PTD 2014 Judgments

2014 P T D 1721

[Board of Revenue, Punjab]

Before Waheed Akhtar Ansari, J

CH. SALIK HUSSAIN

Versus

The STATE and others

ROR No.743 of 2014, decided on 28th May, 2014.

Punjab Agricultural Income Tax Act (I of 1997)---

----S.3(2&3)(ix)---West Pakistan Land Revenue Act (XVII of 1967), S.164---Agriculture income tax---Revision---Petitioner deposited amount of assessed Annual Income Tax and requirement of law as per S.3(2 & 3)(ix) of Punjab Agricultural Income Tax Act, 1997, had been fulfilled---Effect---Issue of maintainability of revision petition before Additional Commissioner (Revenue) had been resolved positively---Order passed by Additional Commissioner (Revenue) was set aside and matter was remanded to him for decision afresh---Revision was allowed in circumstances.

Malik Muhammad Afzaal Khokhar for Petitioner.

2014 P T D (Trib.) 1677

[Customs and Excise Appellate Tribunal]

Before Ch. Muhammad Asghar Paswal, Member Judicial

Messrs CRLF COMPANY and 2 others

Versus

DIRECTORATE OF INTELLIGENCE AND INVESTIGATION FBR and another

C.A. No.227/LB of 2013, decided on 19th September, 2013.

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

----Ss. 26, 211 & 156, Cls. 12 & 96---Customs Rules, 2001, R. 126---Confiscation of imported goods---Grounds---Imported goods tallying with the import documents---Sufficient proof to show goods imported lawfully---Importer not maintaining record of import transactions under Ss. 26 & 211 of Customs Act, 1969---Non-maintenance of such record was no ground to declare goods as unlawfully imported and liable to be seized---Plea of importer-companies that all goods in question tallied with the import documents, but the same were only confiscated by customs authorities on the basis that the companies were not maintaining record of their import transactions in terms of Ss. 26 & 211 of Customs Act, 1969---Validity---On seizure of the goods, the Goods Declarations supported by relevant documents were provided by the companies, which were scrutinized and found tallied with the goods---Truth or accuracy of the import documents provided by the companies was never doubted---All the articles contained brand name of the companies, thus importer-companies had discharged their burden of proof---Customs department had failed to bring on record any proof or evidence that the goods were brought into the country without payment of duty and taxes consequently it failed to discharge its burden of proof---Goods were imported and dispatched by the importer and as such production of import documents to establish the status of the goods was enough proof and the same could not be confiscated merely on the basis that no record as required under Ss. 26 & 211 of the Customs Act, 1969 was maintained or provided by the importer---Penalties for violation/non-compliance with Ss. 26 & 211 of the Customs Act, 1969 were provided under S. 156, Cls. 12 & 96 of the said Act respectively---In the present case customs department had based its entire findings for violation of Ss. 26 & 211 of the Customs Act, 1969 but strangely the show-cause notice and impugned confiscation order revealed that neither Ss. 26 & 211 of the said Act nor penal clauses thereof under S. 156, Cls. 12 & 96 respectively were invoked---No penalty of any sort could be imposed under the charge which had not arisen out of the contents of the show-cause notice---Customs authorities, in the present case had exercised their powers beyond the scope of show-cause notice, which was not permissible under the law---Goods subject matter of the present appeal were lawfully imported on payment of leviable duty and taxes under proper import documents---Appeal was allowed accordingly and the impugned confiscation order was set aside.

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

----Ss. 26 & 168---Import documents tallying with the seized goods---Customs authorities---Burden of proof---On production of import documents tallying with the seized goods, the burden of proof stood shifted to the seizing agency to prove that the goods in question were not lawfully imported and instead thereof brought into the country without payment of duty and taxes.

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

----S. 180---Show-cause notice---Contents---Penalty, imposition of---Scope---No penalty of any sort could be imposed under the charge which had not arisen out of the contents of the show-cause notice.

Mian Abdul Salam Sajid for Appellant.

Saleem Ullah Khan, SIO for Respondents.

Date of hearing: 9th September, 2013.

2014 P T D (Trib.) 1850

[Customs Appellate Tribunal Bench-II, Karachi]

Before Adnan Ahmed, Member (Judicial-II) and Ghulam Ahmed, Member (Technical-II)

Messrs HASCOL PETROLEUM (PVT.) LTD.

Versus

COLLECTOR ADJUDICATION, QUETTA and another

Customs Appeal No.H-261 of 2013, decided on 2nd December. 2013, Customs Act (IV of 1969)-

----S.194-A---Appeal before appellate tribunal---Locus Standi to file appeal by owner of confiscated goods, who had not joined adjudication proceedings---Scope-Customs officials seized an oil tanker found loaded with smuggled HSD Oil---After serving show-cause notice, Oil tanker loaded with smuggled HSD Oil was confiscated---Oil Marketing Company/owner of the confiscated oil did not join the adjudication proceedings but challenged the order-in-original before Appellate Tribunal---Validity---Appeal had been filed by Oil Marketing Company who was the non-entity in the case---No order had been passed against said appellant but the order was against owner of the seized oil tanker and driver of the tanker, who did not file appeal before the Appellate Tribunal within prescribed period, therefore the order-in-original had attained finality-Order having attained finality could not be disturbed at any later stage by any Authority including courts---Appellant/Oil Marketing Company had no locus-standi to file appeal as if intentionally had not joined the adjudication proceedings for claiming the ownership of the transported oil inspite of having knowledge from the owner of the tanker/driver regarding detention/seizure of the oil tanker and issuance of show-cause notice---Appeal was dismissed in limine.

Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310; Messrs Glaxo Smith Kline Pakistan Limited Karachi v. Collector of Customs, Sales Tax and Central Excise (Adjudication), Karachi-III, Government of Pakistan, Karachi 2004 PTD 3020 and Messrs Edulji Dinshaw Limited v. Income Tax Officer 1990 PTD 155 rel.

Syed Ali Zaheer Jafri for Appellant.

Nemo for Respondents.

Date of hearing: 2nd October, 2013.

2014 P T D (Trib.) 1389

[Customs Appellate Tribunal Bench-II]

Before Adnan Ahmed, Member Judicial-II and Ghulam Ahmed, Member Technical-II

Messrs ZAIN ALI

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, QUETTA and another

Custom Appeal No.Q-480 of 2012, decided on 27th May, 2013.

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

----Ss. 2(s), 7, 16 & 187---Qanun-e-Shahdat (10 of 1984), Art.117---Confiscation of vehicle used for the transportation of narcotics---Burden of proof---Competence/jurisdiction of Frontier Corps officials---Scope---Officials of Frontier Corps intercepted the impugned vehicle and kept the same under their custody without informing or intimating to Customs officials and subsequently made the seizure without having any jurisdiction---Officials of Frontier Corps had assumed the jurisdiction by invoking S. 7 of the Customs Act, 1969 under which all officials of civil armed forces were only empowered and required to assist the officials of Customs in discharging their functions only---After the lapse of one month of seizure of vehicle, the officials of Frontier Corps had informed subject detention of vehicle to Customs officials, thereon, the Additional Collector Customs passed impugned order for confiscation of vehicle---Penal proceedings were criminal in nature which required a proof beyond reasonable doubts---According to S.187 of the Customs Act, 1969 as well as Art. 177 of the Qanun-e-Shahadat, 1984, it was the sole responsibility of seizing agency to prove their allegations---Officials of Frontier Corps after the seizure of the impugned vehicle had made reference to Customs authorities with the specific allegations, the same were found perverse and based on no evidence---Impugned orders were set aside---Appeal was allowed.

(b) Administration of justice---

----Where the initial order or notices is void, all subsequent proceedings, orders or superstructure built on the same are also void.

(c) Administration of justice---

----If a particular thing is required to be done in a particular manner, it should be done in that manner otherwise, it should not be done at all.

(d) Interpretation of statutes---

----What has not been expressly written by legislature can not be implied.

(e) Constitution of Pakistan---

----Art.13---General Clauses Act (X of 1897), S.26---Criminal Procedure Code (V of 1898), S.403---Customs Act (IV of 1969), Ss.2(s) & 16---Confiscation of vehicle, which had already been seized by the Frontier Corps under the charge of smuggling narcotics---Validity---Customs authorities were not under any legal obligation or empowered to adjudicate upon the matter, because no one could be vexed twice for one and same offence, therefore the impugned action was purely void, illegal, ultra vires and without lawful authority---Impugned orders were set aside---Appeal was allowed.

Ziaul Hassan for Appellant.

Nemo for on behalf Collector of Customs Quetta.

Nemo for on behalf of I-G F.C. Quetta.

Date of hearing: 23rd May, 2013.

2014 P T D (Trib.) 1414

[Customs Appellate Tribunal, Bench-II]

Before Adnan Ahmed, Member (Judicial-II) and Ghulam Ahmed, Member (Technical-II)

Messrs A.J.K. INTERNATIONAL, KARACHI

Versus

COLLECTOR OF CUSTOMS, KARACHI and another

Customs Appeal No.K-739 of 2007, decided on 3rd September, 2013.

Customs Act (IV of 1969)---

----S. 81(4)---Release of goods on the basis of provisional determination of value---Delay in finalization of determination---Effect---Appellant imported consignment of Iron Nuts and the same was released on the basis of provisional assessment---Respondent department had finalized the assessment after the lapse of eight years---Appeal filed by the appellant against final assessment order was dismissed by the Collector of Customs (Appeal)---Contention of the appellant was that final assessment order was hit by limitation period as provided in S. 81(4) of the Customs Act, 1969, therefore void ab initio illegal---Validity---Respondent department had failed to finalize the provisional assessment within the period as provided under S. 81 of the Customs Act, 1969---Record had showed that no order for extending the period of final assessment was passed and as such by virtue of subsection (4) of S. 81 of the Customs Act, 1969, the provisional assessment had attained finality in circumstances---Impugned orders were set aside---Appeal was allowed.

Sardar Faisal Zafar for Appellant.

None for Respondent.

Date of hearing: 13th June, 2013.

2014 P T D (Trib.) 433

[Customs Appellate Tribunal Bench-II]

Before Adnan Ahmed, Member (Judicial-II) and Ghulam Ahmed, Member (Technical-II)

Messrs BAJWA ENGINEERING through Authorized Representative, Karachi

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, KARACHI

Customs Appeal No.K-252 of 2013, decided on 1st July, 2013.

Customs Act (IV of 1969)---

----S.194-A---Appeal to Appellate Tribunal filed by importer-company through another person---Appeal and its accompanying applications and affidavits verified by such person---Power-of-attorney or resolution on behalf of importer-company in favour of such person not placed on record---Appellate Tribunal dismissed appeal for having been filed by an incompetent person in circumstances.

M. Arif Moton and M. Adnan Moton for Appellants.

Ghulam Yasin, P.A., for Respondent.

2014 P T D (Trib.) 1

[Customs Appellate Tribunal, Karachi]

Before Ghulam Ahmed, Member (Technical-II)

Messrs TAYIABA KHATOON and others

Versus

The COLLECTOR, COLLECTOR OF CUSTOMS (APPEALS) and 2 others

Customs Appeals Nos.K-736 to K-740 of 2011, decided on 13th September, 2013.

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

----Ss. 32, 32-A, 131(i)(a) & 156(1), (14), (14-A)---Customs Rules, 2001, R.444---Show-cause notice---Mis-declaration---Fraudulent refund/ rebate---Appellant exported consignment of Adhesive Decorative Laminated Sheets in different sizes and colours and also received drawback amounts---Show-cause notice was issued to appellant alleging that the quantity of goods claimed to be exported was much higher than the quantity of identical goods normally being exported per container by other exporters---Appellant was found guilty of mis-declaration and non-genuiness of exports in order to get fraudulent refund and rebate---Additional Collector of Customs after serving show-cause notice found that rebate claimed by appellant was illegal, therefore ordered for recovery of drawback/rebate amount along with penalty---Appellant being aggrieved by order-in-original filed appeal before Collector of Customs (Appeals), the same was rejected---Contention of the appellant was that goods declared in the export goods declaration were allowed to be shipped by the MCC and PaCCS after terming the declaration as correct and examination of the goods---Appellant had not submitted any fake documents, even otherwise no objection with regard to documentation or description of the goods could be raised post exportation---Validity---Appellant was under obligation to transmit correct and complete particulars of the goods while transmitting "Goods Declaration" with PACCS---E-form submitted by the appellant along with "Goods Declaration" was not traceable by the Bank---Declaration of the goods exported by the appellant was vague---Appellant had not intentionally declared the sizes of laminated sheet in the declaration of goods exported, and so the square meter which was a must as stuffing of laminated sheet in the container was on the basis of CBM not on weight, for deceiving the system---Grammage of sheet had been incorrectly declared---Declaration with regard to description, quantity and value was false in material particular, the same had attracted proceedings under the respective applicable provisions of the Customs Act, 1969---Goods had not shipped physically as declared, therefore the appellant was not entitled for duty drawback---Impugned orders were upheld---Appeal was dismissed.

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

----Ss. 32, 32-A, & 156(1), (14), (14-A)---Customs Rules, 2001, Rr.459 & 460---Show-cause notice---Mis-declaration---Fraudulent refund rebate---Finalized case of duty draw back---Past and closed transaction---Scope---Appellant was found guilty of mis-declaration and non-genuiness of exports in order to get fraudulent refund and rebate---Customs authorities after serving show-cause notice, ordered for recovery of unlawful drawback along with penalty---Appeal by appellant before Collector of Customs (Appeals) was dismissed---Contention of the appellant was that the transaction was past and closed and had attained finality and as such the subject matter could not be re-opened, therefore the impugned orders were illegal---Validity---Customs authorities had power to reassess the goods declaration any time during five years of clearance of the goods for export along with a fine---Customs authorities had power to conduct audit of the finalized cases of duty drawback---Assessing officer had declined the application of duty drawback, to the contrary the duty draw back had been sanctioned fraudulently---Plea raised by the appellant was misconceived---Impugned orders were upheld---Appeal was dismissed.

(c) Administration of justice---

----One who seeks equity must have equity in his favour.

West Pakistan Tanks Terminal (Pvt.) Ltd., v. Collector of Customs Appraisement Karachi 2007 SCMR 1318 rel.

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

----S. 32---Show-cause notice---Practice of serving draft show-cause notice ---Scope---Additional Collector of Customs had signed the draft show-cause notice forwarded by the official of Post Clearance Audit or prepared on the strength of contravention report received by the Collectorate without going through the provisions of Acts/Rules---Practice of serving draft show-cause notice was depreciated and failed the test of judicial scrutiny.

Messrs Zeb Traders v. Federation of Pakistan 2004 PTD 369 rel.

Sardar Muhammad Ishaque (Advocate) for Appellant.

Ghulam Yasin (P.A.) for Respondent No.2

Faiz Mudassar (A.O.) for Respondent No.3.

Date of hearing: 10th September, 2013.

2014 P T D (Trib.) 52

[Customs Appellate Tribunal, Karachi]

Before Adnan Ahmed Member (Judicial-II) and Ghulam Ahmed Member (Technical-II)

Messrs DEWAN SALMAN FIBER LTD.

Versus

The COLLECTOR (APPEALS) and 2 others

Customs Appeal No.K-1306 of 2011, decided on 19th July, 2013.

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

----Ss. 32 (1), (2), (3) & 194-A---Appeal before Appellate Tribunal---Misdeclaration---Short assessed duty, recovery of---Show-cause notice---Prerequisites---Appellant/importer was served with a show-cause notice by the customs authorities---Allegation against the appellant was that he imported ester of Acrylic Acid attracting customs duty, sales tax but with a view to availing inadmissible benefits of zero percent/exemption from customs duty he misdeclared the imported items as Methyl Acrylate---Customs authorities found the appellant guilty of deliberate mis-declaration and passed an order for recovery of exempted amount of customs duty, sales tax and income tax and Collector of Customs (Appeals) dismissed the appeal of the appellant---Appellant in filing goods declaration had not made any false statement regarding the description, quantity of the goods---Appellant was not charged with allegation of any collusion by the customs authorities, therefore show-cause notice under S. 32(2) of the Customs Act, 1969 could not be acted upon---Validity---Appellant transmitted goods declaration with the Model Customs Collectorate (MCC) of Pakistan Customs Computerized System (PACCS) containing description "Methyl Acryalate" on the basis of commodity name in letter of credit, invoice, B/L, certificate of origin and he incorporated the said information of the Goods Declaration (GD) under Pakistan Customs Tariff (PCT) heading with the exemption of customs duty, Sales tax on the basis of infield notifications and Income Tax against certificate issued by the Commissioner of Income Tax---Software of the Pakistan Customs Computerized System (PACCS) had been designed by the agility in such a manner that upon receipt of the goods declaration the system co-relates each declaration with the corresponding Pakistan Customs Tariff (PCT) heading, the claimed notifications and the exemption certificate, which were fed therein either by the FBR/Project Director or Commissioner of Income Tax at their own and after finding those in accordance with the declaration the system pass assessment/clearance order in exercise of its inbuilt vested authority, such fact stood validated from examination of the import documents and goods declaration---Appellant had made no misdeclaration in material and invoking the provisions of S. 32 by customs authorities was erroneous in circumstances---Show-cause notice issued to appellant did not remotely hint the submission of any false documents or statement while transmitting goods declaration with the Model Customs Collectorate (MCC) of Pakistan Customs Computerized System (PACCS) or about the collusion with the project official of Pakistan Customs Computerized System (PACCS) rendering the show-cause notice and the subsequent proceeding void ab initio---Order-in-original passed by customs authorities and order-in-appeal passed by the Collector of Customs (Appeals) was set aside---Appeal was allowed.

Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275; D.G. Khan Cement v. Collector of Customs 2005 PTD 480; Caltex v. Collector 2003 PTD 1593; Union Playing Card Company v. Collector of Customs 2002 MLD 130; Atlas Tyres v. Additional Collector 2002 MLD 180; Kashmir Sugar v. Collector 1992 SCMR 1898 and Sarwar International v. Additional Collector of Customs 2013 PTD 813 rel.

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

----Ss. 32 (1), (2), (3), 3-A & 180-A---Short-levied Customs duties on account of inadvertence, error or misconstruction---Show-cause notice was served in pursuance of contravention report of Directorate of Post-Clearance Audit---Contention was that Customs authorities were not authorized to issue show-cause notice under the provisions of S. 32(1) and (2) of the Customs Act, 1969---Validity---Show-cause notice had been issued under S. 32 (1) and (2) of the Customs Act, 1969, whereas the applicable provision of the Act was S. 32(3A)---No charge had been levelled in the show-cause notice on the basis of the provisions of S.32(1) and (2) of the Customs Act, 1969---Show-cause notice was manifestly defective and without lawful authority in circumstances---No order for creating demand could be passed on the basis of such show-cause notice---Section 180-A of the Customs Act, 1969, provided that it was mandatory requirement upon the competent authority for mentioning the grounds on which proposed action was taken against the appellant/incumbent---Principles of natural justice also imposed condition that all the legal and factual material particulars and applicable provisions of the Customs Act, 1969 must be brought to the notice of the importer---Contravention report/show-cause notice and order in original were patently beyond the expression of Customs Act, 1969 as well as the principles of natural justice---Impugned orders were set aside---Appeal was allowed.

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

----Ss. 32(1), (2), (3) & 3-A---Show-cause notice---Non-observance of mandatory requirements of law---Effect---Appellant was served with a show-cause notice in pursuance of contravention report of Directorate of Post-Clearance Audit---Customs authorities issued show-cause notice under S. 32(1) and (2) of the Customs Act, 1969 instead of 32 (3-A)---Scope---Adjudication on the basis of entire section instead of the applicable provisions of the Customs Act, 1969 rendered the show-cause notice and subsequent order passed as defective and against law---Non observance of mandatory requirement of specific provisions of law was not a commission of technical discrepancy or procedural lapse which was a curable lacuna, it was a substantive illegality which would vitiate all the case proceedings on which the superstructure was built by different quasi-judicial and judicial authorities---Impugned orders were set aside---Appeal was allowed.

Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275; D.G. Khan Cement v. Collector of Customs 2005 PTD 480; Caltex v. Collector 2003 PTD 1593; Union Playing Card Company v. Collector of Customs 2002 MLD 130; Atlas Tyres v. Addl. Collector 2002 MLD 180; State Cement v. Collector PTCL 2001 CL 558; Kashmir Sugar v. Collector 1992 SCMR 1898 and Sarwar International v. Addl: Collector of Customs 2013 PTD 813 rel.

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

----Ss. 32 (3) & 3-A---Short-levied customs duties on account of inadvertence, error or misconstruction---Recovery notice to be served "within three years"---Show-cause notice issued after the expiry of stipulated period of three years was time-barred and as such not enforceable.

Dadabuoy Sack Ltd. v. The Collector of Customs, Sales Tax and Federal Excise (Appeals) Hyderabad and others 2009 PTD (Trib.) 500; Shah Murad Sugar Mills and others's case 2007 PTD 117; Messrs Ghandhara Nissan Diesel Ltd., v. The Collector of Customs, Karachi 2005 PTD 2453; PSIC Cutlery, Wazirabad v. Collector of Sales Tax and Central Excise, Gujranwala and others 2008 PTD 981; Joyla Sadat Cotton Industries v. Collector of Customs 1992 SCMR 1898 and Federation of Pakistan v. Messrs Ebrahim Textile Mils Ltd. and others 2006 PTD 537 rel.

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

----S. 193-A(3)---Extension of time in passing order by Collector of Customs (Appeals)---Scope---Extension given without serving notice to the appellant/incumbent importer---Effect---Order on appeal should have been passed within 120 days from the date of filing of appeal or within further extended period of 60 days prior to expiry of initial period of 120 days with reasons to be recorded for extension in writing---Order of extension was passed after the expiry of initial period with the reasoning that the proceedings in the case could not be finalized within the stipulated time limit due to adjournment obtained by the appellant/counsel---Extension granted by Collector (Appeals) was without any lawful authority as he could not extend the time, unless a notice to the appellant had been served---Impugned orders were set aside---Appeal filed by the appellant/importer was allowed.

Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881 rel.

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

----Ss. 193-A(3) & 194-A---Appeal before Appellate Tribunal---Collector of Customs (Appeals) passed order in appeal after the expiry of prescribed initial time period of 120 days---Scope---Order of extension in time period for the decision of appeal was not passed prior to the expiry of initial period of 120 days---Extension in time period granted after the expiry of initial period was unlawful and without jurisdiction---Extension in time period was given without answering the condition prescribed for exercising such powers i.e. Collector (Appeals) had to apply his mind and after making an objective assessment, if it came to the conclusion that the extension of time was to be granted, he had to grant the same prior to expiry of the initial period and not merely on the basis of his personal opinion---Where exercise of jurisdiction by any Authority or Court or Tribunal was made subject to existence of specific condition, then such power could not be exercised in the absence of that condition---Extension of time in passing order in appeal was akin to giving a new lease of life into dead entity and was tantamount to flogging a dead horse---If an event or documents had become dead on account of non-timely extension of time period, the same was legally considered dead and new spirit could not be infused into it by means or on account of any reason whatsoever.

2007 PTD 117; 2008 PTD 60; 2007 PTD 2092; 2010 PTD (Trib.) 1636; 2010 PTD (Trib.) 2117; 2009 SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 578; 2009 PTD 762; 2009 PTD (Trib.) 107; 2010 PTD 465; 2011 PTD (Trib.) 79; 2011 PTD (Trib.) 987; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1146 and 2012 PTD (Trib.) 1650 rel.

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

----S. 194-A---Constitution of Pakistan, Art.25---Appeal before Appellate Tribunal---Discriminatory treatment---Facility allowed by the other Collectorate of Customs of the country was denied by the Model Customs Collectorate (MCC) of Pakistan Computerized Collectorate of Customs (PACCS)---Effect---Treatment given to the appellant was against the principles enshrined in Art. 25 of the Constitution---Impugned orders were set aside---Appeal of the importer was allowed.

1990 SCMR 1059; 2002 SCMR 312; 2002 PTD 976; 2007 PTD 361 and 2009 PTD 1507 rel.

Messrs P&G International, Lahore v. Assistant Collector of Customs, Appraisement, Gr-11, Karachi and 3 others 2010 PTD 870; Collector of Customs v. Shaikh Shakeel Ahmad 2011 PTD 495; Assistant Collector of Customs v. Khyber Electric Lamps 2001 SCMR 838; Union Sport Playing Cards Company v. Collector of Customs 2002 MLD 130; PIA v. CBR 1990 CLC 868; Messrs Sarwar International v. Addl: Collector of Customs 2013 PTD 813; Messrs Super Industries (Pvt.) Ltd. v. Central Board of Revenue and others 2002 PTD 955; Messrs Colgate Palmolive Pakistan Ltd. v. Federation of Pakistan 2004 PTD 2516; Collector of Customs v. Power Electronic Pakistan 2011 PTD 2837 and State Cement Corporation of Pakistan v. Collector of Customs and others 2002 MLD 180 ref.

Junaid Ghaffar for Appellant.

Ghulam Yasin for the Respondents Nos.1 and 2.

Fiaz Modassar for Respondent No.3.

Date of hearing: 25th June, 2013.

2014 P T D (Trib.) 76

[Customs Appellate Tribunal, Karachi]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Ghulam Ahmed, Member (Technical-II)

R.M. GULISTAN ENGINEERING AND CONSTRUCTORS (PVT.) LTD. through Chief Executive

Versus

COLLECTOR OF CUSTOMS (APPEALS) and another

Customs Appeal No.K-230 of 2013, decided on 19th September, 2013.

(a) Words and phrases---

----"Plant"---Definition.

Collector of Customs (Appraisement) Karachi and others v. Fauji Fertilizer Co. Ltd. PLD 2005 SC 577 rel.

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

----S.32----"plant" and "other appliances"---What includes---Plant in combination with other appliances in the business effectuated and perpetuated the trade commerce in question---Induction or introduction of plant should be deemed to be such that they were placed in a position for service or use in the business---Catalyst, Epoxy Grout, especiality paints, dump trucks, fiber cans, roving bobbins, drawings, designs charts, pre-fabricated building structures, PVC Conduit pipes, Housing Electrical Wiring, etc. imported either for initial installation, balancing, modernization, replacement or expansion were either equipment or a part of the plant.

DG. Khan Cement Company Ltd. v. Deputy Collector of Customs, Appraisement, Group-VII, Custom House, Karachi 2003 PTD 986; Aisha Steel Mills Ltd. v. Federation of Pakistan and others 2011 PTD 569; Moro Textile Mills Ltd. v. Central Board of Revenue 2007 PTD 60 and Scientific Engineering House (Pvt.) Ltd., v. Commission of Income Tax AIR 1986 SC 388 fol.

(c) Words and phrases---

----"Equipment"---Definition.

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

----S. 32---General Clauses Act (X of 1897), S.24-A---Recovery of short levied customs duties---Non-speaking adjudication orders---Natural justice, principles of---Scope---Appellant was charged for mis-declaration---Contention of the appellant was that impugned order, in-original was illegal as the same was non-speaking and did not address all the issues put forth by him---Validity---Impugned order by the Adjudication Officer suffered from want of application of mind to the various submissions made before them at length by appellant---Respondent was not enjoined to fully dilate upon the legal and factual issues raised and agitated before him by the appellant, therefore impugned orders so issued by adjudicating authorities had not considered as "speaking orders"---Sketchy, slip-shod and unreasoned judicial order was not sustainable under law---Judicial order must be a "speaking order" reflecting the application of judicial mind by court to issues and point of controversy involved in the case.

2005 PTD 2566; PLD 1959 SC 272; PLD 1970 SC 158, 173; 1994 SCMR 1014 and 2009 SCMR 1407 rel.

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

----Ss. 32 (3) & 32(3A)---Recovery of short levied customs duties---Time barred show-cause notice---Scope---Show-cause notice was issued after an expiry of three years from the date of clearance of consignments---Time prescribed for re-opening of case on the basis of scrutiny of the record of tax-payers on the basis of post clearance audit was three years---Show-cause notice issued beyond the period of limitation as stipulated in the relevant statute was time-barred---Inordinate delay in issuing show-cause notice could not be ignored and factum of delay being a mandatory requirement of law had to be strictly implemented which otherwise make the demand without jurisdiction being issued beyond the period of limitation---Orders passed on the basis of time barred show-cause notice were set aside---Appeal was allowed.

2009 SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 578; 2009 PTD 762; 2009 PTD (Trib.) 107; (2010) 109 Taxation 221; 2011 PTD (Trib) 79; 2011 PTD (Trib) 987; 2011 PTD (Trib) 1010; 2011 PTD (Trib) 146; PTCL 2012 CL 47; Collector of Customs (Preventive) Karachi v. (sic) 2011 SCMR 1279; Federation of Pakistan v. Messrs Ibrahim Textile Mills (Pvt.) Ltd., 1992 SCMR 1898; 2011 PTD 2220 and Messrs Cargilll Pakistan Seeds (Pvt.) Ltd. v. Customs, Excise and Sales Tax Appellate Tribunal Lahore 2004 PTD 26 rel.

