rule, 2002--Certificate of Chartered Accountant did not contain the basis of allocation of expenses as required under Sub-R.(5) of R.13 of the Income Tax Rule, 2002---Taxation Officer did not bother to comment upon the contents of the certificate or spell out a reasonable basis of allocation of expenses keeping in view the nature and size of the activities of the company which the company undertook in connection with the dividend income as well gain on sale of shares---Amended order was set aside by the Appellate Tribunal and remanded the case to Taxation Officer for reconsideration in the light of observations and case law available on the subject.?

2010 PTD 25 ref.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.113---Income Tax Ordinance (XXXI of 1979), S.80D---Minimum tax on the income of certain persons---Sales assessable under Presumptive Tax Regime---Sales assessable under normal law---Charge of minimum tax on the aggregate turnover including presumptive sales---Validity---Appellate Tribunal directed that the minimum tax under S.113 of the Income Tax Ordinance, 2001 be charged and calculated on the combined turnover from all sources which meant the turnover assessable under normal law as well as the Presumptive Tax Regime.?

Appeal No. 218 of 2005; Concise Oxford English Dictionary" and Mushtaq Textile Mills Ltd. v. Karachi Metropolitan Corporation 1994 CLC 1516 rel.

Syed Zulqarnain Tirmizi, D.R. for Appellants (in I.T.As. Nos.406/LB to 408/LB of 2009).

Naeem Akhtar Sh., F.C.A. for Respondents (in I.T.As. Nos.406/LB to 408/LB of 2009).

Naeem Akhtar Sh., F.C.A. for Appellants (in I.T.As. Nos.481/LB toA83/LB of 2009).

Syed Zulqarnain Tirmizi, D.R. for Respondents (in I.T.As. Nos.481/LB to 483/LB of 2009).

2011 P T D (Trib.) 857

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Shahnaz Rafique, Accountant Member

Messrs GOLDEN LUBRICANT, MULTAN

Versus

COMMISSIONER C&E INLAND REVENUE (RTO), MULTAN

F.E. No.8/LB of 2010, decided on 16th August, 2010.

Federal Excise Act (VII of 2005)---

----S.12 (1)(4)---Sales Tax Act (VII of 1990), S. 2(46)---Federal Excise Rules, 2005, R. 8---Determination of value for the purposes of duty---Rejection of refund claimed from the period from 1-7-2007 to 31-3-2008---First Appellate Authority directed to constitute a Valuation Committee under S.12(1) of the Federal Excise Act, 2005 which shall estimate the value of supply and Federal Excise Duty would be determined and charged accordingly---Taxpayer contended that refund was applied on the basis of goods sold on retail price during the period 1-07-2007 to 31-03-2008; that provision of S.2(46) of the Sales Tax Act, 1990 in the Federal Excise Act, 2005 regarding S.12(1) was incorporated and enforced w.e.f. 1st July, 2008 and such law could not be given retrospective effect; that case did not fall under S.12(1) of the Federal Excise Act, 2005 and that it was case of S.12(4) of the Federal Excise Act, 2005 and as per, subsection (4) of S.12 of the Federal Excise Act, 2005 the appellant being manufacturer was at liberty to fix the retail price of the goods produced by him and denial of this legal right was in total contradiction to the statutory provisions of law---Validity---Taxpayer applied for refund on the basis of goods sold on retail price during the period 1-10-2007 to 31-3-2008 while the provisions of S.2(46) of the Sales Tax Act, 1990 in the Federal Excise Act, 2005 regarding S.12(1) was introduced/incorporated and enforced w.e.f. 15th, July, 2008---Provision of S.12(1) of the Federal Excise Act, 2005 came into force from July, 2008 and was applicable for the determination of excise duty depending upon the value after excluding the amount of duty, whereas on the retail price in terms of S.12(4) of the Federal Excise Act, 2005 includes all charges and duties and these two are distinct and totally distinguishable provisions of Federal Excise Law and could only be applied separately remaining within their own spheres---Taxpayer having exclusive right to fix the retail price of the commodities produced by him and he had charged Federal Excise duty on the same retail price---Federal Excise duty paid on purchases was adjustable under S.6 of the Federal Excise Act, 2005 against Federal excise duty payable on supplies---Taxpayer had paid excess amount of Federal excise duty on the purchases than the duty charged on the supplies and it was the legal right of the taxpayer that over paid Federal excise duty should be refunded to him under R.8 of the Federal Excise Rules, 2005---Orders passed by the authorities below had no legal consequences in the eye of law---Orders of the said authorities were vacated and it was directed that the Additional Collector should allow refund in accordance with law.

Government of Pakistan v. Hashwani Hotel Ltd PLD 1990 SC 68 and Souvenir Tobacco Company Ltd. v. The Deputy Collector 1989 CLC 1134 rel.

Mian Abdul Basit, D.R. for Appellant.

M. Nouman Malik, D.R. for Respondent.

2011 P T D (Trib.) 866

[Inland Revenue Appellate Tribunal of Pakistan]

Before Chaudhry Munir Sadiq, Judicial Member

Messrs UNITED DISTRIBUTORS, MULTAN

Versus

COLLECTOR OF SALES TAX & FEDERAL EXCISE, MULTAN and others

S.T.A. No.1796/LB of 2009, decided on 5th October, 2010.

(a) Sales Tax Act (VII of 1990)----

----Ss. 38, 2(14), 2(37), 7(1), 7(2)(i), 8(1)(d), 10, 21(2), 25, 26(1), 33, 34 & 73---Sales Tax Refund Rules, 2002, R.13(1)---Authorized officers to have access to premises, stocks, accounts and records---Post refund audit---Registered person informed that all the relevant record was submitted with the refund claim and their routine audit had already been conducted by the team of DARR and Auditors of the department--Contravention report was prepared, show-cause notice was issued---Registered person contended that show-cause notice pertaining to the period January, 2003 to December, 2005 was unwarranted, nullity in the eye of law and of no legal effect, for being without jurisdiction and barred by time---Validity---Validity of the show-cause notice was fundamental to the assumption of jurisdiction by the Revenue authority to pass the order---Show-cause notice alleged the illegal sanction of refund but patently omitted to specify the mode of error or the acts constituting/causing the purported error---Assumption of jurisdiction was an act contrary to law; and show-cause notice served upon the registered person was patently illegal and without lawful authority; and all the orders based thereupon were liable to be set aside---Show-cause notice and all proceedings and orders based thereupon were without jurisdiction---Remaining issues were not dealt with by the Appellate Tribunal.

The Collector Central Excise and Land Custom and others v. Rahm Din 1987 SCMR 1840; Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492; 2004 PTD 2928; 2010 PTD (Trib.) 1631; Messrs Al-Hilal Mines and Sons and others v. Collector of Sales Tax and Federal Excise (East), Karachi and others 2004 PTD 868; Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and others 2001 SCMR 838 and Ibrahim Textile Mills Ltd. v. Federation of Pakistan and others PLD 1989 Lah. 47 rel.

(b) Sales Tax Act (VII of 1990)---

----S.21---Sales Tax Rules, 2006, R.12---Sales Tax General Order No.1 of 2004---De-registration, blacklisting and suspension of registration--Order of blacklisting---Scope---Persons registered under Sales Tax Act, 1990 could only be declared as blacklisted through an order passed under Cl. (N) of para. 3 of Sales Tax General Order No.1 of 2004 read with R.12 of Chapter 1 of Sales Tax Rules, 2006 and S.21 of the Sales Tax Act, 1990.

(c) Sales Tax Act (VII of 1990)---

----S.21---De-registration, blacklisting and suspension of registration--Order of blacklisting---Registered person contended that there was no order of blacklisting of supplier units mentioned in the detail provided by the department-Non-production of order by the Revenue led to presumption that stance of registered person was correct; had there been any order of blacklisting of the units mentioned in the show-cause notice, the Revenue should have produced the same before Appellate Tribunal---Although there was no order to show that suppliers were blacklisted yet the order through which the suppliers were alleged to be blacklisted should have been an executive order and could not be given retrospective effect.

(d) Sales Tax---

----Orders or notifications which confer rights and are beneficial would be given retrospective effect and those which adversely affected or invaded upon the vested right could not be applied with retrospective effect.

Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 and 2004 PTD 2928 rel.

(e) Sales Tax Act (VII of 1990)---

----S.21---De-registration, blacklisting and suspension of registration---Subsequent blacklisting of a supplier could not be made a tool to deprive the registered person of a valuable right accrued in his favour for purposes or transactions made prior to the suspension of registration of such supplier.

2010 PTD (Trib.) 1631 rel.

(f) Sales Tax Rules, 2006---

----R.12(5)---Sales Tax Act (VII of 1990), S.10---Blacklisting and suspension of registration---Re fund---Tern: used "whether prior.... such blacklisting" meant the invoices issued during the period of suspension of registration prior to blacklisting---Admittedly, when refund was sanctioned the status of supplier units was neither "registration suspended" nor "blacklisted", R.12(5) of Sales Tax Rules, 2006 was not applicable at that point, otherwise the refund claim must have been refused straight away.

(g) Sales Tax Act (VII of 1990)--

----Ss.2(37)---Tax fraud---Burden of proof---Initial burden to prove, that the provisions of tax fraud were attracted, lay on the department but it had failed to discharge onus amid for that reason charge of tax fraud had no legal consequence.

Messrs Al-Hilal Mines and Sons and others v. Collector of Sales Tax and Federal Excise (East), Karachi and others 2004 PTD 868 rel.

(h) Sales Tax Act (VII of 1990)---

---S.36---Recovery of tax not levied or short-levied or erroneously refunded---Reasons for the alleged non-levy, short-levy or erroneous refund of sales tax---Limitation---For proceeding against a person under provisions of S.36 of the Sales Tax Act, 1990 the show-cause notice had to mandatorily specify the reasons for the alleged non-levy, short-levy or erroneous refund of sales tax---Notice had to be served within the period of limitation prescribed in subsection (1) of S.36 i.e. within 5 years of the relevant date if non-levy, short-levy or erroneous refund of sales tax or charge was the result of the reasons of some collusion or a deliberate act---Subsection (2) of S.36 of the Sales Tax Act, 1990 was invokeable when inadvertence, error or misconstruction had caused such non-levy, short-levy or erroneous refund and the show-cause notice thereunder could be served within 3 years of the relevant date.

Mian Abdul Basit for Appellant.

Faisal Asghar, D.R. for Respondent.

2011 P T D (Trib.) 893

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

C.I.T. (LEGAL DIVISION) L.T.U., ISLAMABAD

Versus

Messrs FAUJI FERTILIZER COMPANY LIMITED

I.T.A. No.184/IB of 2009, decided on 10th February, 2011.

(a) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----Ss.2(i) & 4---Income Tax Ordinance (XLIX of 2001), S.221(2)---Circular No.13 of 2008 dated 23-10-2008---Total income---Net profit as per accounts---Total income as per return of income---Demand of Workers' Welfare Fund was raised on the basis of net profit as per account being higher than the income of return by passing order under S.221 of the Income Tax Ordinance, 2001---First Appellate Authority held that Workers' Welfare Fund was chargeable on total income as was assessable under the Income Tax Ordinance, 2001 instead of accounting profit (before taxation); and order of Taxation Officer was against the provisions of charging S.4 of Workers' Welfare Fund Ordinance, 1971 which would prevail over the definition of total income---Validity---At the time of amendment in definition of total income in S.2, corresponding amendments had not been made in S.4(i) of Workers' Welfare Fund Ordinance, 1971 which at that time provided that industrial establishment shall pay to the Fund equal to two percent "of so much of its total income as is assessable under the Ordinance "---Subsection (4) of S.4 of the Workers' Welfare Fund Ordinance, 1971 at that time provided "At the time of making an assessment under the Ordinance or as soon thereafter as may be, the Taxation Officer shall" by order in writing, determine the amount due from industrial establishment under subsection (1), if any, on the basis of the income so assessed"-Words "of so much of its total income as is assessable under the Ordinance" clinch the issue in favour of the taxpayer and such words were omitted through Finance Act, 2008 and could not operate retrospectively---Federal Board of Revenue admitted the lacunas in S.4 of Workers' Welfare Fund Ordinance, 1971 at the time of amendment through Finance Act, 2006---Order passed by the Taxation Officer suffered from legal infirmity---First Appellate Authority correctly deleted the Workers' Welfare Fund demand raised by the Taxation Officer and confirmed the order of First Appellate Authority---Appeal of the Department was without merit and dismissed by the Appellate Tribunal.?

2002 PTD 14 and 2009 PTD (Trib.) 738 rel.

1998 PTD (Trib.) 1379; 2008 PTD 1988; 1999 PTD (Trib.) 3226; 2005 PTD 259 (H.C. Kar.); (2010) PTD 755 (H.C. Kar.); 1996 SCMR 1470 and 1993 SCMR 474 = 1993 PTD 69 ref.??

(b) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----S.2 (ff)---Word "Ordinance" had been defined to be Income Tax Ordinance, 2001 in Cl. (ff) of S.2 of Workers' Welfare Fund Ordinance, 1971 through Finance Act, 2006 which previously referred to Income Tax Ordinance, 1979.

Tahir Muhammad Khan D.R. for Appellant.

M. Rashid Qureshi, FCA for Respondent.

2011 P T D (Trib.) 901

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Abdul Rauf, Accountant Member

C.I.R. LEGAL DIVISION, LTU, LAHORE and others

Versus

Messrs SERVICE INDUSTRIES LIMITED, LAHORE and others

I.T.As. Nos.599/LB, 948/LB, 706/LB, 707/LB of 2009, decided on 1st February, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

---Ss.221 & 122 (5)---Income Tax Ordinance (XLIX of 2001), S. 62---Rectification of mistake---Mistake apparent on the face of record---Assessment year 2002-2003---Rejection of appeal by the First Appellate Authority---Application for rectification was moved on the ground that vires of S.122 of the Income Tax Ordinance, 2001 with reference to assessment year 2002-2003 had not been adjudicated---Order of Taxation Officer was vacated by the First Appellate Authority on the ground that provisions of 5122 of the Income Tax Ordinance, 2001 could not be invoked for the amendment of assessment for the assessment year 2002-03; and allowed relief through rectification order passed under S.221 of the Income Tax Ordinance, 2001---Department contended that earlier order had been passed by the First Appellate Authority after conscious application of mind which could not be reversed through rectification as the scope of rectification, being limited in nature, did not include resolution of controversial issues through a process of debate and argumentation---Validity---If, in a case, law was found to have been applied in a manner contrary to the rulings of competent court, the application of law would be a mistake apparent on the face of record which could be got rectified through recourse to the rectification provisions, if the matter had not become a past and closed transaction by virtue of limitation---First Appellate Authority disposed of appeal of the taxpayer against the explicit enunciation of High Courts, to the extent of repugnancy with the said judgments constituted a mistake of law and was rightly rectified by him to bring his order in conformity with the judgments of High Courts---Departmental appeal was dismissed by the Appellate Tribunal.

Kashmir Edible Oil v. CIT 1993 Tax 197 SC Pak(sic); Honda Shahrah-e-Faisal v. CIT 2005 PTD 1316 H.C. Karachi; Fauji Terminal and Distribution Co. Ltd. 2006 PTD 97 H.C. Karachi and Idrees Cloth House v. CIT 1997 Tax 393 L.H.C.(sic) ref.

National Food and Sliadman Cotton Mill's case 2008 SCMR 204 = 2008 PTD 253 and 1992 SCMR 687 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 21-K---Deductions not allowed---Profit and loss expenses---Assessee a company---Un-documented economy---Deletion of disallowance by the First Appellate Authority---Department contended that taxpayer was duly confronted with the un-verifiability of the expenses because of non-availability of credible documentary evidence and the additions were made only when the taxpayer could not furnish any satisfactory explanation; and the direction of the First Appellate Authority regarding deletion of disallowance of the expenses was with observation that in cash economy like ours proper vouchers were not issued "in respect of numerous items of purchases"---Taxpayer contended that in an un-documented economy it was not possible to obtain proper voucher for each expense because vendors of various items from whom different petty items were purchased did not issue proper vouchers; and because of proper system of checks and balances operative within the company, bogus, fictitious, and fake vouchers could not even be thought of---Validity---Held, Taxation Officer may be well within his right to assert that it was only documented and properly vouched expenses that could be allowed as admissible deductions but department could not be oblivious of factual position on ground vis-a-vis petty business concerns which carry on their business on cash basis and issue katcha vouchers and that too on demand by the customers---Buyer could not obtain proper vouchers from these petty business concerts because they were not in the habit of doing so---Assertion of the taxpayer in that behalf could not be casually brushed aside in the case of a public limited company having business operations scattered over a number of places because it was not possible for it to manage its business affairs without effective and efficient internal control and in the presence of such fool proof control, it was not possible to book fake and bogus expenses and claim them as deductions---If loose and ineffective control was allowed to remain operative in a business organization it may cause irreparable loss to the company at the hands of unscrupulous employees---having weighed arguments from both the sides, Appellate Tribunal held that First Appellate Authority had rightly deleted the disallowance.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 169 & 148---Circular No.14 of 1993 dated 19-08-1993---Tax collected or deducted as a final tax---Exports---Local business---Proration of expenses---Compensatory/Export rebate---Export sales was enhanced by the amount of compensatory rebate and thereafter allocated the expenses charged 'to revenue in proportion to the ratio between the two types of sales---Validity---Compensatory rebate, as a matter of fact, was the refund of the taxes which entered into the cost of manufactured products exported by the taxpayer, which had the effect of reducing the cost of sales rather than enhancing the export proceeds---Appellate Tribunal 'directed that the rebate may not be treated as part of the export proceeds for the purpose of proration of expenses.

2004 PTD (Trib.) 1890 and 2001 PTD 1649 rel.

2009 PTD (Trib.) 869 per incuriam.

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 21(c)---Deductions not allowed---Gratuity---Expenses were held to be inadmissible deduction on the ground that taxpayer paid gratuity to its employees on which tax was not deducted at source---Taxpayer contended that Taxation Officer had wrongly found that payment of gratuity was made to employees but payment had been made to gratuity ,fund which was established by the company also approved 'by the Commissioner of Income Tax---Controversy whether the expense on account of gratuity was incurred by way of payment to approved gratuity fund or to employees could be resolved through further investigation---Orders of the authorities below were vacated by the Appellate Tribunal and case was remanded to Taxation Officer with the direction to ascertain the factual position in that .regard---If payment was found to have been made to approved gratuity fund same should be allowed as deduction.

(e) Income Tax Ordinance (XLIX of 2001)---

----Ss. 21 & 20---Income Tax Rules, 2002, R.6-C---Deductions not allowed---Personal and non-business use of vehicles---Disallowance---Taxpayer had not denied the observation of the Taxation Officer that vehicles provided by the employer were meant both for business and personal use---Expense incurred in connection with the running and maintenance of vehicles being not wholly and exclusively incidental to business, disallowance by the Taxation Officer and confirmed by the First Appellate Authority was upheld by the Appellate Tribunal.

(f) Income Tax Ordinance (XLIX of 2001)---

----Ss.21 & 2(36)---Deductions not allowed---Donation---Disallowance--Donation was made to Charitable Trust which was not approved as a non-profit organization under S.2(36) of the Income Tax Ordinance, 2001---Evidence regarding the "approved" status of the donee at the material time was not produced---Findings of First Appellate Authority regarding disallowance of donation were maintained by the Appellate Tribunal.

Syed Zulqarnain Tirwizi, D.R. for Appellant (in I.T.As. Nos.599/LB and 948/LB of 2009).

Jalal Ahsan, F.C.A. for Respondents (ill I.T.As. Nos.599/LB and 948/LB of 2009).

Jalal Ahsan, F.C.A. for Appellant (in I.T.As. Nos.706/LB and 707/LB of 2009).

Syed Zulqarnain Tirmizi, D.R. for Respondent (in I.T.As. Nos.706/LB and 707/LB of 2009).

2011 P T D (Trib.) 912

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.A. TEXTILES, FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.1732/LB of 2009, decided on 23rd September, 2010.

Sales Tax Act (VII of 1990)---

----Ss.10, 3, 7 & 21---Sales Tax Rules 2006, R.12---Constitution of Pakistan, Art.4---Refund of input tax---Rejection of refund on the basis of suspension of registration of supplier; scrutiny for verification of input tax in spite of providing evidence of payment through banking channels and document regarding physical transfer of goods i.e. copies of gate passes, copies of cash payment vouchers/cross cheque through which payment had been made and bank statement in which relevant cheques were duly reflected---Validity---Held, there was no justification for rejecting the claim of registered person---Both the officers below without considering the legal aspects of the case had rejected the claim of the registered person---Both the orders were vacated and the adjudicating authority was directed to allow the claim of the registered person in accordance with law, if no other liability existed against the registered person.

GST 2003 LC. 465; PLD 1992 SC 531; 2003 SCMR 1505; 2004 CL 1; 2010 PTD (Trib.) 857; 2005 SCMR 492; PLD 2001 SCMR 340; 2010 PTD (Trib.) 1631 and 2010 PTD (Trib.) 1675 rel.

Khubaib Ahmed A.R. for Appellant.

Muhammad Jamil Bhatti, D.R. for Respondent.

2011 P T D (Trib.) 923

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member

Messrs AMTEX LIMITED, FAISALABAD

Versus

COLLECTOR SALES TAX, FAISALABAD

S.T.A. No.569/LB of 2009, decided on 29th July, 2010.

Sales Tax Act (VII of 1990)---

----Ss.45, 11(2), 4,7, 8(1), 10, 26 & 36---Refund, claim of---Power of adjudication---Assessee contended that adjudication officer, at the relevant time, only adjudicated upon the cases involving amount of tax or amount erroneously refunded not exceeding Rs.one million and Assistant Collector had transgressed his jurisdiction which was unlawful. and that the Assistant Collector had the jurisdiction to adjudicate upon the cases under Ss.11(2) and 36 of the Sales Tax Act, 1990 involving amount of Rs.one million---Validity---Held, since the amount involved was more than Rs.one million, the assumption of jurisdiction by the Assistant Collector was coram non judice; and all the subsequent proceedings conducted thereafter could not be considered as having been done in pursuance of law---Case was aside by the Appellate Tribunal and directions were issued to allow the refund claimed by the registered person.

2006 SCMR 470; 2008 SCMR 240; S.T.A. No.94/LB/2008 and S.T.A. No.105/LB/2008 rel.

Khubaib Ahmed for Appellant.

Asim Halim D.R. for Respondent.

2011 P T D (Trib.) 936

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Abdul Rauf, Accountant Member

Messrs RAFI ELECTRONICS CORPORATION (PVT.) LTD., LAHORE

Versus

C.I.T., R.T.O., LAHORE

I.T.As. Nos.963/LB to 965/LB of 2009, decided on 21st December, 2009.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5), 121, 115(4), 114, 144(6) & 177---Income Tax Ordinance, (XXXI of 1979), S.59A---Amendment of assessment---Concept and procedure---Correctness of the return was presupposed, on the date of filing return, by words of law and no order like under S.59A of the Income Tax Ordinance, 1979, was required to be passed---For verification of declarations made in the return, the Commissioner was empowered to select a person for audit under S.177 of the Income Tax Ordinance, 2001, of income tax affairs of the person who had filed a return under S.114 of the Income Tax Ordinance, 2001 or a statement under S.115(4) of the Income Tax Ordinance, 2001---Audit was a concept, different from assessment and was not envisaged to be adopted as a routine in every case---If a person failed to file a return or statement, as envisaged under Income Tax Ordinance, 2001, the Commissioner could, under S.121 of the Income Tax Ordinance, 2001, made a "Best Judgment Assessment" based on the available information or material---Assessment order treated as issued under S.120 or S.121 of the Income Tax Ordinance, 2001 could be amended under S.122 of the Income Tax Ordinance, 2001---Subsection (5) of S.122 of the Income Tax Ordinance, 2001 provided that such amendment could be made on receiving definite information, from audit or otherwise, to the effect that income 'had escaped assessment', 'was under assessed', 'assessed at too low a rate', subjected to excessive relief/refund' or 'had been misclassified'---Subsection (5A) of S.122 of the Income Tax Ordinance, 2001, allowed such amendment if the assessment order was found to be 'erroneous in so far as it was prejudicial to the interest of revenue'---Subsection (3) of the S.120 of the Income Tax Ordinance, 2001 treated the revised return, filed under S.144(6) of the Income Tax Ordinance, 2001, also an amended assessment order, having been passed by Commissioner, on the day revised return was filed, for all purposes of the Income Tax Ordinance, 2001---Subsection (4) of the S.122 of the Income Tax Ordinance, 2001 authorized the Commissioner to 'further amend the assessment order `as many time as may be necessary'.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.122---Amendment of assessment---Doctrine of merger---Though the doctrine of merger deals with orders between inferior and superior authorities, nevertheless, the doctrine of merger was applicable on all fours to the concept of amendment.

Messrs Gojer Brothers (P.) Ltd. v. Shri Ratan Lal Singh AIR 1974 SC 1380 rel.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.122---Amendment of assessment---Effect---Necessary effect of the amendment was that the amended part of the assessment order under S.120 of the Income Tax Ordinance, 2001 was changed, absorbed into or swallowed by the amended assessment order and the amended part of the original assessment order disappears.

(d) Income Tax Ordinance (XLIX of 2001)---

----S.122---Amendment of assessment---Second amendment---Doctrine of merger ---Change of opinion---Merger of original assessment order under S.120 of the Income Tax Ordinance, 2001 in the first amendment assessment order---Validity---Several part of order treated as issued under S.120 or issued under S.121 of the Income Tax Ordinance, 2001 merged into amended assessment order under S.122(1) or (3) of the' Income. Tax Ordinance, 2001---Assessment order under S.120 of the Income Tax Ordinance, 2001, to the extent of determining commercial status of the taxpayer, had merged into the first amended assessment order---In the present case, Taxation Officer in opening paragraph of that order, treated the taxpayer as 'manufacturer' before making addition of the claimed expenses---Since taxpayer's commercial status, as manufacturer, had already been examined by the Taxation Officer,' re-examination of the same for further amendment was change of opinion---Language of second amended assessment order clearly showed that it was amending the original assessment order under S.120 of the Income Tax Ordinance, 2001, without discussing the first amended assessment order---Even the 'taxable income/(loss)' was noted, whereas the same was reduced, by first amendment---Taxation Officer through second amended order had attempted to amend the part of assessment order under S.120 of the Income Tax Ordinance, 2001 which had merged into first amended assessment order under S.122(5A) of the Income Tax Ordinance, 2001 so was not in existence--Second/further amended assessment order was not sustainable.

Glaxo Laboratories (Pak.) Ltd. v. IAC of Income Tax 1992 PTD 82 and Messrs Gojer Brothers (P.) Ltd. v. Shri Ratan Lal Singh AIR 1974 SC 1380 rel.

(e) Income-tax---

----Functus officio, doctrine of---Applicability---Adjudicating authority, judicial or quasi judicial, cannot change its determination in an adjudication, after signing the order/judgment as doctrine functus officio conies in the way.

(f) Income-tax---

----Review---Review of a determination in an order or judgment can only be made if the same is specifically allowed by the legislature in any enactment.

(g) Income-tax---

----Change of opinion---Assessing Officer, while making additional assessment under the former laws, could not re-adjudicate a determination made in an assessment order and the same was termed as 'change of opinion'.

(h) Income Tax Ordinance (XLIX of 2001)---

----S.122 (4)---Amendment of assessment---Limitation---Second/further amendment---Application of one year limitation' for further amendment---Validity---Subsection (4) of S.122 of the Income Tax Ordinance, 2001 dealt only with the limitation for further amendment of an order which had already been amended and the un-amended part of the order under S.120 or S.121 of the Income Tax Ordinance, 2001 was termed as 'original order'---Limitation for first amendment of orders under S.120 or S.121 of the Income Tax Ordinance, 2001 was given in subsection (2) of S.122 of the Income Tax Ordinance, 2001, which was five years from the end of financial year in which Commissioner had issued or treated to have issued an assessment order---To further amend the original assessment order "as many times as may be necessary", limitation was provided in the later part of the subsection, where key words were "within the later of" the period provided either-in Cl. (a) or (b)---Clause(a) provided that a further amendment, of the original order, could again be made within `five years front end of the financial year in which the Commissioner had issued or treated as having issued the original assessment order'---Whereas Cl. (b) provided limitation of one year front the end of the financial year in which, the Commissioner had issued the amended assessment order under S.122(1) of the Income Tax Ordinance, 2001 or treated as having issued the amended assessment order under S.122(3) of the Income Tax Ordinance, 2001, when revised return was filed---When period of limitation given in Cls. (a) and (b) of subsection (4) of S.122 of the Income Tax Ordinance, 2001 were read with the key words 'within the later of', the necessary conclusion would be ; first if limitation of five years had not expired, the original order could be further amended within this limitation; secondly, if the limitation of five years had expired but limitation of one year, as provided in Cl. (b) of subsection (4) of S.122 of the Income Tax Ordinance, 2001 had not expired, further amendment could still be trade till the date of limitation of one year---Clause (b) of subsection (4) of S.122 of the Income Tax Ordinance, 2001 shall remain dormant unless limitation under Cl. (a) of subsection (4) of S.122 of the Income Tax Ordinance, 2001 was available---If said limitation expired, Cl. (b) of Sub-S. (4) of S.122 of the Income Tax Ordinance, 2001 shall be operative by dint of the words 'within the later of'---Appellate Tribunal disagreed with the taxpayer that after amendment, the limitation of five years was restricted to one year because the assessment order under S.120 of the Income Tax Ordinance, 2001 became an amended assessment order, after having been merged---Such interpretation led to uncertainties---If such interpretation was accepted, a taxpayer could misuse his right of revising return under S.114(6) of the Income Tax Ordinance, 2001, which was treated as amended assessment order under S.122(3) of the Income Tax Ordinance, 2001---Taxpayer would file a revised return showing a minor discrepancy, say after six months of its becoming assessment order under S.120 of the Income Tax Ordinance, 2001 and would claim that the limitation of five years given under subsection (2) of S.122 of the Income Tax Ordinance, 2001 was now curtailed to one year---Answer to question "whether limitation of one year was applicable for further amendment was in the negative.

(i) Income Tax Ordinance (XLIX of 2001)---

----Ss.221 & 122 (5A)---Rectification of mistake---Amendment of assessment---Dropping of proceedings initiated under S.122(5A) of the Income Tax Ordinance, 2001 was termed as an order under S.122(5A) of the Income Tax Ordinance, 2001 and rectified under S.221 of the Income Tax Ordinance, 2001---Result of dropping proceedings initiated under S.122(5A) of the Income Tax Ordinance, 2001 was that no amendment was made and order under S.120 or S.121 of the Income Tax Ordinance, 2001, as the case may be, remained intact---Dropping of proceedings at best be termed as withdrawal of notice through which proceedings were initiated, as taxpayer had answered the notice to the satisfaction of the Taxation Officer---Order under S.122(1)(5) or S.122(5A) of the Income Tax Ordinance, 2001 must be the one which amended the assessment order for the reasons given in subsection (5) or (5A) of S.122 of the Income Tax Ordinance, 2001 and not the one by which such reason were withdrawn---Action under S.221 of rectifying the order was held to be nullity in the eye of law.

(j) Income Tax Ordinance (XLIX of 2001)---

----S.221---Rectification of mistake---No investigation on facts, through evidence, could be made in rectification proceedings.

(k) Income Tax Ordinance (XLIX of 2001)---

----Ss.122 & 115(5)(6)---Amendment of assessment---Presumptive Tax Regime---Whether notice under S.115(5) of the Income Tax Ordinance, 2001 was mandatory before bringing the assessment into Final Tax Regime by invoking S.122 of the Income Tax Ordinance, 2001---Held, notice under S.112(5) of the Income Tax Ordinance, 2001 was directory in nature, as no consequence of failure to issue such notice was given in the Income Tax Ordinance, 2001, however, Taxation Officer could not just ignore a provision of law casting any duty upon him---Legislature had enacted said provision for an amicable resolution of the issue, if the taxpayer found the opinion of the Commissioner as correct-If the taxpayer contested such notice, the Commissioner would necessarily resort to the provisions of S.122 of the Income Tax Ordinance, 2001, for making any amendment of legally recognized order under S.120 of the Income Tax Ordinance, 2001---Non-issuance of notice under S.115(5) of the Income Tax Ordinance, 2001 would not vitiate the proceedings initiated under S.122 of the Income Tax Ordinance, 2001.

Malik Muhammad Akram and Nasir Jamil, ACA for Appellant.

Ahmad Shuja Khan, D.R. for Respondent.

2011 P T D (Trib.) 952

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jameel Raza Zaidi, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs SALFI TEXTILE MILLS LIMITED

Versus

COLLECTOR (APPEALS) and others

Sales Tax Appeal No.803/K of 2009 (Old S.T.A. No.134 of 2009), decided on 20th January, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss.10(4), 11, 2(14), 7, 8(1), 26, 33(17), 36, 37 & 67---Sales Tax Refund Rules 2006, R.37---Penal Code (XLV of 1860), S.163---Refund of input tax---Finding of facts gathered from one case was applied to the cases of 17 different registered persons/refund claimants without giving consideration or applying judicial mind to the case of all those including the appellant---Taxpayer was charged for violations (not committed by himself) under different sections of Sales Tax Act, 1990with threat for punishment by rejection of his lawful refund claims, which were unlawfully rejected---Taxpayer contended that mischief of S.10(4) of the Sales Tax Act, 1990 was not liable to adjudication, as such mischief did not fell within the scope of S.11 or S.36 of the Sales Tax Act, 1990; and virtually no mischief under S.11 or S.36 of the Sales Tax Act, 1990 was warranted and the proceedings of adjudication carried on in the case were nothing except futile exercise being unauthorized and void ab initio and non-existent in the eyes of law; and refund was applied for only but nothing was refunded at the crucial time of notice or adjudication; and, adjudication was unauthorized as no mischief of S.36 of the Sales Tax Act, 1990 was warranted---Validity---Held, there was no independent finding rather finding on the appropriate facts of the case in Order-in-Appeal---No judicial mind was applied while passing the Order-in-Original---No rebuttal or rejection was offered by the department to the documents presented by the appellant, which proved that the documents submitted by the appellant for removal of the objections were in order and admissible, which were not adhered to---Every case was an independent one for findings of facts, findings on fact may be given on existence of facts in each case and proved by evidence, not by surmises and conjectures and applying findings of facts of another person---Each and every case would be decided on its own peculiar circumstances of facts---No one should be penalized for violations of other registered persons---Infrastructure founded on void order and proceedings were void and non-existent in the eyes of law---Appellant was entitled for immediate release of his held-up refund claims as well as delayed for refund surcharge under S.67 of the Sales Tax Act, 1990, workable since the last date of the statutory period as envisaged under S.10 of the Sales Tax Act, 1990 till the date of payment.

?

2007 SCMR 855; 1994 SCMR 2214; 2009 PTD 1993; Government of Balochistan through Secretary Board of Revenue v. Muhammad Ali 2007 SCMR 1574; 2006 PTD 2124; 2010 PTD 1692; 2010 PTD 1681; Iqbal Hussain v. Province of Sindh 2008 SMCR 105; Government of Pakistan v. Muhammad Younus 2009 CLC 46; Ghulam Muhammad v. Abdul Ghaffar 2007 'CLC 1633; Messrs A.K. International, Rawalpindi v. Secretary, Revenue Division, Islamabad 2007 PTD 1337; Messrs Sabir Daud Exports Faisalabad v. Secretary, Revenue Division, Islamabad 2007 PTD 430; Muhammad Ayaz alias Cheena v. The State 2004 P'I'D 652; Mst. Kiuza v. Judge Family Court Lahore 2003 YLR 2356; 2003 PTD 691; Federation of Pakistan v. Metropolitan Steel Corporation 2002 PTD 87; Zahir Ansari v. Karachi Development Authority 2000 PLD 168; Sanghar Sugar Mills ltd. v. Federation of Pakistan 1991 CLC 456; Naseer Iqbal v. Shaffat Ali 1990 CLC 1974; Murad v. Sardar Bibi 1989 CLC 2485 and Javed Dastgir Mirza v. Additional Chief Secretary, SGA & I Department 1983 PSC 983 rel.

(b) Sales Tax Act (VII of 1990)---

----S.10 ---Refund of input tax---Comparison of S.10 of the Sales Tax Act, 1990 before and after 30-06-2007.?

(c) Sales Tax Act (VII of 1990)---

----S. 10(4)---Refund of input tax---Duty of field forces---Contents of S.10 of the Sales Tax Act, 1990 put a liability on the shoulders of the field forces of the Sales Tax as to make payment of refund claim to the claimant within prescribed period but not later except in exceptional cases---Mandate contained in S.10 (4) of the Sales Tax Act, 1990 binds the field forces of the Sales Tax as to do investigation and verification in person by applying judicial mind even in exceptional cases.?

(d) Sales Tax Act (VII of 1990)---

----S. 10---Refund of input tax---Violations of suppliers---Objections---Validity---All objections raised by the department were representing violations by the suppliers other registered persons---Law did not authorize to held money of one registered person due to act of omission or commission on part of other registered person---Computer system was an only devise to detect the discrepancies in data fed therein correctly or incorrectly by the registered person or sales tax staff under bona fide or non-bona fide designs ---Heavy duty was cast upon the field forces of the department to make human struggle for removal of objection at their own end by applying judicial and fair mind.?

(e) Sales Tax Act (VII of 1990)---

----S. 10---Refund of input tax---Detention of refund---Field forces of the Department were not authorized under any law, norm and logic, as to penalize or detain refund claims of the claimant in any circumstances resulting out of faults or default of the supplier who collected the Sales Tax at the time supplies were made---Supplier, on collection of such input tax deposited the same into the national exchequer, in proof whereof supplier issued the Sales Tax Invoice, which the registered person presented to the Department for refund of money equal to tax charged and deposited thereagainst.

(f) Sales Tax Act (VII of 1990)---

----Ss. 10 & 25---Refund of input tax---Verification through application of judicial mind---Sales Tax Automated Refund Repository computer system is a "mischief finding system" only; it did not allow to amend or sweep the legislative provisions of law; it did not give licence to functionaries as to neglect their legal duties cast upon them under S.10 or 25 of the Sales Tax Act, 1990---Said functionaries were bound to act promptly for verification of payment of tax under S.10 of the Sales Tax Act, 1990 through application of judicial mind and to approach the defaulter under S.25 of the Sales Tax Act, 1990. ?

(g) Sales Tax Act (VII of 1990)---

----S. 10---Refund of input tax---Application of finding of facts through consolidated judgment---Finding of facts in each case is independent, which needs to be decided individually and determination of facts made in one case could not be applied to the other case---Finding of law could be applied through a consolidated judgment.?

(h) Sales Tax Act (VII of 1990)---

----S. 10---Refund of input tax---Consolidated judgment---Controversy of facts could be decided by an individual judgment on each and every case---Judgment on existence of facts, in the case of one registered person could not be applied on the facts of other registered person for award of punishment by forfeiture of refund.?

(i) Sales Tax Act (VII of 1990)---

----S.10---Refund of input tax---Act of omission or commission on part of Department may be strictly reprimanded with direction to nip the evil of negligence or inaction on part of the department or men working under them within their control.?

Muhammad Afzal Awan for Appellant.

Imtiaz Ahmed, D.R. for Respondent.

2011 P T D (Trib.) 967

[Inland Revenue Appellate Tribunal of Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Abdul Rauf, Accountant Member

Messrs HONDA ATLAS CARS (PAKISTAN) LTD, LAHORE

Versus

C.I.T., LEGAL DIVISION, LTU, LAHORE

I.T.As. Nos.767/LB and 759/LB of 2009, decided on 1st October, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 148(7), 177 & 122(5A)---Imports---Tax withheld at import stage in respect of vehicles given to employees under Employees Cars Scheme, had been held to be discharge of final tax liability and depreciation on such vehicles had been held to be an inadmissible deduction---Assessee contended that provisions of S.148 (7) of the Income Tax Ordinance, 2001 were applicable to the "Commercial Imports" i.e. goods which were imported for onward sale only whereas the goods which were imported for self-utilization, not involving any subsequent sale/profit, were not covered by the provisions of S.148(7) of the Income Tax Ordinance, 21101---Validity---Held, there was no confusion or disagreement between the parties that subject items (vehicles) were not commercial imports and were meant for self-use in the business---Word "commercial import" did not figure in law and to this extent the contention of the Department was correct, however, when the provision of S. 148(7) of the Income Tax Ordinance, 2001 were minutely examined it transpired that legislature had used the words "...income of the importer arising from.... "---Such words, particularly the word 'arising', made the intention of the legislature manifestly clear---By reference to these words, what was brought within the ambit of final tax regime was a transaction which involved an import to made a profit i.e. a commercial import or import undertaken for resale with the intention of making profit---Definition of expression 'income' itself includes the amount subject to collection of tax under S.148 of the Income Tax Ordinance, 2001 but had the intention been to treat all types of transaction as 'income' the legislature would have not used the words "income of the importer arising from" rather the wording would have been ".... the tax collected under this section shall be a final tax .... "---Said cautious and discreet choice of words made it amply clear that within the scope of final tax regime only those goods fell which were imported for resale to make a profit---Items which were imported for the purpose of self-use fell outside the ambit of final tax regime---Tax withheld/collected at the import stage in respect of the vehicles remained an. adjustable advance tax---Further, Taxation Officer had also no valid basis/reason to disallow the depreciation---Orders of the authorities below on such account was annulled by the Appellate Tribunal and it was directed that depreciation be allowed to the taxpayer.

I.T.A. No.1885/KB of 2002 ref.

2004 PTD 1251 rel.

(b) Income-tax---

----Royalty on self manufactured capitalized vehicles---Disallowance---Depreciation attributable to royalty (paid by the taxpayer to its parent company under Licence Agreement) in respect of vehicles manufactured by it and capitalized in the financial statement was disallowed---Assessee contended that Taxation Officer in the case of taxpayer had held that no royalty was payable yet the department while assessing the income of the recipient had colleted tax on royalty including the subject amount; stance of the department was self-contradictory; on the one hand the department did not allow deduction of expense on account of royalty but collected tax from the recipient under the same head---Validity---Contradictory nature of stance of department was obvious as on the one hand tax was being collected by treating the amount as royalty in the hands of recipient but it was being disallowed as a deduction on the other in the case of the tax payer---Appellate Tribunal directed deletion of the disallowance as the department could not be allowed to blow and cold in the same breath---Addition was also made without confronting the taxpayer, which was against the principles of natural justice---Addition was not sustainable both on factual and legal grounds.

GST 2003 LR 79 rel.

2004 PTD 441 ref.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 21(c), 2(54) & 152(1)---Deductions not allowed---Amortization of licence fee---Royalty---Disallowance of deduction claimed on account of 'initial license fee' by holding that withholding tax was deductible at the rate of 30%.of the gross amount of fee as against the rate of 15% effected by the taxpayer---Assessee contended that initial licence fee was 'royalty' in nature and attracted 15% withholding tax rate which was correctly applied while effecting payment; that amount was on account of use of model/design which was classifiable as royalty under the provisions of S.2(54) of the Income Tax Ordinance, 2001; that since law itself provided that amounts for specified heads would remain a royalty, howsoever described, the initial fee being an amount for use of design/model remained royalty and that department had itself treated the amount as royalty in the hands of the recipient---Validity---Amount was clearly paid in consideration of use of design/model which could be classified as royalty under the relevant provisions of law and could not be given a treatment other than the one given by the taxpayer itself---Disallowance was deleted by the Appellate Tribunal being not sustainable under the law.

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 21(K)---West Pakistan Canteen Rules, 1959---Circular No. 16 of 1990 dated 4-12-1990---Deductions not allowed---Excess cost of perquisite---Canteen subsidy, cost of living allowance and freight and handling charges---Cost, of living allowance was treated by the taxpayer as part of salary for computing excess cost of perquisite, the other two amounts were not categorized as perquisites for the purpose of S.21(k) of the Income Tax Ordinance, 2001---Addition by treating all the three amounts as perquisites for the purpose of working out excess perquisites under S.21(k) of the Income Tax Ordinance, 2001---Validity---Taxation Officer did follow the instructions contained in Circular No.16 of 1990 regarding issue of canteen subsidy by observing that the circular granted concession to 'expenditure 'incurred on maintenance of canteen' and did not apply to provision of subsidized food---Matter needed reconsideration in the light of Board's circular as well as the case-law---Orders of both the authorities below was set aside and matter was remanded for fresh decision in the light of instructions as well as case-law.

2008 PTD 1559 and (1998) 77 Tax 2004(sic) rel.

(e) Income-tax---

----Profit and loss expenses---Summarily disallowance of expenses on account of tax consultancy charges, customs clearing charges and petty production expenses-Explanation submitted was arbitrarily rejected and no reason whatsoever was recorded for not accepting the taxpayer's contention---Practice of brushing aside of defence without assigning any reason could no be subscribed---Order had to be a speaking order and each and every contention of taxpayer had to be considered and dealt with carefully---Disallowance was deleted by the Appellate Tribunal.

(f) Income-tax---

----Apportionment of expenses---Appeal---Request for apportionment of expenses after taking into account various disallowances and additions---Taxation Officer was directed to make apportionment of expenses in accordance with law at the time of passing the appeal effect order.

(g) Income Tax Ordinance (XLIX of 2001)---

----Ss. 23 & 221---Initial allowance---Initial depreciation allowance on assets---Taxation Officer concluded that initial depreciation allowance was wrongly claimed as the assets were put to use for the first time in the preceding year by relying upon that order for the purchase of goods was placed in March 2005 which fell wit/tin the tax year 2005; and that the items of machinery related to discontinued model meaning thereby that machinery had no relevance with the current year---First Appellate Authority observed that there was no economic effect of the matter because if initial depreciation was allowed in the preceding year, refund would become due which offset the impact of disallowance in the current year---Department contended that principles of taxation did not recognize the concept of economic effect and affairs of every year to be dealt with independently---Validity---How placement of order for acquisition of an item of machinery in the preceding year could be proved that the said asset was also put to business use in the preceding year---No doubt, model was the discontinued one, but manufacture of parts of an older model would essentially continue as a part of after sale activity---Basis adopted was misconceived-Taxpayer in the preceding year disclosed the amount as capital work in progress in audited statements of accounts which could not be brushed aside casually on the basis of whims, conjectures and surmises---If the _ Taxation Officer had acted judiciously he would have simultaneously allowed initial depreciation in the preceding year by resorting to provisions of S.221 of the Income Tax Ordinance, 2001, but he had not adhered to principle of equity and justice---Finding of First Appellate Authority was maintained by the Appellate Tribunal.

(h) Income Tax Ordinance (XLIX of 2001)---

----S. 148(7)---Imports---Warranty parts---Presumptive Tax Regime--Import of spare parts utilized in warranty services were held to be not covered by the final tax regime by the First Appellate Authority---Validity ---Final consumption was relevant for determining the mode of their taxation---If these parts had not been resold but provided free of cost as replacement under warranty scheme the tax collected al import stage would not constitute a final tax---Such will be covered by the exception of S.148(7) of the Income Tax Ordinance, 2001 being import of equipment for own use---Order of First Appellate Authority was upheld by the Appellate Tribunal.

(i) Income Tax Ordinance (XLIX of 2001)---

----Ss. 21(g) & 34(3)---Deductions not allowed-Provision for customs duty was disallowed on the ground that the same did not meet the requirement of S.34(3) of the Income Tax Ordinance, 2001; and was also in the nature of a penalty which was not an allowable expense .in terms of S.21(g) of the Income Tax Ordinance, 2001--- Order of Taxation Officer was vacated by the First Appellate Authority---Validity---Disputed amount was neither in the nature of a fine nor a penalty; rather it was a provision on account of principal amount of customs duty---Order of First Appellate Authority was maintained by the Appellate Tribunal.

(j) Income Tax Ordinance (XLIX of 2001)---

----S. 75(3A)---Disposal and acquisition of assets---Obsolete plant and machinery written off---Claim on account of loss from writing off of obsolete plant and machinery was held to be an admissible deduction by the First Appellate Authority---Department contended that when an asset was disposed of, the department had the authority to compute sale consideration on the basis of fair market value; since company had ignored fair market value of the obsolete machinery and claimed deduction of amount representing the book value of machinery, the Taxation Officer was justified in disallowing the deduction---Assessee contended that once write-off was treated as disposal under S.75(3A) of the Income Tax Ordinance, 2001, the general principle of fair market value was inapplicable---Validity ---Order of First Appellate Authority was upheld and departmental appeal was dismissed by the Appellate Tribunal.

I.T.A. No.1003/LB of 2008 rel.

(k) Income-tax---

----Advertisement expenses---Direction to curtail the disallowance---No dispute between the parties that identified expenditure pertained to final tax regime---After ascertaining factual position from the relevant documents it was agreed with the taxpayer that addition had been made twice and order was annulled to that extent---Department could not establish the existence of any error or legal infirmity in the order---There being no mistake in the order of First Appellate Authority, the same was upheld and confirmed on the point by the Appellate Tribunal.

(l) Income Tax Ordinance (XLIX of 2001)---

----S. 67---Apportionment of deductions---Attribution of common expenses---Other income---Allocation of certain expenditure to other income on the basis of provisions of S.67 of the Income Tax Ordinance, 2001---Taxation Officer rejected the computation and held that no expenses could be allocated to "other income "---Addition was cancelled by the First Appellate Authority by placing reliance on the order of Appellate Tribunal---Since treatment meted out was based upon on existing binding precedent, there was no irregularity in the order of First Appellate Authority---No interference was called for and order was upheld by the Appellate Tribunal.

(m) Income Tax Ordinance (XLIX of 2001)---

----S.113(2)(c) & First Sched., Division-II, Part-I---Minimum tax on the income of certain persons---Difference between the liability to pay minimum tax @ 0.5% of turnover and the liability under Part I of Division II of First Schedule of the Income Tax Ordinance, 2001 was carried forward which the First Appellate Authority had confirmed to be correct---Validity---There being no confusion in the language used in the statute, the action of Taxation Officer was held to be illegal, which had been rightly vacated by the First Appellate Authority.

(n) Income Tax Ordinance (XLIX of 2001)---

----S. 222---Rectification of mistake---Refund adjustment---Adjustment of refund relating to prior years was not allowed---First Appellate Authority held that it was rectifiable matter and assessee was directed to pursue the matter through filing a rectification application which Taxation Officer would dispose of in accordance with law after affording appropriate opportunity to taxpayer---Validity---Nothing was wrong with directions of First Appellate Authority---Appeal on said ground was also rejected by the Appellate Tribunal.

Asian Zulifqar Ali, FCA for Appellant (in I.T.A. No.767/LB of 2009).

Syed Zulqarnain Tirmizi, D.R. for Respondent (in I.T.A. No.767/LB of 2009).

Syed Zulqarnain Tirmizi, D.R. for Appellant (in I.T.A. No.759/LB of 2009).

Asim Zulifqar Ali, FCA for Respondent (in I.T.A. No.759/LB of 2009).

2011 P T D (Trib.) 1010

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Farooq Shah, Judicial Member and Khalid Siddiqui, Accountant Member

Messrs INNOVATIVE IMPEX, KARACHI

Versus

COLLECTOR CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), KARACHI

S.T.A. No.508/K of 2009, decided oil 18th January, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 10, 11, 45-B, 46, 66, 67 & 73---Sales Tax Refund Rules, 2002, R.8---Refund claim---Rejection of claim---Appellant had claimed refund upon confirmation of zero rating and submitted proof of his claim with supporting documents---Functionaries of Collectorate of Sales Tax withheld the processing of claim of the appellant for indefinite period---Appellant filed complaint with Federal Tax Ombudsman who recommended that Collector concerned to process and finalize the claims of the appellant; and that compensation for the withheld amount be paid under S.67 of Sales Tax Act, 1990---No compliance having been made by the department, appellant filed appeal before Deputy Director, who rejected claim: of the appellant despite the recommendation and findings of the Federal Tax Ombudsman---Validity---Show-cause notice regarding rejection of refund claim issued by Deputy Collector was found in excess of jurisdiction as same could be issued by Additional Collector under S.11(2) of Sales Tax Act, 1990, empowered under S.45 of said Act---Show-cause notice had also been issued after inordinate delay of about five years, which under R.8 of Sales Tax Refund Rules, 2002, should have been issued within 14 days from the date of receipt of supportive documents---Appeal filed before the Collector (Appeals) was to be decided within 90 days from the date of its filing or within the further extended period of 90 days i.e. 180 days in all, but appeal had not been decided with said stipulated period---No provision existed in Sales Tax Act, 1990 to levy tax twice i.e. firstly at the time of purchase and secondly at the time of sales, in addition to the tax already paid---Appellate order passed by the Collector (Appeals) was not sustainable in law being contrary to the law/rules and being erroneous was not in consonance of law, equity and natural justice---Department was directed to pay the ref fund claim as permissible under the law.

[Case law referred].

Nadeem Ahmed Mirza for Appellant.

Hassan Sardar (DR) for Respondent.

2011 P T D (Trib.) 1039

[Inland Revenue Appellate Tribunal of Pakistani

Before Khawaja Farooq Saeed, Chairperson and Abdul Rauf, Accountant Member

SIGMA MOTORS (PVT.) LTD., ISLAMABAD

Versus

TAXATION OFFICER (AUDIT-V), LTU, ISLAMABAD

I.T.As. Nos.578/IB of 2010, 425/IB to 427/IB of 2010, M.A.(AG) No.127/IB of 2010 decided on 3rd January, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 221 & 156(4)---Income Tax Ordinance (XXXI of 1979), Ss.35, 62, 50(5A) & 80C---Rectification of mistake--- Carry forward of business losses---Rectification of assessment finalized under S.62 of the Income Tax Ordinance, 1979 on the grounds that brought forward losses which could be set-off only against business income, had been set-off against income from other sources; that imports were to be taxed 6% under Final Tax Regime whereas applied rate of 5% was causing loss to revenue---Validity---Mistakes were apparent on face of record in shape of adjustment of brought forwarded business losses against other income as well as levy of tax on presumptive income at a rate not prescribed by law which could be taken care of through rectification action under S.221 of the Income Tax Ordinance, 2001 notwithstanding the fact that assessments for both the years had been finalized under the Income Tax Ordinance, 1979---Mistakes of fact as well as law existed both in original order passed under S.62 of the Income Tax Ordinance, 1979 and the subsequent orders passed under S.221 of the Income Tax Ordinance, 2001---While rectifying the mistakes, earlier mistake committed by the predecessor was repeated and applied 6% rate of sale proceeds of commercial imports instead of the cost of imports to be calculated under the-provisions of S.50(5A) of the Income Tax Ordinance, 1979---Orders of both the authorities below were vacated and case was remanded with the direction that for purpose of charging tax under S.80C of the Income Tax Ordinance, 1979 the value of commercial imports be taken from the relevant bills ­of-entry in accordance with the procedure laid down in S.50(5A) of the Income Tax Ordinance, 1979 instead of charging tax on the sale proceeds.

Elly Lilly Pakistan (Pvt.) Ltd.'s case 2009 PTD 1392 distinguished.

2009 PTD 712 res.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.221-Rectification of mistake---Controversial issues which entail debate and discussion from both sides did not fall within the ambit of rectification action.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.221---Rectification of mistake--- Mistake of law---Explanation---Controversy no longer remained a controversy as soon as it was resolved through an authoritative pronouncement by a competent court which while interpreting a provision of law with reference to the specific facts of a case not only removed ambiguities about the meaning of said provision of law but also highlighted its correct import---If the said provision of law was found to have been applied in a manner contrary to the interpretation of competent court, the application for rectification would constitute a mistake of law which was required to be brought in harmony with the interpretation of competent court.

(d) Income Tax Ordinance (XLIX of 2001)---

---S. 221 ---Rectification of mistake---Mistakes' of law and fact which crept into assessments finalized under the Income Tax Ordinance, 1979 could be rectified under the corresponding rectification provisions of the Income Tax Ordinance, 2001 if, at the time of promulgation of Income Tax Ordinance, 2001, they had not become past and closed transactions.

2009 PTD 712 rel.

(e) Income Tax Ordinance (XLIX of 2001)---

----S. 56---Set off of losses---Interest income and exchange gain---Department contended that interest front bank and exchange gain being assessable as "income from other sources" could not be set off against brought forwarded business losses of company---Assessee contended that other income earned by the company from bank deposits and fluctuation of exchange rate was in the nature of business income which had rightly been set off against the brought forwarded business losses---Validity---Interest income from bank deposits was distinct and separate from business income and as such it could not be set off against accumulated business losses of previous years.

Uchpower (Pvt.) Limited and others v. I.T.A.T. of Pakistan 2010 SCMR 1236 = 2010 PTD 1809 rel.

(f) Income Tax Ordinance (XLIX of 2001)---

---Ss.57 (4) & 56(1)---Carry forward of business losses---Accumulated unadjusted depreciation allowance carried forward from year to year was to be treated as an admissible expense of the current year in terms of subsection (4) of S.57 of the Income Tax Ordinance, 2001 and adjusted against income assessable under any other head under S.56(1) of the Income Tax Ordinance, 2001.

(g) Income-tax---

----Interest income---Expense incurred for earning interest income was also to be allowed as a deduction from the interest income.

2010 SCMR 1236 = 2010 PTD 1809 rel.

(h) Income Tax Ordinance (XLIX of 2001)---

---S. 56---Set off of losses---Exchange gain---Business income---Treatment of exchange gain as part and parcel of business income---At the time of booking of vehicles the company received the price in advance from its customers in foreign currency which was kept in foreign currency account till it was remitted to the foreign supplier ---Such amount may yield profit or loss to the company depending upon the fluctuation in exchange rate---Gain accruing from the transactions in foreign currency bank account was essentially a business gain because the bank deposits from which the gain emanated were made in connection with and in course of normal business of the company---Appellate Tribunal directed that other income to the extent of exchange gain be treated as part and parcel of business income for the purpose of set-off of preceding year's accumulated business losses in circumstances.

(i) Income Tax Ordinance (XLIX of 2001)---

----S. 67---Income Tax Rules, 2002, R.13---Apportionment of deductions---Taxable income under normal law as well as Presumptive Tax Regime---Assessee charged expenses under the heads "technical assistance", and "service charges", "freight and material handling", amortization of deferred cost" and "bad debts" to the category of income to which such expenses pertained in accordance with S.67 of the Income Tax Ordinance, 2001 read with R.13 of the Income Tax Rules, 2002---Proration of---Validity---Taxation Officer prorated both cost of sales and Profit and Loss account expenses on the basis of ratio of turnover between the two types of income without realizing that the expenses which were exclusively attributable to either type of income could not be prorated and only those common expenses which were attributable to both types of income could be prorated on the basis of S.67 of the Income Tax Ordinance, 2001 read with R.13 of the Income Tax Rules, 2002---Allocation made by the Taxation Officer' without identifying and confronting the taxpayer with any defect in allocation made by the assessee/company could not be held as sustainable---Departmental appeal on such score was dismissed by the Appellate Tribunal.

(j) Income Tax Ordinance (XLIX of 2001)---

----S.21(g)---Deductions not allowed---Sales promotion, entertainment, fine and penalty---Disallowance of---Disallowances had been made on the basis of stock phrases without identifying the element of un­verifiability---Amount added treating same as fine or penalty was without any valid basis because it represented payment of principal amount of sales tax and not the penalty---Taxation Officer did not go through the detailed explanation submitted by the assessee during the course of audit proceedings---Addition was deleted by the Appellate Tribunal in circumstances.

(k) Income Tax Ordinance (XLIX of 2001)---

----Ss. 21 & 23---Deductions not allowed---Initial allowance---Disallowance of initial allowance on vehicles and donations---Add back to the extent of 20% out of entertainment expenses as directed by the First Appellate Authority was to be just an estimate against the other---Add-back had been made on the basis of stock phrases without identifying element of un-verifiability and was not sustainable---Appellate Tribunal directed to delete the same.

Tahir Razzaq, F.C.A. for Appellant (I.T.A. No.578/IB/2010).

Sardar Zafar Iqbal D.R. for Respondent (I.T.A. No.578/IB/2010).

Sardar Zafar Iqbal, D.R. for Appellant (in MA(AG) No.127/IB/2010 and I.T.As. No.245 to 427/IB of 2010).

Tahir Razzaq, F.C.A. for Respondent (in MA(AG) No.127/IB/2010 and I.T.As. No.245 to 427/IB of 2010).

2011 P T D (Trib.) 1062

[Inland Revenue Appellate Tribunal of Pakistan]

Before Raja Lehrassab Khan, Judicial Member

Messrs COSY INTERNATIONAL (PVT.) LIMITED, FAISALABAD

Versus

COLLECTOR SALES TAX, RTO, FAISALABAD

S.T.As. Nos.1863/LB to 1868/LB of 2009, decided on 16th September, 2010.

(a) Sales Tax Act (VII of 1990)---

----S.11(2)---Sales Tax Rules 2006, R.37---Sales Tax Rules, 2004---Sales Tax Rules, 2002---S.R.O. 555(I)/2006 dated 5-6-2006---Assessment of tax---Claim of refund pertaining to periods December 2005, January, February, March, April and September 2006 was found inadmissible due to Sales Tax Automated Refund Repository objection---Taxpayer contended that except refund claim for September 2006, all the other claims were much prior to introduction of electric device as Sales Tax Automated Refund Repository; and same device made applicable me": July 2006, so action of Assistant Collector, by rejecting the claim on the basis of Sales Tax Automated Refund Repository objection was ab initio void and illegal---Validity---Admittedly, except refund claim for the month of September 2006, all the other claims were not subject to scrutiny under Sales Tax Automated Refund Repository as the same was made applicable w.e.f 1st July 2006 in term of S.R.O. 555(I)/2006 dated 5-6-2006---Refund claimed for the period December, 2005, January to April 2006, should have been scrutinized under Sales Tax Refund Rules, 2002 and not under Sales Tax Automated Refund Repository system which was introduced for the first time in Sales Tax Rules, 2004.

(b) Sales Tax Act (VII of 1990)---

----S. 10---Refund of input tax---Sales Tax Automated Refund Repository objections for the period prior to 1st July 2006---Validity---Rejection of refund claims filed against invoices issued prior to 1st July 2006 on the objections pointed out by the Sales Tax Automated Refund Repository computer system was illegal and void ab initio.

2010 PTD (Trib.) 1636 and S.T.A. No. 191/LB of 2008, rel.

(c) Sales Tax Act (VII of 1990)---

----S.10---Refund of input tax---Sales Tax Automated Refund Respository system---Retrospective application---Validity---Refund claims of the taxpayer stood for the periods December, 2005, January to April, 2006, while Sales Tax Automated Refund Repository system was introduced in 1st July, 2006---Said system could not be applied retrospectively.

2010 PTD (Trib) 1636 and S.T.A. No.191/LB of 2008, dated 9-6-2008 rel.

(d) Sales Tax Act (VII of 1990)---

----S.10---Constitution of Pakistan, Art.25---Refund of input tax---Limitation---Discrimination---Rejection of refund claim by the assessee by the First Appellate Authority on the ground of limitation---Such claim of other accepted tax payer was accepted---Validity---Taxpayer was treated discriminatorily which was against Art. 25 of the Constitution.

2005 PTD 492 and 2002 PTD 976 rel.

(e) Sales Tax Act (VII of 1990)---

----S.10---Refund of input tax---Void order---Limitation---Question of limitation in case of void orders of the authorities below were void ab initio.

PLD 1998 SC 64 and (2008) 97 Tax 116 Trib.(sic) rel.

(f) Sales Tax Act (VII of 1990)---

----S.10---Refund of input tax---Illegal show-cause notice---Refund claim prior to September, 2006---Issuance of show-cause notice was illegal, ab initio; and as such whole proceedings from the very date was without lawful authority and as such the rejection of refund claim pertaining to the month of September, 2006, would also fell within the parameters of illegal orders---Orders of both the authorities below suffered from grave infirmities were set, aside by the Appellate Tribunal---Appeals of the taxpayer for the periods December, 2005, January, February, March, April and September, 2006 were accepted by the Appellate Tribunal.

2007 SCMR 729; 2005 SCMR 69 and 1996 SCMR 856 rel.

Khubaib Ahmad for Appellant.

Syed Mehmood Jafri, D.R. for Respondent.

2011 P T D (Trib.) 1069

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

Messrs BASHIR PRNTING (PVT.)

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.1007/LB of 2009, decided on 18th September, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10 & 45---Refund of input tax---Rejection of refund---Objection regarding pecuniary jurisdiction and time limitation---Taxpayer contended that Assistant Collector had jurisdiction regarding the cases falling under S.11(2) and S.36 of the Sales Tax Act, 1990, provided that the amount of tax involved or the amount erroneously refunded exceeds ten thousand rupees, but did not exceed one million rupees while the amount involved in the case was more than one million rupees; that show-cause notice had been issued on 10-4-2007 while the Order-in-Original had been passed on 9-8-2007 which was after more than 100 days and that in the Order-in-Original, nowhere it had been mentioned that the time of adjudication was in any case extended---Validity---Order had been passed by the Assistant Collector who was not having the pecuniary jurisdiction at the relevant time and had not been passed within the time period provided in law---Order-in-Original being without lawful basis on both counts was cancelled and consequently, order of First Appellate Authority equally suffered from illegalities being without jurisdiction---Said order was vacated by the Appellate Tribunal.

S.T.As. Nos.94 and 105/LB of 2008; GST 2003 CL 63; 2008 SCMR 240; STA No.272/LB of 2009; 2010 PTD (Trib.) 81; 2008 PTD 578; 2009 PTD 2004 and (2009) 100 Tax 32 rel.

Khubaib Ahmad for Appellant.

Adrian Ahmad Khan, D.R. for Respondent.

2011 P T D (Trib.) 1073

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs MUMTAZ GHANI TEXTILES (PVT.) LTD., FAISALABAD

Versus

C.I.R.(A), (R.T.O.), FAISALABAD

S.T.A. No.120/LB of 2010, decided on 10th November, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10, 11, 36 & 46---Claim for refund of input tax---Appellant/ taxpayer claimed refund of input tax amount against four invoices of the registered persons, who subsequently were declared blacklisted/ suspended units---Taxpayer was called upon to show cause as to why input tax illegally received by him could not be recovered in terms of Ss.11(2) and 36(1) of Sales Tax Act, 1990, read with relevant rules of the Sales Tax, Refund Rules---Adjudicating Officer vide impugned order-in-original ordered for recovery of amount of input tax---Collector (Appeals) having upheld order-in-original passed by adjudicating Officer, taxpayer had filed appeal to Appellate Tribunal---Validity---Authorities had failed to consider the fact that at the material time when the transactions were made the status of the said suspended unit was not black-listed---Show-cause notice issued to the taxpayer, otherwise was time-barred as the time pertained to April, 2005, whereas the show-cause notice was issued on 26-6-2008 which was beyond the period of 3 years time as prescribed under S.36(2) of the Sales Tax Act, 1990---Orders passed by the authorities below, which suffered from grave legal infirmities, were vacated and set aside, in circumstances.

Muhammad Farooq Sheikh for Appellant.

Azmat Elahi Ghuman, D.R. for Respondent.

2011 P T D (Trib.) 1087

[Inland Revenue Appellate Tribunal of Pakistan]

Before Raja Lehrassab Khan, Judicial Member

Messrs MUMTAZ GHANI TEXTILE (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.1754/LB of 2009, decided on 23rd September, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10 & 46---Taxpayer claimed refund of Input Tax under S.10 of Sales Tax Act, 1990 for the tax period January 2005---Such claim was deferred by the STARR' computer system for the reason that invoice summary was not submitted---Assistant Collector (Appeals) rejected refund claim of taxpayer, who filed further appeal which was rejected by Collector (Appeals)---Validity---Evidence produced on record had proved that invoice summary was duly submitted--Refund claim of taxpayer which pertained to January, 2005, was not subject of scrutiny under theSTARR' computer system as same was applicable w.e.f. 1st July 2006---Case of taxpayer, in circumstances, with regard to refund claim for the period January 2005 should have been scrutinized under Sales Tax Refund Rules, 2002 and not under `STARR' system, which was introduced for the first time in Sales Tax Rules, 2004---Rejection of refund claims filed by the taxpayer prior to 1st July, 2006, was illegal, void ab initio---Impugned order was set aside, in circumstances.

Messrs A.T. Fabrics, Faisalabad v. Collector Sales Tax, Faisalabad 2010 PTD (Trib.) 1636 ref.

Muhammad Farooq Sh. for Appellant.

Syed Mehmood Jafri, D.R. for Respondent.

2011 P T D (Trib.) 1108

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

Messrs AL-REHMAT TEXTILES (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.653/LB of 2009, decided on 23rd September, 2010.

(a) Sales Tax Act (VII of 1990)---

---Ss. 7, 10, 23, 46, 66 & 73---Rejection of refund claim---Appellant had called in question order-in-appeal passed by Collector whereby his refund claim was rejected---Appellant had challenged order-in-appeal on certain grounds, including that refund claim was rejected merely on the objection that suppliers of appellant as enlisted in the impugned show-cause notice and the subsequent order had been de-registered, in fact they were not deregistered at the time of making of taxable supply of the appellant; that suppliers being registered persons at the time of making of supplies, refund of sales tax against invoices could not be disallowed upon his subsequent deregistration due to his low sales turnover and appellant had prayed that impugned show-cause notice and consequent impugned orders being biased, vindictive, mala fide, false, unfounded, illegal, void ab initio and ultra vires, could be set aside on merits to meet the ends of justice, since adjudication order was illegal and defective, no time limitation would run against a void and illegal order---Counsel for Department, could not rebut the submissions made on behalf of appellant with any solid plausible argument or by quoting any contrary case-law to controvert the stance taken by counsel for appellant---Impugned orders passed by forums below, were vacated, in circumstances.

2004 PTD 868; Messrs Avari Hotel Ltd. v. The Collector Sales Tax and 3 others 2000 PTD 3765; Messrs Mehran Associates Ltd.'s case 1993 SCMR 274; Collector, Sales Tax and Central Excise (West), Karachi v. Messrs Al-Hadi Industries (Pvt.) Ltd. 2002 PTD 2457; 2010 PTD (Trib.) 1636; 2002 PTD 976; 2006 SCMR 492; 2006 PTD 1412; 2010 PTD (Trib.) 1681; 2007 SCMR 729; 1996 SCMR 856; 2005 SCMR 69 and 2007 SCMR 834 ref.

(b) Void order---

----No limitation.

2005 SCMR 69 rel.

Khubaib Ahmed for Appellant.

Muhammad Jamil Bhatti, D.R. for Respondent.

2011 P T D (Trib.) 1120

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwa, Judicial Member and Masood Ali Jamshed, Accountant Member

COLLECTOR OF SALES TAX (RTO), FAISALABAD

Versus

Messrs KEY AND EMMS (PVT.) LTD, FAISALABAD

S.T.A. No.1934/LB of 2009, decided on 26th October, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 4, 10, 46, 66 & 674--Refund claim---Rejection of refund claim being time-barred---Registered person claimed refund of Sales Tax incurred in connection with zero supplies---Assistant Collector rejected said refund claim being time-barred through order-in-original---Collector (Appeals) set aside order-in-original and registered person was allowed to apply for filing of the refund claim holding case to be fit one for availing the benefit of notification dated 11-12-2007---Supreme Court in its judgment PLD 1998 SC 64, followed by the Tribunal in 2008 PTD (Trib.) 370, had deprecated and discouraged withholding of a citizen's money by a public functionary on the plea of limitation or on any other technical plea, if it was not legally payable by him.

Messrs Pfizer Laboratories Lahore v. Federation of Pakistan and others PLD 1998 SC 64 and 2008 PTD (Trib.) 370 ref.

Waqas Tarar, D.R. for Appellant.

Khubaib Ahmed for Respondent.

2011 P T D (Trib.) 1124

[Inland Revenue Appellate Tribunal of Pakistan]

Before Raja Lehrassab Khan, Judicial Member

HABIB CALICO WEAVING INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.637/LB of 2009, decided on 15th September, 2010.

Sales Tax Act (VII of 1990)---

---Ss. 3, 6, 7, 11, 22, 23, 26 & 46---Liability to pay sales tax---Claim for input tax adjustment in respect of destroyed goods by fire---During the course of audit it was observed that the appellant consumed yarn packed in Polypropylene bags and paper cones, but no disposal of empty bags/paper cones had. been shown in sales tax record; nor any payment of sales tax was shown on those sales; it was alleged that appellant had violated the provisions of Ss.3, 6, 7, 11, 22, 23 & 26 of Sales Tax Act, 1990 and had suppressed the sales as well as tax payable along with additional tax---Claim of appellant for input tax adjustment on goods which were destroyed by fire, was also objected to by the department---Appellant was engaged in the sale and supply of textile goods and not in the sale and supply of Polypropylene bags and paper cones---Appellant consumed yarn packed in bags and paper cones and supplied those to registered persons who retained the cones and bags for disposal---Department could not prove that said items were returned to the appellant---Department had constructed its case merely on presumptions-Appeal on the issue of empty bags and wastage of paper cones, was accepted holding that no Sales Tax was recoverable on those items---Appellant's yarn stocks on which input tax was claimed was destroyed due to fine---As per S.7 of Sales Tax Act, 1990, a registered person was entitled to deduct input tax paid during the period for the purpose of taxable supply made or to be made by him from the output tax---Appellant had rightly claimed input tax credit incurred with regard to goods destroyed by fire---Impugned order-in-original was set aside, in circumstances.

Messrs Mayfair Spinning Mills Ltd.'s PTCL 2002 CL 115 ref.

Khubaib Ahmad, A.R. for Appellant.

Syed Mehmood Jafri, D.R. for Respondent.

2011 P T D (Trib.) 1140

[Inland Revenue Appellate Tribunal of Pakistan]

Before Ch. Munir Sadiq, Judicial Member and Abdul Rauf, Accountant Member

Messrs AMTEX LTD., FAISALABAD

Versus

CIR (RTO), FAISALABAD

M.A. (AG) No.131/LB of 2010 in S.T.A. No.130/LB of 2009 and M.A. (AG) No.132/LB of 2010 in S.T.A. No.131/LB of 2009, decided on 21st December, 2010.

(a) Sales Tax Act (VII of 1990)---

----S. 45---Jurisdiction and powers of adjudication---Applications seeking permission to argue legal ground---Applicants had sought permission to argue legal ground that order was passed by the authority having no jurisdiction in the matter as per provisions of S.45 of Sales Tax Act, 1990---Counsel for applicants had argued that since the grounds taken were purely of legal nature, those could be allowed to be agitated during the arguments---Validity---No doubt applicants had not taken before the final Appellate Authority, the grounds sought to be argued. through present applications for additional grounds, but applications merited acceptance for the reason that High Court in its judgment 2002 PTD 541 had observed that word "additional grounds" itself implied that a ground not already taken was being stressed---Whatever be the reason when a lis was pending before the court or a judicial forum, entertainment of an additional ground should be a rule and not an exception---As the grounds sought to be agitated were legal and were going to the root of the case, applicants were permitted to agitate/argue the grounds mentioned in the application.

Haji Mehr Din v. Commissioner of Income Tax 2002 PTD 541 ref.

(b) Administration of justice---

----Rules of procedure were meant to advance the case of administration of justice than to thwart it---Technicalities should never undermine the advancement of purpose for which judicial or quasi judicial forums were established by law---Every kind of such technicality could even be ignored, if directly or indirectly it hindered the process of justice; or due relief to which a party was found entitled to---Mere technicalities should not be allowed to defeat the ends of justice; and a departure could justifiably be made, if required by the circumstances of the case---Refusal of audience by a Judicial Tribunal, was an extreme step and it ought to be avoided unless necessary in the interest of justice.

Manager, Jammu and Kashmir State Property in Pakistan v. Khuda Yar and another PLD 1975 SC 578 ref.

(c) Interpretation of statutes---

----Rules of Court/Judicial Forum---Status---Place of rules in judicial system was more to provide strength and support, rather to demolish or destruct it---Rules of a court of a judicial forum were to be interpreted in the perspective of the purpose or the reason for the creation of the forum; and to advance its effectiveness, rather that to discourage petitioner at the threshold---Interpretation of the Rules of a court or judicial forum, was totally different from the Rules by which the administrative wings of the State proceed to curb crime, regulate the conduct of a particular relationship between the citizens; or ensure peace, tranquility, enjoyment of civil liberties etc. ---Rules of a court or a judicial forum, must have only one aim i.e. that the person seeking justice must be facilitated---Rules of court or procedure should not be used against him, unless he was contumacious and attempted to employ them against his adversary or to destroy the credibility of the forum itself---If a person charged with a simple crime to felony, could be the most favourable child of law then why an assessed (Tax payers) should not be facilitated in his defence against revenue.

Khubaib Ahmad for Appellant.

Dr. Syed Ali Adnan Zaidi, D.R. for Respondent.

2011 P T D (Trib.) 1143

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Sohail Afzal, Accountant Member

COLLECTOR SALES TAX AND FEDERAL EXCISE, RTO, FAISALABAD

Versus

Messrs KAMAL FABRICS, FAISALABAD

S.T.A. No.1315/LB of 2009, decided on 17th February, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 10, 21, 46, 66 & 67---Rejection of refund claim---Deregistration, blacklisting and suspension of registration---Refund claim of assessee was rejected in order-in-original on the charge of violation of Ss.2(14), 7, 8(1)(a), 10(4), 23 and 26 of Sales Tax Act, 1990---Order-in-original was set aside in appeal by the Collector (Appeals) and department had filed appeal before Appellate Tribunal---Validity---Purchases were made by assessee at the time when supplier was not suspected and his subsequent inclusion in the list of suspected units could not be charged retrospectively---Recovery against the suspected person could be made upon his listing by the Collector of Sales Tax after adhering to due process of law as provided under S.21 of Sales Tax Act, 1990 and Sales Tax Rules, 2006---Order-in-appeal passed by the Collector (Appeals), being within law could not be interfered with, in circumstances.

2010 PTD (Trib.) 857 and 2005 SCMR 492 ref.

Sahib Zada Umer Riaz, D.R. for Appellant.

Khubaib Ahmad for Respondent.

2011 P T D (Trib.) 1172

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

C.I.R. LEGAL DIVISION, RTO, KARACHI

Versus

Messrs JIN TECHNOLOGIES (PVT.) LTD., KARACHI

I.T.A. No.345/KB of 2010, decided on 16th March, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 111, 122, 127 & 131---Additions---Un-explained credit and expenses---Additions made under S.111(1)(a)&(d) of Income Tax Ordinance, 2001 for un explained credit and for un-explained expenses by Taxation Officer had been deleted by Commissioner (Appeals)---Validity---If additions were warranted under subsection (2) of S.111 of Income Tax Ordinance, 2001, came could be made in the total income of the taxpayer in the tax year relevant to immediately preceding financial year in which the said discovery was made---Said provisions of law had not given blanket powers to the Taxation Officer to make additions whenever and/or in any tax year---Legislature had restricted that addition in the year immediately preceding financial year of discovery, provided the addition was made in accordance with law---Case of taxpayer was for the tax year 2007 which was selected for audit in the year 2008, but the taxpayer was confronted regarding difference of credit and debit entries through show-cause notice in the year 2009, the period that related to the tax year 2009---Unless the discovery was made during the period of tax year 2008, the addition under S.111(1)(a) & (d) of Income Tax Ordinance, 2001 in the tax year i.e. 2008, would be without jurisdiction, illegal, invalid and not sustainable in law being void ab initio---Provisions of S.111(2) of Income Tax Ordinance, 2001 having not been properly adhered to by the Taxation Officer and additions made in that respect were not sustainable--Impugned order of Commissioner could not be interfered with which was upheld.

2009 PTD (Trib.) 1919; 2006 PTD (Trib.) 2662 and 2005 PTD 2229 ref.

(b) Administration of justice---

----Acts, things and deeds should be done in the manner prescribed or should not be done at all.

Gohar Ali, D.R. for Appellant.

Amir Yasir for Respondent.

2011 P T D (Trib.) 1199

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Nawaz Bajwa, Judicial Member and Masood Ali Jamshed, Accountant Member

Messrs FALETTIS HOTEL, LAHORE

Versus

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, CUSTOMS, LAHORE

F. Excise No.53/LB of 2009, decided on 25th March, 2010.

Central Excise Act (I of 1944)---

---Ss. 2(28) & 3-B---Order to deposit Central Excise duty along with additional duty and imposition of penalty---Appeal was directed against the order-in-original passed by Additional Collector (Adjudication) whereby appellant/Hotel was ordered to deposit Central Excise duty, along with additional duty and penalty was also imposed---Counsel for the appellant had contended that impugned order could not stand for the only legal plane that the show-cause notice was issued by the Additional Collector on the report of the Staff of the Directorate of Audit and Revenue Receipt, who had examined the record of the appellant for relevant year---Validity---Directorate General of Revenue Receipts Audit, was a branch of the Auditor-General; and its officers did not fall in the category of officers mentioned in S.2(28) of Central Excise Act, 1944---Charter of function of said Directorate given in notification dated 17-12-1990 had revealed that President of Pakistan, had required the Auditor-General of Pakistan to audit the receipt of Federal Government and not the record of private enterprises, registratered under the Sales Tax/Central Excise Laws---Show-cause notice showed that Directorate General Revenue Receipts Audit had examined the Central Excise record of the appellant, which was not allowable---Whole exercise conducted by Directorate in circumstances, was coram non judice and could not be held to sustain in the facts and circumstances of the case.

2010 PTD 1355 rel.

Muqtidar Akhtar for Appellant.

Mrs. Amina Kamal D.R. for Respondent.

2011 P T D (Trib.) 1219

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

Messrs ASKARI AVIATION (PRIVATE) LTD., ISLAMABAD

Versus

COMMISSIONER INLAND REVENUE (APPEALS-I), ISLAMABAD

I.T.A. No.867/IB of 2010, decided on 8th February, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 233 & 131---Taxing service charges---Amendment of assessment---Commissioner income was treated as income and was charged accordingly---Taxpayer was a private limited company engaged in the business of air transport service---Counsel for the taxpayer had contended that taxpayer was engaged in the business of providing of air transport services and amount in question represented payment of service charges from Army Welfare Trust for charter of flights which did not attract the provision of S.233 of Income Tax Ordinance, 2001 and placed on record agreement arrived at between the taxpayer and the Army Welfare Trust---Said agreement provided that appellant/ taxpayer in consideration of service would be paid by Askari Chartered Services/Army Welfare Trust, service charges at 5% profit subject to a maximum, limit of Rs.500,000 for each contract in addition to actual expenses---Section 233 of Income Tax Ordinance, 2001 related to brokerage and commission, but as per agreement in question, appellant had not received the brokerage or commission, but had received amount as per agreement executed between the parties prescribing same as service charges; and the mode of payment of which also had been mentioned in the agreement---No justification existed for taxing the said amount at the separate block of income in view of legal as well as factual position---Impugned order of Commissioner was vacated and order passed by the Taxation Officer was annulled.

Zahid Hussain, ACMA for Appellant.

Zia Ullah Khan, D.R. for Respondent.

2011 P T D (Trib.) 1250

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Malik Abdul Samad, Accountant Member

Messrs UNITED SALES (PRIVATE) LTD., KARACHI

Versus

COMMISSIONER OF INLAND REVENUE, LEGAL DIVISION, KARACHI

I.T.A. No.724/KB of 2010, decided on 11th January, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5-A), 129 & 131---Amendment of assessment order---Appellant/taxpayer, had alleged that Commissioner Inland Revenue (Appeals), was not legally justified in remanding the case to the Assessing Officer for re-adjudication as the power of setting aside/ remand of the case had been omitted from 5.129 of Income Tax Ordinance, 2001---Contention of representative of department was that Taxation Officer had rightly assessed the difference between retail price and hire purchase under the head "Income from other service" and there was no justification for directing to allow the deduction of bad debts---Contention of counsel for taxpayer was that Taxation Officer had treated the finance income on hire purchase as income from other sources without any justification and that the income declared from business activity of the appellant/taxpayer could in no way be treated as finance income on hire purchase as income from other sources---Counsel for taxpayer had placed before the Tribunal order passed by Taxation Officer for the previous as well as subsequent year and contended that appellant was maintaining the accounts in the similar fashion as were in previous as well as in the subsequent years---Validity---Once the similar issue had been adjusted in the previous as well as in the subsequent years and department had not agitated the issue in appeal, for that particular years, deviation from the settled issues therefore could not be approved---No justification existed for directing to reconsider the issue by the Taxation Officer---Impugned order of Commissioner Inland Revenue (Appeals) to the extent of the remanding of the matter, was vacated and the order passed by the Taxation Officer under S.122(5-A) of Income Tax Ordinance, 2001 being against the previous as well as the subsequent tax years was recalled---Appeal filed by the taxpayer was allowed, while the cross appeal filed by the department was dismissed.

2004 PTD 3020; 2006 PTD (Trib.) 356 and (2010) 102 Tax 554 (Trib.) ref.

Shahid Iqbal Baloch, D.R. for Appellant.

Miss Lubna Pervez for Respondent.

2011 P T D (Trib.) 1306

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs FAUJI KABIRWALA POWER COMPANY LTD, KHANEWAL

Versus

COMMISSIONER OF INCOME TAX, ISLAMABAD

S.T.A. No.132/IB of 2010, decided on 3rd March, 2011.

(a) Sales Tax Act (VII of 1990)---

----S. 30---Auditor General's (Functions, Powers and Terms and Conditions of Service) Ordinance (XXIII of 2001), S. 12---S.R.O. 1195(I)/90 dated 17-12-1990---Authorities---Audit by staff of Directorate of Revenue Receipt Audit---Officers of Directorate of Revenue Receipt Audit had not been vested with powers of Sales Tax Officer and therefore, could not conduct audit of a tax payer directly.

2007 PTD (Trib.) 1600 and 2008 PTD (Trib.) 261 rel.

(b) Sales Tax Act (VII of 1990)---

----Ss. 25 & 30---Auditor General's (Functions, Powers and Terms and Conditions of Service) Ordinance (XXIII of 2001), S.12---S.R.O. 1195(I)/90 dated 17-12-1990---Auditor General of Pakistan's Circular No.1167-Coord(Hq)PRA/35-2007 dated 29-2-2007---Access to record, documents, etc.---Initiation of adjudication proceedings on observations of staff of Directorate of Revenue Receipt Audit---Validity---Initiation of adjudication proceedings based on the pointation or observations of Directorate of Revenue Receipt Audit was perfectly lawful---To say that the Directorate of Revenue Receipt Audit could not point out any short payment or inadmissible adjustment of input tax was to disable the constitutional duty of the institution of the Auditor General which had the responsibility of protection of public revenues and tantamounted to denying the constitutional role of Public Accounts Committee in safeguarding the public revenue---Directorate of Revenue Receipt Audit analyses the federal revenue receipts on the basis of tax record of a tax collecting agency---Since, tax collecting agency collects tax from a taxpayer, it was quite rational that the taxpayer records had to be scrutinized in order to figure out any leakage of revenue---Directorate of Revenue Receipt Audit could exercise the functions of review of the audit receipt of a federal tax collecting agency only by examining the tax record of a taxpayer---Directorate of Revenue Receipt Audit pointed out short payment of the tax not to the taxpayer, but to the tax collecting agency, which was quite lawful---Directorate of Revenue Receipt Audit did not audit the taxpayer's account directly---Every citizen of the State had a duty to point out evasion of public money---If a complaint by a private person leads to recovery of a short paid tax, the complainant had vested right to payment of reward according to the Reward Rules notified by the Federal Board of Revenue from time to time.

2007 PTD (Trib.) 1600 and 2008 PTD (Trib.) 261 distinguished.

(c) Sales Tax Act (VII of 1990)---

----S.8(1) & (2)---S.R.O. 555(I)/2006 dated 5-6-2006---Tax credit not allowed---Determination of input tax---Taxable and non-taxable supplies---Apportionment of---Section (1) of the Sales Tax Act, 1990, specifically postulates the qualification for re-claiming or deduction of input tax paid and S.8 (2) of the Act hypothesizes that if a person deals in taxable and non-taxable supplies at the same time, he could reclaim only such portion of the input tax as was attributed to taxable supplies in such manner as specified by the Board.

(d) Sales Tax Act (VII of 1990)---

----Ss.3,7, 8, 2(33), 2(35) & 2(46)---STGO No.1 of 2000 dated 24-1-2000---STGO No.3 of 2004 dated 12-6-2004---S.R.O.578(I)/98 dated 12-6-1998---Sales Tax Special Procedure Rules, 2006, R.38 (3)--Sales Tax Special Procedure Rules, 2007, R.13---Scope of tax---Taxpayer, a power supply company---Energy purchase price---Capacity purchase price---Claim of input adjustment---Apportionment of---Contention that input adjustment could only be claimed for the sales tax paid on energy price---Validity---Expression "supply" includes. capacity purchase price as it was received by the taxpayer in furtherance or in connection with her business---Capacity purchase price, energy price premium, excess bonus and supplemental charges etc., were part of total sales but were specifically excluded for the purpose of valuation of supply under S.2(46) of the Sales Tax Act, 1990---If the supply was either non-taxable, or exempt or excluded from the value of supply under S.2(46) of the Sales Tax Act, 1990, no input adjustment in respect thereof was admissible under Ss.7 and 8 of the Sales Tax Act, 1990---Section 8(1)(a) of the Sales Tax Act, 1990 specifically provides that no input adjustment or tax credit could be claimed in respect of any goods or services used or to be used for any purpose other than for taxable supplies made or to be made---Taxable supply was a sine quo non for claim of input adjustment which was not absolute but contingent upon a supply being taxable---Capacity purchase price portion of the consideration received by the taxpayer was not a taxable supply and claim of tax credit in respect thereof was prima facie inadmissible which necessitates apportionment of total input tax for total supplies into two distinct categories i.e. taxable and non-taxable supplies---Energy purchase price was taxable and capacity purchase price, energy price premium, excess purchase supplemental charges etc., were non-taxable or not taxable---Taxpayer could not claim input adjustment without fulfilling criteria laid down in Ss.7 and 8 of the Sales Tax Act, 1990---Taxpayer was liable to apportionment of total input tax claimed between the taxable (receipt or turnover on account of energy purchase price) and non-taxable (receipt or turnover on account of capacity purchase price, energy price premium, excess bonus and supplemental changes etc.)---Appeal was found to be without any merit and the same was dismissed by the Appellate Tribunal and order of adjudication officer and the First Appellate Authority was sustained---Additional tax and penalty imposed was remitted for the reason that taxpayer was not found to have wilfully defaulted the payment of sales tax.

Sheikhoo Sugar Mills Ltd. v. Government of Pakistan and others 2001 SCMR 1376 = 2001 PTD 2097; Messrs Ambar Tabacco Co. (Pvt.) Ltd. Distt. Swabi v. The Additional Collector, Sales Tax and 3 others 2003 PTD 800; Collector Customs, Central Excise and Sales Tax, Karachi (West) v. Navartis Pakistan Ltd. 2002'PTD 976; Messrs Service Industries Ltd. v. Federation of Pakistan and 5 others 2002 PTD 2845; Messrs Al-Hailal Motors Store and others v. The Collector, Sales Tax and Central Excises (East) Karachi and others 2004 PTD 868; Messrs Umani Associates Sub-Proprietary Firm v. Central Board of Revenue and another 2001 PTD 2982; Collector Sales Tax and Central Excise (West), Karachi v. Messrs Al-Hadi Industries (Pvt.) Ltd. 2002 PTD 2457; Messrs Peoples Concerns (Pvt.) Ltd. Gadoon Amazai, Industries Estate, Sawabi v. Assistant Collector, Sales Tax Peshawar PTCL 2003 CL 428; Messrs Mayfair Spinning Mills Ltd. Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and 2 others PTCL 2002 CL. 115; Collector of Customs, Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902; Ghandhara Nissan Diesel Ltd. v. Collector, Large Tax Payers Unit and 2 others 2006 PTD 2066 and 2008 PTD (Trib.) 261 rel.

(e) Sales Tax Act (VII of 1990)---

----Ss.33 & 34---Offences and penalties---Default surcharge---Scope---Generally, default surcharges and penalty was imposed as punishment or economic sanction against a deliberate attempt to evade---Taxpayer simply took advantage of a rule that enabled him to avoid tax---Tax avoidance was "rule assisted "---There being no mens rea, or a wilful default on part of taxpayer, the imposition of default surcharge and penalty was set aside by the Appellate Tribunal.

(f) Sales Tax Act (VII of 1990)---

----S.8 (1)(a)---Constitution of Pakistan, Art.25---Tax credit not allowed---Discrimination---Remission of lawful tax liability could not be allowed just because the department did not take action to recover lawful tax from other IPPs---Rule of consistency would require that all other IPP should also be given the same treatment as had been given to the present taxpayer---Sales Tax Act sufficiently enables the department to invoke demand from others, too on case by case basis but subject to due process of law---Federal Board of Revenue may like to issue necessary instructions to all of its field formations to conduct audit of all such IPPs within their area of jurisdiction in order to quantify the illegal and inadmissible input adjustments taken by such IPPs on the strength of illegal rules framed by Federal Board of Revenue against the statutory provisions contained in S.8(1)(a) of the Sales Tax Act, 1990, and recover the amount after fulfilling all codal formalities under the law in case it was figured out that there had been loss to the public money.

2004 PTD 2294 and 2004 PTD 942 ref.

(g) Sales Tax Act (VII of 1990)---

----Ss.2(46), 7 & 8---Sales Tax Rules 2006, R.13---Sales Tax General Order No.3 of 2004 dated 12-6-2004---Federal Board of Revenue letter C.No.3(4) ST-L&P/07 dated 2-12-2008---Value of supply---Capacity purchase price---Exclusion of capacity purchase price from purview of value of supply through device of Sales Tax General Order No.3 of 2004 dated 12-6-2004---Validity---Federal Board of Revenue or any other executive agency was not an unelected wielder of legislative power---Agency exercising a delegated legislative power could not change the purpose of a statute promulgated by the legislature---Effect of Ss.2(46), 7 & 8 of the Sales Tax Act, 1990 was neutralized in favour of IPPs through Sales Tax Rules 2006 and STGO No.3 of 2004 dated 12-6-2004---Federal Board of Revenue could not lawfully defy a statutory provision---Exclusion of capacity purchase price from the purview of value of supply through the device of STGO No.3 of 2004 dated 12-6-2004 and R.13 of Sales Tax Rules, 2006, could not survive the test of judicial scrutiny if challenged before superior courts of Pakistan.

75, Va L. Rev .431 (1989); 68 Cornell L.J. 1 (1982); Hampton and Co. v. United States, 276 U.S.394 (1028); Schechter Poultry Carp v. United States 295 v. 495 (1935); 15-20 (1978); John H. Ely, Democracy and Distrust 132-133 (1980); Zemel v. Rusk, 381 U.S 1 (1965); Arizona v. California, 373 U.S. 546, 626 (1963); Arizona v. California, supra, at 626 and American Power and Light Co. v. SEC 329 U.S 90, 106 (1946) rel.

(h) Sales-Tax---

----Budget---Taxation---Scope.

Rashid Ibrahim, FCA for Appellant.

Imran Shah, DR/Senior Auditor for Respondent.

2011 P T D (Trib.) 1351

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Tabbana Sajjad Naseer, Accountant Member

A & A (PVT.) LIMITED, DHA, LAHORE

Versus

C.I.R., RTO-1, LAHORE

I.T.A. No.441/LB of 2011, decided on 9th April, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 37(50), 122(5), 177 & 117(1)-Constitution of Pakistan, Fourth Sched. Item 50, Federal Legislative List, Art.7 (4)---Capital gain---Amendment of assessment---Definite information---Taxation of capital gain on the ground that since 39% of the total required land of 2579 kanals for the project was to be used for housing scheme, the same proportion of the gain on sale of actually purchased land of 739 kanals was to be taxed as trading gain---Validity---Intention of the taxpayer at the time of purchase of land was to use the same for commissioning a project---Taxpayer could not materialize its intention to start the project and had to sell the land on financially compelling circumstances resulting in capital gain on the sale---Transaction being a solitary one, a heavy burden laid on the Revenue .`o establish the same to be in the nature of a business---Revenue instead of discharging its burden attempted to cash on some events of very insignificant nature to hold against the taxpayer---Company had no history of dealing in sale and purchase of land in the past---Land was sold after a considerable period of 4 years without any value addition under severe financial crises which was an undeniable evidence that the gain on sale of land in the transaction was exempt capital gain---Company could only purchase 28% of total required laud of 2579 kanals and could not purchase any land for housing project---Theory of calculating proportionate gain on land purchased for construction of houses as taxable would have only been convincing if tax payer had purchased entire land of 2579 kanals for the project and earned again on its sale---Taxation Officer could not bring plausible evidence, whatsoever, on record suggesting that land purchased by tax payer was partly meant for construction of houses or whether the taxpayer had actually purchased any land for housing colony or not and had earned gain on its sale---Assumption of the Taxation Officer that since 1019 kanals of the total. required land of the project was to be used for housing scheme, the same proportion of the gain on sale of actually purchased land of 739 kanals was to be taxed was arbitrary, unjustified, based on supportless assumptions and without any definite information which was basis prerequisites for passing order under S.122(5) of the Income Tax Ordinance, 2001---In absence of any definite information as regards the intended use of land actually purchased by tax payer, apportionment of gain by whimsically assuming that purchased land was to. be partly used for houses was neither pragmatic nor justified-Order of Taxation Officer/Additional Commissioner under S.122(5) of the Income Tax Ordinance, 2001 to the extent of such issue was cancelled by the Appellate Tribunal and order of First Appellate Authority setting aside the order for fresh consideration was vacated. ?

1990 PTD (Trib.) 671; 1988 PTD Trib. 354; PLD 1990 SC 399; 1990 PTD 155 (SC Pak.); 2006 PTD 1422 (SC Pak); 1989 PTD (Trib.) 460; 1984 PTD (Trib.) 127; 1994 PTD (Trib.) 1034; 2007 PTD 82 (SC Pak.); 1991 PTD (Trib.) 786 and 2008 PTD 226 (Trib.); 1992 SCMR 250 = 1992 PTD 1 (SC of Pakistan) and 1975 PTD (Trib.) 6 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 37---Capital gain---Exemption---Principles for exemption of capital gain recorded.

Following are the principles for exemption of capital gain:-

(1)? Intention at the time of purchase of land is very important. If land was purchased with a sole intention to execute a project, for example hotel, plaza, cinema, construction project etc; but afterward, it could not materialize its intention and had to sell the land in inevitable and compelling circumstances then the consequent gain is an exempt capital gain.

(2)? That in case of solitary transaction of gain arising on immovable property heavy burden lies on the revenue to establish that the impugned transaction in fact was a business and receipts out of it business receipts.

(3)? If immovable property is sold after considerable period then this fact is undeniable supportive evidence that the resulting gain is capital gain.

(4)? If company has no history of dealing in sale and purchase transactions of land in past and this is an isolated transaction entered into without having other realistic business alternative destined to avoid this transaction then the resulting gain is capital gain.

(5)? If Immovable property is sold in same condition as it was when it was purchased. This means that no value addition or improvement in quality of the said property was made for the purpose of selling it. In this case, realization of accretion in value of immovable property is capital gain.

(6)? If the land is sold in compelling circumstances and the intention at the time of sale is to realize blocked money then gain arising in the transaction is a capital gain which is not taxable.

?

1990 PTD (Trib.) 671; 1988 PTD Trib. 354; PLD 1990 SC 399 = 1990 PTD 155 (SC Pak.); 2006 PTD 1422 (SC Pak); 1989 PTD? (Trib.) 460; 1984 PTD (Trib.) 127; 1994 PTD (Trib.) 1034; 2007 PTD 82 (SC Pak.); 1991 PTD (Trib.) 786; 20Q8 PTD 226 (Trib.); 1992 SCMR 250 = 1992 PTD 1 (SC of Pakistan) and 1975 PTD (Trib.) 6 rel.

Qamar Rasheed, C.A. for Appellant.

Naeem Hussain, D.R. for Respondent.

2011 P T D (Trib.) 1399

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and M.B. Tahir, Accountant Member

Messrs JAMAL NAVEED PAPER MILLS, KHANEWAL

Versus

COMMISSIONER INLAND REVENUE, MULTAN

S.Ts. Nos.144/LB and 152/MB of 2010, decided on 8th February, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 2(46), 7, 11 & 46---Constitution of Valuation Committee---Appellant/taxpayer had contended that it was necessary condition for the constitution of Valuation Committee under S.2(46) of Sales Tax Act, 1990 that there should be sufficient reason to believe that the value of supply had not been correctly declared in the Sales Tax invoice; whereas no such allegation was ever framed against the appellant/taxpayer as the department had not brought on record any such invoice in which the value of supply was not declared correctly---Per Kg. value of the fluting paper declared by the taxpayer in the invoices was Rs.8.50 Kg. and the declared earned profit was on 12% value addition---Taxpayer had appended with his appeal memo. the profit and loss account, wherein all the expenses incurred on the manufacturing of the fluting paper had been mentioned along with cost of goods sold---Department had contended that cost per Kg. incurred on the manufacturing of the fluting paper mentioned by the taxpayer was Rs.8.88 per Kg, and same as per the Adjudicating Authority could not be sold at Rs.8.50 per Kg.---No calculation or documents in that regard had been mentioned by the department from which said claimed cost was denied or calculated---Version of the department, in circumstances, was based on the suppositions and conjectures, arbitrary and same could not be approved---Value of the same commodities i.e. the fluting paper declared by the other manufacturing units in the territorial jurisdiction of the same office and other Collectorates/Regional Tax Offices, was exactly the same which had been the value declared by the taxpayer in the case during the period in question---Value so declared by the other units had been accepted by the department---Direction of the Commissioner (Appeals) for the constitution of Valuation Committee, was illegal because the taxpayer had declared the value of supplies exactly in accordance with provision of S.2(46) of Sales Tax Act, 1990---Appeal filed by the taxpayer against illegal and discriminatory treatment of Commissioner (Appeals) whereby direction was given for constitution of the Committee, was given, was allowed.?

?????? 2006 PTD 558; 2004 PTD 868; 2008 PTD 221; Messrs Crescent Re-Rolling Mills Ltd. v. Assistant Collector Sales Tax Lahore and others 2007 PTD 47 and 2007 PTD 2436 ref.

?????? Abdul Basit for Appellant (in S.T. No.144/LB of 2010).

?????? Imran Latif, D.R. for Respondent (in S.T. No.144/LB of 2010).

?????? Imran Latif, D.R. for Appellant (in S.T. No.152/MB of 2010).

?????? Abdul Basit, for Respondent (in S.T. No.152/MB of 2010).

2011 P T D (Trib.) 1419

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

COMMISSIONER INLAND REVENUE (LEGAL), KARACHI

Versus

SCANWELL LOGISTIC PAKISTAN (PVT.) LIMITED, KARACHI

I.T.A. No.13/KB of 2010, decided on 1st April, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 7, 21(c), 111, 122, 131 & 152---Amendment of assessment---Deletion of additions---Assessee, who was engaged in the business of freight forwarding agent and logistic services was selected for audit under S.177(4)(d) of Income Tax Ordinance, 2001---After conducting of audit proceedings the deemed order was amended under S.122(1) of Income Tax Ordinance, 2001 by making add backs of freight paid to Shifting Companies and Airlines for non-deducting of tax under S.152 of Ordinance, 2001 and also under S.111 of the Ordinance---Department aggrieved by the order under S.122(1) of Income Tax Ordinance, 2001 preferred appeal to the Commissioner (Appeals) and Commissioner vide appellate order deleted both the additions---Validity---Provisions of S.152(2) of Income Tax Ordinance, 2001, were not applicable where the non-resident person was not chargeable to tax in respect of the amount---List of carrier was available on record and the entire freight had been to those persons, who were not chargeable to tax in view of the double taxation treaty with China, USA etc.---Provisions of S.152 of Income Tax Ordinance, 2001 being not applicable in the case, order of Commissioner (Appeals) was confirmed on that point---No addition could be made under the section without confronting the aggrieved person---Assessee before making any addition, must have been given an opportunity of being heard---Mandatory requirements having been violated in the case, no addition was to be made---Order of Commissioner (Appeals) on that point was also confirmed.

2010 PTD 1159; 2010 PTD 704 and 2009 PTD 1791 ref.

Nemo for Appellant.

Muhammad Mehtab Khan and Muhammad Javed Alvi for Respondent.

2011 P T D (Trib.) 1439

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

C.I.R. (APPEALS), ABBOTABAD

Versus

M. MASOOD KHAN

I.T.A. No.62/IB of 2011, decided on 1st March, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114(4), 121, 127 & 131---Ex parte assessment order---Setting aside of---Ex parte assessment order having been set aside by Commissioner (Appeals), department had filed appeal against said order---Only a single opportunity was provided by the Taxation Officer through notice under S.114(4) of Income Tax Ordinance, 2001 asking the taxpayer to file the return---Ex parte order had been passed under S.121 of Income Tax Ordinance, 2001 without affording reasonable opportunity of being heard to the taxpayer and without bringing any material evidence regarding the taxpayer's business activity---Taxation Officer passed order of six lines without mentioning any basis for his estimation---Action of the Taxation Officer was absolutely unjustified and against departmental procedure---Taxation Officer should mention the basis of his estimation, available information or the material, and to the best of his judgment make assessment of the taxable income---In the present case, neither the principle of audi alteram partem, had been followed nor any basis for the assessment had been given---Impugned order, in circumstances, was illegal---Taxpayer had conducted his business for only two months during the period relevant to tax year 2008, but the Taxation Officer estimated the taxpayer's income for the whole year, without bringing any material on record regarding business volume of the taxpayer---Commissioner (Appeals) had rightly held the action of the Taxation Officer being not justified and not sustainable in the eyes of law---Impugned order, could not be interfered with.

Nadir Mumtaz DR for Appellant.

Masood Khan for Respondent.

2011 P T D (Trib.) 1452

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Jahandar, Judicial Member and Muhammad Ashraf, Accountant Member

MUNIR FAZLA, PROPRIETOR

Versus

COMMISSIONER OF INCOME TAX/WEALTH TAX (APPEALS) ZONE-II, ISLAMABAD

I.T.A. No.822/IB of 2005, decided on 24th December, 2010.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66 & 136(8)---Limitation for assessment in certain cases---Reference to High Court---Re-assessment---Assessee contended that an application for reference was filed in Appellate Tribunal which was not entertained whereon the assessee was forced to file Reference in High Court under S.136 of the Income Tax Ordinance, 1979 which was still pending, that pending disposal of Reference, the Taxation Officer passed re-assessment order; and that Taxation Officer was intimated that a Reference had been filed in the High Court; and re-assessment could not be framed when a said Reference was pending---Department contended that taxpayer was required to produce evidence showing filing of Reference before High Court which was not done and the re-assessment order was passed---Validity---Assessee had not produced any order by High Court showing the stay of the proceedings---Bare reading of provisions of S.136(8) of the Income Tax Ordinance, 1979 showed that there was no bar in conducting re-assessment proceedings after a decision by the Appellate Tribunal unless an order by the High Court for stay of recovery had been issued---Indisputably, recoveries were effected only following the existence of assessment orders---Legal proceedings could not be withheld, merely because order of Appellate Tribunal was under reference, where no stay had been issued---If re-assessment proceedings could not be conducted in the event of an appeal or Reference, having been filed, the words showing of stay for recovery contained in subsection (8) of S.136 of the Income Tax Ordinance, 1979 would not have been incorporated/used---Passing of re-assessment order was not illegal which however had been set aside by the First Appellate Authority---Appeal was rejected by the Appellate Tribunal having no force.

Waseem Ahmed Siddique, FCA for Appellant.

Mrs. Aysha Khalid, D.R. for Respondent.

2011 P T D (Trib.) 1455

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Jahandar, Judicial Member

C.I.R., (LEGAL), R.T.O., RAWALPINDI

Versus

WASEEM IQBAL ANSARI

I.T.A. No.488/IB of 2010, decided on 15th June, 2010.

Income Tax Ordinance (XLIX of 2001)---

----S. 177(4)---Audit---Selection of case for audit was declared illegal by the First Appellate Authority by following a judgment of High Court on the ground that no notice was issued to the taxpayer before selection of case for audit and no further proceedings could be conducted---Department contended that there was no law requiring issuance of notice before selection of case for audit; and very requirement of issuance of notice before audit had been expunged by the Supreme Court of Pakistan and as such, no advantage could be taken from the judgment relied by the First Appellate Authority---Validity---Judgment referred to by the Department may not again be preferred to that of High Court wherein it was held that pre selection notice was necessary while relying on judgment of Supreme Court of Pakistan to the effect that even if the statute did not incorporate provision as to the issuance of notice yet the same should be read as having been provided for an action which was detrimental to one's interest may be taken only after confronting him as to the nature of action---Very findings of the High Court may have to be followed as to the requirement of the pre selection notice---Findings of First Appellate Authority were unexceptional and there being no force in appeal, the same was rejected by the Appellate Tribunal.

Writ Petition No.4630 of 2009rel./fol.

Writ Petitions Nos. 960 of 2008 and 11166 of 2009 distinguished.

Muhammad Umer v. C.I.T. 2009 PTD 284 and C.I.T. v. Fatima Sharif Textile, Kasur 2009 PTD 37 ref.

Zia Ullah Khan, D.R. for Appellant.

Abid Mehmood, ITP for Respondent.

2011 P T D (Trib.) 1505

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Jahandar, Judicial Member

Messrs AZIZ BROTHERS, RAWALPINDI

Versus

COLLECTOR SALES TAX, RAWALPINDI

S.T.A. No.23/IB of 2009, decided on 28th October, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss. 3(1)(3), 2(25), 2(47), 6(2), 7, 8, 14, 21, 22(1), 23, 25, 26, 34, 36(1), 45-B(2), 49 & 53---Sales Tax Registration Rules, 2005---S.R.O. 485(I)/2004 dated 12-6-2004, Part-V---Scope of tax---Un-registered person---Inheritance of business---Taxable supplies were made by the taxpayer without getting themselves registered under Sales Tax Act, 1990---Taxpayer was charged by default in depositing sales tax and failure to get registration including the fact of non-filing of correct monthly sales tax return---Taxpayer contended that predecessor in interest of the taxpayer expired during the period under consideration and issuance of show cause notice to an expired person was invalid and illegal; that charge of non-compliance of the provisions of Sales Tax Act, 1990 was baseless and invalid due to the fact that all these provisions were applicable on the person duly registered under the Sales Tax Act, 1990 and that said provisions did not pertain to an un-registered person; and no proceedings of default could be initiated against legal heirs of expired person if it was not determined or created during the life time of the deceased---Validity---Taxable supplies were made but due sales tax was not deposited---Stance of the taxpayer that predecessor taxpayer had expired and liability of sales tax could not be demanded from deceased person was baseless---Liability was not demanded from a individual or from deceased person but from the business entity; it was transfer of ownership from father to son---Taxpayer, on the basis of evidence, was liable to be registered under S.14 of the Sales Tax Act, 1990 but failed to deposit the due sales tax in time---First Appellate Authority directed to register the tax payer, if not already registered---Business having passed to the taxpayer through inheritance his liability to pay sales tax could not be disputed and there was no need to highlight the fact of predecessorin-interest of taxpayer being liable to be registered on account of having made taxable supplies---Taxpayer appeared to have failed to deposit the due sales tax and the sales tax along with default surcharge and penalty was recoverable.

(b) Sales Tax Act (VII of 1990)---

----S. 46---Appeal to Appellate Tribunal---Limitation---Request was made to First Appellate Authority on 14-4-2009 for supply of copy of its order---Copy of order was delivered to taxpayer on 18-4-2009 and appeal was filed on 19-4-2009---Department failed to produce any record of First Appellate Authority to show communication of order passed in appeal filed by the taxpayer before First Appellate Authority---Appeal was within time as the department had failed to prove earlier communication of Order-in-Appeal.

(c) Sales Tax Act (VII of 1990)---

----S. 45---Power of adjudication---Assistant Collector---Deputy Collector---Objection was raised that show-cause notice had been issued by an Assistant Collector who was not competent to proceed in the matter and it was only the Deputy Collector who had the jurisdiction to adjudicate in the matter and as such proceedings culminating in Order-in-Original were without jurisdiction---Department contended that Order-in-Original had been passed by Additional Collector who was competent to pass such an order; and mere fact that show-cause notice was issued by Assistant Collector did not militate against or negate the powers of adjudication exercised by the Additional Collector---Validity--While passing Order-in-Original the taxpayer was confronted on all aspects of the case---Taxable supplies made by the father of taxpayer and then on his demise, the very fact of inheriting the business of their father and continuation thereof by the taxpayer in the same name and style; and amount of sales tax which was not paid showed the liability of taxpayer to pay tax along with default surcharge---Additional Collector entertained the reply and after evaluating the same passed the Order-in-Original---Not only the very requirement of adjudication by Additional Collector within the purview of S.45 of the Sales Tax Act, 1990 was met but also procedural modalities of justice were fulfilled---Objection was without any force.

Inam Packages v. Appellate Tribunal Customs, Lahore 2007 PTD 2265 and Jamal Hussain v. Deputy Collector Customs PLD 1975 Kar. 1029 ref.

Mian Nazir Azhar for Appellant.

Zia Ullah Khan, D.R. for Respondent.

2011 P T D (Trib.) 1513

[Appellate Tribunal Inland Revenues, Islamabad Bench]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs PAKISTAN TELEVISION CORPORATION LTD. (P.T.V.C.L.), ISLAMABAD

Versus

COLLECTOR (ADJUDICATION), COLLECTOR OF CUSTOMS, SALES

TAX AND CENTRAL EXCISE and 2 others

C.No. 13/CE/IB/2009 C.No.15/CE/IB/2009 (Old No.C.No.45(CE/ IB/2005, C.No. 16/CE/IB/2009 (Old No. C.No.46/CE/IB/2005) and S.T.A. No.7/IB of 2009, decided on 17th February, 2011.

(a) Central Excise Act (I of 1944)---

----Ss.3, 2(20), 3-B, 4(3) & First Sched.---Central Excise Rules, 1944, R.10(1), 96ZZJ & 210(2)---Sales Tax Act (VII of 1990), Ss.3, 6, 14, 23, 26, 33(2cc), 33(3) & 36(2)---Pakistan Telecommunication (Reorganization) Act (XVII of 1996), Preamble---S.R.O. 456(I)/1996 dated 13-6-1996---S.R.O. 333(I)/2002 dated 15-6-2002---S.R.O. 617(I)/2000 dated 9-2-2000---PTC Heading No.9812-9000---Duties specified in First Schedule to be levied---Transponder (Channel Access Service)---Charge of central excise duty---Taxpayer, Pakistan Television Corporation Limited, contended that services received did not fall within the definition of "excisable services" and taxpayer had merely obtained "on lease" for its use a transponder on the satellite operated, being a lease arrangement, the amounts paid to service providers were merely lease rentals for the taxpayer's use of the transponder and were not to be taken as compensation for any services rendered by service providers---Use of leased/rental equipment by the taxpayer and payment of charges/rentals in respect thereof to service providers shall not amount to provision of services by service providers to the Pakistan Television Corporation Limited to start with; and the said services were neither originating from, nor terminating in, Pakistan or its tariff area, but rather, both originate and terminate thirty-six thousand kilometers in upper space i.e. well outside the territorial and aerial limits/jurisdiction of Pakistan---Validity---Recipient of excisable services in Pakistan was as much service provider as other service providers do and was liable to pay Central Excise Duty on services so received/provided---Insertion of word "including" in the definition of excisable services was not accidental one, rather it had certain meanings which should have been assigned to it as redundancy was not permissible in law---Word "include" enlarged the meanings of the words and phrases occurring in the body of a statute---Appellant could not establish that services provided and rendered by them did not fall within the purview of telecommunication services and not chargeable to being Central Excise Duty or sales tax in vat mode---Central Excise Duty was recoverable from service providers on their respective share of the payments received from Pakistan Television Corporation Limited on account of provision of telecom services of the transponders and access channel system---Pakistan Television Corporation Limited as withholding agent had the onus of depositing the duties with the concerned revenue authorities---Providers of channel access system whether agents of the providers of the transponders service or otherwise i.e. independent of the provider of transponders telecom services were also determined to be providers of excisable services---Service providers was also obligated to pay the leviable taxes in respect of the service fee received from the Pakistan Television Corporation Limited---Pakistan Television Corporation Limited, having voluntarily assumed the role of a withholding agent was obligated to either charge the duties from the payments made to its service providers or pay those by itself---Bottom-line was that no agreement among the parties to a service or supply transaction containing certain clauses whereby the liability to pay a chargeable or leviable tax was confused to avoid payment of duties could not be construed to preclude the application of a public law to such transaction or the jurisdiction of a public agency to recover a tax from the provider of any such services, unless expressly exempted---Order-in-Original and Order-in-Appeal was upheld by the Appellate Tribunal being lawful---Appeals of the appellants i.e. Pakistan Television Corporation Limited, and service providers was dismissed and Department was directed to very carefully scrutinize the amounts of taxes recoverable from Pakistan Television Corporation Limited in respect of payments made by it to service providers and make sure that there was no overlap in the recovery of taxes from any of the appellants.

?????? PLD 1989 SC 128; PLD 1976 Lah. 423 (DB); PLD 1967 Lah. 553 (DB) and? AIR 1932 PC 121 ref.

(b) Interpretation of Statutes---

----Word "include" is very generally used in interpretation clauses in order to enlarge the meaning of words or words or phrases occurring in the body of statute.?

(c) Interpretation of Statutes---

----Where the interpretation clause of statute states that certain things are included in a term, the term includes, unless the context otherwise requires not only those things which the interpretation clause declares that it shall include but also such things as the term signifies according to its natural import. ?

??????????? PLD 1989 SC 128; PLD 1976 Lah. 423 (DB); PLD 1967 Lah. 553 (DB) and? AIR 1932 PC 121 ref.

(d) Central Excise Act (I of 1944)---

----Ss.2 (20) & 3---S.R.O. No.477(I)/2003 dated 7-6-2003---Excisable services---Channel Access Services---Taxability---"International Incoming Calls" received by the Pakistan Telecommunication Company Limited became excisable to which exemption was granted; and appellants were service providers in the eye of law and were liable to pay leviable Central Excise Duty.

(e) Central Excise Act (I of 1944)---

----Ss.2(20) & 3---Excisable services---Ground telecommunication facilities had directly, been operated by the appellants for the purpose of up-linking and it was incorrect to contend by them that they were mere recipient of the services.?

(f) Central Excise Act (I of 1944)---

----Ss. 3 (11) & First Sched.---Duties specified in the First Schedule to be levied---Input adjustment---Since the appellants did not discharge their liability to payment of duty in time and manner prescribed by law, they could not exercise, at present appeal stage, input adjustment right which was contingent upon their liability---Exercise of right to input adjustment was time specific as well as service specific.?

(g) Central Excise Act (I of 1944)---

----S. 3 & First Sched.---S.R.O. 456(I)/1996 dated 13-6-1996---Duties specified in the First Schedule to be levied---Telecommunication Services---Definition of "alike"---There was no exhaustive list of Telecommunication? Services? which? fell? under? the? Sub-Heading "9812-9000---Others"---In view of very rapid day to day advancements in Telecommunication Sector, it was not possible to prescribe specifically any exhaustive list---All Telecommunication Services fell? under? "9812-9000---Others" with? the? exception? of? those? specified? at? 9812-1000, 2000, 3000 & 4000 and if escaped from the purview of such heading would fall in the definition of "alike" appearing in the S.R.O. 456(I)/1996 dated 13-6-1996.??

(h) Central Excise Act (I of 1944)---

----Ss.2 (20) & 3---Excisable services---Change of nomenclature---Mere change of nomenclature did not exclude a service from the ambit of taxable activities whatsoever---To say that the functions/signal/services of the Transponders were not like the functions/signal/services of Telephone was erroneous as the purpose of using these gadgets from the same meanings.

(i) Central Excise Act (I of 1944)---

----S. 3 & First Sched.---Duties specified in the First Schedule to be levied---PCT Heading No.9813-0000; sub-Heading 9812-9000---Services provided and rendered by the Pakistan Television Corporation Limited---Number of services were not defined in PCT Heading No.9813-0000 of the Central Excise Act, for example, banking companies, insurance companies, cooperative financing societies, modarbas, musharkas, leasing companies, liable to central excise duty when there was no special law then general law and finally dictionary meaning were to be followed---Sub-heading "9812-9000---Others" clearly applied to all instruments which had been advented with the passage of time as a result of advancement in the scientific technologies that had to be clearly interpreted to expand the scope of any one or more of the services specified under the said heading by reading it with conjunction with any one of them---Services provided and rendered by the Pakistan Television Corporation Limited expressly fell? within? the? purview ?of? excisable? services? under? "Sub-heading 9812-9000---Others" of the First Schedule of the Central Excise Act, 1944.?

(j) Central Excise Act (I of 1944)---

----S.3 & First Sched.---S.R.O. 333(I)/2002, dated 15-6-2002---Duties specified in the First Schedule to be levied---Telecommunication Services---Transponders---Non-inclusion of "Transponders" in the S.R.O. 333(I)/2002 dated 15-6-2002---Effect---Had the legislature been in knowledge of these developments use of the words such as "others" "alike" and "include" would not have found in the Tariff---Requisite enactment/provisions of law existed which was binding on the persons in Pakistan rendering Telecommunication Services.?

(k) Central Excise Act (I of 1944)---

----S. 3 & First Sched.---Duties specified in the First Schedule to be levied---Telecommunication services---Transponder (Channel Access Service)---Nature---Transponder (Channel Access Service) was essentially telecom service and could not be characterized as any thing else---All electronic signals whether satellite based or otherwise, in connection with speech, sound data, signal, writing, image or video emitted within, into, or from Pakistan are covered by the definition of? "Telecommunication Services" envisaged in the Pakistan Telecommunication Regulation Act, 1996---Appellants being, intermediary provider of telecom services to Pakistan Television Corporation Limited through access channel system was also providing a? telecom? service? to? the? Pakistan? Television? Corporation? Limited.?

(l) Central Excise Act (I of 1944)---

----S. 3 & First Sched.---Duties specified in the First Schedule to be levied---Telecommunication services---Transponder (Channel Access Service)---Exemption---Validity---Pakistan Television Corporation Limited failed to charge federal excise duty on the invoices submitted to it by the appellants for receiving the contractual amount---Telecom services were being rendered by the appellants in Pakistan in as much as the radio bandwidth beam or channel base through which Pakistan Television Corporation Limited was un-lining its transmission to the respective Satellite with the help of "rented equipment in Pakistan"---Unlike the international leased circuits used by the Pakistan Telecommunication Company Limited for International Calls, the services in question procured by Pakistan Television Corporation Limited did not enjoy the benefit of exemption from payment of federal excise duty.?

(m) Legislation/Rules---

----In parliamentary form of Government the law making is the exclusive domain of the legislature; however, alongside the delegation doctrine also exists to allow the administrative agencies to frame rules for achieving the stated objectives of a statute promulgated by the legislature---Rule framed in exercise of delegated legislative authority is valid only if it is made to advance public interest and purpose of the statute---In judicial review of rules framed under delegated legislative authority, superior courts of law had laid down certain criteria for testing the validity of a rule framed under delegated legislative authority which include "the intelligible test", "the welfare test" and "the statutory objective tests" - -- Any rule which does not conform to the criteria of public interest or other tests is unlikely to survive the test of judicial scrutiny, if challenged before a court having jurisdiction to interpret a law.?

(n) Central Excise Act (I of 1944)---

----S. 3 & First Sched.---S.R.O. 477(I)/2003, dated 7-6-2003---Duties specified in the First Schedule to be levied---Exemption Order No.1/2003 dated 27-6-2003---Telecommunication services---Transponder (Channel Access Service)---Retrospective exemption being extended to Pakistan Telecommunication Company Limited being specific, did not and could not extend to the telecom services provided by the appellants---Appellants did not fall in the purview of S.R.O. 477(I)/2003 dated 7-6-2003 read with central excise special Exemption Order No.1/2003 dated 27-6-2003.?

(o) Central Excise Act (I of 1944)---

----S. 3 & First Sched.---Duties specified in the First Schedule to be levied---Transponder---Definition of transponder given in the contract explained that transponders generate telecom signals within the tariff areas of Pakistan and said service couldn't be excluded from the purview of excisable services being "the services terminating in Pakistan and its tariff area" which was an excisable service within the meaning of S.3 of the Central Excise Act, 1944.

(p) Central Excise Act (I of 1944)---

----S. 3 & First Sched.---Duties specified in the First Schedule to be levied---Transponder --?Service of---Transponder was rendering certain service which terminated in the tariff area of Pakistan as a service provider in as much other service providers do---Central Excise Duty was payable on such service under S.3 of the Central Excise Act, 1944.?

(q) Central Excise Act (I of 1944)---

----S.3 & First Sched.---S.R.O. 456(1) 2006 dated 13-6-2006---Economic? Coordination? Committee? decision? No. 44(4)/2002 dated 28-3-2002---Duties specified in the First Schedule to be levied---PCT Heading No."9812-9000---Others"---Alike service---Duty on "Others" services---Economic Coordination Committee had concurred with the chargeability of Central Excise Duty on the "Others" services as contained in Para (2) of the Economic Coordination Committee decision No.44 (4)2002 dated 28-3-2002 (levy of General Sales Tax) on remaining services of Pakistan Telecommunication Company Limited---Insertion of word "alike service" in the body of S.R.O. 456(I)/2006 dated 13-6-2006 was not accidental---Services like "Voice Cast" (Voice Broadcasting Service) and "VSAT" (Very Small Aperture Terminal Service)? had? also? not? elsewhere? been? provided? specifically? under PCT Heading No.9812-9000-"Others" yet these were subject to excise duty---Perception that decision of Economic Coordination Committee ousted such like services from the purview of S.2(20) of the Central Excise Act, 1944 was not correct because Central Excise Duty was chargeable from services like "Voice Cast" (Voice Broadcasting Service) and "VSAT" (Very Small Aperture Terminal Service) and Pakistan Telecommunication Company Limited had been paying Central Excise Duty---Charge of Central Excise Duty on services falling under the alike service of PTC Heading 9812-0000 was never challenged by the Pakistan Telecommunication Company Limited in any appellate forum and had attained finality---Use of word "alike service" was meant to enlarge the meaning of the words and phrases occurring in the body of a statute.

(r) Interpretation of Statutes---

----Interpretation clause---Word? of? a? statute "includes"---Connotation---Where the interpretation clause of statute states that certain things are included in a term, the term includes, unless the context otherwise requires, not only those things which the interpretation clause declares that it shall include but also such things as the terms signifies according to its natural import.?

(s) Central Excise Act (I of 1944)---

----S.3 & First Sched.---S.R.O. 477(I)/2003, dated 7-6-2003---Duties specified in the First Schedule to be levied---Signal generated by the transponders---"Alike service" --?Taxability of---Since federal excise duty was paid under the category of "alike service" by the Pakistan Telecommunication Company Limited under PCT Heading 9812, the telecom signals generated by transponders were also liable to federal excise duty on the same analogy and fell under "alike service"---International incoming calls operating on mechanism and characteristics identical to the transponders were liable to federal excise duty---Telecom signals generated by transponders, being similar to the "Voice Cast" and "Very Small Aperture Terminal Service" need equal treatment under the doctrine of consistency---Retrospective exemption of duty granted by Federal Board of Revenue to international calls did not? apply? to? telecom? services? provided? by? transponder? because S.R.O. 477(I)/2003 dated 7-6-2003 was Pakistan Telecommunication Company Limited specific as it specified Pakistan Telecommunication Company Limited as the only beneficiary of the exemption.?

(t) Central Excise Rules, 1944---

----R. 96ZZJ---S.R.O. 456(I)/1996 dated 13-6-1996---S.R.O. 333(I)/2002 dated 15-6-2002---PCT Heading 9812-9000---Special procedure for collection of central excise duty on telecommunication services---"Alike" service---Exemption---Rule 96ZZJ of the Central Excise Rules, 1944 provides special procedure for collection of Central Excise Duty on telecommunication services as provided under S.R.O. 456(I)/1996 dated 13-6-1996---S.R.O. 333(I)/2002 dated 15-6-2002 extends exemption from Central Excise Duty to goods imported, produced or manufactured locally and services named therein---Said S.R.O.? suggested? that? no? exemption? from? payment? of? Central Excise? Duty? was? available? to? "alike"? service? of? PCT? Heading 9812-9000.

(u) Central Excise Act (I of 1944)---

----S.2 (20)---Excisable services---Charging of Central Excise Duty (on VAT mode) from Pakistan Television Corporation Limited was lawful and consistent with S.2(20) of the Central Excise Act, 1944.?

(v) Central Excise Act (I of 1944)---

----S.3 & First Sched.---Duties specified in the First Schedule to be levied---Transponder---Nature of transaction---Pakistan Television Corporation Limited received telecom signals from satellite with the help of transponders and the access channel system and on the other hand delivers telecom signal to the satellite through and the access channel system---Such was unique transaction of a two way exchange of telecom signals---Pakistan Television Corporation Limited was both the recipient and provider of telecom signals characterizable as service within the meaning of Central Excise Act, 1944 and liable to Central Excise Duty.?

(w) Central Excise Act (I of 1944)---

----S. 3 & First Sched.---Duties specified in the First Schedule to be levied---Transponder(Channel Access Service)---Privity of contract---Applicability of---Agreement/contract of privity between its parties was an inter se arrangement for? settlement of fiscal, administrative, technical issues and so on but could not oust operation of a public law or jurisdiction of a State agency---Federal Government was not a party to the agreement between Pakistan Television Corporation Limited and service provider and in no way restricted or neutralized the operation of a public law or jurisdiction of a State agency like the Federal Board of Revenue or any office subordinate to it---Since the ground telecommunication facilities had directly been operated by the Pakistan Television Corporation Limited, their contention that they were mere recipient of the services was unfounded---Pakistan Television Corporation Limited paid income tax on behalf of service provider but in the case of payment of Central Excise Duty they had taken a divergent position---Privity of contract was not applicable because it was the Pakistan Television Corporation Limited who voluntarily delivered copy of its contracts with Service Provider and Interactive to the revenue authority.??

(x) Central Excise Act (I of 1944)---

----S. 3 & First Sched.---Duties specified in the First Schedule to be levied---Transponder (Channel Access Service)---Withholding agent---Pakistan Television Corporation Limited was a withholding agent from service providers---Pakistan Television Corporation Limited was liable to pay taxes as a withholding agent for service providers---Pakistan Television Corporation Limited was not justified in aiding them and to avoid or evade Central Excise Duty and injuring the government's revenue---Non-payment of tax due in the manner provided under the provisions of Sales Tax Act, 1990 and rules made thereunder also attracted penal action---Demand of duty and taxes was lawfully made from the Pakistan Television Corporation Limited in circumstances.??

?????? Afnan Karim Kundi for Appellant (in C.Nos. 15/CE/1B and 16/CE/IB of 2009).

?????? Mujeeb-ur-Rehman and Danish Afzal for Respondents (in C.Nos. 15/CE/IB and 16/CE/IB of 2009).

?????? Tariq Mehmood, ITP for Appellant (in STA No.7/IB of 2009).

?????? Shaukat Ali, LA and Ghulam Hasnain, Audit Officer for Respondent (in STA No.7/IB of 2009).

?????? Danish Afzal for Appellant (in C.No.13/CE/IB of 2009).

?????? Mujeeb-ur-Rehman and Ghulam Hasnain, Audit Officer for Respondents (in C.No.13/CE/IB of 2009).

?????? Date of hearing: 15th December, 2010.

2011 P T D (Trib.) 1548

[Appellate Tribunal Inland Revenues, Lahore Bench]

Before Jawaid Masood Tahir Bhatti, Judicial Member

Messrs COTTON ARTS (PVT.) LTD.

Versus

COLLECTOR SALES TAX, FAISALABAD

S.T.A. No.968/LB of 2009, decided on 28th September, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 2(47), 7-A & 46---Levy and collection of Tax on specified goods on value addition---Adjudicating Officer as well as the Appellate Authority had not considered the fact that the supplier of the appellant was a commission agent and had been registered as such with the Income Tax Department as a wholesaler and as commission agent with the Sales Tax Department; and being commission agent he was not required to make any value addition; and was bound to supply the goods on prices fixed by his principal/manufacturer---Sales Tax invoice by the supplier of the appellant was already paid by the manufacturer/principal supplying such goods---No tax was required to be paid, in circumstances---Department had not objected that the Computer Profile of the registered person was showing his status as "operative" and the input tax and output tax were equal which confirmed his status as a commission agent---Neither any charge of false transactions nor of tax fraud, either on the part of the supplier or appellant had been levelled in the show-cause notice without which refund of input tax paid by the appellant, could not be rejected---Matter was remanded to the Adjudicating Authority for fresh order in accordance with the law.

2004 PTD 868; Messrs Avari Hotel Ltd. v. The Collector of Sales Tax and 3 others 2000 PTD 3765; Messrs Mehran Associated Ltd.'s case 1993 SCMR 274 and Collector, Sales Tax and Central Excise (West) Karachi v. Messrs Al-Hadi Industries (Pvt.) Ltd. 2002 PTD 2457 ref.

Khubaib Ahmad for Appellant.

Muhammad Jamil Bhatti, D.R. for Respondent.

2011 P T D (Trib.) 1588

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Muhammad Iftikhar Khan, Accountant Member

Messrs MYKA STEEL (PVT) LTD

Versus

COLLECTOR, SALES TAX & FEDERAL EXCISE, PESHAWAR and another

S.T. No.69/PB/08-S.T.No.38/ATIR/09, decided on 1st February, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 2(46), 33(2-cc), 34, 36, 45 & 46---Short payment of Sales Tax---Imposition of penalty---Delay in passing order---Appeal---Taxpayer was alleged to have made short payment of Sales Tax and after issuing him show-cause notice, Adjudication Officer through order-in-original, held the appellant/taxpayer liable to pay additional tax and penalty---On filing appeal by the taxpayer and order-in-original having been upheld in order-in-appeal, the appellant had filed appeal before the Tribunal---Order-in-original under S.45 of Sales Tax Act, 1990 was to be passed within 90 days but in the present case, it was passed after 635 days after the issuance of show-cause notice---Commissioner, for sufficient reason, could extend the period of 60 days---Inordinate delay in passing order-in-original had not been explained---Order-in-original being barred by time was not tenable---Show-cause notice issued to the appellant and order-in-original, were vacated, in circumstances.

Issac Ali Qazi for Appellant.

Shad Muhammad, D.R. and Shuaib Sultan, IRAO for Respondent.

2011 P T D (Trib.) 1625

[Inland Revenues Appellate Tribunal of Pakistan]

Before Tabana Sajjad Naseer, Accountant Member and Shahid Jamil Khan, Judicial Member

Messrs TAJ PROCESSING INDUSTRIES (PVT) LTD.

Versus

C.I.R. (R.T.O.), FAISALABAD

M.A.No.654/LB/2010 in STA No.908/LB/2009, decided on 1st February, 2011.

Sales Tax Act (VII of 1990)---

----S. 46---Dismissal of appeal in default---Application for restoration of appeal---Appeal was dismissed in default on the date for which neither the taxpayer nor his counsel had received any notice for hearing---Law favours adjudication on merits---Reason narrated by the taxpayer showing his inability for non-attendance, appeared to be logical---Application was accepted and impugned order was recalled and appeal was listed for regular hearing for deciding on merits.

Khubaib Ahmed for Applicant.

Azmat Elahi Ghumman, D.R. for Respondent.

2011 P T D (Trib.) 1629

[Inland Revenues, Appellate Tribunal, Pakistan]

Before M.B. Tahir, Accountant Member and Nazir Ahmad, Judicial Member

Messrs NAVEED ENTERPRISES, FAISALABAD

Versus

COLLECTOR SALES TAX AND FEDERAL EXCISE (RTO), FAISALABAD

M.A. No.468/LB of 2010, decided on 2nd December, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 131 & 132(2)---Income Tax Appellate Tribunal Rules, 2005, R.20(2)---Dismissal of appeal in default---Application for restoration of appeal contending that next date of hearing which was 27-9-2010, was inadvertently noted in his diary as 29-9-2010---Non-appearance of taxpayer on the date of hearing was not wilful and intentional, which was duly supported by the affidavit---Application for restoration of appeal was allowed in the interest of justice and fair play, and earlier ex parte order was recalled and appeal was restored at its original number.

Khubaib Ahmad for Applicant.

Dr. Sheryar, D.R. for Respondent.

2011 P T D (Trib.) 1645

[Inland Revenues, Appellate Tribunal, Pakistan]

Before Masood Ali Jamshed, Accountant Member and Shahid Jamil Khan, Judicial Member

COLLECTOR OF SALES TAX, FAISLABAD

Versus

Messrs BASHIR PRINTING INDUS., FAISALABAD

S.T.A. No.829/LB of 2009, decided on 6th September, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10 & 46---Refund claim---Registered person, engaged in manufacture and export of textile products, claimed refund for the period June, 2004 against input tax paid on raw material consumed in manufacturing of taxable goods---Said refund claim was rejected by Assistant Collector Sales Tax (Refund)---Appeal of registered person having been accepted by Collector (Appeals), the department had filed appeal before Appellate Tribunal---Submission of counsel for registered person was that connecting appeals arising from the same impugned order had already been dismissed by the Tribunal, for the reasons that order-in-original was hit by limitation---Order-in-original was passed after 260 days of issuance of show-cause notice---Basis of appeal was of the same order-in-original which had already been held as time-barred---Present appeal was also dismissed for that reason.

Shahid Sattar, D.R. for Appellant.

Khubaib Ahmad for Respondent.

2011 P T D (Trib.) 1656

[Inland Revenues, Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Shahnaz Refique, Accountant Member

Messrs NIAGRA MILLS (PVT.) LTD, FAISALABAD---Appellant

Versus

COLLECTOR (APPEALS), FAISALABAD and 2 others---Respondents

S.T.As. Nos. 257/LB to 261/LB of 2009, decided on 23rd July, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10, 46 & 73---Disallowance of input tax paid by assessee----Taxpayer claimed adjustment of input tax deducted by his supplier at the time of supply of diesel which had subsequently been used by him in generation and start up of the machinery of its Textile Unit---Diesel used in production and manufacturing of a product on which the assessee/taxpayer was liable to pay sales tax was equally important ingredient like other such purchases---Tax charged thereon should always be allowed provided the taxpayer had fulfilled the other legal requirements including the ones provided under S.73 of Sales Tax Act, 1990---Filing of claim was a procedural act---If the assessee had made a manual application, even after introduction of the software, unless there was any special exclusion, the taxpayer should not be deprived of his claim for having not complied the requirements of the said software---Department should not reject the said application and rather ask the taxpayer to comply with the requirement thereof; and then allow the necessary input tax etc.---Department was directed to allow input tax adjustment on diesel in respect of all the years and to do consequential acts forthwith.

Abzur Hussain and Khubaib Ahmad for Appellant.

Dr. Shahid Siddique, D.R. for Respondent.

2011 P T D (Trib.) 1669

[Inland Revenues, Appellate Tribunal, Pakistan]

Before Syed Nadeem Saqlain, Judicial Member

Messrs BASHIR PRINTING INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

C.I.R. (RTO), FAISALABAD

S.T.A. No.140/LB of 2010, decided on 19th July, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 2(14)(37), 10, 11(2), 33(11), 34, 36 & 46---Recovery of input tax---Appeal---Appellant/assessee was found involved in tax fraud and evasion of Sales Tax---Adjudication proceedings culminated in passing of an order-in-original wherein an amount was ordered to be recovered from assessee along with default surcharge and penalty was also imposed on the assessee---Order-in-original was upheld by Commissioner (Appeals)---Validity---Order-in-original was passed after about 236 days of issuance of show-cause notice, which should have been passed within 120 days of issuance of show-cause notice, or within such extended period which would in no case exceed 60 days---On expiration of original time limit of 120 days for adjudication, extension of another 120 days was sanctioned which was unjustified---Appeal of the assessee was accepted and the show-cause notice issued after the expiry of prescribed extended time limit was ordered to be cancelled and all the proceedings initiated thereafter were ordered to be quashed, in circumstances.

Khubaib Ahmad for Appellant.

Ishaq Ahmed, D.R. for Respondent.

2011 P T D (Trib.) 1680

[Inland Revenues, Appellate Tribunal, Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

Messrs INTERLOOP (PVT.) LTD.

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.1233/LB of 2009, decided on 28th September, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 10, 11, 45(1)(iii) & 46---Assessment of tax---Refund claim---Power of Adjudication---Order-in-original in the case with regard to assessment of tax had been passed by Assistant Collector, while the show-cause notice was sent by the Deputy Collector---No jurisdiction was available with Assistant Collector for the passing of order-in-original as once the Deputy Collector had assumed the jurisdiction through sending a show-cause notice, Assistant Collector who was lower Authority, was not justified to pass order regarding the Sales Tax Refund amounting to Rs.22,07,157 as the amount involved was more than one million rupees; and the assumption of jurisdiction by the Assistant Collecter was coram non judice---All subsequent proceedings conducted thereof could not be considered as having been done in pursuance of the law---Impugned order of Collector (Appeals), in circumstances was vacated and order-in-original passed by Assistant Collector, was set aside, with the direction to allow the refund claimed by registered person.

2004 PTD 868; Messrs Avari Hotel Ltd. v. The Collector of Sales Tax and 3 others 2000 PTD 3765; Messrs Mehran Associates Ltd.'s case 1993 SCMR 274; Collector, Sales Tax and Central Excise (West), Karachi v. Messrs Al-Hadi Industries (Pvt.) Ltd. 2002 PTD 2457; 2006 SCMR 783; 1976 PTD 56 and 2000 PTD 359 ref.

Khubaib Ahmad for Appellant.

Muhammad Jamil Bhatti, D.R. for Respondent.

2011 P T D (Trib.) 1716

[Appellate Tribunal Inland Revenues, Islamabad]

Before Khalid Waheed Ahmad, Chairman, Muhammad Jahandar, Judicial Member and Istataat Ali, Accountant Member

PAKISTAN TELECOMMUNICATION CO. LTD, ISLAMABAD

Versus

DCIT, CIR-11, COMPANIES ZONE, ISLAMABAD

I.T.As Nos.1023/IB to 1026/IB of 2006 and M.As.(AG) Nos.439/IB and 313/IB of 2006, decided on 30th May, 2009.

Per Istataat Ali, Accountant Member, Khalid Waheed Ahmad, Chairman and Muhammad Jehandar, Judicial Member agreeing---[Majority view]

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 24(i)---Deductions not admissible---Excess perquisites---Salary---Assessee included orderly allowance, special allowance for officers, drinking water allowance, stipend, honorarium, cash reward for meritorious services and good conduct pay in salary---Assessing Officer excluded such payments from salary, and made addition being perquisites in excess of 50% of the salaries paid---Validity---Appellate Tribunal disagreed with the assessee that "cash reward for meritorious services" was paid to all the employees and this payment was in the nature of "bonus", which was part of salary---Payment made to employees on account of "cash reward" could be equated with "bonus"---Nature of both these payments was totally different than each other---"Cash reward for meritorious services was a perquisite and not part of salary; its nature was different than bonus and the treatment given to said item of payment was legally correct at the assessment as well as first appeal stage.

Lexicon Webster's Dictionary ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 24(c)---Deductions not admissible---Non-deduction of with-holding tax from salaries---20% addition of the claim---Assessee contended that 20% of the basic pay had been disallowed on the suspicion about non-deduction of tax from salaries; no such addition had been made in the subsequent years; and suspicion was entirely baseless as not a single case of non-deduction of withholding tax from salaries could be identified by the Assessing Officer during monitoring of withholding taxes---Validity---Assessing Officer had no justification for making estimate at the rate of 20% for the purposes of making addition---Assessing Officer should have brought on record complete details and data to establish the default in deduction of tax at source---No addition on this score was made at assessment stage in the succeeding years---Addition was made on estimate basis---Addition on estimate basis could not be legally maintained---Orders of both the authorities below were vacated and addition was deleted by the Appellate Tribunal.

2009 PTD 1 ref.

Per Istataat Ali Accountant Member, Minority view---

Income Tax Ordinance (XXXI of 1979)---

----S. 23(1)(vii)---Deductions---Borrowing cost on acquisition of machinery---Straight deduction from income---Disallowance of--- Assessee contended that interest was capitalized in accordance with the accounting policy which provided that mark-up, interest and other charges on redeemable capital, long term loans and other borrowings were capitalized up to the date of commissioning of the respective asset, acquired out of the proceeds of such redeemable capital and long term liabilities; and all other mark-up, interest, profit and other charges were charged to income---Department contended that assets acquired out of borrowed funds on which interest and mark-up was claimed, had not been commissioned during the year; and interest on assets not actually put to business use or commissioned was not admissible as revenue expenditure and was to be capitalized; and it had also not been proved that assets had actually been commissioned and the amount was wrongly capitalized in the books---Expenses being in the nature of capital expenditure could not be allowed as deduction from income chargeable to tax; and First Appellate Authority had rightly observed that expenditure on installation of new telephone lines was a capital expenditure which should be capitalized---Validity---First Appellate Authority while upholding the addition properly took into account the relevant facts and confirmation of addition was quite justified specially when proper opportunity had been provided to the assessee to substantiate its claim but it failed and the Assessing Officer conclusively established that the amount in question was in the nature of capital expenditure which was inadmissible ---Action of both the authorities below was confirmed by the Appellate Tribunal.

1993 SCMR 1224 = 1993 PTD 758 distinguished.

Income Tax Ordinance (XXXI of 1979)---

----S. 23(1)(x), Second Sched: Part-I, Cl. (140A)---Pakistan Telecommunication (Re-Organization) Act, (XVII of 1996)---Deductions---Bad debts---Disallowance of---Bad debts were disallowed for the reasons that these were not written off during the year under consideration and that all measures for recovery were not exhausted to and First Appellate Authority, for assessment year 2002-2003, observed that disallowance pertaining to exemption period was in order---Assessee contended that no reservation was expressed by the Assessing Officer in his assessment order regarding the irrecoverability of the debts claimed to be bad; and since assessee had fulfilled both the statutory conditions; the facts that these debts were created when the income of assessee or its predecessors was exempt from income tax was simply irrelevant---Department contended that philosophy behind inclusion of CI.23(1)(x) of the Income Tax Ordinance, 1979 relating to allowance of bad debt was to provide relief in such cases when revenue had been offered for taxation in the earlier years on accrual basis and subsequently a part of the revenue which had already suffered taxation was not actually recovered despite all efforts; and in such situation law provides a concession to write-off such amounts, which had become irrecoverable so that the assessee could recoup the tax paid on revenue, which had not been actually earned---Both accruals and receipts of income were not liable to tax during the period to which bad debt related as income of the assessee was exempt---Bad debts relating to exempt period could not be allowed against the income of the taxable period as the exempt income could not be termed as income chargeable to tax---Validity---Claim relating to exempt period was not admissible under the law---Amount relating to predecessor companies and amount allowable during previous years to the assessee and its predecessor companies and claims relating to previous years could not be allowed---First Appellate Authority rightly confirmed the addition relating to assessment year 2001-2002---Department had not contested the setting aside of assessment on this point for assessment year 2002-2003 and tax year 2003; and setting aside of assessment for these two years were confirmed---Assessee's appeal for all years failed on this point.

Mettur Sandalwood Oil Co. v. Commissioner of Income Tax, Madras 47 ITR 781 ref.

2005 PTD (Trib.) 621 and 2004 PTD 1940 rel.

Income Tax Ordinance (XXXI of 1979)---

----Ss.24(b) & 50(3)---Deductions not admissible---Payments to telecommunication satellite companies---Royalty---Fee for technical services or disbursement of commercial profit---Non- deduction of tax from such payments to non-residents---Assessee was confronted that payment for use of satellite had to be treated as royalty and tax was deductible from such payments---Assessee contended that these payments were not in the nature of royalty; it was rather in the nature of fee for technical services or disbursement of commercial profit; and non-resident companies did not have any permanent establishment in Pakistan; and any payment made on account of fee for technical services or commercial profit was not liable to deduction of tax at source under S.50(3) of the Income Tax Ordinance, 1979---Assessing Officer treated the payments made to telecommunication satellite companies as royalty and due to default in deduction of tax at source the expenditure in the shape of payments to non-resident companies was disallowed under S.24(b) of the Income Tax Ordinance, 1979 ---Validity---Payment for the use of electronic equipment was a payment on account of royalty---Payment made to non-residents was in the nature of royalty on which tax was deductible under S.50(3) of the Income Tax Ordinance, 1979---Powers of issuing certificate of exemption or a certificate of low rate of withholding tax could be given only by the Deputy Commissioner of Income Tax---No other person or authority could assume such powers to determine as to whether or not withholding tax was deductible from any payment made to a non­resident---Assessee was under legal obligation to deduct withholding tax under S.50(3) of the Income Tax Ordinance, 1979 from payments made to non-residents---Assessee did not make such deduction and also failed to obtain a certificate of exemption or a certificate of low rate of tax deduction from the concerned Deputy Commissioner of Income Tax---Assessee committed a default in tax deduction at source from payments released to non-residents---Assessing Officer rightly disallowed the expenditure claimed on account of payments to non-residents.

ITA No.194 to 199/IB/1997-98; ITA No.194 to 199/IB/1997-98 and 2002 PTD (Trib.) 2679 distinguished.

Chamber's Dictionary of Science and Technology; Mc Graw Hill's Dictionary of Scientific and Technical Terms; I.T.A. Nos.194 of 199/IB/97-98; 1989 PTD 126; Messrs Hub Power Company Ltd. v. DCIT Circle-01, Companies Zone in I.T.A. Nos. 763 to 765 IB 1996-bb; 1961 PTD 900 = PLD 1961 Dacca 602 and Black's Law Dictionary (8th Edition) ref.

Words and phrases---

-----'Machine'--- 'Equipment'--- 'Transponder'--- Connotations---"Machine" is a device that uses energy to perform some activity---Historically, device performing or assisting in performing any type of work through use of electric energy can be classified as an electric or an electronic machine e.g.; computer, aeroplane, railway engine and air conditioners etc.---"Equipment" is a set of tools or devices used for particular purposes---Every machine is also an equipment but every equipment may not be a machine---Transponder fitted in a satellite is certainly an electronic equipment.

Income Tax---

----Royalty---Payments made for use of electronic property of non-resident satellite owners were in the nature of royalty.

Income Tax Ordinance (XXXI of 1979)---

----S.50---Deduction of tax at source---Exemption---Amount of tax assessed or in lesser or bigger amount would be payable as income tax in accordance with law enforced would not effect the liabilities and obligations of the persons responsible for making deduction of tax at source---Even though the income of non-resident recipient was exempt from tax the persons making payments to them would not be absolved of their liability of making tax deduction at source.

Income Tax Ordinance (XXXI of 1979)---

----S.50(3)---Deduction of tax at source---Exemption---Responsibilities of the tax deducting persons---Scope---Provisions contained in S.50(3) of the Income Tax Ordinance, 1979 virtually covered all sums payable to non-residents irrespective of their character---Person responsible for making deduction of tax at source did not have any powers to find out the chargeability of payments to tax---Functions of the assessee company were not to enter into shifting the ultimate fate of taxability or exemption of the payments which were liable to deduction of withholding tax at source---Assessee could not determine as to what was the proportion of the income/properties which recipients had earned out of payments received by them---Function of determining the income of non-resident recipients had been assigned by law to the Deputy Commissioner of Income Tax---If in the opinion of assessee the payment released to non-resident recipients were not liable to deduction of withholding tax at source an exemption certificate must have been obtained from the concerned Deputy Commissioner of Income Tax---Assessee did not make the tax deduction at source from the payments made to non-resident recipients nor did it obtain a certificate of exemption from the Deputy Commissioner of Income Tax---Assessee committed a default in making deduction of withholding tax from the payments made by it---Since default was established on record, the Assessing Officer was fully justified to disallow the claim and First Appellate Authority had also rightly confirmed the addition.

1993 SCMR 1224 = 1993 PTD 758; Mettur Sandalwood Oil Co. v. Commissioner of Income Tax, Madras 47 ITR 781; 2005 PTD (Trib.) 621; 2004 PTD 1940; Lexicon Webster's Dictionary; 2002 PTD 1; I.T.A. Nos.194 to 199/IB/1997-98; 2002 PTD (Trib.) 2679; Chamber's Dictionary of Science and Technology; Mc Graw Hills's Dictionary of Scientific and Technical Terms; 1989 PTD 126; Messrs Hub Power Company Ltd. v. DCIT Circle-01, Companies Zone, Islamabad I.T.A. Nos.763 to 765 IB 1996-bb; 1961 PTD 900 = 1961 PTD 602 and Black's Law Dictionary (8th Edition) ref.

Income Tax Ordinance (XXXI of 1979)---

----S.50(3)---Deduction of tax at source---International Telecommuni-cation Satellite Organization---Exemption---Non-deduction of tax from payments to non-residents---Disallowance of---Fiscal domicile of a foreign company was as important as its physical domicile---International Telecommunication Satellite Organization created by resolution of General Assembly of United Nations may have its income exempt from tax in Pakistan but non-resident recipients in the present case was a separate entity from the International Telecommunication Satellite Organization---Said non-resident company could not avail any exemption from tax in Pakistan and payment made to said company were also liable to deduction of tax at source because these payments were in the nature of royalty on which tax was deductible under S.50(3) of the Income Tax Ordinance, 1979---First Appellate Authority wrongly found that tax was not deductible at source from payments made to the company---Taxation Officer had rightly held that said payments were liable to withholding tax at source---Since no such tax deduction was made, the claim of expenditure on this account was rightly disallowed by the Assessing Officer---Order of the First Appellate Authority was vacated by the Appellate Tribunal on the issue relating to the said company and restored the orders of Assessing Officer---Departmental appeal on this point stood accepted---Both Assessing Officer as well as First Appellate Authority rightly disallowed the assessee's claim on this account relating to the company---Such orders on this point were upheld and assessee's appeal being devoid of any merit was rejected.

Per Muhammad Jahandar, Judicial Member; Khalid Waheed Ahmad, Chairman agreeing

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 23(1)(vii)---Deductions---Borrowing cost on acquisition of machinery---Straight deduction from income---Disallowance of---Validity---Admittedly, assessee was already a running concern and seemingly it intended to enhance its efficiency by inducting into operation new equipment/devices as had emerged in the telecommunication field---Borrowed capital was being used in converting old system of Analogue into one to the Digital System---Action taken by the forums below was not in line with rule laid down by Supreme Court and was thus exceptionable---Assessee was entitled to claim borrowing cost on acquisition of machinery but the claims shall be subject to re-verification by the Taxation Officer.

1994 SCMR 1224 = 1993 PTD 758 rel.

(d) Income Tax Ordinance (XXXI of 1979)---

----S. 23(1)(x), Second Sched., Part-I, Cl. (140A)---Pakistan Telecommunication (Re-organization) Act (XVII of 1996), Ss. 34 & 35---Companies Ordinance (XLVII of 1984)---Deductions---Bad debts---Claim of bad debts was disallowed for the reasons that debts were not written off during the relevant income year; and that these debts related to a period when income of assessee's predecessors was not subject to income tax; and debts related to a period before the assessee company came into existence---Assessee contended that debts were actually written off on 30-6-2001 and this action was approved on 8-11-2001 by the Board of Directors and the debts invariably became bad much later than the date of their creation; that debt which was considered as recoverable, at one time gets bad or irrecoverable at a later stage when all rays of hope of its recovery die down; that deduction on account of a bad debt being a loss becomes allowable at a time when the debt was irrecoverable; and that the debts were created by assessee's predecessors whose business had been taken over by the assessee---Department contended that assessee company earned big profits from 1967 to 1995 which were more than Rs.110 billion, yet these so called bad debts were not written off and the assessee waited for termination of exemption period and made the claim only when its income became taxable; that it was done intentionally to reduce the taxable income and tax liability; that taxpayer took a period of over 30 years to write them off; that the assessee neither deserved any favourable treatment nor it was warranted by law; that the intention of the legislature appeared to be that relief could only be granted when revenue had been offered for taxation in the earlier years on accrual basis and subsequently a part of the revenue, which had already suffered taxation was not actually recovered despite all efforts; and that so called bad debts relating to exempt period could not be allowed against the income of the taxable period---Validity---After promulgation of Pakistan Telecommunication Re-organization Act, 1996, the Federal Government had to establish a company to be known as Pakistan Telecommunication Corporation to whom shall have to vest all rights and liabilities, once held by predecessor organizations---All rights and liabilities of former organizations, of which Pakistan Telecommunication Company Limited would be a successor, stood devolved on the said company---Assessee company on its coming into being could recover the dues if any which accrued to the former organizations from time to time and the entitlement of Pakistan Telecommunication Company Limited/assessee could not be disputed---Assessee when it came into being might make a decision as to when these debts should be written off as having become irrecoverable and proved such fact before the tax officer---Findings of both the forums below were vacated and Taxation Officer was directed that the issue of bad debts be decided afresh while living within the parameters laid down by the relevant law.

Mettur Sandalwood Oil Co. v. Commissioner of Income Tax Madras 47 ITR 781 and 1976 PTD 237 rel.

2005 PTD (Trib.) 621 ref.

(e) Income Tax Ordinance (XXXI of 1979)---

----S. 23(1)(x)---Deductions---Bad debts---Admissibility---Principles---Debt---Concept---Generally a debt proper is that which one owed to another, any money, goods or services that one is bound to pay to another, a pecuniary due or a liquidated demand---Debt has invariably been treated to be bad when it becomes irrecoverable and the eventuality of irrecoverability rests upon the fact when the debtor is in bad financial position and is unable to repay the debt, either wholly or in part or it may be that the debtor is in sound financial position but he denies his liability to pay or it is otherwise prudent and expedient for the assessee not to seek to recover the debt---To recover the debt, it is not always essential that the creditor should go to a court of law to enforce his claim and that he could write off the debt as irrecoverable only after he failed in court; it may happen that on an examination of the circumstances and after taking appropriate legal advice the creditor may come to a conclusion that resort to a court of law would only result in his throwing good money after bad or that his chances of recovery are doubtful and slender----Creditor, in such circumstance, may claim the debt as a 'bad debt'---As to what print of time a debt become a bad debt, it , is a question of fact and there is no general rule or universal test---Decision had to be arrived at after considering all the facts and circumstances of each case---Age of a debt is no doubt a relevant factor to be taken into consideration yet the mere fact that the debt has become barred under the law of limitation does not itself make it a bad debt---Statute-barred debt is not necessarily bad; neither is a debt which is not statute-barred necessarily good.

(f) Income Tax Ordinance (XXXI of 1979)---

----Ss. 24(b) & 50(3)---Resolution No.1721 (XVI) of the General Assembly of the United Nations---Deductions not admissible---Non-deduction of tax from payments to non-residents---Double Taxation Treaty--- Exemption---First Appellate Authority observed that the organization came into being in 1973 pursuant to a Resolution No.1721 (XVI) of the General Assembly of the United Nations and was an inter-governmental organization ---Pakistan being one of its Members, Article XV of Agreement creating the said organization gave exemption for income tax to the income of the organization---Validity---Payments were made to the organization which statedly came into being in 1973 pursuant to a Resolution of the General Assembly of the United Nations and Pakistan was one of its members---Payments were made to said organization, a U.K based company and in view of Pak-UK Double Taxation Treaty, the payments were to be regulated by the said Treaty---First Appellate Authority while dealing with such aspect, came to the conclusion that disallowance was not justified and deleted the same---Nothing had been shown to take an exception to such a finding; Pakistan being a signatory to the agreement, the income of organisation appeared to be exempt from tax in Pakistan---Findings of First Appellate Authority were upheld by the Appellate Tribunal on this issue.

(g) Income Tax Ordinance (XXXI of 1979)---

----Ss.31(4) & 12(4)---Income Tax Ordinance (XLIX of 2001), S.2(54)--- Deductions--- Royalty--- Intellectual property---Use of machinery or equipment---Use of satellite---Royalty deals with intellectual property and could not be stretched to the sue of any machinery or equipment---Legislature in the use of words is very specific and by no intendment, the use of satellite could be brought within the meaning of royalty---Income Tax Ordinance 2001, in S.2(54) while defining the term royalty had covered and treated such kind of payment, that is consideration for use of satellite, as royalty it could be inferred that had the Income Tax Ordinance, 1979, contemplated such kind of payment as royalty, a different definition would not have been provided in the Income Tax Ordinance, 2001.

(h) Income Tax Ordinance (XXXI of 1979)---

----S.50---Deduction of tax at source---Payments on account of satellite facilities---Commercial profits---Fee for technical services---Royalty---Absence of Double Taxation Treaty---Findings of a Bench of Appellate Tribunal that "payments on account of satellite facilities, in absence of Double Taxation Treaty, was to be commercial profit seemed correct on the simple ground that these were neither fee for technical services nor covered by the term royalty---There being admittedly no Double Taxation Treaty with Hong Kong and the definitions of royalty and fee for technical service contained in the Income Tax Ordinance, 1979 having not covered such kind of payments, the receipts of the year to said company were commercial profits and since there was no permanent establishment in Pakistan were not liable to deduction of tax.

2002 PTD (Trib.) 2679 rel.

(i) Income Tax Ordinance (XXXI of 1979)---

----Ss. 24(b) & 50(3)---Double Taxation Treaty between Pakistan and U.K---Non-deduction of tax from payments to non-residents ---Transponder---Scientific equipment---Transponder is an automatic device that receives, amplifies and retransmits a signal on a different frequency and a receiver-transmitter that will generate a reply signal upon proper electronic interrogation---Communications satellites channels were called transponders because each was a separate transceiver or repeater---With digital video data compression and multiplexing, several video and audio channels may travel through a single transponder on a single widefored carrier---Non-multiplexed radio stations could also travel in single channel per carrier (SCPC) mode, with multiple carriers (analog or digital) per transponder; this allowed each station to transmit directly to the satellite rather than paying for a whole transponder or using land lines to send it to an earth station for multiplexing with their station---Nature of the instrument was a scientific equipment---Contention of the assessee was that he had no control over the transponder which was necessary in order to treat the payments as royalty---Validity---Undoubtedly the assessee remained in use of transmitting and retrieving the signals by dint of transponder which would not have been possible but for the facility which was let out to him---Payments in respect of assessment year 2002-2003 and Tax year 2003, shall be royalty as per Article 12 of Pak-UK Double Taxation Treaty---Treatment endorsed by the First Appellate Authority was upheld by the Appellate Tribunal.

Shaukat Amin Shah, FCA for Appellant (in I.T.As. Nos.1023/IB to 1025/LB of 2006 and M.As. (A.G.) Nos. 439/IB and 313/IB of 2006).

Shahid Iqbal, LA for Respondent (in I.T.As. Nos.1023/IB to 1025/LB of 2006 and M.As. Nos. (AG) 439/IB and 313/IB of 2006)..

Shahid Iqbal, LA for Appellant (I.T.A. No.1026/IB of 2006).

Shaukat Amin Shah, FCA for Respondent (I.T.A. No.1026/IB of 2006).

Date of hearing: 9th May, 2009.

2011 P T D (Trib.) 1766

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs AES PAK GEN (PVT.) COMPANY and others

Versus

COLLECTOR OF SALES TAX, MULTAN

S.T.As. Nos.1332/LB, 1331/LB and 1297/LB of 2009, decided on 19th November, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 7, 8 & 46---Determination of tax liability---Entitlement to deduct input tax---Disallowing tax credit---Grounds expressed by appellant's Representative in appeal were, firstly, that Collector (Adjudication) had erred in treating the input tax paid on the purchase of High Speed Diesel as inadmissible for adjustment; secondly that Collector (Adjudication) erred in calculating the sales tax liability on account of supply of electricity to residential colony and street lights etc. and thirdly Collector (Adjudication) had erred in treating the input tax claimed on electricity during period when unit remained closed and did not produce taxable goods---First ground, regarding admissibility of input tax paid on High Speed Diesel, was settled by Federal Board of Revenue in cases of electricity producing Companies like the appellant---Federal Board of Revenue had accepted recommendation based on admission by the department; that High Speed Diesel was consumed as fuel and was taken directly in the cost; direction of Federal Board of Revenue in clarification letter also strengthened the appellant's case---Impugned orders to the extent of said issue were vacated and department was directed to allow adjustment of input on High Speed Diesel in view of direction given by Federal Board of Revenue---Regarding secondly, appellant had conceded on chargeability of Sales Tax against supply of electricity to its residential colonies and streets---Grievance of appellant against rate/value of the supplied electricity, was entertained as same was consequential to the main issue---Department was directed to charge sales tax on the supply in question applying the same rate of electricity at which appellant had sold to any other commercial entity during the relevant period; as Third ground was of disallowing adjustment of input on electricity consumed by the appellant during non-productive period; as per appellant's assertion number of auxiliaries remained operative in exigency of the business and explanation that shutting down of unit completely, during non-productive period, would have incurred huge losses to the appellant, required verification through expert opinion---However, if that assertion was found correct, then electricity consumed during non-productive period was within the provisions of S.7(1) of Sales Tax Act, 1990 and was not caught by the mischief of S.8(1)(a) of said Act---Department while disallowing the adjustment of input in question, had not dialated upon the main issues i.e. "whether consumption of electricity during standby position of the unit was a necessary part of business or not"---Orders on the said issue were vacated and case was remanded to Adjudicating Authority, having jurisdiction of the case; with direction to ascertain the answer of question posed and allow adjustment/deduction of input, if the consumption of electricity during non-productive period was found necessary for the business of the appellant.

Khaliqe-ur-Rehman, FCA for Appellant.

Tahir Tanveer, DR for Respondent.

Date of hearing: 19th October, 2010.

2011 P T D (Trib.) 1771

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

Messrs BAHRIA TOWN, RAWALPINDI and others

Versus

TAXATION OFFICER (AUDIT-III), ISLAMABAD and another

I.T.As. Nos.170/IB and 183/IB of 2009, decided on 15th January, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----S.177(4)(a)(b)(c)(d)---Audit---Word "also" ---Connotation---Rule of literal construction is that an interpretation which renders any part of provision as surplusage is not correct---Construction which would leave without effect any part of the language of a statute will normally be rejected---Provisions of subsections (2) and (4) of S.177 of the Income Tax Ordinance, 2001 were disjunctive and not conjunctive---Subsection (4) of S.177 of the Income Tax Ordinance, 2001 clearly empowered the Commissioner of Income Tax to issue notice on the basis of criteria spelt out in sub-clauses(a)(b)(c) and (d) of sub-section (4) of S.177 of the Income Tax Ordinance, 2001.

Writ Petition No.11166 of 2009 rel.

(b) Maxim---

----Audi alteram partem---Applicability---Strict observance of norms of natural justice in general and the principle of audi alteram partem is to be read in every statute.

PLD 2008 SC 663; 2007 SCMR 330; 2005 SCMR 678; 2005 SCMR 1814 and PLD 2004 SC 441 rel.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.177(4)(a)(b)(c)(d)---Audit---Pre-selection notice---Exclusion of pre-selection notice is essential for effective and smooth workability---If a brief scenario of fact along with legal implication was presented before the court order passed will be having complete subjective assessment of each issue---Court never intends to deprive the assessee to refute the version of the department---Right of assessee was protected in subsection (6) of S.177 of the Income Tax Ordinance, 2001 as well as in S.122(9) of the Income Tax Ordinance, 2001---Pre-selection notice was not necessary.

2008 PTD 1440; Muhammad Hussain v. C.I.T. 2005 PTD 152 and 2009 PTD 284 ref.

Commissioner of Income Tax and others v. Fatima Sharif Textile, Kasur and others 2009 SCMR 344 = 2009 PTD 37; Writ Petition No.11166 of 2009; Liberty Oil Mills v. Union of India AIR 1984 SC 1271; Union of India v. Tulsi Ram Patel AIR 1984 SC 1416; Lewis v. Heffer and others (1978) 3 All ER 354; Wednesbry Corporation v. Minister of Housing and Local Government (1965) 1 All ER 186; Hardutt Mull Jute Mills v. State of Bihar AIR 1957 Patna 2l and 2009 PTD 284 rel.

(d) Precedent---

----Curative philosophy---Where the judgments of the same forum with the same strength are in contrast to each other, then definitely, the judgments being later in time were to be followed due to concept of curative philosophy.

Mohsin Raza v. Chairman, F.B.R. and others 2009 PTD 1507 and Writ Petition No.11166 of 2009 ref.

(e) Income Tax Ordinance (XLIX of 2001)---

----S.177(4)(a)(b)(c)(d)---Audit---Non-quoting sub-clauses (a)(b)(c) & (d) of S.177(4) of the Income Tax Ordinance, 2001---Conditions and parameters set forth in Sub-Clauses (a) (b) (c) and (d) of subsection (4) of S.177 of the Income Tax Ordinance, 2001 were the jurisdictional basis, non-existence whereof was a sine qua non for selection of a person for audit ---Existence of such jurisdictional basis must necessarily be determined before power could be exercised---Such determination could only be effected after hearing the petitioners and granting them opportunity to produce the material to displace the case of the Department, which exercise could only be undertaken on an individual case-to-case basis---Department may very well issue notice purportedly under S.177(4) of the Income Tax Ordinance, 2001 but whether in fact and in law Department was entitled to exercise the powers conferred thereby and whether such powers had in fact been exercised within the parameters prescribed by law could always be challenged by the assessee by responding to the notice including by objecting to the jurisdiction and authority of the Commissioner to issue the same---Any objection raised would require to be adjudicated upon through a speaking order, if the very jurisdiction to issue such notice was challenged then the question of jurisdiction would require to be dealt with and decided first before the Commissioner could proceed further in the matter.

(f) Income Tax Ordinance (XLIX of 2001)---

----Ss.177, 120, 120(1A) & 121---Audit---Commissioner may amend any assessment under S.120 or 121 of the Income Tax Ordinance, 2001 and could do so on definite information acquired through audit or otherwise---For resorting to audit, powers had to flow from sub-section (1A) of S.120 of the Income Tax Ordinance, 2001 because S.177 of the Income Tax Ordinance, 2001, as was at relevant time, clarified as to how Commissioner shall select a case for audit; it will be according to the criteria laid down by Federal Board of Revenue or in addition to this he may also select a case for audit with regard to person's history, quantum of tax payable, class of business or where it was essential to determine correct income---Original powers flow from subsection (1A) of S.120 of the Income Tax Ordinance, 2001 and S.177 of the Income Tax Ordinance, 2001 provides procedure in detail as to how these cases will be selected---In law no provision could be considered as surplus or superfluous---Primary jurisdiction to select a case for audit flows from Sub-S.(1A) of S.120 of the Income Tax Ordinance, 2001 and S.177 of the Income Tax Ordinance, 2001 explained procedure and touchstone, as to how these cases will be selected---Section 177 of the Income Tax Ordinance, 2001 was a procedural or the machinery section-- Subsection (1A) of S.120 of the Income Tax Ordinance, 2001 empowered the Commissioner to select any person for audit of person's income tax affairs under S.177 of the Income Tax Ordinance, 2001; there was lacuna in the law which had been filled later on through Finance Act, 2005---Similarly subsection (4) of S.177 of the Income Tax Ordinance, 2001 was inserted in the Income Tax Ordinance, 2001 through Finance Act, 2004 relevant to tax year 2005 onward and not applicable to the tax year 2004---Taxpayer was to be dealt in a tax year as per law enforceable for the tax year.