(f) Interpretation of statutes---

----Amendment in statute---Scope---Amendment in any statute, notification or an executive order would be deemed to take effect prospectively and not retrospectively.

2005 SCMR 492; PLD 2001 SC 340 and 1984 PTD 216 rel.

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

----S. 32---Mis-declaration---Show-cause notice---Pre-requisites---Short assessed duty, recovery of---Scope---Before issuing show-cause notice on account of mis-declaration, the customs authorities were bound to determine mens rea---Show-cause notice could not be issued without proving any guilty intention, knowledge, mens-rea on the part of maker of statement---In the present case, element of mens rea was not visible and guilty intention was not proved, therefore provisions of S.32 of Customs Act, 1969 could not be invoked.

Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi 2002 PTD (Trib.) 3053; Moon International v. Collector of Customs (Appraisement) Lahore 2001 PTD 2097 = 2001 SCMR 1376; Union Sport Playing Card Co. v. Collector 2002 YLR 2651; Al-Hamd Edible Oil Ltd. v. Collector 2003 PTD 552; A.R. Hosiery v. Collector of Customs (Export) 2004 PTD 2977; Ibrahim Textile Mills Ltd. v. F.O.P. PLD 1989 Lah. 47; Central Board of Revenue v. Jalil Sheep Co. 1987 SCMR 630; State Cement Corporation v. G.O.P.C.A. 43 of 1999 and Cargil Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26 rel.

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

----Ss. 32(2) & 32(3A)---Mis-declaration---Show-cause notice---Pre-requisites---Short assessed duty, recovery of---Requirements of law to be adhered to by the Authority issuing show-cause notice---Scope---Defective show-cause notice---Effect---Contention of the appellant importer was that respondent customs authorities invoked two different penal provisions of law simultaneously as stated in the show-cause notice---Both the penal provisions of law were separate and required different implications, therefore the show-cause notice was defective consequently the order-in-original passed on the basis of the same was also illegal---Validity---Where show-cause notice was defective, all subsequent proceedings would be void including the appellate orders---Respondent had invoked two different penal provisions of law simultaneously in the show-cause notice, which reflected a stereo-type and mechanically worded approach without due application of judicial mind---Both the penal provisions of law were separately defined having different implications of law and circumstances---Respondents were required to invoke only relevant provision of law applicable to the facts and merits of the case in the show-cause notice, which in the present case to the contrary had vitiated the whole proceedings---Authority issuing a show-cause notice had required to make out a case in the show-cause notice itself as to under which provision of Act, the case had followed---Respondent was under obligation to incorporate the grounds and reasons in the show-cause notice very clearly and explicitly---Impugned orders followed by defective show-cause notice were set aside---Appeal was allowed.

Messrs Kamran Industries v. Collector of Customs PLD 1996 Kar. 68 and DG Khan Cement Co. Lahore v. Collector of Customs, Sales and Central Excise Multan 2003 PTD 1797 rel.

Mansab Ali Amir and 3 others's case PLD 1971 SC 124 ref.

(i) Administration of justice---

----If the statute enacts that certain action shall be taken in a certain manner and in no other manner, such requirement was absolute and non-compliance will invalidate the whole.

Messrs Khyber Electric Lamp MFG Company Ltd.'s case 2001 SCMR 838; PLD 1995 Kar. 687; PLD 1975 SC 331; PLD 1971 SC 197 and PLD 1973 SC 236 rel.

(j) Jurisdiction---

----Question of jurisdiction in forum is always considered to be very important and no order passed by a Court or a forum having no jurisdiction, even it is found to be correct on merits, is not sustainable---Jurisdiction of a Court lays down a foundation stone and no sooner the question of jurisdiction is determined in negative, whole edifice of such defective proceedings is bound to crumble down---If the mandatory condition of exercising of jurisdiction by a Court, Tribunal or Authority is not fulfilled then the entire proceedings become illegal and suffer from want of jurisdiction---Any order passed in continuation of such proceedings equally suffers from want of jurisdiction.

Khyber Tractors (Pvt.) Ltd. v. Government of Pakistan PLD 2005 SC 842 rel.

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

----Ss. 32, 79, & 223---Incorrect classification of PCT heading in goods declaration---Charge of mis-declaration---Show-cause notice---Scope---Appellant imported a consignment and while submitting goods declaration, classified the goods in PCT heading, which was not attracted to subject goods---Customs authorities charged the appellant for mis-declaration and directed the payment of short levied customs duty along with penalty---Contention of the appellant was that he filed goods declaration in good faith and correctly provided all the relevant details required for clearance of such goods---Details provided by appellant were not false, therefore appellant could not be proceeded on account of mis-declaration, merely for invoking incorrect PCT heading---Validity---Determination of appropriate PCT heading or an incorrect claim to PCT heading would not constitute an advertant, intentional and deliberate act of mis-declaration---Tax payer had declared all other material particulars correctly in all commercial and customs documents including the goods declaration and such incorrect claim to PCT was always construed to be in good faith---Incorrect claim to PCT heading whether under self automation clearance system or otherwise would not constitute an act of mis-declaration---Importer had declared all the material particulars viz description, value, quantity or weight, origin, etc. in commercial and customs documents including goods declaration presented to customs authorities---Appellant could not be charged for mis-declaration, in circumstances---Impugned order in original and appellate order were set aside---Appeal was allowed.

Collector of Customs Karachi v. Messrs Power Electronic Pakistan (Pvt.) Ltd. Lahore 2011 PTD 2837 rel.

Muhammad Arif Moton and Muhammad Adnan Moton for Appellants.

Ghulam Yasin P.A. for Respondent.

2014 P T D (Trib.) 108

[Customs Appellate Tribunal, Karachi]

Before Ch. Niamatullah, Chairman/Member Judicial-I, Ghulam Ahmed, Member (Technical-II) and Muhammad Nadeem Qureshi, Member (Judicial-I)

Messrs VENUS PAKISTAN (PVT.) LTD.

Versus

ADDITIONAL COLLECTOR CUSTOMS PREVENTIVE, MCC CUSTOMS HOUSE and another

Customs Appeal No.K-461 of 2011, decided on 28th May, 2013.

(a) "Force majeure" doctrine of---

----Meaning.

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

----Ss. 27, 108, 110, 115, 121, 128, 129, 156(1)(64), 209 & 219---Customs Rules, 2001, R.566---Customs General Order (6 of 2010), Cl. (f)(vii)---Transshipment of goods to foreign country/Afghanistan---Goods destroyed by terrorist attack---Doctrine of "force majeure"---Scope---Charge of customs duties upon non-delivery of goods to consignee in Afghanistan---Scope---NATO/ISAF forces deployed in Afghanistan imported "Low Sulphur Diesel", which arrived at Karachi Port for onward transit to Afghanistan---Appellant/clearing agent got cleared the subject goods from Customs for its safe transportation in transit to Afghanistan---Goods cleared by appellant was lost within Pakistan territory while en-route to Afghanistan---Appellant/carrier was responsible for safe transportation of the cargo and its onward delievery to ISAF/NATO forces in Afghanistan against proper acknowledgment---Customs authorities found the appellant guilty of non-delivery of goods to Afghanistan, therefore he was directed to deposit customs duties and other taxes on the subject goods lost by appellant within the territory of Pakistan---Contention of the appellant/carrier/clearing agent was that the impugned goods were destroyed by the terrorist attack, non-delivery of consignment was not on account of tampering, pilferage, damage, breakdown or accident, therefore he could not be directed for payment of customs duties---Validity---Fuel tanker/impugned goods destined for ISAF/NATO supply in Afghanistan had been destroyed by terrorists and such attacks were neither controllable nor predictable by the appellant/clearing agent---Terrorist attacks had not resistible by the drivers or conductors of trucks---Impugned goods destroyed by terrorist attack had been well covered under the act of "force majeure"---Customs duties on goods destroyed by an act of "force majeure" had not been chargeable in many statutes of the world and if had been charged, the same were liable to be refundable---Impugned goods had proven to be destroyed in unavoidable accidents, fire or act of terrorism, etc., therefore the principal importer, exporter or the respondent clearing agent could not be held liable for the recovery of customs duties and taxes---Impugned order in original and appellate order, directing the appellant for payment of customs duties and taxes were set aside---Appeal was allowed.

Messrs Crescent Sugar Mills v. CIT Lahore (1981) 49 Tax 1; Messrs Kashmir Pottry Work's case (1973) 28 Tax 172; 2002 PTD 804 and 2002 PTD 2169 ref.

(c) Words and phrases---

----"Un-avoidable accident"---Definition.

(d) Words and phrases---

----"Un-avoidable cause"---Definition.

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

----Ss. 25, 27, 110 & 115---World Trade Organization (WTO) Valuation Agreement/General Agreement on Tariffs and Trade (GATT), Art.VII---Agreements/Valuation of WTO, applicability on member countries---Importation of damaged goods---Element of "force majeure"---Diminished value of imported goods, charging of customs duties---Procedure and scope---Diminished value of imported goods on account of destruction, loss, theft were exempted from the charge of customs duties in Pakistan---Pakistan had implemented dictates of Technical Committee of WCO on Valuations, the instruments, agreements and protocols to which Pakistan being a member of WTO and WCO was a signatory---Provisions of Ss. 27, 110 & 115 of Customs Act, 1969 had provided to waive off the customs duties on account of diminishing of value of imported goods due to any reason including "force majeure" while in bond or at stage of importation---Customs duties and taxes could not be charged on imported goods damaged/destroyed on account of diminishing value of such goods resulting from terrorist attacks.

Isaac Ali Qazi for Appellant.

Atif Aijaz (A.O.) for Respondents.

Date of hearing: 22nd April, 2013.

2014 P T D 145

[Customs Appellate Tribunal, Karachi]

Before Muhammad Nadeem Qureshi, Member Judicial-I

Messrs TRIUMPH TRADERS

Versus

The ADDITIONAL COLLECTOR OF CUSTOMS, and another

Customs Appeal No.K-340 of 2012, decided on 24th September, 2013.

(a) Words and Phrases---

----Impregnation---Meaning.

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

----Ss. 32, 179 & 223---Pakistan Customs Tariff, Chap. 39(21)---Mis-declaration of description of goods---Misleading specification/ classification of goods under PCT heading---Appellant imported artificial leather and filed goods declaration under PCT 5603.9400 of textile fabric, in pursuance of same he determined tax liability on his own and sought clearance thereof---Goods declaration submitted by appellant was selected for scrutiny, in the light of examination report, it was revealed that the appellant had declared the goods as artificial leather with woven backing in rolls which was classifiable under PCT 5903.9000 attracting customs duty 25% ad.val---After serving show-cause notice, fine and penalty were imposed upon appellant---Appellant filed appeal before Collector of Customs (Appeals), who maintained order-in-original---Contention of the appellant was that primary material of artificial leather was Polyurethane and affixed below to that was mesh of textile whether non-woven or woven---Validity---Reference to goods of a given material or substance should be taken to include a reference to goods consisting wholly or partly of such material and the heading which provide the most specific description should be preferred to the heading providing a more general description---Two or more headings each referred to part only of the material or substance contained in mixed or composite goods or to part only of the material or substance contained in mixed or composite goods or to part only of the items in a setup for retail sale, such headings were to be regarded as equally specific in addition to those goods, even if one of them had given a more or complete or precise description of the goods respectively---Major components of artificial leather was Poly Vinyl Chloride and Polyurethane or allied synthetic, the same did not fall within the ambit of either PCT heading 56.03 or 59.03---Impugned goods had to be sold in wholesale and retail as artificial leather and not as textile---Description of artificial leather being the most specific had to be preferred.

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

----Ss. 32, 179 & 223---General Rules of Interpretation of Schedule, Rr.2(b) & 3(a)---Pakistan Customs Tariff, Chap. 39(21)---PCT heading of artificial leather---Erroneous classification on the basis of past practice---Authority of classification of goods rested with Federal Board of Revenue---Scope---Artificial leather was manufactured/produced from Poly vinyl chloride, Polyurethane or allied polymer which fell under sub-chapter 21 of chapter 39 of Section VII of Pakistan Customs Tariff under PCT 3921.1300---Federal Board of Revenue classified the artificial leather under PCT 3921.1300 in the capacity of final authority for determining the correct classification---Classification made by the Federal Board of Revenue was binding on the hierarchy of Customs---Artificial leather had to be classified for all practical purposes including assessment in future---Classification of artificial leather under PCT heading 56.03 or 59.03 on the garb of non-woven or woven textile backing or on the plea of past practice was to be stopped--Wrong classification was not to be ignored on the pretext of past practice---Goods should be classified under the appropriate PCT heading given in the Customs Tariff.

Messrs P & G International, Lahore v. Assistant Collector of Customs (Appraisement), GR-II), Karachi and 3 others 2010 PTD 870 and Collector of Customs v. Sheikh Shakeel Ahmed 2011 PTD 495 rel.

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

----Ss. 2(kka), 32, & 79(1)---Customs Rules, Rr.433, 437 & 438---Declaration of goods---Charge of mis-declaration---Recovery of short levied customs duty---Scanned copies of additional documents, admissibility---Appellant was charged for mis-declaration---Contention of the appellant was that after filing goods declaration, he was asked to submit further documents to justify his claim---Appellant submitted scanned copies of other relevant documents to justify his claim, the same matched the examination report---Scanned documents were also part of declaration, therefore charge of mis-declaration was not justified---Validity---Principal Appraiser after receipt of examination report on his desktop, required the appellant to justify declaration/ classification---Appellant scanned all supporting documents including printed matter/literature, invoice detail and all other relevant important documents---Unit of measurement and the sizes of the goods matched with the examination report based on the assessing officer---Scanned documents were part of declaration---Charge of mis-declaration of unit of measurement was misplaced---Impugned order-in-original and appellate order of Collector of Customs (Appeals) was set aside---Appeal was allowed.

2011 PTD (Trib.) 22 and 2011 PTD (Trib.) 987 rel.

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

----Ss. 32 & 80(1)---Customs Rules, Rr.433, 437 & 438---Declaration of goods---Erroneous PCT heading---Charge of mis-declaration---Recovery of short assessed customs duty---Responsibilities and duties of assessing officer---Scope---Appellant importer submitted goods declaration mentioning erroneous PCT heading---Customs authorities after serving show-cause notice for mis-declaration imposed penalty on appellant---Contention of the appellant was that he had been charged for mis-declaration on account of transmitting wrong PCT heading whereas official who had suggested wrong PCT heading had been let free despite standing on the same pedestal and that Official opinion considered valid by Collectorate of Customs without going through respective PCT headings was ridiculous and absurd---Validity---Customs authorities were responsible to check the declaration of importer while completing assessment, which included correctness of the particulars of import including declaration, assessment and in case of Customs Computerized System, payment of customs duty and taxes and other charges thereon---Determination of PCT heading was duty of Customs officials for levy of customs duty and taxes as the importer fill the PCT column for assistance of the assessing officer---PCT heading submitted by importer could be either accepted or rejected by the assessing officer at the time of completion of assessment---Erroneous interpretation of statutory notification could not be deemed to be a false declaration---Appellant could not be charged for mis-declaration on account of transmitting erroneous PCT heading---Impugned order-in-original and appellate order was set aside---Appeal was allowed.

2003 PTD (Trib.) 293 and State Cement Corporation of Pakistan v. Collector of Customs and another 2002 MLD 180 rel.

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

----S. 32---Constitution of Pakistan, Arts. 4 & 25---Recovery of short assessed customs duty---Show cause notice---Discrimination---Appellant submitted declaration of artificial leather in units of packing i.e. in rolls---Other importers also declared the artificial leather quantity in rolls but neither contravention report was framed nor any show-cause notice/order-in-original was issued---Consignments of other importers were completed on the basis of weight confirmed in the examination reports---Appellant was given discriminating treatment---Validity---Customs authorities were supposed to adhere to their own precedent in administering taxing statute---Authorities could not give a differential treatment to appellant---Vacating show-cause notice in one case and taking action against another person in similar situation amounted to discrimination---Customs authorities had no power to target incidence of tax in such a way that similarly placed person be dealt not only dissimilarly, but discriminatingly---Facility allowed to someone and denied to other was discrimination---Impugned orders were set aside---Appeal was allowed.

Nazir Ahmed Tajdin v. Deputy Collector of Customs, Lahore and 2 others PLD 1977 Lah. 1392; 2002 PTD 976; 2002 SCMR 312; 2009 PTD 1507; 2005 SCMR 72 and 2010 SCMR 431 rel.

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

----S. 32---Show-cause notice---Short assessed duty, recovery of---Decision of case outside the scope of show-cause notice---Effect---Order of adjudication had been passed on a ground not mentioned in the show-cause notice which was palpably illegal.

Collector of Customs v. Rahm Din 1987 SCMR 1840 and Exide Pakistan (Pvt.) Ltd., v. Deputy Collector of Customs 2004 PTD 1449 rel.

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

----Ss. 32 & 180---Show-cause notice---Proceedings before customs authorities, nature and scope---Proceedings before Adjudication Officer were in the nature of quasi judicial and issuance of show-cause notice was very important ---Decision to issue show-cause notice was to be taken by the Collector, Adjudication by application of independent mind and not merely signing the draft show-cause notice submitted by investing agency separate from the Adjudication Department---Each category of Customs Officers was required to perform their respective functions/duties under the law---Practice to submit draft show-cause notice by the Director General of Intelligence and Investigation to the Collector Adjudication was deprecated.

Messrs Zeb Traders, Karachi v. Federation of Pakistan 2004 PTD 369 rel.

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

----S. 32---General Clauses Act, (X of 1897), S.24-A---Short assessed customs duty, recovery of---Non speaking adjudication order---Scope---Contention of the appellant was that adjudicating and appellate officer had not rebutted the grounds advanced in the memo. of appeal/additional arguments and decision/judgments relied upon by the appellant were given with substantial reasons---Impugned orders were non-speaking, therefore liable to be quashed---Validity---Impugned orders had not been passed on objective consideration and the same were treated as illegal, void, arbitrary and a result of misuse of authority vested in public functionary---No room was available for illegal, void and arbitrarily orders in any system of law---Finding of fact given by Authority Court or Tribunal not based on material available on record was illegal, arbitrary---Findings given without discussing and considering the material available on record were perverse---Perverse finding of fact was violative of the established principles of appreciation of evidence on record, therefore the same was not sustainable in law---Every judicial or quasi judicial finding should be based on reasons containing the justification for the finding in the order itself---Adjudication/appellate orders being violation of basic principles of good governance was not only illegal but also not sustainable under law---Appeal was allowed.

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; 1984 SCMR 1014 and 2012 PTD (Trib.) 619 rel.

Nadeem Ahmed Mirza for Appellant.

Ghulam Yasin, Appraising Officer, for Respondents.

Date of hearing: 24th September, 2013.

2014 P T D (Trib.) 190

[Customs Appellate Tribunal, Karachi]

Before Ghulam Ahmed, Member (Technical-II)

Messrs SHOAIB TAYYAB INTERNATIONAL, KARACHI

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, ADJUDICATION-II, KARACHI and another

Customs Appeal No.K-542 of 2013, decided on 30th July, 2013.

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

----Ss. 25-A, 32, 32-A, 79(1) & 80---Customs Rules, 2001, Rr. 109, 110, 107(a) & 433---Customs General Order No.12 of 2002, dated 15-6-2002, Paras 78(i) & 101(3)---Goods declaration filed electronically was selected for scrutiny---Charge of mis-declaration of classification and value of imported goods---Validity---Provisions of S. 32 of Customs Act, 1969 could be applied on basis of documents produced or statement made by importer before Customs Authority---Valuation Ruling issued under S. 25-A of Customs Act, 1969 and date of identical goods maintained by Collectorate in terms of R. 110 of Customs Rules, 2001 were not prescribed documents to be submitted by importer while transmitting goods declaration under S. 79 of the Act and R. 433 of Customs Rules, 2001---Nothing was available on record to show that importer had delivered any document or statement with MCC of PaCC and was found to be untrue---Invocation of S. 32 of Customs Act, 1969 (being a charging section) on basis of non-prescribed documents, to which importer had no excess, would render charge of misdeclaration to be based on assumption---Penal proceedings being criminal in nature would require proof beyond reasonable doubt---Department levelling charge of misdeclaration of value would be bound to prove same through direct evidence in shape of identical invoice of same goods of period expressed in R. 107(a) of Customs Rules, 2001---Department disputing declared value of imported goods was obliged to transmit view messages to importer for transmitting additional documents, but had failed to do so---Goods declaration did not contain column for valuation ruling---Department had failed to prove declared value as unfair---Contravention report, show-cause notice and order-in-original being void were set aside in circumstances.

2009 PTD 467 and PLD 1996 Kar. 68 ref.

2005 PTD (Trib.) 617; 1668/LB and 1669/LB of 2002; Customs Appeal No. K-1281/05; 1986 MLD 790; PLD 1996 Kar. 68; 2006 PTD 909; 2002 PTD 2957; 2007 SCMR 1357 = 2007 PTD 1858; 2008 SCMR 438; 1992 SCMR 1083; 2008 PTD 1050 and 2008 SCMR 438 rel.

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

----S.32---Allegation under charging section could be invoked on basis of respective section and not on basis of presumption or assumption.

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

----S.32---Penal proceedings being criminal in nature would require proof beyond reasonable doubt.

Hafiz-ur-Rehman for Appellant.

Ghulam Yasin, (P.A.) for Respondent.

Date of hearing: 25th July, 2013.

2014 P T D (Trib.) 203

[Customs Appellate Tribunal]

Before Adnan Ahmed, Member (Judicial-II) and Ghulam Ahmed, Member (Technical-II)

Messrs ALPHA CORPORATION

Versus

COLLECTOR OF CUSTOMS, (APPEALS), KARACHI and another

Customs Appeal No.K-920 of 2010, decided on 19th June, 2013.

Sales Tax Act (VII of 1990)---

----Ss.32-A, 79 & 80---Charge of short payment of taxes due to mis-declaration and mis-clarification of imported goods---Issuance of show-cause notice regarding such charge---Order-in-Original directing importer to pay short paid/evaded amount of taxes while imposing penalty on him---Appellate Authority upheld order-in-original in appeal filed thereagainst by importer---Importer's plea was that show-cause notice had not been issued to him on first stage---Validity---Appellate Tribunal set aside impugned orders and remanded case to Adjudicating Authority for its decision afresh after affording opportunity of hearing to both parties.

Ms. S.T. Enterprises v. Pakistan 2009 PTD 467; Messrs Sikandar Enterprises v. Appellate Tribunal Karachi, 2008 PTD 1968; Ms. Genuine Import Impex v. Deputy Collector 2009 PTD 263; Ms. Walayat Ali Mir v. PIA Corporation 1995 SCMR 650; Ms. Nadeem Textile Mills Ltd.'s case 2002 PTD 3087; Messrs Pakistan Telephone Cables Ltd. v. Federation of Pakistan 2011 PTD 2849 and S.M. Naqi v. Collector of Customs (Adjudication) and another Customs Reference Application No.157 of 2008 ref.

Sardar Faisal Zafar for Appellant.

Ghulam Yasin, P.A. for Respondents.

Date of hearing: 7th May, 2013.

2014 P T D (Trib.) 218

[Customs Appellate Tribunal, Karachi]

Before Ghulam Ahmed, Member (Technical-II) and Adnan Ahmed, Member (Judicial-II)

Messrs KOHSAAR DISTRIBUTOR

Versus

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE and another

Old Customs Appeal No. K-74 of 2005 and New Customs Appeal No. K-243 of 2006, decided on 24th September, 2013.

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

----Ss. 194-A & 194-B(2)---Appeal before Appellate Tribunal---Rectification of factual or legal error in order passed by Tribunal---Powers and scope---Tribunal may amend any of its order with a view to rectify any mistake apparent from the record at any time within one year of that order---Tribunal had inherent jurisdiction to rectify the error whether factual or legal floating on the surface on an order---Error on the face of record was not restricted to clerical error or arithmetical mistake---Appellate Tribunal being final fact finding authority could rectify its orders.

Commissioner Legal Division Large Tax Payer Unit Karachi v. Paracha Textile Mills Ltd., 2010 PTD 106 and 2002 PTD 1587 rel.

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

----Ss. 194-A & 194-B(2)---Civil Procedure Code (V of 1908), O.XX, R.5 & O.XLI, R.31---Application for rectification of order before Appellate Tribunal---Failure to give decision on each issue---Rectification of error mistake floating on the face of order passed by Tribunal---Scope---Judgment had not stated points for determination, decision thereon and the reasons for its findings, the same was not a "judgment" according to law---Forum had acted in exercise of its jurisdiction with material irregularity---Good judgment must be self evident and self explanatory, it must contain reasons which should justify conclusion arrived at and the reasons should be such that a disinterested reader could find some convincing or at least reasonable---Such defect in order fell within the ambit of error floating on the face of order and liable to be rectified---Application for rectification of order passed by Appellate Tribunal was allowed.

2002 CLC 825 rel.

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

----Ss.25 & 26---Customs Rules, 2001, Rr. 107(a), 109(3), 110 & 118---Dispute regarding declared transaction value---Determination of customs value of goods---Show-cause notice---Sequential manner of determining value of goods---Scope---Customs officials disputed the declared value of transaction by the importer---Contention of the importer was that the customs officials assessed the value of goods imported without issuing show-cause notice and failed to follow the sequential manner of determination---Validity---In case the appropriate officer of customs had reservations in acceptance of the declared transaction value, it was obligatory on his part to inform the importer of reservations in writing and give the importer an opportunity to justify the price difference---On failure of the importer to justify the price difference transaction value of identical goods, transaction value of similar goods, deductive value, computer value and fall back method were to be applied in the same sequential manner---Mandatory provisions of law for determining customs value of goods could not be deviated by customs authorities---Customs officials had not fulfilled the requirement of subsection (4) of S. 25 of the Customs Act, 1969 and R.109(3) of Customs Rules, 2001---No letter or notice under S. 26 of the Customs Act, 1969 had been issued to the appellant---Customs officials had no cause or reason for disputing the declared value---Order passed by customs officials declaring the value of goods was set aside---Appeal was allowed.

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

----S. 25---Customs Rules, 2001, Rr. 107(a), 109, 110 & 118---Determination of customs value of goods---Determination on the basis of value of similar goods---Scope---Contention of the importer was that the customs officials had applied the value as per assessment available in the data maintained by the Collectorate of Customs, which had no similarities to the imported goods---Importer further contented that in case of availability of two or more value of the same or the similar item, the lowest import value has to be applied---Validity---Declared value of the importer was fair as no value of similar goods in the data was available with the customs officials---Value could not be applied for determining the value of goods imported unless the department had available similar value of goods in the data of the same period of the same country---Assessment was erroneous and could not be endorsed upon---If two or more transaction value of identical goods were available in the data of import of 90 days maintained by the customs authorities, the lowest value had to be applied for completing the assessment of the identical goods under dispute---Documents produced by the importer had confirmed that the identical disputed goods were cleared at nearest price as declared by the importer by the other Collectorate of Customs, therefore the goods in dispute should have been determined on the basis of said value---Impugned orders were set aside---Appeal was allowed.

Pervaiz Iqbal Kasi for Appellant.

Muhammad Farooq for Respondent.

Date of hearing: 9th July, 2013.

2014 P T D (Trib.) 330

[Customs Appellate Tribunal, Karachi]

Before Ch. Niamat Ullah, Chairman

COLLECTOR OF CUSTOMS through Deputy Collector of Customs

Versus

Messrs SIM LIM INTERNATIONAL and another

Customs Appeal No.213 of 2013, decided on 18th September, 2013.

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

----Ss. 32, 179, 193 & 195---Mis-declaration---Assessment order attained finality---Re-opening of past and closed matter by customs authorities---Scope---Respondent imported consignments of refrigerants, the same were cleared after payment of leviable taxes and customs duties---After the lapse of three years, Director General of Post Clearance Audit had reported that consignments of refrigerants were cleared by mis-declaring the classification of goods and the respondent importer has availed concessionary duty/exemption which was for pure refrigerant gases---Appellant customs authorities issued show cause notice to respondent importer and passed order-in-original demanding payment of short levied customs duties and taxes---Contention of the Collector of Customs was that respondent had imported refrigerant which were chemically blended refrigerant gases therefore because of wrong classification the customs duties and taxes had been shortly paid---Order-in-original passed against the respondent importer was challenged before Collector of Customs (Appeals) which was set aside---Contention of the respondent importer was that the impugned customs clearances were made after lawful assessment orders passed by the appropriate officers at the crucial dates, which had attained finality---Assessment orders became past and closed transactions and vested right accrued to the respondent importer, therefore show cause notice and impugned order-in-original was illegal---Validity---Assessment under the appropriate HS code was the sole duty of the Assessing Officers, who had assessed the goods as per practice of the Customs department prevailing all over the country during the crucial times---Goods were cleared after payment of leviable customs duties and taxes and the same were sold by importer in the normal course of business---Assessment orders held the field as the same were never re-opened or got re-opened under the mandate of S.193 or S.195 of the Customs Act, 1969---Customs authorities had arbitrarily attempted to re-open the matter, which was not permitted under the law---Order-in-appeal was upheld---Appeal was dismissed.

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

----Ss. 32, 80, 179, 193, & 195---Mis-declaration---Re-assessment of goods on the basis of contravention report after the lapse of three years---Scope---Respondent imported consignments of refrigerants, which were cleared after payment of leviable taxes and customs duties---After the lapse of three years, Director General of Post Clearance Audit had reported that consignments of refrigerants were cleared on mis-declaration of the classification of goods---Respondent importer was served with a show cause notice for illegally taking benefit of concessionary duty/exemption which was for pure refrigerant gases---Additional Collector of Customs demanded the respondent importer for payment of short levied customs duties through order-in-original---Respondent importer challenged the order-in-original before Collector of Customs (Appeals) which was set aside---Contention of the respondent importer was that the Additional Collector of Customs while issuing show cause notice had misused the authority for apparent non-bona fides and attempted to re-assess goods through an arbitrary and misconceived classification---Contention of the appellant customs authorities was that the demand for short levied customs duties made through impugned order-in-original was not time barred---Validity---No new evidence on false declaration was alleged or available, therefore re-assessment of goods already cleared could not be made---Dispute had been created by the Post Clearance Audit at belated stage on expiry of three years from the date of first assessment---Action on part of Post Clearance Audit as such was infested with non-bona fides, negligence and had proved nothing but mis-conduct in discharge of duty after lapse of three years---Customs functionaries acted as to injure the importer under misuse of public authority---Appeal was dismissed.

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

----Ss. 32, 80, 179, 193 & 195---Customs General Order (12 of 2002), O.2---Classification Committee---Re-assessment of goods by classifying the HS Code---Scope and powers---Deputy Director Post Clearing Audit submitted contravention report against the goods imported by respondent importer---Show cause notice was issued to respondent importer on the allegation that he got cleared his consignments mis-declaring the classification code---Additional Collector of Customs directed the respondent importer for payment of customs duties---Order-in-original of re-assessment on the basis of classification passed by Additional Collector of Customs was set aside by Collector of Customs (Appeals)---Contention of the respondent importer was that the Additional Collector of Customs had assumed the jurisdiction of Classification Committee, therefore order-in-original was unlawful and Collector of Customs (Appeals) had rightly set aside the same---Validity---Case of re-assessment related to technical and complicated dispute on classification between two HS Codes, which was the sole jurisdiction of Classification Committee comprising of various members having classified knowledge---None else sitting singly could encroach upon the jurisdiction of Classification Committee---Deputy Director of Post Clearing Audit or Additional Collector Adjudication had no jurisdiction to pass judgment or decide the complicated dispute of classification or to make re-assessment---Order of Collector Customs (Appeals) was upheld---Appeal filed by the Collector of Customs was dismissed.

PTCL 2008 CL 17(sic) and Director, Directorate General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 ref.

Muhammad Afzal Awan for Appellant.

Ghulam Yasin Appraising Officer for Respondents.

2014 P T D (Trib.) 453

[Customs Appellate Tribunal]

Before Ch. Naimatullah, Chairman/Member Judicial-I, Ghulam Ahmed, Member (Technical-II) and Muhammad Nadeem Qureshi, Member (Judicial-I)

SHAKOOR ALAM

Versus

ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION), KARACHI and another

Customs Appeal No. K-921 of 2010, decided on 15th August, 2013.

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

----S. 194-A---Appeal to Appellate Tribunal---Affidavit accompanying appeal was not signed by the appellant---Effect---Contention of the Customs authorities was that affidavit accompanying appeal was not signed by appellant, therefore appeal was not maintainable---Validity---Appellant had engaged an advocate and executed power of attorney/ vakalatnama in his favour and authorized the advocate to prepare the appeal and put his signature thereon and file with the appellate authority---Appeal and affidavit had been signed by the Advocate on the strength of vakalatnama---Appeal could not be dismissed as not maintainable on the strength of technical objection which tantamount to denying justice---Appeal was validly filed and maintainable---Objection raised by the respondent customs authorities was overruled.

Soneri Bank Ltd. v. Classic Denim Mill (Pvt.) Ltd. and others 2011 CLD 408 rel.

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

----Ss. 16 & 18---Charge levelled under machinery provision of law---Scope---By virtue of S. 16 of Customs Act, 1969, Federal Board of Revenue had been delegated power for prohibiting or restricting importation and exportation of the goods through a notification---Section 16 of Customs Act, 1969 was a machinery section and no charge could be invoked under the same---Section 18 of Customs Act, 1969 being a machinery section provided for levy of, exemption from and payment of customs duties and the said powers rested with the Federal Board of Revenue and same had no nexus with importer, clearing agent and other person---No charge could be invoked under S. 18 of Customs Act, 1969.

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

----Ss. 32 & 32-A---Mis-declaration---Show-cause notice to "commission agent"---Commission agent was inflicted penalty for mis-declaration---Scope---Contention of the appellant (Commission Agent) was that being commission agent no penalty for mis-declaration could be imposed on him---Validity---Show-cause notice on account of mis-declaration could be served on an importer or exporter or clearing agent or any other person who had submitted a declaration with the customs---Appellant/commission agent least fall in the category of the person defined as he had not submitted any declaration or statement or any documents, which was false in material particular or concocted, altered, mutilated, false, forged, tampered or counterfeit---Commission agent submitted security with the shipping company against the container, subject to refund of the same after delivering empty containers to the terminal of the shipping company after de-stuffing and for providing that service he charged the security amount which instrument was not a document, declaration statement required for obtaining clearance of the import goods---Impugned order penalizing the appellant/commission agent was set aside---Appeal was allowed.

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

----Ss. 32, 32-A, 121, 157 & 192---Trans-shipment of goods without payment of customs duties---Show-cause notice to "commission agent"---Scope---Contention of the appellant commission agent was that he was not responsible for trans-shipment of goods without payment of customs duties, therefore penalty imposed by the customs authorities was illegal---Validity---Importer/clearing agent and customs had to follow the rules made for trans-shipment of goods---Appellant/commission agent had not obtained trans-shipment of the impugned goods---Commission agent who had deposited security of the container allegedly cleared by customs could not have the knowledge that the said container had been removed illegally from the port---Commission agent was not a clearing agent, therefore could not be held responsible for transshipment of goods---Impugned orders were set aside---Appeal was allowed.

Afzal Awan for Appellant.

Ghulam Yasin (P.A.) and Rana Gulzar Ahmed (S.I.O.) for Respondents.

2014 P T D (Trib.) 674

[Customs Appellate Tribunal Bench-I, Karachi]

Before Adnan Ahmed Member (Judicial-II) and Ghulam Ahmed Member (Technical-II)

Messrs SHAHID IMPEX, KARACHI

Versus

DIRECTOR GENERAL, KARACHI

Customs Appeal No.K-695 of 2013, decided on 2nd December, 2013.

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

----S. 25A(1)---Sales Tax Act (VII of 1990), S. 46(g)---Income Tax Ordinance (XLIX of 2001), S.148(9)---Valuation ruling---Determination of value by customs authorities for levy of income/sales tax at import stage---Powers and scope---Director of Directorate General (Valuation) issued Valuation Ruling fixing the value of "menthol crystal" imported by appellant---Appellant being aggrieved by the Valuation Ruling filed review application which was rejected---Contention of the appellant was that import of menthol crystal was subject to preferential trade agreement/PTA and no duty was payable on the same, therefore the Director of Customs was not empowered to fix the value through valuation ruling---Validity---Director of Directorate General (Valuation) was not empowered to fix the value of imported goods for levy/collection of income tax at import stage through valuation ruling in exercise of power vested under S. 25A(1) of the Customs Act, 1969---Determination of value for levy of sales tax and income tax by the Director of Directorate General (Valuation) was without lawful power/jurisdiction---Valuation ruling and order in review was set aside---Appeal allowed.

Muhammad Hussain and others v. Commissioner of Income Tax 2005 PTD 152; 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 (1) Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax 2004 PTD 624; All Pakistan Newspaper Society and others v. FOP PLD 2004 SC 600; Khyber Tractor (Pvt.) Ltd. v. FOP PLD 2005 SC 842; PLD 1976 SC 514; Ali Muhammad v. Hussain Buksh and others PLD 2001 SC 514; Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others 2006 PTD 2237; Pak Suzuki Motors Company Ltd., Karachi v. Collector of Customs, Karachi, 2009 PTD (Trib.) 1996 and 2010 PTD(Trib.) 832 ref.

(b) Jurisdiction---

----Order passed without jurisdiction---Effect---Assuming of jurisdiction is of great importance and power has to be exercised within the allotted sphere, acting contrary to that is incurable rather fatal for the case---Whenever order is passed by an officer without caring whether jurisdiction vests in him or not, it prima-facie reflects on his conduct as well as competency---Whenever authority is exercised in such a manner then no other inference can be drawn except that the functionary has transgressed his jurisdiction for the consideration other than judicial one and the Courts seized with such orders may recommend any action against the said officer because neither the executive authorities nor judicial forum will pass a wrong order because the jurisdiction in both the capacities is conferred upon such authorities to discharge their function in accordance with law which has bestowed upon them to function in that capacity and if there is abuse of power by such officer then no hesitation should be felt in passing stringent stricture against officer keeping in view the norms of justice.

Ali Muhammad v. Chief Settlement Commissioner 2001 SCMR 1822; All Pakistan Newspaper Society and others v. FOP and others PLD 2004 SC 600 and Khyber Tractor (Pvt.) Ltd. v. Pakistan through Ministry of Finance, Revenue and Economic Affairs PLD 2005 SC 842 rel.

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

----Ss.25 & 25A---Determination of value of imported goods---Procedure---Sequential order, method of customs valuation---Scope---Provision of S. 25 of the Customs Act, 1969 are to be followed in sequential manner baring certain exceptional cases where massive group under-invoicing is rampant---However, resort to subsequent method is 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 has to be established as colorable 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 does not give a free hand to Customs Authorities to make them in-effective and redundant---Discretion has to be exercised judicially based on reason, rationale and fairplay---Legislature has specifically defined as to how the Customs value of the imported goods is to be determined by the Customs administration---Method of Customs valuation are normally required to be applied in a sequential order except reversal of the order of subsections (7) and (8) Customs Act, 1969 at the importer's request, if so agreed by the Collector of Customs.

Rehan Omer v. Collector of Customs Karachi 2006 PTD 909; Messrs Toyo International Motorcycle v. Federation of Pakistan and 3 others 2008 PTD 1494; Najam Impex Lhr v. Assistant Collector of Customs, Karachi and others 2008 PTD 1250 and Faco Trading Company v. Members Custom, Federal Board of Revenue and others 2013 PTD 825 rel.

2005 PTD (Trib.) 617; 1986 MLD 790; PLD 1996 Kar. 68; 2006 PTD 909; 2002 PTD 2957; 2007 SCMR 1357 = 2007 PTD 1858; 2008 SCMR 438; 1992 SCMR 1083; 2008 PTD 1250; 2008 SCMR 438 and Messrs Toyo International Motorcycle v. Federation of Pakistan and 3 others 2008 PTD 1494 ref.

(d) Interpretation of statutes---

----Plain language of the law is to be applied.

Nadeem Ahmed Mirza for Appellant.

Afaq Ahmed for Respondent.

Date of hearing: 23rd October, 2013.

2014 P T D (Trib.) 865

[Customs Appellate Tribunal, Karachi]

Before Ghulam Ahmed, Member (Technical-II)

MUHAMMAD TARIQ

Versus

COLLECTOR OF CUSTOMS and another

Customs Appeal No. K-491 of 2013, decided on 30th October, 2013.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 156(1) (8) (77) (89), 169, 171 & 187---Smuggled/non-duty-paid vehicle, confiscation of---Vehicle registered with "Motor Registration Authority"---Scope---Customs officials intercepted the vehicle owned by appellant and asked for production of legal import documents regarding lawful possession/import of said vehicle---Appellant provided running page of Registration Book issued by Excise and Taxation Officer along with copy of delivery order issued by Principal Appraiser of Customs---Auction documents submitted by appellant were found bogus---Appellant was issued show-cause notice on account of possessing smuggled vehicle---Vehicle in question was confiscated through impugned order-in-original---Contention of the appellant was that appellant purchased the vehicle in question from open market and the same was duly registered by Motor Registration Authority, therefore the charge of smuggling and impugned order of confiscation of vehicle was based on misconception---Validity---Appellant was the fifth buyer of the vehicle in question and he purchased the said vehicle after due verification from the respective authority---Appellant/innocent buyer in support of his stance had produced the copies of registration book of the previous four buyers, the veracity of the said fact had not been disputed by the Customs authorities---Opinion of the Collector of Customs was that the appellant was plying the vehicle on the chasis number of some other imported vehicle, he had not provided any bill of entry or other document in support of his claim, therefore the opinion of Collector of Customs was based on assumption/presumption and rowing and fishing inquiry not permitted under the law---Officials acts were presumed to have been done in accordance with law and under the authority vested in this regard unless contrary was proved---Vehicle was registered by Motor Registration Authority under valid documents required for registration of vehicle---Customs authorities had not challenged the genuineness of the registration book, therefore it had been established that appellant was in possession of vehicle under valid registration book issued by Motor Registration Authority and the burden upon the appellant had been discharged by him---Show-cause notice issued on the basis of contravention report prepared on presumption and fishing and rowing inquiries suffered from legal infirmity---Impugned order in original was patently illegal, void ab initio which was set aside---Possession of the confiscated vehicle was restored to appellant---Appeal was allowed.

(1957) 32 ITR 89; (1967) 64 ITR 516; I.T.As. 2400/2401/KB of 1991-92; 1995 PTD (Trib.) 580; 1995 PTD (Trib.) 1152; (1982) 1381 ITR 742; 1993 PTD 206; 1997 PTD (Trib.) 2209; PLD 1992 SC 485; 2013 PTD (Trib.) 353 and 2003 PTD 2118 rel.

Sajjad Latif for Appellant.

Rana Tasleem Akhter, Deputy Director Intelligence and Munawar Ali, Investigating Officer for Respondents.

Date of hearing: 16th September, 2013.

2014 P T D 956

[Customs Appellate Tribunal, Karachi]

Before Adnan Ahmed, Member Judicial-II

Messrs AYYAZ ENTERPRISES

Versus

COLLECTOR OF CUSTOMS and 2 others

Customs Appeal No.K-791 of 2013, decided on 22nd October, 2013.

Customs Act (IV of 1969)---

----Ss. 193(3) & 195---Mis-declaration---Under-invoiced value of imported goods---Short payment of Customs duties---Finalized assessment of imported goods---Re-assessment of imported goods by the orders of Collector of Customs (Appeals)---Powers and scope---Importer/appellant imported a consignment of Fabric and sought clearance of the same by paying Customs duties on declared value of goods---Examination staff of Customs physically examined the consignment and found an original invoice indicating the actual value of goods, which was much higher than the declared value of goods---Appellant was charged with an offence of filing fake and forged information/particulars with a view to get clearance of imported goods at higher under invoiced value---Deputy Collector of Customs (Adjudication) ordered for confiscation of impugned goods with a concession of redemption of goods on payment of fine along with penalty---Appellant importer aggrieved by order in original filed appeal before Deputy Collector of Customs (Appeals)---Collector of Customs (Appeals) directed to refer the case to Directorate General of Valuation for re-assessment of value of imported goods vide order-in-appeal---Contention of the appellant importer was that the Collector of Customs (Appeals) had the power to confirm, modify or annul the decision or order appealed and had no power to remand the case for re-assessment, therefore the impugned order-in-appeal was void and illegal---Validity---After release of consignment, the Deputy Collector of Customs had issued a show-cause notice without jurisdiction---Re-assessment of goods was illegal and without jurisdiction as the Deputy Collector had no authority to re-open the case after its assessment---Impugned orders were set aside---Appeal was allowed.

M.H. Awan for Appellant.

Farooq Khan, Law Officer for Respondent.

Date of hearing: 7th October, 2013.

2014 P T D 974

[Customs Appellate Tribunal]

Before Gulab Shah Afridi, Member (Judicial)

Syed SAAD-UD-DIN SHAH

Versus

DEPUTY COLLECTOR and another

Customs Appeal No.Q-328 of 2013, decided on 9th September, 2013.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 156(1) (8) (9) (89), (90), 168, 171, 180 & 211---Seizure of vehicle on charge of being smuggled---Vehicle registered with "Motor Registration Authority"---Registration Book of vehicle produced by appellant not found fake by Registration department---Non-production of import documents of vehicle by appellant---Effect---Customs authorities had no authority to detain such vehicle merely on suspicion---Appellant had showed documents of registration in his name to the Customs officials who having detained the car, insisted the production of import documents for release of the vehicle---Detention of vehicle was an act of high-handedness, which was committed through misuse of official authority ---Adjudication officer had ignored that the Registration of Vehicle was sufficient proof of fact that the vehicle was legally imported in the country because as soon as the registration papers were presented before Motor Registration Authority, it was their responsibility to check the documents and examine them thoroughly with reference to their genuineness before registration---Calling upon the party to produce the bill of entry or any other legal import documents of vehicle after lapse of nineteen years was nothing but a practical joke---Importer and exporter was liable to maintain importation related record and documents only for a period of five years and individual importer who had imported the goods for private or personal use was exempted from such condition---Appellant had produced the registration documents, the burden of proof shifted on the Customs authorities who had failed to discharge the same---Impugned orders were set aside---Appeal was allowed.

2008 PTD 525; 2004 PCr.LJ 1958 and 2007 SCMR 10 rel.

Muhammad Afzal Awan for Appellant.

Zubair Awan for Respondents.

Date of hearing: 24th July, 2013.

2014 P T D 987

[Customs Appellate Tribunal]

Before Adnan Ahmed, Member (Judicial-II) and Ghulam Ahmed, Member (Technical-II)

INTERNATIONAL BUSINESS MANAGEMENT

Versus

DIRECTOR, DIRECTORATE GENERAL OF CUSTOMS VALUATION and another

Customs Appeal No.K-489 of 2013, decided on 4th September, 2013.

Customs Act (IV of 1969)---

----Ss.25(1)(2)(5)(6), 25-A(1), 25D & 215---Valuation Ruling No.460/2012 dated 29-6-2012---Valuation Ruling No.482/2012 dated 24-10-2012---Determination of customs value of goods---Powers to determine the customs value---Determination of customs values of 'uncoated offset paper for writing, printing and photocopying' through Valuation Ruling No. 460/2012 dated 29-6-2012---Appellant contended that Valuation Ruling No. 460 of 2012 had been issued after application of methods under S.25(5) & (6) of the Customs Act, 1969 simultaneously which was not provided under the law---Validity---Section 25 of the Customs Act, 1969 provided for the determination of customs value of the goods imported and also a sequential methodology under its subsections to be followed in strict sense as all these methods were independent of each other---Controversies arising out of determination of value under subsection (2) of S.25 of the Customs Act, 1969 with application of methods in the sequential order prescribed thereunder, the interplay of valuation advice arrived under S.25A of the Customs Act, 1969 in juxtaposition with S.25 of the Customs Act, 1969---Provisions of S.25 of the Customs Act, 1969 were to be followed in sequential method---Each of subsections (1), (5), (6), (7), (8), and (9) of S.25 of the Customs Act, 1969 define law that the customs value of the imported goods was to be determined by the Customs, except reversal of the order of the subsections (7) and (8) at the importers request, if so agreed by the Collector of the Customs---Since all these subsections carry into themselves procedure independent of each other, thus no two methods could be applied simultaneously as it would lead to an inherent self contradiction---Application of both two methods in the ruling was in total negation of the legal provisions and non-adherence to the statutory provision ---Thing or act which was to be done in a particular manner as prescribed under the law had to be done in the same manner and not in any other manner---Valuation Ruling No.460 of 2012 dated 29-6-2012 lacked warrant of law and its issuance did not have any adherence with the statutory requirements and was also derogative to specific provisions of S.25 of the Customs Act, 1969, besides being not a speaking order in terms of S.24(A) of the General Clauses Act, 1897---Such ruling was declared without lawful authority, void and set aside accordingly---Order-in-review passed during the hierarchy of Customs was also infested with patent illegalities which was held to be null and void and accordingly set aside---Department was directed by the Tribunal to assess the goods of the appellant in accordance with the parameters of Ss.25 and 25-A of the Customs Act, 1969 whichever was deemed appropriate---Appeal was accepted by the Appellate Tribunal.

Messrs Toyo International Motorcycles v. Federation of Pakistan 2008 PTD 1494 and Saadia Jabbar v. Federation of Pakistan and Rehan Umar v. Collector of Customs 2006 PTD 909 rel.

Afzal Awan for Appellant.

Riaz Haider, P.A. for Respondents.

Date of hearing: 18th July, 2013.

2014 P T D (Trib.) 1271

[Customs Appellate Tribunal, Karachi]

Before Muhammad Nadeem Qureshi and Adnan Ahmed, Members (Judicial-I)

AMIR AKRAM

Versus

COLLECTOR OF CUSTOMS (APPEALS), PECH SOCIETY, KARACHI and another

Customs Appeal No.K-301 of 2012, decided on 23rd December, 2013.

(a) Interpretation of statutes---

----Words "shall" and "may" in legal phraseology are interchangeable depending upon the context in which they are used, and are not to be interpreted with the rigidity which is attributed to them in ordinary parlance.

PLD 1972 SC 326 rel.

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

----S. 195-B---Constitution of Pakistan, Art.10-A---Dismissal of appeal for non-deposit of demanded Customs duty/penalty---Scope---Appellant during the pendency of appeal as per the requirement of S. 195-B of Customs Act, 1969, was required to deposit the duty demanded and the levied penalty---Appellant failed to deposit the demanded Customs duty/penalty during the pendency of appeal before the Collector of Customs (Appeals), who dismissed the appeal on account of such default---Contention of the appellant was that the provision of S.195-B of the Customs Act, 1969 was directory and permissive in nature, therefore the appeal could not be dismissed merely on the basis of non-deposit of Customs duty or penalty---Validity---Although S.195-B of the Customs Act, 1969, while directing the deposit of amount of Customs duty in respect of goods which were not under the control of the Customs authorities or any penalty levied, used expression "shall", but the stated provision was silent about the consequences flowing out of its non-compliance---Language of S.195-B of the Customs Act, 1969 was in affirmative and not negative and as such the same was directory and not of mandatory character---Customs authorities had neither attempted to recover Customs duty/penalty during pendency of appeal nor the Collector of Customs (Appeals) directed the appellant for depositing the same before dismissing appeal on account of such default---Right of appeal could not be taken away as said right was protected under Article 10-A of the Constitution---Impugned orders were set aside---Appeal was allowed.

2012 PTD (Trib.) 1913 rel.

(c) Administration of justice---

----If a thing required by law to be done in a certain manner, same must be done in the same manner as prescribed by law or not at all.

Assistant Collector v. Khyber Electronic Lamps 2001 SCMR 838 rel.

(d) Limitation---

----Recovery of money---Limitation---If a law prescribed period of time for recovery of money, after it's lapse, recovery is not enforceable through Court.

Federation v. Ibrahim Textile 1992 SCMR 1898 rel.

(e) Interpretation of statutes---

----Financial statute---While construing a financial statute, its terms are strictly to be followed.

Federation v. Ibrahim Textile 1992 SCMR 1898 rel.

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

----S. 32A(2)---Recovery of short levied customs duties---Time barred show-cause notice---Effect---Show-cause notice issued by the notifying authority beyond the period of limitation was patently illegal, without jurisdiction and lawful authority and as such all subsequent proceedings and orders based thereupon were set aside being without jurisdiction.

2009 PTD 2004 and 2009 PTD 1978 rel.

Atlas Tyres v. Additional Collector 2003 PTD 1593 Kamran and Industries v. Collector PLD 1996 Kar. 68 ref.

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

----Ss. 32 & 156(1)(9)(14)---Charge of fiscal fraud/tax evasion---Standard of proof---Proceedings in such cases required proof beyond all reasonable doubt---Benefit of doubt---Scope---Adjudication officer having found the appellant guilty of fiscal fraud, imposed penalty---Appeal filed by appellant against order-in-original was dismissed by Collector of Customs (Appeals)---Contention of the appellant was that prosecution department failed to establish the allegation levelled in show-cause notice, therefore he was entitled to acquittal from the charge on the strength of benefit of doubt---Validity---Charge of fiscal fraud/tax evasion had been framed against the appellant without establishing mens rea through any material evidence or proof, whole case had been built on assumption or presumption which was unwarranted in law---Department failed to establish the allegation levelled in the show-cause notice beyond any shadow of doubt, therefore benefit of doubt was to go to the accused---Impugned findings and orders of authorities were perverse, arbitrary and based upon no evidence, therefore the same were set aside---Appeal was allowed.

Kamran Industries v. Collector PLD 1996 Kar. 68; Al-Hilal Motors' case 2004 PTD 868 and PTCL 2009 CL 676(sic) rel.

Al-Hilal Motors 2004 PTD 868; Kamran Industries v. Collector PLD 1996 Kar. 68 and PTCL 2009 CL 676(sic) ref.

Aqeel Ahmed and Muhammad Farooq Sheikh for Appellants.

Zubair Awan for Respondent.

Date of hearing: 24th September, 2013.

2014 P T D (Trib.) 1899

[Customs Appellate Tribunal, Karachi]

Before Ghulam Ahmed Member (Technical-II) and Adnan Ahmed Member (Judicial-II)

Messrs DEWAN FAROOQUE MOTORS LTD.

Versus

The COLLECTOR (APPEALS) and 2 others

Customs Appeal No.H-510 of 2008, decided on 9th December, 2013.

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

----S.32(3)---Recovery of short levied duty---Failure to issue show cause notice---Demand notice in absence of statutory show cause notice---Effect---Show-cause notice had to be issued for recovery of any short paid amount, due to inadvertence, error or mis-construction---Adjudicating authority after providing opportunity to the person to whom show-cause notice was issued could pass an order---Demand notice could not be issued directly in derogation of the provisions of Customs Act, 1969 and Customs Rules, 2001---Adjudicating authority was not allowed under law to pass any order upon demand notice as the same was without lawful authority and of no legal effect---Demand notice in the absence of statutory show cause notice was without lawful foundation---Impugned order was set aside---Appeal was allowed.

Forte Pakistan (Pvt.) Ltd., Karachi v. The Director General of Intelligence and Investigation (Customs and Excise), Karachi and another 2006 PTD 978 and Assistant Collector of Customs, Dry Port Peshawar v. Messrs Khyber Electric Lamp MFG Co., Ltd., Peshawar 2001 SCMR 838 rel.

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

----S.32---Short assessed duty, recovery of---Show cause notice---Pre-requisite---Prior to proceeding or adjudication, it was pre-requisite to issue statutory show-cause notice, enabling the person to know the charges levelled and the provision of the Act contravened and the attracted penal clauses of the law---Adjudicating authority had no right to ignore the mandated requirement of law---Show cause notice should contain the brief facts of the case, the offences committed and the evidence on the presumption of which the allegations were based, the law that had been violated and the penal clauses that were attracted---Main object of show-cause notice was to enable the person to whom notice was given to fully know what were the charges levelled against him.

2004 PTD (Trib.) 1324 rel.

(c) Maxim---

----"Expressum facit cessar tacitum": If a thing is required by law to be done in certain specific manner that must be done in the same manner as prescribed by law or not at all.

PLD 1964 SC 536; 2003 SCMR 1505 and 2006 SCMR 129 rel.

(d) Natural justice, principles of---

----Violation of principles of natural justice could be equated with violation of provisions of statutory instruments.

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

----S.32---Show-cause notice---"Audi-Alteram Partem", principle of---Scope---Issuance of proper show cause notice to a person is an essential ingredient of the expression "audi alteram partem", which literally means that no man shall be condemned unheard---Right of being issued with a show cause notice and the right of being personally heard are inseparable rights of the defendant and cannot be denied to the person concerned under any circumstances.

Pakistan v. Pubilc PLD 1987 SC 304 rel.

(f) Interpretation of statutes---

----Principle of natural justice must be read in each and every statute, unless and until it was prohibited by the wording of the statute itself.

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; Pakistan Crome Mines' case 1983 SCMR 1208 and Pakistan's case PLD 1987 SC 304 rel.

(g) Administration of justice---

----Action of executive functionaries are to be restricted to specific sphere permitted by statute.