(g) Income Tax Ordinance (XLIX of 2001)---

----S.21---Deductions not allowed---Capital expenditure claimed in development cost---Addition---Assessee contended that payments were neither claimed as "expenses" nor charged to "development work in progress" rather these were booked as "advances" and were capitalized subsequently---No substantiating evidences were produced by the assessee indicating that the relevant payments were subsequently capitalized---Order indicated that requisite payments were claimed by the taxpayer in development cost and since these payments were capital in nature the Taxation Officer rightly added these in taxable income.

(h) Income Tax Ordinance (XLIX of 2001)---

----S.21 (1)---C.B.R. Circular No.11 of 1998 dated 25-7-1998---F.B.R. Circular No.1 of 2006 dated 17-2-2006---Deductions not allowed---Tax year 2005---Cash payments on account of development work in progress---Addition---Assessee contended that payments in nature of trading expenses were not required to have been paid through banking channel in terms of Circular No.11 dated 25-7-1998; and the same had been withdrawn through Circular No.1 dated 17-2-2006 and that provision of Cl.(I) of S.21 of the Income Tax Ordinance, 2001 were effective from tax year 2006 and not from the tax year 2005---Validity---Contention was based on fact as F.B.R. Circular No.1 of 2006 dated 17-2-2006 provided that payments exceeding Rs.10,000 under a single head of any trading or profit and loss expense shall not be an admissible expense if not made through cross cheque w.e.f. 1-7-2006---Since relevant payments had been made during tax year 2005 i.e. during financial year 2004-2005, provision of Cl.(I) of S.21 of the Income Tax Ordinance, 2001 was not applicable---Additions made in such respect had been rightly deleted by the First Appellate Authority.

(i) Income Tax Ordinance (XLIX of 2001)---

----Second Sched. Cl. (39) & S.21---Payment to employees in respect of special allowance---Non-deduction of tax at source considering the said payments as exempt under Cl.(39) of Second Sched. of the Income Tax Ordinance, 2001---Addition---Taxpayer contended that conditions spelt out in Cl.(39) of the second schedule of the Income Tax Ordinance, 2001 would come into play in the cases of concerned employees who had received the payments and the provisions of said clause had nothing to do with payments made by the taxpayer---Validity---Clause(39) of the Second Sched. of the Income Tax Ordinance, 2001 stipulate certain conditions as to exemption of relevant payments in the hands of recipients i.e. concerned employees and that the said clause had nothing to do with the payments made by the taxpayer---Addition made was found to be rightly un-warranted and the same was rightly deleted.

(j) Income Tax Ordinance (XLIX of 2001)---

----S.21---Deductions not allowed---Claim on account of purchase of land was added back for the reasons that receipts against sale of such land were not declared---Details revealed that such receipts were declared by the taxpayer and observation of Taxation Officer that receipts were not declared was against the facts of the case---Break up of such receipt was produced before First Appellate Authority for the first time---Assessing Officer if able to negate this break up was at liberty to move for rectification before Appellate Tribunal---First Appellate Authority had rightly deleted such addition---Cross appeals filed by the department were dismissed by the Appellate Tribunal.

Hafiz Idrees and Abdul Basit, FCA for Appellant (in I.T.A No.170/IB of 2009).

Shahid Iqbal, L.A. for Respondent (in I.T.A. No.170/IB of 2009).

Shahid Iqbal, L.A. for Appellant (in I.T.A. No. 183/IB of 2009).

Hafiz Idrees and Abdul Basit, FCA for Respondent (in I.T.A. No.183/IB of 2009).

Date of hearing: 15th January, 2011.

2011 P T D (Trib.) 1793

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs SUPREME TEC. INTERNATIONAL, KOT ADDU

Versus

C.I.R. (RTO), MULTAN

M.A. No.611/LB of 2010 in S.T.A. No.270/LB of 2009, decided on 21st January, 2011.

Sales Tax Act (VII of 1990)---

----S. 46---Rectification of order passed by Appellate Tribunal---Scope---Submission of counsel for applicant was that Appellate Tribunal had inherent jurisdiction to rectify its order under S.151, C.P.C. read with S.132 of Income Tax Ordinance, 2001---Appeals filed under S.46 of the Sales Tax Act, 1990 would be decided by Appellate Tribunal under powers and procedure given in Ss.131 & 132 of the Income Tax Ordinance, 2001, but no power of review or rectification of its own judgment/order was given in the said section---After insertion of subsection (2) of S.46 of the Sales Tax Act by Finance Act, 2009, jurisdiction previously provided under S.184-B(2) of the Customs Act, 1969, was no more available---As S.221 of the Income Tax Ordinance, 2001 was not mentioned in subsection (2) of S.46 of the Sales Tax Act, 1990, the powers of rectification available under that section, could also not be invoked while exercising jurisdiction under S.46 of Sales Tax Act, 1990---Provisions of S.221 of Income Tax Ordinance, 2001 whereby the Tribunal was empowered to rectify any mistake apparent on record in any order passed by it, could only be invoked for appeals filed under the provisions of Income Tax Ordinance, 2001---Jurisdiction of review/rectification, could only be given by statute---Since Appellate Tribunal had no jurisdiction to rectify its own order passed in exercise of its jurisdiction under S.46 of the Sales Tax Act, 1990, application for rectification of order, was dismissed.

Waseem Ahmad Malik for Applicant.

Azmat Elahi Ghumman, D.R. for Respondent.

Date of hearing: 21st January, 2011.

2011 P T D (Trib.) 1800

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member and Sohail Afzal, Accountant Member

C.I.T., LEGAL DIVISION, RTO, LAHORE

Versus

Messrs PLASCOAT SYSTEM, LAHORE

I.T.A. No.172/LB of 2010, decided on 13th May, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114, 115(4), 120, 122(5-A), 131 & 153---Furnishing return of income---Amendment of assessment---Payment for goods and services---Deduction of tax from the gross amount payable---Assessment was completed under S.120 of Income Tax Ordinance, 2001 and on scrutiny of record it was found that assessee being manufacturer had been filing statement under S.115(4) of Income Tax Ordinance, 2001 till tax year 2004 by opting for "Presumptive Tax Regime"---For the tax year 2005, the assessee had filed return under Normal Tax Regime under S.114 of Income Tax Ordinance, 2001, whereas he was under legal obligation to follow the option for succeeding three years---Assessee was required to file statement under S.115(4) of Income Tax Ordinance, 2001 for the year in question on account of supplies made to different parties instead of fling of return under the normal law---Taxation Officer observed that assessee had failed to fulfil the requirements of law and assessment was found to be erroneous---Assessee, being manufacturer, was under legal obligation to follow the option upto subsequent three years' and was also required to file statement under S.115(4) of the Income Tax Ordinance, 2001 under Presumptive Tax Regime for the Tax year 2005 on account of supplies made to different parties instead of filing of return under Normal Tax Regime---Assessee having not fulfilled the requirements of law, assessment completed under deeming provisions of S.120 of Income Tax Ordinance, 2001 was erroneous as well as prejudicial to the interest of Revenue---Taxation Officer had rightly modified the assessment under S.122(5-A) of Income Tax Ordinance, 2001 for the year in question and treated the tax deduction under S.153 of the Ordinance on supplies as final discharge of tax liability---Order of the Taxation Officer was on sound footings, justified and in accordance with law; while order passed by the first Appellate Authority was illegal and without lawful authority---Order passed by Commissioner Income Tax (Appeals), was vacated, and that of Assessing Officer restored.?

??????????? Ali Mansoor, D.R. for Appellant.

?????? M. Shahid, for Respondent.

?????? Date of hearing: 14th April, 2011.

2011 P T D (Trib.) 1804

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Tabana Sajjad Naseer, Accountant Member

C.I.R., LEGAL DIVISION, LTU, LAHORE

Versus

Messrs TETRA PAK PAKISTAN LTD., LAHORE

I.T.As. Nos.352/LB and 353/LB of 2010, decided on 9th March, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 113, 154(4) & 131---Chargeability of minimum tax---Addition made on account of reversal of provisions for bad debts---Chargeability of tax on rebate---Department in appeal against Commissioner (Appeals) had challenged the order on three grounds: First ground related to chargeability of minimum tax under S.113 of Income Tax Ordinance, 2001; second ground related to addition made on account of reversal of provisions for bad debts and third ground related to the chargeability of tax on rebate given to the taxpayer on export---First two grounds had already been decided by Appellate Tribunal in favour of the taxpayer---Departmental Representative conceded that said two issues had already been decided in appeal relating to other tax year---Regarding third ground, Representative of the department had submitted that the rebate received by the taxpayer in a relevant tax year, being an income was liable to be taxed---Validity---Rebate in question had arisen from the export by the taxpayer---Provisions of subsection (4) of S.154 of Income Tax Ordinance, 2001, very vividly spoke in support of the arguments made by representative of taxpayer---Representative of department could not dispute that rebate had arisen from a transaction's export, which was covered under S.154 of Income Tax Ordinance, 2001---Income of rebate, in circumstances, would fall within Final Tax Regime and had already been taxed---In presence of very clear language of law, there was no need to take any support from a Circular or S.R.O.---Appeals by the department on that ground also failed.

PTR No.218 of 2005 dated 28-5-2009 and ITA No.124/IB/2007 dated 4-8-2009 ref.

Dr. Ishtiaq Ahmad, D.R. for Appellant.

Hamza Ashraf, ACA for Respondent.

Date of hearing: 9th March, 2011.

2011 P T D (Trib.) 1807

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs FARA AGRO (PVT.) LTD., GUJRANWALA

Versus

C.I.R., (LEGAL DIVISION) RTO, GUJRANWALA

I.T.A. No.1546/LB of 2010, decided on 24th May, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5-A) & 131---Amendment of assessment---Commissioner Income Tax (Appeals) through his order in first round of litigation had not only annulled the order on legal grounds, but also found the addition as not sustainable on factual aspects---Contentions put forth by the taxpayer's representative that the original order ceased to exist and stood merged in the appellate order, was correct---Legal recourse for the department was to file an appeal---Since the first appellate order remained un-challenged, same had attained finality and the invocation of provisions of S.122(5-A) of Income Tax Ordinance, 2001, were not sustainable---Where the Appellate Authority had given its finding on a particular issue, the original order ceased to exist and stood merged into the appellate order---In the present case the Commissioner Income Tax (Appeals) having already considered the issue of waiver of loan and mark-up the deemed order stood merged into the appellate order and the action of the Taxation Officer under S.122(5-A) of Income Tax Ordinance, 2001 was not sustainable---Deemed order having merged into the order of Commissioner Income Tax (Appeals), higher Authority to the Commissioner Income Tax (Appeals) could take action under S.122(5-A) of Income Tax Ordinance, 2001---Proceedings under S.122(5-A) of Income Tax Ordinance, 2001 were revisional in nature, same could not be exercised by a subordinate authority---Order passed by the Taxation Officer as well as the first Appellate Authority, were not sustainable in the eyes of law---Both the orders of the authorities below were vacated in circumstances and appeal preferred by the taxpayer, was accepted.

2009 SCMR 1279 = 2009 PTD 1392; 2001 PTD 1467; 1999 PTD (Trib.) 401; I.T.A No.697/LB/2010, dated 3-8-2010; I.T.A. No.370/LB/2009 dated 6-7-2009; 1999 PTD (Trib.) 401; 1988 PTD (Trib.) 775; 1993 PTD 1113; PLD 1992 SC 549; 1992 PTD 932 and (2009) 100 Tax 81 (SC) ref.

Muhammad Hamid for Appellant.

Atif Bashir D.R. for Respondent.

Date of hearing: 24th May, 2011.

2011 P T D (Trib.) 1813

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Sh. M. IJAZ & COMPANY, LAHORE

Versus

COLLECTOR OF SALES TAX, LAHORE

S.T.A. No.1214/LB of 2009, decided on 13th October, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss. 2(37), 11, 21, 36, 37-C & 46---Assessment of tax---Tax fraud and evasion of tax---Blacklisting of company---During audit of appellant company, tax profile of the company appeared abnormal, which led to believe that appellant might have been involved in issuance of fake/flying invoices and was blacklisted---Appellant having failed to appear despite service of several notices, either in person or through counsel, order-in-original was passed ex parte---Believing that appellant was involved in issuing fake/flying invoices; and that no physical transaction was made, appellant was directed to pay whole amount of tax involved in relevant period along with Additional Tax and penalty was also imposed equal to 50% of the evaded Sales Tax---Appellant was represented before Collector (Appeals) and it was recorded that certain documents were produced by appellant like, Sales Tax return, purchase and sale invoices and purchase register---Genuineness of said transaction, however was not accepted by Collector (Appeals) for not producing transaction documents, inward/outward gate passes etc. which was main reason for denying relief to appellant---No finding was given by Appellate Authority on assertion of appellant that supplies were made by appellant to confirmed buyers---Mere reason that name of the supplier was in negative list, was not sufficient to discard the transactions---To arrive at a just conclusion, it was incumbent upon the first Appellate Authority to verify the documents presented by the appellants before it, either himself or through Revenue authorities---Verification could be made by comparing the presented documents with the record of appellant---Appellant could also be asked directly to confirm the transaction---In absence of any such exercise, the findings and decision of first Appellate Authority, were passed without exercise of judicious mind, which were not sustainable---Evidence produced by the appellant having not been considered and verified properly, first Appellate Authority was directed to re-evaluate the evidence produced by the appellant and pass a speaking and judicious order---Prima facie case of fraud having not been made out, burden of proof under S.2(37) of Sales Tax Act, 1990 was not shifted to the appellant---Revenue was bound to prove its allegations contained in the show-cause notice---Order-in-Appeal was set aside and case was remanded to the first Appellate Authority, in circumstances.

(b) Sales Tax Act (VII of 1990)---

----Ss. 11(4) & 46---Assessment of Tax---Payment of less amount of tax actually payable---Issuance of show-cause notice---Imposition of penalty and additional tax---Limitation---Appellant/taxpayer raised ground of limitation submitting that impugned order-in-original was passed about 11 months after issuance of show-cause notice which was beyond period of limitation under S.11 of the Sales Tax Act, 1990 which was 180 days from the date of issuance of show-cause notice---Higher forum was bound to look into the question of limitation only when the question of limitation was raised before it; duty of higher forum related to the question of limitation regarding initiation of main proceedings as envisaged by legislature in S.3 of the Limitation Act, 1908 and attitude of the party, pressing the question of limitation before the higher forum was also relevant---Limitation under consideration, was not of initiation of proceedings because issuance of show-cause notice was within time---Limitation to conclude proceedings was challenged for the first time before Appellate Tribunal---Attitude of the appellant could also not be overlooked while determining the question of limitation---Appellant did not represent before the adjudicating officer despite submitting power of attorney and getting adjournment---Order-in-original had shown that eleven dates of hearing were fixed; in backdrop of such attitude, appellant could not challenge that the proceedings were not concluded in time; and that too in second appeal for the first time---Question of limitation could not be entertained, in circumstances.

CIT v. Hakim Ali Zardari 2006 PTD 271 and Haji Ghulam Rasul and others v. Government of Punjab and others 2003 SCMR 1815 ref.

Latif Ahmad Qureshi for Appellant.

Tahir Tanveer, D.R. for Respondent.

Date of hearing: 13th October, 2010.

2011 P T D (Trib.) 1820

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Farooq Shah, Judicial Member

Mrs. TEHMINA HASNAIN

Versus

COMMISSIONER INLAND REVENUE, (APPEAL-II), KARACHI

I.T.A. No.36/KB of 2011, decided on 26th March, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 122, 127 & 131---Appeal to the Commissioner (Appeals)---Maintainability of---Commissioner (Appeals) without discussing the merits and demerits of the case had dismissed appeal, merely on the ground that appeal did not lie under S.127 of Income Tax Ordinance, 2001 against order passed by the Taxation Officer under S.122(c) of Income Tax Ordinance, 2001---Statute had not withdrawn the substantive vested right of an aggrieved party to file an appeal against an order not tenable in law and facts---Any order passed under S.122 of Income Tax Ordinance, 2001 had been made appealable---Taxpayer and department were having legal substantive right to contest the legal issues before appellate fora, even no tax liability was involved in the order passed by the Taxation Officer---Provisional assessment under S.122 of Income Tax Ordinance, 2001 was appealable as S.127 of the Ordinance, was completely silent about non-fileability of appeal under S.122(c) of the Ordinance---Impugned order of Commissioner (Appeals) based on technical grounds regarding no vested right of appeal against order of Assessing Officer was not tenable in law---Case was remanded to Commissioner for passing a fresh speaking order on merits, after affording fair opportunity of hearing to both the parties.

AIR 1960 (SC) 122; AIR 1960 (SC) 47; AIR 1962 (SC) 1553; AIR 1987 (SC) 849; Manager J&K State Property v. Khuda Yar and others PLD 1975 SC 678; 2001 PTD 1633; 2004 PTD (Trib.) 1784 and 1981 PTD 210 ref.

(b) Interpretation of statutes---

----Two or many parts of a section, must be construed as a whole and must be read as integral part to avoid repugnancy.

Haji Yusuf Rehmatullah for Appellant.

Rajabuddin, D.R. for Respondent.

Date of hearing: 25th February, 2011.

2011 P T D (Trib.) 1824

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs DJM SECURITIES (PVT.) LTD., KARACHI

Versus

C.I.T., RTO, KARACHI

I.T.A. No.938/KB of 2010, decided on 29th March, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 111(1) (b) & 122(5)---Unexplained income or assets---Addition was made on the ground that out of ten cheques issued to the Director, amount of six cheques were not recorded in the ledger account of the taxpayer/company---Inference was that the taxpayer/company had under reported the debit side of the balance sheet to the extent of such amount to off set the credit side of the balance sheet---Taxpayer contended that Assessing Officer misdirected himself by attempting to cross match the payment made by the company from the customer ledger account which was specifically meant for keeping track records of transaction of shares of listed securities; and misconstrued the nature of payment as an investment without any basis and even without appreciating the facts of the case; and Director of the company had also been a customer of the company and was maintaining customer account with the company to carry out his proprietary transactions of shares of listed companies; and customer account with the company was exclusively meant for or keeping track records of his transactions of shares of listed securities, whereas the payments represented repayment of loans which the Director had advanced to the company through normal banking channels to meet the paucity of funds for meeting day to day routine expenses and to minimize the burden of financial shares; and for purpose of keeping track record of such loan and advances, the company maintained separate ledger account of director loans/advances---Validity---While making addition and upholding the treatment, the authorities below had misdirected themselves by attempting to cross match the payment made by the taxpayer/company from the customer ledger account which was specifically meant for keeping track records of transaction of shares of listed securities---Taxation Officer had misconstrued the nature of payment made by the taxpayer/company to its director as an investment without any basis and even without appreciating the facts of the case---Recipient besides being the Director of the company had also been a customer of the company and was maintaining the customer account with the company to carry out his proprietary transaction of shares of listed companies---Customer account of the recipient with the company was exclusively meant for or keeping track records of his transactions of shares of listed securities, whereas the payment represented repayment of loans which had been advanced to the taxpayer/company through normal banking channels to meet paucity of funds for meeting day to day routine expenses and to minimize the burden of financial charges---Addition was deleted by the Appellate Tribunal being without justification; and appeal was allowed.

?????? Sohail Jute Mills Ltd. v. Federation of Pakistan PLD 1991 SC 329; Messrs Mehran Associates v. CIT 1993 SCMR 274 = 1993 PTD 69; I.T.A. No.370/KB/2009; Income Tax Officer v. Chappal Builders 1993 SCMR 1108; 1993 SCMR 1108; Central Insurance Company and others v. Central Board of Revenue 1993 PTD 766; Pakistan Education Society v. Federation of Pakistan 1993 PTD 804 and Syed Azhar Ali v. Director General Excise and Taxation 2002 PTD 700 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.111(1)(b)? &? 122(5)---C.B.R.? Circular? No.9? of? 1998? dated? 21-7-1998---C.B.R. Circular No.15 of 1980 dated 26-6-1980---Unexplained income or assets---Addition---Taxpayer contended that composite audit proceedings was conducted and the Taxation Officer mainly focused on the sources of investment; and after making verification of sources of investment he did not draw any adverse inference with regard to investment and closed the audit proceedings with prior approval of the Additional Commissioner; and since, audit proceedings were closed with prior approval of the Additional Commissioner, the Taxation Officer being a subordinate officer to Additional Commissioner could not review the same issues from his own spectacles which had already been adjudicated upon by his supervising officer---Validity---Taxation Officer had made addition under S.111(1)(b) of the Income Tax Ordinance, 2001 for alleged non-recording of certain payments in its books of accounts without taking the cognizance of the fact that his predecessor had already closed the audit proceedings after seeking details, documents and explanation in respect of certain issues including verification of inflow and outflow of cash vis-a-vis nature of transactions raised by the then Commissioner---Such fact could be verified from the copy of composite audit report issued by the predecessor of the Taxation Officer---Sources of investment had been duly discussed in the audit report after seeking complete details and documentary evidence including bank statements, details of trade creditors and debtors, agreement of bank financing, details of capital gain etc. had closed the audit proceedings---No justification was available to initiate amended proceedings at later stage on the basis of same material which the taxpayer had himself? provided---During audit the Deputy Commissioner Inland Revenue had mainly focused on the sources of investment made by the taxpayer and after making verification of sources of investment he had not drawn any adverse inference with regard to investment made by the taxpayer and had closed the audit proceedings with prior approval of the Additional Commissioner---As audit proceedings were closed with prior approval of the Additional Commissioner, the Deputy Commissioner Inland Revenue being sub-ordinate officer to Additional Commissioner could not review/amend the assessment on the same issue from his own spectacle which had already been adjudicated upon by his supervising officer.?

?????? 1990 PTD 389 (H.C.); 2003 PTD 1068 (Trib.); 2004 PTD 1010 (Trib.) and 2004 PTD 2749 (Trib.) rel.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5), 210, 211 & 114---Income Tax Ordinance (XXXI of 1979), Ss. 59(1), 62, 63 & 65---Amendment of assessment---Jurisdiction---Taxpayer contended that amendment of assessment was illegal, ab initio void and without jurisdiction as the power rested with Commissioner, and Deputy Commissioner Inland Revenue was not legally competent to amend the order treated to have been passed under S.120 of the Income Tax Ordinance, 2001 by his higher authority i.e. Commissioner Inland Revenue; and the order under S.122(5) of the Income Tax Ordinance, 2001 was without jurisdiction---Validity---Deputy Commissioner/Taxation Officer was empowered under the delegated powers of Commissioner Inland Revenue under S.210 of the Income Tax Ordinance, 2001 to amend the order deemed to have taken place under S.120 of the Income Tax Ordinance, 2001 after receiving definite information by invoking the provisions of S.122(5) of the Income Tax Ordinance, 2001, the action taken was well within the ambit of law as provision of S.210 of the Income Tax Ordinance, 2001 empowers the Commissioner to delegate powers and function to any Taxation Officer sub?ordinate to him except the power of delegation as expressly mentioned in S.210(1A) of the Income? Tax? Ordinance, 2001---Section 211 of the Income Tax Ordinance, 2001 treated the powers exercised or the functions performed by the Taxation Officer under a delegated authority as powers or function exercised or performed by the "Commissioner"---Since under Income Tax Ordinance, 2001, by fiction of law the taxpayer itself was presumed to be author of his assessment order because the return so filed under S.114(4) of the Income Tax Ordinance, 2001 shall be taken for all purposes of Income Tax Ordinance, 2001 to be an assessment order issued to the taxpayer by the Commissioner on the day the said return was furnished---Assessment would be deemed to have taken place by fiction of law and not ipso facto an order passed by the Commissioner with conscious application of mind unlike as was so provided in the Income Tax Ordinance, 1979, under Ss.59(1), 62 and 63 on which provisions of S.65 of the Income Tax Ordinance, 1979 were invoked---None of the Officers Inland? Revenue was empowered to make an assessment under S.120 of the Income Tax Ordinance, 2001---Assertion that to pass an amended order under S.122(5) of the Income Tax Ordinance, 2001 to be framed by a superior authority hardly remained applicable---Factual position was that taxpayer himself was making his own assessment and authority under the Income Tax Ordinance, 2001 who had been delegated the powers under S.210 of the Income Tax Ordinance, 2001 could amend an order under S.122(5) of the Income Tax Ordinance, 2001; it was only because of such restriction placed under subsection (1A) of S.210 of the Income Tax Ordinance, 2001 that the powers under S.122(5A) of the Income Tax Ordinance, 2001 could not be delegated to an officer below the rank of Additional Commissioner---Section 211(1) of the Income Tax Ordinance, 2001 provide that any order passed by an officer under delegated powers from the Commissioner shall be treated to be an order passed by the Commissioner---Order under S.122(5) of the Income Tax Ordinance, 2001 issued by the Deputy Commissioner was to be treated as an order issued by the Commissioner himself and not by the Deputy Commissioner---Deputy Commissioner did not amend the order of the Commissioner but the Commissioner himself was passing order under S.122(5) of the Income Tax Ordinance, 2001 by virtue of operation of S.211(1) of the Income Tax Ordinance, 2001---If contention made by the taxpayer that only a superior authority should evaluate or revise the order of the Commissioner was accepted, appeal against the order of Commissioner and those treated to have been issued by him by virtue of provisions of S.211(1) of the Income Tax Ordinance, 2001 should not lie with the Commissioner (Appeals),? which? will? lead? to? a? situation? of? deadlock? and? this? proposition? being? against? the? scheme? of? law? and? intention? of? legislature? was? unacceptable---Order? passed? by? the Deputy Commissioner Inland Revenue under S.122(5) of the Income Tax Ordinance, 2001, was legal and within lawful authority.??

?????? Writ Petition 653 of 2009; C.Ps. Nos.1664-1665 of 2009 dated 11-9-2009 and I.T.As. Nos. 393 and 270/KB/2010 rel.

(d) Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5), (5A) & (9)---Income Tax Ordinance (XXXI of 1979), S.65---Amendment of assessment---Methods of amendment of assessment---Two methodologies were provided to amend an assessment order treated to have been made under S.120 of the Income Tax Ordinance, 2001 First being? under subsection (5) of S.122 of the Income Tax Ordinance, 2001 which action could be taken only on the basis of definite information acquired from audit or otherwise and the other was provided under subsection (5A) of S.122 of the Income Tax Ordinance, 2001 where Commissioner considered that the assessment order under S.120 of the Income Tax Ordinance, 2001 was erroneous so far as it was prejudicial to the interest of revenue---First method had been applied in the present case, as the case of taxpayer was selected for audit and thereafter on the basis of findings of audit a notice under S.122(9) of the Income Tax Ordinance, 2001 was issued---Action under S.122(5) of the Income Tax Ordinance, 2001 could only be taken on the basis of definite information acquired from audit or otherwise---Expression? "definite? information"? had? been? defined? under? sub-section (8) of S.122 of the Income Tax Ordinance, 2001, which was an "inclusive" definition.??

?????? Income Tax Officer v. Chappal Builders 1993 SCMR 1108; 1993 PTD 1108; Central Insurance Company and others v. Central Board of Revenue 1993 PTD 766; Pakistan Education Society v. Federation of Pakistan 1993 PTD 804 and Syed Azhar Ali v. Director General Excise and Taxation 2002 PTD 700 ref.

(e) Income Tax Ordinance (XLIX of 2001)---

----S.122(5)---Income Tax Ordinance (XXXI of 1979), S. 65---Amendment of assessment---Change of opinion---Re-opening of assessment under S.65 of the Income Tax Ordinance, 1979 was para meteria to provisions of S.122(5) of the Income Tax Ordinance, 2001---Where all the facts had been fully disclosed by the assessee which had been duly considered by the Income Tax Authorities and the assessment had been framed consciously and no new fact had been discovered the assessment could not be reopened at later stage merely for the reasons of change of opinion.?

?????? 1990 PTD 389 (H.C.); 2003 PTD 1068 (Trib.); 2004 PTD 1010 (Trib.) and 2004 PTD 2749 (Trib.) rel.

?????? Muhammad Athar for Appellant.

?????? Nemo for Respondent.

?????? Date of hearing: 29th March, 2011.

2011 P T D (Trib.) 1844

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member and Tabana Sajjad Naseer, Accountant Member

MUHAMMAD MUTI-UR-RAHMAN

Versus

COLLECTOR OF SALES TAX (APPEALS), LAHORE

S.T.A. No.1633/LB of 2009, decided on 6th May, 2011.

(a) Sales Tax Act (VII of 1990)---

----S. 65---Exemption of tax not levied or short levied as a result of general practice---Convenience Store at filling station---Taxpayer did not get itself registered despite carrying on business as a retailer---On being appraised by the Department, taxpayer moved application for registration and business was registered---As the taxable supplies would cross the exemption limit during financial year 2005-2006, taxpayer paid sales tax for the tax periods 07/2005 to 11/2005 voluntarily along with default surcharge and moved application under S.65 of the Sales Tax Act, 1990 for exemption of the tax not levied by him as a general practice on 28-12- 2005---During pendency of application, show-cause notice under S.11(2) & 36(1) of the Sales Tax Act, 1990 was issued without waiting for the fate of application under S.65 of the Sales Tax Act, 1990 raising demand of sales tax---Taxpayer contended that his case did qualify for exemption of sales tax not levied by him up to 30-6-2005 as a result of general practice; and general practice was evident from the fact that prior to the taxpayer the said Convenience Store was run by his predecessor, which had been operating the filling stations on the Motorway; and neither the taxpayer nor his predecessor was ever apprised by the Sales Tax Department that sales tax had to be charged on the retail sales, nor the taxpayer or his predecessor, ever charged the sales tax as a retailer---Concept of having a Convenience Store on every filling station was introduced throughout the country, which was followed by the other filling stations but none of them had been levying and paying sales tax on the retail sales of its Convenience Store---General practice was not to charge sales tax on the retail sales being made by the Convenience Store---Taxpayer did not levy and pay sales tax on the retail sales of the Convenience Store being run by him inadvertently and as a general practice---Department contended that pendency of taxpayer's application under S.65 of the Sales Tax Act, 1990 with the Federal Board of Revenue since long meant that the Federal Board of Revenue did not want to extend exemption to the taxpayer---Validity---Department admitted that neither the taxpayer nor his predecessor ever charged the sales tax, and they were not apprised by the Sales Tax Department that the sales tax ought to have been charged on the supplies made by the Convenience Store---Non-levy and non-payment of sales tax by all the persons engaged in business gave rise to a general practice---Case of the taxpayer was comparable only with the Convenience Stores on the filling stations throughout the country and not with the others---Department had not been able to quote even a single case of such Convenience Store, which voluntarily paid sales tax, or which was subjected to sales tax like the taxpayer, which meant that taxpayer did not charge and pay the sales tax as a general practice prevailing among the parallel cases of Convenience Stores---First condition of S.65(a) of the Sales Tax Act, 1990 that "tax has not been charged in any area on any supply which was otherwise taxable" was fully satisfied---Taxpayer did not levy and pay the sales tax inadvertently as a result of general practice up to 30-06-2005---Second condition that "the registered person did not recover any tax prior to the date it was discovered that the supply was liable to tax" the Department had not brought on record any evidence that the taxpayer recovered any sales tax from the tax periods 2 of 2001 to 6 of 2005 was also satisfied---Third condition of S.65(c) of the Sales Tax Act, 1990 that "the registered person started paying the tax from the date when it was found that the supply was chargeable to tax" also stood complied with---On being apprised by the Department, the taxpayer got himself registered and started paying sales tax and had been faithfully discharging his sales tax liability till date under Sales Tax Special Procedure Rules, to which the Department had never raised eye-brow---Taxpayer's case of exemption was fully covered by provisions of S.65 of the Sales Tax Act, 1990---Taxpayer was fully entitled to exemption of the sales tax not levied by him up to 30-6-2005 inadvertently and as a result of general practice---Demand along with default surcharge raised was set at naught and the orders of the authorities below to that extent were annulled by the Appellate Tribunal.

D.G. Khan Cement Company Ltd. and others v. The Federation of Pakistan (C.A. 1866/1996) decided on 11-11-2003 and GST 2005 CL 100 ref.

2005 PTD 480 rel.

(b) Sales Tax Act (VII of 1990)---

----S. 65---Exemption of tax not levied or short levied as a result of general practice---Grant of exemption---Conditions; (a) tax has not been charged in any area on any supply which was otherwise taxable, or according to the said practice the amount charged was less than the amount that should have actually been charged; (b) the registered person did not recover any tax prior to the date it was discovered that the supply was liable to tax and (c) the registered person started paying the tax from the date when it was found that the supply was chargeable to tax---Power to grant exemption rested with Federal Government.

(c) Sales Tax Act (VII of 1990)---

----S. 65---Exemption of tax not levied or short levied as a result of general practice---Power of Appellate Tribunal to adjudicate the issue of exemption---Federal Board of Revenue had not taken any decision on the application under S.65 of the Sales Tax Act, 1990 despite a lapse of more than five years, the Appellate Tribunal was empowered to adjudicate upon the issue of exemption.

2005 PTD 480 rel.

(d) Sales Tax Act (VII of 1990)---

----S. 65---Exemption of tax not levied or short levied as a result of general practice---Disallowance of exemption leisurely, arbitrarily and whimsically---Provisions granting exemption are to be strictly construed, but it was equally true that a benefit conferred by law subject to certain conditions could be withheld if the conditions were complied with/satisfied, and such benefit could not be disallowed merely on the basis of conjecturers and surmises---When liberal construction of the provisions granting exemption is not permissible in favour of taxpayer, the Department could not disallow exemption leisurely, arbitrarily and whimsically.

Syed Ali Imran Rizvi for Appellant.

Atif Bashir, D.R. for Respondent.

Date of hearing: 6th May, 2011.

2011 P T D (Trib.) 1857

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs PAKISTAN HOTELS DEVELOPERS LTD., KARACHI

Versus

D.C./TO.XII AD LTU, KARACHI

I.T.As. Nos.716/KB and 723/KB of 2010, decided on 16th March, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 20, 21(n), 22, 23, 34, 37(5) & 131---Claim for deduction---Denial of claim---Taxpayer, a public company, engaged in Hotel business decided to extend existing premises---As per mutual agreement and confirmation by consortium of Banks, entire finance cost of said extension was to be borne by Bankers---Taxpayer in view of said undertaking entered into agreement with owner of land to purchase the land for extension and he paid huge amount as earnest money to land owner and it was agreed between the parties that if the balance amount was not paid on or before stipulated date, the earnest money would be forfeited---Prior to execution of the agreement of sale the consortium had agreed to finance by loaning upto Rupees 1,200 million through redeemable finance facilities---Bankers had committed to provide entire funds in respect of the extension and on the basis of said undertaking given by the Bankers taxpayer had not only executed an agreement for purchase of land, but had also paid advance earnest money; and appointed an architect for preparing site plan and said site plan was presented for approval of Municipal and Building Authorities---Fees and other charges were also paid---When the taxpayer had taken all the steps within its power, one of the Members of consortium, refused to approve the finance facilities and as finance facility was not approved nor received by the taxpayer, the balance amount of sale of land could not be paid by the taxpayer, consequently according to sale agreement huge amount of earnest money was forfeited---Taxpayer, in circumstances, pleaded that such loss suffered by him was of revenue nature and allowable as a business expenditure under S.20 of Income Tax Ordinance, 2001---Contention of representative of taxpayer was that as entire expenditure was incurred for expansion of same business, the assumption that it was an expenditure of capital nature was totally incorrect, but as same had incurred during course of business in existence, the entire expenditure was admissible deduction and allowable under S.20 of Income Tax Ordinance, 2001---No negligence of the taxpayer was on record and the entire investment was made for the purpose of expansion of running the hotel business---Said investment was lost which included forfeiture of security deposit, which could not be termed a 'capital expenditure'---Every investment or expenditure was not a capital expenditure and as taxpayer had suffered a loss in the cost of business in existence and regularly carried on, the loss suffered on account of forfeiture of security deposit and other expenses, like food cost expenses and replacement of carpet and repairing cost of generator, were of revenue nature and the necessity of Hotel business---In the past, claim in that respect had never been disallowed---Addition made in respect of repairs and maintenance expenses and disallowance made by the Taxation Officer, was deleted, in circumstances; however regarding disallowances made out of travelling and transport expenses; guest supplies expenses; replacement of linen and printing and stationery expenses, treatment in that respect by the officers below were fair and reasonable---No interference was required in that regard---Appeal on that ground was dismissed. ?

?????? 2007 PTD (Trib.) 2860; 1983 PTD 58; CIT v. Sugar Dealers (1975) 100 ITR 424; ITAT Lahore's case (1959) 1 Tax (V-60); CIT v. Textool Co. Limited (1982) 135 ITR 200. ; 15 Tax 53 (H.C.); Messrs? Goton Lime Syndicate v. CIT, 59 ITR 178; Messrs? Empire Jute Company Limited v. CIT, 124 ITR 1; Messrs? L.H. Sugar v. CIT, 125 ITR 193 (SC); 2007 PTD (Trib.) 1860; (2007) 96 Tax 61 (Trib.) and 2009 PTD 1392 ref.

?????? Iqbal Naeem Pasha, Senior Advocate Supreme Court of Pakistan, Salman Pasha and Nadeem Dawoodi for Appellant (in I.T.A. No.716/KB of 2010).

?????? Abdul Hameed Shaikh, D.R. for Respondent (in I.T.A. No.716/KB of 2010).

?????? Abdul Hameed Shaikh, D.R. for Appellant (in I.T.A. No.723/KB of 2010).

?????? Iqbal Naeem Pasha, Senior Advocate Supreme Court of Pakistan, Salman Pasha and Nadeem Dawoodi for Respondent (in I.T.A. No. 723/KB of 2010).

?????? Date of hearing: 16th March, 2011.

2011 P T D (Trib.) 1868

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

Messrs KONNECT HOLDEN (PVT.) LTD., ISLAMABAD

Versus

COMMISSIONER INLAND REVENUE, (AUDIT), LTU, ISLAMABAD and 4 others

S.T.A. No.6/IB of 2011, decided on 14th April, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss. 3 & 4(c)---S.R.O. 549(I)/2008 dated 11-06-2008---S.R.O. 530(I)/2005 dated 6-5-2005---S.R.O. 70(I)/2006 dated 28-2-2006---S.R.O. 550(1)/2008 dated 11-6-2008---S.R.O. 472 (I)/2009 dated 13-6-2009---Pakistan Customs Tariff, Chapter 84, 85 & 90---PTC Heading 8544---Negative list by the Board vide Letter C.No.1/33/STB/ 2004/(main)/20124-R dated 15-7-2008---Scope of tax---Zero rating---Optical fiber cable---Zero rated supply of---Validity---S.R.O. 549(I)/2008 dated 11-6-2008 did not provide any restrictions or conditions on the taxpayer for availing zero rating for supplies made during currency of the said S.R.O.---Board notified a negative list of the said S.R.O. vide letter C.No.1/33/STB/2004/(main)/20124-R dated 15-7-2008 for ensuring uniformity of the application throughout the country---Such negative list could not be given retrospective effect---Department's claim that S.R.O. 549(I)/2008 dated 11-6- 2008 stood amended through the negative list was not persuasive---Board amended the S.R.O. 549(I)/2008 dated 11-6-2008 through S.R.O. 472(I)/2009 dated 13-6-2009---Clarification issued by the Board vide letter C.No.1/33/STB/2004/(main)/20124-R dated 15-7-2008 had no bearing on the case as the supplies in question were made prior to the issue of Board's clarification---No dispute between both the parties with regard to period of zero rating supplies made by the taxpayer during 1-7-2008 to 12-7-2008---Supplies made prior to the issuance of negative list of the S.R.O. 549(I)/2008 dated 11--6-2008 were not chargeable to sales tax under S. 3 of the Sales Tax Act, 1990 or S.R.O. 530(I)/2008.

(b) Sales Tax Act (VII of 1990)---

----Ss.7, 3 & 2(46)---S.R.O. 549(I)/2008 dated 11-6-2008---Board's Letter C.No.1/33/STB/2004/(main)/20124-R dated 15-7-2008---Determi-nation of tax liability---Optical fiber cable---Zero rated supply--Claim of Input tax adjustment subsequent to issuance of clarifications vide letter C.No.1/33/STB/2004/(main)/20124-R dated 15-7-2008---Validity--Exclusion of certain items under S.No.03 of the S.R.O. 549(I)/2008 dated 11-06-2008 could not operate retrospectively---Supply of Optical Fiber Cable in terms of S.R.O. 549(I)/2008 dated 11-6-2008 had been zero rated at the time when supply was made---Claim of input adjustment, if any, in respect of zero rated supplies was prima facie inadmissible---If the input adjustment was claimed in respect of supplies made between 1-7-2008 to 12-7-2008, the amount of input adjustment should be recoverable from the taxpayer.

(c) Sales Tax Act (VII of 1990)---

----S. 11---Assessment of tax---Auditor General of Pakistan's Circular No.1167-Coord (Hq) RRA/35-2007 dated 29-2-2007---Adjudication proceedings based on the observation of Directorate of Revenue Receipt Audit---Validity---Initiation of adjudication proceedings based on the pointation or observations of Directorate of Revenue Receipt Audit was perfectly lawful---Such case did not involve a direct audit by the staff of the Directorate of Revenue Receipt Audit---To contend that the Directorate of Revenue Receipt Audit could not point out any short payment was to deny the statutory role of the office of the Auditor General to protect public revenues and tantamount to denying the institutional role of Public Accounts Committee in safeguarding the public revenue.

(d) Sales Tax Act (VII of 1990)---

----S. 4---S.R.O. 549(I)/2008 dated 11-6-2008---Negative list by the Federal Board of Revenue vide Letter C.No.1/33/STB/2004/(main)/ 20124-R dated 15-7-2008---Zero rating---Optical fiber cable---Benefit of zero rating supplied during the period 1-7-2008 to 12-7-2008---Promissory estoppel, doctrine of---Applicability---Notwithstanding the clarification issued by the Board vide letter C.No.1/33/STB/ 2004/(main)/20124-R dated 15-7-2008, the zero rated supplies made by the taxpayer prior to 15-7-2008 were not chargeable to sales tax under S.R.O. 549(I)/2008 dated 11-6-2008 as it did not provide any conditions or restrictions to avail such benefit---No negative list of S.R.O. 549(I)/ 2008 dated 11-6-2008 was in field during the period of supplies made by the taxpayer (1-7-2008 to 12-7-2008)---Doctrine of principle of "Promissory Estoppel" was rightly attracted in the case.

(e) Sales Tax Act (VII of 1990)---

----Ss. 34 & 33---Default surcharge---Penalties---Levy of surcharge and penalty when principal amount of sales tax was not payable---Validity---Supply of Optical Fiber Cable falling under PCT Heading 8544-7000 being zero rated was not liable to sales tax---Where there was no default in payment of sales tax (principal amount) or sales tax, the demand of default surcharge and imposition of penalty under Sales Tax Act, 1990 was unlawful.

Syed Ali Imran, CFO for Appellant.

Imran Shah, DR for Respondent.

Date of hearing: 14th April, 2011.

2011 P T D (Trib.) 1877

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shahin, Judicial Member and Sohail Afzal, Accountant Member

Messrs MASTER POLY PLAST IND., GUJRANWALA

Versus

C.I.R., R.T.O., GUJRANWALA

M.A. (A.G.) No.163/LB of 2010 and S.T.A. No.322/LB of 2009, decided on 21st May, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 11, 33, 34, 36 & 46---Assessment of Sales Tax---Initiation of proceedings for recovery of tax not levied or short levied or erroneously refunded---Limitation---Demand of additional tax and imposition of penalty---During audit of appellant/registered person for relevant year, certain discrepancies/shortcomings having been observed proceedings were initiated against him and after issuing notice Adjudication Authority passed order-in-original---Appellate Authority partially allowed appeal of the registered person, but he being dissatisfied with the treatment of the first Appellate Authority filed appeal before Appellate Tribunal---Held, in terms of S.11(4) of the Sales Tax Act, 1990, the competent officer could decide a case within 90 days from the date of issuance of notice; and law had provided for extension of time through a formal order for another 90 days; meaning thereby that it had to be finalized within 180 days after obtaining extension from the higher competent Authority after mentioning reasons therein---In the present case order-in-original was passed after about 407 days after issuance of notice---Order-in-original passed beyond the prescribed period of limitation, in circumstances, was ab initio void, being without lawful jurisdiction and had no effect in the eyes of law and same was set aside.

Messrs Leo Enterprises v. President of Pakistan 2009 PTD 1978; Messrs Hanif Straw Board Factory v. Collector Sales Tax Gujranwala 2008 PTD 578; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd., v. The Collector of Sales Tax Gujranwala 2008 PTD 60; 2010 PTD 1636; and 2010 PTD 1469 ref.

Waheed Shahzad Butt for Appellant.

Madam Rabia Shah, D.R. for Respondent.

Date of hearing: 2nd March, 2011.

2011 P T D (Trib.) 1883

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member

Messrs EM EM ENTERPRISES, KARACHI

Versus

COLLECTOR, COLLECTORATE OF CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), KARACHI

S.T.As. Nos.462-K to 465-K and 476-K of 2009, decided on 21st April, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss.3(3)(a)(b), 10 & 7---S.R.O. No. 575(I)/2002 dated 31-8-2002---Scope of tax---Refund of input tax---Responsibility of payment of tax---Question for consideration was as to whether buyer can be held responsible for wrong doings of the supplier---Held, law had placed responsibility of payment of tax on the part of seller and the same could not be shifted to buyer---According to provisions of S.3 (3) [a] and [b] of the Sales Tax Act, 1990, the liability to pay the tax was explicitly on the person who makes supplies---Charge framed by the Department on such count was illegal.

(b) Sales Tax Act (VII of 1990)---

----Ss.21 (4), 7 & 10---De-registration, blacklisting and suspension of registration---Notice---No notice had been given even after placing the name of the registered person in the negative list which meant throwing him out of business without allowing him a chance to reply the allegations---Case with which the Revenue had taken the action was spectacular; even a semblance of fairness was not considered necessary---Action of the Revenue of placing the name of the registered person in the list of suspected/suspicious units was declared to be illegal and unlawful---Charge framed on such count against the registered person was not maintainable.

(c) Sales Tax Act (VII of 1990)---

----Ss.21, 10 & 7---Sales Tax General Order No.6 of 2003 dated 20-12-2003--- De-registration, blacklisting and suspension of registration---Refund of input tax---Question for consideration was as to whether "supplier was a taxpayer at the time of supply made to appellant"---Record showed that at the time of purchases the suppliers were operative---Sub-Para (iii) of para 2 of the Sales Tax General Order No. 6 of 2003 dated 20-12-2003 provided that unless the Collector specified otherwise, orders of blacklisting shall have effect from the date of original order of concerned person, so that invoices issued by a supplier during the relevant period were acceptable---Suppliers were blacklisted after the purchases made by the registered person; and it was evident that the suppliers were operative at the time of purchases and their documentation of the relevant time could not be disregarded on flimsy grounds.

(d) Sales Tax---

----Show-cause notice---Grounds---Allegation of non-filer and blacklisted was mentioned in the show-cause notice---Grounds not mentioned in the charter of the show-cause notice could not be subsequently taken up.

Shamshad Younus for Appellant.

Nemo for Respondent.

Date of hearing: 5th April, 2011.

2011 P T D (Trib.) 1888

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member

Messrs SUNRISE FOOD INDUSTRY, FAISALABAD

Versus

COLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.935/LB of 2009, decided on 18th February, 2011.

(a) Sales Tax Act (VII of 1990)---

----S.10---Refund of input tax---Agreement between department and Confectionery Association---Packing material---Tax period June, 2006---Registered person contended that refund was allowed only to the extent of 20% and excess claim of refund against input tax paid on packing material was denied on the basis of an agreement between the department and the Confectionery Association where under 20% of input against packing material was agreed; and such agreement was not binding for the purpose of adjustment/claim of the input tax on packing material---Department maintained that such plea was not raised by the registered person before any forum below; and only reason for rejecting the refund was non-submission of supporting documents/evidence against the claim in excess of 20%---Validity---Taxpayer had not produced supporting evidence before the concerned authority---Unless the supporting evidence/documents were filed, quantum of the acceptable refund could not have been determined---Case was remanded to the refunding authority with direction to re-examine the claim of refund on the basis of evidence/documents to be produced by the registered person---Agreement between the Confectionery Association and department, if any, was held illegal, and not binding---Department was directed to determine the refund on actual basis after examining the supporting evidence---Both the orders below were vacated by the Appellate Tribunal accordingly.

2011 PTD (Trib.) 22 and 2007 PTD 47 ref.

(b) Sales Tax---

----Agreement---Any agreement between an Association of taxpayer and the Revenue has no binding effect against the express provisions of law unless the same is supported by any superior or subordinate legislation.

2007 PTD 47 rel.

(c) Precedent---

----Law laid down by the superior courts can only be followed if material facts of the case under consideration are identical with the facts under which the judgment was passed.

Khubaib Ahmad for Appellant.

Azmat Elahi Ghumman, D.R. for Respondent.

Date of hearing: 18th February, 2011.

2011 P T D (Trib.) 1893

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member

C.I.R., LD, R.T.O., KARACHI

Versus

Messrs NATIONAL MEDICAL CENTRE, KARACHI

I.T.A. 867/KB of 2010, decided on 20th April, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.128(5), 182, 190 & 165---S.R.O. No.662(I)/2007 dated 8-6-2007---Procedure in appeal---Filing of evidence at first appellate stage---Levy of penalty for non-compliance of show-cause notice and for non-filing of statements---First Appellate Authority held that initial penalty was wrongly imposed as compliance of letter was duly made---Department contended that required documents and evidences were not filed; and in view of lack of evidence and non-furnishing of necessary documents before Taxation Officer, the appeal of the taxpayer was liable to be dismissed as, according to provision of S.128(5) of the Income Tax Ordinance, 2001, the First Appellate Authority was not empowered to accept any documentary evidence submitted before him that was not produced before the Taxation Officer, therefore the order of First Appellate Authority being illegal was without jurisdiction---Validity---Taxpayer failed to furnish any evidence in respect of filing the statements before Taxation Officer---Taxpayer was duly confronted through a show-cause notice but on the date of compliance, the taxpayer neither complied with the show-cause notice nor requested for an adjournment in the matter---As a consequence of non-compliance of the notice, Taxation Officer imposed penalty under Ss.182 and 182(3) of the Income Tax Ordinance, 2001 by treating the taxpayer a 'taxpayer in default'---First Appellate Authority accepted the evidence of filing of statement produced by the taxpayer, deleted the penalty---First Appellate Authority accepted the evidence by violating the provision of S.128(5) of the Income Tax Ordinance, 2001, as he was not authorized to accept the evidence furnished by the taxpayer at the first appellate stage---Taxpayer had not complied with the Taxation Officer notice which resulted in penalty order---Matter was remanded back to the Taxation Officer for fresh adjudication and orders of both the officers below were vacated with the directions that the taxpayer should furnish the evidence before Taxation Officer and Taxation Officer was to decide the matter in accordance with law after affording an adequate opportunity to the taxpayer to present necessary documents and evidence in support of his case.

2004 PTD 745; 1980 PTD 74 (Trib.) and Messrs National Foods's case 65 Tax 274 ref.

Dr. Muhammad Ali Saand, D.R. for Appellant.

Farooq Ibrahim, A.R. for Respondent.

Date of hearing: 1st April, 2011.

2011 P T D (Trib.) 1897

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Masood Ali Jamshed, Accountant Member

C.I.T., (LEGAL), DIVISION, R.T.O., LAHORE

Versus

Messrs SARGODHA TEXTILE MILLS LTD., LAHORE

I.T.A. No.160/LB of 2008, decided on 13th August, 2009.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 34(5), 122 & 131---Interest payable to different financial institutions against trading loan---Failure to pay after lapse of statutory period of three years---Chargeability to tax---Contention of department was that the interest payable to different financial institutions against trading loan which remained unpaid after lapse of the statutory period of three years, was liable to be charged to tax under Head "Income from Business"---Contention of taxpayer, on the other hand was that since the loan against which the interest was payable as expense having stood rescheduled, same would amount to have been paid and could not be termed as payable within the words of S.34(5) of Income Tax Ordinance, 2001---Validity---Interest, being unpaid would become part of a larger liability called principal---Rescheduling of any unpaid financial liability was based on the admission that the liability whether in shape of principal or mark up/interest, could not be paid in due course or at specified time---Rescheduling on default by the taxpayer, was a sufficient proof for the purpose of S.34(5) of Income Tax Ordinance, 2001, to the effect that the liability of expense allowed as deduction, in shape of interest, had not been paid---Order of Taxation Officer was restored to the extent of addition under S.34(5) of Income Tax Ordinance, 2001.

I.T.A. No.1470/LB/1997; Big Mac Foods (Pvt.) Ltd.'s case I.T.A. No.6304/LB of 2005; UBL v. Aziz Tanneries (Pvt.) Ltd. 2004 CLD 1715; Cebee Industries v. I.T.A.T. 2006 PTD 348; 1983 PTD (Trib.) 320; Messrs Ethyl Saxena v. Commissioner of Income Tax, New Delhi (1984) 146 ITR 518; Qamaruzzaman Khan v. Industrial Development Bank of Pakistan 2009 CLD 460 and Habib Bank v. Qayyum Spinning Ltd. MLD 2001 Kar. 1351 ref.

Dr. Ahmed Shahab, D.R. for Appellant.

Muhammad Iqbal Khawaja for Respondent.

Date of hearing: 13th August, 2009.

2011 P T D (Trib.) 1904

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Muhammad Iftikhar Khan, Accountant Member

Messrs M. HAYAT & BROTHERS (PVT.) LTD., PESHAWAR

Versus

ADDITIONAL COLLECTOR, SALES TAX, PESHAWAR

S.T. No.7(400)/PB/2000--ST No.7/ATIR of 2009, decided on 17th February, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 36 & 46---Determination of amount of Sales Tax---Limitation---Record had shown that for the years 1990-91 to 1994-95 as per provisions of S.36(2) of Sales Tax Act, 1990, per the Finance Act, 1996 period of limitation was five years, whereas prior to amendment of Finance Act, 1996 it was 10 years---Show-cause notice in the present case had been issued on 2-2-2002, order-in-original had been passed on 1-6-2006, which was beyond the prescribed period of limitation of five years---Show-cause notice and order-in-original being barred by limitation were nullity and were vacated.

Danish Ali Qazi for Appellant.

Shad Muhammad, DR and Shuaib Sultan, IRAO for Respondent.

Date of hearing: 17th February, 2011.

2011 P T D (Trib.) 1906

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs MERCK (PVT.) LIMITED, KARACHI

Versus

C.I.T., LEGAL DIVISION, LARGE TAXPAYERS UNIT, KARACHI

I.T.As. Nos.3/KB to 7/KB of 2009, decided on 26th March, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 21(I)---Deductions not allowed---Disallowance of expense on alleged payment other than through a crossed cheque or a crossed banking instrument---Assessee contended that First Appellate Authority misdirected by observing that Assessing Officer before making addition had specifically confronted as the break up of the total amount of disallowance was not provided to the assessee for rebuttal of the proposed action; and prayed that disallowance may be set aside with the direction to Taxation Officer to provide break up of individual entries picked up from the petty cash ledger and provide an appropriate opportunity to submit its rebuttal---Validity---Taxation Officer, before making addition had adequately confronted the appellant and had given his categorical findings on the issue---Assessee, at the first appellate stage, failed to plead his case against the action of the Taxation Officer---Order of the First Appellate Authority was confirmed by the Appellate Tribunal, in circumstances.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.21, 32(2) & 71---Deductions not allowed---Method of accounting---Currency conversion---Disallowance of exchange loss---Assessee contended that question of 'notional' gain or loss or making the provision for exchange loss did not arise in the case as it essentially followed the 'accrual basis' of accounting; and exchange loss recorded at the year end date on conversion of foreign currency liability was reworked at the time of actual payment in the next year; and this result in recording actual loss in two steps, once at the year end rate and the balance amount at the time of actual payment in the subsequent year; and loss claimed in such two steps remained equal to the total loss; and no loss was caused to revenue from accounting of the transaction under accrual system of accounting---Validity---First Appellate Authority endorsed the finding of Taxation Officer that out of total claim only notional loss was disallowed which was legally and factually justified and order of Taxation Officer on the issues was upheld---Appellate Tribunal declined interference in the order of First Appellate Authority which was upheld.

2008 PTD (Trib.) 1040 ref.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss.21, 221 & 122(5A)---Deductions not allowed---Disallowance of unrealized exchange loss for being a notional amount---Unrealized/ notional loss disallowed in the immediately preceding tax year was to be allowed as deduction as such loss became realized on payment in the next year---Assessee contended that non-allowing the loss realized in the succeeding year would amount to making disallowance of exchange loss for entirety which was neither intended nor justified--- No dispute arose between the Department and the taxpayer on the allowability as such loss as a business expense and the only contention of the Department was that it was unrealized/notional loss; and in case disallowance of alleged notional loss was maintained then a deduction for exchange loss made in the immediately preceding year may be allowed as it had been realized during the years---Validity---Appellate Tribunal agreed with the findings on the issue for the two tax years and there was no reason to interfere with the order of First Appellate Authority and the same was confirmed---Appeal of the taxpayer/ assessee was dismissed on the said issue.

(d) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----Ss.4(1) & 2(i) ---Mode of payment by, and recovery from, industrial establishment---Tax year 2007---Accounting profit---Income as determined under the Income Tax Ordinance, 2001---Assessee contended that First Appellate Authority erred in observing that Workers' Welfare Fund was payable at the rate of 2 per cent on accounting profit and had maintained the order of Assessing Officer; and prayed that Taxation Officer be directed to re-compute Workers' Welfare Fund @ 2% of total income as determined under Income Tax Ordinance, 2001---Validity---Under amended S.4(1) of Workers' Welfare Fund Ordinance, Workers' Welfare Fund was payable by an industrial establishment at an income which was less than Rs.500,000 @ 2% on accounting profit---Findings of the First Appellate Authority was fully endorsed by the Appellate Tribunal and same was confirmed; and appeal filed by the taxpayer was dismissed.

(e) Income Tax---

----Grounds not adjudicated---First Appellate Authority had not decided some of the issues/grounds; and such issues were remanded back to First Appellate Authority for adjudication after hearing to the arguments of the taxpayer/assessee as well as the Department.

Faraz Ahmed, FCA for Appellant.

Dr. Muhammad Ali, D.R. for Respondent.

Date of hearing: 1st November, 2010.

2011 P T D (Trib.) 1918

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

Messrs TWIN CITY HOUSING (PVT.) LTD., ISLAMABAD

Versus

C.I.R., LTU, ISLAMABAD

I.T.As. Nos.58/IB to 61/IB of 2011, decided on 9th April, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.36, 32, 34, 120 & 122(1)(5)---Income Tax Rules, 2002, R.68---C.B.R. Circular No.2 of 1975---Long term contracts---Percentage Completion Method---Receipt of the year---Accumulated receipt of the entire project---Income from land developing and sale/purchase of plots---Assessing Officer took 25% of the accumulated advances from allottees and taxed the same under S.36 of the Income Tax Ordinance, 2001 and treatment given by the department was accepted; as the taxpayer company did not contest it before any appellate authority---No-taxation of remaining 75% of advances on proportionate basis of 25% for each subsequent year required amendment of assessments---Validity---25% of the accumulated advance was taken in tax year 2005 and on same analogy, rest of the amount was distributed by taking in the ratio of 25% in the coming years---Assessment were completed for tax year 2006 to 2008---Margin of net savings profit was taken @ 10% (estimated)---Amendment under S.122(1)(5) of the Income Tax Ordinance, 2001 was made accordingly; and contended that amended assessment for tax year 2005 was made basis for amending the subsequent deemed assessment; and taxpayer had not challenged that amended assessment of 2005; and assessee had now filed the application for condonation of delay much after when the assessment of subsequent year were amended---Appellate Tribunal held that assessment of all the years had been made on wrong premises as percentage method only spoke of cost incurred divided by total feasibility cost X 100---Department had taken the accumulated figure of receipts, then distributed the same in the ratio of 25% over all the years---Taxation Officer could not do? so, as and every assessment year was an independent year---Taxation Officer had to take receipt of that year only and not the accumulated figure---Methodology of distributing the accumulated figure over years was not warranted by law because assessment of every year was independent one---Department may take either the figures mentioned in feasibility report on proportionate basis or actual receipts declared by taxpayer during the year---Once any methodology was adopted; it had to be stuck with onward and? was to be left upon choice of the department to select any of methodology between the two---Actual expenses had to be examined vis-?-vis receipts during the year----Order passed by the officers below were set aside by the Appellate Tribunal and cases were remanded with the direction to take only receipts of the respective year and not accumulated receipts of the entire project---Amendment if warranted could be made within the limitation period prescribed under the law.

?????? 1994 PTD 174; 2001 PTD 3090; PLD 1964 SC 113; 275 ITR 30 and 1985 ITR 144 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.36---Long term contracts---Nature and method for computation of income---Section 36 of the Income Tax Ordinance, 2001 gave a computation method and was not a charging section---Such was an explicit? method? for? computation? of? income? where? cost? incurred? during the year was compared with the total estimated cost of the project---Revenue and expenses were required to be recognized by referring to the stage of completion under General Accepted Accounting principles--Plea of the taxpayer regarding the charging nature of S.36 of the Income Tax Ordinance, 2001 being vague and variant was not sustainable in the eye of law.?

(c) Income Tax Ordinance (XLIX of 2001)---

----S.36---C.B.R. Circular No.2 of 1975---Long term contracts---Allocation of profit or loss was to be made on the basis of receipts for each year---Instructions of C.B.R. Circulars No.2 of 1975 which supersede the instructions of 1946 apply only to those contractors who keep regular accounts and where the total profit of a contract on completion was acceptable, subject to such adjustments or inadmissible expenses as may be necessary.

(d) Income Tax Ordinance (XLIX of 2001)---

----S.36---Long term contracts---Method for calculation of receipts---Receipt on percentage basis from feasibility---Actual receipts during? the? year---Taxation? Officer? could? take? the? receipts? either? as? reported? in? feasibility? or? the? actual? receipts? declared? by? taxpayer? after verification of the same---If the receipts were taken from the feasibility report; then definitely income will come in positive figure every year, but at the same time loss to department was that actual receipts will slip away from the verification---Law was silent about the receipts to be taken either on percentage basis from feasibility submitted or the actual receipts during the year---Among the two methodologies, department could adopt any of them which may suit.?

?????? S. Shahzad Mehmood for Appellant.

?????? Tahir Khan, D.R. for Respondent.

?????? Date of hearing: 9th April, 2011.

2011 P T D (Trib.) 1929

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and M.B. Tahir, Accountant Member

Messrs KOHAT CEMENT COMPANY LIMITED, LAHORE

Versus

C.I.R. (LEGAL), LTU, LAHORE

I.T.A. No.84/LB of 2010, decided on 14th April, 2011.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 54, 62, 65, 88, 107-AA & 134---Imposition of additional tax for non-payment of tax liability---Additional tax was imposed on appellant/taxpayer for non-payment of tax liability along with return for relevant assessment year---Validity---Representative of taxpayer had submitted that tax payable was deposited after adjustment of tax credit available to him under S.107-AA of Income Tax Ordinance, 1979---Tax payable was on the basis of return for the relevant assessment year and in case Deputy Commissioner would hold that tax credit was not available, he would re-compute the tax payable by taxpayer for the relevant tax year---Taxpayer was to determine/calculate tax payable as per declaration in the return for the relevant period, which would be the tax payable on the basis of such return---If the declaration in the return was modified under Ss.62 & 65 of Income Tax Ordinance, 1979 or any other provision, the tax payable under later section would not be taxable under S.54 of said Ordinance---Action taken under S.88 of Income Tax Ordinance, 1979 imposing additional tax, was declared against the provisions of law and was annulled, in circumstances.

Commissioner of Income Tax v. Lahore Cantonment Cooperative Housing Society Lahore 2002 PTD 629 ref.

Waqar A. Khan, FCA for Appellant.

Muhammad Majid Ch. D.R. for Respondent.

Date of hearing: 14th April, 2011.

2011 P T D (Trib.) 1932

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and Zarina N. Zaidi, Accountant Member

COLLECTOR, CUSTOMS, SALES TAX AND FEDERAL EXCISE, QUETTA through Additional Collector, Sales Tax, Hub, Balochistan

Versus

COLLECTOR OF SALES TAX (APPEALS), QUETTA and another

S.T. No.688/K of 2009, decided on 17th March, 2011.

Sales Tax Act (VII of 1990)---

----Ss.10 & 7---Refund of input tax---S.R.O. 1071(I)/2003 dated 25-11-2003---S.R.O. 609(I)/2004 dated 16-7-2004---Import---Refund was claimed on the ground that sales tax at import stage was paid at a value of Rs.9,280 per metric ton whereas subsequently the value for assessment of sales tax was reduced from Rs.9,280 to Rs.4,610, the claimant was entitled for refund at the reduced rate of value---Validity---Import was made on 19-5-2004 and 21-8-2004---In the first import value was Rs.9,280 per metric tone and in the second import value was Rs.4,610 as the same was reduced or fixed by the government on 16-7-2004---For purpose of first import, the values fixed on 16-7-2004 had no relevance as the effective date of operation of S.R.O. 609(I)/2004 was 16-7-2004, and the tax charged at a higher rate was refundable as the final product was also taxable---Tax paid at import at a higher value was adjustable within the purview of S.7 of the Sales Tax Act, 1990---S.R.O. 609(I)/2004, dated 16-7-2004 was to operate prospectively and not retrospectively---After 16-7-2004 when value stood reduced, the output tax also stood reduced, but input tax paid by the claimant at a higher value at an earlier date was adjust-able---Refund claimed by the taxpayer was as such very much in order---In VAT type of taxes, input tax was adjustable irrespective of increase or decrease of values, and S.2(46) of the Sales Tax Act, 1990 had nothing to do with such internationally accepted norm of taxation---Issuance of show-cause notice was not only wrong but was also tainted with mala fide intention and required an investigation as to why such a senior officer of department acted illegally and in an arbitrary manner---All notifications or orders take prospective effect and no retrospective effect could be given---In respect of imports made on 19-5-2004, the tax was paid at a value of Rs.9,280 per metric tone and such tax was refundable irrespective of subsequent decrease of value---Rejection order was simply based on mala fide---Under the Constitution all functionaries of the government were expected to work within the permissible norms of law; and where law had been properly interpreted by the superior courts and settled legal practice operate, an undue and harsh action by the authorities against a taxpayer spoke volumes of mala fide on the part of functionaries as a flagrant violation of law and procedure was committed by the Additional Collector, who issued the show-cause notice and the Collector who decided to file an appeal without having any basis--- Appeal of the Department was dismissed by the Appellate Tribunal having no force of law.

Zafar Akhtar, A.R. for Appellant.

Abdul Raheem Lakhani, D.R. for Respondent.

Date of hearing: 3rd November, 2010.

2011 P T D (Trib.) 1943

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and M.B. Tahir, Accountant Member

Messrs FLYING BOARD AND PAPER PRODUCTS LIMITED, LAHORE

Versus

COLLECTOR, SALES TAX, LAHORE

S.T.As. Nos.1763/LB, 1764/LB and 1302/LB of 2009, decided on 11th February, 2011.

(a) Sales Tax Act (VII of 1990)---

----S. 7 & Third Sched.---S.R.O.994(I)/92 dated 8-10-1992---Determination of tax liability--- Arrears of Input tax---Adjustment of arrears of input tax was made after 1-11-1990 in accordance with the provisions of S.7 of the Sales Tax Act, 1990---Department contended that taxpayer had rightly been denied adjustment of input tax claimed as the claim of adjustment under S.7 of the Sales Tax Act, 1990, was not in accordance with law, whereas they were required to make the same as per procedure provided under the Sales Tax Act, 1950---Validity---Department had not objected to the authenticity of input tax of the claim rather it was conceded before the Collector that the subject raw materials were consumed in the manufacturing of taxable supplies---Departmental objection was that the claim was not in accordance with the procedure prescribed under the Sales Tax Act, 1950---If the departmental view was taken to be correct even then it was merely a procedural lapse on the part of taxpayer---Denial of input tax adjustment merely on technical pleas amounted to burdening the taxpayer with the sales tax which was not only contrary to the statutory provisions but also against the norms of justice----Adjustment of input tax was a substantive right of a registered person, consciously created by the legislation, which could not be taken away merely on some technicalities and procedural lapses.

2007 PTD (Trib.) 728 ref.

PLD 1998 SC 64 rel.

(b) Sales Tax Act (VII of 1990)---

----S.7----Determination of tax liability---Input tax---Adjustment input tax is a substantive right and it could not be withheld on mere technical grounds.

(c) Sales Tax Act (VII of 1990)---

----S.43---S.R.O. 994(I)/92 dated 8-10-1992---Adjudication---Pecuniary jurisdiction---Taxpayer contended that show-cause notice issued by the Deputy Collector was beyond his pecuniary jurisdiction; and main case was decided by the First Appellate Authority which involved goods valuing Rs.13,059,960 and the show-cause notice was issued on 2-12-1992, when the adjudication powers were conferred by S.R.O. 994(I)/92 dated 8-10-1992, issued under S.43 of the Sales Tax Act, 1990---Validity---Show-cause notice was issued beyond pecuniary jurisdiction of the Deputy Collector---Notice issued without jurisdiction was illegal and unlawful and no action could be taken against a citizen in pursuance thereof---Order without jurisdiction was a fraud on the law and could never be assumed to have been passed under the particular statute.

2010 PTD (Trib.) 1636 ref.

2006 PTD 219 rel.

(d) Sales Tax Act (VII of 1990)---

----Ss.36 & 11---Recovery of tax not levied or short levied or erroneously refunded---Limitation---Time barred show-cause notice---Show-cause notice upon which proceedings were based issued on 2-12-1992 and case was decided vide order-in-original dated 3-5-1995---On appeal, case was remanded by the Collector and again the case was decided which was again remanded vide order-in-appeal dated 15-1-1996---Additional Collector again decided the case which was after a lapse of 10 years---Sales Tax Act, 1990, was amended in 2000 and period of limitation to decide a case was fixed as 45 days which was further extendable by another 45 days under Ss.11 and 36 of the Sales Tax Act, 1990---Since there was a gap of almost 6 years between 2000 and 2006 when the case was decided, the order-in-original, was time-barred and not tenable in the eyes of law---Appeal filed by the taxpayer was accepted by the Appellate Tribunal and findings recorded by both the authorities below were declared to be not tenable in law---Show-cause notice as well as consequent orders of authorities below being illegal, void and without lawful authority were set aside.

2008 PTD 60; 2010 PTCL 1134; 2009 PTD 1978 and 2011 PTD (Trib.) 619 rel.

Hussain Ahmad Sherazi for Appellant.

M. Tahir, D.R. for Respondent.

Date of hearing: 11th February, 2011.

2011 P T D (Trib.) 1950

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikram Ullah Ghauri, Accountant Member

COMMISSIONER OF INCOME TAX (LEGAL DIVISION), ISLAMABAD

Versus

Messrs WARID TELECOM (PVT.) LTD., LAHORE and 2 others

I.T.A. No.589/IB of 2009, decided on 15th February, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

---Ss.122 & 177---Amendment of assessment---Definite information---Information gathered through audit---Taxpayer contended that assessment order could only be amended on the basis of definite information; and details of expenses which were claimed were gathered through audit which did not constitute definite information and the order passed by the Assessing Officer was illegal, null and void ---Department contended that issue raised was procedural one and law favoured adjudication on merit rather than technicalities; and taxpayer was appraised through show-cause notice on the grounds of the assessment which contained detailed account of the basis on which expenses claimed were declared inadmissible ; and grounds contained in the show-cause notice constituted definite information; and show-cause notice also listed the discrepancies noticed by the Taxation Officer in the income tax return---Validity---Not only there was a full disclosure of definite information to the taxpayer but also sufficient opportunity of being heard was provided to the taxpayer who after giving consideration to the taxpayer's point of view passed a valid order under S.122(1) of the Income Tax Ordinance, 2001---No legal infirmity in the revised assessment order of the Taxation Officer having been found the same was sustained by the Appellate Tribunal.

(b) Income Tax---

----Commercial expediency--- Meanings--- Expression 'commercial expediency' means and includes an expenditure which a prudent man might incur for the purpose of business provided it was not entirely gratuitous and unconnected with the business.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss.21 & 122---S.R.O. 391(I)/2001 dated 18-8-2001---Deductions not allowed---Taxpayer a cellular company---Disallowance of amortized expenses of activation tax---Validity---Collection of activation tax was not related to for the purpose of business but merely as a consequence of a charge on the customer to have been collected in the capacity of withholding agent; and there was no element of any commercial expediency involved---Claiming of expenses on activation charges on its profit and gains would amount to set off debt which the law did not allow---Clause (viii) of the S.R.O. 391(I)/2001 dated 18-8-2001 would not have disentitled the cellular company operators to claim adjustment of input tax---Taxpayer could not bring on record any evidence of out of pocket payment of tax on activation charges---Order of the Taxation Officer to the extent of said ground was upheld and that of First Appellate Authority was set aside by the Appellate Tribunal.

(d) Income Tax Ordinance (XLIX of 2001)---

----Ss.20(1) & 122---Deductions in computing income chargeable under the head "Income from business"---Assessee a cellular company---Disallowance on account of free air time---Validity---Taxpayer allowed its customers benefit of free extra time on standard rates, but did not report the revenue for the extra time nor paid excise duty in respect thereof---Such an extra time allowed as free air time did not qualify for a claim of expenses---Payment of federal excise duty and withholding tax being the liability of the customer and not that of the company would not entitle to tax payer to claim expenses on collection of excise duty---Claim of expenses by the taxpayer in respect of free air time allowed at certain rate was not within the scope of S.20(1) of the Income Tax Ordinance, 2001---Taxation Officer had rightly added back the same as the appellant/taxpayer did not incur any expense on collection of excise duty paid by its customers---Order of Taxation Officer was affirmed and the order of the First Appellate Authority was vacated by the Appellate Tribunal.

(e) Income Tax Ordinance (XLIX of 2001)---

----Ss. 21(c), 153 & 49(3)---Deductions not allowed---Taxpayer a cellular company---Line leased charges paid to Pakistan Telecommunication Company Limited and National Telecommunication Corporation---Non-deduction of withholding tax---Disallowance of---Taxpayer contended that payment made to Pakistan Telecommunication Company Limited was exempt in view of exemption certificate issued under S.153 of the Income Tax Ordinance, 1979 and National Telecommunication Corporation was a government entity and exempt from tax under S.49(3) of the Income Tax Ordinance, 2001---Validity---Any specific exemption certificate issued in respect of National Telecommunication Corporation was subject to withholding tax which required to be added back---Case of National Telecommunication Corporation was not covered under S.49(3) of the Income Tax Ordinance, 2001 as being taxable entity filing income tax returns regularly---Taxpayer had also not furnished exemption certificate under S.153 of the Income Tax Ordinance, 2001---Payment made to National Telecommunication Corporation without deduction of withholding tax was without force of law---Expenses claimed by the taxpayer under S.21(c) of the Income Tax Ordinance, 2001 were held to be inadmissible---Taxation Officer had rightly disallowed the expenses claimed by the taxpayer and added back the same in respect of payment made to National Telecommunication Corporation---Order of Taxation Officer was sustained and that of First Appellate Authority was set aside by the Appellate Tribunal.

(f) Income Tax Ordinance (XLIX of 2001)---

----Ss. 24 (3) & 21---Intangibles---Advertisement expenses---Dis-allowance of ---Taxpayer contended that expenses were only limited for a specific year and could not be construed of either capital or permanent nature; and it was common feature of telecom industry to spend such expenses for the benefit of the consumers and such expenditure was of a recurring nature on year to year basis in order to mitigate cut throat competition---Department contended that advertisement campaign was meant to retain existing customers and attract new customers through certain attractive packages and expenses for this purpose were of capital nature and its recurring nature did not preclude it from the definition of "intangibles"---Validity---Expenditure on the advertisement campaign was a common feature of telecom industry and heavy amount was incurred to attract customers through various incentives and lucrative packages---Taxpayer conceded that determination of period of benefit for a particular campaign may or may not be for a period of one year or more---Safe inference could easily be drawn that such expenses which were of recurring nature for an indefinite period and in case the useful life of an expense was not determinable would fall under S.24(3) of the Income Tax Ordinance, 2001 as "intangibles" and such expense should be amortized over a period of ten years---Expenses claimed fell within the ambit of "intangibles" as the benefit beyond one year was not determinable---Taxation Officer had rightly amortized the intangibles over a period of ten years---Order of Taxation Officer was upheld and that of First Appellate Authority was vacated by the Appellate Tribunal.

(g) Income Tax Ordinance (XLIX of 2001)---

----Ss. 24 (11), 22 & 23---Intangibles---Depreciation---Initial allowance---Computer software---Embedded softwares in the equipment---Claim of initial allowance and depreciation---Department contended that taxpayer had wrongly taken his case under Ss.22 & 23 of the Income Tax Ordinance, 2001 as "depreciable assets" instead of resorting to S.24(11) of the Income Tax Ordinance, 2001---Computer softwares were intangibles---Taxpayer declared the softwares as "fixed assets" and claimed initial allowance and tax depreciation on the softwares under head computer and accessories which left no room for escape from the purview of S.24(11) of the Income Tax Ordinance, 2001---Softwares whether embedded or computer software, their basic function performance of compact logical operation in accordance with pre-determined program to obtain desired results---Software which could not run on a computer could be designated as computer software---All softwares whether system softwares or application softwares fully satisfy the definition of "intangibles"---Supplier of these softwares had given license to the taxpayer for both hardware and software parts of the equipment supplied---It gave a similar and identical performance which was developed on a computer system---All the softwares which were capable of transmitting data and voice were basically "computer softwares"---Embedded softwares had separately been declared by the taxpayer in their audited accounts---Taxpayer failed to determine the period for usage of these softwares during the course of proceeding at initial stage, First Appellate Authority and before Appellate Tribunal---Cost of such softwares should have been amortized over a period of ten years as provided under S.24(3) of the Income Tax Ordinance, 2001---Stance of the taxpayer was not in conformity with the provisions of income tax law---Taxation Officer had rightly disallowed initial allowance and tax depreciation and the same was affirmed by the Appellate Tribunal.

(h) Income Tax Ordinance (XLIX of 2001)---

----S.113(2)(c)---Minimum tax on the income of certain persons---Credit for taxes paid/suffered at source---Assessee contended that he was entitled to adjust minimum tax paid in subsequent five years if it had taxable profits while Taxation Officer had allowed credit for taxes paid/ suffered only to the extent of tax liability due whereas the company had paid in excess of the same---Department contended that in absence of ascertaining correct tax liability and without verification, the minimum tax paid under S.113(2)(c) of the Income Tax Ordinance, 2001 against tax credits paid by the company could not be accepted --- Validity---Was yet to be ascertained that taxable profits, if any, were liable to be adjusted against further tax liability in order to adjust minimum tax paid in subsequent five years---Appellate Tribunal agreed with the finding of First Appellate Authority on said issue, in which no final order had been passed---Determination of said issue was left to the Taxation Officer after providing a personal opportunity of hearing to both the parties.

(i) Income Tax---

----Exemption---Expenses---Claim of tax exemptions had to be construed strictly in the context of overlapping relevant statutory provisions---Claim of expenses and the resultant tax relied had to be tested on the touchstone of the criteria laid down by the superior courts.

1993 PTD 306; PLD 1966 SC 828; PLD 1966 Dacca 523; 1998 PTD 3835; 1998 PTD (Trib.) 62; 2000 PTD 497; 1973 PTD 361; 1998 PTD 3669; 1998 PTD 930; 2003 PTD 1805; 2003 PTD (Trib.) 1081; 2002 SCMR 312; 2002 PTD (Trib.) 783; 1998 SCMR 1950; 1990 PTD (Trib.) 121 and 1988 PTD (Trib) 315 ref.

(j) Income Tax---

----Exemptions---Legal position.

1993 PTD 306; PLD 1966 SC 828; PLD 1966 Dacca 523; 1998 PTD 3835; 1998 PTD (Trib.) 62; 2000 PTD 497; 1973 PTD. 361; 1998 PTD 3669; 1998 PTD 930; 2003 PTD 1805; 2003 PTD (Trib.) 1081; 2002 SCMR 312; 2002 PTD (Trib.) 783; 1998 SCMR 1950; 1990 PTD (Trib.) 121 and 1988 PTD (Trib) 315 ref.

Tahir Khan, D.R. for Appellant.

Rashid Ibrahim, FCA and Jehanzeb Amin, ACA for Respondents.

Date of hearing: 15th February, 2011.

2011 P T D (Trib.) 1966

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Farooq Shah, Judicial Member

COMMISSIONER INLAND REVENUE (LEGAL), R.T.O., HYDERABAD

Versus

COMMISSIONER INLAND REVENUE (APPEALS-III), KARACHI and another

S.T.A. No.24/K of 2011, decided on 10th May, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss. 7, 11, 36, 34 & 46---General Clauses Act (X of 1897), S.24-A---Determination of tax liability--- Input tax---Department contended that taxpayer had adjusted input tax which was inadmissible because no sales had been reported by their supplier; and the taxpayer was held responsible for that; while the First Appellate Authority observed that "taxpayer had been deprived from his legal right of claiming input tax adjustment on merely a complaint, which had never been revealed to the taxpayer and no whereabouts of person complaining were known and incorporated in order regarding its authenticity"; and admittedly, the case was not a case of lodging complaint by some one against the taxpayer---Validity---Such was a case of misuse of exercise of powers under an enactment---Facts of some other case had wrongly been included in the case for making a base of wrong decision by the First Appellate Authority---Order passed hurriedly in a slipshod manner was against the principle of natural justice---By no stretch of imagination, the order may be considered passed judiciously, consciously, fairly and justly and the same was not sustainable in law.

1998 SCMR 2268 and PLD 2005 Lah. 381 rel.

(b) General Clauses Act (X of 1897)---

----S.24-A---Exercise of power under an enactment---Public functionaries were obliged to decide the matters of the citizens in accordance with law with sound reasons.

S.M. Javed, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 10th May, 2011.

2011 P T D (Trib.) 1970

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

Maulvi AHMED SAGHEER

Versus

COMMISSIONER OF INCOME/WEALTH TAX (APPEALS) COMPANIES ZONE, ISLAMABAD

I.T.A. No.575/IB of 2009, decided on 4th November, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.137 & 138---Due date for payment of tax---Demand notice---Taxpayer contended that demand notice was issued under S.138 of the Income Tax Ordinance, 2001, whereas it had to be issued under S.137 of the Income Tax Ordinance, 2001; and that demand notice was legally defective and proceedings suffered from legal infirmities and assessment was liable to be quashed---Department contended that after introduction of Income Tax Ordinance, 2001, new forms were applicable and there was no dispute about application of provisions of Income Tax Ordinance, 1979 for the purpose of computation of income; and that income was computed under the provisions of Income Tax Ordinance, 1979, the objection of taxpayer was not maintainable; however, new forms had been used and there was a printing error in the heading of demand notice; and instead of 137, S. 138 had been printed, whereas language of the notice was according to the provisions of S.137 of the Income Tax Ordinance, 2001; and this technicality could not vitiate the entire proceedings, which were otherwise conducted according to law---Validity---Demand notice carried a printing error, which could not vitiate the assessment proceedings---Language of demand notice was according to the provisions of S.137 of the Income Tax Ordinance, 2001---New form was rightly used and objection of the taxpayer in this regard was not maintained by the Appellate Tribunal.

2005 PTD (Trib.) 490; (2005) 95 Tax 552 (Trib.) and (1997) 75 Tax 261 ref.

(b) Income Tax Rules 1982---

----R.207A---Income Tax Ordinance (XXXI of 1979), S.62---Valuation of immovable properties---Profit on sale of land---Sale consideration was declared Rs.1950 per kanal---Taxation Officer observed that sale price of land was grossly understated, because in the same vicinity, a Housing Scheme was launched inviting applications from general public, where price of plot of one kanal was fixed at Rs.7,00,000; and an purchaser also acquired land in nearby at a price of Rs.9,000 to Rs.10,000 per kanal---Taxpayer's contention was rejected and income from sale of land was added to taxable income---Validity---Taxpayer had brought documentary evidence in the shape of 'Fard' (Copy of Record of Rights) from the Patwari that average sale price of similar land was in the same range on which transaction in question took place---Department produced documentary evidence showing valuation as Rs.18000 to Rs.22000 per kanal on the basis of five year average price w.e.f. 1-7-2000 to 30-6-2005 while transaction in hand pertain to year 2002---It was of no avail to rebut contention of assessee showing evidence of particular year---Estimate made by the Taxation Officer was baseless and against the factual position---Orders of the authorities below were vacated and addition was deleted by the Appellate Tribunal.