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

----Ss.4, 32(3) & 179---Recovery of short levied duty---Order passed by superior authority instead of the authorized officer---Effect---Contention was that superior authorities could exercise the powers of their subordinate under S. 4 of the Customs Act, 1969---Validity---If superior officers were allowed to exercise the adjudication powers clearly conferred by law upon their subordinates, it would be a total anarchy---Powers of adjudication were specific and empowered by statute---Where there was a conflict between special and general provision of law, the special provision shall prevail---Power of adjudication was special in nature and could not be eclipsed by any other general provision---If it was held that Ss. 4 & 179 of Customs Act, 1969 occupy the same fields, there was likely to be redundancy in respect of powers conferred under S. 179 of Customs Act, 1969---Redundancy was to be avoided in respect of any provision of the statute---Where there was a conflict between two provision of the statutes, the later provision prevail and had to be given precedence---Law favoured 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 was nullity---Impugned order was set aside---Appeal was allowed.

Lt. General (Retd.) Shah Rafi Alam v. Lahore Race Club 2004 CLD 373; East West Steamship v. Queen Land Insurance PLD 1963 SC 663; Sahibzada Sharfuddin v. Town Committee 1984 CLC 1517 and Abida Rashid v. Secretary, Government of Sindh PLD 1995 Kar. 587 rel.

(i) Interpretation of statutes---

----Absurdity of provision---Court can supply construction with a view to avoiding absurdity.

Khalid Qureshi v. UBL 2001 SCMR 103 rel.

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

----S.223---Central Board of Revenue, powers of---Central Board of Revenue can not interfere, when Customs authorities are exercising a judicial or quasi judicial functions---Powers of the Central Board of Revenue is to prescribe guidelines which are not relevant for the exercise of judicial function---Central Board of Revenue does not figure in the hierarchy of the officers provided in the statute for the purpose of assessment and adjudication.

Assistant Director v. B.R. Herman Mohata Ltd. PLD 1992 SC 485; Central Insurance v. CBR 1993 SCMR 1232; Collector of Customs, Peshawar v. Collector of Customs (Appeals) Peshawar 2011 PTD 2114 and Messrs Wawa Garments Industries (Pvt.) Ltd. v. The Additional Collector of Customs, Export, Karachi 2011 PTD (Trib.) 2557 rel.

(k) Administration of justice---

----If a mandatory condition for exercise of jurisdiction by Court, Tribunal or Authority is not fulfilled then the entire proceedings which follows become illegal and suffer from want of jurisdiction/powers---Any order passed in continuation of such proceedings in appeals or revisions equally suffer from illegality and are without jurisdiction.

Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184; Ali Muhammad v. Hussain Buksh and others Omer and Company v. Controller of Customs, (Valuation) PLD 1976 SC 514; Karachi, AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax 1992 ALD 449(1); 2004 PTD 624; Khyber Tractor (Pvt.) Ltd., v. Pakistan through Ministry of Finance Revenue and Economic Affairs PLD 2005 SC 842; Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others PLD 2001 Supreme Court 514; 2010 PTD (Trib.) 1636; 2010 PTD 465; 2010 PTD 465; 2010 PTD (Trib.) 2158; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1680; 2011 PTD (Trib.) 2086; Ali Muhammad v. Chief Settlement Commissioner 2001 SCMR 1822; All Pakistan Newspaper Society and others v. F.O.P. and others PLD 2004 SC 600; PLD 1996 Kar. 68; 2006 PTD 978 and PLD 1971 SC 184 rel.

(l) 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 objectives of performing or doing of a thing in manner other than provided by law would not be permitted---Superstructure built on such foundation, no matter how strong it is, has to fall.

Imran Javaid for Appellant.

Abdul Latif Sher, Inspector for Respondents.

Date of hearing: 28th November, 2013.

2014 P T D (Trib.) 237

[Customs Appellate Tribunal]

Before Ch. Muhammad Asghar Paswal, Member Judicial

FARID KHAN---Petitioner

Versus

DEPUTY COLLECTOR (ADJUDICATION) ALLAMA IQBAL INTERNATIONAL AIRPORT, LAHORE and 2 others---Respondents

Customs Appeal No.189/LB of 2013, decided on 11th September, 2013.

Customs Act (IV of 1969)---

----Ss.2(s), 3(1)(3) 16, 18 & 156(1)(89)---Imports and Exports (Control) Act (XXXIX of 1950), Ss.3(1) & 3---Allegation of "Smuggling"---Goods of foreign origin loaded on truck going from Lahore to Rawalpindi---Seizure and confiscation of such goods for being non-duty paid and smuggled one on ground that imports documents produced by appellant did not tally therewith---Dismissal of appeal by Appellate Authority---Validity---Import documents produced by appellant showing such goods to have been imported from U.A.E. and Malaysia stood corroborated by reconciliation report produced by department---Nothing on record was available to show that such goods had been either imported from any other country or brought into Pakistan through an un-authorized route without payment of duty and taxes---Department had failed to reput billties of such goods produced by appellant showing booking thereof from Karachi to Lahore---Such goods, in absence of any solid proof, would not fall within ambit of S.2(s) or definition of "smuggling" as given in Customs Act, 1969---Appellate Tribunal set aside lower appellate order and order-in-original in circumstances.

Adnan Ahmad Ch. for Appellant.

Mubarak Ali Sherazi I.O. for Respondents.

2014 P T D (Trib.) 299

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I)

Messrs M.I. TRADERS, LAHORE

Versus

ADDITIONAL COLLECTOR OF CUSTOMS

Customs Appeal No.K-460 of 2012, decided on 25th November, 2013.

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

----Ss. 3, 32 & 179---Mis-declaration---Short levied customs duty, recovery of---Show cause notice---Proceedings initiated by incompetent authority without jurisdiction---Effect---Appellant imported a consignment and declared the same as assorted Choco Toffee and Candy---In order to verify the appellant/importer's declaration the consignment was referred for physical examination, whereby it was found that importer had mis-declared the description of goods and some of the items were not even declared---On account of mis-declaration by importer, the government exchequer had suffered a loss of revenue, therefore Additional Collector of Customs of Executive Collectorate after serving show cause notice passed impugned order-in-original against the importer---Contention of the appellant/importer was that Additional Collector of Customs of Executive Collectorate transgressed the authority vested in Collector of Customs, therefore the impugned show cause notice and order-in-original was coram non judice---Validity---Before the date of issuing impugned show cause notice, the Government of Pakistan had withdrawn the power of adjudication from the Executive Collectorate and had formed Collectorate of Customs (Adjudication)---Additional Collector of Customs (Executive Collectorate) (respondent) being non-existent authority had not been empowered to adjudicate the matter, therefore the whole exercise was coram non judice---Respondent/Additional Collector of Customs (Executive Collectorate) had taken action against the appellant in absence of availability of powers, therefore the show-cause notice and order-in-original had been passed without jurisdiction and the same were of no legal effect---Show cause notice and impugned order-in-original was set aside---Appeal was allowed.

2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; 2006 SCMR 129; PLD 1996 Kar. 68; 2006 PTD 978 and PLD 1971 SC 184 ref.

(b) Administration of justice---

----If a mandatory condition for the exercise of jurisdiction by Court, Tribunal or Authority is not fulfilled then the entire proceeding which follows become illegal and suffer from want of jurisdiction/powers---Any order passed in continuation of such proceeding in appeals or revisions equally suffers from illegality and are without jurisdiction.

Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184; Omer and Company v. Collector 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 Buksh and others PLD 1976 SC 514; Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others PLD 2001 SC 514; 2010 PTD (Trib.) 1636; ((2010) 101 Tax 221(sic) (H.C. Kar)); 2010 PTD 465; 2010 PTD (Trib.) 2158; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1680 and 2011 PTD (Trib.) 2086 ref.

(c) 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 obtaining the objectives of performing or doing of a thing in a manner other than provided by law would not be permitted.

Director, Directorate General of Intelligence and Investigations and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 ref.

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

----S. 32---Mis-declaration, charge of---Show cause notice---Prerequisites---"Mens rea"---Scope---For invoking the provisions of mis-declaration, prima facie, an element of "mens rea" should be present meaning thereby that there should be an attempt of wilful and deliberate false declaration---Importer who had made a correct declaration on bill of entry or opted for first appraisement for determination of correct description, PCT heading of quantity of goods could not be charged for mis-declaration---Consignment was found to contain goods for description other than the one declared falling under separate PCT heading but chargeable to same rate of customs duty, importer, in circumstances, could not be charged for mis-declaration---Case of mis-declaration could not be made when the description of goods was as per declaration but incorrect PCT heading had been mentioned in the bill of entry and there was no change in the rate of customs duty as a result of ascertained PCT heading.

Messrs Khawaja Metals v. Collector of Customs (Appeals) 2010 PTD (Trib.) 1983 and Messrs Iqbal Traders v. Collector of Customs (Appeals) 2010 PTD (Trib.) 2576 ref.

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

----Ss. 3, 16, 32 (1), (2), 156(1) (9), 179---Sales Tax Act (VII of 1990), Ss. 6, 11, 25(3)(c) & 36---Income Tax Ordinance (XLIX of 2001), Ss.120, 148, 162(1), 192 & 195---Federal Excise Act (VII of 2005), Ss.3, 14 & 14A---Mis-declaration---Short paid customs duties and taxes, recovery of---Show cause notice---Proceedings initiated by incompetent authority without jurisdiction---Effect---Customs officials were empowered to collect the taxes and Federal Excise Duty on import of the goods like customs duty on the determined value---Additional Collector of Customs was not empowered to initiate adjudication/ recovery proceedings for the short collected/paid sales tax, income tax and federal excise duty, either due to collusion or connivance or inadvertence, error or misconstruction---Officer of Inland Revenue and the Commissioner of Income Tax was empowered to issue show cause notice for the recovery of taxes paid short---Additional Collector of Customs had the authority to collect Sales Tax, Income Tax and Federal Excise duty at import stage in the capacity of collecting agent, he was empowered to adjudicate the cases of short payment/recovery due to any reason---Show cause notice and impugned order-in-original passed by Additional Collector of Customs was set aside---Appeal was allowed.

Collector of Customs, Model Customs Collectorate v. Messrs Kapron Overseas Supplies Co., (Pvt.) Ltd. 2010 PTD 465 ref.

(g) Jurisdiction---

----Determination of jurisdiction by court seized with the matter is one of the important elements in administration of justice---If justice has been provided basing upon coram non judice order then same would have no legal sanction behind it.

All Pakistan Newspaper Society and others v. FOP and others PLD 2004 SC 600 and DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 ref.

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

----S. 32---Short assessed duty, recovery of---Show-cause notice---Appellant had been served with a show cause notice without mentioning the applicable provisions of law---Effect---Provisions of law had been invoked without mentioning the same in show cause notice, therefore impugned order passed in pursuance of said show cause notice was void.

Collector Central Excise and Land Customs and others v. Rahmdin 1987 SCMR 1840 rel.

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

----S. 32---Customs Rules, 2001, R. 107(a)---Customs General Order No. 12 of 2002, Para, 78---Mis-declaration of value, charge of---Onus of proof---Scope---Appellant was served with a show cause notice on account of mis-declaration of the value of imported goods---Customs authorities being dissatisfied with the reply of appellant passed impugned order-in-original---Contention of the appellant was that Customs authorities had failed to substantiate the charge of mis-declaration of value in accordance with the provisions of Customs laws, therefore the impugned order-in-original was illegal---Validity---Department was under obligation to substantiate the allegations through an incriminating undisputed direct evidence in the shape of evidential invoice of the product in question for the relevant period---Customs officials had not produced any evidence during the adjudication proceeding or before the Tribunal---Department had failed to discharge the onus of establishing that the price declared by the appellant/importer of the imported goods were not fair and had been mis-declared---Allegation of mis-declaration of value were without any concrete and positive evidence, therefore charge of mis-declaration of value was declared to be unsubstantiated and of no legal effect---Appeal was allowed.

2005 PTD (Trib) 617; 1986 MLD 790; PLD 1996 Kar. 68; 2006 PTD 909; 2002 PTD 2957 and 2007 SCMR 1357 = 2007 PTD 1858 ref.

Nadeem Ahmed Mirza for Appellant.

Ehtasham Paracha , Appraising Officer for Respondent.

2014 P T D (Trib.) 510

[Customs Appellate Tribunal]

Before Ghulam, Ahmed Member (Technical-II) and Muhammad Nadeem Qureshi, Member (Judicial-I)

Messrs S.S. TRADING

Versus

ADDITIONAL COLLECTOR OF CUSTOMS

Customs Appeal No.K-471 of 2012, decided on 3rd June, 2013.

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

----Ss. 3 & 179---S.R.O. 886(I)/2012, dated 18-7-2012---Issuance of show-cause notice dated 24-8-2012 by Additional Collector of Customs, MCC of PaCC (Executive Collectorate)---Validity---Government had withdrawan power of adjudication from Executive Collectorate w.e.f. 1-8-2012---Additional Collector was non-existing authority w.e.f. 1-8-2012 by virtue of S.R.O. 886(I)/2012, dated 18-7-2012---Impugned notice for being beyond 31-7-2012 rendered the whole exercise as coram non judice.

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 (1) 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, Noslzehra and others v. Sarfraz Khan and others PLD 2001 SC 514; S.T.A. 444/03, S.T.A. 465/07, 2010 PTD (Trib.) 1636; 2010 PTD 465; 2010 PTD (Trib.) 2158; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1680; 2011 PTD (Trib.) 2086; Director, Directorate General of Intelligence and Investigations and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; 1990 SCMR 1059(sic); 2002 SCMR 312, 2002 PTD 976; 2007 PTD 361; 2009 PTD 1507; 2005 SCMR 492 and 2010 SCMR 431 ref.

(b) Notification---

----Amendment of---Scope---Notification could be amended through a subsequent notification, and not by any executive order.

Messrs Paramount Corporation v. Additional Collector of Customs (Adjudication) MCC (PaCCS) Customs Appeal No.K-24 of 2013; 2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; 2006 SCMR 129; PLD 1996 Kar. 68; 2006 PTD 978 and PLD 1971 SC 184 rel.

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

----Ss. 25, 25-A(1) & 80---Customs Rules, 2001, R. 438---Guidelines issued by Assistant Collector of Customs for assessment of imported goods and levelling charge of mis-declaration---Validity---Value of imported or exported goods could be determined under S. 25 of Customs Act, 1969---Assistant Collector of Customs had power to determine prices of imported/exported goods for levy of duty and taxes, but could not fix valuation thereof through a guideline---Assessment of imported goods could not be completed under S. 80 of Customs Act, 1969 and R. 438 of Customs Rules, 2001---Impugned guidelines were, without jurisdiction, void and of no legal effect.

2005 SCMR 492; 1990 SCMR 1059; 2002 SCMR 312; 2002 PTD 976; 2007 PTD 361 and 2009 PTD 1507 ref.

Nadeem Ahmed Mirza for Appellant.

Ghulam Yasin (P.A.) for Respondent.

Date of hearing: 7th March, 2013.

2014 P T D (Trib.) 548

[Customs Appellate Tribunal]

Before Adnan Ahmed, Member (Judicial-II)

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF PACCS, CUSTOMS HOUSE, KARACHI

Versus

Messrs CAPTAIN AND COMPANY and another

Customs Appeal No.K-490 of 2013, decided on 9th September, 2013.

Customs Act (IV of 1969)---

----S.194-A---Appeal to Appellate Tribunal---Filing of appeal in name of wrong person---Affidavit in support of appeal filed by Deputy Collector Customs (Law) to the effect that he was authorized by Collector of Customs (PaCCS) through Office Order dated 10-9-2007---Validity---Cause of action to file appeal had arisen in March, 2013---Such Office Order had been drafted much earlier than accrual of such cause of action---Appellate Tribunal dismissed appeal in circumstances.

Ghulam Yasin, P.A. for Appellant.

Muhammad Abbas for Respondents.

Date of hearing: 28th August, 2013.

2014 P T D (Trib.) 618

[Customs Appellate Tribunal]

Before Ch. Niamatullah, Chairman/Member Judicial-I, Muhammad Nadeem Qureshi, Member Judicial-I and Ghulam Ahmed, Member Technical-II

SHAKOOR ALAM

Versus

DIRECTORATE OF INTELLIGENCE AND INVESTIGATION FBR

Customs Appeals Nos.K-610 to 640 of 2011, decided on 15th August, 2013.

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

----Ss.16 & 18---Show-cause notice to commission agent under machinery provisions of law---Scope---Commission agent/appellant was imposed a penalty--Appeal filed by commission agent before Collector appeals of Customs was dismissed---Contention of the appellant commission agent was that no charge could be levelled against him under machinery provisions of law---Validity---Section 16 of Customs Act, 1969 had delegated power to Federal Board of Revenue for prohibiting or restricting importation and exportation of the goods through a notification---Section 16 of the Customs Act, 1969 was a machinery section and no charge could be invoked under the same---Section 18 of the Customs Act, 1969 was for levy of, exemption from and payment of, customs duties and the powers for the same rested with the Federal Board of Revenue and had no nexus with importer, clearing agent and any other person by invoking machinery section---Impugned order in original and appellate order was set aside---Appeal was allowed.

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

----Ss.16, 18, 32(1)(2), 32-A, 79, 80, 156(1), (9), (14), (14-A), (43), (43-A), (47) & 178---Show-cause notice to commission agent---Security submitted with the shipping company---Scope---Certain imported goods were fraudulently cleared without payment of customs duties and taxes---Appellant/Commission agent was charged for the fraudulent clearance of imported goods---Contention of the appellant was that he was mere commission agent, who submitted security with shipping company against the container and he had nothing to do with clearance of imported goods---Validity---Sections 32 & 32-A of the Customs Act, 1969 could be invoked on an importer or exporter or clearing agent or any other person who had submitted a declaration to the customs department---Appellant/Commission agent least fell in the category of the person defined as he had not submitted any declaration or statement or any documents, which was false in material particular or concocted, altered, mutilated, false, forged, tampered or counterfeit---Appellant/ Commission agent had submitted security with shipping company against the container, subject to refund of that after delivering empty containers to the Terminal of the Shipping Company after de-stuffing and for providing that service appellant had charged 1% of the security amount---Security submitted with the shipping company was not a document, declaration statement etc. required for obtaining clearance of the imported goods---Provisions of Ss. 32 & 32-A could not be invoked against appellant commission agent, therefore impugned orders were set aside---Appeal was allowed.

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

----Ss. 32, 32-A, 121, 157 & 192---Trans shipment of goods without payment of customs duties---Show-cause notice to "commission agent"---Scope---Contention of the appellant commission agent was that he was not responsible for trans shipment of goods without payment of customs duties, therefore penalty imposed by the customs authorities was illegal---Validity---Appellant/commission agent deposited security of container allegedly cleared by the customs had no knowledge that the container in question had been removed illegally from the port---Appellant commission agent could not be charged for non informing the commission of offence to the customs station in the absence of tangible evidence that he had the information or knowledge of the occurrence of events---Appellant had been un-necessarily implicated in the impugned case---Impugned orders were set aside---Appeal was allowed.

Afzal Awan present in Appellant.

Ghulam Yasin (P.A.) for Appellant.

Rana Gulzar Ahmed (S.I.O.) for Respondent.

Date of hearing: 22nd July, 2013.

2014 P T D (Trib.) 709

[Customs Appellate Tribunal]

Before Ch. Niamatullah, Chairman/Member Judicial-I and Ghulam Ahmed, Member (Technical-II)

Messrs PORT QASIM AUTHORITY through Secretary

Versus

DIRECTOR GENERAL, INTELLIGENCE AND INVESTIGATION F.B.R. and 3 others

Customs Appeal No. K-708 of 2013, decided on 18th September, 2013.

(a) Pakistan Merchant Shipping Ordinance (LII of 2001)---

----S.2(2)---"Charter"---Kinds---Three types of "Charters"---"Bareboat Charter"; "Time Charter" and "Voyage Charter".

(b) Pakistan Merchant Shipping Ordinance (LII of 2001)---

----S.2(2)---Charters: "Bareboat Charter", "Time Charter" and "Voyage Charter"---Distinction---Hiring of a whole ship without the master or crew is a "bare boat (or demise) charter"---Hiring of a services of a ship with master and crew for a period of time usually quite long is a "time charter"---Hiring of the services of a ship or part of a ship for a voyage is a "voyage charter"---Considerations for "bare boat" and "time charter" is "hire" and for a "voyage charter" is freight, much light the bill of lading---"Voyage charter" give the charterer very little control of ship only slightly more than the bill of lading holder, but much less than the "time charter" and very much less than the bare boat charterer.

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

----Ss. 9, 79 & 82---Pakistan Merchant Shipping Ordinance, (LII of 2001), S.15(c)---Merchants Shipping (Registration of Ships) Rules, 2002, R.2(1)(d)---Ship temporarily imported by Port Authority---Exemption from registry---Non-filing of goods declaration---Effect---Appellant/Port Qasim Authority temporarily imported used tugs along with all machinery and fittings without filing goods declaration within stipulated period---Customs authorities after serving show-cause notice found the appellant guilty of evading taxes and customs duties---Appellant was directed to deposit amount of evaded taxes and customs duties along with penalty through order-in-original---Contention of the appellant was that tug boats were imported on the basis of lease agreement, therefore the same were government property and exempted from customs duty and sales taxes---Validity---Tug boats were obtained on the basis of "bare boat charter" through temporary importation as evident from the invoices prepared by the Shipper favouring the appellant reading as "Tug for two years operation at Port Qasim (Temporary Import)"---Argument of appellant that the tugs were hired on the basis of "time charter" on the basis of clauses incorporated in charter did not render the Tugs as being hired on "time charter" basis as these conditions were suitably amended with the consent of the appellant for keeping entire hold on the Tugs during the period of hiring without any influence of the owner despite contrary to the definition of "time charter"---Appellant had hired the tug boats on the basis of "bare boat charter" not "time charter", therefore liable to pay customs duty and taxes---Appeal was dismissed.

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

----Ss.9, 79, 80 & 83---Goods permanently or temporarily imported into Pakistan---Filing of goods declaration for clearance of imported goods---Pre-conditions---Imported goods could not be either taken out of the port, terminal/customs station/airports, etc. without filing of goods declaration, completion of procedure of assessment, payment of leviable customs duty and taxes thereon through the assessment order and thereafter could get issuance of clearance order, likewise filing of goods declaration for exporting goods was mandatory for exporter---Mechanism of filing goods declaration at arrival had been adopted by every country of the world and to be adhered to by the citizen---Even the goods coming from Space/Moon were also not exempted from filing of declaration.

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

----Ss.2(2), 79, 80, 83, 130 & 131---Imported goods taken out from the premises of port without clearance---Effect---Appellant imported tug boats and operated the same in the port for the entire period of charter and after completion of the period exported tug boats without following the laid down procedure for clearance---Appellant was found guilty of smuggling and directed to deposit leviable customs duty and taxes along with surcharge---Validity---Appellant wilfully and with mala fide intention deceived the laid down procedure for evading leviable customs duty and taxes on the wharfed tug boats and operated the same in the port for the entire period of charter and after completion of the period exported tug boats without following the laid down procedure for clearance---Goods/tug boats taken out of the port premises for any purpose for home consumption including operation in the port for tugging the vessel or for export after expiry of period of charter without completion of procedure given in the Customs Act, 1969 and payment of leviable customs duty and taxes was an act of "smuggling"---Appeal was dismissed.

East and West Steam Ship Co. v. Collector of Customs and others PLD 1976 SC 618 distinguished.

(f) Pakistan Merchant Shipping Ordinance (LII of 2001)---

----S.15(c)---Merchants Shipping (Registration of Ships) Rules, 2002, Rr.2(1)(d) & 7---Customs Act (IV of 1969), Ss.79 & 82---Chartered tug boats---Exemption of customs duty and taxes---Scope---Exemption from customs duty and sales tax were allowed to the tug boats purchased or bare boat chartered by a Pakistani entity and flying Pakistani flag and to none else---Appellant chartered tug boats on bare boat basis, but failed to get those cleared from the customs and registration from the Marine Mercantile Department---Chartered tug boats in question were not Pakistani entity, unless the same were registered in Pakistan and fly Pakistani flag, the same could not be considered as Pakistani entity---Appellant was not entitled for exemption of customs duty and taxes---Appeal was dismissed.

Agha Faquir Muhammad for Appellant.

Zafar Iqbal Superintendent and Zafar Naqvi (I.O.) for Respondents.

Date of hearing: 8th July, 2013.

2014 P T D (Trib.) 767

[Customs Appellate Tribunal]

Before Adnan Ahmed, Member (Judicial-II)

Messrs K.K. ENTERPRISES, KARACHI

Versus

ADDITIONAL COLLECTOR-II MCC and 2 others

Customs Appeal No.K-551 of 2013, decided on 28th August, 2013.

Customs Act (IV of 1969)---

----S.180---Customs Rules, 2001, Rr. 101 & 102---Penal Code (XLV of 1860), S.489-F---Imported goods released without payment of leviable taxes on submission of post-dated cheques and indemnity bond by Clearing Agent in pursuance of order of High Court passed in constitutional petition filed by importer---Dismissal of such petition by High Court---Issuance of show-cause notice by Customs Authority to importer demanding payment of leviable taxes while endorsing its copy to Clearing Agent---Penalty of Rs.5,00,000 imposed upon Clearing Agent reduced to Rs.50,000 by Departmental Appellate Authority---Validity---Customs Authority had issued show-cause notice to importer on 29-8-2011 and passed order-in-original on 23-2-2012, which was without jurisdiction for being barred by 60 days---Show-cause notice was silent about acts and omission of Clearing Agent---Customs Authority had not provided opportunity to Clearing Agent to submit his reply to show-cause notice and had not lodged F.I.R. under S.489-F, P.P.C. against Clearing Agent---Appellate Tribunal set aside both impugned orders for being without jurisdiction and against natural justice.

Messrs Sikandar Enterprises v. Customs, Excise and Sales Tax Appellate Tribunal Karachi 2008 PTD 1968 ref.

Nadeem Ahmed Mirza, Consultant for Appellant.

None for Respondent No.1.

Date of hearing: 16th July, 2013.

2014 P T D (Trib.) 774

[Customs Appellate Tribunal]

Before Ch. Niamatullah, Chairman/Member Judicial-I and Ghulam Ahmed, Member (Technical-II)

Messrs RAZAQUE STEELS (PVT.) LTD. through Authorised Director

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, KARACHI

Customs Appeal No.K-975 of 2010, decided on 9th September, 2013.

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

----Ss. 32(2), 180-A & 206-A---Show-cause notice, corrigendum---Scope---Customs authorities issued show-cause notice to appellant importer on account of short levied customs duty and sales tax---Customs authorities issued corrigendum to earlier show-cause notice by correcting amount of short levied tax---Contention of the appellant importer was that adjudicating authority was not authorized to issue corrigendum and the same was illegal and without jurisdiction---Validity---Federal government, the Federal Board of Revenue or any officer of the Customs could correct clerical or arithmetical error arising therein from accidental slip or omission in any decision or order passed---Correction through a corrigendum in show-cause notice was not permissible under law---Customs authorities had acted in very cursory and perfunctory manner, rendering the corrigendum as of no legal effect.

PLD 1971 SC 61; PLD 1973 SC 236; 2003 PTD 2457 and 2006 SCMR 129 rel.

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

----Ss.32(1), (2) & 202---Sales Tax Act (VII of 1990), Ss.6 & 36---Income Tax Ordinance (XLIX of 2001), Ss.148 & 162(1)---Collection of sales tax and income tax by the customs authorities as recoveries---Scope---Customs authorities served a show-cause notice upon appellant/importer on account of evading sales tax and short levied income tax on imports---Contention of the appellant importer was that Customs authorities had no powers for recovery of sales tax and income tax---Validity---Section 6 of the Sales Tax Act, 1990 and S. 148 of Income Tax Ordinance, 2001 had empowered the Collector of Customs to recover sales tax on the import of goods---Section 32(2) and (3) of Customs Act, 1969 mentioned any duty and charge which had not been levied or had been short levied, and had not restricted to the word exclusively customs duty or customs charges---Inherently, an agency which was to collect taxes at the import stage had the powers to recover the same under the powers delegated with its collection to avoid procedural complications.

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

----Ss.32(1), (2) & 223---Sales Tax Act (VII of 1990), S.2(16) & (17)---Sales Tax Special Procedure Rules, 2007, Rr. 58(A) & 58(B)---Manufacturer or producer---Payment of value added tax at import stage---Double taxation---Scope---Appellant importer imported a consignment of Hot Rolled Deformed Round Steel Bars and got cleared the same without payment of value added tax and income tax---Importer was issued show-cause notice alleging that the goods imported by him had not gone through the process of manufacture, instead had been sold in same state condition, therefore he was liable to pay sales tax in lieu of value added tax---Additional Collector of Customs directed the importer to make payment of short realized amount of value added tax along with penalty amount---Appeal filed by importer before Collector of Customs (Appeals) was also rejected---Contention of the appellant was that he was a registered person under the Sales Tax Act, 1990, principally as a "manufacturer", therefore he was not liable to payment of value added tax at import stage---Validity---Any article imported in the same state condition was either converted into another distinct article or product or is so changed, transformed or reshaped that it became capable of being put to use differently or distinctly or included any process incidental or ancillary to the completion of manufactured product fell within the definition of manufacture or produce and the person or the unit engaged in such activity squarely fell within the ambit of manufacturer or producer---Appellant after importing the goods carried out the process of sorting, straightening, sand blasting, cutting, bending, etc. rendered the goods undergone the process of manufacturing and was not liable to pay sales tax on value addition---Show-cause notice and impugned orders were not warranted as manufacturer was not liable to pay additional tax at import stage, resultantly the impugned orders tantamount to "double taxation", which was not permitted by law which were set aside---Appeal was allowed.

2004 PTD 791; 1992 PTD 593; 2003 PTD (Trib.) 928; 2010 PTD 1515 and 2009 PTD (Trib.) 2025 rel.

(d) Words and phrases---

----Entitle---Meaning of.

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

----Ss. 179(3) & 194-A---Appeal before Appellate Tribunal---Order in original was time-barred---Effect---Impugned penalty order was passed by Additional Collector of Customs after the expiry of prescribed time period---Scope---Contention of the appellant importer was that order in original was passed after the expiry of 120 days of issuance of show-cause notice---Validity---Order-in-original was passed after the expiry of initial period of 120 days without any extension---Order-in-original was silent regarding the extension of time and besides nothing was placed on record of the Tribunal that as to whether any extension was given by the Collector of Customs in lawful legal prescribed manner---Order-in-original was barred by time and could be enforceable being without power/jurisdiction---Order-in-original as well as impugned appellate order of the Collector of Customs (Appeals) based on proceedings which were void ab initio, were set aside---Appeal was allowed.

2007 PTD 117; 2008 PTD 60; 2007 PTD 2092; 2010 PTD (Trib.) 1636; 2010 PTD (Trib.) 2117; 2009 SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 578; 2009 PTD 762; 2009 PTD (Trib.) 107; (2010) 109 Taxation 221(sic); 2011 PTD (Trib.) 79; 2011 PTD (Trib.) 987; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 1146 and 2012 PTD (Trib.) 1650 rel.

M. Junaid Ghaffar for Appellant.

Jamshed Ali Khan (A.O.) and Farooq Khan (L.O.) for Respondents.

Date of hearing: 23rd July, 2013.

2014 P T D 807

[Customs Appellate Tribunal]

Before Ghulam Ahmed, Member

DEPUTY COLLECTOR OF CUSTOMS, KARACHI

Versus

COLLECTOR COLLECTORATE OF CUSTOMS, KARACHI and another

Customs Appeal No.K-403 of 2011, decided on 29th January, 2013.

Customs Act (IV of 1969)---

----S.25(5)---Customs Rules, 2001, Rr.117 & 118---Appeal to Appellate Tribunal---Imported textile accessories---Weight of goods found to be higher than the one declared in goods declaration---Re-assessment of goods on basis of lowest value on which identical goods had been imported during relevant period---Validity---Appellant failed to controvert impugned assessment, which did not suffer from any factual and legal infirmity---Tribunal dismissed appeal in circumstances.

Director, Directorate General of Intelligence and Investigations and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; 2002 SCMR 312; 2002 PTD 976; 2005 SCMR 492; 2007 PTD 361; 2010 SCMR 431; 2009 PTD 1507 and Messrs Shafique and Company v. Assistant Collector of Customs and 2 others 2008 PTD 1481 ref.

Nadeem Ahmed Mirza (Consultant) for Appellant.

Nemo for Respondents.

Date of hearing: 23rd January, 2013.

2014 P T D 818

[Customs Appellate Tribunal]

Before Ch. Muhammad Asghar Paswal, Member (Judicial-I)

ALAMGIR FAROOQ and 4 others

Versus

COLLECTOR OF CUSTOMS (APPEALS), CUSTOMS HOUSE, LAHORE and another

Customs Appeal No.132 of 2013, decided on 28th June, 2013.

Customs Act (IV of 1969)---

----S.156(1)---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Confiscation of imported goods on the ground of "Goods Declaration" being old---Validity---No time limit for disposal of imported goods was prescribed under Customs Act, 1969 or rules made thereunder or Import Policy Order---Impugned order was set aside in circumstances.

Abdul Salam Sajid for Appellants.

Saleem-Ullah, S.I.O. for Respondents.

Date of hearing: 29th May, 2013.

2014 P T D (Trib.) 830

[Custom Appellate Tribunals]

Before Adnan Ahmed Member (Judicial-II) and Ghulam Ahmed Member (Technical-II)

MUBASHIR AHMED MAGOON, KARACHI

Versus

COLLECTOR OF CUSTOMS (APPEALS-I) and another

Customs Appeal No.Old K-79 of 2006, New Appeal No.K-2520 of 2011, decided on 25th November, 2013.

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

----Ss.32, 156(14) & 193---General Clauses Act (X of 1897), S.24A---Mis-declaration---Benefit of the judgment of similar consignment---Mutatis mutandis, principle of---Scope---Appellant/importer was given show-cause notice on account of mis-declaration of origin of imported goods---Customs authorities ordered for confiscation of imported goods through order-in-original---Appeal before Collector of Customs (Appeals) was dismissed---Contention of the appellant was that his case was identical in facts and points of law with the case of an other importer, therefore order passed in favour of said other importer had to be applied in appellant's case---Validity---Contention of the appellant was repelled as the case of other importer revolved around mis-declaration of description and value as against the appellant's case which related to mis-declaration of origin of goods---Tendency of 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 right that his case should be disposed of on its own factual position and not on the factual position of the case of any other importer, despite the position that the facts would be the same.

Pakistan Telephone Cable Ltd. v. FOP 2011 PTD 2849 and Collector of Sales Tax, Faisalabad v. Mian Ghous Bux (Pvt.) Ltd., Faisalabad 2011 PTD (Trib.) 424 rel.

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

----Ss.25, 179 & 181---S.R.O. 574(I)/2005 dated 6-6-2005---Mis-declaration---Confiscation of imported goods---Option to pay fine in lieu of confiscation---Calculation of redemption fine---Scope---Customs authorities ordered for confiscation of goods imported by appellant on account of mis-declaration, however, the appellant was given option to redeem confiscated imported goods on payment of 30% of redemption fine equivalent to ascertained Customs value of goods---Appellant challenged the order-in-original in appeal, which was dismissed---Contention of the appellant was that the redemption fine was to be worked out with reference to duties and taxes attempted to be evaded and not the duties and taxes on the whole consignment---Validity---Option given to the appellant to redeem the goods on payment of all levialbe duty and taxes as well as redemption fine of 30% of the offending value of goods was against the essence of S.R.O. 574(I)/ 2005, dated 6-6-2005---Redemption fine was not to be worked out with reference to the duty and taxes attempted to be evaded and not on the duty and taxes leviable on the whole consignment---"Customs value" meant that the amount of duty and taxes said to be evaded through the impugned consignment---Fine had to be imposed on the amount arrived at said to be short paid/evaded and not on the basis of value of the consignment or duty and taxes leviable on the whole consignment---Appellate Tribunal modified the redemption fine in accordance with S.181 of the Customs Act, 1969---Impugned order was modified accordingly---Appeal was disposed of.

2004 PTD 2981; Messrs Weave and Knit (Pvt.) Ltd. Karachi v. Additional Collector of Customs (Adjudication) Karachi 2004 PTD 2981; Superior Textile Mills Ltd. v. FOP 2000 PTD 399; The Collector of Sales Tax and others v. Superior Textile Mills Ltd. and others PLD 2001 SC 600 and Saleem Raza v. FOP and others 2012 PTD 302 rel.

Usman Shaikh for Appellant.

Ghulam Yasin, Principal Appraiser for Respondents.

Date of hearing: 4th September, 2014.

2014 P T D (Trib.) 1566

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi Member (Judicial)-I) and Ghulam Ahmed Member (Technical-II)

Messrs QADRI HAJVERI GOODS FORWARDING AGENCY (REGD.), LAHORE

Versus

DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION-FBR, SUKKER and 2 others

Customs Appeal No.K-339 of 2012, decided on 29th October, 2013.

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

----Ss.168(1), (2), 177, 180 & 194-A---Seizure of goods/consignment from the possession of carrier---Carrier/transporter of consignment filed appeal---Locus standi---Respondents/customs authorities intercepted the carrier/appellant and detained transported goods of his clients on account of the charge of smuggling---Appellant/carrier challenged the order-in-original before Appellate Tribunal---Objection was raised on the locus standi of carrier as he was not owner of the detained goods---Validity---Being transporter, carrier was custodian of the goods and received the same from shipper as "amanah" for delivering in safe and sound condition to the recipient upon surrendering the bilties (delivery orders)---Non-delivery of the goods to the consignee had serious consequences because when any consignment was entrusted to a carrier to a port of destination, then it was carrier's bounden duty to ensure that consignment reached designated port---If shipment did not reach its destination or even if it did reach its destination but on account of negligence of carrier or its agent; the same was lost or mis-delivered and the real consignee or the endorsee of the bill of lading did not get the delivery of consignment, then the carrier was answerable to the shipper or consignee or the endorsee of the bill of lading for the loss of shipment---Carrier in such condition could not absolve itself of the obligation by shifting its responsibility on the port authorities---Shipper or consignee or the endorsee of the bill of lading had every right to claim from the carrier compensation as well as damages for the lost consignment and carrier was to compensate them for value of goods as for a claim of damages which they had sustained on account of non-delivery of consignment---Appellant/carrier, in circumstances, had/enjoyed locus standi for filing appeal before Appellate Tribunal.

Adam Holding Ltd. v. Global Container Line (Bahamas Ltd.) 2006 CLC 1511 ref.

Collector of Customs (Preventive) and 2 others v. Muhammad Mehfooz PLD 1991 SC 630 and 2005 PTD (Trib.) 135 ref.

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

----Ss. 168(1), (2) & 177---Smuggled goods, confiscation of---Scope---None of the seized goods were specifically mentioned in the definition of "smuggled" as provided in Customs Act, 1969 nor the same were brought into Pakistan via route other than one declared or from a place other than a "Customs-station", therefore the matter would not come within the ambit of "smuggling"---Goods in question (intercepted and detained) were not transported by the appellant within five miles of Indian and Iran borders, instead from Rohri tool plaza at National High Way, while the same were transporting from Lahore to Karachi---Transporting of the goods by the appellant did not fall within the meaning of smuggling and not the goods as "smuggled".

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

----S.168(1)(2)---Smuggling of goods---Seizure of smuggled goods---Goods were transported through lawfully registered conveyance---Effect---Container or vehicle through which the appellant was transporting goods had no hidden or false cavities made for the time being or artificially made, instead at the hind of vehicle openly and due to the said reason the official of the Customs released the vehicle without any hitch or hindrance---Neither the appellant was involved in any type of smuggling nor the goods transported by him were "smuggled goods"---Interception of vehicle, detention and seizure of goods was nullity in law in circumstances.

Noor Muhammad v. Deputy Collector of Customs, (Adjudication), Hyderabad Customs Appeal No.H-185 of 2009 Lahore High Court and 2010 PTD 2015 rel.

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

----S.2(s)---Smuggled goods---Items alleged to be smuggled were freely available in the open market---Effect---Items alleged to be smuggled by the prosecution were freely available in the open market and the import of such goods were not banned in the country, presumption could be that the goods in question were lawfully brought in the country and duty paid unless contrary was shown---Demand of customs officials to produce legal import document was nothing but to put undue pressure on the business community.

Sikandar A. Karim v. The State 1995 SCMR 387 rel.

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

----Ss.187 & 2(s)---Qanun-e-Shahadat (10 of 1984), Art.117 & 121---Smuggling of goods---Burden of proof---Scope---Appellant had submitted copies of respective goods declaration and purchased receipt with the customs authorities, after detention of goods---Appellant had discharged the burden of proof laid upon him---Respondent/customs authorities had failed to prove the charge of "smuggling" or transportation of "smuggled goods" as the same stood shifted on their shoulders---Person levelling the allegation was responsible to prove the same.

PLD 1996 Kar. 68 and 2012 PTD 428 rel.

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

----S.2(s)---Release of smuggled goods on payment of fine---Powers and authority---Scope---Customs authorities were not empowered to release the smuggled goods upon payment of fine---No option could be given to pay fine in lieu of confiscation in respect of smuggled goods.

2003 PTD (Trib.) 928; 2010 PTD 1515 and 2009 PTD (Trib.) 2025 ref.

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

----S. 179(3)---Confiscation of smuggled goods---Impugned order-in-original was passed after the expiry of prescribed time period---Effect---Order-in-original should have been passed within One Hundred and Twenty days from the date of issuance of show cause notice or within a further extended period of Sixty days due to emergence of "exceptional circumstances" prior to expiry of initial period after serving a notice to the person concerned---Impugned order-in-original was passed after the expiry of initial period without any extension as evident from the order---Impugned order-in-original was barred by time and as such was without power/jurisdiction and not enforceable under law---Appeal was allowed.

1999 SCMR 1881 rel.

(h) Administration of justice---

----Doctrines of "binding precedents" and "Stare Decisis"---Applicability---Scope---Judgments delivered by the superior judicial fora and the provisions relating thereto are mandatory in nature for implementation by all subordinate judicial and quasi judicial forum.

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

----S. 194A---Constitution of Pakistan, Art. 254---Appeal---Non-observance of time limit prescribed under provisions of Customs Act, 1969---Effect---Order-in-appeal was time barred---Customs officials by relying on Art.254 of the Constitution, contended that prescribed time period was administrative and directory in nature and not mandatory, therefore delay in passing order would not render the same as illegal---Validity---Article 254 of the Constitution was general in nature and did not specify or rebut the statutory provisions contained in special/ specific Acts, otherwise there was no requirement for legislature to prescribe different limitation periods for different statues---Redundancy could not be attributed to statutory prescribed time limits---Impugned orders were declared illegal---Appeal was allowed.

2007 PTD 117; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala and another 2008 PTD 60; 1999 SCMR 1881; Nagina Silk Mills Lyallpur v. The Income Tax Officer and the Income Tax Appellate Tribunal, Pakistan PLD 1963 SC 322; 2006 PTD 340; PTCL 2005 CL 841; 1992 SCMR 1898; 2009 SCMR 1126; 2002 MLD 180; 2003 PTD 1354; 2003 PTD 1797; 2008 PTD 578; 2009 PTD 762; 2009 PTD (Trib.) 107; (2010) 109 Taxation 221(sic); 2004 PTD 369; 1998 MLD 650; 2005 PTD 23; 2003 PTD 2821; 2004 PTD (Trib.) 2898; 2007 PTD 2092; 2008 PTD 60; 2009 PTD (Trib.) 1263; 2009 PTD 1978; 2011 PTD (Trib.) 1010; 2011 PTD (Trib.) 987; 2011 PTD (Trib.) 79 and 2012 PTD (Trib.) 1650 rel.

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

----Ch. XVIII [Ss.158 to 192]---Draft show cause notice---Proceeding before customs authorities, nature and scope---Proceedings before Adjudication Officer were in the nature of quasi judicial and issuance of show cause notice was very important document---Decision to issue show cause notice was to be taken by the Collector, Adjudication by application of independent mind and not merely signing the draft show cause notice submitted by investigating agency separate from the Adjudication Department---Each category of Customs officers were required to perform their respective functions/duties under the law---Practice to submit draft show cause notice by the Director General of Intelligence and Investigation to the Collector Adjudication was depricated.

Messrs Zeb Traders, Karachi v. Federation of Pakistan 2004 PTD 369 rel.

Nadeem Ahmed Mirza Consultant/A.R. for Appellant.

Syed Munawar Hussain (Investigating Officer) for Respondent.

Date of hearings: 19th December, 2012.

2014 P T D (Trib.) 2056

[Customs Appellate Tribunal]

Before Ghulam Ahmed Member (Technical-II)

Messrs O.H.O. INTERNATIONAL

Versus

The COLLECTOR OF CUSTOMS (APPEALS) and 2 others

Customs Appeal No.Old No. K-1029 of 2010, New Appeal No.K-428 of 2013, decided on 18th November, 2013.

Customs Act (IV of 1969)---

----Ss.25, 80, 81, 155-Q, 193, 194A & 215---Customs Rules, 2001, R.440---Customs General Order No.12 of 2002, Paras. 44, 66 & 79---Appeal against view message---Maintainability---Appellant imported clear float glass and declared the value of same on lower side---Customs authorities opted to determine the value of imported goods and cleared the consignment provisionally subject to deposit of security---Customs authorities, after few days of provisional clearance, transmitted view message to pay additional amount in addition to the security already deposited---Appellant aggrieved by the transmitted view message preferred an appeal before Collector of Customs (Appeals), which was dismissed---Validity---Assistant/Deputy Collector of Customs of the respective group upon appearance of valuation advice on their desktop in case of automated system and hard copy of advice from the office of Assistant Director of Customs in case of "One Customs Regime" issued view message/notice to the importer---After receipt of reply of the importer and conclusion of personal hearing the Assistant/Deputy Collector of respective group was to pass the final assessment order on the prescribed format and communicate the same electronically online to the importer and that order became an appealable order---In the present case, neither the impugned view message had spelled about passing of assessment order nor it qualified as per the prescribed format---Impugned view message could not be termed as an order transmitted/passed under the respective provisions of the Customs Act, 1969---Collector of Customs (Appeals) had erroneously registered the appeal and passed impugned order in appeal---Appeal filed by appellant before the Collector of Customs (Appeals) was not maintainable---Impugned order in appeal was set aside---Customs authorities were directed to supply the copies of final assessment orders according to law and appellant was given right to file appeal against that very order---Appeal was disposed of accordingly.

Muhabat Hussain Awan for Appellant.

Ghulam Yasin, Principal Appraiser for Respondent No.2.

Nazar Muhammad, Appraising Officer for Respondent No.3.

Date of hearing: 17th July, 2013.

2014 P T D (Trib.) 1518

[Customs Appellate Tribunal, Peshawar]

Before Hafiz Ahsan Ahmad Khokhar, Chairman, Gulab Shah Afridi, Mian Muhammad Hanif Tahir, Mohammad Arif Moton, Members Judicial, Javed Kazi and Humayun Khan Sikandar, Members Technical

MUHAMMAD SARWAR and another

Versus

COLLECTOR OF APPEAL CUSTOMS and 3 others

Customs No.217/PB of 2011, decided on 2nd December, 2013.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 17 & 168---Re-stamped chassis number of vehicle---Confiscation/seizure of vehicle on the charge of being smuggled/non duty paid---Scope---Vehicle of the appellant was seized on the suspicion of being smuggled---Detained vehicle was referred to the Forensic Science Laboratory for chemical examination---Customs officials, on the report of chemical examiner, found that chassis number of seized vehicle was re-stamped, therefore vehicle of the appellant was ordered to be confiscated---Appeal filed by the appellant against the impugned order in original was dismissed by Collector Customs (Appeals)---Contention of the appellant was that mere re-stamping the chassis number of vehicle was not sufficient to consider the vehicle to be tampered one and smuggled, therefore the confiscation of the vehicle on such ground was not justified---Validity---Vehicle was seized far away from the border area---Appellant had the registration book issued by motor registering authority, whereby registration number was allotted to vehicle in question---During investigation no other vehicle was found registered on the same chassis number---Chemical examiner had opined that, "chassis number was re-stamped one, the original chassis number filled with weld material and not decipherable"---Chemical examiner had neither given opinion that another new number was found in the chassis number nor the report showed that chassis sheet was replaced one---Statement of the laboratory expert was not commensurate with the contention of the respondent department/ customs officials, because when the laboratory expert himself stated that the present chassis number was re-stamped one, then how the vehicle in question could be said to be tampered one---Respondent Customs department had failed to show any evidence to the effect that any other chassis number was embossed on the chassis plate/place of vehicle in question---Impugned orders were set aside---Appeal was allowed.

PTCL 2007 CL 673 and 2006 PTD (Trib.) 1553 ref.

Attiq-ur-Rehman for Appellants.

Naseer Khan, Superintendent Customs for Respondents.

Date of hearing: 24th September, 2013.

2014 P T D 104

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs S.R. ENTERPRIZES

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.502/LHR/ST(128)/902 of 2013, decided on 18th September, 2013.

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

----S.7---Determination of tax liability---Jurisdiction---Taxpayer contended that jurisdiction of the case vested in the specified Inland Revenue Officer while the assessment had been made by the Inland Revenue Officer of other unit and assessment thus was out of jurisdiction and void ab initio, that and in pursuance of finalization of (illegal) assessment by the non-specified Inland Revenue Officer the Inland Revenue Officer of specified Unit threatened of coercive action, in case the sales tax demand raised as a result of assessment made by Inland Revenue Officer of non-specified unit was not deposited in treasury---Validity---Department admitted that the assessment made was out of jurisdiction---Sales tax demand raised as a consequence of that assessment had no validity in the eye of law---Order passed without jurisdiction had been held to be a fraud on the statute, a nullity in the eye of law and void ab initio---Show-Cause Notice for recovery issued by the specified Inland Revenue Officer was also illegal and notwithstanding the fact that the Department claimed that the said Show-Cause Notice stood withdrawn---Order-in-Original remained an illegal order and tax demand raised thereby could not be enforced---Order-in-Original being illegal, having no validity in law, tax demand raised as a consequence of such assessment could not be recovered---Illegal assumption of jurisdiction by Inland Revenue Officer was tantamount to maladministration---Federal Board of Revenue was directed to ensure that illegal assessment made by the Inland Revenue Officer vide Order-in-Original be vacated under S.45A of the Sales Tax Act, 1990 by the Competent authority.

2008 SCMR 240; 2006 PTD 219 (Trib.) and 2011 PTD 1943 (Trib.) rel.

(b) Federal Ombudsman Institutional Reforms Act (XIV of 2013)----

----Ss. 18 & 28---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9(1)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Federal Tax Ombudsman holds "concurrent jurisdiction without restraint" in all cases involving maladministration by Federal Board of Revenue functionaries---Taxpayer had the option to go either before the regular appellate forum or the Federal Tax Ombudsman where maladministration was a predominant feature---Under Ss. 18 & 28 of the Federal Ombudsmen Institutional Reforms Act, 2013, once a matter was placed before the Federal Tax Ombudsman and he had assumed cognizance, it could not be taken up by any Court, Tribunal or Authority.

Messrs Arafatex Industries Faisalabad v. CBR Complaint No.732 of 2004 not considered.

Muhammad Saleem v. FTO and others Writ Petition No.11545 of 2012 rel.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Khubaib Ahmad , Authorized Representative.

M. Javaid Akhtar, DCIR Departmental Representative.

2014 P T D 1182

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs BASHIR JAMIL AND BROS. (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.528/KHI/CUS(150)/1686 of 2013, decided on 27th February, 2014.

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

----S.215---Establishment of the office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Show-cause notice---Service of order---Proof---Customs authorities should have produced either postal or courier receipt to prove service of show-cause notice---In the absence of such receipt mere contention of Customs authorities that notice was served could not be taken as conclusive evidence of receipt of show-cause notice.

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

----Ss.4 & 195---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Order was passed on the verbal approval of authorized officer---Scope---Complainant's request for reopening the case was rejected on the verbal approval of the Collector---Validity---Record did not show that Collector had examined the merits of the complainant's request for reopening the case and authorized its rejection---If merits of the request were verbally discussed, such fact should have been recorded in writing on the note sheet side of the relevant file as evidence---Oral authorization of Collector was not tenable.

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

----S. 25---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.10---Short levied customs duty---Non-application of Valuation Ruling by importer or clearing agent---Customs authorities failed to apply any relevant Valuation Ruling while passing impugned assessment order---Validity---Non-application of Valuation Rulings at the time of appraisement was failure of appraisement staff---System followed by Appraisement Collectorates was based on self-assessment which was cross-checked by the Customs experts known as "Appraisers" to point out any deficiency in declarations made by the importers/Clearing Agents in order to forestall post clearance disputes of short levies---Application of Valuation Rulings was, therefore, as much the obligation of importers/clearing agents as that of Appraisement Staff---Appraiser failed to detect non-application of Valuation Ruling in Goods Declaration in the present case, therefore order-in-original passed by appraisement staff detecting evasion indulged in avoidance of Valuation Ruling was found un-justified.

Razia Sultana Taher, Advisor, Dealing Officer.

M. Afzal Awan for the Authorized Representative.

Asim Rehman, Assistant Collector for Departmental Representative.

2014 P T D 1340

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs MUMTAZ GHANI TEXTILE (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.986/LHR/ST(327)/1827 of 2013, decided on 2nd April, 2014.

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

----Ss. 9 & 10(3)---Complaint regarding delay by Appellate Tribunal in deciding refund claim after matter was remanded for fresh adjudication, despite directive of Appellate Tribunal---Contention of Department was that complaint was not within the period of limitation provided under S. 10(3) of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Validity---Department appeared to have slept over the case for over three and half years till the time the present complaint was filed---Department issued first ever notice to complainant three years after case was remanded for fresh adjudication, which constituted maladministration of a serious nature---Such neglect became even more serious in view of the fact that the complainant had furnished complete record two years ago---Departments' contention that the complaint was time barred as per limitation provided under S. 10(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 was misconceived as the complainant had been pursuing the Tribunal's' directive through repeated reminders and reckoned form the date of last reminder sent by complainant, the complaint was well within time----Federal Tax Ombudsman recommended to the Federal Board of Revenue to direct the adjudicating officer to decide the matter within 21 days and issue refund due, as per law, if established after adjudication, within 15 days thereafter, and report compliance within 15 days thereafter.

Umar Farooq, Advisor Dealing Officer.

Khubaib Ahmad, Authorized Representative.

Iftikhar Masood Khan, DCIR Departmental Representative.

2014 P T D 1353

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

WAHEED SHAHZAD BUTT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.20/ISD/FBR(1)/507 of 2013.

Income Tax Rules, 2002---

----R.73 (6)---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Maladministration---Manipulation of data of by an unauthorized E-Intermediary---Complainant contended that in the e-system designed by the Federal Board of Revenue, anyone could exploit the verification process of the Election Commission of Pakistan, by filing income tax returns/wealth statements without the actual taxpayer's consent, permission or knowledge; and any election contestant could damage his opponent's candidature through filing his wrong income tax returns/wealth statements through an E-Intermediary---Validity---Revenue could not offer any plausible, justifiable defense against the evidence provided by the complainant---Federal Board of Revenue appeared to have badly failed to devise a secure automated online system to safeguard confidential and classified data of taxpayers---Gross negligence and incompetence together with possibility of collusion of Pakistan Revenue Automation Limited employees with criminal elements could not be ruled out---All such was a maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue to (i) take immediate remedial steps to ensure fool proof security of taxpayers' data (ii) create a system where addition of a client of E-Intermediary was predicated on verification by the Commissioner concerned; (ii) System must not issue the activation code without the electronic approval by the Commissioner (iii) ensure that annual withholding statements and withholding certificates etc generated through the Federal Board of Revenue web portal do not end up in fraudulent criminal hands and (iv) commission a thorough investigation by a credible third party in relation to the vulnerabilities system.

Sardar Irshad Shaheen, Advisor for Dealing Officer.

Waheed Shahazad Butt, for Authorized.

Imtiaz Ahmad, CEO, PRAL, Rafi, Manager PRAL, Nasir Khan, Deputy Director, I&I, FBR, Islamabad, I&I, FBR, Islamabad, for Departmental Representative.

2014 P T D 1424

[Federal Tax Ombudsman]

Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman

WAHEED SHAHZAD BUTT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.192/LHR/ST(48)/390 of 2012, decided on 23rd August, 2012.