2009 PTD 1656 ref.

(c) Income Tax Ordinance (XXXI of 1979)---

----S.13(1)(aa)---Income Tax Ordinance (XLIX of 2001), Ss.210, 2(13) & 2(65)--- Addition--- Approval of Inspecting Additional Commissioner---Source for payment of outstanding liability---Addition was made for the reason that liability in the name of Bolan Bank Limited was cleared, but no sources were available for liquidation of outstanding liability---Assessee contended that procedure of making addition under the Income Tax Ordinance, 1979 had been laid in S.13 which provides that approval of Inspecting Additional Commissioner was mandatory; and Commissioner had to delegate his power under S.210 of the Income Tax Ordinance, 2001 to the Inspecting Additional Commissioner who was required to grant approval under the Income Tax Ordinance, 1979 but delegation of such powers was open to question and contrary to law; and addition was illegal because it was made with the approval of Inspecting Additional Commissioner and such approval was not legally correct---Validity---Issue of approval for addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 had already been decided by the Appellate Tribunal---Department failed to put forth any explanation to justify any deviation from such judgment---Addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 was legally incorrect and was deleted by the Appellate Tribunal.

I.T.A. Nos.86-91 of 2005 and I.T.As. Nos.1902, 1903 and 1910-1913(IB) of 2005 ref.

2010 PTD (Trib.) 494 rel.

Zahid Masood Chatta for Appellant.

Sarfraz Ahmed, D.R. for Respondent.

Date of hearing: 4th November, 2010.

2011 P T D (Trib.) 1978

[Inland Revenue Appellate Tribunal of Pakistan]

Before Raja Lehrassab Khan, Judicial Member and Amjad Ikram Ali, Accountant Member

Messrs DILPASAND HOSIERY, FAISALABAD

Versus

C.I.R., R.T.O., FAISALABAD

S.T.A. No.203/LB of 2010, decided on 3rd November, 2010.

Per Raja Lehrassab Khan, Judicial Member

(a) Sales Tax Act (VII of 1990)---

----S. 36---Recovery of tax not levied or short-levied or erroneously refunded---Section 36, Sales Tax Act, 1990---Interpretation---Show­cause notices under subsections (1) and (2) of S.36 of the Sales Tax Act, 1990 were two distinct and separate types of notices as different grounds and different period for service of notice in each subsection had been prescribed---Under subsection (1) for non levy and short levy or erroneous refund, specific allegations of deliberate act or collusion between the assessee and the sales tax department staff had to be levelled with proper particulars in the show-cause notice which had to be issued within five years of the relevant date while under subsection (2) if non-levy or erroneous refund is done due to inadvertence, error or misconstruction, specified details of such an event had to be entailed in the show-cause notice which had to be issued within three years of the relevant date.

(b) Sales Tax Act (VII of 1990)---

----S. 36---Recovery of tax not levied or short-levied or erroneously refunded---Show-cause notice---Non-citing of relevant subsection of S.36, Sales Tax Act, 1990---Validity---Where the Adjudicating officer did not invoke subsections of S.36 of the Sales Tax Act, 1990, the show-cause notice was not only void but also nullity in the eyes of law due to non-citing of subsection (1) or subsection (2) of S.36 of the Sales Tax Act, 1990---Tax authority while issuing the subject notice will have to incorporate the grounds and reasons very clearly and explicitly so that it could be ascertained whether recovery of sales tax was made under subsection (1) or subsection (2) of S.36 of the Sales Tax Act, 1990---Failure on the part of authority while issuing show-cause notice without mentioning subsections of S.36 of the Sales Tax Act, 1990 would render his order invalid and illegal and against the law---Show-cause notice served upon the taxpayer by the Adjudication Officer was patently illegal and without lawful authority as neither the allegations as specified under subsections (1) and (2) of S.36 of the Sales Tax Act, 1990 were levelled nor even the subsection (1) and subsection (2) of S.36 of the Sales Tax Act, 1990 itself had keen invoked in the operative part of the show-cause notice---All orders based thereupon were liable to be set aside---Validity of show-cause notice was fundamental to the assumption of jurisdiction by the revenue authorities to pass the orders---Show-cause notice and subsequent order were held to be patently devoid of jurisdiction and lawful authority by the Appellate Tribunal.

2001 SCMR 838; GST 2004 CL 635; GST 2005 CL 239; Messrs Inam Packages, Lahore v. Appellate Tribunal, Lahore 2007 PTD 2265 and Assistant Collector Customs and others v. Messrs Khyber Electric Lamp and others 2001 SCMR 838 rel.

(c) Administration of justice---

----Thing required by law to be done in certain manner must be done in the same manner as prescribed by law or not at all.

2001 SCMR 838 rel.

(d) Sales Tax Act (VII of 1990)---

----S. 36---Recovery of tax not levied or short-levied or erroneously refunded---Taxpayer had a legal right to know as to under what law he was being proceeded against---Assessing authorities were obliged to communicate to the taxpayer as to under what provisions of S.36 of the Sales Tax Act, 1990, he was being required to furnish his explanation.

(e) Taxation---

----Where an assessee is deprived of his right to know about the law being applied to him, the proceedings taken against him will be of no legal consequence.

(f) Sales Tax Act (VII of 1990)---

----S. 36---Recovery of tax not levied or short-levied or erroneously refunded---Non-confrontation of specific provisions of law---Effect---Show-cause notice to the extent that it failed to invoke the applicable provisions of law was faulty, flawed and legally invalid Consequently, order passed after the notice also became invalid because the taxpayer was not confronted with the specific provisions of law under which tax liability was adjudged---Order based on a vague, defective and faulty show-cause notice was void and legally not sustainable in the eye of law.

GST 2004 CL 635 and GST 2005 CL 239 rel.

(g) Sales Tax Act (VII of 1990)---

----S. 36---Recovery of tax not levied or short-levied or erroneously refunded---Charge of 'collusion or deliberate act'---No specific charge of 'collusion or deliberate act' was levelled in the show-cause notice under S.36(1) of the Sales Tax Act, 1990---In absence of any detail or proper allegation regarding 'collusion or deliberate act'; it could not be said that the notice had been issued under S.36(1) of the Sales Tax Act, 1990---Pre-requisites for a show-cause notice as required by law having not been served to the taxpayer; no straightforward demand notice for payment of sales tax could be issued.

(h) Sales Tax Act (VII of 1990)---

----S. 36---Recovery of tax not levied or short-levied or erroneously refunded---Charge-sheet with evidence---Person being alleged should be provided a complete and comprehensive charge-sheet with all evidences in the show-cause notice which he could reply and defend---Was necessary under subsection (1) of S.36 of the Sales Tax Act, 1990, to show that the taxpayer had the knowledge or had the reason to believe that his act was the result of `collusion or deliberate' otherwise allegation would be vague and would not be in accordance with law.

(i) Sales Tax Act (VII of 1990)---

----S. 36---Recovery of tax not levied or short-levied or erroneously refunded--Grounds and reasons given in the show-cause notice did not show that the taxpayer knowingly and deliberately received the refund against invoices of the alleged supplier---Show-cause notice to such extent, could not be termed a valid show-cause notice in its true meanings and the same was liable to be vacated on this ground.

Messrs Inam Packages, Lahore v. Appellate Tribunal, Lahore 2007 PTD 2265 and Assistant Collector Customs and others v. Messrs Khyber Electric Lamp and others 2001 SCMR 838rel.

(j) Sales Tax Act (VII of 1990)--

----S. 36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Show-cause notice was issued on 2-4-2003 and consequent Order-in-Original was passed on 23-4-2004 after about 386 days while it should have been passed within 90 days of issuance of show-cause notice or within such extended period as the Collector may 'for reasons" to be recorded in writing, fix provided that such extended period shall in no case exceed 90 days---Any extension for time of adjudication had neither been sought for from competent authority nor its mention was made in the adjudication order---Original time-limit and extended time-limit for adjudication shall in no case exceed 180 days in toto---Contrarily, order was passed after lapse of 386 days without any lawful authority and legal excuse---Action taken was hit by time limitation provided under S.36(3) of the Sales Tax Act, 1990.

Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. The Collector of Sales Tax, Gujranwala 2008 PTD 60 and Messrs Tanveer Weaving Mills v. Deputy Collector and others 2009 PTD 762 rel.

(k) Sales Tax Act (VII of 1990)---

----S. 36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Conditional judgment---Non-determination of final liability---Validity---Adjudication authority had given his judgment conditionally i.e. It may be verified by the Collectorate that whether these amount have been paid or adjusted---In case, these are not verified as disputed or withheld then it is recoverable from the registered person under S.36" without determining final liability (if any) against the taxpayer which was not only illegal but also contrary to the mandatory provisions of subsection (3) of S.36 of the Sales Tax Act. 1990.

(l) Sales Tax Act (VII of 1990)---

----Ss. 46 & 36(3)---Appeal to Appellate Tribunal---Illegal order in utter contravention of mandatory provisions of law---Question of time limitation---On perusal of provisions of subsection (3) of S.36 of the Sales Tax Act, 1990, it became vivid that the authority had to determine actual amount of tax payable by a registered person but in adjudication order, the same had not been determined---Order of adjudicating authority was vague, illegal and void as there was no room for any intendment, equity or presumption particularly in fiscal matters---Order of the adjudicating authority was not only illegal, void ab initio but also passed in utter contravention of the mandatory provisions of law therefore, question of time limitation did not arise against it---Finding recorded by both the authorities below were declared not only against law but also contravening expressed mandatory provisions of Sales Tax Act, 1990---Show-cause notice as well as consequent order of authorities below being illegal, void and without lawful authority were set aside by the Appellate Tribunal.

2005 SCMR 69; 2007 SCMR 729; 1987 SCMR 1543; 2007 SCMR 834 and 1996 SCMR 856 rel.

(m) Sales Tax Act (VII of 1990)---

----S. 36---Recovery of tax not levied or short-levied or erroneously refunded---Illegal show-cause notice---Effect -Show-cause notice being illegal and without lawful authority, all the subsequent proceedings conducted thereon were also illegal and void on the face of it---Where the foundation was defective, the entire edifice built thereon would fat/ to the ground.

2007 SCMR 818 and 2007 SCMR 1835 rel.

(n) Constitution of Pakistan---

----Art. 189---Decision of Supreme Court binding on other Courts---Law laid down by the Supreme Court of Pakistan is binding by virtue of Article 189 of the Constitution.

Collector of Customs v. Messrs Achak Enterprises 2007 PTD 1458 rel.

Per Amjad Ikram Ali Accountant Member, agreeing with Raja Lehrassab Khan Judicial Member

(o) Sales Tax Act (VII of 1990)---

----S.36---Recovery of tax not levied or short-levied or erroneously refunded---Non-citing of relevant subsections of S.36, Sales Tax Act, 1990---Effect.

2007 PTD 967; 2007 PTD (Trib.) 307 and 2008 PTD 1293 rel.

Khubaib Ahmad for Appellant.

Usman Asghar, D.R. for Respondent.

Date of hearing: 3rd November, 2010.

2011 P T D (Trib.) 2005

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Muhammad Tauqir Afzal, Jawaid Masood Tahir Bhatti, Judicial Members and Muhammad Munir Qureshi, Accountant Member

Mass CARGO SERVICE (PVT.) LTD., LAHORE and others

Versus

DEPUTY COMMISSIONER OF INCOME TAX/WEALTH TAX, LAHORE and others

I.T.As. Nos.4304/LB of 2000, 2686/LB of 2001 and M.As. Nos.523/LB, 524/LB of 2005, decided on 25th February, 2004.

Per Syed Nadeem Saqlain, Judicial Member, Muhammad Munir Qureshi, Accountant Member, contra

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 132/63---Assessment on production of accounts, evidence etc.---Remand of case---Pending appeal adjudication before Appellate Tribunal---Re-assessment---Validity---Re-assessment completed by the Assessing authority in pursuance of order of First Appellate Authority whereby the case was remanded was nullity in the eye of law for the reason that the assessee had already approached the Appellate Tribunal in further appeal and the same was pending for adjudication before the Appellate Tribunal---Propriety demanded that the Assessing Officer should have waited till any findings were given on the issue by the Appellate Tribunal---Re-assessment being void ab initio, all the proceedings conducted thereafter were also not sustainable in the eye of law.

2002 PTD 1195 and Commissioner of Income Tax, Bombay President and others v. Khaim Oland Rani Das (1938) V .1.6) ITR 414 rel.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 132/63---Decision in appeal---Direction for fresh proceedings by the First Appellate Authority after observing that assessee's arguments carry weight---Validity---First Appellate Authority erred in law in recommending the case for de-novo proceedings after having accepted the assessee's stance---First Appellate Authority was not within domain of legal frame work while snaking direction for fresh proceedings---First Appellate Authority gave categoric findings regarding submission made at the bar and observed that Assessing Officer had apparently completed the proceedings without considering the arguments of the assessee---In the light of observations recorded by the First Appellate Authority the appeal of the assessee should have been accepted---Giving another chance to the Revenue would have amounted giving premium to the department and also an opportunity to snake up deficiencies in the assessment framed by the Assessing Officer.---Appeal of the assessee was accepted and order passed by the First Appellate Authority was vacated by the Appellate Tribunal.

Per Muhammad Munir Qureshi, Accountant Member, contra

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 132/63---Assessment on production of accounts, evidence etc.---Remand of case---Pending appeal for adjudication before Appellate Tribunal---Re-assessment---Validity---When re-assessment proceedings were taken up by the Assessing Officer the assessee had not filed any appeal before Appellate Tribunal against First Appellate Authority's order dated 3-10-2000 and no such appeal had been filed before Appellate Tribunal till the date that re-assessment was finalized i.e. 1-12-2000---Appeal before Appellate Tribunal against order of First Appellate Authority dated 3-10-2000 was filed by the assessee on 7-12-2000 whereas re-assessment under S.63/132 of the Income Tax Ordinance, 1979 had been finalized on 2-12-2000---Re-assessment framed under S.63/132 of the Income Tax Ordinance, 1979 dated 2-12-2000 could not be knocked down on this score---Assessee failed to produce books of accounts and supporting documentation when its case was fixed for hearing both at the time of original assessment as well as when re-assessment was taken up---Such persistent default on assessee's part made an ex parte assessment in the best judgment of the Assessing Officer inevitable---Assessment made under S.63/132 of the Income Tax Ordinance, 1979 was fair and reasonable and consistent with operative facts.

2002 PTD 1195 distinguished.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 63 & 61---Best judgment assessment---Ex paste assessment at a date other than the date stipulated in the notice---Validity---Judicial Member of the Tribunal had observed that order of Assessing Officer under S.62 of the Income Tax Ordinance, 1979 was not tenable in law as it had been finalized when notice under S.61 of the Income Tax Ordinance, 1979 had been issued---Accountant Member disagreed with such findings for the reason that fact of the matter was that the assessee did not appeal before the Assessing Officer in compliance to the notice duly served on him issued under S.91 of the Income Tax Ordinance, 1979 and did not seek any adjournment and as a consequence the Assessing Officer was fully justified to finalize the assessment ex parse under S.63 of the Income Tax Ordinance, 1979.

1996 PTD 1125 and 1975 PTD 58 rel.

Income Tax Ordinance (XXXI of 1979)---

----S. 63---Best judgment assessment---Once default of notice was established assessment could be finalized by the Assessing Officer ex parse at a date other than the date stipulated in the notice and such an assessment was valid in law.

Per Muhammad Tauqir Afzal Malik, Judicial Member---

(c) Income Tax Ordinance (XLIX of 2001)---

---S.132---Disposal of appeals by the Appellate Tribunal---Appeal referred on difference of opinion was dismissed on account of default of assessee.

Per Jawaid Masood Tahir Bhatti, Judicial Member, agreeing with Syed Nadeem Saqlain, Judicial Member

(d) Income Tax Ordinance (XLIX of 2001)---

---S.132---Disposal of appeal by the Appellate Tribunal---Difference of opinion---Order of Appellate Tribunal dismissing the matter of difference of opinion in default was recalled on the explanation offered by the assessee that he attended the court late due to bronchitis attack on the way and matter was directed to be fixed for hearing after issuing notices to the concerned parties.

(e) Income Tax Ordinance (XLIX of 2001)---

----S.132(2)---Disposal of appeals by the Appellate Tribunal---Default of appeal---Difference of opinion amongst Members of Tribunal---Section 132 of the -Income Tax Ordinance, 2001 deals with only the default of appeal and not the subject of difference of opinion---Default of appeal was a new phenomenon in the Income Tax Ordinance, 2001---Earlier, there was no concept of such kind in taxation history---Dismissal of appeal in default had been derived from the Civil Procedure Code whereby the suits were dismissed in default---Law encourages the disposal of the cases on merit---Appellate Tribunal performs judicial functions and in deciding appeal, all materials and not only a part of it must be considered---Order of Judicial Authority, like that of an Appellate Tribunal, was a solemn one, and the Appellate Tribunal should devote great care in expressing same---Appellate Tribunal had also inherent and ancillary powers to restore, recall and rehear the matter/appeal dismissed in default or decided to proceed ex parte on the basis of available record while exercising discretionary powers to invoke subsection (2) of S.132 of the Income Tax Ordinance, 2001---Discretion given under S.132 of the Income Tax Ordinance, 2001 to Appellate Tribunal was a wholly judicial discretion which was embodied first time in the Income Tax Ordinance, 2001 and must be exercised in accordance with legal principles and not in an arbitrary or capricious manner---Tax administration which disposes of appeals promptly and reaches a fair and final settlement speedily, was itself to be classed as a tax incentive---Avalanche of ill-conceived changes and complications, which may be compendiously called "legal litter" were mainly responsible for the poor quality of tax administration.

(f) Income Tax Ordinance (XLIX of 2001)--

----Ss.132 (2) & 130(10)---Disposal of appeals by Appellate Tribunal---Discretionary powers---Dismissal of appeal in default---Dismissal of difference of opinion due to default of party---Words "the Tribunal may if it deems fit"-Connotation---Subsection (2) of 5.132 of the Income Tax Ordinance, 2001 was discretionary in nature as the legislature had used the words "the Tribunal may if it deems fit, dismiss the appeal in default or may proceed ex parte "---Said subsection clearly gave the discretionary powers of dismissal of appeal in default which was not necessary that in every and each case such discretionary powers may be exercised---Said section relates to dismissal of appeal and Referee Member (s) could not dismiss the case of difference of opinion due to default of party as while hearing difference of opinion the Referee Member did not act as independent court or appellate court---Even if, it was presumed that the Referee Member could exercise such discretion as envisaged under sub-section (2) of S.132 of the Income Tax Ordinance, 2001 and may dismiss the assigned difference of opinion in default for non prosecution, same will make the provision of S.130(10) of the Income Tax Ordinance, 2001 as redundant---Difference of opinion will remain intact and there was no resolution of difference of opinion and whole scheme of law shall fall on the ground---Referee Member(s) should concur with the either Member and could not give the third opinion or separate findings or views contrary to the agreeing Member---Chairperson was perfectly right in assigning the task to resolve the difference of opinion as Referee Member regarding issues which had arisen due to different views by the two Members on the subject in cross appeals.

(g) Income Tax Ordinance (XLIX of 2001)---

----S. 130(10)---Appellate Tribunal---Limitations of referee Member---Analysis---Difference of opinion---Where there was difference of opinion amongst the Members, the point had to be decided by the opinion of majority, if there was a majority; but if the members were equally divided, they were to state the point or points on which they differ and the case should be referred by the Chairperson of the Appellate Tribunal for hearing on such point or points by one or more of the other Members of the Tribunal, and such point or points should be decided according to the opinion of the majority of the Members, who had heard the case including those who first heard it will prevail---When an issue was raised and referred to Chairperson for making reference to a third member, the Chairperson will refer the said matter to a third member---Under said subsection, the third Member or Members had been conferred a limited power and they were competent to decide only the point or points referred to him and could not sit on a case of difference of opinion as appellate court and the referee Member will not be allowed to entertain fresh material or new point/issue/ argument which were not advanced earlier before the original Bench during the course of hearing of original appeal---After the decision: by the third Member on the point or points referred to him, the case should go back to the original Bench who heard it, since the, third Referee Member had not been given the jurisdiction to decide and dispose of the appeal as independent appellate court.

(h) Income Tax Ordinance (XLIX of 2001)---

----S.132 (2)---Disposal of appeals by the Appellate Tribunal---Powers of referee/third member---Summarized.

2007 PTD (Trib.) 676 rel.

(i) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 63/132---Assessment on production of accounts, evidence etc.---Question "whether Assessing Officer was bound in law to stay re-assessment proceedings consequent to First Appellate Authority setting aside the original assessment framed under S.63 of the Income Tax Ordinance, 1979 because the assessee "intended" to file appeal before Appellate Tribunal against the order of First Appellate Authority and to wait for disposal of that "intended appeal" by the Appellate Tribunal"-When the matter of first assessment was still pending before Appellate Tribunal and the Assessing Officer having been duly intimated of the said fact ought to have waited for the decision of the Appellate Tribunal---First Appellate Authority had remanded the matter for reconsideration despite the fact that the assessee had already approached the Appellate Tribunal and the appeal was pending adjudication---Even the propriety demanded that the Assessing Officer should have waited till any findings were given on the issue by the Appellate Tribunal; and giving another chance to the Revenue would have amounted giving premium to the department and also an opportunity to make up the deficiencies in the assessment framed by the Assessing Officer; and the assessment was void ab initio and all the proceedings conducted thereafter also were not sustainable in the eyes of law.

2002 PTD 1195 rel.

(j) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 132/63---Assessment on production of accounts, evidence etc.---Question "whether ex pane assessment finalized on 29-4-2000 was sustainable in law when notice under S.61 of the Income Tax Ordinance, 1979 had been duly served for 28-4-2000 on which date neither did the assessee appear before the Assessing Officer nor sought any adjournment---Assessee was sent a notice on 18-4-2000 but in the Diary Sheet date had been mentioned as 11-4-2000 and according to that entry of 11-4-2000, the notice was to be issued under S.62 of the Income Tax Ordinance, 1979 for 28-4-2000 and in the next entry dated 26-4-2000, it had been noted with "not attended "---After considering all such entries of Order Sheet and copies of notice, First Appellate Authority had rightly observed that the Assessing Officer had apparently completed the proceedings without considering the arguments and without discarding the evidence and ignoring the replies of the specific notices---Appeal filed by the Department was dismissed while the appeal filed by the assessee was allowed.

1975 PTD 58 rel.

Muhammad Arif Chaudhry, FCA for Appellants (in I.T.A. No.4304/LB of 2000).

Wajid Akram D.R. for Respondents (in I.T.A. No.4304/LB of 2000).

Wajid Akram D.R. for Appellants (in I.T.A. No. 2686/LB of 2001).

Muhammad Arif Chaudhry, FCA for Respondents (in I.T.A. No.2686/LB of 2001).

Muhammad Asif Ch. FCA for Applicant (in M.As. Nos.523/LB and 524/LB of 2005).

Nemo for Respondent (in M.As. Nos.523/LB and 524/LB of 2005).

Date of hearing: 24th February, 2004.

2011 P T D (Trib.) 2026

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and M.B. Tahir, Accountant Member

Messrs PROGRESSIVE WEAVERS (PVT.) LTD., FAISALABAD

Versus

C.I.T., FAISALABAD

I.T.As. Nos.75/LB, 76/LB, 1067/LB and 1068/LB of 2010, decided on 22nd March, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 114(6), 120, 122(3)(b), 122(5-A) & 131---Furnishing a revised return---Amendment of assessment---Show-cause notices for amendment of assessment were issued to the appellant/taxpayer who instead of replying said show-cause notices, revised the returns--Ignoring the revised return, Taxation Officer continued with the action, proposed in the show-cause notices and passed orders amending assessments taken to have been made under S.120 of Income Tax Ordinance, 2001---Validity---Taxpayer under S.122(3) of Income Tax Ordinance, 2001 had been authorized to revise its return and revising of return would create a right in shape of an 'amended assessment' and Ordinance had recognized it for all purposes including the purpose of determining payable tax---Provisions of S.122(3) of Income Tax Ordinance, 2001 was substantive and the authority given to taxpayer for such amendment was a substantive right---Substituted subsection (6) of S.114 of Income Tax Ordinance, 2001 could not be given retrospective effect because it curtailed the right vested in the taxpayer by S.122(3) of the Ordinance to cure or amend his earlier declaration given in original return---Right to revise return being unconditional at time when same was revised, the conditions ordained by S.114(6) of Income Tax Ordinance, 2001 should not have been applied retrospectively.

Zakaria H.A. Sattar Bilwani's case 2003 PTD 52; Malik Gul Hassan and Co. and 5 others v. Allied Bank of Pakistan 1996 SCMR 237; Muhammad Ishaq v. State PLD 1956 SC (Pak.) 256 and State v. Muhammad Jamil, PLD 1965 SC 681 and Abdul Rehman v. Settlement Commissioner PLD 1966 SC 362 ref.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss.2(3), 9 & 11---Investigation of allegations of maladministration--Recommendations for implementation---Office of Federal Tax Ombudsman under S.9 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, could investigate any allegation of maladministration---If the investigated allegations of maladministration were found correct, Federal Tax Ombudsman would communicate its finding with the recommendation to Revenue Division under S.11(1) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 and Revenue Division would take action under S.11(2) of the Ordinance on the recommendation; and would inform the Federal Tax Ombudsman; or would inform about the reasons of not taking action--If Office of Federal Tax Ombudsman would feel that reasons for not taking action were not convincing, he could refer the matter to President as "Defiance of Recommendation "---Examination of the Ordinance did not suggest that it was a forum parallel to a court of competent jurisdiction; or to an Appellate Tribunal---Object of said office was to identify the maladministration, by functionaries administering tax laws; and make commendations for eradication or redress of grievance---Recommendation was not an order in itself, changing legal status of acts of omission or commission---Action on the recommendation was to be taken by the Revenue Division, which was authorized also not to take action and inform about the reasons of not taking action---On the contrary, order of a court or Tribunal would change the legal character of impugned order and respondents could only seek remedy in accordance with law---Power to investigate the allegation of maladministration was subject to subsection (2) of S.9 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, which was couched in negative language to restrict such investigation from encroaching upon the quasi judicial powers invested in the authorities under the relevant laws---Principles.

Muhammad Imran Rashid for Appellant.

Azmat Elahi Ghumman, D.R. and Muhammad Azhar, DCIT for Respondent.

Date of hearing: 22nd March, 2011.

2011 P T D (Trib.) 2072

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Jahandar, Judicial Member and Muhammad Ashraf, Accountant Member

Messrs SAFINA IMPEX, ISLAMABAD and others

Versus

COLLECTOR SALE TAX, RAWALPINDI

S.T.A. No.32/IB of 2009, decided on 15th April, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss. 10(2)(4) & 73---Refund of input tax---Limitation---Claim of refund---Issuance of show cause notice---Taxpayer contended that in case of an objection to refund claim a show-cause notice was to be issued within 14 days of receiving of the refund claim---Show­-cause notices were issued after almost one year from the filing of refund claims---Provision of S.10 of the Sales Tax Act, 1990 was a mandatory provision and failure of the department to decide the refund claims within the period, the same could not be rejected and should be deemed accepted---Validity---Refund claims were not processed as required by subsection (2) of S.10 of the Sales Tax Act, 1990 and after almost one year, show-cause notices were issued by raising certain objections as to the admissibility of the refund claims---Subsection (4) of S.10 of the Sales Tax Act, 1990 provides that in case a refund claim seemed to be not admissible, the requirement as to the time limit for processing the claims should not apply till the investigation and verification stood completed---Remittance/price of the exported goods was received by one so called guarantor, then credited to the account of the exporter/registered person---On the face of that, some investigation was required as to why the amount was credited firstly in the name of a guarantor which tantamount to a violation of S.73 of the Sales Tax Act, 1990 providing that payment should have to be made by a cross cheque or pay-order in favour of seller/exporter from the business account of the buyer and in absence of that, the, claim of refund should not be admissible---Once it was shown by the registered person himself of the payment to the guarantor in the refund claims, it became difficult for the department to go by the time schedule laid down in subsection (2) of S.10 of the Sales Tax Act, 1990---As per subsection (4) of S.10 of the Sales Tax Act, 1990 the issuance of show cause notice beyond the period specified in subsection (2) of S.10 of the Sales Tax Act, 1990 did not become a basis for saying that the refund claims should be deemed to have been accepted.

(b) Sales Tax Act (VII of 1990)---

----Ss. 10(2) (4) & 67---Refund of input tax---Limitation---Mandatory provision---Effect of subsection (2) of S.10 of the Sales Tax Act, 1990 as it existed at the relevant time did not appear to be a mandatory provision for the reason that firstly no penalty had been provided in the said section in the event of time schedule laid down in subsection (2) of S.10 of the Sales Tax Act, 1990 being not followed and secondly such assumption was strengthened by the tenor of S.67 of the Sales Tax Act, 1990 which provided a compensation to be made in case of withholding of refund claims beyond period prescribed without there being any reason and a sum along with the refund claim was payable by the department.

(c) Sales Tax Act (VII of 1990)---

----Ss. 10 & 73---Refund of input tax---Limitation---Findings as to the effect of refund claims having not been processed within time could not be given unless another issue pertaining to alleged violation of S.73 of the Sales Tax Act, 1990 was decided---Final verdict will be given after a finding on the alleged violation of S.73 of the Sales Tax Act, 1990.

(d) Sales Tax Act (VII of 1990)---

----Ss. 45 & 10---Sales Tax Refund Rules, 2000, Rr. 2 & 8---Power of adjudication---Rejection of refund ---Competence of Assistant Collector---Taxpayer contended that S.45 of the Sales Tax Act, 1990, as it existed at the relevant time, empowered only the Deputy Collector to decide the refund claims exceeding one million and although the refund claims were more than one million, Assistant Collector passed the order-in-original which was illegal being without jurisdiction--Department contended that Assistant Collector, who passed the order­-in-original had been empowered by the Collector for dealing with refund claims exceeding rupees one million---Validity---Department had not produced any authority letter by Collector empowering the Assistant Collector to act as Officer Incharge to deal and process the refund claims and pass the Order-in-Original---Assuming that department would have produced such an authorization letter that too had not been of any validity and consequence being violative of S.45 of the Sales Tax Act, 1990, for the reason that S.45 of the Sales Tax Act, 1990 being a principal legislation surely override R.2 of the Refund Rules, 2000 and the only harmonious construction which may be placed in the said context was "that for the purposes of dealing with the refund claims exceeding one million, only Deputy Collector would be deemed to be an Officer Incharge and an Assistant Collector could never be authorized for processing such claims".

(e) Sales Tax Act (VII of 1990)---

---Ss. 73 & 10---Foreign Exchange Regulation Act (VII of 1947), S.12(1)---Certain transactions not admissible---Exporter---Claim of refund---Payment was not made through banking channel as the payment was firstly made to guarantor, who then was stated to have transferred the said amount to the account of registered person/ exporters; and exporter contended that there was no word `direct' used in S.73 of the Sales Tax Act, 1990 and transfer of amount by indirect way, yet through the banking channel, should be deemed as correct and within the purview of S.73 of the Sales Tax Act, 1990 which entitled the registered person for refund---Department contended that payment had to be made by the importer from his bank account through banking channel in favour of the seller/exporter; and registered person did not furnish all the necessary documents in support of claims---Validity---Registered person maintained that the amount of exported goods was firstly received by the guarantor who then transferred that to the account of exporter and there was a certificate by the authorized bank of the registered person to this effect on the file---It was under­standable as to how some guarantor's came into picture as there was no possibility of transfer of payment by the authorized bank of the importer to the account of some so-called guarantor---Procedure prescribed by the Foreign Exchange Regulation Act, 1947 had not been followed, a certificate had been issued by the authorized bank of the exporter as to the receipt of amount of the exporter's goods from the account of guarantor---Officer dealing with the refund claim was supposed to examine such aspect of the case as to why the amount was credited firstly in the account of guarantor in violation of Form-E---Such things had not been seen and examined by the dealing officers which was necessary to establish as to whether or not S.73 of the Sales Tax Act, 1990 had been violated for the reason, presumably that all the necessary documents for example Form-E which were statedly 10 in number were not produced by the registered person--- Necessary documents were not on the file of appeal to give any findings in this respect by the Appellate Tribunal -All orders passed by the forums below were set aside by the Appellate Tribunal and case was remanded for re-examination by an officer, who was under the law and relevant rules competent to decide the matter with a direction that all the documents which were necessary for export of goods particularly Letter of Credit and Form-E including the Bank Credit Invoice may be examined afresh and case be decided---Case file was ordered to be sent to Chief Commissioner Inland Revenue for re-examination and decision who had the jurisdiction to decide the matter.

2003 PTD (Trib.) 928 distinguished.

(f) Foreign Exchange Regulation Act (VII of 1947)---

----S.12---Procedure and documents of export proceeds---In export Process among others, Form-E, Bill of Lading, Packing Invoice, Export Commercial Invoice, Letters of Credit were the documents which were necessary to support a refund claim in case of export and S. 12 of Foreign Exchange Regulation Act, 1947 was the relevant Provision in that regard---Form-E was quite helpful in resolving the controversy---Form-E had been prescribed by S. 12(1) of the Foreign Exchange Regulation Act, 1947 showing inter cilia that the authorized bank of the exporter and that of the importer would deal with each other on behalf the exporter and importer---Letter of Credit which was sought to be issued by the importer was processed by the importer's authorized bank and sent to the exporter's authorized bank---After receipt of export goods by the importer, the exporter was required to submit Form-E through his authorized Bank to the State Bank and a copy to the Sales Tax Department along with the refund claim---On the back of Form-E, there were two certificates which were quite pertinent where the authorized bank of the exporter certifies that the payment of the exported goods had been received from the importer's bank which had been credited, of course after examining certain documents, in the account of the exporter, lying with the exporter's authorized bank.

(g) Sales Tax Act (VII of 1990)---

----S. 73---Certain transactions not admissible---Ruling of Federal Board of Revenue---Traveller's cheques---Rulings of Federal Board of Revenue were not precedent and had no binding effect in as much as the same treated the traveller's cheques to be a compliance of S.73 of the Sales Tax Act, 1990 which incidentally was a misunderstanding.

Farhat Nawaz Lodhi for Appellant.

Ghulam Hasnain, Audit Officer and Hafiz Munawwar Iqbal, Legal Advisor for Respondent.

Date of hearing: 26th February, 2011.

2011 P T D (Trib.) 2086

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and M.B. Tahir, Accountant Member

Messrs INTERLOOP (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX (R.T.O.), FAISALABAD

S.T.A. No.1210/LB of 2009, decided on 3rd February 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss. 11(2) & 45(2)(iii)---Assessment---Rejection of refund-Taxpayer contended that show-cause notice as well as adjudication order had been issued illegally by the Assistant Collector (Refund) because he was not lawfully empowered to adjudicate the cases falling under sub-section (2) of S.11 of the Sales Tax Act, 1990 beyond pecuniary limit of one million rupees as specified under cl. (iii) of subsection (2) of S.45 of the Sales Tax Act, 1990 as the amount of tax involved was Rs.2,334,953---Validity---Assistant Collector had transgressed his jurisdiction and powers of adjudication by issuing show-cause notice and passing adjudication order beyond pecuniary limit of one million rupees as admittedly amount of refund involved was Rs.2,334,953---Under S.45(1)(ii) of the Sales Tax Act, 1990, it was only the Deputy Collector who had the power to issue show-cause notice and to pass adjudication order---Show-cause notice and Order-in-Original was passed by an authority having no jurisdiction in the matter---Such was an order coram non judice and was accordingly declared as illegal, ab initio void and without lawful jurisdiction and set aside---Order passed by the First Appellate Authority equally suffered from illegalities being without jurisdiction and was vacated by the Appellate Tribunal.

2008 SCMR 240 SC (Pak.) and 2001 SCMR 1822 SC (Pak.) rel.

2010 PTD (Trib.) 1636 ref.

(b) Sales Tax Act (VII of 1990)---

----S.45---Power of adjudication---Jurisdiction---Jurisdiction objection or a basic lacuna on assumption of jurisdiction can be raised at any stage of proceedings inasmuch as it goes to the very root of the matter.

(c) Sales Tax Act (VII of 1990)---

---S.45---Power of adjudication---Jurisdiction---Each authority working under the hierarchy of the Sales Tax Department has been given power to perform his duty and to exercise jurisdiction within the parameters as specifically provided under the law---Any transgression to the above limit would render the entire exercise of authority illegal and void ab initio.

(d) Administration of justice---

----Power vested in any authority can only be exercised by the same authority, in default whereof, the entire action would be without jurisdiction, void ab initio and of no legal effect.

Khubaib Ahmad for Appellant.

Rizwan Ahmad Urfi, D.R. for Respondent.

Date of hearing: 3rd February, 2011.

2011 P T D (Trib.) 2090

[Inland Revenue Appellate Tribunal of Pakistan]

Before Raja Lehrassab Khan, Judicial Member and Amjad Ikram Ali, Accountant Member

Messrs SHAMA EXPORTS (PVT.) LTD., FAISALABAD

Versus

COLLECTOR OF SALES TAX, FAISALABAD

S.T.A. No.560/LB of 2009, decided on 22nd December, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss.10, 26 & 73---Refund of input tax---Objection of "scrutiny for verification of input tax "---Rejection of refund---Validity---Objection was provisional in nature having not been raised after due examination of the records of supplier whose required scrutiny had not been finalized despite expiry of almost three years---Since, supplier was regularly filing monthly sales tax returns and summary statements under Ss.26 and 26(5) of the Sales Tax Act, 1990 and payments in respect of all alleged transactions had also been made through banking channel and the computer profile of the said supplier as available on Sales Tax Automated Refund Repository Computer System indicated its status as "operative unit "---Rejection of refund against invoices of such registered supplier was without lawful authority and of no legal effect---Neither any charge of fake transactions nor of tax fraud either on the part of supplier or on registered person had been levelled in show-cause notice without which refund of input tax paid by registered person could not be rejected; and rejection of refund claimed merely on assumptions and presumptions was not warranted under law---Rejection of refund by the sales tax department on the charge of scrutiny for verification of input tax was illegal and unlawful, in circumstances.

Commissioner of Income Tax v. Messrs. Fakir Cotton Ginning and Processing Industries Ltd. PLD 1991 SC 280; Collector of Customs v. Muhammad Mehfooz PLD 1991 SC 630; Messrs Avari Hotel Ltd. v. Collector of Sales Tax and 3 others 2000 PTD 3765 and 2010 PTD (Trib.) 857 rel.

(b) Taxation---

--Assesee can be subjected to tax under the provisions of law which are clear and unambiguous.

(c) Sales Tax Act (VII of 1990)---

----Ss. 10 & 21- Sales Tax Rules, 2006, R.12(5)---Refund of input tax---Objection of "registration suspended" of the supplier---Rejection of refund---Validity---Rejection of refund for period in question on the charge of "registration suspended" was without any lawful ground as refund against invoices of a person whose registration was suspended could be rejected upon his black-listing by the Collector of Sales Tax adhering due process of law as prescribed under S.21 of the Sales Tax Act, 1990 read with Sales Tax Rules, 2006---Rejection of refund during the currency of suspension of registration was premature, invalid, unwarranted and illegal because no formal order of blacklisting under the law had been issued by the competent authority---Whole proceedings culminated in show-cause notice and consequent order were nullity in the eyes of law.

(d) Sales Tax Rules, 2006---

----R.12 (5)---Sales Tax Act (VII of 1990), S.10---General Clauses Act (X of 1897), S. 24---Suspension of registration---Blacklisting---Retrospective effect---Rejection of refund on the ground that department could reject refund of input tax because 'suspension of registration or black-listing' of any registered person in its sprit covered the activities of his past having retrospective effect and it would be in no way for his prospective activities---Validity---Invoices issued during suspension of registration and after black-listing of such person shall not be entertained for the purposes of sales tax refund or input tax credit whereas no transaction had ever been made during or after "suspension of registration and black-listing of the suppliers"---Rejection of refund by relying on Rule 12(5) of the Sales Tax Rules, 2006 was palpably illegal and unlawful---Word "prior" used in the said rule did not cover the period beyond suspension of registration but it meant during currency of suspension of registration, up to and after its blacklisting---Rule 12(5) of the Sales Tax Rules, 2006 would come into play when a registered person transacted with another person during or after its suspension of registration and black-listing as same was not meant for, before suspension of registration or black-listing---While interpreting the taxing statute one must look into the words of the statute and to interpret it in the light of what is clearly expressed---Record showed that at the time of business transactions, neither registration of alleged suppliers was suspended nor were declared as blacklisted units rather having "operative status" at that time---Order through which registration of suppliers was suspended was an executive order; and if an executive order or a notification had been used for the benefit of the subject then it could be made operative retrospectively but if its operation was to the disadvantage of a party who was the subject of the notification then same would operate prospectively---Under S.24 of the General Clauses Act, 1897 every insertion, replacement or amendment runs prospectively and not retrospectively.

1992 SCMR 1652; PLD 2001 SC 340; PLD 1997 SC 582; 1986 SCMR 1917; Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 and 2010 PTD (Trib.) 2406 rel.

(e) Interpretation of statutes---

----Faical statute---While interpreting the taxing statute one must look into the words of the statute and to interpret it in the light of what is clearly expressed.

(f) Sales Tax Act (VII of 1990)---

----S. 10---Refund of input tax---Charge of non-filer-Rejection of refund---Validity---Unit had filed sales tax return which was attached with the appeal memo and the same was also found satisfactory by the Department and had not shown 'his concerns---Registered person could not be impeded with undue rejection of refund due to any fault or non-updating of refund automated system---Rejection of refund on the objection raised by Sales Tax Automated Refund Repository System without verifying the actual and factual position on the subject-matter was highly unjustified and of no legal effect.

(g) Sales Tax Act (VII of 1990)---

----S. 10---Refund of input tax---Registered person, a manufacturer­-cum-exporter---Objection that "shipping bill does not exist"---Rejection of refund---Validity---Due to non-updating of computer system, said charge had been levelled otherwise, the quadruplicate copy of shipping bill along with the rebate documents were attached with the appeal memo.---Orders of authorities below were vacated against said objection in view of such factual position.

(h) Sales Tax Act (VII of 1990)---

----Ss. 10, 7 & 8---Refund of input tax---Determination of tax liability---Objection "wrong tax period "---Registered person claimed refund in connection with zero rated supplies during August-2007 against invoices pertaining to month of July 2007 and computer system generated an electronic objection of "wrong tax period"-Validity-Registered person was entitled to claim refund of input tax for a preceding tax period in his sales tax return for a succeeding tax period under the proviso to S.7 of the Sales Tax Act, 1990---Charge of wrong tax period was not only wrong and false but also illegal and unlawful---Registered person committed a lapse by not claiming refund in the relevant tax period and rather claimed the same as input tax in the next month---Law had given a right to registered person and availing of such a right later that stipulated period and it would not attract rejection of refund at all---Refund of input tax was a right of a registered person which could not be denied or withheld on merely some procedural lapses and technical grounds---Any such denials of refund of input tax would tantamount to double taxation not covered by the express provisions of Ss.7 and 8 of the Sales Tax Act, 1990---Orders passed by the authorities below for such procedural lapse was too harsh and were not sustainable under law---Orders were vacated by the Appellate Tribunal.

Messrs Pfizer Laboratories v. Federation of Pakistan PLD 1998 SC 64 rel.

Khubaib Ahmad for Appellant.

Usman Asghar, D.R. for Respondent.

Date of hearing: 22nd December, 2010.

2011 P T D (Trib.) 2124

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member

COLLECTORATE OF SALES TAX AND FEDERAL EXCISE, FAISALABAD

Versus

Messrs MIAN GHOUS BUX (PVT.) LTD., FAISALABAD and another

S.T.A. No.1862/LB of 2009, decided on 18th January, 2011.

Sales Tax Act (VII of 1990)---

----S. 10---Refund of input tax---Registered person manufac4urer-cum­exporter---Rejection of refund on the ground of "scrutiny for verification for input tax"---Passing of Order-in-Original beyond the show-cause notice---First Appellate Authority set aside Order-in-Original by observing that objection regarding "scrutiny for verification for input tax" was not mentioned in the show-cause notice and was never confronted to the registered person; and treated the Order-Up Original to have been passed beyond the scope of show-cause notice--Department contended that although the objection regarding scrutiny for verification for input tax was not mentioned in the show-cause notice but the same was the discrepancy on the basis of which the refund claimed by the registered person did not merit acceptance---Validity---Admittedly, charge of "scrutiny for verification for input tax" was not levelled in the show-cause notice, on the basis of which the refund claimed by the registered person had been rejected---Since the objection of "scrutiny for verification for input tax" was not confronted, the rejection of refund had no legal sanctity---If an order had been passed on the ground other than the grounds confronted to the taxpayer by way of issuance of show-cause notice, same had no legal sanctity---First Appellate Authority had rightly found the Order­-in-Original to be illegal and void and set aside the same---Appellate Tribunal did not interfere in the order-in-appeal and the same was upheld by the Appellate Tribunal.

1987 SCMR 1840 rel.

Dr. Sheryar, D.R. for Appellant.

Khubaib Ahmad for Respondent.

Date of hearing: 18th January, 2011.

2011 P T D (Trib.) 2158

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairman

Messrs SHAHSONS PAKISTAN (PVT.) LTD., MULTAN

Versus

C.I.R., R.T.O., MULTAN

I.T.A. No.414/LB of 2011, decided on 31st May, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.177(4), 120, 122(9), 18, 20 & 22---Audit---Tax year 2008---Pre­-selection notice---Selection of case for audit on the ground that claim of manufacturing and profit and loss account expenses needed examination for verifiability, reasonability and admissibility with reference to provisions of Ss.18, 20 and 22 of the Income Tax Ordinance, 2001-After examination of return of income, details of information produced and audited accounts a show-cause notice was issued---Since no documentary evidence in response to said notice was provided, the assessment was amended and a tax liability was created---Taxpayer contended that selection of the case for audit was illegal and void as no pre-selection notice was issued; and a show-cause notice was pre-requisite before selecting case for audit---Department contended that for selection of case for audit, no pre-selection show-cause notice was required as the taxpayer would have ample opportunity to prove his case during the course of audit proceedings and if nothing untoward was found, the declared version would be accepted---Validity---Selection of the case was not made in accordance with the parameters laid down by the law and the apex court---Even otherwise, selection of the case for audit in itself was tantamount to an adverse order since it undermined the sanctity of an assessment order issued by the Commissioner of Income Tax under S.120(1)(b) of the Income Tax Ordinance, 2001---Non-issuance of pre-selection notice was against the norms of natural justice i.e. audi alteram partem---Selection, in the facts and circumstances was illegal void ab initio--Amended assessment order under S.122(1) of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal.

2009 SCMR 344 = 2009 PTD 37 and 2010 PTD 395 ref. I.T.A No.618/LB/09 rel.

Riaz Ahmed, ITP for Appellant.

Abid Raza Bodla, D.R. for Respondent.

Date of hearing: 4th May, 2011.

2011 P T D (Trib.) 2169

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairman and Tabana Sajjad Naseer, Accountant Member

Messrs ALBERTA SPORTS (PVT.) LTD. SIALKOT

Versus

C.I.R., R.T.O., SIALKOT

S.T.A. No.14/LB of 2011, decided on 29th March, 2011.

Sales Tax Act (VII of 1990)---

----S.11---Assessment of tax---Audit by Directorate of Revenue Receipt Audit---Validity---Proceedings initiated on the basis of audit conducted by Directorate of Revenue Receipt Audit, were coram non judice, unsustainable in the eye of law-Case was set aside by the Appellate Tribunal.

2007 PTD (Trib.) 1600; 2010 PTD 1355 and Civil Petition No.1580 of 2008 dated 13-4-2010 rel.

Hussain Ahmad Sherazi for Appellant.

Syed Jawad Ali Shah, D.R. for Respondent.

Date of hearing: 29th March, 2011.

2011 PTD (Trib.) 2171

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmad, Judicial Member

Messrs IMRAN PIPE MILLS (PVT.) LTD., LAHORE

Versus

COLLECTOR CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), LAHORE and another

S.T.A. No.2290/LB of 2009, decided on 15th February, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 33(5), 46, 73 & 74---Delay in payment of amount of tax---imposition of penalty---According to provisions of S.73 of Sales Tax Act, 1990, payment of amount for a transaction was to be made within 180 days of issuance of the Tax invoice---In the present cash; taxpayer bad made the payment through cheque with the delay of 19 days beyond the prescribed limit of 180 days; as sequence to which a penalty of Rs.10,000 had been imposed on him by resorting to provisions of S.33(5) of the Sales Tax Act, 1990 besides refusing the adjustment of input tax---In case of failure to deposit the amount of tax due within prescribed limit of 180 days, the taxpayer would not be entitled to claim input tax until or unless such limitation was condoned by the Commissioner by exercising power delegated by the Board---Input tax adjustment was the substantive right of taxpayer, which could not be denied simply on the basis of procedural/technical lapses, but in case of violation of statutory provisions, the taxpayer would be penalized---Order of payment of amount as input tax, in circumstances, was deleted; and the payment of said amount by the taxpayer was considered to be admissible input tax---Penalty of Rs.10,000 imposed by Additional Collector on the taxpayer and confirmed by Collector (Appeals) did not call for any interference being in accordance with law prescribed under S.33(5) of Sales Tax Act, 1990.

Farooq Sheikh for Appellant.

Dr. Sheryar, D.R. for Respondent.

Date of hearing: 18th January, 2011.

2011 P T D (Trib.) 2180

[Inland Revenue Appellate Tribunal of Pakistan]

Before Muhammad Jahandar, Judicial Member

Messrs ADNAN HONDA CENTRE, KAMRA

Versus

COLLECTOR (APPEALS) SALES TAX AND FEDERAL EXCISE, R.T.O., RAWALPINDI

S.T.A. No.1/IB of 2009, decided on 20th April, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss.3, 6, 26, 33, 34 & 36(1)--- Sales Tax Special Procedure Rules, 2006, Rr.16 17, 123 & 129---Scope of tax---Retailer---Sale of motorcycles---Issuance of show cause notice for payment of sales tax by retailers, a registered retailer of motorcycles shall have to pay 2% sales tax and 1% income tax of the value of taxable supplies after 4% value addition---Registered person contended that audit by Directorate General of Revenue Receipt Audit (DGRRA) was illegal as it was not competent to conduct the audit and that Rr.16 & 17 of the Sales Tax Special Rules, 2006 were not applicable and instead R.123 read with R.129 were the applicable Rules---Department contended that record of registered person was requisitioned by the Sales Tax Officer who had the jurisdiction at the relevant time and was then got examined by the staff of Directorate General of Revenue Receipt Audit whereby certain discrepancies and short payments were pointed out; that Deputy Collector Adjudication issued a show cause notice by referring to short payments; that any assistance by staff of Directorate General of Revenue Receipt Audit could not be taken to be illegal; and that admittedly registered person was a retailer and Rr. 16 & 17 of Sales Tax the Special Procedure Rules, 2006 were applicable whereas Rr.123 and 129 pertained to a dealer and the registered person had not got himself registered as such---Validity---Record could be requisitioned by the Sales Tax Officer for audit and after receiving the record by the Sales Tax Officer assistance from the staff of Directorate General of Revenue Receipt Audit was taken and then show cause notice was issued to the registered person by the Deputy Collector of Adjudication by pointing discrepancies/short payments---For the purposes of S.25 of the Sales Tax Act, 1990, it may be said that no illegality had been committed--- Sales Tax Act, 1990 provided a mechanism by getting the records of the registered person audited by Sales Tax Officers from certain audit firms and after receipt of the report the proposed action should had been taken by Officer of the Inland Revenue---Objection of the registered person was of no consequence and did not make the order-in-original to be questionable---Show cause notice was issued by a competent Officer and after confronting the registered person with related issues the Order-in-Original was passed.

(b) Sales Tax Act (VII of 1990)---

----S. 25---Access to record, documents etc.---Audit---Assistance from the staff of Directorate General of Revenue Receipt Audit (DGRRA)--- Section 25 of the Sales Tax Act, 1990 provided that the audit of the Sales Tax of the registered person could be conducted by the Sales Tax Officer, now Inland Revenue Officer only--Sales Tax Officer who had the jurisdiction at the relevant time directed the registered person to produce the record before him and then took assistance from the staff of the Directorate General of Revenue Receipt Audit for audit, wherein certain discrepancies/short payments were pointed out---Such exercise was an internal management which did not prejudice in any way the case of the registered person---Admittedly, the order for production of record by the registered person was issued by the Sales Tax Officer and not by any member of staff of Directorate General of Revenue Receipt Audit and then no action culminating in passing an Order-in-Original was passed by the staff of Directorate General of Revenue Receipt Audit.

(c) Sales Tax Special Procedure Rules, 2006---

----R.123---Retailer---Dealer---Admittedly, the registered person was not a dealer and had been registered as a retailer, thus R.123 of the Sales Tax Special Procedure Rules, 2006 was not applicable and the registered person had rightly been dealt with under the relevant rules.

Syed Tanseer Bukhari for Appellant.

M. Jawad, D.R. for Respondent.

Date of hearing: 29th March, 2011.

2011 P T D (Trib.) 2194

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs AL-FATEH TRADERS, KARACHI

Versus

COLLECTOR, CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEAL), KARACHI

S.T. No.571/K of 2009, decided on 7th March, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 73, 11(2), 34 & 36---Certain transactions not admissible---Payments through cheques but after stipulated time period---Validity---Registered person was charged that failed to make payments through banking and financial transactions and as such he was net entitled for claiming adjustment of tax paid---Registered person had failed to explain the reason for doing so and accordingly these charges against him were established and the Adjudicating Officer refused the ground of appeal to adjust tax paid and in addition imposed a penalty and default surcharge---Registered person failed to produce any documentary evidence in support of his claim and his appeal was rejected by the First Appellate Authority---Even at the stage of Appellate Tribunal, the registered person had failed to produce any documentary evidence on the basis of which he could support the claim made by him---Registered person evidently had committed the violations of the provisions of the Sales Tax Act, 1990 and were engaged in activities which were not permissible within the framework of law---Appeal was rejected by the Appellate Tribunal being devoid of any merit.

Order-in-Appeal No.367 of 2009 dated 9-6-2009 ref.

Mir Afzal, Consultant for Appellant.

Sunil Kumar, D.R. for Respondent.

Date of hearing: 13th October, 2010.

2011 P T D (Trib.) 2216

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shahin, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs ANMOL PAPER MILLS (PVT.) LTD., LAHORE

Versus

C.I.R., (LEGAL DIVISION) R.T.O., LAHORE

F.E.A. No.64/LB of 2009, decided on 7th June, 2011.

Sales Tax Act (VII of 1990)---

----Ss.36 (3) & 45B (2)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Taxpayer contended that Order-in-Original should have been passed within 90 days of the issuance of show-cause notice or within such extended period as the Commissioner may, for the reasons to be recorded in writing, provided that such extended period should in no case exceed 90 days; admittedly the show-cause notice was issued on 9-10-2004 and the Order-in-Original was passed on 15-11-2006; which was clearly time barred having not been passed within the prescribed time limit by law---Validity---Limitation provided by law under S.36(3) of the Sales Tax Act, 1990 was mandatory and the order under said section should have been passed within such time period---Since the Order-in-Original was passed beyond the limitation provided in law, it was not sustainable and had to be struck down---Show-cause notice as well as orders were set aside by the Appellate Tribunal; and orders of the authorities below were vacated and the demand created was deleted.

2006 PTD 271 (SC); 2008 PTD 60 (H.C.) and 2009 PTD 2004 rel.

2009 PTD 762; 2008 PTD 2025; 2008 PTD 578 (H.C.); 2010 PTD (Trib.) 81; 2010 PTD (Trib.) 251 and 2009 PTD (Trib.) 1263 ref.

Farooq Sheikh for Appellant.

Nayyar Mehmood, D.R. for Respondent.

Date of hearing: 7th June, 2011.

2011 P T D (Trib.) 2234

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

C.I.T., ZONE-1, R.T.O.; KARACHI

Versus

Messrs Mrs. SALMA AMIN TAI, SECURITIES (PVT.) LTD., KARACHI

I.T.As. Nos.509/KB and 510/KB of 2011, decided on 15th June, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.2(46), 151, 233A (1) (d), 122 (5A) & 122(9)---Profit on a debt---Continuous Funding System---Income from dividend and profit on debt---Tax had been deducted @ 10% of the profit which had been claimed as final discharge of tax liability---Profit on debt was from bank and from Continuous Funding System which was financing instrument managed by Stock Exchange and on such yield as in respect of yield on batik debt tax was deducted @ 10%---Show-cause notice was issued by the Taxation Officer as to why income earned under Continuous Funding System should not be taxed at normal rate as the same fell under S.233A(1)(d) read with S.233A(2) of the Income Tax Ordinance, 2001 as the tax deducted was adjustable---Taxpayer explained that Continuous Funding System income was interest income, and even in return of income "profit on debts" and "Continuous Funding System Profit" were bracketed together and shown in Column of "Final Tax"; and tax deducted on income arising under S.233A(1)(d) was not adjustable tax---Taxation Officer subjected Continuous Funding System income to normal rate of tax with the argument that tax deducted on income was "adjustable tax" in tax year 2008 and minimum tax .in tax year 2009---First Appellate Authority directed that tax on Continuous Funding System deduced @ 10% be treated as final discharge of tax liability and discussed the nature and species of Continuous Funding System in the light of definition of profit on debt and found that income from Continuous Funding System fell under definition of profit on debts; and also found that in S.233A(1) of the Income Tax Ordinance, 2001 only the treatment of tax deducted under clauses (a) to (c) of. S.233A(1) of the Income Tax Ordinance, 2001 had been defined in S.233A(2) of the Income Tax Ordinance, 2001 which were final tax, minimum tax and adjustable tax in different tax year, but the treatment of tax deducted on income under S.233(A)(1)(d) of the Income Tax Ordinance, 2001 had not been touched and logically so as the nature of the income falling under S.233(A)(1)(d) of the Income Tax Ordinance, 2001 being in nature of profit on debt had already been taken care of under S.2(46) read with S.151 of the Income Tax Ordinance, 2001-Validity-First Appellate Authority had correctly found that the nature and species of Continuous Funding System was profit on debt and same was covered under S.2(46) of the Income Tax Ordinance, 2001 and was also covered under Ss.151(d) and 151(3) of the Income Tax Ordinance, 2001 and tax deducted on Continuous Funding System @ 10% was final discharge of tax liability---Tax on income arising out of S.233A(1)(d) of the Income Tax Ordinance, 2001 was final discharge of tax liability and had always been so, and the legislature had declared tax on income arising out of S.233A(1) clauses (a) to (c) to be "adjustable" and logically tax on income under S. 233A(1)(d) of the Income Tax Ordinance, 2001 was not "adjustable" and `final tax"---Order of First Appellate Authority was well reasoned and correct and was not interfered with by the Appellate Tribunal---Taxation Officer fell in error by misreading the provisions of law and misunderstanding the nature of Continuous Funding System---Order of First Appellate Authority was upheld and the appeal of the department was dismissed.

C.I.T. v. Gelcaps (Pvt.) Ltd. 2009 PTD 331; 2004 PTD 2255 (SCP); 2010 PTD 1809; Viswapriya Finance Services and Securities Ltd. v. CIT 258 ITR 496; 2002 PTD 877 (SCP), 2004 PTD 2479 (SC) and 1997 PTD 1724 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.131(1)(d)---Appeal to Appellate Tribunal---Filing of appeal after expiry of limitation by two days---Covering letter had stamp of office and initials of functionary of the Department that the order being received on 3-3-2011---Incorrectly on appeal memo. date of receipt of order had been shown as 7-3-2011 by the tax department which was contrary to the facts and evidence---No application in writing had been moved for condonation, neither satisfactory cause for delay had been advanced---Appeals were filed on 5-5-2011 in the office of Appellate Tribunal---Date of service of appeal order was clear from evidence as 3-3-2011 and appeal had been filed on 5-5-2011 which was clearly time barred by two days---Even a delay of one day in filing of appeal creates a right in favour of opposite party and time barred appeal was liable to be dismissed---Appeal being clearly time barred was dismissed by the Appellate Tribunal.

(1980) 42 Tax 140 (SCP); 1995 PTD 1085, 1992 PTD 37, 2005 PTD 1650; 2010 PTD 1739; 2008 PTD 1203 and 2007 PTD 1387 (SCP) rel.

AIR 1998 SC 2276 ref.

Zaffar Akhtar, D.R. for Appellant.

Abid Shuban for Respondent.

Date of hearing: 15th June, 2011.

2011 P T D (Trib.) 2252

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

Messrs UNITEX INDUSTRIES (PVT.) LTD., KARACHI

Versus

A.C.I.R.-B, AUDIT DIVISION-I, R.T.O., KARACHI

I.T.A. No.483/KB of 2011, decided on 26th May, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.122 (5A), 120, 210, 210(1A) & 211---Income Tax Ordinance (XXXI of 1979), Ss.59(1), 62, 63,65 & 66A---Amendment of assessment---Jurisdiction of Taxation Officer---Assessee contended that order passed under S.122(5A) of the Income Tax Ordinance, 2001, amending the assessments deemed to have taken place under S.120 of the Income Tax Ordinance, 2001 was illegal ab initio and bad in law, as the same had been passed without jurisdiction which rested with the Commissioner and the Taxation Officer was not legally competent to amend the deemed order passed under S.120 of the Income Tax Ordinance, 2001 invoking the provisions of S.122(5A) of the Income Tax Ordinance, 2001---Validity---Taxation Officer was empowered under the delegated powers by Commissioner under S.210 of the Income Tax Ordinance, 2001 to amend the order deemed to have taken place under S.120 being erroneous and prejudicial to the interest of revenue by invoking provisions of S.122(5A) of the Income Tax Ordinance, 2001---Action taken by the Taxation Officer was well within the ambit of law as the provision of S.120 of the Income Tax Ordinance, 2001 empowered the Commissioner to delegate powers and functions to any officer Inland Revenue subordinate to him except the power of delegation as expressly mentioned in S.210(1A) of the Income Tax Ordinance, 2001---Section 211 of the Income Tax Ordinance, 2001 treats the powers exercised or the functions performed by officer under a delegated authority as powers or functions exercised or performed by the Commissioner---As by fiction of law, the taxpayer itself was assessing authority of its income tax because the return filed under S.114(4) of the Income Tax Ordinance, 2001 shall be taken for all purposes of the Income Tax Ordinance, 2001 to be an assessment order issued by the Commissioner on the day the said return was furnished---Provisions of law under the Income Tax Ordinance, 2001 and the Income Tax Ordinance, 1979 had inter alia different schemes regarding assessment of income and the tax payable thereon and the principle that governed remedial action under S. 66A of the Income Tax Ordinance, 1979 could not be applied to actions under S.122(5A) of the Income Tax Ordinance, 2001---Assessment had been deemed to have taken place by fiction of law and not finalized by Commissioner with conscious mind unlike it was done in the Income Tax Ordinance, 1979 under Ss.59(1), 62, 63 and 65 on which provisions of S.66A were invoked---None of the officers Inland Revenue was empowered to make an assessment under S.120 of the Income Tax Ordinance, 2001---Assertion that to pass an amended order under S.122(5A) of the Income Tax Ordinance, 2001 to be framed by a superior authority hardly remained applicable--- Factual position was that the taxpayer itself was making its own assessment and the authority under the Income Tax Ordinance, 2001 who had been delegated powers under S.122(5A) of the Income Tax Ordinance, 2001 could pass an order under the section; it was only because of the restriction placed under subsection (1A) of S.210 of the Income Tax Ordinance, 2001 that the powers under S.122(5A) of the Income Tax Ordinance, 2001 could not be delegated to an officer below the rank of Additional Commissioner---Section 211(1) of the Income Tax Ordinance, 2001 provided that any order passed by an officer under delegated powers from the Commissioner shall be treated to be an order by the Commissioner---Order under S.122(5A) issued by the Additional Commissioner was to be treated as an order issued by the Commissioner and not by the Additional Commissioner---Additional Commissioner was not amending the order of the Commissioner, but the Commissioner himself was passing the order under S.122(5A) of the Income Tax Ordinance, 2001 by virtue of S.211(1) of the Income Tax Ordinance, 2001---If the contention that only a superior authority should modify or revise the order of the Commissioner was accepted, then appeal against the order of the Commissioner and those treated to have been issued by virtue of S.211(1) of the Income Tax Ordinance, 2001 should not lie with the Commissioner (Appeals) which being against the scheme of law and intention of the legislature was unacceptable.

Writ Petition No.653 of 2009 and Messrs Karachi Port Trust's case 2010 PTD (Trib.) 2306 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 67 & 154(1)---Income Tax Rules 2002, R.231---Apportionment of deductions---Ratio of export sales---Computation of---First Appellate Authority directed to adopt the declared figure of export proceeds on which tax was duly deducted under S.154(1) of the Income Tax Ordinance, 2001 and constituted final discharge of the tax liability and proration of expense under S.67 of the Income Tax Ordinance, 2001 read with R.231 of the Income Tax Rules, 2002 should also be modified accordingly---Assessee contended that First Appellate Authority had not directed the Taxation Officer to recompute the ratio of export sales after deduction sales of wastage and other export related expenses from export sales in order to recompute correct income---Appellate Tribunal directed the Taxation Officer to consider' the said contention while re-computing the correct income.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.28---Profit on debt, financial cost and lease payments---Profit on security deposit---Addition of--Assessee contended that amount was received from Gas Company as profit on security deposits and not from any bank or on any deposit scheme of National Savings etc. and addition made in this respect was not sustainable in law and was liable to be deleted---Department contended that income from cash deposits (interest) did not fall within the ambit of Presumptive Tax Regime being private limited company and the Taxation Officer had rightly taxed the same under normal law---Appellate. Tribunal held that treatment meted out in this respect by the officers were in accordance with law and required no interference---Appeal on the issue was dismissed by the Appellate Tribunal.

(d) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

---S.4---Income Tax Ordinance (XLIX of 2001)---Mode of payment by, and recovery from, industrial establishment---Tax year 2007---Appellate Tribunal had already held that Workers' Welfare Fund due to amendments in the respective laws was not applicable up to the tax year 2008 and Federal Board of Revenue in this respect had also issued a circular---Levy of Workers' Welfare Fund charged for the tax year 2007 was deleted and appeal on this ground was allowed.

2007 PTD 2860 (Trib) rel.

Nadeem Dawoodi for Appellant.

Zafar Akbar D.R. for Respondent.

Date of hearing: 20th May, 2011.

2011 P T D (Trib.) 2265

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs AVARI HOTELS LIMITED, KARACHI

Versus

COMMISSIONER INLAND REVENUE, LEGAL DIVISION, L.T.U., KARACHI

I.T.As. Nos.43/KB and 48/KB of 2011, decided on 9th June, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5A), 122(9), 177 & 67---Amendment of assessment---Financial charges---Disallowance of---Assessee contended that Taxation Officer was not justified in disallowing financial charges which was incorrectly assumed and wrongly attributed to capital gain on sale of shares; and assessee had declared exempt income on sale of investment of shares and Taxation Officer had disallowed the claim for the reason that assessee had paid financial charges, but had failed to mention any details---Validity---Addition was made on the ground that details had not been filed, which was contrary to the facts and evidence produced by the assessee---Evidence produced by the assessee was not denied by the Department---Taxation Officer was not justified in invoking the provision of S.67 of the Income Tax Ordinance, 2001 and disallowing financial charges especially when the assessee had provided details and had also established the source of investment in shares which were from assessee's own funds---First Appellate Authority failed to appreciate the evidence and explanations filed by the assessee---Order of First Appellate Authority was vacated and addition made by the Taxation Officer was deleted by the Appellate Tribunal.

CIR, Legal Division, LTU, Karachi v. Habib Bank A.G. Zurich, ITRA No.104 of 2010 dated 3-9-2010 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.122 (5A) (9) & 177---Amendment of assessment---Profit & loss expenses---Disallowances on the basis of past history---Validity---Admitted facts were that during the audit proceedings, taxpayer had filed complete details of all the expenses including the disputed expenses; books of accounts, bills and vouchers were produced and examined by both the officers before passing amended orders---Taxation Officer had proposed in notices, to disallowance of expenses on lump sum basis and in none of the notices specific instances of specific unverifiable expenses had been detected nor confronted at any stage---Taxation Officer could not disallow the expenses on the' basis of past history or un-verifiability while amending order under S.122(5A) of the Income Tax Ordinance, 2001 without pointing out specific instances of un-verifiability---Taxation Officer could neither point out nor confront the taxpayer with specific instances---Disallowances made were neither justified nor in strict compliance to the provision of law--Disallowances made were deleted by the Appellate Tribunal ---No. justification was available for disallowance of the claim out of items which were neither useable nor were fit for human consumption and' disallowance in this respect was also deleted.

2002 PTD 1496 rel.

ITA No.245/KB of 2009 and 2010 PTD (Trib.) 3.7 ref.

(c) Workers' Welfare Fund Ordinance, (XXXVI of 1971)---

----S.4---Income Tax Ordinance (XLIX of 2001), S.115---CBR Circular No.13 of 2008 dated 23-10-2008---Mode of payment by, and recovery from, industrial establishment---Levy of Workers' Welfare Fund---Tax year 2007, 2008 & 2009---Brought forward assessed losses including depreciation loss had not been considered before levy of Worker's Welfare Fund---Worker's Welfare Fund was not chargeable up to tax year 2008 in view of Federal Board of Revenue's Circular No.13 of 2008, wherein it was directed that in Presumptive Tax Regime cases and demand of Worker's Welfare Fund for Tax Year 2007 & 2008 may not be created---Levy of Workers' Welfare Fund for tax year 2008 was deleted and levy of Workers' Welfare Fund for tax year 2009 was remanded back to the Taxation Officer with direction to consider the same in accordance with the provisions of law.

CIT v. Kamran Model Factory 2002 PTD 14 (KHC) rel.

2007 PTD (Trib.) 1860 ref.

Iqbal Salman Pasha and Nadeem Ahmed Dawoodi for Appellants.

Mirza Nasir Ali, D.R. for Respondent.

Date of hearing: 2nd April, 2011.

2011 P T D (Trib.) 2286

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs. KARACHI ELECTRIC SUPPLY CORPORATION, LTD., KARACHI

Versus

COMMISSIONER/ADDITIONAL COMMISSIONER INLAND REVENUE, RANGE B, ZONE-III, LTU, KARACHI

I.T.A. No.633/KB of 2001, decided on 23rd June, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss.127, 122 (SA), 122(9) & 113---Appeal to the Commissioner (Appeals)---Stay of demand---First Appellate Authority allowed stay application but had directed to pay 50% outstanding demand---Taxpayer contended that First Appellate Authority was not justified to direct pay 50% of outstanding demand because Additional Commissioner while passing order under S.122(5A) of the Income Tax Ordinance, 2001 had erred in law and on facts in misinterpreting the proviso to subsection (1) of S.113 of the Income Tax Ordinance, 2001 and computing the minimum tax at 0.5% which, action was ab initio void, illegal as no notice under S.122(9) of the Income Tax Ordinance, 2001 read with S.122(5A) of the Income Tax Ordinance, 1979 was issued to the taxpayer deviating from the computation made in the show-cause notice; and without giving any reason had restricted the stay allowed with the condition to payment of 50% of outstanding demand without mentioning any reason---Validity---No justification to make condition for the payment of 50% of the tax demand without giving any reason was available---For grant of interim relief it was necessary for a court to. record positive finding in favour of either party, the party claiming relief was only to be shown to have made out a prima facie case which in turn meant an arguable and not an indefeasible case---In such like matters besides prima facie case it was bounden duty of the court to examine the balance of convenience, irreparable loss as well as behaviour and conduct of the parties---First Appellate Authority in the present case, had not given any reason for making condition of the payment of 50% of the tax demand for allowing the stay---No justification was available for the payment of 50% of the tax demand---Stay allowed by the First Appellate Authority was upheld and the condition of payment of 50% of the outstanding demand was deleted and Department was directed not to initiate recovery proceedings regarding the subject-matter of appeal pending before First Appellate Authority---Order of First Appellate Authority was amended accordingly.

PLD 2003 SC 344; 2006 PTD 670; 1992 CLC 2540 and 1996 CLC 507 rel.

Arshad Siraj for Appellant.

Abdul Aziz, D.R. and Badaruddin, Additional Commissioner for Respondent.

Date of hearing: 23rd June, 2011.

2011 PTD (Trib.) 2290

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mrs. Tabana Sajjad Naseer, Accountant Member

Messrs ZEPHYR TEXTILES LTD., LAHORE

Versus

C.I.R. (LEGAL) R.T.O.

I.T.A. No.257/LB of 2011, decided on 9th May, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.154, 221 & Seventh Sched., Part-II & III---Exports---Tax year 2007---Textile made ups---Textile articles---Woven cloth including terry towels was manufactured and exported and tax @ 1% was being charged on the export proceeds---Tax charged and collected @ 1% was taken as rectifiable for enhancing the rate of tax to 1.5% on the ground that goods exported were woven cloth (Textile/Fabric) which were liable to be charged @ 1.5% being the textile falling under Part-III of the Seventh Schedule of the Income Tax Ordinance, 2001---Taxpayer contended that goods exported were their own manufactured finished goods ready to be used which would be named as Gray Cloth, Terry Towels and bath robs so could be named as "Textile made ups" and were liable to be tax @ 1% on export proceeds---Tax demand was created by charging to tax the export proceeds @ 1.25%---First Appellate Authority held that the claim of taxpayer that exported goods come under the category of textiles made ups against which rate of tax chargeable was 1% was not correct because the finished goods which could not be further processed for value addition could be categorized as made ups; and products manufactured fell in the category "textile articles" as described in Part-III of the Seventh Schedule of the Income Tax Ordinance, 2001 and tax rate chargeable at export stage was 1.25%---Validity---Goods exported were own manufactured terry towels, bath robs falling in the category "textile made ups" and were ready for use where 1% was to be charged as income tax on export proceeds---Goods manufactured exported were the textile made ups; it was established that the goods exported were "textile made ups"-Goods manufactured/exported being "textile made ups" were liable to tax @ 1%-Appeal of the taxpayer was accepted by the Appellate Tribunal.

1999 PTD 4138 (H.C.) and 2009 PTD 2163 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.221, 154, & Seventh Sched., Part-II & III---Rectification of mistake---Tax already deducted and collected by export proceed was increased by making export proceed liable to @ 1.5% by an order under S.221 of the Income Tax Ordinance, 2001 by taking it as a rectification of mistake---Taxpayer contended that there was no mistake apparent from record requiring rectification by invoking the provisions of S.221 of the Income Tax Ordinance, 2001, for the reason that there was no mistake in calculation of tax practically/factually/legally but it amounted to revisit the earlier order, that was, changing the entire shape of assessment treated to have been framed; and it was an attempt to create controversy on the tax rates to be applied to export proceeds by ignoring the irrefutable evidence in form of export documents specifying the goods exported which was rectifiable under 5.221 of the Income. Tax Ordinance, 2001; and the entire matter had been dealt with one sided with an arbitrary authority---Validity---Defect in jurisdiction was found and proceedings were not covered under S.221 of the Income Tax Ordinance, 2001---Existence of such fatal lacuna of defective jurisdiction, which was incurable and had rendered the order passed under 5.221 of the Income Tax Ordinance, 2001 as illegal void-ab-initio and it was declared so by the Appellate Tribunal.

Commissioner of Income Tax, Karachi v. Messrs Shadman Cotton Mills (Pvt.) Karachi through Director 2009 PTD 253 Commissioner of Income Tax, Karachi v. Abdul Ghani 2007 PTD 967; Commissioner of Income Tax, Companies-II, Karachi v. National Foods Laboratories 1992 PTD 1992 SCMR 687 = 1992 PTD 570 and 2007 PTD 967 (SC Pak.) rel.

Momin Sultan and Hassan Kamran for Appellant.

Naeen Hassan, D.R. for Respondent.

Date of hearing: 14th April, 2011.

2011 P T D (Trib.) 2297

[Inland Revenue Appellate Tribunal of Pakistan]

Before Munsif Khan Minhas, Judicial Member and Ikramullah Ghauri, Accountant Member

Messrs EXCEL TOBACCO COMPANY (PVT.) LIMITED, CHAKWAL

Versus

COLLECTOR, FEDERAL EXCISE TAX, ISLAMABAD

C. No.19/FE/IB of 20Q9, C.Nos.6 to 10 and 3/FE/IB of 2009, decided on 1st June, 2011.

(a) Central Excise Act (I of 1944)---

----S. 9---Offences and penalties---Counterfeit---Manufacturing of excisable goods in licensed factories of the other manufacturers--Persons, firms and companies having no factory or having factory of their own and getting excisable goods manufactured in duly licensed factories of other manufacturers according to their own specification and/or under their own brand names or trade names were not required to take out separate licenses---Manufacturer's agreements inter se were commercial transaction entered in to ordinary course of business---Goods manufactured in the duly licensed factories of the licensee manufacturers under their desired brand names, was neither counterfeit nor an. offence ---No complaint from parties owning brand names had supported such fact---Manufacture of goods in circumstances was not counterfeit.

(b) Customs Act (IV of 1969)---

----S.168---Central Excise Act (I of 1944), Preamble---Seizure of things liable to confiscation "Under this Act"---From the words "under this Act" would mean Central Excise Act, 1944 after its incorporation from Customs Act, 1969 into Central Excise Act, 1944.

(c) Customs Act (IV of 1969)---

----S.168---Central Excise Act (I of 1944), Preamble---Central Excise Rules, 1944 Rr. 197, 199, 200 & 201---S.R.O. 543(1)/75 dated 8-5-1975---Seizure of things liable to confiscation---Appropriate officer---Officer of Customs Intelligence---Section 168 of the Customs Act, 1969 provide that Appropriate Officer may seize any goods liable to confiscation---Officer of Customs Intelligence was not the 'appropriate officer' because he was not vested with powers of seizure--When S.168 of the Customs Act, 1969 which was to be read as part of Central Excise. Act, 1944, Customs Intelligence Officer while acting as Central Excise Officer, he was only vested with the powers under Ss.13, 14, 19 and 26 of the Central Excise Act, 1944 and Rr. 197, 199, 200 and 201 of the Central Excise Rules, 1944.

(d) Central Excise Act (I of 1944)---

----S. 26---Central Excise Rules, 1944, R.200---Power of stoppage of moving vessels etc., search and arrest---Section 26 of the Central Excise Act, 1944 and R.200 of the Central Excise Rules, 1944 deal with scenario which covers moving vessels, carts and other means of conveyance carrying contraband item or items without the payment of duty---Philosophy behind was that these moving vehicles carrying goods were supposed to be with documented proof of payment of duty or with issued gate passes mentioning specific timings and destination on it--In case of failure to produce these prescribed documentation requisite to accompany the goods, Intelligence officer had been vested with the powers of seizure---Same was the general practice in the field---Officer of Customs Intelligence on information or on reasonable suspicion can intercept the vehicle coming out of factories on the way when found without prescribed accompanying documentation seizes the goods which were liable to confiscation---S.R.O. 388(1)/82 dated 22-4-1982 was not relevant being related to excise the power under various provisions of Customs Act, 1969 and not under the Central Excise Act, 1944.

(e) Central Excise Rules, 1944---

----R. 197---Constitution of Pakistan, 1973, Arts 4 & 5--- Authorized officers to have free access to premises, equipments, stocks and accounts relating to excisable goods and excisable services---Entry, search and seizure---Seizure of goods by the Customs Intelligence Officer within the licensed premises---Validity---Rule 197 of the Central Excise Rules, 1944 deals with licensed premises and had given power to inspect the premises, goods, machinery and check the record---Power of seizure had not been conferred because duty was leviable on goods manufactured liable to be stored in a approved godown---If some raw material was found deficient or excessive, variation may be due to continuous process of manufacturing and entries in record were to be made at particular time and not after every minute or hour--Philosophy of criminology says that all the crimes which consist of commission of an affirmative act were proceeded by some covert or overt conduct which Wright be divided into three stages, first stage exists when the culprit first entertains the idea or intention to commit a crime, Second stage was preparation; third stage reached when culprit takes deliberate overt acts to commit the offence which was attempt; attempt begins where preparation ends---In cases. of manufacturing units attempt starts when manufactured goods were tried to be taken out of' the gate without payment of duty---Although a manufacturer produces more and showed less in record with mens rea that he will take out excessive production without payment of duty yet it was the intention or preparation and not the attempt because he could change his mind at any time and could decide to pay the duty---Difference in record and actual production could constitute a contravention and not the seizure---Legislature had not authorized to Intelligence Officer for seizure within the licensed premises which was essential for harmonious working within the department-Domain of Incharge Central Excise officer was not to interfere within the licensed premises with the exception of' inspection and checking of record---If on inspection within the licensed premises some elements of contravention was found, it could be reported to the higher hierarchy of Central Excise Officer---If; at all, some seizure was necessitated, Appropriate Central Excise Officer Incharge or Officer in supervisory jurisdiction could be asked to do the needful---Law had set the limits inter se the functionaries and forbid any of functionaries to usurp or meddle into matter of other functionary---Usurping the powers of' a functionary by another leads to complete fiasco---Machinery had delicately established an equilibrium and harmony among supervisory and detective functionary limiting them not to go beyond their limits---Article 4 of the Constitution read with Art. S (2) commands each and every citizen and functionary to remain within its bound---Customs Intelligence officer was not to be considered as omnipotent---Manner of exercising power was colorable exercise if it was violation of law and could not be stamped by the Appellate Tribunal.

PLD 1969 SC 14 and PLD 1983 SC 457 rel.

(f) Central Excise Act (I of 1944)---

----S.26---Central Excise Rules, 1944, R.200---Power of stoppage of vehicles etc., search and arrest---Customs Intelligence Officer intercepting the consignment on the road, checking the requisite documents to be carried with consignment, if not found in order could seize the goods liable to confiscation along with the vehicles also---Power of Customs Intelligence officer was well within his legal domain under S.26 of the Central Excise Act, 1944 and R.200 of the Central Excise Rules, 1944 which dealt with searching vessel, cart or other means of conveyance and not the licensed premises---It order to ensure smooth functioning of system Federal Board of Revenue had decided not to give unlimited and unfettered powers of Central Excise Officer to the officer of the detecting agency and split the same to the requisite extent creating an equilibrium/harmony keeping in view the job requirement and sanctity of' the licensed/regulated business which was immensely significant because according to Constitution of' Pakistan every citizen shall have the right to enter upon any lawful profession or occupation, and to conduct any lawful trade or business.

(g) Central Excise Rules, 1944---

----R.197---Authorized officers to have free access to premises, equipment, stocks and accounts relating to excisable goods and excisable services---Raid---Inspection---Seizure within licensed premises---Jurisdiction---Customs Officer had power to visit licensed premises not for raid but for inspection; he was not supposed to be on fishing expedition operating in the mode of search---If he finds some discrepancy on ground with some proscribed record, he could ask Central Excise Office to make seizure if required---If inc/large Central Excise Officer did not go by his dictates, he could ask higher officers in Central Excise hierarchy like Superintendent, Assistant Collector, Deputy Collector and Collector---Seizure by Customs Intelligence Officer within licensed premises that too of excisable or non-excisable items like packing/advertisement material, machinery etc. was nothing but transgression of his lawful domain---If there would have been any irregularity in search same could not effect the seizure of the excisable articles under the search, but here the seizure which was the main basis to erect the structure was without jurisdiction and lawful authority---Raiding party had no powers to conduct search to seize documents and goods by exercising powers under R.197 of the Central Excise Rules, 1944 within licensed premises---Inspection and search were two distinct actions having different requisite touchstones---Where the legislature had expressly prescribed one or more particular modes of dealing with the matters specified therein, then it excludes any other method of doing such acts---If the statute enacts that it shall be done in such a manner and in no other manner, those requirements were in all cases absolute, and neglect to attend to them will invalidate the whole proceedings---Action of seizure within licensed premises was without jurisdiction and unlawful.

PLD 1971 SC 124 Syed Allah Dost v. Haji Muhammad Alam and others PLD 1987 Quetta 235; Mansib Ali v. Amir Ali PLD 1971 SC 124; Muhammad Yousaf Khattak v. S.M. Ayub and others PLD 1972 Pesh. 151; E.A Evans v. Muhammad Ashraf PLD 1964 SC 536 and Mir Dost Muhammad v. Government of Balochistan and 3 others PLD 1980 Quetta 1 rel.

Zaffar Ali v. Pakistan 1998 CLC 770; S.M. Yousaf v. Collector of Customs, Karachi PLD 1968 Kar. 599; Shokat Hussain v. Zulfiqar Ahmad PLD 1981 Lah.13; Anwar Beg v. Nazir Azhar PLD 1979 Kar. 687; PLD 1977 Lah. 924; Mohd Zubair v. Government of Pakistan PLD 1986 Pesh. 186; Deputy Collector v. Muhammad Mir 1989 SCMR 311; 1991 SCMR 590; PLD 1996 Kar. 68; 2003 PTD 2037; PLJ 2004 Lah. 1936; AIR 1960 SC 210; AIR 1958 Raj 296; Writ Petition No. 2559 of 2003; PLD 1958 SC 104; PLD 1975 Kar. 482; PLD 1981 Lah. 13 and PLD 1986 Pesh. 186 ref.

(h) Administration of justice---

----Proceedings initiate on a wrong legal presumption becomes totally unlawful.

(i) Administration of justice---

----Superstructures raised on wrong foundation remains defective and the whole of it was likely to crumble on identification of said defect.