Sales Tax Act (VII of 1990)---

----S.7---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Determination of tax liability---Adjustment of input tax fraudulently claimed on the basis of fake invoices with the collusion, connivance and complicity of elements within the tax employees of the Federal Board of Revenue, including the Directorate of Intelligence and Investigation and Pakistan Revenue Automation Limited---Validity---Sales tax fraudsters in Pakistan had become adept at targeting the online system of claiming input tax credit; it was the responsibility of the Pakistan Revenue Automation Limited for making the system reasonably fool-proof---Lack of sufficient pre-registration checks was a critical reason as to why it had been possible to get so many dummy entities registered with relative ease by the criminal elements---Online registration being a first step for a participant in the automated sales tax system, it was only reasonable to expect that due attention was paid to build effective checks in the system---What was even more worrisome was that Pakistan Revenue Automation Limited did not appear to had learnt lesson from the case with which dummy entities had been set up in the past---Inept excuse offered by I & I for keeping suspect registered person ACTIVE long after their fraud was discovered was not helpful at all in preventing such a malpractice in future---I & I needs to take up the matter with Pakistan Revenue Automation Limited so that ways could be found to 'Red Flag" a suspect entity at the earliest possible stage in the fraud chain, giving timely warning to the potential buyers---Both Pakistan Revenue Automation Limited and I & I appeared to have failed to devise an effective automated online system for registered sales tax persons---Complicity and collusion of rogue Tax Employees with outside criminal elements was also not ruled out---Federal Tax Ombudsman recommended Federal Board of Revenue to (i) set up a task force to investigate all aspects of sales tax fraud and propose effective countermeasures (ii) restructure Pakistan Revenue Automation Limited and Directorate of Intelligence and Investigation with a view to transform them into proactive agents of sales tax fraud prevention/detection (iii) review Directorate of Intelligence and Investigation staffing policy and only highly qualified professionals with demonstrated expertise in uncovering cases of online white-collar crime would be assigned key investigative roles (iv) proceed against tax employees found involved in perpetration of fraud and bring them to justice, particularly those in the higher ranks (v) hire high quality prosecutors to handle complex tax frauds prosecutions (vi) enable prospective buyers to deal only with legitimate sellers the procedure for blacklisting and listing as INACTIVE must be telescoped so that doubtful firms do not remain in the field to dupe innocent buyers and (vii) to report implementation of recommended steps within three months.

Muhammad Munir Qureshi, Advisor for Dealing Officer.

Waheed Shahzad Butt for Applicant.

Mukarram Jah Ansari, Addl. Director, I. & I FBR, Muhammad Nayyar Shafiq, Deputy Director, I & I, FBR for Departmental Representatives.

2014 P T D 1480

[Federal Tax Ombudsman]

Before Abdul Rauf Chaudhry, Federal Tax Ombudsman

Messrs RADIANT GLASS (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.985/LHR/IT(590)/1826 of 2013, decided on 18th March, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss 170(4), 171 & 120---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Complaint against non-issuance of tax refund---Deduction of tax at source under provisions of the Income Tax Ordinance, 2001----Refund due to taxpayer---Additional payment for delayed refunds---Jurisdiction of Federal Tax Ombudsman---"Maladministration" & "contrary to law"---Scope---Complainant/taxpayer in return filed under S. 120(1) claimed refund on account of tax deducted at source under various provisions of the Income Tax Ordinance , 2001---Contention of complainant was that Department failed to process return / deemed assessment within mandatory period of sixty days under S. 190(4) of the Ordinance, and sought intervention of the Federal Tax Ombudsman---Validity---Commissioner, Inland Revenue was under a mandatory obligation to, suo motu, dispose of any refund claim arising out of return of income, that had been deemed to have been assessed under S. 120(1) of the Income Tax Ordinance, 2001 within 60 days of the date of deemed assessment and order under S. 170(4) of the Income Tax Ordinance, 2001 must be passed within 60 days; and if the same was not done, then delay in disposal of refund claim was evident and compensation for such delay was payable under S. 171 of the Ordinance---Department, in the present case had failed to adhere to mandatory sixty days time frame prescribed for disposal of refund claim, and such lapse was therefore, "contrary to law" and tantamount to "maladministration" under S. 2(3) of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Chief Commissioner to issue refund due to the taxpayer/complainant in accordance with law, and report compliance of the same within 30 days---Complaint was disposed of, accordingly.

Gojra Textile Mills Ltd.'s case Complaint No.11/289/88118 ref.

2010 PTD (Trib.) 519; Assistant Collector Customs Pakistan v. Khyber Electric Lamps MFG Company Ltd. Peshawar PTCL 2002 CL. 1; Muhammad Saleem v. FTO and others Writ Petition No.11545 of 2012; 2001 SCMR 838; Writ Petition No.11545 of 2012 and Pfizer Ltd. v. FOP PLD 1998 SC 64 rel.

Muhammad Munir Qureshi, Advisor for Dealing Officer.

Navid Farid, ITP for Authorized Representative.

Yasif Butt, DCIR for Departmental Representative.

2014 P T D 1554

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

SECRETARY, REVENUE DIVISION, ISLAMABAD

Versus

Messrs IQ STUDIO (PVT.) LTD., 12/1, BLOCK Q. GULBERG, LAHORE

Review Application No.24 of 2013 in Complaint No.837/LHR/IT (608)/1473 of 2012, decided on 21st April, 2014.

(a) Judicial review---

----Scope---Judicial review is involved when a Court declares a provision of law or order passed by competent authority to be unconstitutional or ultra vires the Constitution.

(2010) PTD (Trib.) 519 rel.

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

----S.132(10) ---Appellate Tribunal, judgment of---Scope---Judgment of Appellate Tribunal is binding on all parties in matters involving factual determination in computation of income and calculation of tax/refund/ compensation under Income Tax Ordinance, 2001---Appellate Tribunal is final fact finding authority and its jurisdiction in such regard is vast and is acknowledged by all Courts.

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

----S.120(1)(b)---Term 'all purposes'---Connotation---Term 'all purposes' includes payment of refund and determination of compensation for any delay in making payment of refund.

2009 SCMR 973 = 2009 PTD 1016 rel.

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

----Ss.120, 170 (4) & 171---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9---Review of order---Scope---Delay in refund---Compensation---Assessee was aggrieved of delay in issuance tax refund and complaint was allowed by Federal Tax Ombudsman---Validity---Statutory time allowed under Income Tax Ordinance, 2001, for processing/disposal of its refund claim was 45 days from date of deemed assessment (or 90 days after date of deemed assessment as per the 'later' judgment of Tribunal)---Order under S.170(4) of Income Tax Ordinance, 2001, was required to have been passed within 45 days of mandatory statutory time frame---Authorities did not adhere to mandatory timeline and was responsible for resultant delay in payment of refund was liable to pay compensation under S.171 of Income Tax Ordinance, 2001---Filing of application for payment of refund was not mandatory under the statute and refund was liable to be paid to taxpayer immediately it became due without waiting for any refund application---E-filed refund application under S. 170 of Income Tax Ordinance, 2001, could be seen as 'reminder' to department for payment of a taxpayer's outstanding refund---Federal Ombudsman did not find any 'mistake' in the order that needed to be corrected during review---Review application was dismissed in circumstances.

2010 PTD (Trib.) 519; 2005 PTD 2139; 1987 PTD 149; 2011 PTD 549; 2013 PTD (Trib.) 1083; PLD 1997 SC 582 = 1997 PTD 1555 and 2001 PTD 3956 ref.

Muhammad Munir Qureshi, Advisor for Dealing Officer.

Liaquat Ali Chaudhry, for Applicant.

Nemo for Respondent.

2014 P T D 1688

[Federal Tax Ombudsman]

Before Abdul Rauf Chaudhry, Federal Tax Ombudsman

Messrs RAINBOW INDUSTRIES, MULTAN

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.775/LHR/CUS(44)/1369 of 2013, decided on 17th December, 2013.

Export Oriented Units and Small and Medium Enterprises Rules, 2008---

----R. 3---Establishment of the Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 9---Federal Board of Revenue, S.R.O. 327(I)/2008 dated 29-3-2008---License for an Export Orientated Unit---Issuance of---License number allotted to company but formal license not issued due to lapse by Customs Collectorate---Effect---Harassment tantamount to maladministration---Complainant-company in question, which exported all its products, applied for issuance of an export orientated unit under S.R.O. 327(I)/2008 dated 29-3-2008 (Rules)---Company was granted formal approval by the Customs authorities on the relevant file and licence number was also allotted to the company, however formal licence could not be issued as Additional Collector concerned directed his office to obtain format of the licence from authority concerned and prepare the same accordingly---Formal licence was not issued to the company and when company sought clearance of one of its consignments, customs authorities raised the plea that company did not possess the requisite licence, thus it should pay the requisite duties---Validity---Failure of Customs Department to issue formal certificate (licence) was a lapse by the Collectorate of Customs for which no blame could be apportioned to the company---Two consignments belonging to the company were cleared despite formal license having not been issued---Departmental proceedings against the company were of the genus of harassment tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue should direct the Collector Customs to grant approval for grant of licence to the company in terms of S.R.O. 327(I)/2008 dated 29-3-2008 (Rules) after the company had submitted all necessary requisitioned documents, and that the case instituted by the Collectorate Customs against the company should be withdrawn.

Umar Farooq, Advisor Dealing Officer.

Mian Abdul Ghaffar for Authorized Representative.

Mrs. Kanwal Ali, Deputy Collector, MMC Multan for Departmental Representative.

2014 P T D 1709

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs HAMSONS INDUSTRIES, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No.54 in Complaint No. 1031 of 2013, decided on 9th May, 2014.

Customs Act (IV of 1969)---

----Ss.19-A & 81---Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 10(4)---Review of order---Complaint---Limitation---Provisional assessment---Finality, attaining of---Maladministration---Scope---Grievance of importer was that authorities committed maladministration by encashing its security treating provisional assessment of goods declaration as final---Complaint filed by importer was dismissed by Federal Tax Ombudsman---Validity---Encashment of security on expiry of period under S. 81(2) of Customs Act, 1969, by treating provisional assessment final in terms of S. 81(4) of Customs Act, 1969, was not in violation of law, rules and procedure and did not tantamount to maladministration as defined under S. 2(3) of Federal Tax Ombudsman Ordinance, 2000---Goods declaration was finalized on 11-9-2008, leviable duty and taxes were recovered by encashment of securities in May, 2012 but complaint was filed on 18-6-2013, i.e. after more than one year of finalization of the matter---Complaint, on the face of it, under the provisions of S. 10(4) of Federal Tax Ombudsman Ordinance, 2000, was hit by limitation---Review was rejected in circumstances.

Messrs SUS Motors (Pvt.) Ltd., v. Federation of Pakistan 2011 PTD 235, Rehan Omer v. Collector of Customs Karachi 2006 PTD 909 ref.

Razia Sultana Taher, Advisor for Dealing Officer.

Pervez Iqbal Kasi and Naseer Malik on behalf of Applicants.

Feroz Alam Junejo, Additional Collector and Ms. Mehwish Shah, Assistant Collector on behalf of Respondent.

2014 P T D 1723

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

Messrs SALEH EJAZ CONSTRUCTION COMPANY, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.67/ISD/CUS(10)/980 of 2013, decided on 2nd April, 2014.

Customs Act (IV of 1969)---

----S. 81---Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 10---Maladministration---Importer alleged that authorities caused inordinate delay in clearance of consignment---Validity---Acts of omission and commission of customs appraiser and principal appraiser constituted very serious maladministration in terms of S. 2(3) of Federal Tax Ombudsman Ordinance, 2000---Issuance of auction notice without confirming facts also showed inefficiency and ineptitude on the part of Assistant Collector of Customs incharge of auction---Federal Tax Ombudsman directed Collector of Customs to get the matter investigated to determine extent of maladministration by each of three customs officials involved in the matter and proceed against those found responsible for irregularities---Federal Tax Ombudsman further directed to compensate complainant's loss to be determined by Collector---Federal Tax Ombudsman also directed to get demurrage and storage charges remitted by Container Terminal Operator---Complaint was allowed accordingly.

Yasin Tahir, Senior Advisor Dealing Officer.

Umar Vardag, Ejaz Abbasi and Jawad Abbasi for Authorized Representatives.

Syed Ali Zaman Gardezi, DC (Customs) Departmental Representative.

2014 P T D 1950

[Federal Tax Ombudsman]

Before Abdur Rauf Chaudhry, Federal Tax Ombudsman

ABACUS-ELS (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No.5 of 2014 in Complaint No.405/LHR/IT(279)/ 705 of 2013 decided on 25th June, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122 (5A), 153, 214 & 221---Federal Ombudsman Institutional Reforms Act (I of 2013), Ss.18 & 24---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 10(4) & 29---Review of order---Earlier recommendation---Corroborates service receipts---Concealing of proceedings---Assessee approached Commissioner Inland Revenue (Appeals) of relief in orders passed under S.122 (5A) of Income Tax Ordinance, 2001---When Commissioner Inland Revenue (Appeals) became aware of earlier recommendations of Federal Tax Ombudsman, he rectified his order---Assessee filed review application before Federal Tax Ombudsman and made no mention of the fact that Commissioner Inland Revenue (Appeals) had rectified his findings/decision recorded earlier and by concealing such fact assessee obtained favourable decision---Validity---Assessee had deliberately concealed his knowledge regarding Commissioner Inland Revenue (Appeals) recourse to provisions of S.221 of Income Tax Ordinance, 2001, when he filed review application earlier before Federal Tax Ombudsman---Such review application was not bona fide and therefore, not competent, as assessee did not approach Federal Tax Ombudsman with clean hands---Assessee tried to abuse process of law through concealment before Commissioner Inland Revenue (Appeals), Appellate Tribunal Inland Revenue and Federal Tax Ombudsman---Assessee sought to obtain relief by concealing facts and misrepresenting his case---If assessee had apprised Federal Tax Ombudsman that Commissioner Inland Revenue (Appeals) started proceedings to rectify/reverse his findings recorded in his earlier order and had then gone to actually rectify his earlier order, Federal Tax Ombudsman would have straight-away rejected review application in limine---Federal Tax Ombudsman directed the authorities to proceed strictly in accordance with law as per statutory stipulation and applicable case-law including findings/recommendations of Federal Tax Ombudsman on the issue of Minimum Taxation on corporate service receipts that might be applicable in the years concerned and would issue refund due on adjustable deductions in such years, if any, found to be properly due to assessee---Review application was rejected accordingly.

Waheed Shahzad Butt v. FBR 2012 PTD 554; 2013 PTD 2159; 2007 YLR 585 and 2005 CLD 314 ref.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Naveed Farid, ITP Authorized Representative.

Umer Zaib Khan, ACIR Departmental Representative.

Waheed Shahzad Butt, Amicus Curiae.

2014 P T D 793

[High Court (AJ&K)]

Before Munir Ahmed Chaudhary, J

TAXATION OFFICER/DEPUTY COMMISSIONER INCOME TAX KOTLI A.K.

Versus

SAID AKBAR and 3 others

Civil Appeal No.10 of 2011, decided on 20th December, 2013.

Income Tax Ordinance (XLIX of 2001)---

----S.227---Specific Relief Act (I of 1877), S.42---Suit for declaration---Dispute as to recovery of income tax---Bar on jurisdiction of civil courts to adjudicate upon such dispute---Scope---Plaintiff sought declaration to the effect that tax recovery certificate issued to plaintiff be declared null and void---Suit was dismissed by Trial Court on the ground that Trial Court had no jurisdiction to hear the matter, however, Appellate Court set aside order of Trial Court and remanded the matter to it---Validity---Recovery certificate was issued to the plaintiff against which he preferred appeal before the Commissioner Income Tax, which appeal was heard, and dismissed---By his own conduct, plaintiff had conceded to jurisdiction of the tax assessing authority and its appellate authority---Plaintiff had also filed his tax returns before the very same authorities wherein, plaintiff was shown to be owner of taxable property---Civil Court had not jurisdiction regarding matters concerning income tax, which fell within the ambit of the Income Tax Ordinance, 2001; by virtue of the bar contained in S. 227 of the Income Tax Ordinance, 2001---Plaintiff, therefore, had no cause of action to file the suit in the civil court, findings of the Appellate Court were therefore not sustainable---Impugned order was set aside and suit of plaintiff was dismissed.

1994 MLD 904 and 2000 MLD 820 distinguished.

Mirza Zaid-ullah Khan for Appellant.

Shafique Amjad Kiani, Addl. A.G. for Respondents.

2014 P T D 1484

[High Court (AJ&K)]

Before Abdul Rashid Sulehria and Sardar Abdul Hameed Khan, JJ

COMMISSIONER INLAND REVENUE, MUZAFFARABAD and another

Versus

GHALIB HUSSAIN and another

Income Tax Nos.24 and 35 of 2012, decided on 30th April, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122C, 127, 137 & 133---General Clauses Act (X of 1897) Ss. 5, 6 & 6-A---Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974) S.56---Provisional assessment---Section 122C of the Income Tax Ordinance 2001---Nature---Question before the High Court was whether S.122C of the Income Tax Ordinance regarding provisional assessment, could be applied retrospectively and whether the right of appeal provided under S. 127 of the Income Tax Ordinance, 2001 was available to a taxpayer in order to impugn an order under S. 122C of the Ordinance---Held, that perusal of S. 56 of Azad Jammu and Kashmir Interim Constitution Act, 1974 read with Ss. 5,6, 6-A and other enabling provisions of the General Clauses Act, 1897; for interpretation of statutes regarding "coming into operation of the enactment" "effect of repeal" etc; it became crystal clear that S. 122C of the Income Tax Ordinance, 2001 could neither operate retrospectively nor could it take away right of appeal of taxpayer provided under S. 127 of the Income Tax Ordinance, 2001---Income Tax Ordinance, 2001 was amended whereby S. 122C was inserted, and it had not been given retrospective effect, rather it had been enforced from date of coming into force of amending statute---Right of appeal under S. 127 of the Income Tax Ordinance, 2001 was a substantive right which could not be taken away by addition of S. 122C of the Ordinance---Tax under provisional assessment order under S. 122C of the Income Tax Ordinance, 2001 had been made payable vide S. 137 of the Ordinance and such scheme of law suggested the prospective applicability of S. 122C of the Ordinance---Law followed events and laws of the time of occurrence/incident would apply, hence the law of the year for which the assessment was made, would be applied in order to make assessment of tax amount---Reference was answered, accordingly.

2011 SCR 390; 2006 SCR 396; PLD 1996 SC (AJ&K) 1 and Commissioner Inland Revenue v. Islam-ud-Din and others 2014 PTD (Trib.) 1018 rel.

Shaikh Masood Iqbal and Liaqat Ali for Petitioners.

Mirza Zaid Ullah for Respondents.

2014 P T D (Trib.) 347

[Inland Revenue Appellate Tribunal]

Before Faheemul Haq Khan, Accountant Member and Shahid Masood Manzar, Judicial Member

Messrs PAKISTAN BEVERAGE LTD., KARACHI

Versus

DCIR-09 AUDIT DIVISION-II, LTU

F.E. Nos.2/KB and 3/KB of 2010, decided on 29th November, 2013.

Federal Excise Act (VII of 2005)---

----Ss. 3, 2(12a), 8, 14 & 19(1)---Federal Excise Rules, 2005, R.43A---Federal Excise General Order No.5 of 2006 dated 5-8-2006---Duties specified in the First Schedule to be levied---Levy of duty on franchise fee or royalty remitted to principal for using foreign brand name---Taxpayer contended that under new arrangement, it was not required to pay franchise/royalty; and the term "franchise" clearly stipulated that an agreement could only be identified as a franchise agreement in case the franchise was granted the representational right to sell or manufacture goods or to provide service or to undertake any process identified with franchiser against an agreed fee or consideration including royalty; and no such agreement existed between the principal and the taxpayer; question of payment of any kind of franchise fee or royalty did not arise---Validity---Taxpayer company was importing concentrate from principal in USA besides the payment of franchise fee/royalty---After tripartite agreement, the principal discontinued charge of royalty/franchise fee, whereas the taxpayer company continued to sue the brand name and good will associated with the product---Taxpayer operating in the tax free area had become the supplier of raw material of the principal to all manufacturers working in Pakistan---If the agreement, which had not been produced even before the Appellate Tribunal was relied then the taxpayer was using brand name without any encumbrance or reciprocal consideration but bound to purchase concentrate from the local manufacturer who operated directly under the strategic, functional and operation supervision of Principal stationed at USA---This arrangement absorbed in itself the payment of royalty/franchise fee in the price of concentrate, because the importer of concentrate and the user of concentrate were different entities---Clause (ii) of Federal Excise General Order No.5 of 2006 dated 5-8-2006 envisaged such arrangement---Local purchase of concentrate also carried the element of taxability as provided in the Federal Excise General Order No.5 of 2006---Action taken by the two officers below was justified---Appeals of the taxpayer in respect of principal levy and additional levies failed.

Naseer Ahmed Malik, C.A. for Appellant.

Aijaz Hussian, D.R./DCIR for Respondent.

2014 P T D (Trib.) 353

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Akram Tahir, Accountant Member

Messrs RUPALI POLYESTER LTD.

Versus

COMMISSIONER INLAND REVENUE, LTU, LAHORE and others

S.T.A. No.300/LB of 2012, decided on 14th October, 2013.

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

----S.11(3)---General Clauses Act, (X of 1897), S.24---S.R.O. 555(I)/ 1996 dated 1-7-1996---Assessment of tax---Pecuniary jurisdiction---Section 11(3) of the Sales Tax Act, 1990 under which the notification S.R.O. 555(I)/1996 dated 1-7-1996 was issued had been repealed without any saving clause for said notification---If contention of the taxpayer that the notification would have continued notwithstanding the repeal of S.11(3) of the Sales Tax Act, 1990 was accepted, that would be in conflict with S.24 of the General Clauses Act, 1897.

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

----S.30(3)---S.R.O. 555(I)/1996 dated 1-7-1996---Appointment of authorities---Pecuniary jurisdiction---After creation of Inland Revenue Services, S.30(3) of the Sales Tax Act, 1990 was substituted through Finance Act, 2010 which only empowered Commissioner Inland Revenue to direct their subordinate Officers to perform functions in respect of such persons or class of persons or such areas as the Commissioners may direct---Assistant Commissioner Inland Revenue had rightly passed the order-in-original dated 16-8-2010, whereas S.R.O. 555(I)/1996 dated 1-7-1996 was inconsistent with the provisions of S.30(3) of the Sales Tax Act, 1990 and dealt only with the officers of defunct Customs, Excise and Sales Tax group cadre.

PLD 1989 Lah. 47; S.T.A. No. 871/LB of 2012; Watson v. Winch by Lord Reading; Craies on Statute Law, 6th Edn. Page 334 and A.R. Awan and 2 others v. City District Government, Karachi 2011 SCMR 691 ref.

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

----S.11(3)---S.R.O. 555(I)/1996 dated 1-7-1996---S.R.O. 594(I)/2012 dated 1-6-2012---Assessment of tax---Jurisdiction---At the time of issuance of rescinding S.R.O. 594(I)/2012 dated 1-6-2012, the provisions of subsection (3) of S.11 of the Sales Tax Act, 1990 were not available on the statue book, whereunder S.R.O. 555(I)/1996 dated 1-7-1996 was issued---Federal Board of Revenue made a futile exercise to issue the said notification as the said S.R.O. had already lost its legal efficacy since the date of enforcement of the Finance Ordinance, 2000 whereunder subsection (3) of S.11 of the Sales Tax Act, 1990 was omitted.

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

----S.30(3)---S.R.O. 555(I)/1996 dated 1-7-1996---Appointment of authorities---Pecuniary jurisdiction---Judgments on the issue of pecuniary jurisdiction were silent regarding implications of the "Finance Amendment Ordinance, 2009", "Finance Amendment Ordinance, 2010", Finance Act, 2010" and the substitution of S.30(3) of the Sales Tax Act, 1990, whereunder, jurisdiction was vested in the authorities of Inland Revenue Service to exercise the powers irrespective of any restriction of pecuniary jurisdiction---Appellate Tribunal while rendering such judgments was not properly assisted by the taxpayers and the referred judgments were "per incuriam"---Law of precedent was not applicable to per-incuriam decision---Contention of the taxpayer regarding issuance of Show Cause Notice was rejected and the assumption of jurisdiction by the Assistant Commissioner Inland Revenue in terms of S.30(3) of the Sales Tax Act, 1990 for issuance of Show-Cause Notice dated 10-5-2010 and passing of order-in-original dated 16-8-2010 was affirmed---S.R.O. 555(I)/1996 dated 1-7-1996 had lost its validity when the provision of subsection (3) of S.11 of the Sales Tax Act, 1990 was repealed/omitted by virtue of Finance Ordinance, 2000.

S.T.A. No.871/LB of 2012; S.T.As. Nos. 530 and 578/LB of 2011; S.T.A. No.55/LB of 2012; S.T.A. No.579/LB of 2012; S.T.As. Nos.629 and 630/LB of 2012; S.T.As. Nos.685 and 686/LB of 2012 and S.T.A. No.69/LB of 2013 held per-incuriam.

PLD 1963 Kar. 280; 1995 CLC 1453 and PLD 1991 Kar. 320 rel.

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

----S. 45B(2)---Appeal---Limitation---Contention of the taxpayer that First Appellate Authority was legally bound to pass the order within 120 days as required under first proviso to S.45B(2) of the Sales Tax Act, 1990 had no force as the first proviso to subsection (2) of S.45B of the Sales Tax Act, 1990 was directory in nature and not mandatory in character---If for argument sake it was accepted that the appeal before First Appellate Authority was time barred, that will result in confirma-tion of tax demand against the taxpayer and will not be an acceptable situation for the taxpayer against whom a tax demand which had been contested in appeal would automatically stand confirmed---Plea taken by the taxpayer for the time-barred of appeal beyond the limitation period prescribed under first proviso to subsection (2) of S.45B of the Sales Tax Act, 1990 was misdirected and not sustainable in law and was rejected by the Appellate Tribunal.

Messrs Super Asia Muhammad Din Son (Pvt.) Ltd. v. Collector of Sales Tax and others 2008 PTD 60 and 1976 PTD 321 rel.

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

----Ss. 33 & 34---S.R.O. 648(I)/2011 dated 25-6-2011---Offences and penalties---Default surcharge---Amnesty---Adjustment of refund---Revenue had adjusted the adjudged principle amount of sales tax against its refund in consequence of a letter of the taxpayer---Federal Board of Revenue, at the relevant time, issued S.R.O. 648(I)/2011 dated 25-6-2011 which applied to the taxpayer's case as well---Request of the taxpayer on this score in the light of amnesty order/S.R.O. 648(I)/2011, dated 25-6-2011 was allowed and order-in-original was modified accordingly.

Safdar Ali, Tax Manager for Appellant.

Abdul Jawwad, D.R. for Respondent.

2014 P T D (Trib.) 375

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Sohail Afzal, Accountant Member

Messrs GRAVITY MILLS LTD., LAHORE

Versus

THE CIR, RTO., MULTAN

S.T.As. Nos. 933/LB and 934/LB of 2013, decided on 20th November, 2013.

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

----S.45B---Appeal---Limitation---Issuance of attested copies of order---Taxpayer contended that First Appellate Authority was not justified to hold that the appeals filed by the appellant were barred by time, as orders were not served to the taxpayer and that the appeals were filed well in time after the receipt of attested copies of order-in-original---Validity---Date of service of order-in-original, as mentioned by the First Appellate Authority in his order i.e. dated 26-12-2006 was contrary to the facts of the case, the same was in fact the date of issuance of Show-Cause Notice and not order-in-original, which was evident from the copy of Show-Cause Notice available on file---Show Cause Notice, bore date 26-12-2006, whereby it was clear that date of service of order-in-original , i.e. 26-12-2006, as recorded in the appellate order was misleading and contrary to the facts of the case---Attested copies of order-in-original admittedly were issued to the appellant on 30-5-2013 and appeals filed by the appellant with the First Appellate Authority were well in time.

S.T.A. No.84/IB of 2011 rel.

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

----S.36---Recovery of tax not levied or short levied or erroneously refunded---Conditions---Show Cause Notice could only be served under S.36 of the Sales Tax Act, 1990 if any tax or charge had not been levied or had been short-levied or had been erroneously refunded; if such non-levy, short-levy or erroneous refund had been caused by the reason(s) of "some collusion or a deliberate act" under subsection (1) of S.36 of the Sales Tax Act, 1990 or owing to inadvertence or error or misconstruction per subsection (2) thereof and if the same was within the period of five years under subsection (1) and three years under subsection (2) of S. 36 of the Sales Tax Act, 1990---Mere non-levy, short-levy or erroneous refund to tax or charge could not be basis for a Show-Cause Notice, it had to be founded upon non-levy, short-levy or erroneous refund caused by any of the said reasons which being the dominant factor also determine the period of limitation thereto---In absence of any of the three conditions or the jurisdictional facts, the taxing authorities shall have no power or jurisdiction to serve a Show Cause Notice under S.36 of the Sales Tax Act, 1990.

2007 PTD 2265 rel.

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

----Ss.11(2), 33(19), 34 & 36(1)---Special Procedure for Ginning Industries Rules, 1996, R.6 (5)---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Jurisdiction---Taxpayer contended that order framed by the Assessing Officer was illegal and unlawful, as R.6 of Special Procedure for Ginning Industries Rules, 1996 did not allow him to frame an order against the taxpayer without having its jurisdiction over the case and orders as framed by the Assessing Officer were without jurisdiction; that unit in question was registered in Regional Tax Office Lahore for income tax purpose and Regional Tax Office Faisalabad for sales tax purpose; that letter from Regional Tax Office Faisalabad had confirmed this fact; that Assessing Officer might frame the order to direct the "ginners" not to supply ginned cotton to the buyers, in contravention of sub-rule (3), as contemplated in the provisions of Sub-Rule (5) of R.6 of Special Procedure for Ginning Industries Rules, 1996 and the Order-in-Original were contrary to the provisions of law---Validity---Collector of Sales Tax, Multan could have framed orders, to direct the "ginners" not to supply ginned cotton to the buyers, against the contravention of sub-Rule (3), as contemplated in the provisions of sub-rule (5) of R.6 of Special Procedure for Ginning Industries Rules, 1996 and it was clear that "Ginning Industries Rules 1996 did not authorize him, to create the sales tax demand against the taxpayer, against whom the jurisdiction did not lies with him---Assessing Officer could have passed on the information to the concerned Collectorate (Faisalabad) as the unit existed at Faisalabad Collectorate for sales tax purposes, that was a clear violation of law by the Adjudicating Authority---Order passed by the Assessing Officer was declared to be without jurisdiction, illegal, null and void.