(j) Central Excise Act (I of 1944)---

----S. 26--- Central Excise Rules, 1944, R.210---Power of stoppage, search and arrest---Seizure of machinery---Validity---Although Customs Intelligence Officer had no powers of seizure but in the present case seizure of' machinery for main production was very unique action---Even if seizure would have been made by appropriate Central Excise Officer, it was not warranted under the law---Business growth had the top priority---Tax growth had primary nexus with business activity---If businessman/manufacturer will earn something, he will pay some share to public exchequer---Not only non-excisable goods like packing material and advertisement material had been seized but also machinery i.e. main source of production had also been seized and factory had been locked/sealed---Only those goods could. be seized which were liable to confiscation---Neither packing or advertisement material nor machinery was liable to confiscation---Such action was defended on the plea of being useful for evidence---Such could have been done by directing that machinery will not be removed from the factory, if action would have been from competent Central Excise Officer---After ascertained liability of tax in recovery proceedings such property might have been attached---No provision of law could justify seizure of machinery---Rule 210 Central Excise Rules, 1944 empowers to the adjudicating authority to order for seizure and not to the detecting agency---If Such action would have been taken by the competent/ appropriate Central Excise Officer even then he had to seek prior permission from the Federal Board of Revenue---Rule 57 of the Central Excise Rules, 1944 was omitted just to avoid such drastic action---Such drastic action had deprived the State from future revenue, if the unit remained in operation it would have paid some share to Government exchequer---Order passed by the forums below for confiscation of seized goods including machinery were set aside by the Appellate Tribunal---Demand of principal amount along with additional duties/additional tax, penalties was dropped---Customs Intelligence authorities/Central Excise authorities were ordered to handover the seized goods/machinery and de-seal the factory subject to NOC by the National Accountability Court---In case of auction of any seized goods the amount received in Government exchequer will be refunded/ adjusted in favour of taxpayer.

(k) Central Excise Act (I of 1944)---

----S. 15---Seizure---Jurisdiction---Customs Intelligence Officer was not vested with the power of seizure---For such job Customs Intelligence Officer had to associate the concerned incharge of the Central Ex'cise Officer or officer having the jurisdiction to affect seizure---Seizure was not made by the competent authority---However, the places from where recoveries had been made were not licensed ones; and was not a regulated business after obtaining a valid requisite license from the government; and such persons were not supposed to raise the objection regarding validity of seizure by an Officer of Customs Intelligence.

(l) Central Excise Act (I of 1944)---

----Preamble---Recovery of record effected from Lahore, Hyderabad etc. and sent for adjudication to Rawalpindi-Islamabad---Territorial jurisdiction---Appellate Tribunal refrained to record finding on the issues because the forums below had not specifically recorded their findings in the light of arguments---Case was remanded back to the authority passing order-in-original to record his finding on the issue after scrutinizing all the record and discussing the relevant law.

(m) Central Excise Act (I of 1944)---

----S.18---Manufacture of cigarette---Calculation of duties---In the present case, each and every document recovered after raid was used to calculate federal duty, sales tax to exaggerate the figure of evasion to the climax without considering the aspect that it was being hit by philosophy of double jeopardy---On abilities, AR, stock register, trial balance, distribution or sale record; independent and separate calculations were made without keeping in mind that it resulted in duplication---If sale record was made basis then tobacco record was not be made a basis---Prosecuting agency had to select one of these because cigarette was manufactured by tobacco and from one quantity of tobacco, cigarettes were not to be manufactured twice in imagination---Front sale record quantity of tobacco have again been calculated through reversal method and tobacco record recovered had again been made basis for presumptuous calculation that so many cigarettes on the formula of one gram for one cigarette would have been manufactured, cleared without payment of duty and sold in imagination without having any evidence of sale---If from sale record Prosecuting Agency was calculating the tobacco used in it by applying the formula of one gram from one cigarette, through reversal method, then again calculation of Federal Excise duty, sale tax on tobacco record recovered from manufacturing premises of taxpayer were nothing but a case of double jeopardy; and the same was dropped / deleted by the Appellate Tribunal.

(n) Central Excise Act (I of 1944)---

----S.35-D---Appellate Tribunal is a quasi judicial forum of law and had to go by evidence; and it was not the domain of Appellate Tribunal to go outside the evidence.

(o) Central Excise Act (I of 1944)---

----S.9---Show cause notice---While issuing the show cause notice, each and every document relied upon was to be given its copy to the taxpayer along with show cause notice.

(p) Central Excise Act (I of 1944)---

----S.34-B---Record to be made a part of file of First Adjudicating Authority---Huge and voluminous record had been kept in the safe custody to the customs Intelligence Office; even it had not been made part of the case file at the time of first adjudication level---Staff of customs intelligence brought the record during the argument and then took it back after showing documents under discussion during the proceedings-Prosecution agency if had danger of record being stolen, at least record in the shape of attested copies be annexed and made a part of file of First Adjudicating Authority.

(q) Criminal Procedure Code (V of 1898)---

----S.103---Central Excise Act (I of 1944), S.26---Recovery---Search to be made in presence of witnesses---Record alleged to have been recovered had never been opened in the presence of taxpayer or private witness, which was clear violation of S.103 of the Criminal Procedure Code, 1898.

(r) Central Excise Act (I of 1944)---

----S.3---Duties specified in the First Schedule to be levied---Scope---Excise duty is leviable not on the basis of theoretical yield but on actual production.

(s) Central Excise Act (I of 1944)---

----S. 26--- Power of stoppage, of vehicles etc., search and arrest---Customs intelligence Officer if gets hold of the excisable goods being removed from the factory outside the gate or on the road without gate pass or payment of duty i.e. case is on the firm footing---If manufacturer denies ownership, seized goods were with the department, duty could be recovered through auction.

(t) Central Excise Act (I of 1944)---

----Ss.9, 17, 3, 3-B, 4(2) & 14(2)---Federal Excise Act, 2005, Ss. 31(3) & 33(2)---Central Excise Rules, 1944, Rr.7, 9, 42-B, 43, 44, 45, 49, 51, 52, 52-C, 53, 54, 174, 210, 226 & 248 ---Sales Tax Act (VII of 1990), Ss. 3, 6, 14, 22, 23, 26, 33, 34, 36 & 37---Constitution of Pakistan, Art. 24---SRO 333(1)/2002 dated 15-6-2002---Offences and penalties---Cigarette manufacturing---Calculation of duty---Presumptuous calculation that such and such quantity of tobacco might have resulted in so much production and then would have removed without payment of duty was a case which had to be proved through strong evidence---Such was a deeming scenario which could have been deemed to have been done in the past-All the links and nexus were to be established through un-rebuttable strongest evidence to bring the petitioner into net of conviction, there should be no missing link---Order had been passed mechanically on the basis of a set formula that what the raiding/investigation agency had written was sacred and petitioner's version was not to be adjudged on the standard norms of evidence---Undoubtedly document did not speak itself but these were to be corroborated and supported with some oral evidence, which could connect links to bring the taxpayer into the net of burdening with liability---Orders of both the authorities below were set aside and case was remanded to the authority passing order in original with the direction that first of all to record his specific finding on the assumption of jurisdiction; formula that one cigarette is prepared by one gram tobacco, element of wastage had been ignored; that he will record his finding to discuss on such aspect as well; that he will provide each and every copy to taxpayer of the document intended to be used adversely against him; that documents used against the taxpayer will be exhibited/marked through production of corroborative connecting evidence, if oral then subjected to cross examination and taxpayer will be provided full opportunity to cross examine and taxpayer be provided full opportunity to negate/rebut the evidence and if he wanted to produce some evidence, he will be provided opportunity and to rule out any duplication if made.

1995 MLD 1532; 1994 PCr.LJ 475; 1992 MLD 2205; 2002 YLR 1231; 2002 MLD 1075; PLD 1997 SC 408; 2003 PTD 2037; AIR 1954 SC 447 and PTCL 2007 Cl. 60. (sic) ref.

Nazir Azhar for Appellant.

Ziaullah Khan D.R. for Respondent.

Khawar Ikram Bhatti, L.A.

Dates of hearing: 26th March and 1st June, 2011.

2011 P T D (Trib.) 2332

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javaid Masood Tahir Bhatti, Judicial Member and Abdul Rauf, Accountant Member

C.I.R. (LEGAL), RTO, RAWALPINDI

Versus

Messrs H.S. AHMEDALLY, RAWALPINDI

S.T.A. No.43/LB of 2010, decided on 28th April, 2011.

Sales Tax Act (VII of 1990)---

----Ss. 8(1)(ca) & 73---Tax credit not allowed---Input tax---Adjustment---First Appellate Authority directed to allow the credit of input tax on the ground that registered person was found to have made payment in consideration of purchase of goods along with the amount of sales tax to the supplier through banking channel as required under S.73 of the Sales Tax Act, 1990; and registered person had complied with the relevant provision of law and could not be denied the credit of input tax when the payments to the supplier had been credited from the bank account of the purchaser to that of the seller---Validity---Adjudication officer passed the order in original without adequate discussion regarding the pertinent aspects of the case i.e. current status of the supplier, and payments made by the registered person to the supplier in accordance with the procedure laid down under S.73 of the Sales Tax Act, 1990---First Appellate Authority also directed to allow the credit of input tax merely on the ground that the registered person had made payments of sales tax to the supplier in accordance with the procedure laid down in S.73 of the Sales Tax Act, 1990 had discharged its legal obligation---Although findings of fact were not controverted by the Appellate Tribunal, but it was observed by the Tribunal that one could not be oblivious of the fact that under S.8(1)(ca) of the Sales Tax Act, 1990 credit of input tax could be allowed. to the registered person only if the seller had also deposited the collected tax in the State Treasury---Order of First Appellate Authority was silent on the point of deposit of tax by the supplier---Order of the authorities was vacated and case was remanded to the Adjudication Officer with direction that the record of the supplier, which according the registered person, still enjoyed active status, be examined carefully and if the tax attributable to the purchases made by registered person was also found to have been deposited by the supplier, only then the registered person be allowed the credit of input tax.

Mohidin, D.R. for Appellant.

Fakhar Mehmood Chandu for Respondent.

Date of hearing: 21st April, 2011.

2011 P T D (Trib.) 2347

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs ASHAR INTERNATIONAL (PVT.) LTD., FAISALABAD

Versus

C.I.R., FAISALABAD

S.T.A. No.15/LB of 2010, decided on 13th April, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss.21, 36 & 45A---Sales Tax Rule, 2006, R.12 (5)---De-registration, blacklisting and suspension of registration---Post audit of refund files---Show cause notice was issued for recovery of refund already sanctioned on the ground that registered person had illegally received refund of input tax against invoices of the suppliers units who had been declared black-listed---Registered person contended that if a unit was black-listed, the said status should be treated from the date of its black-listing and not from the date of its registration; and purchases related to months May-2004 to Novermber-2004 whereas the alleged suppliers were black-listed during 2005-2006; and black listing orders could (not) be made applicable retrospectively; and refund payment order was a legal and proper decision; and if the department had found any illegality in the said order, it should have been reviewed under S.45A of the Sales Tax Act, 1990 instead of starting new litigation by issuing show cause notice and neither any charge of tax fraud had been levelled nor any violation of S.2(37) of the Sales Tax Act, 1990 had been cited in the show cause notice without which imposition of default surcharge and penalty was illegal and unlawful---Department contended that audit for sales tax record of a registered person was always conducted for his past business activities and department had declared it as black-listed unit; and black-listing of any registered person in its spirit covers the activities of his past having a retrospective effect and it would be in no way for his prospective business activities---Validity---Rule 12(5) of the Sales Tax Rules, 2006 clearly emphasized that refund claimed by a registered person should not be entertained if invoices were issued by his supplier unit during suspension of registration or after black-listing---No provision existed for effecting recovery from the person who had received refund against invoices of a registered supplier black-listed at a later stage; in other words, R.12(5) of the Sales Tax Rules, 2006 did not contain any procedure for recovery of already refunded amount but it provided a legal safeguard against any amount of refund being claimed from such black-listed concerns---Past liabilities on such, account should have been assailed by invoking provisions of S.45A of the Sales Tax Act, 1990 instead---In case of already refunded amount, provisions of R.12(5) of the Sales Tax Rules, 2006 were least sufficient to effect its recovery against black-listing of his suppliers units at subsequent stage and such act. of recovery of already refunded amount did not find any support from,R.12(5) of the Sales Tax Rules, 2006 as said Rule only came into play where refund was being processed but not sanctioned---Where refund had been sanctioned/received, said Rule was not applicable---Action of the sales tax department to recover the amount of tax refunded to registered person due to subsequent black-listing of any of their suppliers did not find any support from any provision of Sales Tax Act, 1990 and the rules made hereunder---Show cause notice and consequent orders passed thereon were declared to be illegal, ab initio void, without jurisdiction and were accordingly set aside by the Appellate Tribunal---Demand raised by the sales tax department was vacated.

(b) Sales Tax Rules, 2006---

----R.12(5)---Blacklisting and suspension of registration---Question of retrospective application of an executive order of black-listing---Purchases made by the registered person pertained to the periods when the alleged suppliers were not black-listed but were actually having operative status---Subsequent inclusion the supplier in the list of black-listed units could not be implemented retrospectively---Rule 12(5) of the Sales Tax Rules, 2006, clearly stipulated that claim of refund should not be entertained if invoices were issued during suspension of registration and claim should be rejected if supplier unit was black-listed subsequently---Word "prior" used in the R.12(5) of the Sales Tax Rules, 2006 did not cover the period beyond the suspension of registration but it included the period after ,suspension of its registration and its ultimate black-listing thereafter---Rule 12(5) of the Sales Tax Rules, 2006 would be applicable when a registered person purchased goods from -another person during the period when his registration was suspended or after its black-listing, but would not be applicable., before the period of suspension of registration or black?listing---Fiscal statue should be given its ordinary meaning, be strictly applied and, if there was any ambiguity in interpreting such statute or application thereof, ambiguity always be resolved in favour of the assessee.

2010 PTD (Trib.) 1675; 2010 PTD (Trib). 1631; S.T.A. No.560/LB of 2009; Messrs Anoud Power Generation Ltd. v. Federation of Pakistan and others PLD 2001 SC 340 and Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 rel.

PLD 2001 SC 340; 2005 SCMR 492; 2002 PTD (Trib.) 889 and Messrs Fauji Sugar. Mills v. Assistant Collector Sales Tax, Lahore S.T.A. No. 1104/LB of 2002 ref.

(c) Sales Tax Act (VII of 1990)---

----S.45A---Power of the Federal Board of Revenue and Collector to call for record---Past and closed transition---Re-opening of---Provisions of S.45A of the Sales Tax Act, 1990 indicated that any proceedings under the Sales Tax Act, 1990 were subject to review by the Federal Board of Revenue or by the respective Collector and that too for satisfaction in respect of legality or propriety of any decision or order passed by an officer of Sales Tax subordinate to them---No other provision was available in the Sales Tax Act, 1990 authorizing a sales tax functionary to review or reopen past and closed transactions.

(d) Sales Tax Act (VII of 1990)---

----S.66---Proceedings---Meaning---Act of sanction or rejection of a refund claim fell within the preview of the word "proceedings"---In general parlance, all happenings and events before a Tribunal or any authority on whom jurisdiction was conferred by law to dispose of, contentious matter were covered by the term "proceedings".

(e) Sales Tax Act (VII of 1990)---

----Ss.45A, 36 & 10---Powers of the Federal Board of Revenue and Collector to call for record---Refund---Re-opening of a past and closed transaction by the Assistant Collector---Jurisdiction---Refund payment order was a proper legal order/decision of an officer of sales tax---In case, any impropriety and illegality was observed in any order/decision, it should have been checked by the Federal Board of Revenue or by the Collector himself by exercising their revisional jurisdiction under S.45A of the Sales Tax Act, 1990---Provisions of S.45A of the Sales Tax Act, 1990 did not empower any other authority subordinate to Federal Board of Revenue or to the Collector of Sales Tax to reopen and review an order passed lawfully---Issuance of show cause notice under S.36 of the-Sales Tax Act, 1990 by re-opening a past and closed transaction by the Assistant Collector having no revisional jurisdiction was an act of assumption of wrong jurisdiction and as such the order passed by him was without jurisdiction---Where, a basic notice issued for assumption of jurisdiction was defective, the subsequent action/orders based upon the said notice were also patently void ab initio and without jurisdiction.

2002 PTD (Trib.) 889 rel.

(f) Sales Tax Act (VII of 1990)---

----Ss.2 (37), 33 & 34---Tax fraud---Provisions of S.2(37) of the Sales Tax Act, 1990 defining "tax fraud" had not been invoked and the contents of the show cause notice did not indicate that it was case of tax fraud or any attempt was made to receive any fraudulent refund---Where the provisions of S.2(37) of the Sales Tax Act, 1990 had not been invoked and no charge of tax fraud or intention for receiving fraudulent refund was contained in the show-cause notice, the imposition of default surcharge and penalty was illegal and unwarranted.

Messrs Fauji Sugar Mills v. Assistant Collector Sales Tax, Lahore S.T.A No. 1104/LB of 2002 rel.

Khubaib Ahmed for Appellant.

Naeem Hassan, D.R. for Respondent.

Date of hearing: 13th April, 2011.

2011 P T D (Trib.) 2362

[Inland Revenue Appellate Tribunal of Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Malik Abdul Samad, Accountant Member

Messrs JS INVESTMENT LIMITED, KARACHI

Versus

ADDITIONAL COMMISSIONER INLAND REVENUE-E, KARACHI

I.T.A. No.761/KB of 2010, decided on 23rd December, 2010.

Income Tax Ordinance (XXXI OF 1979)---

----Ss.66A, 62 & 65---Income Tax Ordinance (XLIX of 2001), Ss.122(5A) & 239---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Limitation---Assessment was framed under S.62 of the Income Tax Ordinance, 1979 on 28-6-2005---Taxation Officer found that assessment was erroneous and prejudicial to the interest of revenue---Taxation Officer in order to resort to suitable remedial action to retrieve a loss of revenue invoked authority under S.66A of the Income Tax Ordinance, 1979 read with S.239 of the Income Tax Ordinance, 2001 and issued notice on 22-06-2010 despite the fact that limitation provided under the law had already expired---Validity---Section 66A of the Income Tax Ordinance, 1979 specifically provided time limits of four years for amending the order passed by Assessing Officer considered to be erroneous in so far as prejudicial to the interest of revenue by using the word "shall" making limitation mandatory---Admittedly, original order under S.62 of the Income Tax Ordinance, 1979 had been passed by the Deputy Commissioner of Income Tax on 28-06-2005, while the order under S.66A of the Income Tax Ordinance, 1979 had been passed on 21-9-2010, by invoking S.66A of the Income Tax Ordinance, 1979 which had become barred by time on 28-6-2009 and notice under S. 66A of the Income Tax Ordinance, 1979 had been issued on 22-6-2010---Order being passed after the time period provided under the mandatory provisions of law was without any jurisdiction and was cancelled by the Appellate Tribunal.

2009 SCMR 1279 = 2009 PTD 1392 distinguished.

Khaliq-ur-Rahman, C.A. for Appellant.

Yousif Hyder Shaikh, D.R. for Respondent.

Date of hearing: 23rd December, 2010.

2011 P T D (Trib.) 2368

[Inland Revenue Appellate Tribunal of Pakistan]

Before Javid Iqbal, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs SARFARAZ AHMED & BROTHERS, ROHRI

Versus

C.I.R., R.T.O., SUKKUR

M.A. Recalling No.133/KB in I.T.A. No.966/KB of 2010, decided on 20th January, 2011.

Income Tax Ordinance (XLIX of 2001)---

----S. 221---Rectification of mistake---Miscellaneous application for recall of order on the grounds that in response to notice sent by the Appellate Tribunal, the appellant had sent an application for adjournment as due to heavy flood in Indus River the appellant could not arrange for the railway ticket and even the road transportation was not functioning at that time and a close relative of the counsel of the appellant was also seriously ill and counsel was obliged to stay with the ill relative; and the absence of counsel of the appellant was not intentional and was due ,to unavoidable circumstances---Validity---Counsel of the appellant had to come from another city and due to floods and illness of his relative, could not appear before the Appellate Tribunal---Application was sent by him on 25-3-2010 requesting for adjournment of the appeal fixed on 27-3-2009 but the application could not be placed before the Bench at the time of hearing of appeal--Acknowledgement from the Courier Service dated 25-03-2011 was also placed before the Bench---Order of Appellate Tribunal dated 27-3-2011 was recalled and the appeal was directed to be placed at its original number and to be fixed for hearing after issuing notices to the concerned parties.

Abdul Tariq Ansari, ITP for Appellant.

Imtiaz Ahmed Dev, D.R. and Fiaz Hussain Abro, AC for Respondents.

Date of hearing: 26th January, 2011.

2011 P T D (Trib.) 2370

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shahin, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs MEHMOOD MEHBOOB BROTHERS (PVT.) LIMITED, MULTAN

Versus

C.I.R., R.T.O., MULTAN

I.T.A. No.394/LB of 2011, decided on 18th May, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----S.122 (SA)---Amendment of assessment---Profit and loss expenses---Markup/interest recovered by the taxpayer from its associated undertakings against the loans provided to them out of borrowed funds---Addition---Taxpayer contended that finance cost was the net amount of mark up expense after deducting the amount of markup recovered from the associated undertakings---Validity---Taxation of markup income which had already been taxed through adjustment with total mark up would tantamount to double taxation---Perusal of audited accounts showed that profit before taxation had remained the same even showing the gross amount of markup expense and markup income (i.e. markup recovered from associated undertakings)---Inspecting Additional Commissioner had accepted the same treatment/adjustment of markup made by another associated company of the group---Addition made on account of markup income recovered by the taxpayer from associated undertakings was deleted in toto.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.122 (SA)---Amendment of assessment---Profit and loss expenses---Loss on sale of shares of listed companies---Addition---Taxpayer contended that capital loss on disposal of shares of public limited companies claimed under the head "administrative" expenses had been voluntarily added back while computing the taxable income; and loss on sales of share was a capital loss but since the gain from sales of shares was exempt from tax, such loss could not be carried forward and adjusted against any capital gain of the subsequent years; and had rightly been added back as inadmissible expenses that included the loss of shares---Department contended that taxpayer had not disclosed the sale of shares in the audited accounts as normal sale, the addition made was correct and should be maintained---Taxpayer contended that disposal of shares of listed companies was not a normal business sale of the taxpayer rather it was a disposal of asset, the difference between the sale proceeds and cost of such was taken to profit and loss account under head 'administrative expenses', which was voluntarily added back in the accounting profit to arrive at taxable prom---Validity---Since the taxpayer itself added back the. loss of shares of listed company which was claimed in Profit and Loss account under the head 'administrative expenses', any further add back of the same amount would tantamount to double taxation---Addition made on such count was deleted by the Appellate Tribunal.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 29 & 122(5A)---Bad debt---Addition---Amount of actual waiver was written off after the approval of the Board of Directors of the company, having authority under the Companies Ordinance, 1984 and claimed waived amount as bad debt written off under the head Profit and Loss expenses---Department contended that amount written off' as bad debt was a loan given to an employee of the company, different what was stated by the taxpayer,; and recovery measures were not intimidated to Department; and medium of special purpose vehicles was not used to recover the amount---Taxpayer contended that normal business debt was treated as loan given to employees by the First Appellate Authority and cases quoted in his order were either inapplicable or irrelevant; and since all the conditions laid down in S.29(1) of the Income Tax Ordinance, 2001 have been fulfilled the addition made should have been deleted in toto---Validity---Held, it was difficult to accept the treatment given by the authorities below---Cases relied by the First Appellate Authority were distinct from the present case---Addition made by the Inspecting Additional Commissioner on such count was deleted by the Appellate Tribunal.

2007 PTD (Trib.) 1529 rel.

(d) Income Tax Ordinance (XLIX of 2001)---

----Ss. 67 & 122(5A)---Income Tax Rules, 2002, Rr.13 & 231---Apportionment of deductions---Addition on account of proration of expense and profit between normal and Presumptive Tax Regime turnover---Taxpayer contended that assessee was maintaining single books of account and the apportionment of expenditure / income had been properly made; and profit related to presumptive tax regime had been excluded from the total profit as appearing in the income tax return to arrive at the income related to normal tax regime; and proration provided clearly showed that all the expenses directly relatable to Presumptive Tax Regime income were charged to Presumptive Tax Regime income and common expense prorated between Presumptive Tax Regime and normal income in accordance with law; and order of First Appellate Authority was not speaking order---Validity---Taxpayer had properly prorated the profit between Presumptive Tax Regime and normal sale in line with S.67 of the Income Tax Ordinance, 2001 read with Rr.13 and 231 of the Income Tax Rules, 2002---In other cases, of the same group the same Inspecting Additional Commissioner had accepted such proration made by, the taxpayer---To meet the ends of justice the taxpayer also deserved for the same treatment---Addition made on such count was deleted being arbitrary and discriminatory.

(e) Income Tax Ordinance (XLIX of 2001)---

----S.122 (5A)---Amendment of assessment---Profit and loss expenses---Addition on account of difference between the amount of salaries appearing in annual withholding statement of the company and figures of salaries as appearing in the audited accounts---Taxpayer contended that although a proper reconciliation along with supporting documents were provided and also produced the related record, but the First Appellate Authority went on to confirm the additions without considering the factual position; and since proper reconciliation was Made duly supported by verifiable documents, the addition was not justified---Validity---No addition was called for on such count as the entire amount was fully recorded, properly reconciled and fully supported by documentary evidence---Addition was deleted by the Appellate Tribunal.

Shabbir Ahmad, FCA for Appellant.

Atif Bashir, D.R. for Respondent.

Date of hearing: 18th May, 2011.

2011 P T D (Trib.) 2389

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Safdar Hussain Shah Bukhari, Judicial Member and Abdul Aziz Memon, Accountant Mernber

COMMISSIONER INLAND REVENUE, LEGAL DIV. RTO, HYDERABAD

Versus

Messrs SHAD & CO. CARRIAGE CONTRACTOR HEAD OFFICE; HYDERABAD

I.T.A. No.738/KB of 2009, decided on 8th January, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.177, 122(3)(b) & 114(6)---F.B.R. Circular No.3 of 2009 dated 17-7-2009---Audit---Audit proceedings---Revision of return---Non acceptance of---Taxpayer contended that Taxation Officer erred while not taking in account the revised return for all purposes of the Income Tax Ordinance, 2001; and "all purposes" meant that once the return had been filed that should be treated as deemed order under S.122(3) of the Income Tax Ordinance, 2001 and Taxation Officer seriously erred not to accept the revised return during the audit proceedings; and such principle had not been adopted by the Commissioner under the clear legal pronouncement---Validity---Taxation Officer just reproduced the revised statement which was on the basis of second revised return and no adverse inference had been drawn regarding acceptance or rejection of revised returns-When Taxation Officer reproduced the receipts and expenditure account in the order and tax adjustment on the basis of second revised return, it was incumbent upon the officer to accept the revised return or to reject the revised return and should have dilated upon the issue of revised return in view of subsection (3) of S.122 of the Income Tax Ordinance, 2001---Before insertion of amendment through Finance Act, 2009, a tax payer was allowed to file revised return under the provision of subsection (6) of S.114 of the Income Tax Ordinance, 2001 at any time within 5 years of filing of the original return---Subsection (3) of S.122 of the Income Tax Ordinance, 2001 clearly allowed to revise the return which should be taken for all purposes of the Income Tax Ordinance, 2001 to be. an amended assessment order to the taxpayer by the Commissioner on the day on which the revised return was furnished---Taxpayer's revised return had not been taken for "all purposes" whereas 'all purposes' included audit under S.177 and amendments under S.122 of the Income Tax Ordinance, 2001---Making an assessment in ignorance to the amended assessment order by implication of the provisions of S.122(3)(b) of the Income Tax Ordinance, 2001, an amended order on the basis of earlier assessment order obviously could not stay in the field---Assessment framed was illegal and the same was cancelled by the Appellate Tribunal.

2009 PTD (Trib.) 749 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.177---Audit---Pre-show cause notice---Intimation---Not necessary for the department to issue a pre-show-cause notice---While selecting a taxpayer's case for audit, the Department should intimate him about the same and also disclose the criteria/reasons of selection of the case for audit---Such condition was obligatory in nature in the present scenario---If the case of any taxpayer was selected for audit, an intimation should be given by the department, about such selection to the taxpayer and criteria/reasons of such selection should also be communicated---Criteria having already been confronted by the Commissioner, the objection of taxpayer was overruled by the Appellate Tribunal.

2009 PTD (Trib.) 749 ref.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.177---Audit---Deficiencies in return---Reasons and grounds for selection of the case for audit---Validity---Reasons / grounds which were confronted had not been taken in the preliminary examination of the return filed under the Income Tax Ordinance, 2001--Letter of deficiencies had been issued in which it was only asked to submit Annexure-III, whereas said deficiency had not been cured and the same had been repeated and further became the reasons and grounds for selection of the .case---Such was a very unpleasant state of affairs that when the deficiency notice was issued by the concerned officer he should fulfil the deficiencies as observed after obtaining the return under S.120(3) of the Income Tax Ordinance, 2001---Criteria for not mentioning certain facts was prima facie not justified.

Amjad Memon, DCIR/D.R. for Appellant.

A.S. Jafri for Respondent.

Date of hearing: 8th December, 2010.

2011 PT D (Trib.) 2440

[Inland Revenue Appellate Tribunal of Pakistan]

Before Shahid Jamil Khan, Judicial Member and Abdul Rauf, Accountant Member

Messrs SHAMS TEXTILE MILLS LTD., LAHORE

Versus

C.I.T., L.T.U., LAHORE and another

I.T.As. Nos.838/LB and 857/LB of 2009, decided on 1st December, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 39 & 18---Income from other sources---Deposit of surplus fund in bank account---Interest income---Income from business---Interest income was claimed to be an integral part of business income on the ground that surplus funds deposited in the bank account were generated from business of the company; and logically interest income could only be treated as an integral part of business income because the amounts which were deposited in the bank account from time to time were generated from the business activities of the company---Validity---Interest income earned from investing the surplus funds in bank deposits was distinct and separate from the business income and had rightly been ,assessed as income from other sources.

I.T.As. Nos. 4696, 5467/LB of 2003; 2009 PTD 331 and C.I.T. v. Liquidator Khulna Bagerhat Railway Company 1962 PTD 415 ref.

Genertech Pakistan Limited v. I.T.A.T of Pakistan 2004 PTD 2255 and Uchpower (Pvt.) Limited and others v. I.T.A.T. of Pakistan ' 2010 SCMR 1236 = 2010 PTD 1809 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.18 & 39-:-Income from business---Other income---Sale of scrap-Assessee contended that sale proceeds of scrap were an integral part of the business income and should have been clubbed with the local sales or credited to the cost of goods sold--Validity---Taxation Officer had treated sale of scrap as "other income" which was not 'either fair or according to law---Sale of waste, goods of sub-standard quality produced during the manufacturing process and drums containing dyes and chemicals etc. and fixed assets were the activities which were inextricably linked to the main manufacturing activity of the company---Sale proceeds of such items were the business receipts of the company and an integral part of the business income---Appellate Tribunal directed that sale proceeds of scrap be treated as business income of the company instead of "other income".

2005 PTD (Trib.) 1208 and 2006 PTD 499 rel.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.21-K --Punjab Employees' Special Allowance Payment Act, 1988 (II of 1989), Preamble---Employees' Cost of Living Relief Act, 1973 (I of 1974), Preamble---Deductions not allowed---Excess perquisites---Addition---First Appellate Authority observed that issue needed to be re-examined with reference to relevant provisions of law to determine as to what items were to be treated as part of salary and wages in order to work out the amount of allowances and perks paid to the employees in excess of 50% of the salary---Taxpayer contended that special allowance and cost of living allowance being statutory allowances were to be treated as part of the salary for the purpose of working out the amount of excess perquisites; and if only these two allowances were considered as part of salary, there would remain nothing to be added to the income of the company---Validity---Amount paid/payable in compliance with Provincial legislation was to be treated as part of salary and not perquisite---Issue of excess perquisites needed thorough examination in the light of cases decided by the hierarchy of judicial fora---Case was remanded to the Taxation Officer for working out the amount of excess perquisites to be added to the income of the company under S.21-K of the Income Tax Ordinance, 2001 after excluding labour statutory allowances.

1997 PTD (Trib.) 2342; 2002 PTD (Trib.) 1898 and (1998) 77 Tax 2004 rel.

(d) Income Tax Ordinance (XXXI of 1979)---

----Third Sched., Part-Il---Initial depreciation allowance---Machines were imported by the sister concern of the taxpayer but were never used by it and were sold to the taxpayer in the same packed condition in which they were imported---Taxation Officer disallowed the initial depreciation on these machines with the observation that said machines, being the previous assets of the sister concern, were second hand and not entitled to initial depreciation---Taxpayer contended that machines imported by the said concern were never used by the said concern in its own business and were sold to the taxpayer in brand new condition---However, if revenue did not feel inclined to treat them as new machines Written Down Value be enhanced next year to the extent of initial allowance disallowed by the department---Validity---Contention of the taxpayer appeared to be fair and logical; and accordingly Appellate Tribunal directed the Taxation Officer to enhance the Written Down Value of the machinery to the extent of initial allowance disallowed in the year under appeal and allowed depreciation on the enhanced Written Down Value in the next year.

(e) Income Tax---

----Add back---Bonus and W.P.P.F---Expenses was disallowed with the observation that it was only a provision without any basis---Both the authorities below had dealt with the matter in a casual manner, not realizing that it was the case of quoted company accounts of which were subject to a number of checks and balances---Being a quoted company it was required to make disclosure of all of its liabilities and payables etc. in order to depict and present a true picture of its financial worth to its share holders and for this reason no expense could be booked without any valid basis---What the taxation officer was required to do was to ascertain whether the expenses claimed under the heads bonus and W.P.P.F. were actually paid to the employees in the immediately succeeding year or not and this exercise could easily be undertaken by consulting the books and record of the next year but this was not done and an easy way was found in disallowance of the expenses---Taxpayer was required to maintain its accounts on mercantile basis and incorporate therein all the definitely ascertainable receivables and payables---Taxpayer's version that provisions under the two heads were booked on valid basis thus needed to be looked into---Orders of authorities below were vacated and case was remanded to the Taxation Officer with the direction that admissibility or otherwise of both the provisions be re-examined in the light.

(f) Income Tax Ordinance (XLIX of 2001)---

----Ss.21(c) & 153---CBR Circular No.27 of 1991 dated 24-08-1991-S.R.O. 586(1)/91 dated 30-06-1991, Cl. (L)--;Deductions not allowed---Expenses incurred by the company without fulfilling its legal obligation of withholding tax---Addition---Taxpayer contended that payments were made to different truck owners who transported cotton bales to the factory of the company and tax under 5.153 of the Income Tax Ordinance,"2001 was not withheld from these payment on the ground that all the trucks made only a single journey to the factory premises of the company during the whole year; and bilities which substantiated the contention of single journey were available with the company and could still be produced before the Taxation Officer; and loading, unloading expenses and brokerage were petty expenses which were not hit by provisions of S.153 of the Income Tax Ordinance, 2001---Validity---Orders of the authorities below were vacated and matter was remanded to the Taxation Officer for de novo consideration keeping in view the directions that (a) the taxpayer company be allowed to substantiate its assertion with regard to the single journey made by all the truck owners during the whole year with the help of books of accounts as well as copies of relevant bilities, the Taxation Officer may also examine any other evidence which he considers to be necessary and relevant (b) brokerage was also subject to withholding provisions of the Income Tax Ordinance, the taxpayer will have to explain reasons for non-compliance with these provisions before the taxation officer and in case reasons were found to be satisfactory, the expense be allowed as a deduction (c) expense on account of loading and unloading is incidental to business and should be adjudicated upon as per practice of the business and also keeping in view the fact that the amounts paid were petty.

(f) Income Tax Ordinance (XLIX of 2001)---

----S.34 (5)---Accrual-basis accounting---Assessment year---Tax year---Various payments remained unpaid for more than three years--Addition of such payable amounts to the income of the company---Taxpayer contended that deductions allowed in the assessment years falling within the domain of Income Tax Ordinance, 1979 could not be dealt with by recourse to the provisions of S.34 (5) of the Income Tax Ordinance, 2001---Validity---Only those deductions which were claimed and allowed in any of the tax years more than three years which remained unpaid could be added to the income of a taxpayer under S.34(5) of the Income Tax Ordinance, 2001---Since additions made by Taxation Officer were in respect of deductions allowed in assessment year 1999-2000, the provision of S.34(5) of the Income Tax Ordinance, 2001 could not be pressed into service for adding back the said amounts because the words used in the said provision speak of the deductions allowed against the income of a "tax year" and not of the "assessment year"---Addition made under S.34(5) of the Income Tax Ordinance, 2001 was directed to be deleted because they were not covered under the provision of law.

2008 PTD 1420 and I.T.As. Nos. 720 and 721/LB of 2007 rel.

(g) Interpretation of Statutes---

----Fiscal statute---Person can be subjected to tax only on the basis of plain and explicit language of a taxing provision; nothing is to be read in and nothing to be implied.

(h) Income Tax Ordinance (XLIX of 2001)---

----S. 67---Income Tax Rules, 2002, R.13---Apportionment of deductions---Income assessable under normal law as well as Presumptive Tax Regime---Proration of expenses was a consequential step depending upon the determination of ratio of two types of income---Taxation Officer was directed to look into the allocation of expenses and work out the ratio between income assessable under the Presumptive Tax Regime and normal law and allocate the expenses to both types of income on the basis of S.67 of the Income Tax Ordinance, 2001, read with R.13 of the Income Tax Rules, 2002.

(i) Income Tax Ordinance (XXXI of 1979)---

----S.107AA---Tax credit for investment---Direction of First Appellate Authority regarding tax credit under S.107AA of the Income Tax Ordinance, 1979 to the effect that claim of taxpayer be considered and if it was found entitled to statutory credit the same should be allowed, appeared to be fairly reasonable and just---Direction of First Appellate Authority was maintained the departmental appeal was dismissed on the said issue.

M. Iqbal Khawaja for Appellant (in I.T.A. No.838/LB of 2009).

Zulqurnain Tirmizi, D.R. (LTU) for Respondent (in I.T.A. No.838/LB of 2009).

Zulqurnain Tirmizi, D.R. (LTU) for Appellant (in I.T.A. No.857/LB of 2009).

M. Iqbal Khawaja for Respondent (in I.T.A. No.857/LB of 2009).

Date of hearing: 29th April, 2010.

2011 P T D (Trib.) 2459

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member and Sohail Afzal, Accountant Member

Messrs FLYING CEMENT COMPANY LIMITED, LAHORE

Versus

COLLECTOR SALES TAX AND FEDERAL EXCISE, LTU, LAHORE

S.T.A. No.2188/LB of 2009, decided on 17th June, 2011.

Sales Tax Act (VII of 1990)---

---Ss. 7, 11, 25, 32-A, 33, 34, 36 & 46---Determination of tax liability---Payment of additional tax and imposition of penalty---Assessee/registered person was a public limited company which was engaged in business of manufacturing. and selling ordinary Portland cement---It was observed that on the basis of audit conducted by the team of "DRRA "for relevant tax period, adjustment of input tax on the purchase of diesel oil was not allowed, mainly due to the fact that diesel oil, capable or being put to multiple uses, could also be used in automotive vehicles and other non-taxable activities, therefore, precise quantification thereof was not possible---Diesel oil, all kinds of petrol and other petroleum products, were not admissible for input adjustment---Additional Collector (Legal) directed assessee to deposit sales tax along with default surcharge/additional tax vide order-in-original, which order was upheld by the Collector and assessee had filed appeal to Appellate Tribunal---Subject case was based on audit conducted by `DRRA' which was non-existent entity under the Sales Tax Act, 1990 and could not have access to the books of account and record of the private parties under the law; as Auditor General was required to audit the receipts of Federal Government and not the records of industrial units registered under the Sales Tax Law--Impugned order of authorities below was vacated and show-cause notice issued to the assessee, was cancelled, in circumstances.

2007 PTD (Trib.) 1600 and 2008 PTD (Trib.) 261 ref. 2010 PTD 1355 and PTCL 2011 CL 109 rel.

Hussain Ahmed Sherazi for Appellant.

Farrukh Majeed, D.R. for Respondent.

Date of hearing: 19tkx March, 2011.

2011 P T D (Trib.) 2470

[Inland Revenue Appellate Tribunal of Pakistan]

Before Raja Lehrassab Khan, Judicial Member and Amjad Ikram Ali, Accountant Member

PASBAN COTTON INDUSTRIES (PVT.) LTD, BAHAWALNAGAR

Versus

COLLECTOR, R.T.O., MULTAN

S.T.A. No.2209/LB of 2009, decided on 21st December, 2010.

(a) Sales Tax Act (VII of 1990)---

----Ss. 11, 36 & 46---Assessment of sales tax---Failure to deposit tax--Issuance of show-cause notice---During the course of scrutiny of record of the appellant/taxpayer for relevant period, it was found by the department that taxpayer supplied cotton lint to different textile units, but sales tax involved on such supplies had not been deposited by the taxpayer into government treasury---Show-cause notice was issued to the taxpayer without specifying the provisions of charging sections---In the absence of particular allegation or charge in the show-cause notice against the taxpayer by notifying authority, was patently illegal and without lawful authority---All orders based thereupon, were liable to be set aside---Adjudicating officer having not invoked the provisions of Ss.11 & 36 of the Sales Tax Act, 1990 in the show-cause notice, same was illegal and impugned order based on such show-cause notice, was liable to be set aside.

2003 PTD 1593; GST 2004 CL 423 and GST 2005 CL 239 ref.

Assistant Collector Customs v. Messrs Khyber Electric Lamps 2001 SCMR 838 and PTCL 2003 CL 78(sic) rel.

(b) Sales Tax Act (VII of 1990)---

----Ss. 11, 36 & 46---Special Procedure for the Ginning Industries Rules, 1996, R.6---Liability to pay sales tax---Department found that taxpayer had supplied cotton lint to different textile units, but sales tax involved on such supplies had not been deposited into government treasury---Show-cause notice was issued to the taxpayer and he in reply to show-cause notice had claimed that he was not liable to pay sales, tax, but liability to pay sales tax was on the ginning units---Validity---Under R.6 of Special Procedure for Ginning Industries Rules, 1996, the buyers of the cotton lint, were required to deliver pay order/bank draft in the name of Collector concerned for the amount of sales to the Ginners before taking the delivery of the supply of the cotton lint---Liability to pay sales tax, was on the buyers/the spinners and not on ginners---Committee constituted, by order of the Tribunal, which was headed by the Departmental Representative, had itself held that taxpayer was not liable to pay sales tax---No justification was available to the department to recover amount of sales tax from the taxpayer---Findings recorded by both authorities below being illegal, vague and unlawful, were set aside, in circumstances.

GST 2004 CL 546 rel.

Mian Abdul Basit for Appellant.

Usman Asghar, D.R. for Respondent.

Date of hearing: 21st December, 2010.

2011 P T D (Trib.) 2538

[Inland Revenue Appellate Tribunal of Pakistan]

Before Nazir Ahmed, Judicial Member and Shahnaz Rafique, Accountant Member

COLLECTORATE OF CUSTOMS, SALES TAX AND CENTRAL EXCISE, MULTAN

Versus

Messrs NAEEM CORPORATION, MULTAN

S.T.A. No.1434/LB of 2009, decided on 8th October, 2010.

Sales Tax Act (VII of 1990)---

----Ss.11, 2(9)(37); 3, 3-1A, 23, 26, 37(C), 71, 33, 34 & 36(1)(2)---S. R. O.1271(I)/96 dated 10-11-1996---Assessment of tax---Bank account was detected by-the revenue in the name of accountant of the factory where huge amounts were received during the last two years--Department observed that all amounts deposited in bank account were sent either by textile mills or whole sellers engaged in the business of cotton lint/cotton waste; on the basis of such facts taxpayer was charged with violation of provisions of Sales Tax Act, 1990---First Appellate Authority after going through the facts and scrutinizing the relevant record concluded that case had been prepared on the basis of hypothetical presumptions; and charges as enumerated in the show-cause notice had not been established which was vacated---Validity---Account detected by the revenue was in the name of account of the firm---Departmental appeal was dismissed by the Appellate Tribunal in the light of judgment reported as 2004 PTD 868.

2004 PTD 868 rel.

(b) Sales Tax Act (VII of 1990)---

----S.46---Appeal to Appellate Tribunal---Appeal before Appellate Tribunal by the Assistant Collector---Validity---Such appeal had not been filed in accordance with law because the Assistant Collector had not been empowered to file appeal before Appellate Tribunal.

2007 PTD (Trib.) 2494 and S.T.A. No.1429/LB of 2009 rel.

(c) Sales Tax Act (VII of 1990)---

----S.36---Recovery of tax not levied or short levied or erroneously refunded---Show-cause notice---Issue which was not raised in the show-cause notice that could not be taken during the course of court proceedings---Departmental appeal was dismissed on such ground as well.

1987 SCMR 1840 rel.

Dr. Sheryar, D.R. for Appellant.

Mian Abdul Basit for Respondent.

Date of hearing: 5th October, 2010.

2011 P T D (Trib.) 2590

[Appellate Tribunal Inland Revenue, Islamabad Bench]

Before Syed Nadeem Saqlain, Munsif Khan Judicial Members and

Istataat Ali Accountant Member

C.LT;/W.T. (LEGAL), RTO, RAWALPINDI

Versus

Brig. IRFAN-UL-HAQ

I.T.As. Nos.852/IB to 854/IB of 2009, decided on 10th April, 2010.

Per Munsif Khan Minhas, Judicial Member---[Majority view]

(a) Income Tax Ordinance (XLIX of 2001)---

----S.177(4)(a)(b)(c) & (d)---Audit---Powers of Commissioner of Income Tax to select the case for audit under S.177(4) of the Income Tax Ordinance, 2001 without issuance of "audit selection criteria" by the Federal Board of Revenue---Word 'also' had lost sight in the judgment Mohsin Raza v. Chairman F.B.R. etc. reported as 2009 PTD 1507---Interpretation which renders any part of provision as surplusage in not correct---Construction which would leave without effect any part of the language of a statute will normally be rejected---Provision of subsections (2) and (4) of S177 of the Income Tax Ordinance, 2001 are disjunctive and not conjunctive---Subsection (4) of S.177 of the Income Tax Ordinance, 2001 clearly empowered the Commissioners Income Tax to issue notice on the basis of criteria spelt out in sub clauses (a), (b), (c) and (d) subsection (4) of S.177 of the Income Tax Ordinance, 2001---Question "whether the commissioner could select a case for audit under S.177(4) of the Income Tax Ordinance, 2001 without issuance of "audit selection criteria" by the Federal Board of Revenue" was answered in favour of Department and against the taxpayer by the Appellate Tribunal.

2010 PTD 571 rel.

Mohsin Raza v. Chairman F.B.R. and others 2009 PTD 1507 dissented from.

Muhammad Hussain v. CIT 2005 PTD 152; Commissioner of Income Tax and others v. Fatima Sharif Textile, Kasur and others 2009 SCMR 344 = 2009 PTD 37; Writ Petitions Nos.960 of 2008; 550 of 2009; 99 of 2009.; 1006 of 2009; 2009 PTD 284; Writ Petition No.2663 of 2007; 2010 PTD 395; Writ Petition No.1858 of 2009; Writ Petition No.20306 of 2009; Writ Petition No.20339 of 2009; Writ Petition No. 20340 of 2009; 2007 PTD 239 (H.C. Lahore); 2009 PTD 20 (H. C. Lahore.); 2009 PTD 284 (H,C. Lahore.); 2007 PTD 2185 (H.C. Lahore.); 2008 PTD 1440 (H.C. Islamabad); PLD 1963 Kar. 182; 2000 SCMR 1017; I.C.A. No.1250 of 2007 (unreported); Writ Petition No.7146 of 2008 (unreported); Writ Petition No. 2928 of 2008 (unreported) and PLD 2008 SC 663 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.177, 177(6) & 122(9)---Audit---Pre-selection notice for selection of case for audit---While, pitting in subordinate forum wisdom of the upper forum in interpretation is to dominate---Forum of Appellate Tribunal was not supposed to make any interpretation contrary to that of upper foums rather obey the same---Exclusion of pre-selection notice was essential for effective and smooth workability---If a brief scenario of facts along with legal implication was presented before the court, order passed would have complete subjective assessment of each issue---Court never intended to deprive the assessee to refute the version of the department---Right of assessee was protected in subsection (6) of S.177 of the Income Tax Ordinance, 2001 as well as in S.122(9) of the Income Tax Ordinance, 2001, so that pre-selection notice was not necessary.

CIT and others v. Fatima Sharif Textiles Mills, Kasur and others 2009 SCMR 344 = 2009 PTD 37; 2009 PTD 284 (H.C. Lahore); Libety Oil Mills v. Union of India AIR 1984 SC 1271; Union of India v. Tulsi Ram Patel AIR 1984 SC 1416; Lewis v. Heffer and other (1978) 3 All E.R. 354; Wednesbry Corporation v. Minister of Housing and Local Government (1965)' 1 All E.R. 186 and Hardutt Mull Jute Mills v. State of Bihar AIR 1957 Patna 21 rel.

PLD 2008 SC 663; 2007 SCMR 330; 2005 SCMR 678; 2005 SCMR 1814 and PLD 2004 SC 441 ref.

(c) Precedent---

----Where the judgments of the same forum with the same strength are in contrast to each other, then the judgments being later in time are to be followed due to the concept of curative philosophy.

(d) Income Tax Ordinance (XLIX of 2001)---

----Ss. 177(4) & 126(2)(a)(b)---Audit---Non-mentioning of sub-clauses (a), (b), (c) &'(d) of S.177(4) of the Income Tax Ordinance, 2001---Effect---Confrontation of substance intended to be assessed---Department contended that if intended action was confronted; then non- mentioning of sub-clauses will not be fatal---Validity---Conditions and parameters set forth in sub-clauses (a)(b)(c) and (d) of sub-section. (4) of S.177 of the Income Tax Ordinance, 2001 were on the jurisdiction basis, non-existence whereof was a sine qua non for selection of a person for audit--Existence of such jurisdictional basis must necessarily be determined before power could be exercised---Such determination could only be effected after hearing the petitioners and granting them opportunity to produce the material to displace the case of the department which exercise could only be undertaken on an individual case to case basis---Though the Department may very well issue notice purportedly under S.177(4) of the Income Tax Ordinance, 2001 but whether in fact and in law Department was entitled to exercise the powers conferred thereby and whether such powers had in fact been exercised within the parameters prescribed by law could always be challenged by the petitioners by responding to the notice including by objecting to the jurisdiction and authority of the Commissioner to issue the same---Any objection raised would require to be adjudicated upon through a speaking order, if the very jurisdiction to issue such notice was challenged then the question of jurisdiction would require to be dealt with and decided first before the Commissioner could proceed further in the matter ---Taxpayer's explanation on all the issues raised in the order including issue of the jurisdiction will be answered in yes' orno', either the proceedings of audit were to be dropped or Commissioner could proceed to amend the assessment under sub-section (I) or subsection (4) of S.122 of the Income Tax Ordinance, 2001 ---Such order could be independently passed under subsection (6) of S.177 of the Income Tax Ordinance, 2001 or objection raised by the taxpayer could be answered by discussing in detail in show cause notice issued under S. 122(9) of the Income Tax Ordinance, 2001.

(e) Income Tax Ordinance (XLIX of 2001)---

----Ss.120 (1A), 120, 122 & 177(4) ---Assessment---Audit---Tax years 2004 and 2005---Selection of case for audit---Taxpayer contended that selection of the case for audit for tax years 2004 and 2005 was not sustainable on the ground that Cl. (1A) of S.120 of the Income Tax Ordinance, 2001 was inserted in the Ordinance through Finance Act, 2005 relevant to tax year 2006 onward and was not applicable to the tax years 2004 and 2005---Department contended that S.122 of the Income Tax Ordinance, 2001 empowered the Commissioner to amend the assessment---Subsection (1A) of S.120 of the Income Tax Ordinance, 2001 was inserted by Finance Act, 2005; and by insertion of subsec?tion (IA) of S.120 of the Income Tax Ordinance, 2001, the Legislature conferred a power in addition to the powers under S.122 of the Income Tax Ordinance, 2001 already possessed by the Commissioner; and applicability of subsection (IA) of S.120 of the Income Tax Ordinance, 2001 being retrospective or prospective was not the issue for the reasons that the Commissioner already possessed the power to select a case for audit under S.177 of the Income Tax Ordinance, 2001---Validity---Commissioner may amend any assessment under S.120 or 121 of the Income Tax Ordinance, 2001 and he could do so on definite information acquired through audit or otherwise---For resorting to audit, powers had to flow from subsection (IA) of S.120 of the Income Tax Ordinance, 2001 because S.177 of the Income Tax Ordinance, 2001, as was at relevant time, clarified as to how Commissioner shall select a case for audit---Such will be according to the criteria laid down by Federal Board of Revenue or in addition to this he may also select a case for audit with regard to person's history, quantum of tax payable, class of business or where it is essential to determine correct income---Original powers flow from subsection (IA) of S.120 of the Income Tax Ordinance, 2001 and S.177 of the Income Tax Ordinance, 2001 explained procedure and touchstone, as to how such cases would be selected-Section 177 of the Income Tax Ordinance, 2001 was a procedural or machinery section---Subsection (IA) of S.120 of the Income Tax Ordinance, 2001 empowered the Commissioner to select any person for audit of person's income tax affairs under S.177 of the Income Tax Ordinance, 2001---Such was a lacuna in law which had been filled later on through Finance Act, 2005---Similarly subsection (4) of S.177 of the Income Tax Ordinance, 2001 was inserted in the Income Tax Ordinance, 2001 through Finance Act, 2004 relevant to tax year 2005 onward and not applicable to tax year 2004 ---Taxpayer was to be dealt with in a tax year as per law enforceable for that tax year---Law could not be applied retros?pectively---Selection of case for tax years 2004 and 2005 was a nullity in the eyes of law---Departmental appeals for tax years 2004 and 2005 were rejected by the Appellate Tribunal---Amended assessments had rightly been annulled while original deemed assessments for said test two years shall stand' restored.

(f) Income Tax Ordinance (XLIX of 2001)---

----S.177 (6)---Audit---Tax year 2006---Selection of case for audit---Appeal for tax year 2006 was remanded to the Commissioner (Audit) to confront substance of intended action to taxpayer and provide hire opportunity to furnish explanation then after passing the speaking order under 5177(6) of the Income Tax Ordinance, 2001, he could proceed to amend assessment in accordance with law if it warranted.

Marius Bercea Sarin Co. Messrs Schlumberger Seaco Inc. v. Commissioner of Income Tax (Legal), Regional Tax Officer, Islamabad in I.T.A. No.940/IB/2009 (Tax Year, 2008) ref.

Per Istataat Ali Accountant Member disagreeing Minority new.

Per Syed Nadeem Saqlain Judicial Member agreeing with Munsif Khan Minhas, Judicial Member [Majority view]

(g) Income Tax Ordinance (XLIX of 2001)---

----S.177(4), Clauses(a), (b), (c) & (d)--Audit---Non-mentioning of sub-clauses (a), (b) and (d) of S.177 (4) of the Income Tax Ordinance, 2001 in the notice---Assumption of jurisdiction under S.177(4) of the Income Tax Ordinance, 2001 must be clearly spelled out and taxpayer be given an opportunity to object to such assumption as the case may be---Non-mentioning of clauses of S.177(4) of the Income Tax ordinance, 2001 could not be condoned as it tantamount to denial of a statutory right to the taxpayer---If a taxpayer did not know that on what basis his case had been selected for audit, he could not come up with his view as to legality of jurisdiction and no finding as to any such objection` could be brought on to the record by the Commissioner--Judgment of High Court reported as 2010 PTD 571 was required to be followed; and audit proceedings not being initiated and concluded in accordance with directions issued by the High Court could not be validated---Commissioner (Audit) recommenced the audit proceedings in respect of subject tax years i.e. 2004 through 2006 by clearly mentioning the clauses of S.177(4) of the Income Tax Ordinance, 2001 under which jurisdiction was intended to be assumed and concluded the audit proceedings after following the procedure as directed to be adopted by the High Court of Member of the Tribunal adopting as for tax years 2004 and 2005 by invalidating was modified by Referee member remanding the Matter in respect of all the three tax years was remanded to Commissioner (Audit) for adjudication afresh in accordance with direction of the High Court.

(h) Income Tax Ordinance (XLIX of 2001)---

---Ss.120(14) & 122(5)---Assessment---Audit---View that "while a mandate to 'amend' a deemed assessment was available to department under S.122(5) of the Income Tax Ordinance, 2001 inter-alia on the basis of an 'audit', the mandate to conduct an 'audit' of a taxpayer, in respect whereof a 'deemed assessment' had already been made, was not available to the department uptil July 1, 2005 when such jurisdiction was made available through insertion of subsection (IA) in S.120 of the Income Tax Ordinance, 2001" if endorsed; the expression `audit' employed by legislature in provisions of S.122(5) of the Income Tax Ordinance, 2001 would have to be rendered as being redundant--Such an interpretation would mean that since 'mandate' to conduct an audit of a 'deemed assessment' was non-existent; and every return of Income filed by a taxpayer was a deemed assessment order; and any amendment' on the basis of 'audit' was an impossibility and thus expression 'audit' used in S.122(5) of the Income Tax Ordinance, 2001 Was a redundancy and S.177 of the Income Tax Ordinance, 2001 was plus or at least ineffective until July 1, 2005---Such a position could not be endorsed as it would injure and violate the basic tenet of Interpretation of statutes viz. "redundancy could not be attributed to legislature".

(i) Income Tax Ordinance. (XLIX of 2001)---

----S.120(1A)---Assessment---Audit --Provisions of S.120 (IA) of the Income Tax Ordinance, 2001 did not cast any doubt as to availability of audit jurisdiction to Commissioner prior to insertion of said provision the statute.

(j) Income Tax Ordinance (XLIX of 2001)--

----Ss.120 (1A) & 122---Assessment---Jurisdiction of audit---Pragmatic interpretation---Instead of concluding that jurisdiction to conduct 'audit' of taxpayers did not exist prior to insertion of subsection (1A) in S.120 of the Income Tax Ordinance, 2001, an attempt had to be made to give a pragmatic interpretation to such legal provision and reconcile same with the overall scheme of law contained in the Income Tax Ordinance, 2001---Subsection (1A) of S.120 of the Income Tax Ordinance, 2001 was clarificatory in nature and was aimed to elaborate that passing of deemed assessment order should not be so construed that it prejudiced the administrative domain as to review of such assessment by way of conducting an audit---Such position found strength from the fact that not only 'audit' procedure was laid down in S.177 of the Income Tax Ordinance, 2001, but department was also empowered to give effect to audit findings through invocation of powers conferred upon it under S.122 of the Income Tax Ordinance, 2001---Such a position would ensure that whole scheme of self- assessment and administrative authority to review it later on remained intact and legally valid and no violence was done to a piece of legislation---Audit proceedings for tax years 2004 and 2005 were legal and did not suffer from statutory infirmity---Amendment orders in respect of all the three tax years were vacated and Commissioner (Audit) was directed to recommence the audit proceedings, if required, after following the procedure spelled out in the High Court's judgment reported as 2010 PTD 571.

Ziaullah Khan, D.R. for Appellant.

Ch. Naeem-ul-Haq for, Respondent.

Date of hearing: 10th April, 2010.

2011 P T D (Trib.) 2619

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Chairman

Messrs ZAHID JEE TEXTILE MILLS LTD., FAISALABAD

Versus

COLLECTOR (APPEALS), FAISALABAD

S.T.A. No.644/LB of 2009, decided on 22nd March, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss.10, 2(14), 4, 7, 8(1), 11(2) & 26---Sales Tax Rules, 2006, R.37---Refund of input tax---Rejection of refund on the ground that the refund against invoices of blacklisted and registration-suspended units could not be allowed as no tax was paid by them to the national exchequer---Validity---Liability to pay sales tax was on the supplier under S.3(3)(a) of the Sales Tax Act, 1990 and could be extended to the buyer only by a notification under S.3(a) of the Sales Tax Act, 1990 which provides shifting of tax liability to the person receiving the supply of specific goods and in taxpayer's case, no such notification was issued by the Federal Government as such defaulted amount should have been recovered from the defaulter instead of the buyer---Order of blacklisting or suspension of registration would take effect from the date of its issuance and invoices issued by the suppliers during the intervening period were acceptable---Purchases of the taxpayer pertained to the period 'December-2007' when the alleged suppliers were' not included in the list of blacklisted/suspended units and their subsequent inclusion in the list of blacklisted/suspended units in 'November-2008' could not operate retrospectively---Orders passed by the authorities below were not maintainable in the eye of law---Show cause notice and subsequent orders passed thereon were set aside by the Appellate Tribunal and appeal filed by the registered taxpayer was accepted.

Messrs Superior Textile Mills Ltd. v. Federation of Pakistan and others 2000 PTD 399; 2011 PTD (Trib.) 1073; Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492; Messrs Anoud Power Generation Ltd. v. Federation of Pakistan and others PLD 2001 SC 340 and Messrs Silver Cotton Mills Ltd. v. Commissioner of Sales Tax (West), Karachi 1984 PTD 216 rel.

(b) General Clauses Act (X of 1897)---

----S.24---Any amendment in the statute and issuance of a notification or an executive order would be deemed to be effective prospectively and not retrospectively as expressed in S.24 of the General Clauses Act, 1897.

Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492; Messrs Anoud Power Generation Ltd. v. Federation of Pakistan and others PLD 2001 SC 340 and Messrs Silver Cotton Mills Ltd. v. Commissioner of Sales Tax (West), Karachi 1984 PTD 216 rel.

Khubaib Ahmed for Appellant.

Syed Javed Ali Shah, D.R. for Respondent.

Date of hearing: 22nd March, 2011.

2011 P T D (Trib.) 2679

[Inland Revenue Appellate Tribunal of Pakistan]

Before M.A. Javed Shaheen, Judicial Member and Tabana Sajjad Naseer, Accountant Member

Messrs JARIT INTERNATIONAL, SIALKOT

Versus

COLLECTOR (APPEALS), CUSTOMS, SALES TAX AND FEDERAL EXCISE, GUJRANWALA

S.T.As. Nos.73/LB to 75/LB of 2011, decided on 21st May, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss.2(37) & 2(18)---Qanun-e-Shahadat (10 of 1984), Art.150---S.R.O. 575(I)/2002 dated 31-8-2002---Tax fraud---Registered person contended that statement of suppliers had not been confronted, who had allegedly refused to have issued the input tax invoices; and input tax invoices were in the shape of documentary evidence, which could not have been brushed aside on the basis of alleged oral testimony of the suppliers; and suppliers, who had made statements against the interest of the registered person and contrary to the documents Previously issued by them, had become "hostile witnesses ", who ought to have been produced by the Department for cross-examination---Validity---Authorities below had failed to apply a judicious mind to the facts of the case and registered person had. been made to suffer on the basis of alleged evidence gathered at his back---Whenever any evidence contradictory to the one already on record was procured by the Department, the registered person not only had a right to be confronted with the same, but also he had a right to cross-examine the hostile witness, who allegedly negated his previous testimony, but the department had not made any effort of fulfillment of said legal obligations before displacing the evidence relied upon---Department had `innocently' desired that the registered person ought to have taken their stance as sacrosanct or gospel truth, whereas the law was/is otherwise---Order accordingly.

(b) Sales Tax Act (VII of 1990)---

----Ss.10 & 7---Excess amount to be carried forward or refunded---Tax period 02/2004, 04/2004 & 05/2004---Rejection of input tax credit---Hostile witnesses---Documentary evidence---Statement under duress and undue influence---Input tax invoices in support of claim of refund were in shape of documentary evidence---When the person issuing the same had gone hostile and deposed that the same were not issued by him, it was incumbent upon the Department to provide the statement of the hostile witness to the registered person and to summon the hostile witness and provide an opportunity of cross-examining him to the registered person---Without following such procedure the Department was not justified to brush aside the documentary evidence produced by the registered person on the basis of any statement made at the back of `registered person---No rule of administration of justice justifies such mode adopted by the Department---Department having failed to follow legal mode for rejecting the input tax invoices produced by the registered person, the input tax invoices held the field and they were never displaced by any cogent evidence brought on record by the Department---Whims, caprices and inadmissible pieces of evidence could not dislodge documentary evidence already in the field---Documentary evidence could not be excluded by mere statements allegedly procured through duress and undue influence exercised by the Department---Documentary evidence in the field could be excluded/contradicted only by an admissible documentary evidence---Registered person had brought on record the affidavits of suppliers regarding duress of the Department; the certificate by the suppliers that they did issue the input tax invoices in question and copies of register of supplies and sales maintained by the suppliers-in-question in respect of relevant tax periods---In view of such corroborative evidence, there was no justification of rejecting the claimed input tax credit.

(c) Sales Tax Act (VII of 1990)---

----Ss.8(1)(d) & 10---Tax credit not allowed---Tax period 02/2004, 04/2004 & 05/2004---Department invoked cl. (d) of subsection (1) of S.8 of the Sales Tax Act, 1990 for refusing refund---Said clause was brought through Finance Act, 2004, which was effective from the 1st day of July, 2004, whereas the refund claimed by the registered person was in respect of tax period 02/2004, 04/2004 & 05/2004, which were beyond the mischief of Cl. (d) of subsection (1) of S.8 of the Sales Tax Act, 1990.

(d) Sales Tax Act (VII of 1990)---

----Ss. 8(1)(d) & 2---Tax credit not allowed---Fake invoices---Definition---Clause (d) of subsection (1) of S.8 of the Sales Tax Act, 1990 disallowed the credit of input tax claimed on the basis of "fake invoices"-What constitutes "fake invoices" had not been explained either through any 'explanation' to subsection (1) of S.8 of the Sales Tax Act, 1990, or any definition of such expression is contained in S.2 of the Sales Tax Act, 1990.

(e) Sales Tax Act (VII of 1990)---

----Ss.2(40), 8(1)(d) & 23---Tax invoices---`Fake invoices'---Definition and meanings---Word "fake" (as a noun) had been defined to be "something that is not what it purports to be ", and as a verb, it means "to make or construct falsely "---In the expression 'fake invoices ", the word "fake" had been used neither as a noun, nor as a verb, rather it is an adjective, which describes the quality of the input tax invoices, which are either not true in any material respect or they have been falsely made or forged by the person claiming credit of the input tax---Word "invoice" had not been defined in the Sales Tax Act, 1990, rather an expression -"tax invoice" had been defined by subsection (40) of S.2 of the Sales Tax Act, 1990 to be "a document required to be issued under S.23" and S.23 of the Sales Tax Act, 1990 in turn described the expression "tax invoice".

(f) Sales Tax Act (VII of 1990)---

----Ss.23 & 8---Tax invoices---Tax credit---If an input tax invoice, corresponds to the requirements of S.23 of the Sales Tax Act, 1990, it qualifies to be a "tax invoice", and if it has been issued by a "registered person", it is a valid input tax invoice and entitles the holder to claim credit of the input tax evidenced by such invoice.

(g) Sales Tax Act (VII of 1990)---

----Ss. 10 &' 23---Excess amount to be carried forward or refunded---Tax invoices---Change of opinion---Re-initiation of scrutiny of the refund which had already been sanctioned to be issued on the dictation of Collector---Validity---Case of the Department was not that the input tax invoices produced by the registered person did not qualify to be "Tax invoices" within the meanings of S.23 of the Sales Tax Act, 1990, rather the invoices-in-question were so perfect and confidence inspiring that during scrutiny of the same none of the refund sanctioning authority raised any eye-brow to any of the invoices, and sanctioned issuance of Refund Payment Order on 24-8-2004---Almost nine months later the Assistant Collector, on the dictation of the Collector, Sales Tax and Central Excise, re-initiated the scrutiny of the refund which had already been sanctioned to be issued---Such an exercise amounted to 'change of opinion' on the same material which was not permissible, as it would divest the actions taken in accordance with law of the finality, and the taxpayer's claim would remain on the tenterhook of time to time changes in views of the succeeding officers, and no finality to an action would ever be conferred---Policy of law had always been to confer finality on the actions once taken in accordance with law, so that enforceable rights and obligations may flow therefrom---Department could not be allowed to have dwindling views on a given issue, and move on changing views according to whims and caprices of the big bosses---Departmental officers dubbed the input tax invoices to be 'fake" notwithstanding the fact that the same had been considered by their predecessors to be "genuine" and Refund Payment Order had been sanctioned to be issued on 24-8-2004---If the then refund sanctioning authority had treated the allegedly 'fake' invoices to be 'genuine', that authority was involved in the 'tax fraud', and action ought to have been taken against him also---If he was not tried for tax fraud, how his decision of issuance of refund could be dissented from, and the same be ignored in the lighter vein, and one could refuse to issue an already determined refund to the registered person---Fact that there was nothing on record which may justify declining of claimed refund was evident from the Daily Refund Sanctioning Report which showed that the Refund Payment Order had been made after ascertaining the claimed input tax and refund, and there remained nothing except issuance of the refund in accordance with the Refund Payment Order, but for the reasons best known to the Departmental officers, the whole mess was created and the registered person was denied the refund due---Registered person was an exporter, whose supplies/exports were zero-rated, and he was entitled to refund of the whole of the sales tax paid as input tax on local purchases; provided he held a tax invoice in respect of taxable supply as required by S.7(2) of the Sales Tax Act, 1990 in his name and bearing his registration number---Registered person's claim of refund in respect of tax periods 02/2004, 04/2004 and 05/2004 had been rejected illegally and without lawful authority, which was ordered to be issued without further probe---Order-in-Appeal and Order-in-Original were upheld and set at naught.

2004 PTD 1893; 1999 PTD 4126; 2002 PTD 2440; 2000 PTD 399; 2003 PTD 63; 2005 PTD 1390; 2004 PTD 1893; 2004 PTD 1659; 2004 PTD 2845; 2002 PTD 1805; 2007 PTD 1982 and 2011 PTD (Trib..) 773 rel

(h) Sales Tax Act (VII of 1990)---

----S.3---Scope of tax---Payment of tax in State exchequer---Liability of---Such was not the liability of the buyer to ensure payment of input tax in the State exchequer, rather S.3 of the Sales Tax Act, 1990 cast such duty upon the supplier to deposit the sales tax collected in a tax period into the State exchequer---If the supplier did not fulfil his obligation, the buyer could not be victimized for the default committed by the supplier.

(i) Sales Tax Act (VII of 1990)---

----S.3---Scope of tax---Liability of supplier to pay tax---When defaulting suppliers were apprehended, they, in collusion with the Department, resile from the input tax invoices duly issued, and the Sales Tax Department, instead of compelling the suppliers to do the needful by depositing the unpaid output tax, start the proceedings against the buyers who had claimed the corresponding credit of input tax, which was utterly against the true spirit of S.3 of the Sales Tax Act, 1990---Liability must be enforced against the person upon whom the-same had been fixed by law.

(j) Sales Tax Act (VIF of 1990)---

----Ss.73 & 33(16)---Constitution of Pakistan, Art.13---Certain transactions not admissible---Non-adherence to provisions of S.73 of the Sales Tax Act, 1990, though the same was not available in the present case, as the registered person did make payments for the supplies through Bank, and the same were evidenced as transfer entries in the Bank statement, yet if a transaction was otherwise genuine, a genuine buyer could be disentitled to claim credit of input tax on account of mere non-adherence to the provisions of S.73 of the Sales Tax Act, 1990---Non-adherence to the provisions of S.73 of the Sales Tax Act, 1990 had been made penal by S.33(16) of the Sales Tax Act, 1990, it would not be fair to disallow credit of input tax as a result of non-adherence to the provisions of S.73 of the Sales Tax Act, 1990, and penalize such non-adherence under S.33(16) of the Sales Tax Act, 1990 also---Such action would amount to double jeopardy, which was guarded against under Art. 13 of the Constitution.

2010 PTD (Trib.) 2345; 2010 PTD (Trib.) 975; 2010 PTD (Trib.) 2656 and 2010 PTD (Trib.) 1377 rel.

Syed Ali Imran Rizvi and Tariq Hanif Malik for Appellants.

Atif Bashir, D.R. for Respondent.

Date of hearing: 21st May, 2011.

2011 P T D (Trib.) 2704

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member

Messrs SACRAL RICE MILLS, Proprietor Girdharilal Khorwah

Versus

C.I.R., AUDIT DIVISION, RTO, HYDERABAD

I.T.A. No.955/KB of 2010, decided on 22nd June, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.122(4)(5), 209, 210, 211, 262, 120 & 114(6)---Amendment of assessment---Filing of revised return---Rejection of---Further amendment---Scope---Commissioner was fully empowered to amend an assessment and assessment could further be amended under Sub-section (4) of S.122 of the Income Tax Ordinance, 2001 on the basis of `definite information' acquired from audit or otherwise---Provision of law was to be read as it was and was to be applied in its ordinary English meaning---Sections 120 read with Ss.122, 209, 210, 211 and 262 of the Income Tax Ordinance, 2001 had been drafted and approved by the legislature with wisdom and were to be read and applied by understanding the same in the manner its plain language demands---After having filed the revised return by the taxpayer, it .was not obligatory on the Taxation Officer to accept the revised return filed under S.114(6) of the Income Tax Ordinance, 2001---Revised return filed by the taxpayer did not cover the quantum of discrepancies confronted by the Additional Commissioner, such discrepancies were enumerated by the Deputy Commissioner in his order---Despite service of several notices to taxpayer, no compliance was made by the taxpayer---Deputy Commissioner had the prerogative to reject the revised return in circumstances.

(b) Income Tax---

----Estimation of sales---Fine rice---Relief by reducing the estimate sale---Sufficient relief was granted by reducing/decreasing the estimate sales price of fine rice and broken rice whereby the First Appellate Authority had reduced/curtailed the fair price of rice from Rs.15 to Rs.12 as against declared rate of Rs.11.75 per kg and in respect of broken rice reduced the same from Rs.11 per kg to Rs.9.50 as against declared price of Rs.9.25 per kg.

(c) Income Tax---

----Profit & loss expenses---Diesel Oil expenses---Disallowance of--Sufficient relief was granted by the First Appellate Authority to the taxpayer by reducing the same from 20% to 5%---Order of First Appellate Authority was just and proper and did not require any interference.

(d) Income Tax---

----Profit & loss expenses---Disallowance out of profit and loss expenses---Disallowance estimated on the higher side was reduced to 10% of the amount claimed by the Appellate Tribunal.

None for Appellant.

None for Respondent.

Date of hearing: 14th June, 2011.

2011 P T D (Trib.) 2712

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member

C.I.R., ZON$-II, R.T.O., KARACHI

Versus

Messrs H.R. COTTON INDUSTRIES, KARACHI

S.T.A. No.43/K of 2011, decided on 26th May, 2011.

Sales Tax Act (VII of 1990)---

----S. 7---Special Procedure for Collection and Payment of Sales Tax (Electric Power) Rules, 2000 R. 7(2) (S.R.O. 124(1)/2000 dated 15-3-2000)---Determination of tax liability---Adjustment of input tax of electricity bills---Disallowance of---Department contended that electricity bills were not in the name of registered person, the Adjudicating Officer rightly disallowed the claim of adjustment input tax and that First Appellate Authority was not justified in ordering to allow the credit of input tax on utility bills---Validity---Input tax paid at an earlier stage was deductible from the tax liability arising from the payment of output tax, and S.7 of the Sales Tax Act, 1990 supported the point of view---Record showed that the taxpayer had paid input tax irrespective of the fact whether the bills were in his name or not---Evidence established that the fact of payment of input tax and the same was refundable to the taxpayer from his output tax---No illegality or irregularity was found in the order of First Appellate Authority---Appeal of the department was rejected by the Appellate Tribunal.

Gulz Riaz Raza, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 24th May, 2011.

2011 P T D (Trib.) 2758

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member

Messrs RAKHSHANI BUILDERS, QUETTA

Versus

CIR (APPEALS), HYDERABAD

S.T.A. No.60/Q of 2010, decided on 9th August, 2011.

Income Tax Ordinance (XLIX of 2001)---

----S.127---Appeal to the Commissioner (appeals)---Limitation--Condonation of delay---Pursuance of case before Ombudsman and courts of competent jurisdiction---Request was made to condone the delay on the ground that the case was legitimately persuaded before the Ombudsman and subsequently before the courts of competent jurisdiction---First Appellate Authority did not agree with the taxpayer and rejected the appeal being time barred---Validity---Applicant had filed an application for condonation of delay by stating that he had been legitimately following his -case before the courts of competent jurisdiction---Where a person had been pursuing his case in different forums believing that his action was within the framework of law, he became entitled for condonation of delay when these proceedings were irregular or lacked jurisdiction---Applicant had been following his case and pursuing remedies as provided under different circumstances---Taxpayer had genuine cause for getting condonation of delay by filing appeal---Keeping in view the long line of adjudication before Ombudsman and believing the intention of the appellant that he had been genuinely contesting his case as being aggrieved from the impugned order, request for condonation of delay was allowed and application was treated to be in time--Order of First Appellate Authority was set aside and the case was remanded to the First Appellate Authority with the direction that the appeal be heard on merits and be decided in accordance with law.

Kamal Hassan Siddiqui for Appellant.

Muhammad Ilyas for Respondent.

Date of hearing: 27th July, 2011.

2011 P T D (Trib.) 2770

[Inland Revenue Appellate Tribunal, Peshawar]

Before Javid Iqbal, Judicial Member

Messrs PREMIER SUGAR MILLS & DISTILLERY CO. LTD., MARDAN

Versus

ASSISTANT COLLECTOR (ADJUDICATION), PESHAWAR and another

S.T.As. Nos.449/PB of 2008 and 198/ATIR of 2009, decided on 23rd May, 2011.

(a) Sales Tax Act (VII of 1990)---

----S.7---Determination of tax liability---Adjustment of input tax on gas bills---Disallowance of---Validity---Certificate had been issued by the competent authority about the gas bills indicating the amount of input tax as claimed by the registered person---Input adjustment claimed by the registered person had been found correct in view of gas bills---Disallowance of claim by the department was unjustified---Department was directed to allow adjustment of input tax as per claim of the registered person.

(b) Federal Excise Act (VII of 2005)---

----S.3---Duties specified in the First Schedule to be levied---Beat sugar manufactured prior to July, 2007--Levy of special federal excise duty @ 1%---Validity-On examination of monthly performance statement, it had been seen that for the period ending on June, 2007 the quantity 413 MT sugar beat had been declared which as per contention of the taxpayer was not raw sugar, but beat sugar manufactured prior to July, 2007---Statement of the period, starting from 24-11-2007 and ending on 11-3-2008 showed the factum of beat sugar as 413 MT---Beat sugar was not raw sugar---Beat sugar manufactured prior to July, 2007 was not liable to special federal excise duty at 1%---Department had wrongly charged the special federal excise duty which was deleted by the Appellate Tribunal---Penalty and additional surcharge being consequential also stand deleted.

Danish Ali Qazi for Appellants.

Shad Muhammad, DR and Shuaib Sultan, IRAO for Respondents.

Date of hearing: 18th May, 2011.

2011 P T D (Trib.) 2772

[Appellate Tribunal Inland Revenues, Islamabad Bench]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member

Messrs DAWOOD CAPITAL MANAGEMENT LIMITED, KARACHI

Versus

ADDITIONAL COMMISSIONER INLAND REVENUE-D, LTU, KARACHI

I.T.A. No.471/KB of 2011, decided on 25th June, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----S.21---Deductions not allowed---Disallowance of financial charges--Taxpayer contended that disallowance of the financial charges would amount to double taxation and the such ground was not adjudicated by the First Appellate Authority---Validity---Disallowance of lease rental was confirmed on the ground that the payment was not made to an approved Modarba and further disallowance of financial charges related to lease rentals was remanded to the First Appellate Authority for passing judicious and speaking order as the ground relating to financial charges was duly taken by the taxpayer before the First Appellate Authority which had not been adjudicated by him---Charges in question suffered incidence of tax twice, First Appellate Authority should pass the order keeping in view the assertion made by the taxpayer as well as keeping in view the relevant provisions of law regarding expense incurred by the taxpayer/assessee to an approved Modarba.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 67---Income Tax Rules, 2002, R.13---Apportionment of deductions---Allocation of expenses between exempt income and normal income---Taxpayer contended that no expenses were incurred on earning exempt income, therefore, the question of allocation of expenses between exempt income and normal income did not arise---Validity---No income could be earned without incurring any expenses---Any expense attributable to an activity which generated income from business or capital gain were required to be allocated accordingly on proportionate basis---Treatment meted out by the Taxation Officer being in accordance with the provisions of S.67 of the Income Tax Ordinance, 2001 read with R.13 of the Income Tax Rules, 2002 and its confirmation by the First Appellate Authority was confirmed by the Appellate Tribunal.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.122(5A)---Amendment of assessment---Opportunity of being heard---Record revealed that several opportunities were provided to the taxpayer/assessee to appear before Additional Commissioner but each time he sought adjournment---Several adjournments were granted to taxpayer---Several opportunities were provided to the taxpayer and the taxpayer had also furnished his explanation---Assertion of the taxpayer, in circumstances, that no opportunity was provided to the taxpayer was devoid of any merit and the taxpayer himself had furnished the reply which was examined and incorporated in the order---Additional Commissioner was fully justified in passing ex parte order in circumstances---Grounds pertaining to confirmation of proceedings under S.122(5A) of the Income Tax Ordinance, 2001 were held to be within the parameters of law and no interference was required to be made with the order of First , Appellate Authority.

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 5 & 1st Sched., Part-I, Div-III---Public limitation company---Tax on dividend---Taxation of dividend income---Tax on dividend income was levied @ 35% under Normal Tax Regime rather than @ 5% under the Final Tax Regime which was applicable to corporate taxpayer in the tax year under reference---Validity---Taxpayer was a public limited company and the rate applicable was 5% of the gross amount of the dividend received by the taxpayer---Orders of the officers below were vacated by Appellate Tribunal and the Additional Commissioner was directed to levy tax @ 5% on dividend received by the taxpayer.

(e) Administration of justice---

----Courts and other adjudicating forums to decide the issue before them in accordance with law--Courts and the adjudicating forums are not relieved of their duties on account of an act or omission of a litigant or a lawyer---Courts are required to do justice though the heaven may fall.

Arshad Mehmood, FCA for Appellant.

Shafqat Hussain Kehar, D.R. for Respondent.

Date of hearing: 18th June, 2011.

2011 P T D (Trib.) 2788

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Sohail Afzal, Accountant Member

Messrs MODEL STEEL ENTERPRISES (PVT.) LTD., LAHORE

Versus

COLLECTOR OF CUSTOMS, CENTRAL EXCISE AND SALES TAX (ADJUDICATION), LAHORE

S.T.A. No.282/LB of 2009, decided on 22nd February, 2011.

Sales Tax Act (VII of 1990)---

----Ss.3, 6, 7, 11(2)(4), 22, 23, 26, 33, 36 & 46---S.R.O. 501(7)/94 dated 9-6-1994---S.R.O. 753(1)/98 dated 1-7-1998---Scope of tax--Concessionary rates of duty---Inquiry report---Affidavit---Manufacturing of agricultural implements---Certificate issued for import of raw material---Raw material imported on payment of concessionary rates of duty---Raw material was utilized in manufacturing agricultural implements (plough blades etc.) and supplied to various dealers to different cities---Registered person applied for consumption certificates on consumption of raw material---Instead of issuance of such certificate, contravention report was prepared alleging that the registered person in lieu of manufacturing agricultural implements sold the raw material in the local market and misused the concession/facility---In the inquiry report it was observed that " all the buyers submitted the documents regarding purchase of agricultural implements (cultivator plough) from the registered person and also admitted that affidavits had been signed by them and they produced the original National Identity Cards to prove the genuineness of their affidavits and identity card; however, they failed to produce any documentary evidence in support of their purchases and everybody stated that he had no record and also stated that he was unable to maintain record because of the reason that he was illiterate and did not know how to maintain the record"---Collector (adjudication) remarked in his order that" the report of the departmental representative clearly showed that the buyers failed to render any documentary evidence regarding purchases from the registered person; affidavits submitted by the buyers that they had no record and were unable to maintain record because they were illiterate also seemed to be hypothetical on the ground that it totally differed from those statements which were previously endorsed to the department and statements in the affidavit that they had purchased plough blades from the registered person were totally baseless because their employees previously categorically stated that they had not made any such purchases and all affidavits provided were an afterthought and had been made with the connivance of the registered person; and order of the adjudicating officer levying sales tax, additional tax and penalties was upheld being not illegal"---Validity---Collector (adjudication) issued summons to all the purchasers and during the cross-examination all the purchasers admitted/stated in their statements that they knew the registered persons who were manufacturing plough blades and they had purchased the blades from the said company at the relevant time---All the purchasers admitted such facts through the affidavits and also produced their original identity cards during the court proceedings---When everything had been established in favour of the registered person, why the department intended to drag the registered person into another chain of litigation, after recording all the evidence why the Collector (Adjudication) ignored the factual as well as legal facts of the case---Both the authorities had initiated the proceedings against the registered person on the basis of surmises and conjunctures which did not have any legal consequences in the eyes of law---Orders of the authorities below were vacated by the Appellate Tribunal being void, illegal and ab initio and, were set aside and directed the department to waive off the tax demand as well as the further tax and penalties imposed therein.

Mian Abdul Ghaffar for Appellant.

Sahibzada Umer Riaz, D.R. for Respondent.

Date of hearing: 20th October, 2010.

2011 P T D (Trib.) 2809

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Muhammad Jamil Raza Zaidi, Judicial Member

C.I.R., ZONE-II, L.T.U., KARACHI

Versus

Messrs NAQSHBANDI INDUSTRIES LTD., KARACHI

I.T.A. No.332/KB of 2011, decided on 14th June, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.56 & 22(8)(b)---Setting off of losses---Sale of assets---Interest income---Setting off of loss on sale of assets in local market against interest income---First Appellate Authority allowed the setting off of business loss arising from sale of assets in local market against interest income---Department contended that taxpayer declared export receipts and tax deducted on exports was final discharge of tax liability; that in addition to exports, taxpayer suffered loss on disposal of assets in local market and the taxpayer had interest income and loss on sale of fixed assets was claimed as an expense against interest income; that in the past also, the entire income was from exports and interest income was assessed under S.39 of the Income Tax Ordinance, 2001 being income from other sources and only expenses allowable under S.40 of the Income Tax Ordinance, 2001 could be allowed as expense and if there was no normal business revenue, business loss could not be determined---Validity---Taxpayer had sold fixed assets in local market and suffered loss and there was no controversy about the factum or the amount of loss---Taxpayer also had interest income---Assessing Authority was of the opinion that loss on sale of fixed assets in local market could not be computed as there was no business revenue stream and loss ° should form part of export---Such stance of Assessing Authority was incorrect and contrary to law---Where there was no business revenue during the year, yet Taxation Officer was obliged to determine and compute loss under the head of "business income" due to expenses incurred---Fixed assets were sold in local market and loss was computed as per provisions of S. 22(8)(6) of the Income Tax Ordinance, 2001 by the taxpayer and was business loss and did not constitute exports as observed by the Assessing Authority---Once the loss was determined as per S.22(8)(b) of the Income Tax Ordinance, 2001 it was a "business loss" and business loss could be set off against income assessed under any head of income---Taxpayer correctly set off interest income against business loss on sale of fixed assets in local market---Order of First Appellate Authority was not interfered with by the Appellate Tribunal as the same had been passed in accordance with law.

1996 PTD 292; 2011 PTD (Trib.) 286 and 2010 PTD 1809 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.56 & 11-Setting off of loss---Income/loss had to be computed under different heads of income as specified in S.11 of the Income Tax Ordinance, 2001---Where there was no business revenue during the year, yet Taxation Officer was obliged to determine and compute loss under the head of business income due to expenses incurred and this business loss so determined had to be set off during the year as provided under S.56 of the Income Tax Ordinance, 2001 against income assessable under any head of income.

1996 PTD 292 and 2011 PTD (Trib.) 286 rel.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.56---Setting off of losses---Loss under one head of income is required to be set off against profit in other head of income and S.56 of the Income Tax Ordinance, 2001 was clear in this respect and in conformity with settled law.

2010 PTD 1809 rel.

Asim Iftikhar, D.R. for Appellant.

Abid Shaban for Respondent.

Date of hearing: 21st May, 2011.

2011 P T D (Trib.) 2822

[Inland Revenue Appellate Tribunal of Pakistan]

Before Syed Nadeem Saqlain, Jawaid Masood Tahir Bhatti, Judicial Members and

Abdul Rauf, Accountant Member

Messrs MEHR DASTGIR TEXTILE MILLS LTD., MULTAN

Versus

COLLECTOR SALES TAX, MULTAN

S.T.A. No.112/LB of 2009, decided on 19th July, 2010.

Per Syed Nadeem Saqlain Judicial Member; Jawaid Masood Tahir Bhatti, Judicial Member, agreeing--

(a) Sales Tax Act (VII of 1990)---

----Ss. 7, 26 & 36---Determination of tax liability-Return--Adjustment of arrears against carry forward of refundable amount--Department contended that such adjustment was not admissible because arrears should have been paid in cash through sales tax payment challans---Validity---Arrears had been adjusted against refundable amount lying with the department---Such factum had not been denied by the department that the amount in question was not refundable to the registered person---When S. 7 of the Sales Tax Act, 1990 permits the registered person to claim input tax on purchases in the monthly sales tax returns, he could not be denied the adjustment or carry forward refundable amount against arrears---By no stretch of imagination carry forward of such amount could be termed to be evasion of tax as contemplated under S.36 of the Sales Tax Act, 1990---Registered person had rightly adjusted the arrears against his carried forward refund---Issuance of show-cause notice for recovery of such amount in terms of S.36 of the Sales Tax Act, 1990 was illegal and unsustainable in the eyes of law---Findings of the Adjudicating authority as well as that of First Appellate Authority were set aside by the Appellate Tribunal.

2003 PTD 589 (H.C. Kar.) rel.

(b) Sales Tax Act (VII of 1990)---

----Ss. 7, 3' & 73---Determination of tax liability---Purchases from wholesalers against sales tax invoices, containing registration numbers and input tax was claimed---Supply was made to unregistered persons when the goods became zero-rated---Suppliers were blacklisted, input tax claimed on purchases was declared to be inadmissible which resulted into short payment of sales tax---Validity---Admittedly, registered person was a bona fide purchaser from suppliers and payments against such purchases were made in accordance with provision of S.73 of the Sales Tax Act, 1990-Sales tax was paid by the registered person following provision. contained in S.3 of the Sales Tax Act, 1990 and input tax was claimed as envisaged in S.7 of the Sales Tax Act, 1990---Period involved was May & June 2005 when the suppliers were actually engaged in business and had active registered status---Suppliers were declared as blacklisted in the year 2006 after more than one year---Such order could not be operated retrospectively--Input tax had been claimed exactly as per provision of S.7 read with Ss.73 and 8 of the Sales Tax Act, 1990 and the suppliers who had been subsequently declared as blacklisted were having valid legal status, the claim of such input tax -could not be termed against law and the same could not be held inadmissible---Since registered person had complied with the provision of S.73 of the Sales Tax Act, 1990 and also the fact that suppliers in question were alive with legal status the demand of tax from the registered person which was to be paid by the supplier was uncalled for---No recovery could be enforced or input tax could be held inadmissible on the basis of findings of the audit or show-cause notice based on presumptions.

Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 and Kashmir Foods (Pvt.) Ltd. v. C.B.R. (sic) rel.

(c) Sales Tax Act (VII of 1990)---

----S.7---Determination of tax liability---Refund---Arrears---Adjustment of refund---Registered person was required under law to deposit the arrears despite the fact that refund due was payable in his favour---Adjustment or carry forward could be made after consulting a senior officer of the department i.e. Cost Accountant.

(d) Administration of justice---

----Action which was not expressly forbidden by any provision of law was admissible in the eye of law.

(e) Interpretation of statutes---

----Fiscal statute---No room for any intendment, inference or presump?tions.

2003 PTD 589 (H.C. Kar.) rel.

(f) Notification/Executive Order----

----Retrospective effect---Notifications/executive order which is detrimental or prejudicial to the interest of a person could not operate retrospectively rather a beneficial notification/executive order issued by an executive authority could be given retrospective effect.

Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 rel.

(g) Administration of justice---

----Past and closed transaction could not be reopened especially when a beneficiary has no role in the irregularity committed by the other party.

Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 and Kashmir Foods (Pvt.) Ltd. v. C.B.R. rel.

(h) Sales Tax Act (VII of 1990)---

----S.23---Tax invoices---Supplier denied making any supply to the registered person---Registered person contended that original invoices duly signed by the authorized officer were issued by the said supplier in accordance with S.23 of the Sales Tax Act, 1990 and the same were produced before the departmental authorities and sales tax returns for the relevant period were also filed by the said supplier---Held, in view of such fact the registered person rightly claimed input tax paid to the supplier.

(i) Sales Tax Act (VII of 1990)---

----S.7---Determination of tax liability---Claim of input tax---Purchases from different registered wholesalers/suppliers sold in different manners---Some material was used for manufacturing and the resultant finished goods were sold and remaining material was sold in the open market @ 0% sales tax and claimed input as envisaged under the sales tax law---Rejection of claim of input tax---Registered person contended that purchases had not been doubted by the department and without violating any provision of law, the registered person was well within its domain to watch its business interest and expediency warranted that if under the government's policy such transactions had been made zero rated, there was no contravention of any law prevalent at the time---Validity---Material purchased was partially used for manufacturing and partially sold in the local market @ 0% sales tax; it was purely the outlook of the registered person to conduct his business affairs in the manner he likes, provided he did not transgress the boundaries of law--No illegality was committed by the registered person and the department proceeded on the basis of wrong proposition---Show-cause notice had been issued without appreciating the facts of the case in its entirety which was not sustainable in the eyes of law---Orders made on the basis of such show-cause notice were set aside by Appellate Tribunal.

Per Abdul Rauf, Accountant Member [Minority view].

Per Jawaid Masood Tahir Bhatti Judicial Member, agreeing with Syed Nadeem Saqlain, Judicial Member. [Refree Member]

(j) Sales Tax Act (VII of 1990)---

---Ss. 7, &36---Determination of tax liability---Adjustment of arrears against outstanding refund---Registered person had every right to adjust amount of arrears against the outstanding refund---Allowing adjustment of carried forward of sales tax refund against outstanding tax stood settled.

(k) Sales Tax Act (VII of 1990)---

----Ss. 8(1)(ca) & 73---Determination of tax liability---Suppliers were blacklisted after about one year from the date of purchases---Rejection of input tax---Validity---Without establishing admissibility of input tax, registered person was not entitled to claim its credit---Facts emerged in the case vividly spoke that registered person had claimed credit of input tax after establishing his claim---Show-cause notice had alleged that suppliers had been black listed on 13.10-2006 but the fact remained that purchases were made by the registered person in the month of May and June, 2005---Exercise of verifying antecedents of suppliers had been made by the department after lapse of more than one year from the date of purchases by the registered person---Registered person could not be held responsible for the acts done by the suppliers, because no one could be made to suffer for the acts done by the others in view of doctrine "actus curiae neminen gravabit"---Suppliers were actively engaged in business in the month of May and June 2005 and their status of registration was also active at the relevant time and they were declared to be black listed in subsequent period i.e. 2006---Order of blacklisting the suppliers could not be stretched retrospectively.

Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 rel.

(l) Sales Tax Act (VII of 1990)---

----Ss.7, 8(1), 9 & 73---Determination of tax liability---Adjustment of refundable amount---Sum payable was adjusted against the refundable amount which was in accordance with S.7 of the Sales Tax Act, 1990---Section 7 of the Sales Tax Act, 1990 entitled the registered person to deduct input tax paid or payable during the tax period for the purposes of taxable supplies made, or to be made, by him from the out put tax that was due from him in respect of that tax period and to make such other adjustments as were specified in S.9 of the Sales Tax Act, 1990---Not an iota of evidence had been brought on record by the department to hold that provisions of S.7 read with Ss.73 and 8(1) of the Sales Tax Act, 1990 had been violated by registered person while claiming input tax---Entire edifice built by the department on conjectures and surmises only to disallow the refund and to declare the input tax was inadmissible.

(m) Sales Tax Act (VII of 1990)---

----Ss.8(1)(ca), 7, 8, 21(3) & 73---Tax credit not allowed---Payments through cross cheques---Non payment of tax by the suppliers---Claim of input tax credit---Disallowance of---Validity---Section 8(1)(ca) of the Sales Tax Act, 1990 provided that a registered person shall not be entitled to reclaim or deduct input tax paid on the goods in respect of which sales tax had not been deposited in the government treasury by the respective suppliers---Said section was apparently detrimental to the interest of the purchaser who with bona fide intentions had made purchases but had no force of law to poke his nose in the business affairs of the suppliers; in order to protect the interest of the purchaser, the legislature had inserted a subsection (3) in S.21 of the Sales Tax Act, 1990 which provided that unless the registered buyer fulfilled his obligation under S.73 of the Sales Tax Act, 1990, the invoices issued by such person (supplier) shall not be entertained for the purposes of sales tax refund or input tax credit, and once such person (supplier) was black listed, the refund or input tax credit claimed against the invoices issued by him, whether prior or after such blacklisting, shall be rejected during the period of suspension of registration---Self speaking order shall also be passed in this regard which had been made appealable and an opportunity of being heard shall be afforded to such person---Subsection (3) of S.21 of the Sales Tax Act, 1990 being a beneficial legislation would operate retrospectively---Registered person having fulfilled the requirements of S.73 of the Sales Tax Act, 1990, as was evident from the contents of such show-cause, provision of S.8(1)(ca) read with S.21(3) of the Sales Tax Act, 1990 were not attracted in the case---Refund was claimed as per provisions of S.7 read with S. 73 and S.8 of the Sales Tax Act, 1990 and supplier who had been subsequently blacklisted were having valid status in the past, registered person was fully entitled to claim the credit of input tax being admissible---Issuance of show-cause was not sustainable in law and order was set aside by the Appellate Tribunal.

Shoaib Ahmad Sh. for Appellant.

Asim Halim, D.R. for Respondent.

Date of hearing: 22nd June, 2010.

2011 P T D 876

[Islamabad High Court]

Before Iqbal Hameed-ur-Rehman, C.J. and Riaz Ahmed Khan, J

Messrs AHMED ENTERPRISES, ISLAMABAD

Versus

COMMISSIONER OF TAX (LEGAL) LARGE TAXPAYER UNIT, ISLAMABAD and another

T.R. No.1 of 2011, decided on 2nd February, 2011.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5), 133 & 177---Audit and amendment of assessment---Reference to High Court---Assessee who had business of construction and sales of buildings, filed return for the relevant year and his case was selected for audit under S.177 of the Income Tax Ordinance, 2001---Income Tax Officer resorted to enquire into the income of assessee and passed order regarding assessed income of the assessee---Income Tax Officer made amendment in assessment under S.122(5) of Income Tax Ordinance, 2001, which amendment was upheld up to the Appellate Tribunal---Validity---Assessee had not produced any evidence, like statement of bank accounts, sale deeds of sold buildings etc. during the audit---Audit Officer had no other alternative, but to enquire into the income of the assessee by other means---Statements of two persons, who had purchased two offices from the assessee, were recorded and they produced sale agreements---Only legal issue and not factual controversy could be made the basis of a Reference before High Court---In, the present case, no legal lacuna or infirmity had been pointed out---Factual controversy had already been resolved by the Appellate Tribunal---High Court, in circumstances, could not enter into the factual controversy while deciding Reference application---Order accordingly.

1993 SCMR 1108; 1988 PTD 324 and 1997 SCMR 1256 ref.

Hafiz Muhammad Idris for Petitioner.

Ayaz Shoukat for Respondents.

Date of hearing: 20th January, 2011.

2011 PTD 1007

[Islamabad High Court]

Before Riaz Ahmed Khan, J

Messrs HOME LIFE through Managing Partner and 10 others

Versus

NATIONAL TARIFF COMMISSION through Chairman, Islamabad

Writ Petition No.2000 of 2010, decided on 1st February, 2011.

Anti-Dumping Duties Ordinance (LXV of 2000)---

----Ss. 11 & 52---National, Tariff Commission Act (VI of 1990), S.11---Constitution of Pakistan, Art. 199---Constitution petition---Imposition of Anti-Dumping Duty---Petitioners who imported tiles, had challenged proceedings whereby Anti-Dumping Duty was imposed by authorities/ Commission on the imported goods---Earlier constitutional petition filed by the petitioners was dismissed and petitioners had approached the Supreme Court---Supreme Court setting aside order passed by High Court, remanded case to the authorities/Commission to proceed afresh on the claim by the petitioners---Petitioners had filed present constitutional petition in which it was claimed that as Supreme Court had declared order of the authorities/Commission as void and coram non judice, amount paid by the petitioner as Anti-Dumping Duty was liable to be refunded back to the petitioners---Validity---Held, Supreme Court had not finally decided the case, but had remanded the case on legal ground to the authorities/Commission and Commission had been given authority to look into the matter regarding imposition of levy of Anti-Dumping Duty---Basic object of Anti-Dumping Duty was that the importers could not sell the articles on the price less than the price prevailing in the country wherefrom said articles had been imported---Such was the exclusive prerogative of the National Tariff Commission to allow or refuse the refund---Authorities/Commission had to record the evidence and pass an order on the basis of evidence---High Court, under constitutional jurisdiction, could not enter into the factual controversy or investigate the claim of the petitioners--Basic" claim of the petitioners was still pending before the Commission; and the Supreme Court had not passed any order regarding the merits of the case---Since the case was remanded to the Commission, petitioners could raise their objections before the Commission---High Court could not enter into the exercise of calculating the Anti-Dumping Duty as said matter was within the power of National Tariff Commission---Petitioners, would be at liberty to raise the claim regarding refund of duty paid by then: before authorities/Commission.

Mian Muhammad Athar and Shafqat Mahmood Chohan for Petitioners.

Salman Farooq and Shafi Muhammad Chandio, Deputy Attorney General for Respondents

Date of hearing: 27th January, 2011.

2011 PTD 39

[Karachi High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

WORLDCALL TELECOM LIMITED through Chief Operating Officer

Versus

FEDERATION OF PAKISTAN through Secretary, (Revenue Division) Islamabad and 3 others

Constitutional Petition No.D-1975 and Miscellaneous No. 7976 of 2010, decided on 25th August, 2010.

Customs Act (IV of 1969)---

----S. 59---S. R. O. 575(I)/2006, dated 5-6-2006, Sr. No.16---Constitution of Pakistan (1973), Art.199---Constitutional petition--Exemption, claim for---Petitioner who was importer of communication equipment, claimed exemption on his consignment under Serial No.16 of notification dated 5-6-2006---Federal Government, under said notification had exempted plant, machinery and equipment and apparatus, including capital goods from so much of the customs duty specified in the First Schedule in Column No.4 of notification---Counsel for the petitioner had stated that communication equipment imported by the petitioner had been included in said Schedule---Serial No.16 of the impugned notification did not place any restriction on the exemption provided to machinery, equipment and other capital goods for service sectors---Letter, wherein the exemption was refused by the authorities, for the reason that it was subscriber equipment, could not be sustained which was not based on proper reading of notification, but conditions which had not been prescribed in the said notification, had been read into the said notification by the authorities---No Authority was entitled to put words in a notification, which were not there---Subject equipment imported by the petitioner, fell within the ambit of Serial No.16 of the notification---Petitioner, in circumstances fully qualified for the exemption granted under the Notification S.R.O. 575(I)/2006, dated 5-6-2006.

Mian Abdul Ghaffar for Petitioner.

Zain A. Jatoi for Respondents.

Mian Khan Malik Deputy Attorney-General for the Federation of Pakistan.

2011 PTD 145

[Karachi]

Before Munib Akhtar, Muhammad Athar Saeed and Aqeel Ahmed Abbasi, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI

Versus

HUMAYUN ELLAHI SHAIKH

W.T.As. Nos.440, 215, 216, 392, 437 to 439, 441 to 450, 484, 560, 575 to 578, 691 to 696, 756, 801 to 806, 808, 789 of 1999, 47 to 49 of 2000, 66 of 2011, 88, 106 of 2002 and 87 of 2008, decided on 26th October, 2010.

(a) Interpretation of statutes---

----Nothing can be read in the statute, nor any word can be added to it while interpreting the same.

(b) Interpretation of statutes---

----Intent of legislature-Scope---Principal source of interpretation is the intent of legislature but once the court has discovered the intention of legislature by reviewing the explanation given by legislature for incorporating any statute then court has to give effect to that interpretation.

(c) Wealth Tax Act (XV of 1963)---

----Ss. 16(3), 27(1) & Sched. II, Clauses 7(i), (ii)---Central Board of Revenue Circular No.30(2) Tp-iii/90, dated 13-11-1990---Central Board of Revenue Circular No. 8/42-DWT/84, dated 30-6-1985---Exemption, claiming of---Onus to prove---Foreign remittance-Subsequent conversions---Contention of authorities was that only assets created on first conversion of foreign exchange repatriated through banking channels was entitled to exemption under clause 7(ii) of Second Schedule to Wealth Tax Act, 1963, and any further conversions were not exempted---Validity---Exemption had to be strictly construed and onus was on the person claiming the exemption to establish that he was entitled to such exemption and whenever two interpretations of an exemption were possible the interpretation which was against the grant of exemption had to be given effect---Only one interpretation of clause 7 (ii) of Second Schedule to Wealth Tax Act, 1963, was possible that exemption in respect of assets created out of foreign remittance was applicable not only to first conversion of asset but also to subsequent conversion so long as source of fund remained foreign remittance received through banking channels during the period as provided under the clause, to the extent of amount received through foreign remittance---Exemption was also available in respect of subsequent conversions of original asset created from foreign remittance received through banking channels---Appeal was dismissed in circumstances.

Iqbal Haji Ali Muhammad v. Inspecting Additional Commissioner of Income/Wealth Tax and others 2006 CLC 1000 and Commissioner of Income Tax/Wealth Tax Companies Zone-I, Lahore v. Zoraiz Lashari 2005 PTD 2064 distinguished.

197 (76) Tax 76 (Trib.); 2005 PTD 108; CIT v. Malik Muhammad Ashique 2007 PTD 889 and Noor Hussain v. CIT PLD 1964 Dhaka 373 ref.

Javed Farooqui for Appellant.

Ms. Lubna Pervez, Abdul Rahim Lakhani and Iqbal Salman Pasha for Respondents.

2011 PTD 235

[Karachi High Court]

Before Munib Akhtar and Muhammad Athar Saeed, JJ

SUS MOTORS (PVT.) LTD., KARACHI

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division/Chairman, Islamabad and 2 others

C.P. No. D-1285 and C.M.A. No. 6260 of 2008, decided on 12th November, 2010.

(a) Customs Act (IV of 1969)---

----Ss. 79, 80 & 81---Provisional assessment and provisional determination---Scope---Scheme of Customs Act, 1969, is that there should be only one assessment of goods at any given time---Assessment (whether provisional or final) properly so called (stricto sensu) is ascertainment or fixing of amount of duty or tax payable, it would, therefore, wrong in principle for two or more assessments in respect of same goods to be simultaneously in the field---Assessment in field may be set aside ,and replaced by another assessment but until that is done in accordance with law, it continues to be the assessment of goods and another assessment cannot and ought not to be piled on top of it---If and when S.81 of Customs Act, 1969, is invoked, importer's self-assessment is already in filed and purpose of proceedings thereunder is to ascertain whether that assessment is correct, however, until such exercise is completed, it is the assessment---If in the meanwhile goods have to be provisionally released (which is another purpose of S. 81 of Customs Act, 1969), it would be wrong in principle to pile another assessment on top of importer's self-assessment, which would be the result if there were to be a provisional assessment stricto sensu--Provisional determination to be made in terns of S. 81(1) of Customs Act, 1969, cannot be equated with a "provisional assessment"---Provisional assessment can be regarded as a reassessment in miniature and if properly carried out can, therefore, lead to computation of "additional amount" that is closest to "final determination" that would result from re-assessment and would, therefore, the best safeguard against interest of the State, if importer's self-assessment is found to be incorrect; it is for such reason and in such sense that proviso to S.81(1) of Customs Act, 1969, uses provisional assessment to provide basis for determining additional amount.

(b) Customs Act (IV of 1969)---

----S. 81(1), first proviso---Provisional assessment---Scope---Provisional assessment in first proviso to S. 81 (1) of Customs Act, 1969, merely provides statutory guideline ("the basis") for determining "additional amount" and that is all.

(c) Customs Act (IV of 1969)---

----Ss.32, 79, 80 & 81 (1) (2), proviso--Constitution of Pakistan, Art. 199--- Constitutional petition---Provisional release--- Re-assessment--- Limitation---Extension of time--- Principle--- Words "circumstances of exceptional nature "---Scope---Vehic'es imported were provisionally released on the basis of provisional assessment and after lapse of nine months, authorities issued valuation advice and intended to initiate proceedings against petitioner under S. 32 of Customs Act, 1969---Validity---Purpose behind requiring Collector to record exceptional circumstances which warranted extension of time was to ensure that Collector had applied his mind to relevant facts of each case and made his decision on a proper consideration of the same---Omnibus request, assented to in a mechanical manner was no compliance with the requirements of proviso to S. 81(2) of Customs Act, 1969---Stipulated period was not extended by the authorities, as required by law, with the result that the period lapsed on the expiry of nine months---Additional amount computed on the basis of "provisional assessment" in terms of first proviso to S. 81(1) of Customs Act, 1969, was not included in "provisional determination" on the basis of which goods were provisionally released---If final determination was not completed within stipulated period, then provisional determination would have become final and the same did not include "additional amount"---Stipulated period was not extended in terms of proviso to S.81(2) of Customs Act, 1969, and hence expired at the end of nine months---No final determination was available within nine months, therefore, provisional determination became final---Petitioner having discharged its liability in terms of provisional determination, no other amount was payable by it, and no "additional" amount could be recovered front petitioner---Constitutional Petition was allowed accordingly.

Hassan Trading Company v. C.B.R. and others 2004 PTD 1979; Colgate Palmolive (Pakistan) Ltd. v. Federation of Pakistan 2004 PTD 2516; Collector of Customs v. H. M. Abdullah and others 2004 PTD 2993; Habib-ur-Rehman and Company v. Collector (Appraisement) and others 2005 PTD 69; Collector of Customs (Appraisement) and others v. Auto Mobile Corporation of Pakistan 2005 PTD 2116; Wall Master v. Collector of Customs and others 2005 PTD 2573; Dewan Farooque Motors Ltd. v. Customs Excise and Sales Tax Appellate Tribunal and others 2006 PTD 1276. Rehan Umar v. Collector of Customs and others 2006 PTD 909; Collector of Customs v. Pak Arab Refinery 2010 PTD 900; Sohrab Global Marketing (Pvt.) Ltd. v Deputy Collector of Customs 2005 PTD 67; Commissioner of Income Tax v. Asbestos Cement Industries Ltd. 1993 PTD 459; Bismillah and Co. and others v. Secretary, Ministry of Finance, GOP 2005 PTD 1942; Collector Sales Tax and Central Excise v. Al Hadi Industries (Pvt.) Ltd. 2002 PTD 2457; Noble (Pvt.) Ltd. v. Federal Board of Revenue and others 2009 PTD 844; Irshad Ahmad Shaikh v. The State 2000 SCMR 814; Khairpur Textile Mills Ltd. and others v. National Bank of Pakistan and another . 2003 CLC 326 and Iqbal Pahore v. The State 2004 YLR 2136 ref.

Khalid Jawed Khan for Petitioner.

Zain A. Jatoi along with Ilyas Ahsan (Departmental Representative) for Respondent No.2.

Raja Muhammad Iqbal for Respondent No.3.

Ms. Cookie Rawat, Standing Counsel.

2011 PTD 438

[Sindh High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

ABN AMRO BANK (ROYAL BANK OF SCOTLAND)

Versus

TAXATION OFFICER III, AUDIT DIVISION LARGE TAXPAYER UNIT, KARACHI and another

Income Tax Reference Application No. 1232 of 2008, decided on 2nd December, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 2(40), 11(6), 101(3) & 105---Pakistan Branch of a non-resident Banking company---Interest/profit on debt on money lent by or to Pakistan Branch to or by Head Office and other branches of such company located outside Pakistan, taxation of---Scope---Doctrine of mutuality would not and could not apply to a situation to which S.105(1)(a) of Income Tax Ordinance, 2001 attracted---Provisions of Ss.101(3) and 105 must be read together and consistently---Pakistan Branch was a permanent establishment in Pakistan of non-resident banking company---Pakistan Branch would be regarded as a distinct and separate person and while dealing with Head Office or other branches of its company located outside Pakistan would be regarded as doing business wholly independently---Business income of a non-resident person attributable directly or indirectly to permanent establishment in Pakistan would be regarded Pakistan-source income---Profit on debt paid to or payable by Pakistan Branch in respect of its dealings with Head Office' and other branches of non-resident banking company would be regarded its income and a deductible expense respectively---Principles.

Sharkey (Inspector of Taxes) v. Wernher (1956) AC 58; CIT v. The Lyallpur Cooperative Bank Ltd. 1959 PTD 639; (1983) 47 Tax 67(sic); (1996) 74 Tax 239(sic); PTCL 1996 St. 1045; National Westminster Bank PLC v. United States (2008) 512 F. 3d 1347 and National Westminster Bank PLC v. United States (1999) 44 Fed. Cl. 120 ref.

Dr. Ikramul Haq for Applicant.

Jawaid Farooqui for Respondents.

2011 PTD 476

[Sindh High Court]

Before Muhammad Ather Saeed and Munib Akhter, JJ

COMMISSIONER (LEGAL) INLAND REVENUE

Versus

E.N.I. PAKISTAN (M) LTD., KARACHI

I.T.Rs. Nos. 21 and 22 of 2010, decided on 23rd November, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 147 & 205---Corporate taxpayer---Liability to pay advance tax instead of filing estimate of tax---Scope---Words "any taxpayer" as used in S. 147(6) of Income Tax Ordinance, 2001 would include companies and "association of persons "---All taxpayers including corporate taxpayers liable to pay advance tax under S. 147(1) of Ordinance, 2001 could avail benefit of S. 147(6) thereof by filing estimate of tax payable for relevant tax year, if same was less than tax required to be paid by them---Principles.

(b) Interpretation of statutes---

----No word may be added in a statute and no word may be deleted therefrom.

Ali Mumtaz Shaikh for Applicant.

Ali Almani for Respondent.

2011 P T D 495

[Sindh High Court]

Before Muhammad Ather Saeed and Munib Akhtar, JJ

COLLECTOR OF CUSTOMS

Versus

Shaikh SHAKEEL AHMED

Customs Reference Applications Nos. 90 91 and 92 of 2009, decided on 23rd November, 2010.

Customs Act (IV of 1969)---

----Ss. 32, 79 (1) (b) & 196---Classification of goods---Pakistan Customs Tariff (PCT) Headings 4818.4010, 4818.4090---Applicability--Past departmental practice---Mis-declaration--- Baby diapers were imported and were cleared under PCT Heading 4818.4010 which Heading in fact pertained to diapers for patients---Plea raised by importer was that it was continuous departmental practice to clear diapers under PCT Heading 4818.4010---Validity---If there was past departmental practice which was being carried on wrong interpretation and in violation of law, then such practice had to be stopped and interpretation in accordance with law had to be given effect to---Baby diapers so imported were to be classified under PCT Heading 4818.4090, therefore, order of Tribunal holding that baby diapers were classifiable under PCT Heading 4818.4010 in accordance with past practice followed by department could not be sustained---Where wrong interpretation of a section was made and tax or duty had been short paid due to misconstruction or misinterpretation of relevant law, in good faith, such short fall could not be termed as mis-declaration and was not liable to be levy of penalty---Reference was disposed of accordingly.

Director, Directorate-General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. 2006 SCMR 129; Messrs P & G International, Lahore v. Assistant Collector of Customs, (Appraisement GR-II), Karachi and 3 others 2010 PTD 870; 2008 PTD 1475 and The Engineer-in-Chief Branch and another v. Jalaluddin PLD 1992 SC 207 ref.

Messrs Radaka Corporation and others v. Collector of Customs and another 1989 SCMR 353; Super Industries (Pvt.) Ltd., v. Central Board of Revenue and others 2002 PTD 955; Messrs Colgate Palmolive (Pakistan) Ltd. v. Federation of Pakistan and others 2004 PTD 2516 and Filters Pakistan (Pvt.) Ltd., v. Federal of Board of Revenue 2010 PTD 2036 distinguished.

Ghulam Hyder Shaikh for Applicant.

Junaid Ghaffar for Respondent.

2011 P T D 569

[Sindh High Court]

Before Muhammad Ather Saeed and Munib Akhter, JJ

AISHA STEEL MILLS LTD. Through Director, Karachi and others

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division/Chairman Federal Board of Revenue, Islamabad and others

C.Ps. Nos. D-2330 of 2008 and 308 of 2009, decided on 16th November, 2010.

(a) Customs Act (IV of 1969)---

----Ss. 19, 193 & 194-A---Constitution of Pakistan, Art.199---Imported goods claimed to be exempted from duty under the relevant S. R.O.---Orders of Federal Board of Revenue and Collectorate of Customs refusing to give claimed exemption---Constitutional petition---Maintainability---Remedy of appeal under Ss. 193 & 194-A of Customs Act, 1969 was not available against such orders, same being not appealable thereunder---Such petition involved important question of interpretation as to whether imported goods would or would not fall within provisions of relevant S.R.O.---Petition was maintainable in circumstances.

The Central Board of Revenue, Islamabad and others v. Sheikh Spinning Mills Ltd. Lahore and others 1999 PTD 2174; Talib Hussain and others v. Member, Board of Revenue and others 2003 SCMR 549; Messrs Gul Ahmed Textile Mills v. Collector of Customs (Appraisement), Custom House, Karachi and 2 others 1990 MLD 126 and The Commissioner of Income Tax v.. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 = 2009 PTD 1392 ref.

Noor Elahi and others v. Member, Board of Revenue and others 2003 SCMR 1045; M.A. Kareem Iqbal v. Presiding Officer, Banking Court No.III and 4 others 2003 CLD 1447; Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Noor Elahi and others v. Members, Board of Revenue and others 2003 SCMR 1045 and Khalid Mahmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881 distinguished.

(b) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Scope---High Court in its discretion would decide to exercise such remedy front case to case, based on facts and circumstances of each case.

(c) Customs Act (IV of 1969)---

----S. 19---S.R.O. 575(I)/2006 dated 5-6-2006---Constitution of Pakistan, Art. 199---Constitutional petition-Pre-fabricated buildings/sheds imported for setting up of new industry---Petitioner claimed such buildings/sheds to be exempt from levy of duty by virtue of S.R.O. 575(I)/2006, dated 5-6-2006---Refusal of Federal Board of Revenue to give claimed exemption---Validity---According to Sr. No. 34 of S.R.O. 575(I)/2006, exemption available to such buildings/sheds was in respect of medical sector, hotel, tourism, industries and wholesale and retail stores---According to preamble of S.R.O. 575(I)/2006, exemption provided thereunder was in respect of plant, machinery, equipments, apparatus including capital goods specified in column (2) of Sr. No. 34 of its Table, wherein such buildings/sheds were specified---Word "plant" would include real estate, lands and buildings occupied by a factory or mills---Imported consignment of pre-engineered/ prefabricated steel structure employing crane system quipped with top running crane system being integral component of industrial plants fell within definition of plant, equipment, machinery qualifying for exemption claimed under S.R.O. 575(I)/2006---High Court directed the Authority to provide claimed exemption to petitioner---Principles.

Collector of Customs (Appraisement) Karachi and others v. Fauji Fertilizer Co. Ltd. and others PLD 2005 SC 577 = 2005 PTD 2178); Messrs Moro Textile Mills Limited v. Central Board of Revenue 2007 PTD 60; Messrs Premier Machinery Works, Karachi and others v. Commissioner of Income Tax PLD 1993 SC 233; 19 Queen Bench 647; Scientific Engineering House (Pvt.) Ltd., v. Commissioner of Income Tax AIR 1986 SC 338; The Central Board of Revenue, Islamabad and others v. Sheikh Spinning Mills Limited 1999 PTD 2174; M.A. Kareem Iqbal v. Presiding Officer Banking Court No.III, and 4 others 2003 CLD 1447; Messrs Huffaz Seamless Pipe Ind. Ltd. v. Collector of Sales Tax, Hyderabad 2010 SCMR 707; Noor Elahi and others v. Member, Board of Revenue and others 2003 SCMR 1045; Muhammad Tufail v. The State 1999 SCMR 1981; Sohail Jute Mills Ltd. and others v. Federation of Pakistan PLD 1991 SC 329; Commissioner of Income Tax v. Messrs Eli Lilly Pakistan 2009 SCMR 1279 = 2009 PTD 1392 and Messrs Gul Ahmed Textile Mills Ltd. v. The Collector of Customs (Appraisement), Custom House, Karachi and 2 others 1990 MLD 126 ref.

D.G. Khan Cement Company Ltd. v. Deputy Collector of the Customs 2003 PTD 986 rel.

(d) Notification---

----Notification would be read as a whole in order to arrive at intent of the authority.

(e) Words and phrases---

----"Plant"---Connotation.

D.G. Khan Cement Company Ltd. v. Deputy Collector of Customs 2003 PTD 986 rel.

(f) Notification---

---Beneficial circulars and notifications would apply retrospectively to all pending matters.

Mansoorul Arfin for Petitioner (in C.P. No.D-308 of 2009).

Khalid Jawed Khan for Petitioner (in C.P. No.D-2330 of 2008).

Zain A. Jatoi and Ghulam Hyder Shaikh for Respondents No.3/Collector of Customs (in C.P. No.D-2330 of 2008).

Raja Muhammad Iqbal for Respondent No.3 (in C.P. No.D-308 of 2009).

S. Mohsin Imam for Respondent (in C.P. No.D-308 of 2009).

Ilyas Ehsan Representative of Collector of Customs.

2011 PTD 602

[Sindh High Court]

Before Muhammad Ather Saeed and Munib Akhtar, JJ

Messrs AMTEX LIMITED

Versus

CUSTOMS EXCISE AND SALES TAX APPELLATE TRIBUNAL and 4 others

Customs Reference Application No.41 of 2010, decided on 7th December, 2010.

Customs Act (IV of 1969)---

---Ss. 19, 30, 31-A & 196---Customs General Order 10 of 2003, dated 7-10-2003---Notification S.R.O. 554(I)/98, dated 12-6-1998---Locally manufactured goods' list---Exemption on import of machinery--Importer sought exemption of customs duty on import of gas generator sets as the generators were not included in list of locally manufactured go.:, is available at the time of import of goods--Validity---Customs, Excise and Sales Tax Appellate Tribunal neither considered effect of gas generators being included for first time in list of locally manufactured goods vide Customs General Order 10 of 2003, dated 7-10-2003, nor they considered effect as to whether applicable list of locally manufactured goods would be the one which was specified at the time of placing order and opening of letter of credit or whether it would be one specified at the time of arrival of consignment---If at the time of placing order and opening letter of credit, the item for which order was placed and letter of credit was opened was not mentioned in the list of locally manufactured goods prevalent at that time, then importer would acquire a vested right if he fulfilled other conditions specified in the S.R.O. granting exemption to be entitled to exemption and subsequent modification in Customs General Order, could not take away the vested right---Order passed by Customs, Excise and Sales Tax Appellate Tribunal could not be sustained and the same was set aside---Reference was disposed of accordingly.

Maple Leaf Cement Factory Limited v. Collector of Customs, Customs House, Faisalabad 2000 MLD 1989 fol.

Federation of Pakistan and others v. Amjad Hussain Dilawari and 2 others 1992 SCMR 1270 and Collector of Customs v. Ravi Spinning Mills 1999 SCMR 412 1999 PTD 1078 distinguished.

Pervez Iqbal Kansi, Jatoi for Applicant.

Shakeel Ahmed for Respondents Nos. 1 and 2.

Roshan Lal Haseja, Deputy Manager, and K.B. Ali, DGM (Tech and Tariff-II) Engineering Development Board, Karachi.

Muhammad Ilyas Ehsan Khan Appraising Officer.

2011 PTD 625

[Sindh High Court]

Before Muhammad Ather Saeed and Munib Akhtar, JJ

Messrs HARMONE LABORATORIES PAKISTAN LTD., KARACHI

Versus

COMMISSIONER INCOME TAX, CENTRAL ZONE-B, KARACHI

Income Tax Reference Application No.324 of 1997, decided on 24th December, 2010.

Income Tax Ordinance (XXXI of 1979)---

----S.79---Transfer pricing---Putative source---Income or windfall---Proof---Assessee was a subsidiary of a non-resident foreign company and in assessment years in question it received certain amount from its parent company, which were stated to be a voluntary payment by way of gift and voluntary payment by way of subsidy---In both years, amount received from abroad was stated to be remittances. to help assessee improve its financial position, which deteriorated due to accumulated losses-Plea raised by assessee was that such amounts were not income but rather a windfall received from parent company---Income Tax Appellate Tribunal concluded that since parent company had charged a higher price from assessee than that was prevailing internationally, it would continue to do so---Tribunal further stated that there was a continuous siphoning off of funds with attendant result that parent company would have to periodically make remittances to assessee to (partially) replenish the funds being siphoned off---Income Tax Appellate Tribunal also found that on such basis there was periodical monetary return coming in with an expected regularity front a definite source---Validity---Such reasoning and conclusion was fundamentally flawed and unsustainable in law and if such was the Tribunal's rationale, it could only be described as conjectural---Remittances were what the assessee claimed they were: a mere windfall, which could be regarded as periodical monetary return coming in with an expected regularity---Income Tax Appellate Tribunal erred in its conclusion that the remittances constituted assessee's income---Question was decided in favour of assessee and against the authorities---Reference was decided accordingly.

Pakistan International Airlines Corporation v. Commissioner of Income-Tax 1975 PTD 219; PLD 1975 Kar. 924 and 1991 PTD 999 = 1991 'SCMR 2374 ref.

PLD 1975 Kar. 924 distinguished.

Commissioner of Income Tax v. Smith, Kline and French of Pakistan Ltd. and others 1991 PTD 999 = 1991 SCMR 2374 rel.

Iqbal Salman Pasha for Applicant.

Nasrullah Awan for Respondent.

2011 PTD 637

[Sindh High Court]

Before Muhammad Ather Saeed and Munib Akhtar, JJ

Messrs LALAZAR SHIPPING (PVT.) LTD. through Chairman/Chief Executive Officer, Karachi

Versus

COMMISSIONER INCOME TAX

Income Tax Reference Application No.598 of 2009, decided on 24th December, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 22 (8), 37, 133 (1) & Cl. (21) of Part II, Second Sched.---Presumptive tax---Capital gains---Depreciable assets, disposal of---Assessee company was engaged in shipping business and it contended that its income by disposal of assets fell within the ambit of its income from business' and was covered under Presumptive Tax Regime---Validity---Depreciation was never been allowed to assessee, therefore, there was no Written Down Value (WDV) available for computation of the gain and such gain could not be computed under S. 22 (8) of Income Tax Ordinance, 2001, therefore, plea raised by assessee that such gain would be treated as income from business under S. 22(8) of Income Tax Ordinance, 2001, did not hold ground---Once assessee's income became liable to presumptive tax under Cl. (21) of Part-II of Second Schedule to Income Tax Ordinance, 2001, then entitlement to depreciation deduction under S. 22 of Income Tax Ordinance, 2001, in respect of any property of such person would cease to exist and therefore, such assets did not fall within the ambit of S. 37(5)(b) of Income Tax Ordinance, 2001---Such income would fall within the definition ofcapital assets' and had to be assessed as capital gains' and notbusiness income' and therefore, would not be considered to be `income from business' of shipping of assessee company and was not covered by presumptive tax collected in accordance with provisions of Cl. (21) of Part-II of Second Schedule of Income Tax Ordinance, 2001---Income Tax Appellate Tribunal was justified to hold that gain on disposal of vessel was chargeable tax under the head "capital gains" and was not covered by Cl. (21) of Part-II of Second Schedule to Income Tax Ordinance, 2001---Reference was decided accordingly.

Genertech Pakistan Ltd. and others v. Income Tax Appellate Tribunal of Pakistan Lahore and others 2004 PTD 2255 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 37 & 133(1)---Capital assets---Cost of stores---Assessee company claimed certain amounts received against cost of stores and spares on board, cost of bunker with vessel and brokerage paid on disposal of vessel but the same had not been allowed by Taxation Officer---Validity---High Court directed Taxation Officer to re-compute gain under provisions of S. 37 of Income Tax Ordinance, 2001 and also to decide about allowability or disallowability of other deductions claimed by assessee---Reference was disposed of accordingly.

Kashif Paracha and Jawaid Khurram for Applicant.

Kafeel Ahmed Abbasi for Respondent.

2011 P T D 647

[Sindh High Court]

Before Mushir Alam and Irfan Saadat Khan, JJ

BP PAKISTAN EXPLORATION AND PRODUCTION INC., KARACHI

Versus

ADDITIONAL COMMISSIONER, INLAND REVENUE-B ENFORCEMENT AND COLLECTION DIVISION-I, KARACHI and another

Constitutional Petitions Nos. D-3594 3595, 3596 of 2010, decided on 30th December, 2010.

(a) Constitution of Pakistan---

----Art.199---Constitutional petition---Alternate remedy---Scope---Where there is alternate remedy available, constitutional jurisdiction under Art.199 of the Constitution cannot be invoked---While exercising constitutional jurisdiction, High Court must be first satisfied about non-availability of any other adequate remedy provided by law to petitioner---Authority vested in High Court under Art.199 of the Constitution is not meant to render alternate remedy redundant.

Khalid Mehmood v. Collector of Customs 1999 SCMR 1881 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.122 (5A), 127 & 187 (1)---Constitution of Pakistan, Art.199---Constitutional petition---Maintainability---Alternate remedy---Income tax assessment---Previous practice---Maxim, remedium juris---Applicability---Assessee instead of filing appeal under Income Tax Ordinance, 2001, assailed assessment before High Court in exercise of Constitutional jurisdiction on the plea that the same was in violation of its own previous practice---Validity---It was incumbent upon assessee to have availed alternate remedy under law before approaching High Court for redressal of grievance by invoking constitutional jurisdiction under Art.199 of the Constitution---Where alternate forum was provided, provisions of Art.199 of the Constitution were not attracted and it was attracted where order passed by the authority purportedly lacked jurisdiction---As the only grievance of assessee was with regard to alleged misinterpretation of S. 187 of Income Tax Ordinance, 2001, and the same could be agitated before appellate authority---Invoking of constitutional jurisdiction under Art.199 of the Constitution at such stage was premature---Alternate remedy provided was remedy in law and was not less convenient, beneficial or effective and principle of "remedium juris" was applicable---As alternate remedy was available to assessee, invoking jurisdiction under Art.199 of the Constitution was not warranted---Petition was dismissed in circumstances.

Syed Muhammad Amin and another v. Federal Public Service Commission 2002 PLC (C.S) 1538 and Syed Match Company Ltd. v. Authority under Payment of Wages Act 2003 SCMR 1493 ref.

(c) Income tax---

----Estoppel and res judicata---Applicability---In tax matters every year is a separate and distinct entity and principle of estoppel and res judicata do not apply to tax proceeding.

(d) Interpretation of statutes---

----Fiscal statute---Previous practice---Estoppel and res judicata---Applicability---In tax matters every year is a separate and distinct entity and principle of estoppel and res judicata do not apply to tax proceeding.

Muhammad Umer Soomro for Petitioner.

2011 PTD 666

[Sindh High Court]

Before Muhammad Ather Saeed and Munib Akhter, JJ

Mst. YASMEEN BANO and others

Versus

COMMISSIONER WEALTH TAX

Wealth Tax Reference Applications Nos. 27 to 30 of 1998, decided on 24th December, 2010.

Wealth Tax Act (XV of 1963)---

----Ss. 2(m)(ii), 25(1)(2) & 35---Assessment, rectification of---Limitation---Wealth Tax Officer allowed rectification application of assessee and on 30-6-1987, passed rectification orders but the Commissioner Wealth Tax vide his order dated 29-3-1990, added back the liability claimed and allowed by Wealth Tax Officer---Order passed by Commissioner Wealth Tax was maintained by Appellate Tribunal on the ground that limitation provided under S.25(1) of Wealth Tax Act, 1963, did not apply to the orders passed under S.25(2) of Wealth Tax Act, 1963---Validity---In the totality of the scheme of entire Wealth Tax Act, 1963, Legislature did not intend to leave an assessee at the mercy of Commissioner Wealth Tax for indefinite period---Sword of Damocles in the shape of risk of enhancement of assessment could not be allowed to be hanging for all times to come---Order of Appellate Tribunal on the question of limitation could not be sustained and, therefore, question was decided in favour of assessee and against authorities---Reference was disposed of accordingly.

Commissioner of Income Tax, East Pakistan v. Hossen Kassam Dada PLD 1961 SC 375; Income Tax Officer 'A' Ward, Indore v: Gwalior Rayon Silk Manufacturing (Weaving) Co. Ltd. (1975) 101 ITR 457; Commissioner of Income Tax Bombay City v. Messes. Narsee Nagsce and Co. AIR 1957 Born. 1; (1961) 3 Tax 1; (1962) 3 Tax 374 ; Statutory Constitution by Crawford, 1940 Edn. Pp. 288 to 290; Khomchand Ramdas v. C.I.T. (1934) 2 ITR 216; Commissioner of Income Tax v. Khomchand (1938) 6 ITR 414; Shiv Kirpal Singh v. VV Giri (1970)-2 SCC 567; AIR 1970 SC 209; AIR 1946 PC 156; Babu Rao v. Zakri Hussain; (1968) 2 SCC 133; CIT v. SRY Ankineedu Parsad (1978) 115 ITR 78; Ram Niwaz Vs. Mithan Lal AIR 1979 P&H 262; AIR 1980 Madh. Pra. 166; Parashuran Pottery Works Co. Ltd. v. Income Tax Officer, Circle I, Ward A, Rajkot Volume 106 (1977) and Commissioner of Income Tax v. Kamran Model Factory 2002 PTD 14 ref.

Waseem Shaikh for Applicant.

Nasrullah Awan for Respondent.

Date of hearing: 9th December, 2010.

2011 P T D 683

[Sindh High Court]

Before Muhammad Ather Saeed and Munib Akhtar, JJ

Messrs A. R. AUTOS through Muzzafar Din Shaikh, Karachi

Versus

SECRETARY, REVENUE DIVISION, FEDERAL BOARD OF REVENUE, ISLAMABAD and another

Constitutional Petition No. D-2140 of 2010, decided on 24th December, 2010.

(a) Words and phrases---

----"'Demurrage"-Import, object and scope-Demurrage' refers to the amount payable to port authorities by importer or consignee for any delay in removing imported goods from port after expiry of initial period of "free days" i.e. the period for which no demurrage is charged-Rationale for charge and reason why essentially punitive rates are charged is that space at the port is at a premium---Cargo is constantly being moved and space is required as goods are continuously off-loaded and on-loaded ships.

(b) Customs Act (IV of 1969)---

---S. 195---Customs Rules, 2001, R. 556---Constitution of Pakistan Art. 199---Constitutional petition---Demurrage, charging of---Delay due to official proceeding---Goods imported by petitioner were not allowed to be released as the authorities alleged the same contaminated with certain prohibited items---After retesting the goods by two separate laboratories, High Court directed the authorities to release the goods---During the entire period, the goods remained at container terminal of the Port and demurrage charges continued to accumulate in respect thereof---Plea raised by petitioner was that as action taken by Customs authorities was withdrawn, therefore, it was entitled to complete waiver of demurrage charges---Validity---Firstly the terminal operator must determine the amount of concession to which importer/consignee was entitled, so as to remove any "hardship" caused on account of demurrage or port charges, which must be reduced to no more than the value of goods---Once amount of concession was determined, imported goods were to be released forthwith without payment by importer/ consignee of reduced amount---Terminal operator must then refer the mutter to Collector of Customs concerned, who must satisfy himself that Terminal operator had correctly given concession---Once the amount was certified by Collector, the Terminal operator would be entitled to its payment by Federal Government or its adjustment against any fiscal demand upon Terminal operator under any federal law---If Terminal operator was dissatisfied with the amount certified by Collector, it could seek appropriate relief from Federal Board of. Revenue under S. 195 of Customs Act, 1969, and/or to pursue other remedies as might be available to it under law---High Court directed the Port authorities to re-compute amount of concession to which petitioner was entitled---Once the amount was re-computed and importer had paid the amount of demurrage charges for relevant period, its goods should be released forthwith---Petition was disposed of accordingly.

Aftab Ahmed Saeed v. Federation of Pakistan 1993 CLC 2022; NLR 1991 Civil 372; Adam Holding Ltd. v. Assistant Collector, Customs 1994 CLC 1198; Lone Traders v. General Manager Pakistan Railways and others 2006 PTD 1851 and Super Metal Traders v. General Manager Pakistan Railways and others 2006 PTD 2500 ref.

Mehmood ul Hassan for Petitioner.

Hasan Akbar for Respondent No.4.

Syed Tariq Ali, Federal Counsel for Respondents Nos. 1 to 3.

2011 PTD 886

[Sindh High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI

Versus

Messrs STATE ENTERPRISES MUTUAL FUND, KARACHI

Income Tax Appeals Nos. 656 to 754 of 2000 and 1040 to 1045 of 1999, decided on 7th January, 2011.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 2(29-A) & Second Sched., Cl. 105---Modaraba Companies and Modaraba (Flotation and Control) Ordinance (XXXI of 1980), Ss.2(i)(a) & 8---Exemption from income tax in status of Modaraba claimed by State Enterprises Mutual Funds---Plea of authority that assessee was not entitled to such exemption for not qualifying to be a Modaraba in terms of S.8 of Modaraba Companies and Modaraba (Flotation and Control) Ordinance, 1980---Validity---Words in a statute would be construed harmoniously to give meaning to all words included therein---Meaning assigned to word "modaraba" in S. 2(i)(a) of the Ordinance would be read for purposes of Income Tax Ordinance, 1979 by virtue of S. 2(29-A) thereof---Unit Trusts and Mutual Funds, by whatever name called, would be treated as Modarabas for purposes of applicability of all provisions of Income Tax Ordinance, 1979 including tax treatment---Adopted provisions would become a part of adopting statute---Once meaning of word "modaraba" given in the Ordinance had been adopted by reference in Income Tax Ordinance, 1979, then completion of formalities prescribed in Ordinance, 1980 by assessee for qualifying as modaraba would not be required for application of Income Tax Ordinance, 1979 including tax treatment---Mutual Funds falling under definition of "modaraba" would be entitled to same tax treatment as Modaraba---Assessee was assessed in status of modarabas in circumstances---Principles.

CIT v. Narsee Nagsee and Co. (1957) 31 ITR 164 Bom.; CIT v. V.R.M. Amin (1971) 82 ITR 94 (GUJ); Ramchandra Mardraj Deo v. Collector (1957) 31 ITR 651; CIT v. Alpha Insurance Co. Ltd. PLD 1981 SC 293; Beecham Pakistan v. CI 1995 PTD 577 and CIT v. Zafa Pharmaceuticals 2002 PTD 117 ref.

Crawford "The Constitution of Statutes" rel.

(b) Interpretation of statutes---

----Words in a statute would be construed harmoniously to give meaning to all words included therein---Principles.

(c) Interpretation of statutes---

----Adopted provisions become a part of adopting statute.

Crawford "the Constitution of Statutes" rel.

Jawaid Farooqui and Muhammad Farid for Applicant.

Sirajul Haque Memon and Arshad Siraj for Respondents.

2011 PTD 925

[Sindh High Court]

Before Muhammad Athar Saeed and Munib Akhter, JJ

RAJAB ALI HAMANI, KARACHI

Versus

COMMISSIONER INCOME TAX. KARACHI

Income Tax Reference Application No.177 of 1997, decided on 13th January, 2011.

(a) Income Tax Act (XI of 1922)---

----S. 34---Order of quashment of re-opening of original assessment---Effect---Original assessment order in such case would stand restored automatically.

(b) Income Tax Act (XI of 1922)---

----S. 34---Construction of building as an investment for earning income from its rent--Sale of constructed building by assessee---Profit earned on such sale assessed as capital gain in the earlier year again assessed in subsequent year as an adventure in the nature of trade --Validity--- Income assessed in one year in a particular manner could not be assessed in subsequent year in another manner without cancelling or rectifying earlier assessment after removing such income from its ambit---Same income could not be subjected to assessment in two different years---Impugned order was set aside in circumstances.

Saroj Kumar Masumdar v. Commissioner of Income Tax, West Bengal 1959 (37) ITR (SC) 242 and Yousuf Hakimuddin v. Commissioner of Income Tax 1981 PTD 3 ref.

(c) Income tax---

----Income tax proceedings---Res judicata and estoppel, rules of---Applicability---Such rules would not apply to such proceedings as Assessing Officer on knowing facts subsequently could take a decision different from that taken earlier by him or his predecessor---Income treated in a particular manner in one year, if accrued during another year, might be treated in a different manner in such other year---Principles.

Ms. Farzeen Bhudha Advocate for Applicant.

Mr. Jawaid Farooqui Advocate for Respondent.

Date of hearing: 2nd December, 2010.

2011 P T D 1128

[Karachi High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

Messrs UNITED EXPORTS COMPANY, KARACHI

Versus

REGIONAL TAX OFFICER through Commissioner, Enforcement and Collection Division (I), Karachi

Sales Tax Reference Application No.67 of 2010, decided on 15th March, 2011.

(a) Sales Tax Act (VII of 1990)---

----S. 66---Sales Tax Refund Rules, 2002---S.R.O.679(I)/99, dated 12-6-1999----Claim for refund of tax under S.R.O. 679(I)/99, dated 12-6-1999---Payment of Rs. 2, 07, 04, 342 by assessee under the S.R.O. with written request dated 5-9-2001 to the Authority to treat same as full and final discharge of his tax liability in respect of disputed period and withdrawing cases pending between the parties---Acceptance of such request by the Authority---Assessee's letter dated 27-9-2001 addressed to Special Judge stating that no liability was outstanding against him after such payment---Appointment of Auditor with consent of parties in a pending suit of assessee regarding refund claim---Auditor's report dated 9-1-2001 showing Rs.1,12,2060 paid in excess by assessee---Amount shown in such report claimed to be refunded by assessee through letter dated 30-4-2003 addressed to the Authority in view of the S.R.O.---Validity---Benefit mentioned in the S.R.O., would apply to cases under dispute/audit/adjudication or pending in appeal, wherein dues were held to be not payable in view of adjudication or appellate order---Refund under the S.R.O., could be made only in view of eventualities mentioned therein, but not otherwise---No appeal or adjudication between parties was pending at the time of making such refund claim by assessee---Assessee was blowing hot and cold in same breath as at one hand, he was relying upon terms and conditions of such S.R.O., whereas on the other hand he was flouting its terms---Party could not complain of any act he passively assented to---Refund claim was disallowed in circumstances.

Muhammad Amin v. Province of Sindh 1992 MLD 671; Exide Pakistan v. Deputy Collector 2004 PTD 1449; Pakistan Wood Craft v. C.B.R. 1986 PTD 126; Filters Pakistan v. F.B.R. 2010 PTD 2036; Pfizer Laboratories v. Fed: of Pakistan PLD 1998 SC 64; C.B.R. v. Seven up Bottling Company Ltd. 1996 SCMR 700; Zulfiqar and others v. Shahadat Khan PLD 2007 SC 582; Jam Pari v. Muhammad Abdullah 1992 SCMR 786; Mrs. Anisa Rehman v. PIAC 1994 SCMR 2232; Chenab Fabrics v. Govt. of Pakistan 2006 PTD 1412; 1994 CLC 994; West Pakistan Tank Terminal v. Collector 2007 PTD 1744; Tribunal Decision's 2009 PTD 313 and Tribunal Decision 2009 PTD 350 ref.

(b) Administration of justice---

----No body would be allowed to take advantage of his own wrong.

(c) Maxim---

---"Violenti non fit injuria" (person cannot complain of any act he passively assents to).

Khalid Jawed Khan for Applicant.

Ms. Masooda Siraj for Respondent.

Date of hearing: 22nd February, 2011.

2011 P T D 1275

[Karachi High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

COMMISSIONER INCOME TAX/WEALTH TAX, COS-IV, KARACHI

Versus

Messrs SASI REAL ESTATE DEVELOPMENT (PVT.) LIMITED, KARACHI

I.T.R.A. No.327 of 1999, decided on 12th April, 2011.

Wealth Tax Act (XV of 1963)---

----Ss. 2(5), 3 & 16(3)---Wealth Tax Rules, 1963, R. 8(3)---Incomplete construction projects of a construction company--- Market value of assets held by such company on valuation date determined by Assessing Officer by adding 18% of gross profit to declared cost of such project---Validity---Such projects did not have market value on successive valuation date on basis of progress in construction work---Valuation of such projects as on different valuation dates could be arrived at by finding out actual amount spent on such projects as on different valuation dates---Correct method of valuation of such project in year of its completion would be profit earned plus price of land and cost of construction---Assessing Officer had powers to estimate valuation of assets and property of an assessee keeping in view market rate thereof-Assessing Officer, in the present case, had proceeded in an illegal manner by applying imaginary gross profit rate to declared value of such projects---Assessing Officer could make addition only in year of completion of such projects---Impugned addition was deleted in circumstances.

Jawaid Farooqi for Applicant.

Muhammad Javed Khurrum for Respondent.

Date of hearing: 7th April, 2011.

2011 P T D 1377

[Karachi High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

Major General (Retd.) M. JALALUDDIN

Versus

ACIT, CIR-VI, ZONE-C, KARACHI

I.T.R. No.231 of 2005, decided on 4th May, 2011.

(a) Taxation---

----Facts of one case should be examined on basis of surrounding circumstances thereof only---Principles.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 22---Sale of plot, income arising from---Treating such sale as adventure in nature of trade or a business transaction---Scope---Determination of information regarding intention of assessee at time of purchasing plot would be essential---Plot purchased by assessee with intention to resell and make profit therefrom would fall under ambit of adventure in nature of trade---Assessee not being a dealer or habitual purchaser and seller of plots, if sold plot with intention to convert an un-remunerative asset into a remunerative asset, then gain arising therefrom would fall under ambit of causal income or capital gain being exempt from tax---Gain from sale of plot in each and every case could not be considered as yardstick, rather each case would be judged on basis of facts pertaining thereto only---Mere sale of immovable property by an owner on an accretion would not be enough for treating such transaction to be an adventure in nature of trade in absence of facts warranting so---When intention was not to resell plot at time of its purchase, but was sold due to attending circumstances, then profit made out of such sale could not be considered to be adventure in nature of trade or business transaction---Onus of providing adventure in nature of trade would lie on the Revenue---Illustration.

Ms. Lubna Pervez for Applicant.

Jawaid Farooqui for Respondent.

Date of hearing: 21st April, 2011.

2011 P T D 1460

[Karachi High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

A.P. MOLLER through AGENT

Versus

TAXATION OFFICER OF INCOME TAX and another

Income Tax Reference Applications Nos.205 of 2007 and 882 to 942 of 2008, decided on 27th January, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 7, 11, 107 & 143--- Cargo embarked outside Pakistan carried to Pakistan on ships operated by non-resident shipping companies/ charterers---Sale of such cargo to Pakistani buyers by foreign seller on FOB basis---Payment of freight charges to carriers in Pakistan by resident buyers---Liability of carriers to pay income tax on such freight---Scope---Provision of S. 7 of Income Tax Ordinance, 2001 would apply to freight charges for cargo embarked in Pakistan, whether received or receivable in or outside Pakistan and freight charges for cargo embarked outside Pakistan, if received or receivable in Pakistan---Cargo embarked outside Pakistan should be headed for Pakistan as per terms of S. 143 of Income Tax Ordinance, 2001 for imposing tax thereon under S. 7(1)(b) thereof---Freight charges paid by Pakistani buyers would remain liable to tax under S. 4(1) of the Ordinance, rather than S. 7 thereof---Buyers (here Pakistani importers) in FOB contracts would be regarded as party to Bill of Lading creating relationship between buyer and carrier---Carrier would have a lien on goods shipped for payment of freight charges and would be entitled to hold same till such payment---Release of cargo, in the present case to Pakistani buyers on payment of freight charges had established that freight charges were received by carriers in Pakistan within meaning of S. 7(1)(b) of the Ordinance---According to avoidance of double taxation agreements (DTAs) by Pakistan with France and Denmark, "source State" was that in which payment was made and such State was regarded as entitled to tax such payments---Payment, in the present case, was made in Pakistan, which was a "source State"---Payments received by carriers would be considered as profit derived from sources within Pakistan, thus, were liable to be taxed in Pakistan---Nothing in such avoidance of double taxation agreements that would bar application of S. 7(1)(b) of the Ordinance, to freight charges received or receivable in Pakistan---Profits earned by such carriers from international shipping business would come within meaning of "industrial or commercial profits" used in the agreements---Such carriers were liable to pay tax in terms as provided in S.7(1)(b) read with S.143 of the Ordinance---Principles.

Mahabir Commercial Company Ltd. v. CIT (1972) 86 ITR 417 (Ind. SC); Ishikawajma Harima Heavy Industries v. Director of Income Tax, Mumbai (2007) 288 ITR 408 (Ind. SC); General Bank of Netherlands and others v. CIT (1991) 63 Tax 149; 1991 PTD 687; CIT v. Toshoku Ltd. (1980) 125 ITR 525; Macneil and Barry Ltd. v. CIT (1970) 22 Tax 8 (SC); Jardine Henderson v. CIT PLD 1960 SC 371 and Octavious Steel and Company Ltd. v CIT 1960 PTD 1 ref.

Carriage of Goods by Sea by John F. Wilson (5th ed., 2004); The Danish DTA's case PTCL 1988 St. 181; PTCL 2002 St. 316(sic); The French DTA's case 1997 PTD (Statute) 33; 74 Tax 343; The Japanese's case DTA 1959 PTD 126; Mountain States Mineral Enterprise Inc. v. CIT (Appeals) 2008 PTD 1087; CIT v. Unilever PLC 2002 PTD 44; Raleigh Investment Co. Ltd. v. CIT 1983 PTD 126 Ostime v. Australian Mutual Provident Society (1960) AC 459; (1960) 39 ITR 210; Arabian Express Line Ltd. v. Union of India 212 ITR 31; 1997 PTD 833 and CIT v. Visakapatnam Port Trust (1983) 144 ITR 146 rel.

(b) Interpretation of statutes---

----Fiscal statute---Charging provision---Exemption from taxation---Two or more reasonable interpretations of such provision and exemption from taxation---Effect---Interpretation of charging provision favouring taxpayer would be preferred---Interpretation, which would rob provision of all meaning and make same of any substantive content, could not be regarded as reasonable---Onus would lie on taxpayer to show that he was exempt from taxation---Exemption from taxation would be strictly construed, but where two reasonable interpretations thereof were possible, then one favouring revenue would be adopted.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 7 & 101---Phrase "subject to this Ordinance" as used in S. 7 of Income Tax Ordinance, 2001---Scope---Such phrase would not mean that other provision of Income Tax Ordinance, 2001 would be read or incorporated into S. 7 thereof---Such phrase would mean that in case of conflict between anything else contained in Income Tax Ordinance, 2001 on one hand and S. 7 thereof on other hand, latter must give way and other provision would prevail---When no such conflict existed, then such phrase would do nothing---No conflict existed between Ss. 101 and 7 of the Ordinance---Principles.

C&J Clark Ltd. v. Inland Revenue Commissioners (1973) 2 All ER 513; Harding v. Coburn (1976) 2 NLR 577; Newcrest Mining (WA) Ltd. v. Commonwealth (1997) HCA 38; (1997) 190 CLR 513 and The South India Corporation (P.) Ltd. v. The Secretary, Board of Revenue Trivandrum and another AIR 1964 SC 207 rel.

(d) Interpretation of statutes---

----Fiscal statute---Interpretation increasing substantially tax burden of taxpayer cannot be preferred over one which brings him to tax, but for a much lesser amount.

(e) Bills of Lading Act (IX of 1856)---

----Ss. 1 & 2---Bill of lading to which S. 1 of Bills of Lading Act, 1856 applies is also a bill of lading to which S. 2 thereof is applicable.

Effort Shipping Company Limited v. Linden Management SA and others (1998) UKHL 1; (1998) 1 All ER 495; East West Corporation v. Dampskibsselskabet AF 1912; Aktieselskabet (2003) EWCA Civ 83; (2003) 2 All ER 700, Borealis AB v. Stargas Ltd. (The Berge Sisar) (2001) UKHL 17 and (2001) 2 All ER 193 rel.

(f) Federal Board of Revenue---

----Any interpretation of income tax law by Central Board of Revenue would not be binding on tax authorities.

(g) Avoidance of Double Taxation Agreement---

----Nature and object---Such agreement establishes an agreed framework for distribution of taxation revenue between contracting States---Principles.

OECD, Model Tax Convention on Income and on Capital, condensed version, July 2008; (Nabil Orow, Comparative Approaches To The Interpretation of Double Tax Conventions; (2005) 26 Adelaide Law Review, pp. 73-102; Lord Radcliffe put it in Ostime v. Australian Mutual Provident Society (1960) AC 459 and (1960) 39 ITR 210 ref.

(h) Interpretation of statutes---

----Fiscal statute ---Avoidance of double taxation agreement---Such agreement for being international agreement or treaty would be interpreted broadly and liberally, but not strictly as a fiscal statute -- In case of possibility of two reasonable interpretations of such agreement or any doubt or ambiguity in its interpretation, then same would be resolved in favour of country having a right to tax.

Crown Forest Industries Ltd. v. Canada (1995) 2 SCR 802; McDermott Industries (Aust) Ply Ltd. v. Commissioner of Taxation (2005) FCAFC 67; Union of India and another v. Azadi Bachao Andolan and another (2003) 273 ITR 706; Thiel v Federal Commissioner of Taxation (1990) HCA 37; (1990) 171 CLR 338 and National Westminster Bank, PLC v. United States (2008) 512 F.3d 1347 rel.

Dr. Ikramul Haq for Applicant (in ITRA 205 of 2007 and connected Reference Applications (in relation to the Danish DTA)).

Makhdoom Ali Khan and Najeeb Jamali for the Applicant (in ITRA 882 of 2008 and connected Reference Applications (in relation to the French DTA)).

Aga Faquir Muhammad and Aga Zafar Muhammad for the Applicant (in ITRA 6 of 2008 and connected Reference Applications (in relation to the Japanese DTA).

Jawaid Farooqui for Respondent (in all the Reference Applications).

2011 P T D 1558

[Sindh High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

SHAHNAWAZ (PVT.) LTD. through Director Finance

Versus

PAKISTAN through the Secretary Ministry of Finance Government of Pakistan, Islamabad and another

C.P. No.973 of 2010, decided on 6th April, 2011.

(a) Income Tax Act (XLIX of 2001)---

----S. 177---Audit of income tax affairs---Scope---Each tax year would be a separate unit of assessment---Audit must be carried out with reference to a specific tax year---Audit could be carried out once tax year was complete and not before---Audit would always be retrospective.

(b) Income Tax---

----Income tax legislation as applicable to a given tax year would normally be regarded as being law as same stands on the first day next succeeding the tax year.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 74---Normal tax year and special tax year---Applicability of Income Tax Ordinance, 2001---Scope---Normal tax year being of twelve months period ending on 30th June---In respect of normal tax year, Income Tax Ordinance, 2001 would be regarded as applying as same stands on 1st of July, next succeeding day---Special tax year being of twelve month period ending on a day other than 30th June---In respect of special tax year, Income Tax Ordinance, 2001 would be regarded as applying as same stands on relevant 1st of July---Income Tax Ordinance, 2001 would be regarded as applying in relation to a tax year as amended by Finance Act of such year.

(d) Income Tax Ordinance (XLIX of 2001)---

----Ss. 120 & 177---Selection of cases for audit after transmission of return into an assessment order---Purpose---Selection of cases for audit after trusting taxpayer and accepting his return on its face value would be for ensuring that all income required to be brought to tax had in fact been taxed---Once a taxpayer selected lawfully and properly, then department would be entitled to comprehensively examine his income tax affairs by carrying out a complete and robust audit.

Noble (Pvt.) Ltd. v. Federal Board of Revenue 2009 PTD 841 ref.

(e) Vested right---

----Every vested right would not necessarily be a past and closed transaction---Principles.

Every past and closed transaction is normally based on or comprises a vested right. Every vested right is not necessarily a past and closed transaction. Indeed, if rights were required to be placed in ascending order, the "scale" could be said to comprise of a "bare right", a vested right and a past and closed transaction. Ordinarily, a right can be regarded as progressing from a "bare" right to become a vested right and then perhaps even a past and closed transaction. Of course, some rights only become vested rights, and do not go beyond to become past and closed transactions. Others may vest immediately as soon as they arise or accrue, and then may (or may not) become past and closed transactions. Some right (though this would be a somewhat rare and unusual situation) may even become past and closed transactions once they accrue, i.e. progress to that category straight from being "bare" rights.

Especially in the realm of fiscal statutes, past and closed transactions appear to stand on a footing higher than vested rights.

Molasses Trading and Export (Pvt.) Ltd. v. Federation of Pakistan and others 1993 SCMR 1905; Chief Land Commissioner, Sind and others v. Ghulam Hyder Shah and others 1988 SCMR 715 and Al Samrez Enterprise v. Federation of Pakistan 1986 SCMR 1917 rel.

(f) Vested right---

----Fiscal statues---Past and closed transaction especially in realm of fiscal statute stands on a footing higher than vested rights.

Molasses Trading and Export (Pvt.) Ltd. v. Federation of Pakistan and others 1993 SCMR 1905 rel.

(g) Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 177 [as amended by Finance Act (I of 2009) and Finance (Amendment) Ordinance (XXII of 2009)], 174(3) & 214-C [as added by Finance Act (XVI of 2010)]---Sales Tax Act (VII of 1991), Ss.25 & 32-A---Constitution of Pakistan Art. 199---Constitutional petition---Selection of cases by computer ballot of 11-12-2009 for a composite income tax and sales tax audit for tax year 2008---Validity---Each tax year would be a separate unit of assessment---Income Tax Ordinance, 2001 would apply in relation to each tax year in a specific manner as same stood on first day next succeeding last day of tax year---Audit of income tax affairs could not be conducted without records which taxpayer under S. 143(3) of Income Tax Ordinance, 2001 was required to maintain for certain years in relation to a tax year---In relation to tax year 2008, S. 177 of the Ordinance was to be applied as same stood on 1-7-2008 and on its basis, taxpayer could be selected for audit---Section 177 as stood on 1-7-2008 was materially in a different form on 11-12-2009, when computer ballot was held---Taxpayer had acquired a vested right with regard to how he could be selected for audit of any given year---Taxpayer could only be selected for audit consistently with vested right---Taxpayer had a vested right in S. 177 applying to tax year 2008 as same stood then and taxpayer could be selected then separately and individually---Power to select "classes of persons" for audit did not exist on 1-7-2008---Federal Board of Revenue had no statutory power under S. 177 on 11-12-2009 to select taxpayer for audit by computer ballot for audit of tax year 2008---Section 214-C of Income Tax Ordinance, 2001 inserted w.e.f. 1-7-2010 by Finance Act, 2010 was not in existence on 1-7-2008 and could not save computer ballot held on 11-12-2009---Taxpayer could be selected for an audit only once in respect of a given tax year---Once an audit had been called in relation to a taxpayer and was being or had been conducted or having been called as abandoned by department of its own volition, then taxpayer could not be vexed again by selecting his case a second time for audit of same tax year---If in relation to tax year 2008 taxpayer by computer ballot had already been selected for audit in terms of S. 177 as same stood as a vested right in relation to such tax year, then taxpayer could not be selected a second time by way of computer ballot, for such matter had become a past and closed transaction---Section 214-C would affect vested rights, but not past and closed transactions---Exercise of statutory powers of audit under Income Tax Ordinance, 2001 could not result in action being taken under Sales Tax Act, 1991 for each being governed by its own provisions---Impugned selection of cases by computer ballot for composite audit was without lawful authority and of no legal effect---High Court accepted constitutional petition in circumstances.

Commissioner of Income Tax v. Media Network and others PLD 2006 SC 787 and 2006 PTD 2502 rel.

(h) Interpretation of statutes---

----Beneficial fiscal legislation can, if need be, be regarded as applying retrospectively.

(i) Vested right---

----Vesting of a right would be to protect position of person in whom right vested---Benefit of subsequent change, if improves position of such person, ought not to be denied to him.

(j) Constitution of Pakistan---

----Art. 199---Constitutional petition raising an important question of law of general application---Maintainability---Such question could be raised directly before High Court and decided by it.

Iqbal Salman Pasha, Dr. Farogh Naseem, Ms. Sana Minhas and Abid Shirazi for Petitioners.

Jawaid Farooqui, Ali Mumtaz Shaikh, Syed Riazuddin and Sibtain Mahmud for Respondents.

Umer Hayat Sandhu, Deputy Attorney General.

2011 P T D 1594

[Sindh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ.

Messrs ORIENT COLOR LAB (Pvt.) Ltd. through Director

Versus

THE DIRECTOR GENERAL, CUSTOMS VALUATION, KARACHI and 3 others

C.Ps. Nos.D-1016 and 1017 of 2010, decided on 13th April, 2011.

(a) Customs Act (IV of 1969)---

----Ss. 19-A & 25---Constitution of Pakistan, Art. 199---Constitutional petition---Electronic goods, import of---Fixation of value of such goods by authority on basis of market inquiry after discarding declared transaction value thereof---Clearance of such goods on furnishing of Bank guarantee for disputed customs duties and taxes---Return of Bank guarantee, prayer for---Validity---Word "paid" used in S. 19-A of Customs Act, 1969 would include deferred payment by furnishing Bank guarantee---Provisions of Ss. 19-A and 81 of Customs Act, 1969 were not in conflict with each other---Failure of department to fulfil formalities prescribed under S. 81 of Customs Act, 1969 would not entitle taxpayer to be assessed at declared value, if during pendency of matter before department or appellate court, he had passed on burden of customs duty to end consumer---Statement of cost of such goods submitted in court by importer showed computation of total cost thereof by making addition of customs duty, sale tax and income tax deducted at source and landing cost and advance cost estimated at 10%---Sale price of such goods finding mention in such statement when compared with total cost thereof including customs duties and taxes, then rate of profit was found to be ranging between 35% to 95%---Sale price of such price without inclusion of duties and taxes would range from 50% to more than 100% ---Such statement and comparison would show that importer had passed on burden of customs duties and taxes to end consumer---Importer had not discharged onus of proving that he had not passed on burden of customs duty and taxes to end consumer---High Court dismissed constitutional petition in circumstances.

Facto Belarus Tractors Ltd. v. Government of Pakistan 2005 PTD 2286 and Shpyard K. Damen International v. Karachi Shipyard and Engineering Works Ltd. 2003 CLD 1 rel.

(b) Bank guarantee---

----Bank Guarantee would be payable on demand to a person in whose favour same had been issued for its encashment.

Shpyard K. Damen International v. Karachi Shipyard and Engineering Works Ltd. 2003 CLD 1 ref.

Ziaul Hassan for Petitioner.

Respondent No.1 (in person).

Respondent No.2 (in person).

Respondent No.3 (in person).

Secretary/Chairman, Federal Board of Revenue, Islamabad for Respondent No.4.

Date of hearing: 8th April, 2011.

2011 PTD 1996

[Sindh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

KARACHI PORT TRUST, KARACHI

Versus

COMMISSIONER INLAND REVENUE, KARACHI

Income Tax Reference Application No.138 and C.M.A. No. 174 of 2011, decided on 27th May, 2011.

Income Tax Ordinance (XLIX of 2001)---

----S.147---Estimate of NIL advance tax filed by taxpayer---Powers of Taxation Officer to reject such estimate for being Wrong---Scope---Conditions to file an estimate under S.147(6) of Income Tax Ordinance, 2001 would be the applicability of subsection (1) thereof, if taxpayer estimated that tax payable by him was likely to be less than amount payable by him under subsection (1) thereof---Once such two conditions were fulfilled, then estimate could be filed---No provision existed in S. 147(6) of Income Tax Ordinance, 2001 prohibiting that an estimate could not be filed under which no tax was payable---Section 147(6) of Income Tax Ordinance, 2001 required that tax would become payable on basis of estimate filed, and if no tax was payable, then such estimate could not be filed-After filing such estimate whether right or wrong, no provision existed to provide authority to Taxation Officer to discard same and ask taxpayer to continue paying tax in accordance with provision of S. 147(1)(4) of the Ordinance---Once an estimate was filed, only option available to Taxation Officer would be to levy default surcharge under S. 205(IB) of the Ordinance after completing assessment, if such default surcharge was leviable on basis of assessment---Provision of S. 147(7) of the Ordinance provided an authority to Taxation Officer to recover advance tax not paid as if same was a tax due under assessment order, but such provisions did not provide them authority and jurisdiction to pass any order for recovery of such tax---Principles.

Pak Saudi Fertilizer v. Commissioner of Income Tax 1999 PTD 4061'; Chairman C.B.R. v. Pak Saudi Fertilizer 2000 PTD 3748; J.K. Synthetics Ltd. v. Income Tax Officer Central Circle-XVIII and others 174 (1988) ITR 167; Punjab Tractors Ltd. and another v. Assistant Commissioner of Income Tax and another 267 (2004) ITR 229; Commissioner (Legal) Inland Revenue v. E.N.I. Pakistan (M) Ltd. 2011 PTD 476 and Commissioner of Income Tax v. Anweraly Haji Noor Muhammad 1992 PTD 347 ref.

Makhdoom Ali Khan and Ali Almani for Applicant.

Syed Riazuddin for Respondent.

Dates of hearing: 17th, 19th, 24th and 27th May, 2011.

2011 P T D 2042

[Sindh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

COMMISSIONER (LEGAL) INLAND REVENUE

Versus

Messrs EFU GENERAL INSURANCE LTD.

I.T.R.As. Nos. 158 to 160 of 2010, decided on 6th June, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

--- Ss.3, 67, 99, 100-A & Fourth Sched. Rr. 5, 6-A & 9---Income Tax Ordinance (XXXI of 1979), Ss. 24, 26 & Fourth Sched. Rr. 5, 8--Income Tax Act (XI of 1922), S. 10(7) & First Sched.---Insurance Ordinance (XXIX of 2000), S. 3---Income Tax Rules, 2002, R. 13---Income of Insurance Company from an insurance business and normal business---Taxability---Scope---Legislature had treated such two classes of businesses separately---Ordinary rules for computation of profits and gains could not be applied in case of an insurance business---Profits and gains of an insurance business would be computed in accordance with procedure laid down in Fourth Sched., of Income Tax Ordinance, 2001 for being a special provision would prevail over general provisions thereof---Fourth Sched. of Income Tax Ordinance, 2001 did not speak about proration of any expense---Insurance Company would be taxed as one unit, thus, unidentifiable expenses would not be prorated against exempt income of insurance business and normal business income---Federal Board of Revenue itself had accepted concept of one unit way back in year 1988---Capital gains/dividends income of Insurance Company like other profits of insurance business would be considered as one basket income---Business income of insurance and computation of its income for being governed by special provisions of S.99 read with rules contained in Fourth Sched., of Income Tax Ordinance, 2001 could not be considered at par with computation and taxability of normal business---Application of S. 67 of Income Tax Ordinance, 2001 to Insurance Company would be unlawful and totally against concept of working out its profits and gains under Fourth Sched., thereof---Principles.

Federal Bank for Cooperatives, Islamabad v. Ahsan Muhammad 2004 SCMR 130; Godeln Orphies (Pvt.) Ltd. v. Director of Vigilance, Central Excise, Customs and Sales Tax 1993 SCMR 1635; A.P. Moller v. Taxation Officer of Income Tax, Audit V (ITRA No. 2050 of 2007and others); Commissioner of Income Tax, Central Zone, "A" Karachi v. Messrs Phoenix Assurance Co. Ltd. 1991 SCMR 2485; Messrs E.F.U. General Insurance Co. Ltd. v. The Federation of Pakistan and others 1997 PTD 1693; Central Insurance Co. and others v. Central Board of Revenue, Islamabad and others 1993 PTD 766 = 1993 SCMR 1232 and 2003 PTD 1321 ref.

E.F.U. General Insurance Co. Ltd. v. Federation of Pakistan 1997 PTD 1693; Central Insurance Company's case 68 Tax 86 and Commissioner of Income Tax, Companies-III, Karachi v. Central Insurance Co. Ltd. Karachi [2003 PTD 13211 rel.

(b) Administration of justice---

----Thing not done in prescribed manner would vitiate whole proceedings---Principles.

If something is stated to be done in a particular manner, it has to be done in that manner only; otherwise any deviation in this regard would vitiate the whole proceedings.

(c) Interpretation of statutes---

----Special statute ousts general provisions---Principles.

When special statute provides something to be done in a particular manner, then general provisions are ousted.

Federal Bank for Cooperatives, Islamabad v. Ehsan Muhammad 2004 SCMR 130 rel.

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 214---Instructions of Federal Board of Revenue---Binding on tax authorities.

Kafeel Ahmed Abbasi for Appellant.

Sirajul Haq Memon and Arshad Siraj Memon for Respondent.

Date of hearing: 15th April, 2011.

2011 PTD 2103

[Sindh High Court]

Before Gulzar Ahmed and Irfan Saadat Khan, JJ

KARACHI BULK STORAGE AND TERMINALS (PVT.) LTD.

Versus

COLLECTOR OF CENTRAL EXCISE AND LAND CUSTOMS and another

Constitutional Petition No.D-644 of 1986, decided on 28th March, 2011.

(a) Sales Tax Act (III of 1951)---

----S. 2(6)---Constitution of Pakistan, Art. 199---Constitutional petition challenging issuance of show-cause notice by authority---Main­tainability---Petition involving questions as to whether such notice was issued with lawful authority or not; and whether interpretation of S.2(6) of Sales Tax Act, 1951 made by authority was in accordance with law or not---Validity---Petitioner had questioned jurisdiction of authority and its action in issuing such notice was alleged to be prejudicial, unjust and mala fide---Petitioner had raised question with regard to issuance of such notice without having lawful authority---Constitutional petition was maintainable in circumstances.

MCB Ltd. v. Deputy Commissioner of Income Tax 2004 PTD 1901 rel.