2002 SCMR 122 and 2008 SCMR 240 rel.

2011 PTD 808 and GST 2002 CL 270 ref.

Kamran Khalil for Appellant.

Mrs. Ayesha Imran Butt, D.R. for Respondent.

2014 P T D (Trib.) 386

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Sohail Afzal, Accountant Member

C.I.R., ZONE-III, LTU

Versus

Messrs BROTHER SUGAR MILLS LTD., LAHORE

S.T.A. No.616/LB of 2013, decided on 21st November, 2013.

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

----Ss.66, 11 & 45B---Refund to be claimed within one year---Department contended that order of First Appellate Authority was illegal and without lawful authority as the refund claimed filed by the taxpayer was barred by time; that order under S.66 of the Sales Tax Act, 1990 was an independent order against which appeal lay as provided under S.45B of the Sales Tax Act, 1990; and that First Appellate Authority was not justified to consider the Show-Cause Notice as barred by time under S.11 of the Sales Tax Act, 1990 because S.11 of the Sales Tax Act, 1990 only apply in those cases where tax demand had been created against the taxpayer whereas the present case pertained to the refund which was only dealt under S.66 of the Sales Tax Act, 1990---Taxpayer contended that Show-Cause Notice was hit by limitation prescribed under S.11 of the Sales Tax Act, 1990 which required an officer of Inland Revenue to issue a Show-Cause Notice in various situations inter alia including where a person claims input tax credit or refund which was not admissible under the Sales Tax Act, 1990; that Show-Cause Notice for rejection of refund was required to be issued as per provisions contained in subsections (2) & (5) of S.11 of the Sales Tax Act, 1990 and within a period of five years; that neither he had charged nor had collected further tax from its buyer during the period from July 1998 onwards; and that there was no question that incidence of tax had been passed on to the buyers---Validity---First Appellate Authority had correctly found that Show Cause Notice for rejection of refund shall be issued under subsections (2) & (5) of S.11 of the Sales Tax Act, 1990 within a period of five years and no such provision were available under S.66 of the Sales Tax Act, 1990 for issuance of Show Cause Notice---Show Cause Notice issued after more than five years was barred by time---No interference was warranted in the order of First Appellate Authority by the Appellate Tribunal as First Appellate Authority had discussed all the issues in detail.

PLD 1998 SC 64; 1992 SCMR 1898; 2005 PTD (Trib.) 1571 2003 PTD 2867 and 2002 PTD 3043 ref.

2011 SCMR 1279; 2010 PTD 251; 2008 PTD 1973 and 2008 PTD 981 rel.

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

----Ss. 11, 66 & 45B---Assessment of tax---Further tax---Claim of refund---Refund of the taxpayer was rejected on the ground that since the taxpayer had passed on the incidence, it was not entitled for refund as the taxpayer had failed to establish that the incidence of tax had not been passed on to the consumer; that mere non charging of further tax on the invoice did not prove that the incidence had not been passed on the consumers---Taxpayer contended that he had not enhanced the selling price of the sugar after imposition of further tax and continued selling product at the same price on which it was selling prior to imposition of further tax therefore, there was no question of passing of incidence of the amount paid as further tax on the consumer; and that selling the product at the same price before and after the imposition of further tax, was a conclusive proof that the taxpayer neither charged further tax nor had recovered the amount from its customers---Validity---When the department had already allowed refund for the period from July 1998 to June 1999 based on the record of the taxpayer then there was no lawful reason for rejecting the refund for the period from July 1999 onwards for which the taxpayer had maintained the record identical to that of the period 1998-99---Such a change in opinion was not sustainable under the law---Taxpayer had not charged the further tax from its buyers and the selling price of the sugar after imposition of further tax remained unchanged and the taxpayer had not enhanced the selling price of the sugar after imposition of further tax rather continued selling the product at the same price on which it was selling prior to imposition of further tax---Incidence of further tax was not added by the taxpayer while selling the sugar---Since the taxpayer, according to record, had not enhanced the selling price of the sugar, it could not be argued that the incident of tax was added to the price and passed on to the purchaser---Record depicted that the amount paid as further tax was neither charged nor was recovered from the buyers---First Appellate Authority had rightly annulled the order passed by the Taxation Officer---Departmental appeal was dismissed by the Appellate Tribunal.

2010 PTD 967; PLD 2005 SC 605 and 2001 PTD 2094 ref.

2000 SCMR 1266 rel.

Arshad and Ch. Muhammad Zafar Iqbal, L.A. for Appellant.

Waseem Ahmad Malik for Respondent.

2014 P T D (Trib.) 397

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, Judicial Member and Sabiha Mujahid, Accountant Member

I.T.As. Nos.2143 to 2145/LB of 2012, decided on 19th July, 2013.

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

----Ss. 3 & 20(1)---Oil and Gas Regulatory Authority Ordinance (XVII of 2002), S.8(5)---Oil and Gas Regulatory Authority Ordinance, 2002, a special law, to override other laws---In order to resolve the controversy that "whether the provisions of S.8(5) of the OGRA Ordinance stood overridden by those contained in S.3 of the Income Tax Ordinance, 2001 or otherwise", it was to be decided as to which of these two legislation was "special" in nature which would prevail over the other.

(b) Oil and Gas Regulatory Authority Ordinance (XVII of 2002)---

----Preamble---Special law---Preamble of Oil and Gas Regulatory Authority Ordinance, 2002 explained the purpose behind promulgation of the law reason for the establishment and operations of the Oil and Gas Regulatory Authority clearly substantiates that this was a special law.

(c) Oil and Gas Regulatory Authority Ordinance (XVII of 2002)---

----Preamble---Oil and Gas Regulatory Authority Ordinance, 2002 is a Special Legislative device for increasing private investment and ownership in the midstream and downstream petroleum industry, protect the public interest while respecting individual rights and provide effective and efficient regulations and for matters connected therewith or incidental thereto---Maxim "Generaila Specialibus Non Derogant" sets out the general and accepted principle of interpretation that where there is a general and a special statute in the field i.e. general provisions will not abrogate special provisions.

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

----S.3---Oil and Gas Regulatory Authority Ordinance (XVII of 2002), S.8(5)---Oil and Gas Regulatory Authority Ordinance, 2001 to override other laws---No implied repeal of the earlier special Act by the later general Act without particular intention therein of implied repeal merely by the use of general words---Income Tax Ordinance, 2001 does not override S.8(5) of the Oil and Gas Regulatory Authority Ordinance, 2002 rather S.8(5) of the Oil and Gas Regulatory Authority Ordinance, 2002 overrides S.3 of the Income Tax Ordinance, 2001.

Mst. Imam Bibi v. Allah Ditta and others PLD 1989 SC 384; Maxwell on Interpretation of Statutes, Eleventh Edition, at page 168; Crawford on Statutory Construction, 1940 Ed. p. 429 and Craies on Statute Law, Sixth Ed., P.376 rel.

(e) Interpretation of statutes---

----Special law would prevail over general law regardless of timing until and unless the effect of a special law is nullified in the general law expressly, categorically and with clear words.

2004 PTD (Trib.) 204 rel.

(f) Oil and Gas Regulatory Authority Ordinance (XVII of 2002)---

----S.8(5)---Income Tax Ordinance (XLIX of 2001), S.20(1)---Gas Development surcharge---Allowable to expenditure---Scope---Oil and Gas Regulatory Authority Ordinance, 2002 had specifically provided under proviso to subsection (5) of S.8 that when Income Tax Ordinance, 2001 would come into force this expense will be allowed under that ordinance.

2012 PTD 969 rel.

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

----S. 20---Oil and Gas Regulatory Authority Ordinance (XVII of 2002), S.8(5)---Deductions in computing income chargeable under the head "Income from Business"---Gas Development Surcharge---Payment to government had to be allowed as expense under the Income Tax Ordinance, 2001.

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

----S. 20---Oil and Gas Regulatory Authority Ordinance (XVII of 2002), S.8 (5)---Income Tax Ordinance, 2001 being later in time---Effect---Oil and Gas Regulatory Authority Ordinance, 2002 would be reckoned as a special law and Income Tax Ordinance, 2001, even if considered as being later in time, would not disturb or interfere with Oil and Gas Regulatory Authority Ordinance, 2002 unless expressed provisions were embodied therein to that effect.

(i) Oil and Gas Regulatory Authority Ordinance (XVII of 2002)---

----S.8(5)---Income Tax Ordinance (XLIX of 2001), S.20(1)---Provisions of S.8(5) of the Oil and Gas Regulatory Authority Ordinance, 2002 unambiguously and without any caveat or qualification treat the amount as 'expenditure' for the purpose of tax law, Gas Development Surcharge qualifies to be a deduction under S.20(1) of the Income Tax Ordinance, 2001 and it was irrelevant and immaterial whether or not deduction of Gas Development Surcharge was prescribed in Income Tax Ordinance, 2001 or for that matter Income Tax Ordinance, 2001 was later in time than Oil and Gas Regulatory Authority Ordinance, 2002 or not.

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

----Ss.54, 20(1) & 3---Oil and Gas Regulatory Authority Ordinance (XVII of 2002), S.8(5)---Exemptions and tax provisions in other laws---Deduction of Gas Development Surcharge---Had S.8(5) of the Oil and Gas Regulatory Authority Ordinance, 2002 been extending any 'exemption' from income tax, on the basis of S.54 of the Income Tax Ordinance, 2001, department could have made a valid case for denial of any such exemption to the taxpayer and that too if it was held that Income Tax Ordinance, 2001 was subsequent in time to Oil and Gas Regulatory Authority Ordinance, 2002---Present being not the case of exemption, clearly provisions of S.3 of the Income Tax Ordinance, 2001 assume the character of 'general provisions' whereas those contained in S.8(5) of the Oil and Gas Regulatory Authority Ordinance, 2002 were to be considered as 'special provisions' and had to be complied with and given precedence over general provisions of S.3 of the Income Tax Ordinance, 2001---Denial of deduction of Gas Development Surcharge by the revenue could have again sustained if the provisions of Income Tax Ordinance, 2001 had categorically disallowed the same by referring to S.8(5) of the Oil and Gas Regulatory Authority Ordinance, 2002 which was not the position---Section 8(5) of the Oil and Gas Regulatory Authority Ordinance, 2002 cautiously, expressly and knowingly treat the amount as an allowable deduction under S.20(1) of the Income Tax Ordinance, 2001 which had already been promulgated by the time Oil and Gas Regulatory Authority Ordinance, 2002 was legislated---Principle that special law shall prevail over the general law had to be allowed to the taxpayer.

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

----S.20(1)---Oil and Gas Regulatory Authority Ordinance (XVII of 2002), Ss.8(5) & 43---Allowable deduction---Gas Development Surcharge---Since Oil and Gas Regulatory Authority Ordinance, 2002 made a reference to Income Tax Ordinance, 2001 vis-à-vis the allowability of the amount, the intention was manifestly clear---Legislature, while drafting the Oil and Gas Regulatory Authority Ordinance, 2002, had in its mind the provisions of Income Tax Ordinance, 2001 so by prescribing the allowability the confusion regarding allowability, if any, had been removed---Provisions of S.43 of the Oil and Gas Regulatory Authority Ordinance, 2002 assigned overriding status to the provisions of the Oil and Gas Regulatory Authority Ordinance, 2002 in totality vis-à-vis any other statute---Revenue was blowing hot and cold together, while the receipt i.e. negative Gas Development Surcharge/ differential margin was treated as income, the denial of deduction of Gas Development Surcharge to the taxpayer defeated the principles of consistency and all norms of justice and fair play.

(l) Oil and Gas Regulatory Authority Ordinance (XVII of 2002)---

----S.8 (5), proviso---Interpretation of proviso to S.8(5) of the Oil and Gas Regulatory Authority Ordinance, 2002---Plain reading of said provisions suggested that these had three components viz (i) creation of very charge of Gas Development Surcharge on licensees (ii) treatment of this amount as 'expenditure under the Income Tax Ordinance, 1979; and (iii) then came the proviso which stipulated that upon coming into force of Income Tax Ordinance, 2001, amount would also be considered as an 'expenditure' under the provisions thereof---Provisions in a statute had to be construed harmoniously and in a manner that effect could be given to those rather than attributing redundancy and superfluousness---If the interpretation of the revenue that upon enforcement of Income Tax Ordinance, 2001, entire subsection (5) would cease to have effect is accepted then there would not have been any levy of Gas Development Surcharge ab initio, what to talk of its admissibility or disallowance---Scope of proviso was restricted only to the extent of allowability of amount against taxable income which prior to proviso was with reference to Income Tax Ordinance, 1979 and upon enforcement of Income Tax Ordinance, 2001 thereunder.

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

----Ss.60A, 60B & 20(1)---Oil and Gas Regulatory Authority Ordinance (XVII of 2002), S.8(5)---Workers' welfare fund---Workers Participation Fund---Gas Development Surcharge---Not correct to say that Gas Development Surcharge could have only become an allowable deduction if, in line with provisions of Ss.60A & 60B of the Income Tax Ordinance, 2001 (providing for allowance of deduction regarding Workers Welfare Fund and WPPF), a specific provision had been provided in Income Tax Ordinance, 2001---Provisions of Ss.60A & 60B of the Income Tax Ordinance, 2001 actually restrict the admissibility of expense (in loss cases).

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

----S.20(1)---Oil and Gas Regulatory Authority Ordinance (XVII of 2002), S.8(5)---Deductions---Gas Development Surcharge---Deduction of Gas Development Surcharge had been provided for in a statute i.e. Oil and Gas Regulatory Authority Ordinance, 2002---Contention of revenue that neither any tax could be levied nor it could be exempted except through Income Tax Ordinance, 2001 was completely out of place and was repelled---Present case neither involved levy of tax nor grant of exemption, rather was a case of admissibility of expenditure under a special law.

Qarz-e-Hasna's case (1993) 69 Tax 192 (Trib.) SGS Cotecna's case Writ Petition No.3412 of 2009 and IPP's case 2006 PTD 1 Irrelevant.

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

----Ss.49(4) & 20(1)---Oil and Gas Regulatory Authority Ordinance (XVII of 2002), S.8(5)---Constitution of Pakistan, Art.165A---Income of Federal Government, Provincial Government, and Local Government---Gas Development Surcharge---Deductions---Reference to Art. 165A of the Constitution of Pakistan and S.49(4) of the Income Tax Ordinance, 2001 was misplaced---Deduction of Gas Development Surcharge was allowable to the taxpayer regardless of its ownership by the Federal Government.

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

----S. 20(1)---Oil and Gas Regulatory Authority Ordinance (XVII of 2002), S.8(5)---"Gas Development Surcharge" qualified to be an admissible deduction to the taxpayer as allowability thereof was provided for in a special law which prevailed over general law---Deduction on account of Gas Development Surcharge was allowable expenditure to the tax payer.

Messrs Attock Refinery Limited's case in I.T.As. Nos.39 and 40/IB of 1992-1993; Elahi Cotton's case 1997 PTD 1555; 2004 PTD (Trib.) 204; PLD 1968 Lah. 344; PLD 1972 Lah. 41; 165 ITR 437; 174 ITR 475; 198 ITR 690; 1973 PTD 44 and Messrs Suit Southern Gas Company Ltd. (SSGCL)'s case 2002 PTD 976 ref.

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

----S.122 (5A)---Amendment of assessment---Arbitrary enhancement of taxable income---Earlier assessed income was enhanced arbitrarily---Revenue conceded on the issue and undertook that taxpayer's grievance would be redressed through necessary rectification.

(r) Income Tax---

----Profit and loss expenses---Provision for obsolete stores and spares---Claimed deduction was disallowed---Parties agreed that they would be satisfied if the matter was remanded back to concerned Taxation Officer for adjudication afresh in line with the decision of the Appellate Tribunal earlier passed in the case of taxpayer.

I.T.As. Nos.674 and 653/LB of 2011 rel.

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

----S.2(29C)---Industrial undertaking---Determination of---Meaning of words given in one statute could not be imported or read into any other statute unless so expressly authorized by the legislature---Whether any entity qualifies to be an 'industrial undertaking' for the purpose of Income Tax Ordinance, 2001 needs to be determined exclusively with reference to the provisions of S.2(29C) of the Income Tax Ordinance, 2001.

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

----Ss. 65B & 2(29C)---Tax credit for investment---Industrial undertaking---Taxpayer, a Gas distribution company---Not covered under the definition of "industrial undertaking" and not entitled to take tax credit under S.65B of the Income Tax Ordinance, 2001---Finding by the Assessing Officer and confirmed by the First Appellate Authority were in consonance with provisions of the Income Tax Ordinance, 2001---Appeal on that score was rejected by the Appellate Tribunal.

1996 PTD 408 and 1999 PTD 793 (Trib.) rel.

Khawaja Farooq Saeed, Advocate High Court along with Khawaja Adnan Zahir CIR, Muhammad Tahir ACIR, Ahmad Shuja Khan ACIR and Munir Ahmad Chaudhry DCIR, for Respondents.

2014 P T D (Trib.) 425

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Sabiha Mujahid, Accountant Member

Messrs SULMAN PACKAGES (PVT.) LTD., FAISALABAD

Versus

CIR, ZONE-1, RTO, FAISALABAD

S.T.As. Nos. 402/LB and 403/LB of 2013, decided on 18th November, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 8(1)(ca) & 72A---S.R.O. 555(I)/96 dated 1-7-1996---S.R.O. 594(I)/2012 dated 1-6-2012---Tax credit not allowed---Due to detection of certain discrepancies in the record of suppliers of the registered person, the admissible input tax claimed by the registered person was not merely disallowed but demand was created without denying that payment by the registered person had already been made to such suppliers; and that reason for the same was given that the suppliers had not deposited the sales tax in the Government treasury an amount equal to the input tax claimed by the appellant/registered person---Taxpayer contended that the provisions of S.8(1)(ca) of the Sales Tax Act, 1990 had been struck down by holding the same as un-constitutional; that Show-Cause Notice suffered from the defect in the assumption of jurisdiction as the Assistant Commissioner Inland Revenue exceeded the limitation/authority expressed in S.R.O. 555(I)/96 dated 1-7-1996, as its authority was restricted to adjudication of the cases where sales tax involved did not exceed Rs.500,000; and that Show-Cause Notice issued for the exceeded prescribed mandatory limit---Validity---Assumption of jurisdiction, in circumstances, was without jurisdiction and coram non judice and without lawful authority---Show-Cause Notices were also coram non judice and without lawful authority, the super structure built on such Show-Cause Notices was also to meet the same fate and were held as of no legal consequence---Order passed by the First Appellate Authority could hardly be taken as an order because it was simply repetition of working of Intelligence and Investigation Wing of Federal Board of Revenue, and reproduction of what was given in the Show-Cause Notices---Orders in original, the factual and legal controversies had not been resolved, no finding had been recorded for establishing the correctness of department's stance---Department had not brought out any case for making the registered person liable to sales tax demand due to its non-payment to suppliers or committing any fraud against the Government---Orders passed by the First Appellate Authority were set aside, the Show-Cause Notices were held to be illegal without jurisdiction and orders-in-original were declared to be null and void and of no legal consequence.

D.G. Khan Cement Company v. FOP and others Writ Petition No.3515 of 2012 and S.T.A. No.638/LB of 2012 rel.

Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492; S.T.A. No.317/LB of 2011; S.T.A. No.135/LB of 2011; S.T.A. No.434/LB of 2011, S.T.A. No.435/LB of 2011 and S.T.A. No.1402/LB of 2008 ref.

Monum Sultan for Appellant.

Amanullah Virk, D.R. for Respondent.

2014 P T D (Trib.) 448

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Sohail Afzal, Accountant Member

Messrs FAZAL PAPER MILLS (PVT.) LTD., OKARA

Versus

CIR, RTO, LAHORE

S.T.A. No.833/LB of 2013, decided on 21st November, 2013.

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

----Ss.11(5), First proviso & 36(3)---Assessment of tax---Limitation---Registered person contended that as per First proviso to S.11(5) of the Sales Tax Act, 1990 the assessment order was required to be made within 120 days of the issuance of Show-Cause Notice or within such extended period as the Commissioner may for reasons to be recorded in writing, fix, provided that such extended period shall in no case exceed 120 days; that as per proviso to S.11(5) of the Sales Tax Act, 1990 the order of assessing officer shall be passed not later than 120 days from the date of filing of appeal or within such extended period as the assessing officer may for reasons to be recorded in writing, fix and such period shall in no case, exceed 120 days; and that assessment order dated 9-4-2013 was received on 16-4-2013 was passed after a lapse of 241 days from the date of issuance of Show-Cause Notice i.e. 15-8-2012---Validity---Show-Cause Notice was issued on 15-8-2012 and the assessment order was passed on 9-4-2013 while maximum time limit as envisaged by S.36(3) of the Sales Tax Act, 1990 already stood expired---Admittedly order-in-original was passed beyond the prescribed maximum time limit; and adjudicating authority had neither fixed any extended period nor had recorded any reasons for passing of the order after the period prescribed under the law---Once limitation had started to run and had come to an end the assessee acquired a vested right of escapement of assessment by lapse of time---Order being passed after the lapse of statutory period was declared to have been made without lawful authority and of no legal effect---Order having been passed after the lapse of statutory period was without jurisdiction.

Messrs Super Asia Muhammad Din Sons (Pvt.) Limited v. Collector of Sales Tax 2008 PTD 60; Nagina Silk Mill, Lyallpur v. The Income Tax Officer and the Income Tax Appellate Tribunal, Pakistan PLD 1963 SC 322 and Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and others 2001 SCMR 838 rel.

Messrs Hanif Sraw Board Factory v. Collector (Adj) Customs Central Excise and Sales Tax, Gujranwala and 2 others 2008 PTD 578 v. Messrs Syed Bhai Lighting Limited Lahore v. Collector of Sales Tax and Federal Excise, Lahore 2009 PTD (Trib) 1263 Messrs KAY Chemist, Karachi v. Collector of Customs Central Excise and Sales Tax (Appeals) Karachi-III, 2011 PTD (Trib) 408 and 2008 PTD 2025 ref.

(b) Sales Tax---

----Limitation---Directory or mandatory---Where inaction on the part of a public functionary within the prescribed time is likely to affect the rights of a citizen the prescription of time is deemed directory---Where, however, a public functionary is empowered to create liability against a citizen only within the prescribed time, it is mandatory.

(c) Sales Tax---

----Limitation---Redundancy or superfluity of an Act of Parliament and a provision of law could not be readily accepted---When the prescribed limit is beneficial for the citizen and restricts the executive power to touch the pocket of a tax payer thereby creating certainty that after its expiry even if there was a good case for creation of liability he will not be dragged in.

Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax 2008 PTD 60 rel.

M. Farooq Sheikh for Appellant.

Mrs. Ayesha Imran Butt, D.R. for Respondent.

2014 P T D (Trib.) 484

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.As. Nos.1377/LB and 1378/LB of 2012, decided on 6th March, 2013.

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

----Ss.221 & 153---Rectification of mistake---Taxpayer contended that re-adjudication/re-appreciation of facts was beyond the scope of the provisions of S.221 of the Income Tax Ordinance, 2001---Validity---Wrong tax calculation may be corrected under S.221 of the Income Tax Ordinance, 2001 but this had to remain within the parameters of rectification of error as defined by the courts---Controversial or debatable issues were outside the ambit of rectification.

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

----Ss. 153(6)(iii), third proviso, 113, 221 & Second Sched: Part-IV, Cl.79---FBR Circular No.6 of 2009 dated 18-8-2009---FBR Circular No.3 of 2009 dated 17-7-2009---FBR letter C.No.1(25)WHT/2009 dated 26-4-2001---Corporate sector---Payments for goods and services---Minimum tax liability---Taxpayer contented that Taxation Officer erred in applying the third proviso to Cl.(iii) of subsection (6) of S.153 of the Income Tax Ordinance, 2001 in case of corporate sector; and that actual tax was deducted considering the tax deductible under S.153(1) of the Income Tax Ordinance, 2001 to be minimum tax---Validity---Through insertion of Cl.79 in Part-IV of the Second Schedule to the Income Tax Ordinance, 2001, corporate service providers were taken out of minimum tax regime reinstating the position that was generally understood to be applicable prior to the same---Understanding expressed in Circular No.6 of 2009 was not contrary to the provisions of law---If the understanding expressed in Circular No.6 of 2009 was so patently contrary to law that could have been withdrawn soon after---Clarifications issued both prior to and subsequent to issuance of Circular No.6 of 2009 did not unequivocally clarified to the contrary---Amendment in both the clarifications was made to such service providers which were previously covered by the final tax regime---Corporate service providers being previously covered by the normal tax regime, the text of said clarifications could be construed to suggest that the amendment only altered the tax regime in cases where previously final tax regime was applicable---Position, even after the amendment introduced vide Finance Act, 2011, had not changed since the insertion of Cl.79 in Part-IV of the Second Schedule of the Income Tax Ordinance, 2001 had reinstated the position for corporate service providers in a manner that in such cases tax liability would be governed by the normal tax regime without any cap, or ceiling---Order of the two authorities below were found to be suffering from legal as well as factual infirmities---Appeal filed by the tax payer was accepted by the Appellate Tribunal.

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

----S.153(6) Provisos---Payments for goods and services---Number of 'provisos' had been given with reference to subsection (6) of S.156 of the Income Tax Ordinance, 2001 and need to be interpreted under the principles of 'harmonized construction'---'Proviso' was generally something engrafted on the main enactment---Role and function of a 'proviso' was to create an exception out of a previous enactment in an earlier part of section, something which but for the 'proviso' would have fallen within the scope of enactment---Proviso must be considered only in relation to, and harmoniously with, the principal matter to which it stood as a 'proviso' and not a qualifying or modifying some other enactment---Proper cannon of constructing a section which had several 'provisos' was to read the section and the 'provisos' as a whole and try to reconcile them and give a meaning to the whole of the section along with the 'provisos' with its comprehensive and logical meanings.

1999 SCMR 563 = 1999 PTD 1173; PLD 1971 SC 252; 1977 SCMR 371 and PLD 1961 SC 119 rel.

(d) Interpretation of statutes---

----Section having several provisos---Construction---Principles.

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

----S.153 (6)(iii) provisos---Payments for goods and services---Corporate sector---Taxation of---Normal taxation---Minimum tax---Proviso to S.153(6)(iii) pertained to the exclusion which was evident from the "placement" of the proviso which related exclusively to subsection (iii) of subsection (6) of S.153 of the Income Tax Ordinance, 2001 and not generally---Said proviso had been appended to Sub-clause (iii) which referred to exclusion of services rendered by non-corporate sector only as the corporate sector stood already excluded through first proviso---Position with respect to 'corporate sector' remained unchanged being covered by the first proviso and taxable otherwise on net income basis---Taxation of corporate service providers (generally )continued to be governed by normal taxation and on net income basis and as such minimum tax regime was not applicable.

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

----Ss. 153(6)(iii) & 113---Payments for goods and services---Corporate sector---Non corporate sector---'Minimum tax regime' introduced through S.153 of the Income Tax Ordinance, 2001 could not be said to be applicable to 'corporate sector' because the minimum tax regime was already in placed in terms of S.113 of the Income Tax Ordinance, 2001 which was (then) restricted to corporate taxpayers only---Such minimum tax regime under S.153 of the Income Tax Ordinance, 2001 was applicable to non-corporate taxpayer/service providers who were otherwise not the subject matter of S.113 of the Income Tax Ordinance, 2001---If the position was to be otherwise, legislature could have incorporated some exclusion in S.113 of the Income Tax Ordinance, 2001 to provide that in such cases minimum taxation would be governed by S.153 of the Income Tax Ordinance, 2001.

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

----Ss. 153(6)(iii) Provisos & 113---Payments for goods services---'Provisos' to Sub-Cl.(iii) of subsection (6) of S.153 of the Income Tax Ordinance, 2001---Application and relevance of the provisos with regard to "corporate sector" and "non-corporate sector" detailed---In case of corporate service providers (generally) only the first proviso was relevant---Second proviso specified exclusions over and above the first proviso i.e. those not covered by the first proviso---Amendments made through Finance Act, 2009 only modified the second proviso as these did not alter, in any way, the first proviso and exclusions covered therein---Amendment providing minimum tax was proviso to Sub-Cl.(iii) of subsection (6) of S.153 of the Income Tax Ordinance, 2001 which in itself related to non corporate service providers---In the case of corporate service providers, the minimum tax regime under S.113 of the Income Tax Ordinance, 2001 remained applicable.