(b) Sales Tax Act (III of 1951)---

----Ss. 2(6) & 3---Customs Act (IV of 1969), First Sched. PCT Heading No.73.22---Constitution of Pakistan, Art.199---Constitutional petition---Petitioner-company engaged in business of storage of molasses, edible oils and other liquids in bulk quantities---Fabrication and installation of storage tanks by petitioner for its own commercial use through an Engineering Firm on labour contract basis---Such tanks having average height of 55 feet and diameter ranging between 22 feet to 75 feet erected on concrete ring wall foundation in earth and superstructure firmly embedded in concrete foundations with bottoms laid and welded on well compacted sub-grade-Steel used in construction of such tanks ranging between 100 tons to 215 tons---Notice issued by authority demanding sales tax from petitioner on such fabricated storage tanks---Validity---Word "goods" as defined in S. 2(6) of Sales Tax Act, 1951 would mean all kinds of "movable property" other than actionable claim etc.---Such solid tanks constructed by specialized materials' could not be built by an ordinary contractor--Such tanks could neither be sold in market nor be moved in their original shape from their existing places of erection without dismantling or demolishing same, which would not leave them to be tanks---Term "goods" would mean something which could ordinarily be brought to market and sold---Such tanks could not be termed to be movable assets falling under definition of term "goods"-Tax was levied on sale of certain goods falling under ambit of Sales Tax Act, 1951---Case of revenue was not that petitioner after producing and manufacturing such tanks had ever sold them---Such tanks would not fall within definition of term "goods" as given in S. 2(6) of Sales Tax Act, 1951---High Court vacated impugned notice in circumstances.

Murree Brewery's case PLD 1972 SC 279; Nagina Silk Mills's case PLD 1963 SC 322; Sindh Employees Social Security's case PLD 1975 SC 450 (456-457); Lt. Col. Nawabzada Mohd. Amin Khan's case PLD 1961 SC 119; Kulsum Malik's case 1996 SCMR 710 (725); Gatron Industries's case 1999 SCMR 1072; Sher Shah Industries's case PLD 1982 Kar. 653; Amin Textile Mill's case 2000 SCMR 201; Muhammad Saleem's case 1997 SCMR 315 (321); Eduljee Dinshaw's case PLD 1990 SC 399 (413, 414); PLD 1990 SC 399 = 1990 PTD 155; Usmania Glass Sheet's case PLD 1971 SC 205; PLD 1962 SC 113; Collector of Customs v. Karachi; Bulk Storage and Terminal 2007 SCMR 1357; Colony Sarhad Textile Mills Ltd. v. Collector of Central Excise and Land Customs PLD 1969 Lah. 228 (235, 236, 237 C&D); Muhammad Arif Dar v. Income Tax Officer PLD 1989 SC 109; Muhammad Asim Kurd v. Assistant Commissioner-Cum-Returning Officer Karachi 1996 CLC 1772 (1776); AIR 1965 Guj. 215; Unreported judgment in C.P. No. 2605/.1994 ref.

Blacks Law Dictionary VIth Addition, Page No. 1014; Page No.750 of the Black's Law Dictionary; Defence Authority Club Karachi and 5 others v. Federation of Pakistan and others 2007 PTD 398; Sarwar and Company (Pvt.) Ltd. Lahore v. Collector Sales Tax Multan and others, 2006 CLD 162; Usmani Associates v. C.B.R. 2001 PTD 2982 and Addu Achiar v. The Custodian Evacuee Property, Hyderabad Deccan AIR 1953 Hyderabad 14 rel.

Muhammad Ali Sayeed for Petitioner.

Ms. Masooda Siraj for Respondents.

Date of hearing: 10th January, 2011.

2011 PTD 2128

[Sindh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

Messrs ALUMINUM PROCESSING INDUSTRIAL INTERNATIONAL (PVT.) LTD. through Manager

Versus

PAKISTAN through Chairman, Central Board of Revenue, Islamabad and 2 others

High Court Appeals Nos.445 and 453 of 2003, decided on 1st June, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss. 45A, 45B, 46 & 72---Decision or order passed by an Appellate Authority---Power of Board of Revenue to call for records and satisfy itself as to legality or propriety of such decision or order---Scope---Appellate Authority always worked independently without being influenced by any departmental authority---Proceedings before Appellate Court were always considered to be separate proceedings from normal and routine departmental proceedings---Board while exercising powers under S. 45A of Sales Tax Act, 1990 could not interfere in quasi-judicial proceedings of Appellate Authority or its judicial discretion as same would undermine or influence independence of Appellate Authority---Interference in order/decision of Appellate Authority by Board would amount to disturbing settled issues, where against the department, if having any grievance, could file appeal before Tribunal---Board had no jurisdiction to interfere in proceedings either culminated or pending before an Appellate Authority or Tribunal Principles.

Ch. Sir Muhammad Zafarullah Khan v. The Custodian of Evacuee Property, West Pakistan Karachi PLD 1964 SC 865;' Khan Trading Company, Gujranwala v. Collector of Customs, Excise and Sales Tax (Adjudication), Lahore 2002 CLC 705;. Messrs Flying Board and Paper Products v. Deputy Collector-II Directorate of_ Sales Tax and 3 others 2002 PTD 7; Messrs Muhammad Hussain v. Collector of Custom and 2 others 1991 MLD 1459; (1996) 103 Sales Tax Cases 26; Muhammad Ibrahim v. Group Captain Salehuddin and others 1987 SCMR 218; Iftikhar Hussain Shah and others v. Secretary M/o Defence, Rawalpindi and others 1991 SCMR 2193; AIR 1959 SC 219; PLD 1956 Kar. 178; Malik Jehangir Khan v. Banking Tribunal No.1, Karachi, Division Karachi 2002 CLC 1466; Nazmafk (Pvt.) Ltd. through Chief Executive v. Federation of Pakistan, through Secretary (Revenue Division/F.B.R.) 2009 PTD 1463; Ganga Properties v. Income Tax Officer (1979) 118 ITR 447; Commissioner of Income Tax Orissa v. Dhadi Sahu (1976) 105 ITR 56; Commissioner of Income Tax v. OM Sons (1979) 116 ITR 215; Additional Commissioner of Income Tax Karnataka v. M.Y. Chandigarh (1981) 128 ITR 256; Reckitt Benckiser Pakistan Ltd. v. Federation of Pakistan and others 2009 PTD 642; Commissioner of Income Tax Sukkur Zone v. Messrs Gatron (Industries) Ltd. Quetta 1998 PTD 2769; Assistant Director Intelligence and Investigation Karachi v. Messrs B.R Herman and others PLD 1992 SC 485; Khawaja Auto Cars" Ltd. v. Muhammad Yousuf 1991 SCMR 2223; Abbasia Coop. Bank v. Muhammad Ghaus PLD 1997 SC 3; Anisa Rehman v. P.I.A.C. 1994 SCMR 2232; Pak Land Cement Ltd. Karachi v. Central Board of Revenue 2007 PTD 1524; 2006 PTD 193(SIC); 1999 SCMR 1871 (SIC); Collector of Customs (Export) v. Messrs Chemitex Industries (Pvt.) Ltd. 2000 MLD .836; Central Insurance Company v. C.B.R. 1993 SCMR 1232 and R.A.. Rehman v. Federation of Pakistan 1988 SCMR 691 ref.

(b) Jurisdiction---

----Authority dealing with a matter must possess' jurisdiction to deal with same, and if such authority did not have such power, then initiation of entire proceeding would be liable to be quashed for being coram-non-judice and non-est in eyes of law.

Dr. Muhammad Farogh Naseem for Appellants.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 3rd May, 2011.

2011 PTD 2148

[Singh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

COMMISSIONER OF INCOME TAX, KARACHI

Versus

Messrs B.R.R. INVESTMENT (PVT.) LTD., KARACHI

I.T.R. No. 45 of 1996, decided on 13th, June, 2011.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 2(12), 2(16)(cc) [as inserted by Finance Act (VII of 1992)] & Second Sched. Cl.116---Modaraba Companies and Modarabas (Floatation and Control) Ordinance (XXXI of 1980), Ss. 14, 15 & 36---Modaraba Companies and Modaraba Rules, 1981, R.22---Capital gains derived from sale of Modaraba certificates prior to 30-6-1992---Taxability---Scope---Modaraba being a company and body corporate would squarely fall under definition of term "company" as defined in Income Tax Ordinance, 1979---Clause (cc) had been inserted in S.2(16) of Ordinance, 1979 through Finance Act, 1992 to remove confusion about status of Modaraba---Beneficial provisions of law would have retrospective effect, unless and until made prospective by their implication---Such amendment, was beneficial to taxpayer--Modaraba would be considered a company even prior to such amendment---Modaraba enjoyed status of company being a body corporate formed under Modaraba Companies and Modarabas (Floatation and Control) Ordinance, 1980---Income from sale of Modaraba certificates falling under Cl.116 of Second Sched. of the Ordinance was exempt from ambit of tax---Principles.

Commissioner of Income Tax v. Spring Field Secondary School Karachi 2003 PTD 1264 and Commissioner of Income Tax v. Messrs Lahore Cantt. Cooperative Housing Society 2009 PTD 799 distinguished.

Central Insurance Co. and others v. Central Board of Revenue 1993 SCMR 1232 rel.

(b) Interpretation of statutes---

----Beneficial provisions of law would have retrospective effect unless and until made prospective by their implication.

Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73 rel.

(c) Interpretation of statutes---

----Remedial and curative statutes are always retrospective in nature.

Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73 rel.

Ms. Jawaid Farooqui for Applicant.

Ms. Lubna Pervez for Respondent.

Date of hearing: 21st April, 2011.

2011 PTD 2161

[Sindh High Court]

Before Sarmad Jalal Osmany and Muhammad Athar Saeed, JJ

Messrs GHAZI TANNERIES LTD., KARACHI

Versus

COMMISSIONER OF INCOME TAX, CENTRAL ZONE `B', KARACHI

Income Tax Cases Nos. 3:4 and 20 of 1995, decided on 26th May, 2006.

(a) Income Tax Ordinance (XXXI of 1979)---

----S.32---Books of accounts produced in support of explanation of assessee-Burden of proof---Once such books were produced, onus would lie on Assessing Officer to examine and controvert such explanation with specified instances of its fallacy from such books.

Commissioner of Income Tax, Companies-III, Karachi v. Krudd Sons Ltd. 1994 SCMR 229 = 1994 PTD 174; Pima (Pvt.) Ltd., Karachi v. Commissioner of Income Tax, Companies-I, Karachi 1994 PTD 123; New Snow White Dry Cleaners, Karachi v. Commissioner of Income Tax (Eaast) Karachi 1985 PTD 315; Messrs Zafar Saleem Bros. Ltd., Karachi v. The Commissioner of Income Tax, Karachi 1984 PTD 225; Star Rolling Mills v. Commissioner of Income Tax PLD 1974 Note 129 at Page 189; Messrs Pakistan Oil Mills Ltd. Hyderabad v. The Commissioner of Income Tax (West), Karachi 1985 PTD 320; Muhammadi Textile Mills Ltd. v. Commissioner of Income Tax (East), Karachi 1984 PTD 239 and Unreported judgment dated 12-8-2005 passed in I.T.A. No.493 of 1999 ref.

(b) Income Tax Ordinance (XXXXI of 1979)---

----Ss.32(3) & 136---Trading accounts of assessee, rejection of---Reference to High Court---Maintainability---Question of rejection of such accounts being mixed question of law and facts could be adjudicated upon by High Court.

Commissioner of Income Tax, Companies-III, Karachi v. Krudd Sons Ltd. 1994 SCMR 229 1994 PTD 174 rel.

Iqbal Salman Pasha for Petitioner.

Jawaid Farooqui for Respondent.

Nasrullah Awan, Advocate.

Dates of hearing: 13th April, and 11th May, 2006.

2011 P T D 2175

[Sindh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

PAKISTAN TELECOMMUNICATIONS CORPORATION through Deputy General Manager BLT (South), Karachi

Versus

FEDERATION OF PAKISTAN through Secretary, Finance Central Board of Revenue and 2 others

Constitutional Petitions Nos.D-1396 and D-1397 of 1995, decided on 5th April, 2011.

Customs Act (IV of 1969)---

----Ss. 29, 79 & 88(5)---Constitution of Pakistan, Art.199---Constitutional petition---Refund claim after five months of clearance of goods---Importer's plea that value of imported goods declared in Bill of Entry on higher side was due to error of supplier, thus, he had inadvertently paid higher duties than what was actually due from him---Refusal of Customs authorities to accept such claim---Validity---Amendment of Bill of Entry was permissible under S. 88(5) of Customs Act, 1969 before completion of warehousing but not after clearance of goods---Importer, in the present case, had not only removed/cleared goods, but had consumed major portion thereof---Whether imported goods were software or not, was a matter of inquiry and finding of fact---Whether incorrect description of goods given in Bill of Entry was due to importer's inadvertence or mistake of supplier, was a question of fact and matter of record---High Court, in exercise of constitutional jurisdiction, could not decide such questions of fact---Refund claim was hit by provision of S. 29 of Customs Act, 1969---Constitutional petition was dismissed in circumstances.

PIDC v. Federation of Pakistan 2003 PTD 2241; Shahtaj Sugar Mills v. Addl. Secretary, Ministry of Finance, Government of Pakistan 2009 SCMR 1421; Ghulam Abbas v. C.B.R. 1994 CLC 1612; Pfizer Lab. v. Federation of Pakistan and others PLD 1998 SC 64; H. Shiekh Nooruddin and Sons Ltd. v. C.B.R. PLD 1989 Kar. 601; Messrs Baba Khan v. Collector of Customs 2000 SCMR 678; 2002 PTD 1122 and Government of Pakistan and others v. Sandoz Pakistan Ltd. 2006 SCMR 1403 rel.

H. Shiekh Nooruddin and Sons Ltd. v. C.B.R. PLD 1989 Kar. 601 rel.

Tanveer Ashraf for Petitioner.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 10th March, 2011.

2011 P T D 2186

[Sindh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

COMMISSIONER OF INCOME TAX and others

Versus

Messrs BADRUDDIN and others

I.T.Cs. Nos.132, 154 to 156, 181 of 2002 and 124 to127 of 2003, decided on 28th March, 2011.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 50(4) & 80-C---Stevedoring services rendered during assessment years 1996-97 to 2000-2001-- Deduction of tax at source on such Stevedoring receipts---Treating such deduction, as full and final discharge of tax liability of assessee for the assessment years---Scope---Present case related to period when legislature had not provided definition of term "stevedoring services", thus, ordinary dictionary meaning would be applied thereto during its pre-defined period--Case had to be decided in accordance with law prevalent at relevant time--- Such deductions relating to predefined period of term "stevedoring services" could not be considered as full and final discharge of tax liability---Provisions of S. 80-C of Income Tax Ordinance, 1979 would not apply to such deductions -- Principles.

Premier Mercantile Services v. Commissioner of Income Tax 97 Tax 89 ref.

(b) Taxation---

----Case is to be decided in accordance with the' law prevalent at relevant time.

(c) Interpretation of statutes---

----Fiscal statute---Central Board of Revenue (C.B.R.), powers of---Scope---C.B.R. could not interpret provisions of fiscal law--Illustration.

Central Assurance 68 Taxation 86 rel.

Javed Farooqui for Applicant (in I.T.Cs. Nos.132, 154 to 156, 181 of 2002 and 124 to 127 of 2003).

Muhammad Idrees Sukhera for Respondents (in I.T.Cs. Nos.132, 154 to 156, 181 of 2002.

None for Respondent (in I.T.Cs Nos. 124 to 127 of 2003).

Date of hearing: 10th March, 2011.

2011 PTD 2229

[Sindh High Court]

Before Mushir Alam, C.J. and Syed Hasan Azhar Rizvi, J

LOTTE PAKISTAN PTA LTD. Through Chief Financial Officer and Company Secretary

Versus

FEDERATION OF PAKISTAN through Secretary Ministry of Finance, Islamabad and 4 others

Constitutional Petition No.D-1487, 1488 and Miscellaneous Nos. 6962, 6963 of 2011, decided on 21st June, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

---Ss. 2(68), 4A [as inserted by Income Tax (Amendment) Ordinance (IV of 2011)] & 74---Constitution of Pakistan, Art. 199---Constitutional petition---Levy of surcharge @ 15% of income tax payable by every taxpayer under Income Tax Ordinance, 2001---Petitioner's plea that closing of its accounts on 31-12-2010 for purposes of filing returns would denote as Tax Year 2011, thus provisions of S.4-A of Income Tax Ordinance, 2001 would not apply to him---Validity---Impugned surcharge was levied for 3-1/2 months w.e.f. 15-3-2011 to 30-6-2011 and was not made applicable to tax year 2010 and prior thereto---Provisions of S.4-A of Income Tax Ordinance, 2001 were silent qua applicability thereof either to taxpayer whose tax year started from 1st July and ended on 30th June or those whose tax year started other than normal tax year---Normal tax period would be a period of twelve months ending on 30th June---Permission granted to petitioner to submit return on 1st January of each year was only to accommodate him and not for purposes to evade payment of income on such count--Impugned surcharge was levied for rehabilitation of flood affectees and would apply to every taxpayer using either normal tax year or special tax year---High Court dismissed constitutional petition in circumstances.

(b) Constitution of Pakistan---

----Art.199---Constitutional jurisdiction of High Court---Object and Scope.

It is necessary for the court while' exercising constitutional jurisdiction to bear in mind that the real purpose of entertaining such application is the vindication of the rule of law effective access of justice to the economically weaker class and meaningful realization of the fundamental rights. The directions and commands issued by the court of law in the writ jurisdiction are for the betterment of the society at large and not for benefiting any individual. But if the court finds that in the garb of writ petition actually an individual's interest is sought to be carried out or protected, it would be the bounded duty of the court not to entertain such petition.

Usman Alam and Anwar Kashif Mumtaz for Petitioners.

Kafeel Ahmed Abbasi for Respondents.

Date of hearing: 27th May, 2011.

2011 P T D 2275

[Sindh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

COMMISSIONER OF INCOME TAX

Versus

SEMEA, KARACHI

Income Tax Appeals Nos.256 to 259 of 1999, decided on 21st June, 2011.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 16(2), 24(i) & 136(1)---Reference to High Court---Perquisites---Salary---Cash awards paid by assessee to its employees on basis of their individual performance---Order of Assessing Officer treating such awards as perquisites---Order of Appellate Authority treated such awards as part of perquisites for same having been paid to employees not in terms of appointment---Order of Tribunal treating such awards as part of salary and not as perquisites---Validity---Record showed that such awards were paid on basis of individual performance and not in accordance with terms of employment---Term "salary" as defined in S.16 of Income Tax Ordinance, 1979 included a number of payments to be considered as part of salary---Wherever term "include" was used, intention of legislature would be to give same widest possible meaning---Definition of term "salary" was wide enough, thus, such awards, though not included therein, would fall therein---Such awards had been paid as incentive to employees, which was exclusive decision of management, thus, same could not be considered to be perquisite to an employee---Such award would fall under S. 16(2)(a)(ii) as part of salary and not as part of perquisites--- High Court upheld order of Tribunal in circumstances.

(b) Interpretation of statutes---

----Term "include" used in definition clause of a statute---Scope---Intention of legislature by using such term would be to give same a widest possible meaning.

(c) Income Tax Ordinance (XXXI of 1979)---

---S. 23 & Third Sched.---Expenditure incurred on repair, renovation and alteration---Nature---Such expenditure, if not resulted in creation of any capital asset, but appeared to be that of current repair only would usually fall under head of current repair and would be treated as capital expenditure---Principles.

Girdhari Dass and sons v. Commissioner of Income Tax (1976) 105 ITR 339; Commissioner of Income Tax, East Pakistan, Dacca v. Gulistan Cinema Company, Dacca (1968) 17 Taxation 209); I.T.A. No.39/HQB of 1989-90; 1966 PTD (Trib.) 80; Sui Southern Gas Company Ltd. v. Commissioner of Income Tax 2000 PTD 3741 and Commissioner of Income Tax v. Messrs Excide Batteries of Pakistan Ltd. 1978 PTD 191 ref.

Jawwed Farooqui for Appellant.

Iqbal Haider for Respondent.

Date of hearing: 19th May, 2011.

2011 P T D 2325

[Sindh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

Malik GUL MUHAMMAD AWAN and others

Versus

FEDERATION OF PAKISTAN through Secretary Ministry of Finance and 7 others

H.C. Appeals Nos.98 and 128 of 2009, decided on 24th June, 2011.

(a) Sales Tax Act (VII of 1990)---

----Ss.35-A & 48---Suit for recovery of Rs.81.82 millions as damages from officials of Sales Tax Department---Imposition of embargo on plaintiff's factory due to non-payment of tax---Loaded vehicle found by such official while leaving plaintiff's factory without payment of tax---Confiscation of such vehicle and imposition of penalty by authority---Plaintiff's plea that he was bringing some material to his factory in such vehicle, which was forcibly taken over by such officials, who detained him in their Headquarter whole night, where they assaulted, maltreated, manhandled and blind folded hint---Appellate Tribunal set aside such confiscation order while condemning treatment meted out by such officials to plaintiff being a respectable and educated person---Degree for Rs. 1,00,000 passed by trial Court against such official jointly and severally---Validity---Plaintiff had made out a case of maltreatment against him as manner and method in which he was treated by such official was an inhuman activity--Demand of outstanding tax would not give authority and license to such official to maltreat or misbehave with taxpayer---Such official had taken law in their hands with mala fide intention---Plaintiff had based his claim upon damages and special damages worked out on basis of expected losses only and without bringing any exact amount of losses sustained by him---Damages claimed by plaintiff were exaggerated and he failed to prove same through evidence---Suit for damages in absence of actual losses suffered by plaintiff could not be decreed---Plaintiff had suffered mental shock and agony---Such official entrusted with collection of taxes could not resort to harassing, insulting and torturing taxpayers illegally for their personal gratification---Damages awarded to plaintiff by trial Court, though not being complete relief for agony suffered by him, would act as deterrent for such official not to act so future---High Court dismissed appeal while directed such official to pay damages awarded by Trial Court within thirty days, otherwise plaintiff would be entitled to mark up at Bank rate till its realization.

Haji Salman Ali and Co. v. Province of Balochistan PLD 1994 Quetta 13 rel.

(b) Tort---

----Damages, awarding of---Discretion of Court exercisable in view of facts and circumstances of each case---Principles.

(c) Tort--

----Damages, claim for---Essentials---Exact amount of damages suffered by plaintiff and its proof being essential for decreeing such suit---Principles.

If some damages have been caused to a person the same are to be assessed in the exact amount and proved to this extent. Scanty and the claims based on no evidence should hardly entertainable. The courts do not decree those types of damages the exact amount of which cannot be proved. Though damages to be awarded by the rule of thumb and exact amount is not determinable but person making the claim is legally obliged under the law to claim a sum of money as early as possible to the amount of damages suffered by him:

Damages for mental torture, nerves shocks, the losses of livelihood for family etc., cannot be measured in terms of money and as no standard or method can be laid down in this regard, the claims are, therefore to be worked out on a rational basis and not upon the working submitted by a person.

Haji Salman Ali and Co. v. Province of Balochistan PLD 1994 Quetta 13 and Sufi Muhammad Ishaque v. Metropolitan Corporation Lahore PLD 1996 SC 737 rel.

(d) Tort---

----Damages, claim for---Burden of proof---Person claiming such damages would be bound to prove same through evidence, otherwise, his claim would not be entertainable.

Muhammad Ashraf v. Nawabuddin PLD 1951 Lah. 283 and Muhammad Akram v. Farman Bibi PLD 1990 SC 28 rel.

Malik Gul Muhammad Awan Appellant in person (in HCA No.98 of 2009 and Respondent in HCA No.128 of 2009).

Mrs. Masooda Qureshi for Respondents in HCA No.98 and for Appellant in HCA No.128 of 2009).

Date of hearing: 26th May, 2011.

2011 P T D 2543

[Sindh High Court]

Before Muhammad Athar Saeed and Munib Akhter, JJ

Messrs ADAM SUGAR MILLS LTD., KARACHI

Versus

COMMISSIONER OF INCOME TAX, COMPANIES-II, KARACHI

Income Tax Reference Applications Nos.494, 495 of 2006 27 of 2006 and 341, 342 of 2010, decided on 2nd December, 2010.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 2(44), 9, 10, 80-D, 80-DD & First Sched., Part-III, Para-C---Levy of surcharge under Para-C of Part-III of First Sched., of Income Tax Ordinance, 1979 on companies paying minimum tax under S.80-D or S.80-DD thereof---Validity---Word "total income defined in S.2(11) of Income Tax Ordinance, 1979 was not mentioned in S.80-D(1) thereof, rather declared turnover would be deemed income of a company---Where tax including surcharge after computing found to be less than 0.5 percent of turnover, then taxpayer would fall within ambit of S.80-D of Income Tax Ordinance, 1979 and tax paid thereunder would be minimum and final tax liability not liable to levy of surcharge---Presumptive tax would be final tax liability in cases of taxpayers falling under presumptive tax regime---Minimum tax would not be final tax liability and after assessment, if tax on total assessed income found to have exceed tax payable under S. 80-D of Income Tax Ordinance, 1979, then such case would be excluded from its ambit and would be assessed under normal tax rates---Minimum tax would be compared with tax computed in accordance with provisions of Income Tax Ordinance, 1979---Total income would include all categories of taxes included in comparative tax computed on total income---Surcharge was already included in such comparison, thus, same would be deemed to be included in 0.5 per cent of turnover, whereupon no further surcharge under Para-C of First Sched., of Income Tax Ordinance, 1979 could be levied---Principles.

2002 PTD (Trib.) 2662; 2006 PTD 1189; 2009 PTD (Trib.) 782; Abdul Sattar Noor Muhammad and Co. v. Government of Pakistan and others 1999 SCMR 2345; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan 1997 PTD 1555 and Baig Spinning Mills Ltd. v. Federation of Pakistan and others 2005 PTD 1102 ref.

Dawood Corporation (Pvt.) Ltd. Commissioner of Income Tax Appeal-II, Karachi 2006 PTD 148 and Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan 1997 PTD 1555 rel.

Arshad Siraj for Applicants (in I.T.RAs. Nos.494 and 495 of 2006).

Miss Lubna Perwez for Applicant (I.T.R.A. No.27 of 2007).

Ali Mumtaz Sheikh for the Applicants Commissioner (in I.T.R.As. Nos. 341 and 342 of 2010).

Iqbal Salman Pasha for Respondents (in I.T.R.As. Nos. 341 and 342 of 2010).

Jawaid Farooqui for Respondents (in I.T.R.As. Nos. 27 of 2007 and 494 and 495 of 2006).

Date of hearing: 14th October, 2010.

2011 P T D 2577

[Sindh High Court]

Before Munib Akhtar and Zahid Hamid, JJ

COLLECTOR OF CUSTOMS, KARACHI

Versus

MAZHAR-UL-ISLAM

Special Customs Reference Application No.39 of 2010, decided on 7th January, 2011.

(a) Customs Act (IV of 1969)---

----Ss. 32, 32-A, 79, 168(2) & 180---Seizure of goods for' mis-declaration and short payment of tax---Composite notice to importer after 76 days of such seizure for showing cause for short-levy of duty and civil liability of penalty and confiscation of goods---Importer's plea that show cause notice was time barred as same ought to have been issued within two months of such seizure, thus, all subsequent orders passed on its basis were void ab initio---Validity---Two separate consequences would flow from alleged mis-declaration, one of recovery of short or non-levied duty and other of civil and/or criminal liability to which person guilty of offence might be liable---Section 32 of Customs Act, 1969 dealing with such first consequence provided its own period of limitation for issuance of a show-cause notice---Show-cause notice concerning such first consequence issued in present case was within time as fixed under S. 32 of Customs Act, 1969---Section 180 of Customs Act, 1969 related with such secondconsequence of civil liability of penalty and/or confiscation imposable by issuing a show cause notice thereunder without providing any time limit therefor--Section 168(2) of Customs Act, 1969 would apply only if goods had been seized under subsection (1) thereof and no show cause notice had been issued within two months of seizure-Impugned show cause notice could not be regarded as time barred in relation to either alleged short levied duty under S. 32 of Customs Act, 1969 or imposition of civil liability of confiscation and penalty under S. 180 thereof.

Mrs. Afroz Shah v. Pakistan and another 2007 PTD 167; Zeb Traders v. Federation of Pakistan and others 2004 PTD 369; ' Muhammad Razi v. Collector of Customs and others 2003 PTD 2821; Khannan Jan and others v. Deputy Collector and others PTCL 1983 CL 184; Khurram Jamal v. Collector of Customs (Appraisement) 2007 PTD 131; Sikandar and Brothers v. Government of Pakistan and another PLD 1986 Kar. 373 and Joint Secretary, Central Board of Revenue (Customs) and others v. Raja Nazar Hussain and another 1991 SCMR 647 rel.

(b) Customs Act (IV of 1969)---

----Ss. 32(1) & 138---Mis-declaration A, of goods and claim of inadvertence/misdirection, determination of---Scope---For a finding of mis-declaration under S. 32(1) of Customs Act, 1969, all elements specified therein must be found to exist---Documents or statements found to be false in any material particular would negate importer's claim of inadvertence or misdirection---Factual inquiry would be required to establish importer's knowledge or belief about goods declaration made by him to be false in any material particular---Principle.

(c) Customs Act (IV of 1969)---

----S. 196---Reference to High Court---Scope---Findings of fact could not be challenged before High Court.

Shakeel Ahmed along with Ilyas Ahsan for Applicants.

Departmental Representative for Applicant.

Zia-ul-Hasan for Respondent.

Date of hearing: 20th October, 2010.

2011 P T D 2668

[Sindh High Court]

Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ

Messrs DEWAN FAROOQUE MOTORS LIMITED, KARACHI

Versus

COMMISSIONER OF INCOME TAX, LEGAL DIVISION, KARACHI

I.T.R.A. No.966 of 2008, decided on 28th March, 2011.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss 80-D(1) & 107-AA---Tax credit for investment admissible under S.107-AA of Income Tax Ordinance, 1979 claimed to be adjusted against minimum tax payable by taxpayer under S. 80-D thereof---Validity---Provision of S. 80-D of Income Tax Ordinance, 1979 starting with non obstante clause had imposed minimum tax on certain persons, thus, any deduction of any allowance, rebate or credit therefrom, would definitely be a defiance of law---Intention of law makers by using such clause would be to oust other provisions of law, which were inconsistent with provisions of a section starting with such clause---Such adjustment would defeat objects of law makers with which S.80-D of Income Ordinance, 1979 was introduced---Words "credits or rebates in tax" mentioned in Expln. to S. 80-D(1) of Income Tax Ordinance, 1979 would include tax credit pertaining to S. 107-AA also---Provision of S.80-D of the Ordinance, till deletion of its non obstante clause would enjoy overriding effect over provision of S. 107-AA introduced subsequently---Such claimed adjustment would not be available to taxpayer in circumstances.

2009 PTD 654; 2009 PTD 1187 and 2005 PTD 259 ref. Elahi Cotton Mills v. CIT PLD 1997 SC 582 rel.

(b) Interpretation of statutes---

----Section of a statute starting with non-obstante clause---Effect---Intention of law makers by using such clause would be to oust other provisions of law, which were inconsistent with provisions of a section starting with such clause.

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss.134 & 136---Decision of Appellate Tribunal---Not binding upon High Court.

Iqbal Salman Pasha for Applicant.

Nasrullah Awan for Respondent.

Date of hearing: 22nd March, 2011.

2011 PTD 2708

[Sindh High Court]

Before Mushir Alam, C J and Salman Hamid, J

Messrs E.M. OILS MILLS AND INDUSTRIES LTD. through Director

Versus

COMMISSIONER OF INCOME TAX, AUDIT DIVISION II, COMPANIES III, KARACHI

Income Tax Reference Application No.597 of 2009, decided on 17th May, 2011.

(a) Income Tax Ordinance (XLIX of 2001)---

----S.177---Selection of case for audit---Scope---Commissioner could select any case for audit after recording reasons in writing, if upon examination of a statement of accounts, he came to- conclusion that same did not depict true state of affairs---Legal requirement would stand duly adhered to once such exercise was done by Commissioner and notice thereof sent to taxpayer.

(b) Qanun-e-Shahadat (10 of 1984)---

----Arts. 117 & 118---Burden of proof---Scope---Person asserting a fact would be bound to prove same.

(c) Income Tax Ordinance (XLIX of 2001)---

---Ss. 109, 122 & 177---Selection of completed assessment for audit---Addition of profit on disposal of land by assessee---Assessee's plea that he was not provided sufficient time to produce complete details of such sale and that Taxation Officer had proceeded in haste---Remand of case by Appellate Tribunal to Taxation Officer for its decision afresh after considering evidence produced by assessee---Reference application against such remand order---Maintainability---No assessment order was in field, rather same was yet to be finalized---Such reference for being premature and misconceived was dismissed in circumstances.

The Commissioner of Income Tax v. Electronic Industries Ltd. 1988 PTD 111 rel.

Anwer Kashif Mumtaz for Applicant.

Jawaid Farooqi for Respondent.

Mohsin Imam, Advocate.

Date of hearing: 17th May, 2011.

2011 P T D 2714

[Sindh High Court]

Before Aqeel Ahmed Abbasi, J

FAISAL ELAHI and another

Versus

THE STATE

Special Criminal Bail Applications Nos. 5, 6, 7, 8, 9, 12, 14, 15, 16 and 20 of 2011, decided on 11th August, 2011.

Sales Tax Act (VII of 1990)---

----Ss.2(37) & 33---Criminal Procedure Code (V of 1898), S. 497(2)---Tax fraud---Bail, grant of---Further inquiry---No action had been taken against the registered person i.e. end of users who allegedly claimed input adjustment of tax based upon fake invoices allegedly prepared and issued by accused person---No action had been taken against tax officials who abated and connived in the alleged tax fraud--First Information Report or interim challan 'did not mention about preparation of the mashirnamas at the spot, and associating two independent private witnesses as required under S.103, Cr.P.C.---Alleged offence did not fall within the prohibitory clause of S.497, Cr.P.C. whereas punishment under S.33 of Sales Tax Act, 1990 was five years or fine or both, which could be determined after taking evidence and on conclusion of the proceedings---Investigation had been completed and accused were no more required for further investigation---Trial had not commenced even after a lapse of considerable period of seven months from their arrest, which reflected upon the mala fide of the prosecution---Accused had been able to show that the prosecution story could not be treated as free from doubt and the matter required further inquiry---Accused had no previous history, whereas the alleged confessional statement before the Police in the absence of any other connecting material could not be given due weight at bail stage---Bail was granted.

Akhtar Zaman Khan v. The State 2010 YLR 804; Atta-ul-Haq v. The State 2006 MLD 1901; Masood and others v. The State PLD 2005 Pesh. 150; Arshad Mahmood v. The State 1985 PCr.LJ 2048; Zafar Iqbal v. Muhammad Anwar 2009 SCMR 1488; Syed Amir Ahmed Hashmi v. The State PLD 2004 Kar. 617; Muhammad Nadeem Siddiqui v. The State 2008 YLR 2666; Muhammad Aslam v. The State Special Criminal Bail Application No. 19 of 2001 (unreported); Special Criminal Bail Nos.18 and 19 of 2003; Tariq Bashir and 5 others v. The State PLD 1995 SC 34; Zafar Iqbal v. Muhammad Anwar and others 2009 SCMR 1488; Subhan Khan v. The State 2002 SCMR 1797 and Saeed Ahmed v. The State 1996 SCMR 1132 rel.

Naseem Malik v. The State 2004 SCMR 283; Shah Muhammad v. The State 1996 SCMR 981; Haji Muhammad Nazar 'v. The State 2008 SCMR 807; Muhammad Siddiqui v. Imtiaz Begum 2002 SCMR 442; Imtiaz Ahmed v. The State PLD 1997 SC 545 and Pir Bakhsh v. The State 1999 PCr.LJ 111 distinguished.'

Muhammad Ilyas Khan, Raja Sikandar Khan Yasir, Khaleeq Ahmed, Shamim Akhtar and Aqeel Ahmed for Applicants.

Rana Muhammad Shamim, Muhammad Qasim, Standing Counsel along with I.O. Najeebullah Jafri and Farhatullah Jafri for the Respondent.

Dates of hearing: 4th and 5th August, 2011.

2011 PTD 2760

[Sindh High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

SAIFUDDIN

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division, Ministry of Finance, Islamabad and 2 others

Constitutional Petition No. D-1337 and C.M.A. No.5271 of 20.10, decided on 8th August, 2011.

(a) Customs Act (IV of 1969)---

---Ss. 18(2)(3), 31 & 131---Constitution of Pakistan Art. 199---Constitutional petition---Copper and aluminum scrap, export of--Imposition of regulatory duty on such goods after filing of amended declaration of goods---Demand of such duty by authority on ground of change in vessel for shipment of such goods in amended declaration--Validity---Section 31 of Customs Act, 1969 for purposes of determining rate of duty on goods exported had adopted only one element of S.131 thereof i.e. goods declaration, thus, all other remaining elements of S.131 would not apply to S. 31 thereof---Amended goods declaration not having any material change in goods was necessitated due to subsequent change in vessel on which such goods were to be exported---For purposes of S. 31 of Customs Act, 1969, except correct and complete particulars of goods to be exported, a substitution/amendment/revision of any other information in goods declaration would not be material and relevant---Good declaration had been filed prior to imposition of such duty, thus, petitioner was not liable to such duty---High Court quashed impugned demand in circumstances.

Al-Samrez Enterprise v. Federation of Pakistan 1986 SCMR 1917 ref.

(b) Customs Act (IV of 1969)---

----S. 18 [as substituted by Finance Act, 2005]---Regulatory duty on exported goods, imposition of---Conflict between provisions of S.18(2) & (3) of Customs Act, 1969---Effect;--Provision of S. 18(2) of Customs Act, 1969 for being primary legislation would have primacy over provision of S. 18(3) thereof for being subordinate legislation---Provision of S. 18(2) of Customs Act, 1969 would act as a limitation on power of Federal Government to impose such duty under S.18(3) thereof---If exporter altered his position to his detriment prior to imposition of such duty or filed goods declaration after imposition of such duty, then such duty could not be imposed on him---Principles.

(c) Interpretation of statutes---

----Fiscal statute---Liability of a. taxpayer to pay any tax must come with ambit of charging section clearly and unambiguously---When such liability was not so included and especially when same was omitted, then there could be no levy of and no liability to pay tax.

(d) Interpretation of statutes---

----Redundancy of a statutory provision---Not imputable to legislature---Principles.

Redundancy is not to be lightly imputed to the legislature. If at all a meaning can be reasonably assigned to a statutory provision that would otherwise be rendered purposeless, such meaning should be adopted.

(e) Interpretation of statutes---

----Statutory provisions should be harmoniously interpreted so that any conflict is minimized or eliminated.

(f) Estoppel---

----Promissory estoppel, doctrine of---Scope---Such doctrine is judicially evolved subject to its own limitation and exceptions i.e. there can be no estoppel against statue.

(g) Customs Act (IV of 1969)---

----Ss. 18, 31 & 131---Constitution of Pakistan, Art. 199---Constitutional petition---Copper and aluminum scrap, export of---Contract for supply of such goods concluded prior to imposition of regulatory duty thereon---Demand of regulatory duty by authority on basis of amended goods declaration filed due to change in vessel for its shipment---Validity---Petitioner's contract could not be made liable to such duty regardless of fact whether goods declaration was filed on or after date of imposition of such duty---High Court quashed impugned demand in circumstances.

Amer Raza Naqvi for Petitioner.

Haider Iqbal Wahniwal for Respondent.

Dates of hearing: 19th August, 2010 and 9th May, 2011.

2011 PTD 2837

[Sindh High Court]

Before Munib Akhtar and Muhammad Athar Saeed, JJ

COLLECTOR OF CUSTOMS, KARACHI

Versus

Messrs POWER ELECTRONIC PAKISTAN (PVT.) LTD., LAHORE

Special Customs Reference Application No.105 of 2009, decided on 26th November, 2010.

Customs Act (IV of 1969)---

----Ss. 19, 25, 32 & 196---Determination of customs value of goods---Misdeclaration---Exemption---Reference application---Respondents had imported Automatic Circuit Breakers having voltage of 15 KV and '1eclared the same under PCT Heading 8536.2010 and claimed exemption---Department contended that said goods fell under PCT Heading 8535.2110, on which rate of customs duty was 20% and that the importers had deliberately misdeclared the PCT Code---Comparison of two PCT Headings in dispute, had shown that those could be misinterpreted, and on the basis of such misinterpretation, the goods in question could be declared under any of the two PCT Headings---Alleged misdeclaration was proved to be not intentional and deliberate and said Headings could fall within the ambit of exemption---If claim of exemption in good faith was dis-allowed, penal action could not be taken for the lesser payment of taxes---Decision of Appellate Tribunal on the point was unexceptionable and no interference was called for by the High Court.

State Cement Corporation of Pakistan v. Collector of Customs and others 2002 MLD 180 rel.

Ghulam Haider Shaikh along with M. Ilyas Ehsan for Applicants.

Junaid Ghaffar and Darvesh K. Mandhan for Respondents.

2011 P T D 2849

[Sindh High Court]

Before Irfan Saadat Khan and Muhammad Athar Saeed, JJ

Messrs PAKISTAN TELEPHONE CABLES LTD. through Company Secretary

Versus

FEDERATION OF PAKISTAN through Secretary Ministry of Finance and 3 others

Special Customs Reference Applications Nos.249, 250, 251 and 252 of 2008, decided on 15th March, 2011.

Customs Act (IV of 1969)---

----S. 196---Reference application---Principle of mutatis mutandis---Applicability---Scope---No independent order-in-original was passed in case of the applicants, but order passed in another case, was mutatis mutandis applied to their cases---Tendency of the Customs Authorities to finalize the cases on the basis of the concept of mutatis mutandis was depreciated---Customs authorities were supposed to pass separate orders in each case---Litigant had a right that his case should be disposed of on its own factual position of his case and not on the factual position of the case of any other litigant, despite the position that the facts would be the same---Orders of the lower court were set aside and the matters were remanded to the adjudicating authority to pass a speaking order afresh by independently stating the facts of each case giving both the parties an opportunity of being heard.

Junaid Ghaffar for Applicant.

Raja Muhammad Iqbal for Respondent.

2011 P T D 2853

[Sindh High Court]

Before Munib Akhtar and Muhammad Athar Saeed, JJ

COLLECTOR OF CUSTOMS

Versus

Messrs QASIM IRON MERCHANT

Special Customs Reference Application No.124 of 2009, decided on 1st September, 2010.

Customs Act (IV of 1969)---

----Ss. 25, 32 & 196---Determination of customs value of goods---Misdeclaration---Reference application---Respondent had imported consignment of steel and declared the same to be of secondary quality steel which was classified under PCT Code 7225.1900 on which duty was leviable at 5%---Department collected only one sample from four containers and sent it for test to the Laboratory---Contents of 'silicon' in that sample as per report were 0.58%---Case for misdeclaration was made against the importer and customs duties were imposed under the PCT Code 7209.1510---Minimal difference in the proportion of silicon in the consignment imported by the importer, would not make it a case of misdeclaration, because it could be a difference of which the importer was not aware; and had in good-faith classified it under PCT Heading 7225.1900 and paid duties thereon---Such a minimal difference having occurred in testing of one sample, getting the samples drawn from other containers for testing was obligation of the department instend of arriving at any conclusion---Minimal difference that had occurred in the present case, could be considered to be within margin of error---Case being not of misdeclaration, in view of such a minimal error, and no further test having been gotten done by the department, duties were payable under Heading 7225.1900 and not under PCT Heading 7209.1500---Order accordingly.

Zain A. Jatoi for Applicant.

Junaid Ghaffar Advocate along with Darvesh Mandhan for Respondent.

2011 P T D 2861

[Sindh High Court]

Before Muhammad Athar Saeed and Mushir Alam, JJ

Messrs INTERNATIONAL INDUSTRIES LTD.

Versus

COLLECTOR OF CUSTOMS and 2 others

Customs Reference No.113 and C.M.A. No.929 of 2008, decided on 28th August, 2010.

Customs Act (IV of 1969)---

---Ss. 25-A, 25-D & 196---Determination of customs value---Powers of Member (Technical) to decide question of law---Reference application--Prima facie, a matter of law was adjudicated upon by the Member (Technical) sitting single---Validity---Member (Technical) sitting singly, had no jurisdiction to decide upon question of law and could assume such jurisdiction---Such question though had not been proposed, but being a jurisdictional question, High Court could frame a fresh .question and answer the same---High Court framed question afresh and answered the same in negative---Consequently impugned order was set aside and case was remanded to the Appellate Tribunal to place before an appropriate Bench and to decide the appeal preferably within a period of 60 days after giving both the parties an opportunity of being heard.

Muzammil Ahmed v. Collector of Customs 2009 PTD 266 rel.

Junaid Ghaffar for Applicant.

Raja Muhammad Iqbal for Respondents.

2011 PTD 2871

[Sindh High Court]

Before Muhammad Athar Saeed and Muhammad Ali Mazhar, JJ

SULTAN AHMAD SIDDIQUI and 12 others

Versus

PROVINCE OF SINDH through, Chief Secretary, Government of Sindh and 3 others

Constitutional Petition No.D-2325 of 2009, decided on 27th September, 2011.

(a) Transfer of Property Act (IV of 1882)---

----Preamble---Transfer of property---Nature of transaction---Principle---Where statute requires that particular kind of transfer should be effected by particular kind of instrument, such provision must be enforced with stringency---Court must give effect to the Act and must judge the particular transaction according to its provisions.

(b) Transfer of Property Act (IV of 1882)---

----S. 105-"Lease"-Essential elements.

Following are the essential elements constituting a lease:

(a) right must be one as to immovable property;

(b) right must be that of enjoyment of immovable property;

(c) there must be a transfer of such right;

(d) right of transfer is an interest in property;

(e) transfer must be made for a certain time express or implied, or in perpetuity;

(f) transfer must be one for consideration; and

(g) consideration must be of particular kind namely, premium or rent, as defined by section either or both of them.

Essential feature of lease is transfer of interest to enjoy property with exclusive possession given to transferee of the property and conveyed in consideration of price paid or promised etc.

(c) Finance Act (V of 1989)---

----S. 7(2)(CA)(a)(ii)---Transfer of Property Act (IV of 1882), S. 105---Constitution of Pakistan, Art.199---Constitutional petition--Lease deed--Capital Value Tax, levy of---Petitioners assailed levy of Capital Value Tax on their plot at the rate of Rs.50/- per square yard of the landed area, on sub-lease deed executed in their favour---Validity---For all intents and purposes, consideration for granting lease was a price paid which was subsequently defined and called premium, therefore, for effecting transaction of lease of immovable property, only three indispensable components were required to be fulfilled, i.e. the "lessor", "lessee" and consideration was the "price paid" which was called premium---In order to decipher document of lease, it was essential to perceive what consideration had been made known in the document of lease itself including its tenure---Sub-lease in question granted in favour of petitioners was for a period of 99 years, which was in fact a lease in perpetuity and lessor had clearly incorporated consideration which was occupancy value and/or price paid by sub-lessee to lessor before execution of sub-lease in their favour---Document of lease in question endowed with and imparted record on which petitioners had already paid Capital Value Tax at the rate of 2%, therefore, petitioners were not accountable to pay Capital Value Tax on their plot at the rate of Rs.50 per square yard of the landed area---Demand raised by authorities for payment of additional amount on account of Capital Value Tax was declared to have been raised and issued without any lawful authority and it had no legal effect---Petition was allowed in circumstances.

2010 PTD (Trib.) 1046 rel.

Khaleeq Ahmed for Petitioners.

Kafil Ahmed Abbasi for Respondents.

Umar Hayat Sandhu, Dy. Attorney-General.

Saifullah, Asstt. A.-G., Sindh.

Dates of hearing: 17th January, and 19th September, 2011.

2011 PTD 1

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

AL-KARAM CNG and others

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.3253 of 2010, decided on 15th June, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 156A & 234A---Selling of petroleum products and running of CNG Station---Deduction of tax at source---Provision of Ss.156A and S.234A of Income Tax Ordinance, 2001---Scope Section 156A of the Income Tax Ordinance, 2001 provides that any person selling petroleum products to a petrol pump operator shall deduct tax from the amount of commission at the rate specified. The said tax deducted shall be the Final Tax on the Income arising from the sale of the Petroleum Products. Similarly, advance tax shall be collected on the amount of gas bill for Compressed Natural Gas Station. The tax collected shall be the Final Tax on the income of the CNG Station arising from the consumption of the GAS. Subsection 4 of section 234A further provides that taxpayer shall not be entitled to claim any adjustment of withholding tax collected or deducted under any head, during the tax year.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 169(2)(a), 156A &. 234A---Tax collected or deducted as final tax---If provisions of Ss.156A and 234A, Income Tax Ordinance, 2001 apply to a taxpayer, his income shall not be chargeable to tax under any head of income in computing the taxable income of the taxpayer.

(c) Income Tax Ordinance (XLIX of 2001)---

----S. 235---Electricity consumption---Collection of advance tax on the amount of electricity bill of commercial or industrial consumer---Scope---Such collection is not to be made from a person who produced a certificate of exemption form the Commissioner---Such a tax, in the case of a company is adjustable against tax liability.

(d) Income Tax Ordinance (XLIX of 2001)---

---Ss. 147(1)(d), 156A, 234A read with S.169(2)(a)---Constitution of Pakistan, Arts. 23, 24, 4 & 10A---Petroleum products---CNG Station--Advance tax paid by the taxpayer---Tax deducted as a final tax---Right of individuals to be dealt with in accordance with law---Protection of property rights---Sections 147(1)(d), 156A, 234A read with S.169(2)(a) of the Income Tax Ordinance, 2001 clearly show that once the taxpayer has discharged his liability of Final Tax he is not chargeable to tax under any head while computing his taxable income---Charge of continuous Advance Tax even thereafter under S.235 is therefore in conflict with the cluster of provisions relating to final tax and conceptionally in disagreement' with the legislative intent---Advance tax is an estimated amount which is to be calculated by the taxpayer and paid in advance during the tax year---In the present case, the tax deducted under Ss.156A and 234A of the Income Tax Ordinance, 2001 is the final discharge of the tax; in such a situation to demand advance tax from a taxpayer amounts to frustrating the concept of advance tax---Once the final tax liability is secured, the question of paying advance tax cannot arise which is not the purpose of advance tax under the Ordinance---Prima facie, the constitutionality of S.235 in the face of the final tax. provisions under Ss.156A, 234A and 169 of the Income Ordinance, 2001 appears to be suspect---Even a penny charged without lawful authority offends Arts.23 & 24 of the Constitution besides offending due process guaranteed under Arts.4 and 10A of the Constitution---Poor legislative arrangement which fails to resolve such internal conflict seriously threatens economic justice provided under the Objectives Resolution, which is a substantive part of the Constitution---Taxpayers cannot be deprived of their property because of poor tax governance.

(e) Income Tax Ordinance (XLIX of 2001)---

----Ss.169, 170 & 235---Transitional advance tax---Tax collected or deducted as a final tax---Refund---Scope---Facility to obtain refund under S.169 or 170 of the Income Tax Ordinance, 2001 does not confer a right on the tax authorities to charge tax without any lawful justification---Refund arises where due to some inadvertence excess taxis charged or paid; it surely does not grant a licence to the tax authorities to charge taxes which the law prohibits or does not sanction---In the present case inspite of discharge of Final Tax under the Ordinance the taxpayers were being subjected to deduction of transitional advance tax under. S.235, which was not chargeable and therefore will invariably be refunded---Taxpayer cannot be deprived of his property just because he was entitled to refund at some later stage---Refund could not be a pretext to charge tax if the tax was not lawfully permissible.

(f) Interpretation of statutes---

----Where literal construction or plain meaning causes hardship, futility, absurdity or uncertainty, the purposive or contextual construction is preferred to arrive at a more just, reasonable and sensible result---Every law is designed to further the ends of justice and not to frustrate it on mere technicalities---Though the function of the courts is only to expound the law and not to legislate, nonetheless the legislature cannot be asked to sit to resolve the difficulties in the implementation of its intention and the spirit of the law---In such circumstances, it is the duty of the court to mould or creatively interpret the legislation by liberally interpreting the statute---Statutes must be interpreted to advance the cause of statute and not to defeat sauce.

Interpretation of Taxing Statutes by Mittal ref.

(g) Interpretation of statutes---

----Conflict between two provisions---Resolution of---Theory of "reading down"---Applicability---Scope.

In order to resolve the conflict between the two provisions, after the purpose of the statute is clear, is to rely on the interpretative tool of reading down.

Theory of reading down is a rule of interpretation which is resorted to by the courts when they find a provision read literally seems to offend a fundamental right or falls outside the competence of the particular legislature.

In interpreting the provision of a statute the courts will presume that the legislation was intended to be inter vires and also reasonable. The rule followed is that the enactment is interpreted consistent with the presumption which imputes to the legislature an intention of limiting the direct operation of its enactment to the extent that is permissible. Legislature is presumed to be aware of its limitations and is also attributed an intention not to over-step its limits. To keep the Act within the limit of its scope and not to disturb the existing law beyond what the object requires, it is construed as operative between certain persons, or in certain circumstances, or for certain purposes only, even through the language expresses no such circumstances of the field of operation. To sustain law by interpretation is the rule.

The reading down of a provision of a statute puts into operation the principle that so far is reasonably possible to do so, the legislation should be construed as being within its power. It has the principal effect that where an Act is expressed in language of a generality which makes it capable, if read literally, of applying to matters beyond the relevant legislative power, the court will construe it in a more limited sense so as to keep it within power. If certain provision of law construed in one way would make them consistent with the Constitution and another interpretation would render them unconstitutional the court would lean in favour of the former construction.

Similarly, for upholding any provision, if it could be saved by reading it down, it should be done, unless plain words are so clear as to be in defiance of the Constitution. These interpretations spring out because of the concern of courts to always let a legislation to achieve its objective and not to let it fall merely because of a possible ingenious interpretation. The words are not static but dynamic. This infuses fertility in the field of interpretation. The principle of reading down, however, will not be available, where the plain and literal meaning from a bare reading of any impugned provisions clearly shows that it, confers arbitrary, uncanalised or unbridled power.

Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 and Introduction to Interpretation of Statues (Reprint Edition 2007) by Dr. Avtar Singh ref.

(h) Income Tax Ordinance (XLIX of 2001)---

---Ss. 235(3) & 159(1)---Advance tax---Exemption---Provision of S.235(3) of Income Tax Ordinance, 2001 provides that advance tax shall not be collected if the taxpayer produces a certificate from the Commissioner that his income is exempt from tax---Such certificate is issued under S.159(1) of the Ordinance if the taxpayer enjoys exemption from tax under the Ordinance.

(i) Income Tax Ordinance (XLIX of 2-001)---

----Ss. 53, 156A, 169, 243A, 235(3), 159(1) & Second Sched. Part I---Exemptions and tax concessions in the Second. Schedule of Income Tax Ordinance, 2001---Scope---"Exemption" and "discharge of final tax"---Distinction---Petroleum products---CNG Station---Tax collected or deducted as final tax---Exemption or. lower rate certificate by Commissioner---Taxpayer, under Ss. 156A and 234A read with S.169 of the Ordinance has no chargeability under the law after discharge of final tax---Final tax clauses under the Ordinance stand at higher pedestal than the exemption clauses---If benefit of exemption can preclude the chargeability of tax under S.235(3), the discharge of final tax under the Ordinance can also extend the same benefit to the taxpayer, if not more---"Exemption" in S.159 does not have limited meaning; it would be discriminatory to limit its meaning by excluding "final tax" under the Ordinance---Sections 159(1) and 235(3) of the Ordinance can, therefore, be read down to include "final tax clauses" within the meaning of exemption under said sections---Commissioner, therefore, while issuing an exemption certificate, will also consider the cases falling under final tax clauses---Principles.

Exemptions under the Income Tax Ordinance, 2001 are provided in section 53 read with Part-I of the Second Schedule to the Ordinance. The purpose of exemption is that the payability of the taxpayer is restricted in terms of the exemption however the chargeability of the tax remains. Whereas sections 156A and 234A when read with section 169 of the Ordinance reveal that the taxpayer has no chargeability under the law after the discharge of final tax under the, law. Final Tax clauses under the Ordinance therefore stand at a higher pedestal than the exemption clauses. If benefit of exemption can preclude the chargeability of tax under section 235(3), the discharge of final tax wider the Ordinance can also surely extend the same benefit to the taxpayer, if not more. It would be discriminatory to limit the meaning of "exemption" in section 159(1) of the Ordinance by excluding "final tax provisions" under the Ordinance. In the absence of any legislative integration between sections 156A, 234A and section 235, operational harmonization can be achieved by extending the benefit available to exemption clauses under section 159(1) to the final tax clauses also.

Sections 159(1) and 235 (3) of the Ordinance can therefore be read down to include "final tax clauses" within the meaning of exemption under the said sections. The Commissioner, therefore, while issuing an exemption certificate, will also consider the cases falling under final tax clauses.

(j) Income Tax Ordinance (XLIX of 2001)---

----Ss. 156A, 234A, 169(2)(a), 159 & 235-Constitution of Pakistan, Art.199---Constitutional petition---Petroleum products---CNG Station--Tax collected or deducted as a final tax---Charge of transitional advance tax in monthly electricity bill under S.235, Income Tax Ordinance, 2001---Scope---Exemption or lower rate certificate---Scope---Taxpayers (petitioners) in the present case, run and manage petrol pumps and CNG Stations; they purchase petroleum products and CNG from the market; under Ss.156A and 234A, Income Tax Ordinance; 2001 the tax deducted in purchasing petroleum products or CNG was the final tax on the income of the taxpayers from the said business---Contention of the taxpayers was that their sole income was generated by running petrol pump or a CNG Station and once the said income was subject to final tax, transitional advance tax could not be charged in their monthly electricity bills under S. 235 of the Ordinance---Precise question for determination was that "as the income of the taxpayers solely arose from the consumption of petroleum products and CNG at the Petrol Pumps and the CNG Stations, tax deducted under Ss.156A & 234A of the Ordinance amounted to final discharge of income tax, thereafter having been finally discharged from income tax, advance tax charged under S.235 of the Ordinance was without lawful authority and hence illegal---Validity---Held, taxpayers (petitioners) were entitled to an exemption certificate under S.159(1) of the Ordinance once it was established to the satisfaction of the Commissioner concerned that the final tax had been fully discharged under Ss.156A & 234A of the Ordinance and that there was no other income of the taxpayer---Said exemption certificate would be valid for the purpose of S.235(3) of the Ordinance---High Court directed the taxpayers (petitioners) to approach the concerned Commissioners under S.159(1) of the Ordinance who, on receipt of the application of the taxpayer, will issue exemption certificates after verification that the petitioners had no other income but the one accruing under Ss.156A and 234A of the Ordinance and that the liability of final tax had been fully discharged---High Court clarified that in case the said certificate was not issued to the taxpayers on the ground that they had other source of income, the amount of income tax in the electricity bills which was stayed during the pendency of the proceedings shall stand revived and the petitioners shall be liable to pay the same and in such a situation electricity companies were directed to issue the said bills immediately along with the tax liability withheld by High Court.

Indus Jute Mills Ltd. v. Federation of Pakistan 2009 PTD 1473 distinguished.

Commissioner of Income Tax, Karachi v. Sir E.H. Jaffar and Sons (Pvt.) Ltd. 9 Tax Forum 35-Vol 5; ITA No.98 of 1998; Interpretation of Taxing Statutes by Mittal; Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 and Introduction to Interpretation of Statues (Reprint Edition 2007) by Dr. Avtar Singh ref.

Ch. Anwar-ul-Haq for Petitioners.

Muhammad Ilyas Khan, Muhammad Asif Hashmi for Respondents.

Muhammad Nawaz Waseer, Standing Counsel for Federation.

Asim Zulfiqar, Charted Accountant as Amicus Curiae.

Dates of hearing: 9th, 14th and 15th June, 2010.

2011 PTD 155

[Lahore High Court]

Before Umar Ata Bandial, J

Mst. SHAHIDA ANWAR

Versus

DEPUTY COLLECTOR CUSTOMS and others

Writ Petition No. 18251 of 2005, decided on 17th April, 2010.

(a) Constitution of Pakistan---

----Art. 199-Import Policy Order, 2005-06---Notification S.R.O. 634(I)/2004, dated 22-7-2004---Notification No. S.R.O. 734(I)/2005, dated 21-7-2005---Constitutional petition---Import of vehicle under Gift Scheme---Effectiveness of policy---Declaration by High Court---Retrospective effect---Scope---Vehicle imported by petitioner arrived 18 days prior, to the date of effectiveness of the beneficial Import Policy Order 2005-06, which enlarged the right to import vehicles under Gift Scheme---At the time of promulgation of the Policy Order in question, no action was taken by authorities on their allegation as to importability of petitioner's vehicle---Validity---Issue of importability of vehicle in question was a case under process and pending proceedings at relevant time---As no clearance or charging order of the vehicle was passed on or before the date when beneficial Import Policy Order was issued, therefore, matter of importability of the vehicle was not a past and closed transaction on the relevant date---Declaration by court giving retrospective effect to Import Policy 2005-06 was not a relief that was within the competence of authorities who were bound to implement notification S.R.O. 634(I)/2004, dated 22-7-2004, in its strict terms and for such relief constitutional petition represented a competent remedy---High Court declared that concession under Import Policy Order, 2005-2006 should be made available to the petitioner with regard to import of the vehicle---Petition was allowed accordingly.

Collector of Customs Lahore and others v. Messrs World Traders C.A. No.1882-2002; Ellahi Cotton Mills Ltd. and others v. Federation of Pakistan and others PLD 1997 SC 587; Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 and Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340 rel.

(b) Constitution of Pakistan---

----Art. 199---Constitutional petition---Maintainability---Statutory instrument---Date of effectiveness-Scope-When petition calls in question the date of effectiveness of a statutory instrument, for such purpose constitutional jurisdiction constitutes an appropriate remedy.

Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 SCMR 250 and Messrs Usmania Glass Sheet Factory Limited, Chittagong v. Sales Tax Officer, Chittagong PLD 1971 SC 250 rel.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Petitioners.

Sultan Mahmood and Izharul Haque for Respondents.

2011 P T D 346

[Lahore High Court]

Before Muhammad Farrukh Irfan Khan, J

Messrs FMC UNITED PVT. LTD. through Company Secretary

Versus

FEDERATION OF PAKISTAN through Secretary of Finance and 3 others

Writ Petition No. 660 of 2007, decided on 29th October, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 7, 7-A, 8 & 10(1)---S.R.O. 645(I)/2006, dated 21-6-2006--Constitution of Pakistan, Art.199---Constitutional petition---Refund or set off of input tax paid on the purchase of other items used in the manufacture of pesticides---Scope---Taxpayer is allowed to deduct the input tax paid or payable during the tax period, from the output tax that is due from him in respect of that period, and in case his tax is more than the tax due, then he becomes entitled to refund the same under S. 10(1) of the Sales Tax Act, 1990---When provisions of Ss.7, 7A, 8 and 10(1) of the Act and S.R.O. 645(I)/2006 were read in juxta position, it becomes clear that registered person covered under S.R.O. 645(I)/2006 is to pay the final tax due on "fixed value addition" and not on "minimum value addition", therefore, the taxpayer would not be entitled to any such refund or set off of input tax paid by the taxpayer in relation to purchase of further goods and services used in further value addition undertaken by the tax payer under S.7, Sales Tax Act, 1990---Question of adjustment of input tax and consequently refund of the taxpayer under the regime of S.R.O.645(I)/2006 is not tenable---Liability under S. R. O.645(I)/2006 should be considered to be a final tax liability---Order accordingly.

Sajid Mehmood Sheikh for Petitioner.

Mrs. Amna Warsi for Respondents.

2011 PTD 536

[Lahore High Court]

Before Mamoon Rashid Sheikh, J

WI-TRIBE PAKISTAN LTD.

Versus

MINISTRY OF FINANCE and others

Writ Petition No. 1914 of 2010, decided on 10th December, 2010.

Customs Act (IV of 1969)---

----S.10---Sales Tax Act (VII of 1990), S.13---Notification S.R.O. 575(I)/2006, dated, 5-6-2006, serial No.16---Constitution of Pakistan, Art.199---Constitutional petition---Maintainability---Classification of goods---Exemption from duty---Petitioner claimed exemption under Notification S.R.O. 575(I)/2006, dated, 5-6-2006, on the goods imported by it---Plea raised by authorities was that classification of goods could not be done by High Court in exercise of its Constitutional jurisdiction and petitioner was not entitled to avail exemption on the goods in question---Validity---Classification of goods was not always a pure question of fact and being a mixed question of fact and law, High Court was possessed of the jurisdiction to adjudicate upon such question in Constitutional jurisdiction, therefore, petition was maintainable---Goods in question were goods provided by petitioner to its customers and was included in the category of capital goods for service sector---Therefore, the petitioner was not entitled to claim the exemption---Objection was not sustainable, in view of the terms and conditions contained in the standard form contract, the petitioner entered into with its consumers---Goods in question remained property of petitioner and it had the right to re-possess the same---Goods were included in the purview of serial No.16 of Notification S.R.O. 575(I)/2006, dated, 5-6-2006 and petitioner was entitled to avail of the concession/exemption granted thereunder---Demand of authorities raised against goods in question was set aside---Petition was allowed in circumstances.

(C.P. No.D-1975/2010) fol.

Messrs P.M. International through Special Attorney v. Federation of Pakistan through Secretary Revenue Division (F.B.R.) and 3 others 2010 PTD 1293; Messrs FACO Trading through Attorney v. Federation of Pakistan through Secretary, Revenue Division, Islamabad and 2 others 2008 PTD 1216; Messrs Pioneer Cement Limited, Jauharabad, District Khushab v. Assistant Collector Sales Tax, Sargodha and another 2002 PTD 920; Messrs Samar Murtaza Corporation v. Collector of Customs, Customs House, Faisalabad and 4 others 1999 CLC 1084; Messrs Ampake Pipe Industries (Pvt.) Ltd. v. Collector Customs and others 1998 CLC 674; Agha Gas Company (Pvt.) Ltd. v. Central Board of Revenue and others 1997 PTD 269; Messrs Mubeen Enterprises Limited through Muhammad Mubeen Butt v. Federation of Pakistan through Secretary, Finance Division Customs Department, Government of Pakistan, Islamabad and 3 others 1997 MLD 424; New Jubilee Insurance Co. Ltd. v. The Collector of Customs and others 1997 MLD 2770; Collector of Customs, Customs House, Lahore and 3 others v. Messrs S.M. Ahmad and Company (Pvt.) Ltd., Islamabad 1999 SCMR 138; Collector of Customs (Valuation) and another v. Karachi Bulk Storage and Terminal Ltd. 2007 SCMR 1357 and Messrs EFU General Insurance Ltd. through Joint Managing Director, Karachi v. Federation of Pakistan through Ministry of Law and Parliamentary Affairs, Government of Pakistan, Islamabad and 3 others 2010 PTD 1159 ref.

Sayyid Murtaza Ali Pirzada for Petitioner.

Babbar A. Khan for Respondents.

Date of hearing: 29th November, 2010.

2011 PTD 561

[Lahore High Court]

Before Ijaz Ahmad Chaudhry, J

Messrs MAW AND COMPANY through Proprietor

Versus

COLLECTOR OF CUSTOMS and 6 others

Writ Petition No. 22173 of 2010, decided on 4th November, 2010.

(a) Customs Act (IV of 1969)---

----S. 195---S.R.O. 659(I)/2009, dated 30-6-2007---Constitution of Pakistan, Art.199---Constitutional petition---Petitioner being importer of ceramic tiles and sanitary goods had challenged the validity of report for determination of origin of the goods in the light of order passed by High Court in the year 2010 and sought direction against authorities for the return of amount deposited by the petitioner under protest as balance differential amount and declaration of F.I.R. under Customs Act, 1969 to be ab initio void---Contention raised by petitioner was that under the "Free Trade Agreement" executed with the neighbouring country in the year 2006, petitioner was entitled to be exempted from paying of customs duties/regulatory duties---Authorities objected that FTA certificate on the basis of which the petitioner had claimed benefit in the customs duty had been found bogus on its verification---Imported glazed porcelain tiles were not mentioned in the Free Trade Agreement' vide S.R.O. 659(I)/2007 dated 30-6-2007 and the customs duty was enhanced from 25% to 35% on import of glazed porcelain tiles and Regulatory Duty at the rate of 15% was also imposed on it by virtue of the Finance Act, 2008---Authorities, according to law as well as after verifying the certificate of FTA passed a final assessment order whereunder the indemnity bond and post dated cheque was released to the petitioner upto the extent of difference payable in lieu of provisional concessionary rate of customs duty under the said S.R.O.---Authorities from the neighbouring country vide letter in the year 2009 informed that stamp and signature on the certificate presented by the petitioner was false-Such certificate did not qualify the criteria as laid down underFree Trade Agreement'---Authorities in Pakistan, in circumstances, had rightly re-opened the matter while exercising power under S.195 of the Customs Act, 1969 and had committed no illegality---Constitutional petition was dismissed in limine.

(b) Customs Act (IV of 1969)---

----S.195---Constitution of Pakistan, Art.199---Constitutional petition--Maintainability---Petitioner without availing alternate remedies under the Customs Act, 1969 had directly filed constitutional petition---Constitutional petition was not maintainable coupled with file fact that the controversial question of fact regarding the certificate of origin was involved which could only be resolved by the competent authority after collecting the relevant material---Constitutional petition was dismissed in limine.?

Shafqat Mehmood Chohan for Petitioner.

Sarfraz Ahmad Cheema for Customs-Department/respondents.

2011 PTD 697

[Lahore High Court]

Before Tariq Javaid, J

Messrs Z & J HYGIENIC PRODUCTS (PVT.) LTD.

Versus

COLLECTOR SALES TAX

Writ Petition No.10370 of 2003, decided on 11th November, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 38, 38-A, 40 & 40-A---Criminal Procedure Code (V of 1898), Ss.96, 98, 99-A, 100 & 103---Constitution of Pakistan, Art.199---Constitutional petition---Illegal evading the payment of Sales and Excise Duty---Raiding the premises and seizure of sales tax record---, Petitioner, a manufacturer and a registered person, had alleged that functionary of the department, without any reasonable cause raided the premises of the petitioner and illegally seized the sales tax record---Counsel for the authorities had maintained that they had credible information and reasonable belief that the petitioner was illegally evading the payment of sales tax; and the record of sales tax was being removed; it was also alleged that the petitioner's group was involved in huge evasion of sales tax and excise duty---Where the departmental officer had a reasonable belief and serious apprehension of mischief at the hands of the registered person, such as removal of goods or removal of sales tax record, the requirements of warrant under Ss.96, 98, 99-A, 100 & 103, Cr. P. C., could be dispensed with and under Ss.38, 38-A, 40 & 40-A of the Sales Tax Act, 1990 the departmental officer could not be denied access to the records of the registered person---Sales Tax Officer had to incorporate in his notice under S.38 of Sales Tax Act, 1990 the grounds of his belief with regard to danger he apprehended that the goods or sales tax record, were likely to be removed before search could be made---Assistant Collector in the impugned notice had specified two things; that he had credible information; and that he had sufficient reasons to believe that the petitioner had kept/concealed documents; and there was a danger of removal thereof---Said reasons, ordinarily could not be sufficient as there was no disclosure of "credible information" nor reasons to entertain a belief that the records were being removed---Failure to give reasons in the search warrant, had rendered the whole exercise illegal---Very fact in the case that a demand in the sum of Rs.34,294,663 had been raised on the basis of the seized record, had amply shown that the apprehension of the authorities while raiding the premises of the petitioner, could not be said to be without any reasonable belief and apprehension---However, the fact whether said demand was justifiable or not, could only be ascertained after recording of evidence to be produced by both the parties---Such exercise could not be-made in the constitutional jurisdiction of High Court---Petitioner had an alternate remedy as under the law a forum for adjudication of factual dispute was provided---Parties could contest their grievances before the Adjudicating Officer---Constitutional petition was disposed accordingly.

Messrs Food Consults (Pvt.) Ltd. Lahore and others v. Collector (Central Excise and Sales Tax), Lahore and 2 other 2004 PTD 1731; N.P. Water Proof Textile Mills (Pvt.) Ltd. Through Director, Karachi v. Federation of Pakistan through Secretary, Revenue Division/Chairman, Central Board of Revenue, Islamabad and another 2004 PTD (DB) 2952; Messrs Zikeria Enterprises v. Muhammad Musharaf and 7 others 2005 PTD 1200; A.R.K. Textiles through Proprietor v. Federation of Pakistan through Ministry of Finance, Islamabad and 4 others 2006 PTD 494; Messrs Haq Cotton Mills (Pvt.) Ltd. v. Chairman Central Board of Revenue and 2 others 2006 PTD 1884; Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) and Messrs Diplex Beauty Clinic and others 2007 PTD 2356; Chairman C.B.R. and others v. Haq Cotton Mills (Pvt.) Ltd. 2007 PTD 1351; Collector of Customs (Preventive) and 2 others PLD 1991 SC 630; Federation of Pakistan through Secretary, Ministry of Finance, Federal Secretariat, Islamabad and 4 others 2003 PTD 1034; Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Collector of Sales Tax and Central Excise (Enforcement) another v. Messrs MEGA TECH (Pvt.) Ltd. 2005 PTD 1993 and Messrs Punjab Bevarage Co. (Pvt.) Ltd. v. C.B.R. and 4 others 2001 PTD 3929 ref.

Mian Abdul Ghaffar for Petitioner.

Ms. Kausar Parveen for Respondents.

2011 PTD 1052

[Lahore High Court]

Before Ijaz-ul-Ahsan and Muhammad Farrukh Irfan Khan, JJ

KHALID MUHAMMAD KHAN

Versus

INCOME TAX/WEALTH TAX APPELLATE TRIBUNAL and 2 others

Income Tax Appeal Nos.19 to 24 of 1999 and 233 to 236 of 2002, decided on 23rd December, 2010.

Wealth Tax Act (XV of 1963)---

----Ss.2 (5), 3, 4 & 27---Assets---Reference to High Court---Purchase of agricultural land---Exemption in tax---Transfer against agreement to sell---Grievance of assessee was that he purchased agricultural land against agreement to sell which was for sale on profit and whole consideration amount was paid by him to sellers--Validity---According to agreement to sell in question, assessee had paid entire sale consideration and sellers had delivered possession of the property to assessee---Sellers had also executed general power of attorney in favour of assessee which was duly registered with concerned Sub-Registrar--On the basis of such documents, assessee transferred his agricultural land in question in favour of his minor son, which fact was neither denied nor disputed---Income Tax Appellate Tribunal was not justified in rejecting claim of ownership of agricultural land by assessee and treating the amount paid as advance payment for purchase of that land---In case it was found that property in question was in possession of the assessee, who had paid entire sale consideration and was in possession of a validly executed agreement of sale backed by a general power of attorney, the same would constitute a part of assessee's assets---Contention of authorities was that property in question was acquired for further sale on payment of management fee, which contention was neither substantiated nor supported by record---Position taken by assessee was not only supported by documentary evidence but also by relevant provisions of law and judgments of various Courts---Reference was decided in negative in circumstances.

M. Ghulam Muhammad v. Custodian of Evacuee Property, Lahore and others PLD 1966 (W.P.) Lah. 953; Holomal v. Ghulam Ali PLD 1997 Kar. 509; Mst. Rasheeda Begum and others v. Muhammad Yousaf and others 2002 SCMR 1089; Dost Muhammad and others v. Ghaus Muhammad through Legal Heirs and others 2004 SCMR 515; Muhammad Bashir v. Abdul Haruki 1991 CLC Note 53; Ch.Hakim Ali v. Sultan Khan and 3 others 2001 MLD 563; Commissioner of Wealth Tax v. S.M.T. Satyabihama Ganeriwala ITR 196 at page 401 and Madgul Udyog v. Commissioner of Income Tax ITR 1984 Page 484 ref.

Muhammad Iqbal Hashmi for Appellant.

Khadim Hussain Zahid for Respondent.

Date of hearing: 12th October, 2010.

2011 PTD 1090

[Lahore High Court]

Before Ch. Muhammad Tariq and Syed Akhlaq Ahmad, JJ

TANVEER SPINNING AND WEAVING MILLS and others

Versus

GOVENRMENT OF PUNJAB and others

Writ Petition No. 19640 of 2010, I.C.As. Nos.350, 289, 316, 310, 290, 291, 292, 293, 298, 299; 301, 302, 311, 303, 309, 322; 320, 449, 304, 305, 315, 341 to 345, 300, 306 of 2005, 191, 96, 97 and 98 of 2006, Writ Petitions Nos.7940 of 20D7, 17492, 17493, 19549, 18777, 18778, 19548, 19300, 19301, 21378, 17491, 15425 and 20677 of 2010, heard on 13th January, 2011.

(a) Good governance---

----Evils of society---Reasons---Energy shortfall, dearness, terrorism, unemployment and street crimes have made the whole nation embarrassed and short tempered---Heavy energy shortfall is contributing a lot towards most of the evils of the society such as terrorism, street crime etc.

(b) West Pakistan Finance Act (XXXIV of 1964)---

----S.13---Punjab Finance Ordinance (VI of 2001), S. 4---Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1977), S.2(xi)---Electricity Act (IX of 1910), S.22---Constitution of Pakistan, Art.157, Federal Legislative List, Part-1, Entry 44---Law Reforms Ordinance (XII of 1972), S.3---Intro-Court appeal---Private generation of electricity---Duty, levy of---Scope---Provincial Government issued a notification, whereby electricity duty on generation of electricity from generators of capacity more than 500 KW was levied---Validity---Government could levy tax provided Water And Power Development Authority and other licensees had been providing adequate energy to domestic and industrial consumers according to their satisfaction as well as according to terms and conditions executed between consumer and licensee at the time of installation of electricity connection; in such circumstances if anyone would generate energy, government had every right to impose tax thereon---When Water And Power Development Authority and other licensees badly failed to supply electricity to consumers, production of energy through private generators was not only a great help to the nation but it was also a positive step towards saving of thousands of families from starvation because close of one unit of industry meant to turn a number of employed persons jobless---Government was expected to extend incentives to the persons who were generating energy instead of levying tax thereupon and creating hurdles in the way of investment and prospective employment in such way---Levy of electricity duty on private generators was condemnable in such prevailing circumstances---Provincial Government was not just to levy tax on production of energy by individuals through private generators till the time Water And Power Development Authority and its licensees would provide electricity to individuals and industry according to their requirements---High Court set aside the judgment passed by Single Judge of High Court and operation of notification in question was held in abeyance till the time Water And Power Development Authority would provide sufficient energy to its consumers according to their requirements---Intro-Court Appeal was allowed in circumstances.

PLD 2005 Lah. 596; PLD 1966 SC 684, PLD 1999 CLC 66(sic), 2005 MLD 1165; 2008 CLD 239; AIR 1988 SC 1737; Messrs Gadoon Textile Mills and 814 others v. WAPDA and others 1997 SCMR 641; PLD 2003 Lah. 531; PLD 1997 SC 582 and Kitab-ul-Ikhtiar ref.

PLD 2008 SC 591 distinguished.

(c) West Pakistan Finance Act (XXXIV of 1964)---

----S.13 & Fifth Sched.---Punjab Finance Ordinance (VI of 2001), S.4---Private generation of electricity---Duty, levy of---Charitable trust---.Effect---Provincial Government imposed duty on private generation of electricity from generators of more than 500 KW capacity---Validity---Appellant was a charitable institution, thus it. did not fall within the ambit of Fifth Schedule to West Pakistan Finance Act, 1964---Appellant was not liable to pay electricity duty as imposed through notification in question.

Messrs Imtiaz Rashid Siddiqui Barrister, Muhammad Ahmad Pansota, Wasif Majeed, (Vice Counsel) Ijaz Ahmad Awan and Komal Malik Awan for Appellants/Petitioners.

Aurangzeb Mirza for Respondents.

Shakeel-ur-Rehman Additional Advocate General, Punjab for the State.

Date of hearing: 13th January, 2011.

2011 PTD 1117

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs MAXI INC.

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No. 15494 of 2010, decided on 7th December, 2010.

Customs Act (IV of 1969)---

----Ss. 19-A, 25, 25-A, 25-D & 194-A(1)(e)---Constitution of Pakistan, Art.199---Constitutional petition---Maintainability---Determination of customs value of imported goods---Impugned valuation advice, having been affirmed in review by Director General Valuation, petitioner had filed constitutional petition---Validity---Right of appeal was provided to the petitioner under S.194-A(1)(e) of Customs Act, 1969---On the claimed date of knowledge/receipt of impugned order an alternate remedy of appeal was available to the petitioner and impugned order was within the limitation period for availing said remedy---Petition having failed to avail said alternate remedy of appeal, constitutional petition was not maintainable---Contention of counsellor the petitioner that provisions of S.19-A of Customs Act, 1969, were outside the purview of the scrutiny that could be undertaken by Director General in exercise of his review jurisdiction under S.25-D of the Customs Act, 1969 was repelled as said point about S. 19-A Customs Act, 1969 was neither the sole nor the operative ground of, impugned order---Objection regarding the type and level of market inquiry and the types of imported goods that were allegedly subject to a valuation advice, were not made out from the terms of the relevant statutory provisions in S.25 of the Customs Act, 1969---Valuation advice must be based on the price/value of similar goods in the market and indeed the wholesale price of imported goods, was closer to their import value, rather than their retail price in the market---Valuation advice was not confined to one import, but to contemporaneous import which could not be issued for each import that was made---Constitutional petition was dismissed.

Mian Abdul Ghaffar for Petitioner.

Sultan Mehmood for Customs Department.

Majid Anwar, Advocate for respondents Nos.4, 5 and 6.

2011 PTD 1122

[Lahore High Court]

Before Ijaz ul Ahsan, J

Messrs BARKAT ALI SALAH UD DIN AHMAD & CO. (PVT.) LTD. through Director

Versus

FEDERATION OF PAKISTAN through Secretary Finance and 3 others

Writ Petition No. 7119 of 2010, decided on 31st March, 2011.

Income Tax Ordinance (XLIX of 2001)---

----S.177---Constitution of Pakistan, Art.199---Constitutional petition---Selection of case for audit---Initiation of audit proceedings by authority without deciding assessee's claim of immunity from such proceedings---Validity---Before selecting a case for audit, Authority was legally bound to decide through a speaking order whether assessee was liable to assessment/filing of return and payment of tax---High Court directed assessee to move application to the Authority setting out therein grounds of immunity and further directed Authority to hear assessee and pass speaking order thereon, and then proceed in accordance with law.

Mian Ashiq Hussain for Petitioner.

Muhammad Ilyas Khan for Respondents.

2011 PTD 1290

[Lahore High Court]

Before Sh. Ahmad Farooq, J

Messrs SAIGOL QINGQI MOTORS LTD.

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.3114 of 2011, decided on 21st February, 2011.

Customs Act (IV of 1969)---

----Ss. 202/194-A/194-B---Constitution of Pakistan, Art.199---Constitutional petition-Notice for recovery of government dues---Suspension of operation of notice---Petitioner had prayed for suspension of notice whereby authorities had directed the petitioner to deposit government dues immediately-Petitioner had contended that his second appeal filed under S.194-A of Customs Act, 1969 being pending adjudication before Appellate Tribunal, he could not be penalized for the delay in disposal of his appeal by the Customs Appellate Tribunal---Validity---Since appeal of the petitioner was pending adjudication before the Customs Appellate Tribunal and had not been decided, in the event of the recovery of outstanding demand, petitioner's appeal would become infructuous---Customs Appellate Tribunal was directed to decide the appeal of the petitioner within a period ";t two months and till then authorities would not adopt measures for the recovery of disputed amount.

Sunrise Bottling Company (Pvt.) Ltd. v. Federation of Pakistan 2006 PTD 535; Z.N. Exports (Pvt.) Ltd. v. Collector Sales Tax 2003 PTD 1746 and Mehram Ali and others v. Federation of Pakistan and others PLD 1998 SC 1445 ref.

Mian Abdul Ghaffar and Raza Ahmad Cheema for Petitioner.

Ch. Muhammad Zafar Iqbal for Respondent No.4.

2011 P T D 1442

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

ALLIED BANK LTD.

Versus

DISTRICT OFFICER (REVENUE) and others

Writ Petition No.3681 of 2011, decided on 13th April, 2011.

(a) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction---Scope---Alternate remedy---Adequacy, satisfactoriness and acceptability of the alternate remedy is to be gauged in every case---Alternate remedy alone is not sufficient until it is also adequate---Considerations to adjudge adequacy of the remedy enumerated.

The remedy has to be adequate to the requisite relief, i.e. the removal, or lessening of the cause of distress or anxiety; the deliverance from that which was burdensome. It is evident that the trouble, expense and delay in getting what is wanted are all as much ingredients of the sum total of that what can be described as relief as the substance of that which is wanted. Taken in this light, the adequacy of the remedy must be judged in relation to three separate considerations;

(1) the nature and extent of relief;

(2) the point of time when that relief would be available, and

(3) The conditions on which that relief would be available particularly the conditions relating to the expense and inconvenience involved in obtaining it. [p. 1448] A & B

Judicial Review of Public Actions by Justice (R.) Fazal Karim, Pakistan Law House (p.963) qouted.

(b) Registration Act (XVI of 1908)---

----S. 77---Punjab Finance Act (VI of 2010), S.6(4)(b)---Constitution of Pakistan, Arts. 199 & 23---Constitutional petition---Efficacious remedy---Refusal of Registrar to register sale-deed on the ground that capital value tax had to be paid at 2% on the recorded value of the entire immovable property in the instrument of sale---Contention of the counsel for the department was that constitutional petition was not maintainable as the petitioner had alternate remedy to institute a civil suit under S.77 of the Registration Act, 1908 against the impugned order of the Registrar---Petitioner had already paid the capital value tax besides other taxes and was entitled to an expeditious disposal of the matter, delay in registering property also impaired the fundamental right of the petitioner to property which allowed petitioner to use and enjoy his property, subject only to reasonable restrictions---No cogent reason had been given by the Registrar for the deficiency in capital value tax under S.6(4)(b) of the Punjab Finance Act, 2010---In the present case, all such factors did not qualify the filing of the suit under S.77 of the Registration Act, 1908---Constitutional petition was allowed, in circumstances.

Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 SCMR 250; Messrs Usmania Glass Sheet Factory Limited, Chittagong v. Sales Tax Officer, Chittagong PLD 1971 SC 205; Edulji Dinshaw Limited v. Income Tax Officer 1990 PTD 155 and Government of the Punjab through Collector, Faisalabad and another v. Hudabia Textiles Mills, Faisalabad through Chairman and 4 others 2001 SCMR 209 ref.

(c) Punjab Finance Act (VI of 2010)---

----S. 6(4)(b)---Guidelines for Calculation of CVT on 'Urban Immovable Property issued by the Board of Revenue dated 7-7-2010, Illustration II(b)---Capital Value Tax for the purposes of commercial property situated in urban area, as per S.6(4)(b) of the Punjab Finance Act, 2010, has to be paid in the manner as 2% of the recorded value of the landed area (as opposed to the recorded value of the immovable property inclusive of the constructed area) plus capital value tax at the rate of Rs.10 per Sq.ft. of the constructed area---Illustration II(b) of the Guidelines for Calculation of CVT on Urban Immovable Property issued by the Board of Revenue dated 7-7-2010 is incompatible with S.6(4)(b) of the Punjab Finance Act, 2010---Principles.

Reading of S.6(4)(b) of the Punjab Finance Act, 2010 shows that commercial immovable property has been divided into two distinct categories namely; (i) Landed Area and (ii) Constructed Area. Therefore under item No.(i) in the table in S.6(4)(b) of the Punjab Finance Act, 2010, CVT is 2% of the recorded value of the Landed Area. "Landed" means "consisting of land." Item number (ii) of the table, though not applicable to the present case, helps clarify item No.(i). In case the value of the immovable property is not recorded in the instrument of sale, CVT charged is on the basis of one hundred rupees per square feet of the landed area. Joint reading of items No.(i) and (ii) of the table shows that the emphasis is on LANDED AREA for the purposes of calculating CVT on immovable property. After this item No.(iii) adds further clarity when it charges CVT at the rate of ten rupees per square feet of the CONSTRUCTED AREA in addition to the value worked out. The term and phrase "Constructed Area" and "in addition to the value worked out" are important and make it clear that the CVT is to be charged separately for the CONSTRUCTED AREA, which is then to be added to the CVT calculated on the LANDED AREA. Therefore, immovable property for the purposes of CVT is divided into Landed Area and Constructed Area with different modes of calculation for working out the CVT. It is also incongruous to have two different modes of calculating CVT for the constructed Area. First @ 2% under item No.(i) and then @ Rs.10 per sq.ft of the constructed area under item No.(ii). This does not appeal to logic besides such discordant interpretation cannot be attributed to a taxing statute.

Illustration No.II(b) of the Guidelines, issued by the Board of Revenue dated 7-7-2010 is not in line with section 6(4)(b) of the Punjab Finance Act, 2010. By simply providing that 2% CVT is to be charged on the recorded value of the immovable property, the said Illustration fails to differentiate between LANDED AREA and CONSTRUCTED AREA as has been done by the law itself. Perusal of Illustration-II (a) Commercial Open plot where the value of the property is recorded of the same Guideline further shows that the Board of Revenue has maintained no distinction between the recorded value of a commercial open plot and that of a constructed commercial property. Illustration-II(b) of the Guidelines dated 7-7-2010 is, therefore, incompatible with section 6(4)(b) of the Punjab Finance Act, 2010.

CVT like any other tax cannot be charged twice on any transaction unless specifically provided by the legislature. Once while calculating 2% on the recorded value of the immovable property and then again on the constructed area at the rate of Rs. 10 per sqft. This results in double taxation which is not permissible unless specifically provided by the legislature. "The rule of avoidance of double taxation is merely a rule of construction; therefore, it ceases to have application when the legislature expressly enacts a law, which results in double taxation of the same income. The law so made cannot be held to be invalid merely on the ground that it results in double taxation. In the absence of a clear provisions stipulating double or multiple levies, the courts would lean in favour of avoiding double taxation.

In the present case, the intention of the legislature to tax constructed area of a commercial immoveable property twice, is not visible from the legislation, in fact it is otherwise.

CVT for the purposes of commercial immoveable property situated in urban area as per section 6(4)(b) of the Punjab Finance Act, 2010 has to be paid in the following manner;

(i) 2% of the recorded value of the landed area (as opposed to the recorded value of the immovable property inclusive of the constructed area) plus

(ii) CVT at the rate of Rs.10 per sq.ft of the constructed area.

Black's Law Dictionary, 8th Edn. By Thomson-West p.894; Introduction of Interpretation of Statutes by Dr. Avtar Singh, reprint Edn. 2007 p.236and Municipal Council, Kota v. Delhi Cloth and General Mills Co. Ltd. AIR 2001 SC 1060 ref.

(d) Words and phrases---

----Landed---Meaning.

Black's Law Dictionary, 8th Edn. By Thomson-West p.894 ref.

(e) Interpretation of statutes---

----Double taxation---Rule of avoidance of double taxation is merely a rule of construction; therefore, it ceases to have application when the legislature expressly enacts a law, which results in double taxation of the same income---Law so made cannot be said to be a valid law merely on the ground that it results in double taxation---In the absence of clear provisions stipulating double or multiple levies, the courts would lean in favour of avoiding double taxation.

Introduction of Interpretation of Statutes by Dr. Avtar Singh, reprint Edn. 2007 p.236 qouted.

Municipal Council, Kota v. Delhi Cloth and General Mills Co. Ltd. AIR 2001 SC 1060 ref.

Syed Ali Zafar along with Talib Hussain for Petitioner.

Nayyar Abbas Rizvi, Asstt. A.-G., Punjab, Khawaja Salman Mahmood, Asstt. A.-G., Punjab and Tariq Saeed Khan, Senior Law Officer Board of Revenue, Punjab for Respondents.

Date of hearing: 13th April, 2011.

2011 P T D 2227

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs FAROOQ KHALID PIPE MILLS (PVT.) LIMITED, LAHORE through Director

Versus

FEDERATION OF PAKISTAN through Secretary Finance, Islamabad and 5 others

Writ Petition No.23289 of 2010 and C.M. No.1 of 2011, decided on 17th January, 2011.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 120 & 127---Constitution of Pakistan, Art.199---Constitutional petition---Assessment order, appeal against---Commissioner of Inland Revenue (Appeals), before whom appeal was filed by assessee, had failed to hear appeal or the application for interim relief, filed along therewith, despite a lapse of more than six months---Under the provisions of S.127 of Income Tax Ordinance, 2001, appellate forum was under a duty to decide an. appeal within a period of six months---Owing to procedural and infrastructual exigencies of the forum, Commissioner (Appeals), had not considered petitioner's appeal and in the circumstances the petitioner was suffering hardship---High Court directed, in circumstances that Commissioner (Appeals) would consider and decide petitioner's application for interim relief within a period of two weeks from the date of the order---Order accordingly.

Muhammad Ajmal Khan for Petitioner.

2011 PTD 2243

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

Messrs KHAWER PAPER MART through Proprietor

Versus

NATIONAL TARIFF COMMISSION through Chairman and another

Writ Petition No.5609 of 2011, heard on 29th April, 2011.

(a) Anti-Dumping Duties Ordinance (LX V of 2000)---

----Ss.21, 23(4) & 27---National Tariff Commission Act (VI of 1990), S.5---Constitution of Pakistan, Arts.199, 9, 18 & 23---Constitutional petition---Complaint against petitioner alleging dumping of Goods (Paper) originating in and exported by foreign countries---Investigation proceedings---Provisions of Ss.21, 23(4) and 27 of Anti-Dumping Duties Ordinance, 2000 require the Commission to exercise discretion, importance of such discretion further underlined as it triggers an invasive and investigative process into the affairs of the petitioner which stand constitutionally protected under the fundamental rights (Arts.9, 18, 23 etc.)---Absence of Commission (not constituted under the law) resulted in shifting the fulcrum of discretion from the Commission to its officers (no matter how competent and capable they were) which seriously offended the Anti-Dumping Duties Ordinance, 2000, and was no less than playing a fraud on the statute---Decisions made as such leading to imposition of duties cannot be termed to be decision of the Commission---Investigation proceedings under Ss.20, 21, 23(4) & 27 of the Ordinance were declared to be without lawful authority, void ab initio and therefore, set aside.

Black's Law Dictionary 8th Edition fol.

(b) National Tariff Commission Act (VI of 1990)---

--S. 5---Anti-Dumping Duties Ordinance (LXV of 2000), Ss.20, 21 & 27---Composition of the Commission---Commission comprises of three persons i.e. one Chairman and two Members; their qualifications as given by S.5. of the National Tariff Commission Act, 1990 are that Chairman must not be below the status of a Secretary and Member not below the status of Additional Secretary and there is no supplemental or supporting provision in the Anti-Dumping Duties Ordinance, 2000 that saves the proceedings of the Commission in case its constitution is deficient or irregular-Commission is complete if all the three persons including the Chairman have been appointed and not otherwise.

(c) Anti-Dumping Duties Ordinance (LXV of 2000)---

----S. 21---Constitution of Pakistan, Art.199---Constitutional petition---Complaint against petitioner alleging dumping of goods (Paper) originating in an exported by foreign countries---Notice under S.21, Anti-Dumping Duties Ordinance, 2000 to governments of exporting country by Commission---Procedure---Commission and only the Commission had to deliberate over the complaint and exercise its discretion before issuing such notice---Nature or severity of the notice was irrelevant.

(d) Anti-Dumping Duties Ordinance (LXV of 2000---

----S. 21---National Tariff Commission Act (VI of 1990), S. 5---Commission---Constitution of---Law does not provide for a Chairman of the Commission on acting charge basis or a Chairman who is below the status of a Secretary---Rules of' Business or the Rules under Civil Servants Act, 1973 were specially designed for the working of the Federal or Provincial Governments and for regulating the affairs of civil servants respectively or to regulate the Governments---Such rules have no relevance to a taxing law (Anti-Dumping Duties Ordinance, 2000) which regulates "dumping" in the country---Principles.

(e) Interpretation of statutes---

----Construction of statute---Principles---No room for construction where there is no ambiguity in the words of statute---Words have to be read in their literal sense---Generally, words and expressions would be given their plain and ordinary meaning which cannot be cut down or curtailed unless they themselves are clearly restrictive---Courts are enjoined to take the words as used by the legislature and to give them meaning which is naturally implied.

N.S. Bindra's-Interpretation of Statues 10th Edition-Lexis Nexi Butterworths (pages 432-434) ref.

(f) Anti-Dumping Duties Ordinance (LXV of 2000)---

----Preamble---Ordinance is a special statute with the power to investigate into the trade activity of a business and provides penal powers to impose anti-dumping duty in case dumping is established---Ordinance is, therefore, a taxing statute and has to be construed strictly.

(g) Words and phrases---

----"Status"--Meanings.

Black's Law Dictionary-8th Edition; James Hadley-Introduction to Roman Law 106 (1881) Black's Law Dicatinory-8th Edition page 1447; Page 4925 Words and Phrases by Mian Muhibullah Kakahel-also PLD 1982 SC 82 at 87 and PLD 1966 Azad J&K 66 ref.

Shafqat Mehmood Chohan, Mian Muhammad Athar and Abdul Quddus Mughal for Petitioner.

Ahmed Sheraz for Respondent No.1.

Dr. Pervaiz Hassan and Rafey Alam for Respondent No.2.

Ms. Yasmin Sehgal, Deputy Attorney General.

Ata Hussain Shah, Section Officer (Litigation), Ministry of Commerce.

Date of hearing: 29th April, 2011.

2011 PTD 2260

[Lahore High Court]

Before Syed MansoorAli Shah, J

MUGHAL-E-AZAM BANQUET COMPLEX through Managing Partner

Versus

FEDERATION OF PAKISTAN through Secretary and 4 others

Writ Petitions Nos.2799, 7307, 8.122, 8123 and 8854 of 2011, heard on 2nd May, 2011.

(a) Punjab Sales Tax Ordinance (II of 2000)---

----S. 3---Constitution of Pakistan, Art.199---Constitutional jurisdiction of High Court---Scope---Imposition of Sales Tax under Punjab Sales Tax Ordinance, 2000 on services rendered by petitioner, managing a marriage hall---Contention of the petitioner was that initially services rendered by marriage halls were subject to Sales Tax under the Ordinance, however, later on such services were omitted, therefore, show-cause notice to the extent of, "Sales Tax on Services" was without lawful authority---Authorities contended that "Caterers" were included in the Schedule to the Ordinance and persons rendering services of marriage halls also render services of "Caterers", hence the show-cause notice---Held, question whether the petitioner rendered services as "Caterers" was a question of fact which could not be gone into by High Court in its constitutional jurisdiction and could best be left to be decided by the tax authorities who dealt with the taxpayers more closely on an operational level---Any such decision would always be subject to challenge in accordance with law.

(b) Punjab Sales Tax Ordinance (II of 2000)---

----S. 3---Constitution of Pakistan, Art.199---Constitutional petition---Challenge to show-cause notice---Premature petition---"Ripeness", doctrine of---Applicability---Held, laying challenge to a show-cause notice was, no different than filing a petition on the basis of an apprehension or a speculation---Such a petition was premature and not riped for adjudication---Rationale behind the "ripeness" doctrine was to prevent the courts through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative polices, and also to protect the agencies from judicial interference until an administrative decision had been formalized and its effect left in a concrete way by the challenging parties--- "Ripeness" required that an issue be sufficiently formed and felt to be a justifiable controversy---Courts insist on a concrete context, that context enabled them to better see the problems that they were supposed to redress---Such insistence by the court might eliminate the waste of courts deciding disputes that might be mooted as tin agency runs its course; assured the courts of the knowledge gained front applied agency expertise and provided them with a record already developed by the agency---Constitutional petition was dismissed.

Ronald D. Rotunda, John E. Nowak, Treatise on Constitutional Law, Second Edition West Publishing Company (Volume I; Pages 188-189); Term used for "Departments" under American Administrative Law; Rogers, Healy, Krotoszynski, Administrative Law, Wolters Kluwer, 2008 (page 686) and Alfred C. Arran, Jr. and William T Mayton, Administrative Law, 1993 (page 404) ref.

Mian Muhammad Shahbaz Sharif v. Federation of Pakistan through Secretary, Ministry of Interior, Government of Pakistan, Islanmabad and others PLD 2004 SC 583; Union of India and another v. Kunisetty Satyanarayana AIR 2007 SC 906; Special Director and another v. Mohd. Ghulam Ghouse and another AIR 2004 SC 1467; Executive Engineer, Bihar State Housing Board v. Ramesh Kumar Singh and others AIR 1996 SC 691; State of Uttar Pradesh v. Shri Brahm Datt Sharma and another AIR 1987 SC 943; Chief of the Army Staff and others v. Major Dharam Pal Kukrety AIR 1985 SC 703; Chanan Singh v. Registrar, Co-op. Societies, Punjab and others AIR 1976 SC 1821; Zeal Pak Industries (Pvt.) Ltd., Karachi v. Regional Commissioner, Income Tax, Karachi and 2 others 2009 PTD 712; Mehboob Ali Malik v. The Province of West Pakistan, and others PLD 1963 Lah. 575; Shaheen Asad, Assistant Manager Finance/Accounts, Azad Kashmir Logging and Sawmill Corporation, Muzaffarabad v. Azfar Yaseen, Assistant Manager, Finance and Accounts, Azad Kashmir Logging and Sawmill Corporation, Muzaffarabad 2001 PLC (C.S.) 93 and Dilshad Kausar v. Azad Jammu and Kashmir Government (Prime Minister) through Chief Secretary and 2 others 2005 PLC (C.S.) 1048 rel.

(c) Punjab Sales Tax Ordinance (II of 2000)---

----S. 3---Sales Tax Act (VII of 1990), Preamble---Constitution of Pakistan, Art.199---Constitutional petition---Challenge to show-cause notice---Scope---Interference at the stage of show-cause notice stultifies and retards the adjudicatory process provided under the relevant law---Such interference stalls the investigative machinery of the quasi judicial authorities and hampers discharge of their statutory duties which are to be done with a free hand independent from outside control---Petitioner, in the present case, had an opportunity to place its case before the concerned authority who was competent to look into the factual receipts besides there were elaborate procedures by way of appeal or revision against order passed in such proceedings---Petitioner had already filed its replies to the show-cause notice and the matter was pending adjudication before the concerned authority---Petitioner, however, could invoke the constitutional jurisdiction of High Court, if the show-cause notice was not issued by a competent authority or the liability in the show-cause notice was palpably unlawful and without jurisdiction---Where the show-cause notice was admittedly issued by a competent authority and its contents did not prima facie reveal that the liability was ultra vices the law, and in fact the allegations raised in the show-cause notice required factual inquiry in order to determine whether tile petitioners rendered services as 'caterers', constitutional petition was premature hence not maintainable, however, in the interest of justice, authorities were directed by High Court to decide the impugned show-cause notices, after granting a hearing to the petitioner and allowing, them to raise all questions of law and facts within one month from receipt of present judgment of the High Court by passing a speaking order strictly in accordance with law.

Muhammad Shahid Baig for Petitioner.

Rana Munir Hussain and Zahid Attique Chaudhry for Petitioners (in Connected with petitioners).

Sarfraz Ahmed Cheema for Respondents (in Writ Petitions Nos.2799/2011, 8122/2011, 8123/2001 and 8854/2011.

Sajjad H. Rizvi, for Respondent (in Writ Petition No.7307 of 2011).

Date of hearing: 2nd May, 2011.

2011 P T D 2358

[Lahore High Court]

Before Muhammad Khalid Mehmood Khan and Muhammad Farrukh Irfan Khan, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, LEGAL DIVISION, MULTAN

Versus

Lady Dr. MUSARRAT MUMTAZ, C/o D.H.Q. Hospital, D.G. Khan

T. R. No.150 of 2008, heard on 18th May, 2011.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62, 111, 134, 136(1) & 239---Income Tax Ordinance (XLIX of 2001), S.131---Limitation Act (IX of 1908), Ss.3 & 5---Reference to High Court---Assessment under Ss.62 & 111 read with S.239 of Income Tax Ordinance, 1"979---Order of Appellate Authority challenged in appeal before Tribunal under S. 131 of Income Tax Ordinance, 2001 instead of S.134 of the Ordinance---Tribunal's judgments dated 2-5-2007 and 13-3-2009 passed under Ss.135 & 136 of the Ordinance served on parties on 11-4-2008 challenged in reference before High Court on 8-9-2009 under S.133 of the Ordinance instead of S.136(1) thereof---Maintainability---Reference under S.136 of the Ordinance could be filed within ninety (90) days extendable to 120 days---Reference filed on 8-9-2008 was beyond period of limitation prescribed under S.136 and S.133(1) of the Ordinance---Provisions of Limitation Act, 1908 would apply to proceedings under the Ordinance---Applicant had not filed application under S.5 of Limitation Act, 1908 for condonation of delay caused in filing reference---Limitation once started running could not be stopped or suspended by any subsequent event---Provisions of Limitation Act, 1908 would be construed strictly and applied without having any regard to equitable considerations--Provisions of S.3 of Limitation Act, 1908 for being mandatory in nature could be applied even though limitation was not set up in defence---High Court dismissed reference for being not maintainable and time barred.

CIT v. Asbestos Cement Industries Limited Karachi and others 1993 SCC 1011 ref.

1988 PTD 227; 2003 PTD 2109 and Khalid Saeed v. Shamim Rizwan and others 2003 SCMR 1505 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----Preamble---Limitation Act (IX of 1908), Preamble---Provisions of Limitation Act, 1908 are applicable to proceedings under Income Tax Ordinance, 2001.

(c) Limitation Act (IX of 1908)---

----S.3---Provisions of S.3 of Limitation Act, 1908 for being mandatory could be applied even though limitation was not set up as a defence.

(d) Limitation Act (IX of 1908)---

----Preamble---Provisions of Limitation Act, 1908---Scope---Limitation once started running could not be stopped or suspended by any subsequent event---Such provisions would be construed strictly in accordance with language of words used by legislature and applied without having any regard to equitable considerations.

Ch. Muhammad Asghar Saroha for Appellant.

Muhammad Asghar Bhutta for Respondent.

Date of hearing: 18th May, 2011.

2011 P T D 2435

[Lahore High Court]

Before Muhammad Khalid Mehmood Khan and Muhammad Farrukh Irfan Khan, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX (LEGAL), REGIONAL TAX OFFICE, MULTAN

Versus

INTIZAR ALI, Proprietor, Messrs Eagle Cycle Agency, Multan

T.R. No.52 of 2008, heard on 16th May, 2011.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 65---Notice under S.65 of Income Tax Ordinance, 1979, issuance of---Essential conditions stated.

Notice under S.65 of Income Tax Ordinance, 1979 may be issued in any one of the four conditions: (a) escaped assessment or (b) under assessment or (c) assessment at too low rate or (d) assessment being subject of excessive relief as refund.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 65---Re-opening of assessment---Non-ticking of relevant clause of notice issued under S.65 of Income Tax Ordinance, 1979---Validity---Provisions of S.65 of Income Tax Ordinance, 1979 were of substantive character and penal in nature, thus, notice issued thereunder must be strictly in accordance therewith---Such non-ticking would be like leaving assessee marooned on an Island in middle of Ocean with no communication to mainland---Assessee in such case would not be able to provide his reply and relevant information to Assessing Officer---Such non-ticking would amount to non-compliance of requirement of S.65(2) of the Ordinance---Notice under S.65, in absence of any one specific reason for re-opening of assessment, would be a nullity in eye of law.

C.As. Nos.991 and 992 of 2002; 2001 PTD 1633 and 2007 PTD 1804 ref.

Syed Khalid Javaid Buldiari for Appellant.

Mian Khalid Hussain Mitroo for Respondent.

Date of hearing: 16th May, 2011.

2011 PTD 2465

[Lahore High Court]

Before Sh. Azmat Saeed; J

BROTHERS SUGAR MILLS LTD. through General Manager Finance

Versus

GOVERNMENT OF PAKISTAN through Secretary Finance, Islamabad and 8 others

Writ Petitions Nos. 7608, 4558, 7770, 10162, 7654, 7902, 7901, 8756, 7904, 7903, 7758, 7705, 7704, 7732, 8757, 8755, 8939, 7856, 10161, 7731, 7656, 7655, 7653, 7946 of 2007, 7900, 64 of 2008, 15486, 22666, 24297, 22278, 12241, 15234, 15235, 15236, 15237, 15238, 15239, 15264, 15482, 15483, 15484, 15485, 15487, 15488, 15598, 15599, 15600, 14424, 15775 of 2009, 742, 22209, 22821 and 1398 of 2010, heard on 13th May, 2011.

Federal Excise Act (VII of 2005)---

---S. 3(A) [as inserted by Finance Act (IV of 2007)]---General Clauses Act (X of 1897), Ss. 5 & 22---S.R.O.No.655(1)/2007 dated 29-6-2009---Constitution of Pakistan Arts. 73, 75(3) & 199---Constitutional petition---Issuance of S.R.O. No. 655(1)/2007, dated 29-6-2007 under S.3(A) of Federal Excise Act, 2005 inserted by Finance Act, 2007 w.e.f 1-7-2007---Petitioner's plea that impugned S.R.O. could not be issued on 29-6-2007, when S.3(A) of Federal Excise Act, 2005 was not part of law---Validity---According to S. 22 of General Clauses Act, 1897, rules, bye-laws could be made,' orders and notification could be issued under an Act during period between its passing and before its commencement---Legislature in its wisdom had chosen to use phrase "passing of the Act" in S.22 of General Clauses Act, 1897 rather than its receiving assent of competent authority i.e. the President---Phrase "passing of the Act" as used in S.22 of General Clauses Act, 1897 with reference to a Money Bill under Art. 73 of the Constitution would mean when such Bill was passed by National Assembly---According to S.5 of General Clauses Act, 1897 for being in consonance with Art.75(3) of the Constitution, a Central Act, unless expressed therein to contrary, would come into operation on date the same receives assent of the President---Powers under S.22 of General Clauses Act, 1897 could Abe exercised after passing of Mersey Bill and before its coming into force, thus, any rule or order passed thereunder would become effective in law, unless otherwise provided, on coming into force of such Act---Federal Excise Act, 2005 was passed by National Assembly on 22-6-2007---Impugned S.R.D. issued on 29-6-2007 in purported exercise of powers available under S.22 of General Clauses Act, 1897 was valid---High Court dismissed constitutional petition in circumstances.

PLD 2011 Kar. 415 and 2011 CLD 373 ref.

Venkateswaraloo and others v. Superintendent Central Jail Hyderabad State and others AIR 1953 SC 49 and The State of Rajasthan v. The Mewar Sugar Mills Ltd. Bhopalsagar AIR 1969 Supreme Court 880 ref.

Ijaz Ahmad Awan, Komal Awan, Naman Mushtaq Awan, Azeem Abbas Kazmi and Rana Javed for Appellants.

Asmar Ahmed Shamas, Agha M. Akmal Khan, Tairq Manzoor Sial, Izharul Haque and Ms. Kausar Parveen for Respondents.

Date of hearing: 13th May, 2011.

2011 P T D 2643

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

EAST PAKISTAN CHROME TANNERY (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and others

Writ Petitions Nos. 8763, 8766, 8767, 8768, 3643, 4216 and 4217 of 2011, decided on 19th August, 2011.

(a) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----S. 4(1)---Constitution of Pakistan, Art. 199---Constitutional petition---Adequate alternate remedy---Scope---Scope of the constitutional petition., in the present case, was not limited to the mathematical calculation of the amount of contribution to be paid by the petitioner under the Workers' Welfare Fund Ordinance, 1971 but laid challenge to the new mode of calculation and constitutionality of the amendments introduced in the Ordinance through money bills i.e. Finance Act, 2006 and Finance Act, 2008---Remedy provided under Workers' Welfare Fund Ordinance, 1971, therefore, was not adequate alternate remedy for seeking such a declaration.

(b) Constitution of Pakistan---

----Art. 199---Workers' Welfare Fund Ordinance (XXXVI of 1971), Preamble---Constitutional petition---Laches---Scope---Constitutionality of amendments made in the Workers' Welfare Fund Ordinance, 1971 by Finance Act, 2006 and Finance Act, 2008 were challenged in the year, 2011---Objection regarding lathes was overruled by the High Court on the grounds that cause of action had arisen for the first time after the issuance of the impugned notice to the petitioner in the year, 2011 and the matter complained of was in the nature of a recurring wrong generating an annual liability against the petitioner.

(c) Workers' Welfare Fund Ordinance (XXXVI of 1971)--

----Preamble, Ss.6, 7, 10 & 10-A---Constitution of Pakistan, Concurrent List, Items 26 & 44---Held, Workers' Welfare Fund Ordinance, 1971 is a welfare legislation for the benefit of the labourers as a class and finds its legislative sanction under Items No.26 and 44 of the erstwhile Concurrent List of the Constitution which dealt with welfare of labour; conditions of labour, etc. and fees in respect thereof.

Preamble and sections 6, 7, 10 ,and 10A of Workers' Welfare Fund Ordinance, 1971 show that the Fund created has a specific purpose and has to be utilized specifically for the welfare of the workers e.g., for providing residential accommodation and other facilities to the workers, financing of projects connected with establishment of housing estates or construction of houses for the workers, financing of other welfare measures including education training, re-skilling and apprenticeship for the welfare of the workers. There is no provision in the Ordinance that allows the Fund to be used for any general or undefined purpose other than for the welfare of the workers. Workers' Welfare Fund Ordinance, 1971 is, therefore, a welfare legislation for the benefit of the labourers as a class and finds its legislative sanction under items No.26 and 44 of the erstwhile Concurrent List of the Constitution which deal with welfare of labour; conditions of labour, etc. and fees in respect thereof.

(d) Tax and Fee---

----Distinction.

In case of Fee', the allocation of the moneys collected (i.e. the Fee collected) is for a specific purpose and more importantly for a specific beneficial purpose, as the moneys collected flow back for the benefit and advantage of a particular class or sector or group of individuals who have paid or contributed towards the Fee. It is qualified that this benefit need not be returned with mathematical precision or exactitude against the contribution made. It would be sufficient for a levy to pass as a Fee if the identified class of persons or sector benefits as a whole. Tax, on the other hand, lacks this specificity of purpose. It is more generic and does not have a defined purpose attached to the allocation of revenues collected. It neither has a specified allocation target nor the mandate to extend any benefit or privilege to an identified class. The State, therefore, has discretion in allocating revenues collected through Tax but no such discretion is available in case of a Fee which is already predetermined by law. It is also underlined that payment of both the levies may be mandatory or compulsory therefore the distinction between the two levies does not lie on the basis of its policing or collection mechanism but actually lies in its purpose and mode of allocation of moneys so collected.

Abdul Majid and another v. Province of West Pakistan and others PLD 1960 Dacca 502; The Commissioner, Hindu Religious Endowments, Madras, v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt AIR 1954 SC 282; Biafo Industries v. Federation of Pakistan 2000 CLC 170; Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; Government of North West Frontier Province through Secretary Agriculture v. Rahim Ullah and others 1992 SCMR 750; Sheikh Muhammad Ismail and Co. Ltd., Lahore v. The Chief Cotton Inspector, Multan Division, Multan and others PLD 1966-SC 388; Azad Government of the State of Jammu and Kashmir through Chief Secretary, Azad Kashmir Government, Civil Secretariat, Muzaffarabad v. Haji Mir Muhammad Naseer and others 1999 PLC (C.S.) 1173; Rahimullah Khan and 65 others v. Government of N. WF. P. through Secretary Agricultural Forest and Co-operation Department, Peshawar and 5 others 1990 CLC 550; Messrs Sapphire Textile Mills Limited ,v. Pakistan through the Secretary, Ministry of Finance and 2 others 2006 CLD 1523; Mahboob Yar Khan and another v. Municipal Committee, Mian Channu and 2 others PLD 1975 Lah. 748; Messrs Fatima Enterprises Ltd. v. The Federation of Pakistan through Secretary, Education, Ministry of Education, Islamabad and others 1999 MLD 2889; Messrs Quetta Textile Mills Limited through Chief Executive V. Province of Sindh through Secretary Excise and Taxation, Karachi and another PLD 2005 Kar. 55; Mian Ejaz Shafi and others v. Federation of Pakistan and others PLD 1997 Kar. 604; Taxman's Interpretation of Taxing Statutes (August, 2008-By Dr. K. N. Chaturvedi -- para.2.2 page 14; Words and Phrases under the Constitution and Advanced Law Lexicon ref.

(e) Workers' Welfare Fund Ordinance (XXXVI of 1971)----

----S. 4(7)---Contribution towards the Fund under the Ordinance is a "fee" and not a "tax".

Messrs Mutual Funds Association of Pakistan (MUFAP) v. Federation of Pakistan 2010 PLC 306 dissented from.

(f) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----S. 4(7)---Income Tax Ordinance (XLIX of 2001), Ss.21(a) & 60A---Contribution towards Workers' Welfare Fund is not "tax" but a fee" and treated as an expenditure for the purposes of assessment of income tax and also a deductible allowance which cannot be the case, if the Fund is treated as a tax under the Income Tax Ordinance, 2001---Such position defeats the contention that Fund .is a tax on income.

Messrs Mutual Funds Association of Pakistan (MUFAP) v. Federation of Pakistan 2010 PLC 306 dissented from.

(g) Workers' Welfare Fund. Ordinance (XXXVI of 1971)--

----S. 4(7)---Constitution of Pakistan, Arts. 70 & 73(3)---Contribution towards Workers Welfare Fund being a 'fee", said Ordinance could not be amended, altered or modified through a "money bill" but required regular legislative procedure under Art.70 of the Constitution.

Article 73(3) of the Constitution provides that Money Bill shall not be deemed to be a Money Bill if it provides for fee or charge for any service rendered. This constitutional exclusion fully applies in the case of Workers' Welfare Fund Ordinance, 1971. Fund being a fee, it could not be amended, altered or modified through a money bill but required regular legislative procedure under Article 70 of the Constitution.

(h) Constitution of Pakistan---

----Art. 73---History and Scope of Art.73 of the Constitution.

(i) Constitution of Pakistan---

----Art. 73---Money Bill---Words "if contains provisions dealing with all or any of the following matters" in Art.73(2) of the Constitution carefully carve out the boundaries of a money bill and limit its scope to either all or any of the provisions mentioned in Art.73(2)(a) to Art.73(2)(g) of the Constitution and allow nothing the to enter a money bill-Special legislative procedure is an exception and must operate in its restricted scope---Principles.

ONLY and IF both carefully carve out the boundaries of a money bill and limit its scope to either all or any of the provisions mentioned in Art. 73(2)(a) to Art. 73(2)(g) of the Constitution and allow nothing else to enter a money bill. If matters falling outside Art. 73(2)(a) to Art.73(2)(g) can be legislated by simply tagging them along in a money bill, it would amount to playing a fraud on the Constitution and result in frustrating the normal legislative design under Art. 70 of the Constitution. It would also practically render the Upper House (Senate) legislatively redundant and impair the constitutional balance of legislation between the two Houses of the Parliament.

The special legislative procedure is, therefore, an exception and must operate in its restricted scope. Being a special procedure it also has to be construed strictly as it is a deviation from the normal legislative process under the Constitution. Integrity of a money bill must be jealously guarded and matter falling outside the purview of Art.73(2)(a) to Art.73(2)(g) of the Constitution should not be permitted to stealthily crawl into a money bill (at times due to political sophistry of the Government in power) and adulterate its sanctity. It is equally necessary that all the wielders of "constituted authority", like the legislators, the administrators and the judicial officers, be made fully aware of the limits of their power, so that they may, in the exercise of their authority act, not only within the letter of the law of the Constitution but also in accordance with the spirit thereof. For there is such a thing, as "lawless legality" and this is often, to be found where men deny that in making or interpreting law they are bound by the spirit of the law.

Art. 73(2) of the Constitution reflects that a Bill or amendment shall be deemed to be a Money Bill if it contains provisions dealing with all or any of the matters enumerated in clauses (a) to (g) of paragraph 2 of this Article.

Every constituent of a money bill must pass the test laid down in Article 73(2) of the Constitution or else it cannot be deemed to be a money bill and has to be excised and severed from the money bill so that it can be passed through the regular legislative procedure provided under Article 70 of the Constitution.

Fundamental Law of Pakistan in 1958 by A.K. Brohi; Mr. Walter Lippman; Mir Muhammad Idris and another v. Federation of Pakistan PLD 2011 SC 213; PTD Statutes 2007 at p.888 and Sindh High Court Bar Association v. Federation of Pakistan PLD 2009 SC 879 ref.

(j) Constitution of Pakistan---

----Art. 73(5)---Money Bill---Art.73(5) of the Constitution provides that every Money Bill shall bear a certificate under the hand of the Speaker of the National Assembly and said certificate shall be conclusive for all purposes and shall not be called in question---Said ouster clause does not give protection to an unconstitutional act or an act that is without jurisdiction, coram non judice and based on mala fide.

Messrs Mutual Funds Association of Pakistan (MUFAP) v. Federation of Pakistan 2010 PLC 306; Chief Justice of Pakistan Iftikhar Muhammad Chaudhry v. President of Pakistan through Secretary and others PLD 2010 SC 61; The State v. Zia-ur-Rahman and others PLD 1973 SC 49; Miss Asma Jilani v. The Government of the Punjab and another PLD 1972 SC 139; The Federation of Pakistan through the Secretary, Establishment Division; Government of Pakistan Rawalpindi v. Saeed Ahmad Khan and others, PLD 1974. SC 151; Pir Sabir Shah v. Federation of Pakistan and others, PLD 1994 SC 738 and Mian Jamal Shah v. The Member Election Commission, Government of Pakistan, Lahore and others PLD 1966 SC 1 ref.

(k) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----Preamble---Income Tax Ordinance (XLIX of 2001), 5.221---Finance Act (III of 2006), Preamble---Finance Act (1 of 2008), Preamble---Constitution of Pakistan, Arts. 73 & 199---Constitutional petition---Amendments made in the Workers Welfare Fund Ordinance, 1971, which is a welfare legislation, by Finance Act, 2006 and Finance Act, 2008 was declared to be unconstitutional and therefore struck down by the High Court---Notice (14-6-2011) issued to the petitioner under S.221 of the Income Tax Ordinance, 2001 was set aside, being unlawful and unconstitutional---Petitioner was, however, liable to pay Workers' Welfare Fund under the Workers' Welfare Fund Ordinance, 1971 as it stood prior to the impugned amendments.

Mansoor Umsn Awan for Petitioner.

Muhammad Ashraf Khan and Naseem Kashmiri, Deputy Attorney Generals for Pakistan, Raja Sikandar Khan, for F.B.R. and Moazzam Tahir Minhas for WWF for Respondents.

Date of hearing: 3rd June, 2011.

2011 P T D 2795

[Lahore High Court]

Before Muhammad Farrukh Irfan Khan, J

Messrs PLYFO INDUSTRIES (PVT.) LTD., GUJRANWALA through Director

Versus

ASSISTANT COLLECTOR (AUDIT-I), SALES TAX AND FEDERAL EXCISE, GUJJRANWALA and 2 others

Writ Petition No.5030 of 2007, decided on 30th August, 2010.

Sales Tax Act (VII of 1990)---

----Ss. 30, 31, 32 & 45---Constitution of Pakistan, Art.199---Constitutional petition---Jurisdiction of Collector to adjudicate in the matter---Collector, Sales Tax and Federal Excise, in pursuance of show-cause notice, vide impugned order decided the case and held the petitioner liable to pay the Sales Tax---Contention of the petitioner was that assumption of jurisdiction by the Additional Collector under S.45 of Sales Tax, 1990 by the Collector and passing impugned order and directing the petitioner to file appeal against impugned order before Customs, Excise and Sales Tax and Appellate Tribunal, was void, illegal, without lawful authority and of no legal effect---Validity---Under provisions of S.45 of Sales Tax Act, 1990, adjudication had been assigned to the Officers of the Sales Tax Department upto the rank of Additional Collector---Appeal against the order of the Adjudication passed by the Additional Collector and other officers below in rank to him had been provided to the Collector of Sales Tax (Appeals) in terms of S.45-B(1) of Sales Tax Act, 1990---Powers of adjudication granted under S.45 of Sales Tax Act, 1990 to the Additional Collector had not been delegated to the Collectors of Sales Tax---Collector (Appeals) was functioning as appellate forum and reviewing authority against the order passed by the Additional Collector, Deputy Collector, or Assistant Collector under S.45-A of the Sales Tax Act, 1990---Remedy against the order of the Collector of Sales Tax (Appeals) had been provided to the Appellate Tribunal---Impugned order was coram non judice and being not sustainable under the law was set aside; and case was remanded to Additional Collector to adjudicate upon the matter afresh strictly in accordance with law.

Mian Abdul Ghaffar for Petitioner.

Izhar ul Haq Sheikh for Respondents.

2011 P T D 2839

[Lahore High Court]

Before Muhammad Khalid Mehmood Khan, J

Messrs SUGI (PVT.) LTD. through duly Authorized Regional Manager

Versus

COLLECTOR OF CUSTOMS, and 2 others

Writ Petition No.13486 of 2011, decided on 22nd July, 2011.

(a) Customs Act (IV of 1969)---

----Ss. 13(3)(4) & 193---Customs Rules, 2001, Rr.239, 240, 345(2) & 356---Constitution of Pakistan, Art.199---Constitutional petition---Licence for private bonded warehouse of the petitioner company, was cancelled after expiry of its period by authorities---Petitioner, pending appeal against order of cancellation of licence, moved application for removal of goods under R.356 of Customs, Rules, 2001 but authorities refused to grant the same without Bank guarantee---Validity---Under provisions of S.13(3) of Customs Act, 1969, Collector of Customs, no doubt enjoyed the power for cancellation of licence for infringement of any condition laid down in the licence; or in case of any violation of any provision of the Customs Act, 1969, or any rule framed thereunder, but there was a provision that cancellation could be done after providing opportunity of show-cause notice to the licencee against the proposed cancellation---Suspension of licence was regulated under S.13(4) of Customs Act, 1969, which had provided that the Collector had the power to suspend the licence in case the proceedings were pending under S.13(3) of Customs Act, but no said proceedings for cancellation were pending against the petitioner under S.13(3) of Customs Act, 1969---Impugned order had shown that no reasons had been given about the suspension of the licence---Every functionary of the government was duty bound to act strictly in accordance with law and not in arbitrary or perfunctory manner---Goods available in the bonded warehouse were perishable and an illegal act or delay in disposal of such goods, could cause financial loss to the petitioner---Petitioner, no doubt was bound to adhere to law and in case any violation had been committed, authorities were within their jurisdiction to initiate action, but such action should not be beyond law---Impugned suspension order had shown that it was without reasons and it seemed that the Collector while passing the order had not applied his mind---Order in question was set aside by High Court and was declared to be without lawful authority.

(b) Customs Act (IV of 1969)---

----S. 100---Customs Rules, 2001, R.356---Constitution of Pakistan, Art.199---Constitutional petition---Transfer of goods from one warehousing station to another---Imposition of condition of furnishing bank guarantee by department---Validity---Under provisions of S.100 of Customs Act, 1969, if the owner intended to transfer any goods from the warehouse he had to apply to the Collector of Customs and the Collector could permit said transfer in such form and manner as the bond could prescribe---Petitioner, in the present case did not request for ex-bonding the goods, but only asked for stacking in-bond goods to another bonded warehouse on same terms and conditions, which were applicable to the present bond---Reasons for transferring the goods to other bonded house were evident, as the operation of the wharehouse had been suspended---Petitioner having not asked for ex-bonding the goods, duties/taxes would not be leviable for such transfer---Duties and taxes leviable, would be payable when the goods were requested to be ex-bonded as per terms of import or in-bonding---Petitioner was not manufacturer and not intended to export the goods sought to be transferred---Goods were only finished goods saleable at Duty Free Shops and petitioner was liable to pay duty and taxes according to ex-bonding procedure---Rule 356(1) of Customs Rules, 2001 was applicable to petitioner's case as the goods were not in the process of ex-bonding, nor were in the process of sale, and the Collector could allow said transfer against indemnity bond as per Appendix-VII---Deputy Collector (Bonds) had misinterpreted the law while imposing the condition of bank guarantee for refusing to transfer of goods from one wherehouse to another bond---Appeal against order-in-original being pending disposal before competent forum, High Court could not interfere in the appellate jurisdiction of the department.

Shezada Mazhar for Petitioner.

Sarfraz Ahmad Cheema for Respondents.

2011 PTD 2851

[Lahore High Court]

Before Muhammad Farrukh Irfan Khan, J

Messrs CRESCENT ART FABRICS (PVT.) LTD. through Managing Director

Versus

ASSISTANT COLLECTOR CUSTOMS and 4 others

Writ Petition No.9297 of 2003, decided on 30th September, 2010.

Customs Act (IV of 1969)---

----Ss. 25 & 81---Constitution of Pakistan, Art.199---Constitutional petition---Determination of customs value of goods---Petitioner imported goods and classified the same for the purpose of import under PCT Heading 3009,5000 and paid applicable duty at the rate of Rs.10% ad valorem---Department by issuing Customs General Order, demanded payment of customs duty at the enhanced rate of Rs.25%, which was applicable rate for items under PCT heading 3208.5000---Contention of counsel for the importer was that provisional assessment was made in the year 1990 and according to the provisions of S.81(2) of the Customs Act, 1969, taxes and charges correctly payable on those goods were to be determined within one year of the date of provisional determination; and that department had failed to comply with the said provision of law; and that according to S. 81(4) of the Act, the provisional assessment had become final assessment---Validity---Department having failed to comply with the provisions of S. 81(2) of the Customs Act, 1969, S.81(4) of the said Act had become applicable; and the provisional determination made in the year 1999, was ,to be considered as the final determination---Department was directed to release the relevant bank guarantee to the petitioner within one month, in circumstances.

Mian Abdul Ghaffar for Petitioner.

Ch. Muhammad Zafar Iqbal for Respondents.

2011 P T D 2856

[Lahore High Court]

Before Muhammad Khalid Mehmood Khan, J

Messrs TREND INTERNATIONAL through Partner

Versus

DEPUTY COLLECTOR CUSTOMS, DRY PORT, MULTAN and 4 others

Writ Petition No.11062 of 2010, decided on 5th May, 2011.

Customs Act (IV of 1969)---

----Ss. 79, 80 & 81---Constitution of Pakistan, Art.199---Constitutional petition---Provisional assessment---Petitioner/importer got released imported goods after provisional assessment---Almost three years later, Deputy Director Customs issued a demand notice for recovery of amount against the said goods declaration---Under provisions of S.81(2) of the Customs Act, 1969, provisional assessment could be finalized within a period of one year and 90 days, and extension could be allowed in exceptional circumstances, but with specific approval of the Collector concerned---In the present case, provisional assessment was finalized three years back---Department having failed to finalize the assessment of goods released on provisional assessment in terms of S.81(2) of the Customs Act, 1969, provisional assessment on the basis of declared value, had become final and the additional amount or ad hoc amount to secure the differential, had become refundable, in circumstances---Impugned demand of additional amount by the department, was declared to be without lawful authority, in circumstances.

Collector of Customs (Appraisement) Karachi v. Auto Mobile Corporation of Pakistan Karachi 2005 PTD 2116 rel.

Mian Abdul Basit for Petitioners.

Ahmad Raza for Respondents.

Khawaja Noor Mustafa, Deputy Attorney General.

2011 P T D 104

[Peshawar High Court]

Before Ejaz Afzal Khan, C.J. and Yahya Afridi, J

Messrs DELTA CNG STATION PESHAWAR

Versus

FEDERATION OF PAKISTAN, through Secretary Law, Islamabad and 5 others

Writ Petitions Nos. 282, 1364, 1829, 1995, 2773, 3003, 3008, 3014, 3015, 3024 of 2009 and 81, 82, 83, 84 of 2010, decided on 28th September, 2010.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 234-A(3) & 235---Sales. Tax Act (VII of 1990), Ss.3 & 7---Constitution of Pakistan, Art.199---Constitutional petition---Petitioner, CNG Station, assailed the vires of S.235 of the Income Tax Ordinance, 2001 and S.7-A of the Sales Tax Act, 1990 contending that tax collected under S.234-A(3) of Income Tax Ordinance, 2001 was final tax on income of CNG Stations, therefore, no further tax could be levied on the consumption of electricity under S.235 of Income Tax Ordinance, 2001 as the same would amount to double taxation---Petitioners further contended that subordinate legislation could not override the provisions of S.3 of Sales Tax Act, 1990 which provided for sales tax at the rate of 16%---Validity---Tax collected under S.234-A(3) of the Income Tax Ordinance, 2001 was final vis-a-vis income of a CNG station arising from the consumption of gas only'---Provisions of S.234-A(3) of Income Tax Ordinance, 2001 had nothing to do with the consumption of electricity used by a taxpayer---Sections 234-A(3) and 235 of Income Tax Ordinance, 2001, dealt with different subjects providing for collection of taxes under different schedules of rates and were not repugnant to each other---Sections 234-A(3) and 235 of Income Tax Ordinance, 2001 being neither discriminatory nor confiscatory, were not beyond the competence of legislature---Tax on value addition was levied by virtue of S.7A of Sales Tax Act, 1990 which was prefaced with non obstante clause---Provisions of S.235 of Income Tax Ordinance, 2001 and that of S.7A of Sales Tax Act, 1990 were not ultra vires the Constitution---Petitions were dismissed for being without any substance.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary Ministry of Finance Islamabad and 6 others PLD 1997 SC 582 fol.

Zafar Ali Khan and another v. Government of N.-W.F.P. through Chief Secretary and 3 others PLD 2004 Pesh. 263; Indus Jute Mills Ltd. through Chief Executive v. Federation of Pakistan through Secretary Finance, Islamabad and 3 others 2009 PTD 1473 and Messrs Fauji Cement Co. Limited v. The Federation of Pakistan through Secretary Finance, Ministry of Finance and 4 others Writ Petition No. 1553 of 2008 rel.

Hidayat Ullah Khattak for Petitioner.

Rehmanullah, Subhanallah, Muhammad Habib Qureshi, Shahid Raza Adnan Orakzai and Muhammad Khair Saheed Khan, DAG for Respondents.

Date of hearing: 28th October, 2010.

2011 PTD 301

[Peshawar High Court]

Before Zia ur Rehman Khan and Yahya Afridi, JJ

SHERZADA

Versus

COLLECTOR CUSTOMS, PESHAWAR

S.A.Os. Nos.2, 3 and 19 of 1999, decided on 15th October, 2010.

(a) Customs Act, (IV of 1969)---

----S. 196---Reference to High Court---Disputed factual issue relating to description of seized goods and implication thereof on restriction imposed under law on its import---Validity---Proper forum for adjudication of such issue would be Adjudicating Authority and Tribunal, but not High Court, which could only decide issues relating to question of law arising out of impugned judgment of Tribunal---Principles.

(b) Customs Act (IV of 1969)---

----S. 196---Reference to High Court---Plea raised in defence by Revenue before High Court not taken in show-cause notice issued to importer---Validity---Revenue could not raise such plea for first time before High Court.

(c) Customs Act (IV of 1969)---

----Ss. 2(s), 16, 139, 156(1)(8)(89), 158, 159, 168(2) & 171---Seizure and confiscation of gold ornaments and wrist watches imported by passenger without making its declaration---Validity---Definition of word "smuggle" encompassed within its purview manufactures of gold brought into Pakistan evading payment of duties or taxes leviable thereon---Gold ornaments were "manufacture of gold"-Non-making of declaration of such goods by petitioner and recovery memo thereof prepared by Revenue Staff and its signing by petitioner at time of its seizure had established evasion of duty. by him---Onus of proof under S. 187 of Customs Act, 1969 was on petitioner to rebut such charge, but he failed to do so---Wrist watches, though not falling within purview of smuggling, had been recovered from petitioner---Confiscation of goods under S. 157(1) of Customs Act, 1969 would include any package in which they were found and all other contents thereof---Confiscation of wrist watches, thus, could not be questioned before High Court---Impugned order of confiscation was legal in circumstances.

(d) Customs Act (IV of 1969)---

----Ss. 168, 180 & 184---Proceedings under Ss. 168, 180 & 184 of Customs Act, 1969---Distinction stated.

The administrative proceedings commencing with the show­-cause-notice provided under section 168 and its conclusion in order-in­-original as envisaged under section 180 of the Customs Act, 1969 and the criminal proceedings initiated with the registration of an F.I.R. leading to the trial under section 184 of the Act are independent of each other and the evidence produced, the standard required and the consequences which follow thereafter are to remain independent and cannot be used or applied in the other proceedings.

(e) Customs Act (IV of 1969)---

----S. 168---Service of show-cause notice on petitioner beyond sixty days of seizure of smuggled goods---Time for serving such notice extended by competent authority on ground of "completion of investigation" within period stipulated of sixty days---Validity---Such reason/ground would not invalidate the notice and entire proceedings followed thereafter---Issuance of final show-cause notice within such extended period was permissible under S. 168 of Customs Act, 1969.

Abdul Majeed v. Collector Customs 2009 PTD 119; Collector Customs v. Shah Jehan (F.A.O. No.89/98); Ferozur Rehman Butla v. the State 1980 PCr.LJ 663; Messrs Muhammad Attique Paracha v. The State 2005 PTD (Trib.) 135; Mst. Siddigan Afzal v. Asstt: Collector of Central Excise PLD 2001 Lah. 78; Azizullah v. The State PLD 1981 Kar. 250; Abdul Zahid v. Director-General PLD 1990 Kar. 412; Muhammad Javed v. Customs Central Excise and Sales Tax Appellate Tribunal 2001 YLR 635; Collector Customs v. Haji Noorul Haq PTCL 2003 CL 716 and PTCL 2003 CL 723; Abubakar Siddique v. Collector Customs, Lahore 2006 SCMR 705 and Abu Bakar Siddique v. Collector of Customs 2002 CLC 1066 ref.

Collector of Customs v. Haji Noorul Haq PTCL 2003 CL 723 rel.

(f) Customs Act (IV of 1969)---

----Ss. 2(s), 16, 139, 156(1)(8)(89), 168(2) & 181---Seizure and confiscation of gold ornaments and wrist watches imported by passenger without making its declaration---Non giving option to owner to pay fine in lieu of confiscation of such goods---Validity---Federal Board of Revenue at relevant time had not specified any restriction or prohibition regarding goods or classes of goods for which such option could not be given to its owner---Adjudicating Officer at relevant time was not hindered by any notification of Federal Government to give such option to owner of confiscated goods---Failure on part of Adjudicating Officer to exercise discretion vested in him under S.168 of Customs Act, 1969 was clearly illegal---High Court set aside impugned order while directing Adjudicating Officer to provide an option to owner of confiscated goods to pay fine in lieu thereof.

Abubakar Siddique v. Collector of Customs 2006 SCMR 705 rel.

(g) Discretion---

----Discretion vested in an authority by statute---Corresponding obligation of authority while exercising such discretion---Scope stated.

When the legislation vests discretion in an authority, there is always a corresponding obligation to exercise same fairly, reasonably and justly. It also mandates the said authority not to remain silent and in cases where the authority does not find it appropriate to exercise its discretion, it still has to provide reasons for this inaction on its part.

Isac Ali for Appellant.

S. Mudassir Amir for Respondent.

Date of hearing: 15th September, 2010.

2011 PTD 549

[Peshawar High Court]

Before Abdul Aziz Kundi and Imtiaz Ali, JJ

COMMISSIONER OF INCOME TAX (LEGAL) INLAND REVENUE, REGIONAL TAX OFFICE, PESHAWAR

Versus

Messrs EVER GREEN TRADING COMPANY, CARRIAGE CONTRACTOR, PESHAWAR

Tax Reference No.401/2010, decided 19th October, 2010.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 133 & 153 (1)(b)(c), (9)---Reference to High Court---Refund---Fiscal statute---Clarifcatory amendment---Scope---Taxation officer declined to grant refund to assessee on the ground that amendment brought in S. 153(1) of Income Tax Ordinance, 2001, had no retrospective effect---Plea raised by assessee was that it was clarificatory amendment and it operated retrospectively---Validity---Clarifcatory amendment in a fiscal statute operated retrospectively as the same was to clarify ambiguity---Courts had always treated clarificatory amendments as retrospective amendments even in cases where purpose behind such amendment was to nullify earlier judgments---Sole purpose behind such amendment was to change legal position after an inconvenient, improper or uncalled for interpretation was put on such provision---Unless it was a mere clarification and not a change in substance, retrospectivity of such amendment could not be questioned---Both the forums below had rightly found assessee entitled to the claim of refund and questions posed in the reference stood decided by them which required no further consideration by High Court---Reference was dismissed in circumstances.

2008 PTD (Trib.) 1897 ref.

(b) Interpretation of Statutes---

----Fiscal statute---Clarificatory amendment---Purpose.

2008 PTD (Trib.) 1897 ref.

Rehman Ullah for Petitioner.

2011 P T D (Trib.) 596

[Customs Appellate Tribunal, Peshawar]

Before Sher Nawaz Member (Technical)

Messrs BANOORI CUSTOMS AGENCY, AIRPORT, PESHAWAR and 5 others

Versus

COLLECTOR OF CUSTOMS, SALES TAX AND FEDERAL EXCISE (APPEALS), PESHAWAR and another

Appeal No. Cus. 173/PB of 2010, decided on 10th November, 2010.

Customs Act (IV of 1969)---

----Ss.80, 208(1), 209(3) & 194---Baggage Rules, 2006, Rr.2(c) & 17---Assessment of duty---Short payment of duty---Liability of principal and agent---"Commercial quantity ", determination of---Audit of record of appellant showed that goods in `commercial quantity' were cleared without charging redemption fine etc. and short amount was paid by the principal and his clearing agent---Deputy Collector of Customs vide his consolidated order-in-original ordered to deposit amount which was short paid---Collector dismissed appeal against order-in-original---Validity---Two T. Vs. and two refrigerators were cleared by the agency--Question was as to whether said two T. Vs. and two Refrigerators would come within the definition of "commercial quantity" as defined in R.2(c) of Baggage Rules, 2006 and whether R.17 of said Rules would be attracted---Said aspects needed to be examined at the time of original jurisdiction---Provisions of subsection (3) of S.209 of the Customs Act, 1969 were very clear with regard to the role of clearing agent---Which provided that where any duty was not levied or was short-levied or erroneously refunded on account of any reason, other than wilful act, negligence or default of the agent, such customs duty would not be recovered from the agent---In the present case it was to be ascertained as to whether, it was a wilful act or negligence or default on the part of the agent; or it was mere omission and no wilful act was involved---Case in circumstances, was remanded to the Adjudicating Officer to examine the said aspects; and to issue a speaking order, fixing responsibility upon the clearing agent and other persons involved.

Danish Ali Qazi for Appellants.

Naseer Khan, D.S. and Aziz-ur-Rehman, D.S. for Respondents.

Date of hearing: 11th October, 2010.

2011 P T D 862

[Peshawar High Court]

Before Mazhar Alam Khan Miankhel and Syed Sajjad Hassan Shah, JJ

MINHAJUDDIN

Versus

COLLECTOR OF CUSTOMS, PESHAWAR and others

Customs Reference No.38 of 2009, decided on 20th December, 2010.

(a) Customs Act (IV of 1969)---

----Ss. 15, 16, 156(1)(8)(89), 167, 168, 194-A & 196---Recovery, seizure and confiscation of huge foreign currency---Appeal/reference to High Court---Appellant who was leaving abroad, was intercepted at the Airport and huge amount of foreign currency of different countries was recovered from his possession who intended to smuggle same out of the country in violation of law---Appellant had failed to prove the lawful possession of said currency and taking the same in valid and lawful manner---Said currency was seized and confiscated---Appeal before Collector (Appeals) which was accepted and seizure and confiscation of currency was termed to be disregard of law, justice and equity and currency was directed to be returned to the appellant---Appellate Tribunal accepted appeal by Customs authorities against order of Collector (Appeals) and order passed by Collector was set aside---Validity---Appellant was provided a full chance of rebuttal and nothing was brought on record reflecting that such discretion was exercised by the Appellate Tribunal against law or without jurisdiction; or same had caused any prejudice to the customs department---Reference was rejected.

The Collector Central Excise and Land Customs and others v. Rahm Din 1987 SCMR 1840 and 2006 SCMR page 1609 ref.

(b) Customs Act (IV of 1969)---

---Ss. 6 & 7---Entrustment of functions of the Customs Officers to certain other officers to assist the officers of Customs---Functions of Customs Officials could be entrusted to other officer by the Board by issuing a notification in the official Gazette---All the officers of Central Excise, Police and the Civil Armed Forces; and all the officers engaged in the collection of land revenue were empowered and required to assist the officers of the Customs in discharge of their functions under Customs Act, 1969.

Zahid Idrees Mufti for Petitioner.

Syed Mudassir Ameer for Respondents.

Date of hearing: 30th September, 2010.

2011 P T D 1076

[Peshawar High Court]

Before Dost Muhammad Khan and Yahya Afridi, JJ

Messrs NATIONAL STEEL MILLS AND RE-ROLLERS (PVT.) LTD., HATTAR

Versus

COLLECTOR, SALES TAX AND FEDERAL EXCISE, PESHAWAR

Tax Reference No. 12 of 2009, decided on 27th January, 2011.

(a) interpretation of statutes---

----Amendment in a statute would not affect rights of a person accrued prior thereto---Principles.

The rights, privileges, advantages and benefits, which accrue to any person under the provisions of a statute prior to any amendment therein would be protected and not affected in any manner by any provision introduced through it.

NS Bindra' Interpretation of Statutes (9th Edition); Adnan Afzal v. Capt: Sher Afzal PLD 1969 SC 187; Colonial Sugar Refining Company Ltd. v. Irving 1905 AC 369; Khalid Qureshi v. United Bank Ltd. 2001 SCMR 103; Messrs Rais Khan's case 1996 SCMR 83; Pakistan Steel Mill's case 2002 SCMR 1023; Mian Rafiuddin's case PLD 1971 SC 252; Mirza Mehmood Sharif Baig's case PLD 1973 Lah. 114; Barkat Ali's case 1980 CLC 713 and Devachand Muljimal and others' case PLD 1968 Kar 107 rel.

(b) Sales Tax Act (VII of 1990)---

----Ss. 45-B & 46 [as amended by Finance Act (VII of 2005) w.e.f. 1-7-2007]---Amendments in Ss. 45-B & 46 of Sales Tax, Act, 1990 made through Finance Act, 2005 after passing of order-in-­original by Collector---Appeal to Appellate Tribunal by revenue---Scope---Such amendments were prospective in nature---Right of appeal accrued to revenue prior to such amendments would remain intact and unaffected---Principles.

NS Bindra' Interpretation of Statutes (9th Edition); Adrian Afzal v. Capt: Sher Afzal PLD 1969 SC 187; Colonial Sugar Refining Company Ltd. v. Irving 1905 AC 369; Khalid Qureshi v. United Bank Ltd. 2001 SCMR 103; Messrs Rais Khan's case 1996 SCMR 83; Pakistan Steel Mill's case 2002 SCMR 1023; Mian Rafiuddin's case PLD1971 SC 252; Mirza Mehmood Sharif Baig's case PLD 1973 Lah. 114; Barkat Ali's case 1980 CLC 713 and Devachand Muljimal and others case PLD 1968 Kar 107 rel.

(c) Administration of justice---

----Act of the court shall prejudice no person (actus curiae neminem gravabit).

Mst. Baz Khana's case PLD 2005 Pesh. 214; Mst. Razia Jafar's case 2007 SCMR 1256 and Akbar Shah's case 2010 SCMR 1408 rel.

(d) Appeal (Civil)---

----Appeal is continuation of original proceedings.

Isaq Ali Qazi for Appellant.

Mudasir Amir for Respondent.

Date of hearing: 27th January, 2011.

2011 PTD 1105

[Peshawar High Court]

Before Ejaz Afzal Khan and Mazhar Alam Khan Miankhel, JJ

MOHTAMIM SHAH and others

Versus

DEPUTY COLLECTOR and others

S.A.O. No.20 of 2001, decided on 8th March, 2011.

Customs Act (IV of 1969)---

----Ss. 17, 168, 181 & 196---Seizure and confiscation of imported goods---Failure to produce valid documents---Appeal to High Court---Customs mobile squad during the course of normal checking recovered and seized 44 gunny sacks of foreign black tea and the appellants/ importers failed to provide any legal documentary proof of lawful import thereof---Twenty four bags were ordered to be released to the appellants being legally imported, but remaining bags were confiscated---Vehicle carrying said bags was also confiscated, but an option in terms of S.181 of Customs Act, 1969 was given to the rightful owner of said vehicle to redeem vehicle against redemption fine---Only documents which could provide validity to the importers/appellants, was the triplicate copy of bill of entry---Appellants provided said triplicate copy of bill of entry in respect of 24 bags and on that basis said 24 bags were released while in respect of remaining bags, the appellants produced copies of "Exchange Control" which would not serve the purpose as said documents were for bank record only---Said copies of "Exchange Control" produced by the appellants, could not be termed as a document tendered in accordance with law; as same were not only the photocopies, but were copies from the copies, which had no evidentiary value and were inadmissible in evidence---Said documents would have no presumption of correctness as same were not produced from proper custody---Impugned judgment of Appellate Tribunal, whereby appeal of the appellants against orders of the Deputy Collector Customs (Adjudication) was partly allowed, could not be interfered with in appeal by High Court.?

Khalid Khan for Appellants.

Ishtiaq Ahmad for Respondents

Date of hearing: 1st March, 2011.

2011 P T D 1433

[Peshawar High Court]

Before Shah Jahan Khan and Yahya Afridi, JJ

ADDITIONAL COLLECTOR CUSTOMS, PESHAWAR

Versus

DAULAT KHAN and another

Customs Reference No.27 of 2010, decided on 15th March, 2011.

Customs Act (IV of 1969)---

----Ss. 2(s) & 16---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---Criminal Procedure Code (V of 1898), Ss. 517 & 524---Vehicle purchased in public auction held under Ss. 517 and 524, Cr.P.C., and issuance of auction certificate by District Officer (Revenue)---Seizure and confiscation of such vehicle by Customs authorities despite production of auction certificate by its purchaser on ground that same was not recorded as legally imported in Customs Data Bank of Imported vehicles---Order-in-original upheld by Appellate Authority was set aside by Tribunal while relying upon judgment of Supreme Court delivered in CPSLA No. 4020-L of 2001 titled Province of Punjab v. Arshad Mahmood---High Court dismissed reference application filed by Revenue.

Zahidullah v. Secretary Mines 2007 YLR 1920 ref.

Province of Punjab v. Arshad Mahmood C.P.L.A. No.4020-L of 2001 rel.

Ch. Muhammad Ashraf v. Deputy Superintendent Anti-Smuggling Squad PLD 1977 Lah. 300 not fol.

Moinuddin Hamayun for Petitioner.

Isaq Ali Qazi for Respondent.

Date of hearing: 14th February, 2011.

2011 PTD 2753

[Peshawar High Court]

Before Attaullah Khan and Syed Sajjad Hassan Shah, JJ

MOSAN KHAN and 2 others

Versus

GOVERNMENT OF N.-W.F.P. through Secretary Finance Department and 4 others

Writ Petition No.217 of 2008, decided on 29th March, 2011.

North-West Frontier Province Finance Act (I of 1996)---

----S. 11 [as amended by North-West Frontier Province Finance Act (VI of 2004)]---Pakistan Tobacco Board Ordinance (I of 1968), S.9--Constitution of Pakistan, Arts.4, 148, 151 & 199---Constitutional petition---Levy of tobacco development cess by Government of N.-W.F.P. on harvests of tobacco transported in Dera Ismail Khan Division from Punjab Province---Validity---Two types of tobacco cess were being presently collected i.e. one called Federal Tobacco Cess being collected by Federal Tobacco Board on behalf of Federal Government, and other was provincial levy collected by Provincial Government through Excise and Taxation Department---Provincial Government had legally levied such cess at specified rates on persons, other than tobacco factories, dealing in tobacco business and transporting tobacco from Punjab Province---Collection of such cess by Federal Government and Provincial Government would not amount to double taxation and was not violative of Art. 151 of the Constitution---Federal Tobacco Cess being collected by Pakistan Tobacco Board on behalf of Federal Government was not divisible under Finance Distribution Formula---Impugned cess levied by Provincial Government would not amount to double taxation and was not violative of Arts.4, 148 & 151 of the Constitution---Petitioner by alleging impugned cess to be double taxation had challenged Federal Levy being collected by such Board, which being a necessary party had not been impleaded in constitutional petition, which was a defect---Petitioner had impugned North-West Frontier Province Finance Act, of 2004 without challeng­ing same in constitutional petition---High Court dismissed constitutional petition in circumstances.

Pakistan Tobacco Co. Ltd. v. N.-W.F.P. through Secretary Law, Government of N.-W.F.P., Peshawar and 9 others 2002 CLC 1910; PLJ 2002 SC 625 (sic) and PLD 2005 Kar. 55 rel.

Rustam Khan Kundi for Petitioners.

Sanaullah Khan Shamim Gandapur, D.A.-G. for Respondents.

Date of hearing: 29th March, 2011.

2011 P T D 2778

[Quetta High Court]

Before Mrs. Syeda Tahira Safdar and Muhammad Noor Meskanzai, JJ

COLLECTOR,, CUSTOMS SALES TAX AND CENTRAL EXCISE, QUETTA

Versus

Messrs MANAN KHAN, KARACHI and another

Custom Appeal No.6 of 2005, decided on 25th August, 2011.

Customs Act (IV of 1969)---

----Ss. 2(s), 156, 168, 179, 181, 194-A & 196---Smuggling---Confiscation of vehicle and conviction of accused-Appeal against acquittal---Special Judge (Customs) acquitted the accused and ordered to release vehicle in question---Appellate Tribunal upheld findings of Special Judge---Appellate Tribunal had not recorded its findings on any other material, but complete reliance had been made on the decision given by the Special Judge (Customs)---Appellate Tribunal was supposed to apply its mind apart from the decision of the Special Judge, made in a criminal case; and had to decide the matter in accordance with law, which had not been done---Order of acquittal was set aside, in circumstances.

Ch. Mumtaz Yousaf Standing Counsel for Appellant.

Messrs Manan Khan and Ghulam Hussain Mengal for Respondents.

Date of hearing: 9th March, 2011.

2011 PTD 159

[Supreme Court of Pakistan]

Present: Nasir-ul-Mulk, Jawwad S. Khawaja and Mian Saqib Nisar, JJ

COMMISSIONER OF INCOME TAX, LAHORE and others

Versus

Messrs PROSPERITY WEAVING MILLS (PVT.) LTD. and others

Civil Appeals No. 640 to 643 of 2006, Civil Petition No. 1001-L of 2006 and C.M.As. Nos. 2398 to 2401 of 2009, decided on 26th October, 2010.

(On appeal from the judgment dated 26-9-2005 passed by the Lahore High Court, Lahore in W.Ps. Nos. 1803, 4993, 5486, 6183 of 2004, 18903 of 2005 respectively).

Income Tax Ordinance (XXXI of 1979)---

----Second Sched. Part-I, Cls. 77-C & 77-C(A)---Income Tax Ordinance (XLIX of 2001), S. 239(14)---S.R.D. 100(1)/93, dated 2-2-1993, R.9---National Saving Schemes---Exemption from deduction of withholding tax on profits paid in said schemes---Scope---Exemption has been extended to all kinds of investments made in the National Saving Schemes, which continued on the enforcement of Income Tax Ordinance, 2001 by virtue of its S.239(14), which saved the application and continuity of Cl.77-C, of Part-I of Second Schedule of the Income Tax Ordinance, 1979---Only restriction which remained in force was that said exemption, shall be available on the yield of the investments made on or before 30-6-2001---When the exemption was available to the investments of National Saving Schemes under the express provisions of law, such exemption could not be snatched, withdrawn or taken away by a sub-legislative instrument of the Federal Government, which might have been issued in the garb of interpreting the provision of any law.

Muhammad Ilyas Khan, Senior Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record/Advocate Supreme Court for Appellants (in all cases).

Saghir Ahsan Farooqui, NSO for the Applicants (in C.M.A. Nos.2398 to 2401 of 2009).

Siraj Khalid, Advocate Supreme Court and Dr. Ikram-ul-Haq, Advocate Supreme Court for Respondents.

Date of hearing: 26th October, 2010.

2011 PTD 610

[Supreme Court of Pakistan]

Preset: Mian Shakirullah Jan, Mahmood Akhtar Shahid Siddiqui and Khilji Arif Hussain, JJ

Syed ZIA HAIDER RIZV1 and others

Versus

DEPUTY COMMISSIONER OF WEALTH TAX, LAHORE and others

Civil Appeals Nos. 99, 100 to 106 of 2006, decided on 5th January, 2011.

(On appeal from the judgment dated 29-9-2005 of the Lahore High Court, Lahore passed in Writ Petition No. 15148 of 1999, W.T.As. Nos. 194, 195, 196, 206, 198, 199 and 200 of 2002).

(a) Wealth Tax Act (XV of 1963)---

----S. 27---High Court, appellate jurisdiction of---Scope---Normally High Court would answer question of law arising out of order of Tribunal and then send copy of its judgment to Tribunal for disposing of case in its conformity.

(b) Constitution of Pakistan---

----Art. 68---Parliament---Requirement of a statute to place any notification or Rules before Parliament---Mode and purpose stated.

In a democratic setup, every Government is responsible to its Legislature. When any statute requires mere lying of any notification or Rules before the Legislature, its executive, viz. State Government, comes under the scrutiny of the concerned Legislature. Every function and every exercise of power by the State Government is under one or other Ministry, who in turn is accountable to the Legislature concerned. Where any document, Rule or notification requires placement before any House or when placed, the said House inherently acquires' the jurisdiction over the same. Irrespective of the fact that such rules or notifications may not be under purview of its modification, such members may seek explanation from such Ministry of their inaction, arbitrariness etc.

Laying before the House of Parliament are made in the three different ways. Laying of any Rule may be subjected to any negative resolution within a specified period or may be subjected to its confirmation. This is spoken as negative and positive resolution respectively. Third may be mere laying before the House.

Legislature, Constitutional and Administrative Law, Stanely De Smith and' Rodney Brazier, 7th Edition; Administrative law by HWR Wade and C.F. Forsyth, 10th Edition, page 765; Atlas Cycle Industries Ltd. v. State of Haryana AIR 1979 SC 1149 and Maulana Nur-ul-Haq v. Ibrahim Khalil 2010 SCMR 1305 rel.

(c) Wealth Tax Act (XV of 1963)---

----S. 5(2) & Second Sched. Cl. 12(2)---Exemption from wealth tax in respect of shop owned/occupied by assessee for business purposes---Refusal of authority to accept such claim on ground that exemption notification, though duly gazetted, was invalid for want of its placement before National Assembly---Validity---Second Schedule of Wealth Tax Act, 1963 dealing with exemption from tax only had no concern with imposition of any new tax or change of rate of tax levied under Wealth Tax Act, 1963---Requirement of S. 5(2) of Wealth Tax Act, 1963 for placement before National Assembly notification issued by Federal Government regarding any amendment in its Second Schedule was not mandatory, rather its purpose was to give information to legislature---Principles.

Iram Ghee Mills (Pvt.) Lahore v. Income Tax Appellate Tribunal, Lahore, Commissioner of Income-Tax, Central Zone `B' v. Messrs Farrokh Chemical Industries 1992 PTD 523; Habibur Rehman v. Ali Zafar Siddiqi 1992 SCMR 2351; Rana Muhammad Jamil v. The Punjab Road Transport Board, Lahore and others PLD 1957 (W.P.) Lah. 1; Asim Khan v. Muhammad Fazil Khan PLD 1983 SC 387; Mian Rafi­ud-Din and 6 others v. The Chief Settlement and Rehabilitation Commissioner and 2 others PLD 1971 SC 252; Iftikhar Ahmad Shaikh v. Ch. Muhammad Din and 2 others PLD 1990 Lah. 461; Zulfiqar and others v. Shandat Khan PLD 2007 SC 582; Overseas Pakistanis Foundation and another v. Sqn. Ldr. (Retd) Syed Mukhtar Ali Shah and another 2007 SCMR 569; Reference No.1 of 1988, Made by the President of Pakistan PLD 1989 SC 75; Messrs Chenab Fabrics and Processing Mills Ltd. Faisalabad v. Government of Pakistan through Secretary, Ministry of Finance, Islamabad and 5 others, 2006 PTD 1412; Commissioner of Income Tax, Zone-C, Lahore and others v. Messrs Kashmir Edible Oils Ltd. and others 2006 SCMR 109; Mst. Musarrat Umar Daraz v. Income Tax Appellate Tribunal, Lahore and 2, others 2006 PTD 1743 and Income-tax Appellate Tribunal Pakistan, 2000 PTD (Trib.) 2133 ref.

Legislature, Constitutional and Administrative Law, Stanely De Smith and Rodney Brazier, 7th Edition; Administrative law by Rodney Brazier, 7th Edition; HWR Wade and C,F. Forsyth, 10th Edition, page 765; Atlas Cycle Industries Ltd. v. State of Haryana AIR 1979 SC 1149 and Maulana Nur-ul-Haq v. Ibrahim Khalil 2010 SCMR 1305 rel.

(d) Interpretation of statutes---

----Mandatory or directory statute, determination of---Test stated.

There is no absolute test by which it may be determined whether a statute is mandatory or directory, the primary rule is to ascertain the Legislative intent as revealed by an examination of the whole Act.

Siraj-ud-Din Khalid, Advocate Supreme Court for Appellants (in C.As. Nos.99, 104-106 of 2006).

Muhammad Ilyas Khan, Senior Advocate Supreme Court, Legal Advisor Income Tax for Respondents (in all cases) (in C.As. Nos. 99, 104-106 of 2006).

Shahbaz Butt, Advocate Supreme Court for Appellants (in C.As. Nos. 100 to 103 of 2006).

Muhammad Ilyas Khan Sr. Advocate Supreme Court for Respondents.

Date of hearing: 26th November, 2010.

2011 PTD 690

[Supreme Court of Pakistan]

Before Iftikhar Muhammad Chaudhry, C.J., Ghulam Rabbani and Khalil ur Rehman Ramday, JJ

FEDERATION OF PAKISTAN through Secretary, Revenue Division, F.B.R. and others

Versus

Messrs MILLENNIUM PHARMACEUTICAL COMPANY, KARACHI and others

Civil Petition Nos. 377-K, 398-K and 399-K of 2010, decided on 13th July, 2010.

(On appeal from the, order dated 22-6-2010 passed by the High Court of Sindh, Karachi in C.P. No. D-1468, D-1466 and D-1469 of 2010).

Customs Act (IV of 1969)---

----S. 25---Constitution of Pakistan, Art. 185(3)---Determination of customs value of goods---Respondent company imported the goods and consignments so received were declared under PCT heading 3003.9010 whereas the Customs Authorities applied PCT heading 2106.9090---High Court under constitutional jurisdiction had opined that goods were covered by PCT heading 2930.9000, which was different to those respectively asserted by the respondent and Customs Authorities and ordered that consignments be released under said PCT heading---Representative of respondent company was hut able to satisfactorily point out as to on what basis that respondent formed the view that assessment orders were illegal and void---On perusal of impugned order, it could not be found on what basis High Court was of the view, though tentatively, that the consignment would be covered under PCT heading 2930.9000---Question as to which of the PCT heading was relevant being disputed, required enquiry for appropriate determination---Impugned orders were set aside by converting petitions into appeals by Supreme Court and appeals were allowed.

Raja Muhammad Iqbal, Advocate Supreme Court for Petitioner (in all cases).

Shahzad Saleem, Executive Officer for Respondent No.1 (in all cases).

Date of hearing: 13th July, 2010.

2011 PTD 1185

[Supreme Court of Pakistan]

Present: Tassadduq Hussain Jillani and Nasir-ul-Mulk, JJ

COLLECTOR OF CUSTOMS, LAHORE and others

Versus

Messrs SHAFIQ TRADERS and another

Civil Appeals Nos. 282 and 283 of 2010, decided on 1st April, 2011.

(On appeal against the judgments dated 24-5-2007 passed by Lahore High Court, Lahore in Writ Petitions Nos. 6420 and 6440 of 2006).

Customs Act (IV of 1969)---

----S. 81(2)---Passing of final assessment order by Additional Director Valuation during period extended at his proposal by Collector--Validity---Pre-requisites for such extension being existence of exceptional circumstances and recording thereof by Collector---Neither Director in his proposal had referred to exceptional circumstances nor Collector had recorded such circumstances for extending time---Factual premise for exercise of power to extend time in terms of S.81(2) of Customs Act, 1969 was non-existent---Impugned final order was set aside in circumstances.

Izharul Haq, Advocate Supreme Court for Appellants.

Shehzada Mazhar, Advocate Supreme Court for Respondents.

2011 P T D 1232

[Supreme Court of Pakistan]

Present: Nasir-ul-Mulk and Mahmood Akhtar Shahid Siddiqui, JJ

CENTRAL BOARD OF REVENUE (F.B.R.) and another

Versus

Messrs RECKITT BENCHKISER PAKISTAN LTD. and another

Civil Petition No. 869 of 2009, decided on 30th March, 2011.

(On appeal from the judgment of the High Court of Sindh dated 24-2-2009 passed in C.P: No.D-608 of 2007).

(a) Sales Tax Act (VII of 1990)---

---Ss.2(18), 30, 45-A & 47-A---General Clauses Act (X of 1897), S.21--Alternative Dispute Resolution Committee, recommendations of---Disposal of assessee's appeal by Appellate Tribunal in terms of such recommendations already accepted by Board of Revenue---Issuance of show-cause notice to assessee by Board of Revenue in exercise of its powers under S. 45-A of Sales Tax Act, 1990 read with S. 21 of General Clauses Act, 1897 to re-examine its order accepting such recommendations---Validity---Board had power to examine decision or order of an officer of Inland Revenue, which according to S. 2(18) read with S. 30 of Sales Tax Act, 1990 would not include Board itself---Board had no authority to examine legality or propriety of its own orders---Powers under S. 21 of General Clauses Act, 1897 for being general in nature could not be exercised by an authority for recalling orders passed in quasi judicial capacity---Provisions of S.21 of General Clauses Act, 1897 could not be invoked in presence of S.45-A of Sales Tax Act, 1990---Board under S. 47-A of Sales Tax Act, 1990 had discretion not to appoint such Committee and could withhold its approval---Board had consciously appointed such Committee and accepted its recommendations, which had been duly incorporated in order of Tribunal---Board after such exercise could not re-open entire issue---Impugned show-cause was set aside in circumstances.

(b) General Clauses Act (X of 1897)---

----S.21---Order passed by an authority in quasi judicial capacity---Powers of authority to recall such order under S.21 of General Clauses Act,' 1897---Scope---Provisions of S.21 of General Clauses Act, 1897 for being general in nature could not be invoked for recalling such order.

Asif Wardag, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Petitioner.

Makhdoom Ali Khan, Senior Advocate Supreme Court for Respondent.

Date of hearing: 30th March, 2011.

2011 PTD 2220

[Supreme Court of Pakistan]

Present: Javed Iqbal, Raja Fayyaz Ahmed and Asif Saeed Khan Khosa, JJ

COLLECTOR OF CUSTOMS (PREVENTIVE), KARACHI

Versus

PAKISTAN STATE OIL, KARACHI

Civil Appeals Nos. 432 to 485 of 2009, decided on 21st April, 2011.

(On appeal from the order dated 10-10-2008 passed by High Court of Sindh at Karachi in Special Customs Reference Applications Nos. 1 to 54 of 2008).

(a) Customs Act (IV of 1969)---

----S. 32---Constitution of Pakistan, Art.185(3)---Leave to appeal was granted by Supreme Court where the petitions raised similar issues whereon court had already granted leave to appeal.

Collector of Customs and another v. Messrs Fatima Enterprises Ltd. and others 2005 SCMR 1493 ref.

(b) Customs Act (IV of 1969)---

----S. 32---Scope of S.32, Customs Act, 1969---Provisions as envisaged in S.32, Customs Act, 1969 would be attracted on filing deceptive, false and fake declaration, notice, certificate, document or statement; issuance of notice for payment of specified amount in case of short levy of duty, its non-payment, erroneously refunded as a result of some collusion and in case of inadvertence, error or misconstruction, non-levied or short levied of any charge/duty, the payment shall be made subject to notice within the time period specified under S.32(3).

2007 PTD 1608 ref.

(c) Customs Act (IV of 1969)---

----S. 32(3)-Scope of S.32(3) of Customs Act, 1969---Issuance of show-cause notice---Limitation---Where the case Vas neither that of forgery nor of fraud, matter would fall within the ambit of S.32(3) of the Customs Act, 1969 for which issuance of notice within prescribed period was a mandatory requirement.

(d) Customs Act (IV of 1969)---

----S. 32(3)---Issuance of notices with inordinate delay even after expiry of period as prescribed in S.32(3) of Customs Act, 1969---Effect---Such an inordinate delay could not be ignored when a specific period had been provided under S.32(3).

(e) Customs Act (IV of 1969)---

----S. 8---Levy of duty---Where huge loss had been caused to Government exchequer mainly due to the negligence of relevant functionaries of the Customs Department, Supreme Court directed that action must be initiated against them by the concerned Collector for dereliction of duty and being inefficient which amounted to misconduct and report in that regard be furnished to the Registrar of the Supreme Court within a period of one month for perusal of the Bench in Chamber.

(f) Customs Act (IV of 1969)---

----Ss. 18 & 194---Constitution of Pakistan, Art.185---Appeal---Customs duty, levy of---Manifested quantity of oil and actually recovered oil---Question of fact to be determined by Customs Excise and Sales Tax Tribunal---Supreme Court declined interference in the matter when conclusion as arrived at in the impugned order of the Tribunal was well based.

Raja Muhammad Iqbal, Advocate Supreme Court for Appellant.

Aziz A. Sheikh, Advocate Supreme Court for Respondent.

Date of hearing: 21st April, 2011.

2011 PTD 2251

[Supreme Court of Pakistan]

Present. Muhammad Sair Ali and Khilji Arif Hussain, JJ

MUHAMMAD HANIF

Versus

COMMISSIONER OF WEALTH TAX, and others

C.P. No.449-L of 2008, decided on 17th June, 2011.

(On appeal against the judgment dated 16-4-2008 passed by Lahore High Court, Lahore in Writ Petition No. 6120 of 2007).