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

----S.153 (6), provisos---FBR Circular No.3 of 2009 dated 17-7-2009---Payments for goods and services---No modification/alteration had been made regarding the scheme of taxation applicable to corporate service providers and amendment only applied to non-corporate service providers.

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

----S.153(6)(iii), provisos---Federal Board of Revenue Circular No.6 of 2009 dated 18-8-2009---Payments for goods and services---Final tax regime---Understanding expressed in FBR Circular No.6 of 2009 applied only to such service providers which were previously covered in the scope of 'final tax regime'---In the present case, the companies were previously taxable under normal regime without any cap or ceiling, those continued to remain subject to the existing regime.

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

----S.153(1)(b)---Payments for goods and services---Corporate sector---Clarification dated 26-4-2011 by Federal Board of Revenue could be read to refer to the amendment exclusively applicable to those service providers which, prior to amendments, were taxable under final tax regime---Corporate service providers were not covered by the final tax regime under existing law therefore the amendment/clarification did not apply to such service providers.

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

----S.153---Payments for goods and services---Minimum tax---Entire S.153 of the Income Tax Ordinance, 2001 was redrafted under Finance Act, 2011 and as such the service sector, comprising both corporate and non corporate service providers, were brought into a minimum tax regime.

Imran Afzal, FCA, for Appellant.

Shahid Safdar, D.R. for Respondent.

Date of hearing: 4th October, 2012.

2014 P T D (Trib.) 529

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Sohail Afzal, Accountant Member

Messrs ASHRAF ENGINEERING CORPORATION and others

Versus

COMMISSIONER OF INLAND REVENUE, RTO, LAHORE and others

I.T.As. Nos. 462/LB and 501/LB of 2011, decided on 30th August, 2013.

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

----Ss. 177 (4) & 122(1)/(5)---FBR letter C. No. 4(7S)ITP/2009 dated 9-1-2010---Audit---Tax Year 2008---Federal Board of Revenue directed the field formation that random audit selection of cases for tax year 2008 had been held for Audit of Corporate cases and cases of AOP's and the cases of audit on any other basis for tax year 2008 may be closed, however, cases with proof or evidence of gross irregularities may be intimated to the Board for guidelines as to further necessary action.

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

----Ss. 177 (4) & 122(1)/(5)---FBR letter C. No. 4(7S)ITP/2009 dated 9-1-2010---Audit---Tax year 2008---Taxpayer contended that selection of the case was totally unlawful and unwarranted as the Federal Board of Revenue had directed the Department to close the audit proceedings initiated in respect of tax year 2008 but the department had not complied with the directions---Validity---Case was selected for audit on 20-1-2009 and proceedings were finalized on 30-4-2009, much before that Board's circular through which instructions to the field formation were conveyed that cases of Corporate cases and cases of AOPs had been selected through random ballot for tax year 2008 for audit and the cases of audit on any other basis for tax year 2008 may be closed---Board's instructions would apply to cases of audit of cases selected on the basis other than random ballot for tax year 2008 in which proceedings were pending on the date instruction was received from the Board---Proceedings in such cases could be closed where proceedings were pending on the date, Board Circular was received but this was not the situation in the present case because the Taxation Officer had already finalized the proceedings on 30-4-2009 before Board instructions were communicated on 9-1-2010 and the---Taxpayer contended that appeal was the continuation of assessment proceedings and the policy laid down by the Board was applicable to its case; and Supreme Court had directed to follow the policy guidelines in letter and spirit and exclusion of individual cases was not justified as the same tantamount to discrimination which the law did not permit to do---Appellate Tribunal in line with the arguments of the taxpayer held that the individual taxpayers were also covered in the policy guidelines issued by the Board---Appeal of the taxpayer was accepted and orders of both the authorities were vacated---Departmental appeal became infructuous and was dismissed.

2012 SCMR 597 = 2012 PTD 693 rel.

CIT v. Shahnawaz Ltd., 1993 SCMR 73; Army Welfare Sugar Mills Ltd. v. FOP 1992 SCMR 1652 and CIT v. Ellcot Spinning Mills Ltd. 2008 PTD 140 (H.C.) ref.

Kh. Riaz Hussain for Appellants (in I.T.A. No.462/LB of 2011).

M. Nazir Rizvi, D.R. for Respondents (in I.T.A. No.462/LB of 2011).

M. Nazir Rizvi, D.R. for Appellants (in I.T.A. No.501/LB of 2011).

KH. Riaz Hussain for Respondents (in I.T.A. No.501/LB of 2011).

Date of hearing: 17th July, 2013.

2014 P T D (Trib.) 544

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Khalid Aziz Banth, Accountant Member

Messrs AMTEX (PVT.) LTD. and another

Versus

CIR (LEGAL DIVISION), R.T.O., FAISALABAD and another

S.T.As. Nos.1112/LB and 1739/LB of 2009, decided on 6th February, 2012.

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

----Ss.7 & 73---Determination of tax liability---Input tax---Disallowance of---Taxpayer contended that objections raised by STARR related to scrutiny for verification of input tax and was guideline for tax collectors and to enforce the provisions of law where payment of tax by the suppliers was not made or the suppliers were engaged in short payments; that payments to suppliers were made through proper banking instruments; that copies of gate passes through which the goods were received from the suppliers was also made available at the time of audit along with bank statements and the copies of the relevant crossed cheques was also produced before the adjudicating authority; and that all suppliers were regular filer of sales tax returns; and were paying the output tax which was due from them in their monthly sales tax returns---Revenue contended that one supplier from which input had been claimed was still blacklisted---Taxpayer produced copies of sales tax returns of the said suppliers ; and similarly other suppliers had also deposited the due tax; and order of blacklisting of the said unit had already been vacated by the Appellate Tribunal; and there were similar facts were with regard to other suppliers---No merit having been found in the findings of the authorities below, which were vacated by the Appellate Tribunal.

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

----Ss.10 & 73---Refund of input tax---Automated refund system raised certain objections which were "Scrutiny for verification of input tax" "Abnormal Tax Profile" and MR No. and date mismatch---Taxpayer contended that compliance of the provisions of S.73 of the Sales Tax Act, 1990 was duly made and produced evidence in shape of gate passes indicating the physical receipt of the goods bank statements and copies of cheques---Audit of the supplier was carried out and output tax detected was got deposited; and Collector recommended to remove the name of the said unit from abnormal profile list---Similarly in case of another supplier, detected amount was got deposited and objection regarding scrutiny for verification of input tax was got removed as was evident from Collector's letter---Audit was conducted in another case and it was recommended that the case of the alleged supplier may be removed from showing "Abnormal Tax Profile"---Another unit was excluded from STARR's objection regarding Abnormal Tax Profile/Scrutiny for verification of input tax---No merit was found in the contentions of the department and appeal of the department was dismissed by the Appellate Tribunal.

Khubaib Ahmad for Appellants (in S.T.A. No.1112/LB of 2009).

Sajjad Taslim, D.R. for Respondents (in S.T.A. No.1112/LB of 2009).

Sajjad Taslim, D.R. for Appellants (in S.T.A. No.1739/LB of 2009).

Khubaib Ahmad for Respondents (in S.T.A. No.1739/LB of 2009).

Date of hearing: 30th January, 2012.

2014 P T D (Trib.) 558

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairperson and Sabiha Mujahid, Accountant Member

COMMISSIONER INLAND REVENUE, FAISALABAD

Versus

Messrs CHENAB BOARD, FAISALABAD

S.T.A. No.952/LB of 2012, decided on 29th August, 2013.

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

----Ss. 36(1), 10, 11, 22, 23, 26 & 73---Sales Tax Rules, 2006---Recovery of tax not levied or short-levied or erroneously refunded---Taxpayer contended that tax liability by the detecting agency on the basis of record was created without confronting him and as such demand was raised at his back without making them party to examine the record/documents creating such huge liability---Validity---Record/ documents titled as "sales tax working for the month of July-2006 to December-2010" and "sales for July-2006 to December-2010" providing basis for creation of charge of suppression of sales appeared to be self -fabricated and self engineered---Both the documents found no place in resumption memo.---Records on the basis of which, charge of suppression of sales was created was not mentioned anywhere in resumption memo.---Fabrication of records/documents was established as both the documents contained the similar hand-writing on its face and none of other sales documents in the resumption memo. contained any such hand-writing and that is why, it could not find any place or mention in the resumption memo.---Demand of sales tax could not be created merely on the basis of any document which were altogether found missing in the very list of records resumed during the course of search from the factory premises had no legal foundation and the superstructure built thereon also remained in thin air---Infact, both the documents were never resumed from the business premises but subsequently fabricated to create the charge of suppression of sales that is how it could not find any place or mention in the resumption memo.---Resumption memo. was duly signed by all the officials and the business stakeholders and the taxpayer was constrained to disown both the documents and records as being not prepared, maintained or kept---Even otherwise, officials of Directorate of Intelligence and Investigation had erred in fabricating and engineering of such documents and records while calculating sales tax liability which was manifest of simply a case of "tax on tax and tax on duty, duty on duty and duty on tax" and such phenomena of double taxation had not been denied by the detecting agency itself in its written comments nor during the course of adjudication before the First Appellate Authority which amounted to admission---Appellate Tribunal could not permit the tax authorities to impose a tax on tax and a duty on duty particularly in the cases, where double taxation had been established and could never allow the department to create any tax liability on any of record which was not a prescribed one in the Sales Tax Act, 1990 and were also not included in the list documents given in the resumption memo.---Even otherwise, Sales tax was on sale and supply of goods which necessarily entailed delivery of goods and/or receipts of money consideration in that regard and no corroborating evidence for any clandestine removal of goods and for receipts of money consideration had been provided without which the charge of suppression of supply remained in thin air which was of no legal effect---Whole exercise regarding recovery on the basis of suppression of sales was based merely on surmises and presumptions for which there was no room particularly in the fiscal matters as suppression of supply was not proved by any documentary corroborating evidence regarding clandestine removal of goods or receipts of money consideration, hence, remained unsubstantiated without which the whole exercise was nullity in the eyes of law.

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

----Ss. 36(1) & 21(3)---Recovery of tax not levied or short-levied or erroneously refunded---Suspension of registration of taxpayer---Recovery of adjusted amount of input tax on the charge of "registration suspended"---Validity---Recovery against invoices of a person whose registration was suspended could be effected upon his ultimate blacklisting by the Commissioner Inland Revenue after adhering to due process of law under S.21(3) of the Sales Tax Act, 1990 and the rules made thereunder and after due final order for such action as provided under the law---Suspension of registration was an interim order of the Commissioner Inland Revenue for the sake of conducting an inquiry and scrutiny of the matter where any tax fraud or massive tax evasion was suspected and recovery proceedings from the stakeholders could be initiated after establishing the charge of tax evasion and incidences of tax fraud and upon ultimate black-listing of a registered person as provided under S.21(3) of the Sales Tax Act, 1990---Inadmissibility of input tax against invoices of suspended units whose ultimate fate in form of blacklisting or otherwise was yet to be determined was not justified under the law---Recovery of adjusted amount of input tax upon suspension of registration was illegal and unwarranted and was premature and invalid because no formal and final order of blacklisting under the law had been issued by the competent authority---Whole proceedings culminated in show-cause notice and adjudication order were nullity in the eyes of law---Sales tax refund or input tax credit could be recovered back against invoices of a person upon his blacklisting but no such provision existed therein providing such action upon suspension of registration---Whole exercise of adjudication for demanding sales tax against invoices of a person whose registration was suspended yet not finally blacklisted by the Commissioner Inland Revenue, was premature, unwarranted and nullity in the eyes of law.

Messrs Shama Exports (Pvt.) Ltd. v. Collector of Sales Tax, Faisalabad 2011 PTD (Trib.) 2090 rel.

(c) Administration of justice---

----When law specifies a particular manner and procedure then it is obligatory for the functionary of the State to adhere to the same and comply with it in all respects and any negligence, failure or omission to do so, invalidates the proceedings on account of which whole superstructure raised on such defective foundation automatically crumbles down.

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

----Ss. 36 & 21---Recovery of tax not levied or short-levied or erroneously refunded---One cannot be penalized and impeded with undue and premature tax liability merely on the basis of an interim order like the suspension until and unless, it is eventually acted upon in the form of final blacklisting---Until recovery of sales tax is properly adjudged through an appealable order, no recovery could be made.

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

----S.8A---Joint and several liability of registered person in supply chain where tax was unpaid---In order to attract the provisions of S.8A of the Sales Tax Act, 1990, initial burden lies on the department to establish that the taxpayer had prior "knowledge" and "reasonable grounds" to suspect the supplier that sales tax paid to him remained unpaid and in such an eventuality to proceed against the taxpayer.

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

----S.8A---Joint and several liability of registered person in supply chain where tax was unpaid---Verification of status and genuineness of the supplier from e-portal---Taxpayer, under the prescribed mechanism of value added tax, had made payment of input tax to his supplier and he had no access to confirm that the alleged supplier had made the payment in the Government treasury or not---Taxpayer receiving taxable supplies was legally obliged to check 'validity and veracity' of the supplying person through electronic verification which was obviously done at the time of transactions---Tax functionaries were duty bound to check as to whether the supplier had made payment of tax due to them especially when he was filing his monthly sales tax returns and summaries of sales and purchases with the department---Show-Cause Notice, in the present case, did not disclose that the taxpayer was in the knowledge or had reasonable grounds to suspect that some or whole of the tax payable in respect of supply or any previous or subsequent supply of the goods supplied would go unpaid---Liability to pay tax jointly and severally under S.8A of the Sales Tax Act, 1990 would come into play only when it was established with corroborating material evidences that where registered person receiving taxable supply from another registered person was in the knowledge or had reasonable grounds to suspect that some or whole of the tax payable in respect of that supply would go unpaid---Position, in the present case, was very much different because the taxpayer, after verifying the status and genuineness of the supplier from e-portal of Federal Board of Revenue, made the payments of input tax and fulfilled all the legal responsibilities on his part and after adopting of method for making payments as was prescribed by the law, had discharged his onus so no responsibilities lay on taxpayer's shoulders to haunt his suppliers depositing their liabilities in Government exchequer or not---Mere allegation that alleged suppliers were blacklisted, suspended and were fake was not enough corroborating evidence for denying the lawful right of input tax of the buyer.

Messrs D.G. Khan Cement Company Ltd. v. The Federation of Pakistan and others Writ Petition No.3515 of 2012 rel.

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

----S.8 (1)(d)---Joint and several liability of registered persons in supply chain where tax was unpaid---"Collusion" or "tax fraud"---Provisions of S.8(1)(d) of the Sales Tax Act, 1990 could only be invoked in cases where charge of "collusion" or "tax fraud" had been levelled and established by the department, as the said provision disentitled a registered person from deducting or claiming input tax adjustment or credit made on the strength of a "fake invoice".

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

----S.8(1)(d)---"Fake invoice"---"Fake invoice" had neither collectively been defined in the Sales Tax Act, 1990 nor distinct and individual meanings of each word "fake" and "invoice" had been given therein nor any explanation had been enunciated in the Rules made thereunder nor any definition of the expression is provided in defining clauses as given in S.2 of the Sales Tax Act, 1990.

(i) Interpretation of statutes---

----Words used in statute not defined---In the absence of general or technical definition by the legislature of any word or no particular connotation was appearing in the Act or the Rules framed thereunder or of any judicial interpretation of that word with reference to the same statue or any other statute in pari materia, one has to resort to the dictionary meaning of that word because reference to standard dictionaries can be the sole assistance in assigning meaning of that word or words.

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

----S.8(1)(d)---"Fake invoice"---Connotation of---Any invoice duly issued by a registered supplier could not be purported to be a "fake document", once it was established that the same was duly incorporated in sales shown by the supplier in his summary statement and also declared in his sales tax monthly return for the period in question particularly in the cases where its payment was also transacted through banking channel as prescribed under the Sales Tax Act, 1990---Conversely, if a registered person held a tax invoice which was not incorporated in the supplier's records or payment in its respect was also made clandestinely, it could be said that such person was making a "fake business transactions"---Any invoice that evidenced a fake, fraudulent or sham transaction was known as a "fake invoice" and any distortion in taxable supply tainted with "tax fraud" or "collusion" between buyer and seller rendered the tax invoice defective and "fake".

Black's Law Dictionary, 8th Edition to be something that is not what is purports to be and to make or construct falsely at its page 635 rel.

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

----S.8(1)(d)---Party making an allegation must bring material evidences to prove the same---Where no evidence of tax evasion, issuing of fake invoices or any other commission of tax fraud was put forth on record to substantiate the allegations levelled against the taxpayer, show-cause notice as well as consequent orders were illegal and void ab initio.

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

----Ss.8(1)(d), 7(2)(i), 23 & 73---Determination of tax liability---Adjustment of input tax---For claiming adjustment of input tax under S.7(2)(i) of the Sales Tax Act, 1990, the taxpayer should hold a taxable invoice duly issued by his supplier under S.23 of the Sales Tax Act, 1990 and the claimant should have paid the amount of the goods including tax shown in the invoice through negotiable instrument as per expression of S.73 of the Sales Tax Act, 1990---Taxpayer was holding valid taxable invoices and payment against those to the supplier was also made strictly in terms of S.73 of the Sales Tax Act, 1990---Department had not been able to place on record any evidence by which it could be inferred that the invoices issued by the supplier were fake---Any action which was based upon no evidence was not permitted by any law---Taxpayer had nothing to do with the act and commission of his suppliers under any provisions of the Sales Tax Act, 1990 neither was obliged under any other law to defend the acts or omissions of his suppliers---Taxpayer, who had admittedly paid the input tax covered by the invoices, could not be denied the statutory right of claiming its adjustment---Neither charge of 'tax fraud' was established against the taxpayer nor the charge of 'collusion' with his suppliers to evade sales tax by way of fake invoices was levelled, even the department could not prove and bring on record any evidence for collusion of the taxpayer with the suppliers for the same without which the provisions of S.8(1)(d) of the Sales Tax Act, 1990 were not attracted in the case---Whole proceedings in circumstances, were infested with inherent legal infirmities and were liable to be set aside.

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

----Ss.8(1)(ca), 3(3)(a) & 3(A)---Constitution of Pakistan, Arts.23 & 24---Tax credit not allowed---Taxpayer was charged with violation of S.8(1)(ca) of the Sales Tax Act, 1990 on the ground that his suppliers had not deposited tax due in national exchequer; and taxpayer was not entitled to claim the credit of input tax---Validity---On the one hand, liability to pay sales tax was on the supplier under S.3(3)(a) of the Sales Tax Act, 1990 and could only be extended to the buyer by a notification under S.3(a) of the Sales Tax Act, 1990 in case of supply of specific goods and on the other hand, the taxpayer had jointly and severally was held responsible for such liabilities without any such notification issued by the Federal Government as such defaulted amount had to be recovered from the defaulter supplier instead of the buyer---Such legal and statutory contradiction would result into double taxation as under the charging provisions of S.3 of the Sales Tax Act, 1990, the supplier in case of local sales was held liable to pay sales tax by collecting the same from the buyer and under the machinery provisions of Cl.(ca) of S.8(1) of the Sales Tax Act, 1990, the buyer was impeded with tax liabilities if the supplier failed to deposit the tax collected from the buyer who was not the one who could force the supplier for payment of tax so-collected---Demand of sales tax against the taxpayer was tantamount to double taxation which was not permissible under law because liability to pay sales tax was on the supplier under S.3(3)(a) of the Sales Tax Act, 1990; and taxpayer had already discharged his sales tax liability by making its payment to the supplier---Demanding the same amount from the taxpayer by the department on account of default on the part of his suppliers was clear example of 'double taxation' which was not only illegal and contrary to the provisions of law but also against norms of natural justice and as such the taxpayer could not be burdened with the liability of double taxation---Recoveries adjudged by the department, in circumstances, were illegal and uncalled for---No tax could be levied twice on the same goods---Edifice of the case built up under provisions of S.8(1)(ca) of the Sales Tax Act, 1990 was to be collapsed to its bottom as the provisions of S.8(1)(ca) of the Sales Tax Act, 1990 had been declared to be unconstitutional being illogical, absurd and offending Arts. 23 & 24 of the Constitution.

Messrs D.G. Khan Cement Company Ltd. v. The Federation of Pakistan and others Writ Petition No.3515 of 2012 rel.

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

----S.8 (1)(ca)---Tax credit not allowed---Scope---Every person has a separate legal character enjoying distinct rights and liabilities under the law and to impose the liability of one over the other is opposed to the fundamentals of law and offends due process, logic and rationality---Provisions of S.8(1)(ca) of the Sales Tax Act, 1990 axes an innocent person for the wrong of the other.

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

----S.2(37)---Tax fraud---Definition of "tax fraud" as given under S.2(37) of the Sales Tax Act, 1990 is that the alleged person should have done any act knowingly, dishonestly or fraudulently and without any lawful excuse.

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

----S.2(37)---Tax fraud---Burden of proof---In the present case, there was not any iota of evidence wherefrom it could be deduced that the taxpayer had knowingly or dishonestly or fraudulently committed any tax fraud by claiming adjustment of input tax against tax invoices issued by the suppliers---If at all supplier had committed any tax fraud, same had been done on account of department's negligence and the buyer could not be held responsible for slackness of the tax functionaries---Show-cause notice or orders of the department could not establish with any concrete and solid evidence that the taxpayer was involved in tax fraud by claiming illegal input tax violating the provisions of S.2(37) of the Sales Tax Act, 1990---Provisions relating to tax fraud could not be invoked without first proving that the accused person had committed such act knowingly, dishonestly or fraudulently and without lawful excuse---Department had failed to prove blame on the taxpayer and the entire edifice was built to hold the taxpayer as fraudulent, on conjectures and surmises and whimsical inference had been drawn against the taxpayer on incorrect set of facts---Record had proved that there was an ample justification with the taxpayer to claim adjustment of input tax or refund, because the supplier was a registered person and his status was operative/active as shown on Federal Board of Revenue Website and was also regularly filing his sales tax returns and summaries at the relevant time---In order to attract the provisions of S.2(37) of the Sales Tax Act, 1990, initial burden lay on the department to show that the taxpayer, knowingly, dishonestly or fraudulently and without any lawful excuse had done any act or caused any act to be done or had committed to take any action or had caused the omission to take any action in contravention of duties or obligations imposed under the Sales Tax Act, 1990 or Rules or instructions issued thereunder with the intention of understating the tax liability or underpaying the tax---Initial burden to prove that the provisions of tax fraud were attracted, lay on the department and not on the taxpayer and the department had failed to discharge its onus and for said reason, charge of tax fraud had no legal consequences and the department had failed to establish any such act against the taxpayer.

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

----Ss.7 & 21---Determination of tax liability---De-registration, blacklisting and suspension of registration---Operative persons---Adjustment of input tax---Vital fact in the present case could not be ignored that at the time of making transactions, the suppliers were enjoying their status as an "operative persons" and upon their subsequent inclusion in the list of suspended and blacklisted units in the surpassing years could not be made effective retrospectively---Since, all the stakeholders were very much operative at e-portal of Federal Board of Revenue showing hundred percent compliance level at the time of transactions and upon subsequent default of the suppliers, if department was allowed to recover the amount of input tax paid by the buyer then endless litigation would start---If blacklisting or suspension of registration of a supplier was effected subsequent to a period in which purchases and bank payments were transacted could not be made a tool to deprive the buyer of a valuable right accrued in his favour prior to such blacklisting or suspension of registration of any supplier due to subsequent default whatsoever on his part.

Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492; Messrs Usman Fabrics Pakistan, Faisalabad v. Collector of Sales Tax, Faisalabad 2010 PTD (Trib.) 1631 and S.T.R. No.24 of 2010 rel.

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

----S.30A---S.R.O. 471(I)/2007 dated 9-6-2007---Directorate General, (Intelligence and Investigation) Inland Revenue---Jurisdiction---Federal Board of Revenue was assigned jurisdiction of sales tax matters in Finance Act, 2007 wherein cases of tax evasion and tax fraud in sphere of value added General Sales Tax were also made cognizable by the said agency conversely prior to July-2007, its officers were empowered only to take cognizance of "Customs and Excise matters" as such investigative audit of taxpayer's sales tax record for July-2005 upto June-2007 had not been conducted lawfully---Scope of jurisdiction of Directorate of Intelligence and Investigation was limited to the cases of 'Customs and Central Excise' only having no jurisdiction to sales tax matters because the words, "The Directorate General of (Intelligence and Investigation) Customs and Excise" were substituted for the words, "The Directorate General of (Intelligence and Investigation) C.B.R" in Finance Act, 2007 and Notification No. S.R.O. 471(I)/2007 dated 9-6-2007 for their jurisdiction was also issued accordingly---By virtue of such amendment, the Directorate of Intelligence and Investigation assumed the jurisdiction of sales tax cases as well---Any case or class of cases involving any evasion or avoidance of sales tax prior to 1st July-2007 were not subject to any investigation or inquiry by the said agency---Federal Board of Revenue for resumption of sales tax records and conducting audit thereof for the period prior to July-2007 was illegal and without any lawful jurisdiction.

(s) Administration of justice---

----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.

Khalid Saeed v. Shamim Rizwan and others 2003 SCMR 1505 rel.

(t) Interpretation of statutes---

----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.

Khalid Saeed v. Shamim Rizwan and others 2003 SCMR 1505 rel.

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

----Ss.8(1)(a)(b) & 7(1)---Tax credit not allowed---Manufacturing of paper and Board---Input goods and manufacturing of finished goods---Input tax on furnace oil---Department contended that taxpayer was not entitled to claim input tax adjustment or credit on furnace oil which was not directly related to manufacturing of finished goods under S.8(1)(a) of the Sales Tax Act, 1990---Validity---Under the provisions of S.8(1)(a) of the Sales Tax Act, 1990, a registered person was not entitled to re-claim or deduct input tax paid on the goods or services used or to be used for any purpose other than for taxable supplies made or to be made by him and no such condition of direct relationship of input goods with that of manufacturing of finished goods was specified therein---Taxpayer had claimed and adjusted input tax credit on purchase of furnace oil which was being used in boiler as a fuel as no connection of natural gas was available for said purpose and that could not be termed as being used for any purpose other than for making of taxable supplies as neither any exempt supply was made nor was alleged in the show-cause notice without which denial of input tax on said goods wholly used for the purpose of taxable supplies was highly illegal and unjustified---Legislature had consciously limited the scope of S.7(1) of the Sales Tax Act, 1990 for input tax adjustment or credit thereof through provisions of S.8(1)(a) of the Sales Tax Act, 1990 if the same was paid on goods or services used or to be used for any purpose other than taxable supplies and on the other hand, had also given powers to Federal Government to debar input tax on goods or services even if the same was used for the purpose of taxable supplies through a Statutory Regulatory Order under S.8(1)(b) of the Sales Tax Act, 1990---Goods, in the present case, were not used for any purpose other than taxable supplies, provisions of S.8(1)(a) of the Sales Tax Act, 1990 were not attracted nor the entitlement of input tax thereon was precluded by a notification under S.8(1)(b) of the Sales Tax Act, 1990---Denial from input tax adjustment or the credit paid on such goods was illegal and unlawful and violation of mandatory provisions of law---No condition of direct relation of input goods to manufacturing of finished goods was provided in S.8(1)(a) of the Sales Tax Act, 1990 however, condition of its use for the purpose of making of taxable supplies was specified therein and the taxpayer do qualify for entitlement of input tax credit on the goods in question as the same were not used for any purpose other than for taxable supplies because all of the supplies made by the taxpayer was restricted to taxable supplies only---Officers of Directorate of Intelligence and Investigation were not well versed with the use of kerosene oil which was used for the purposes of making pulp from raw materials like straw, husk and raddi, etc which was used of making of paper and paper board products---Since, kerosene was wholly used for the purpose of taxable supplies only; no recovery could be made from the taxpayer.

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

----S.73---Certain transactions not admissible---Bank payments under S.73 of the Sales Tax Act, 1990 was just a mode of payment embodied in the Sales Tax Act, 1990 for the purpose of documentation of the economy and if the same was not complied with due to some ignorance and inadvertence, that did not provide for recovery of amount of tax already paid by the suppliers and taxpayers in their monthly sales tax returns and in absence of which it stood merely a technical and procedural violation of statutory provisions of law for which a punitive action could be taken against the person not complying with the same in letter and spirit---Non-compliance of S.73 of the Sales Tax Act, 1990 was a technical nature and attracted penalty only under law and the taxpayer was liable to pay only a penalty of 3% of the amount of tax adjustment involved under S.33(1), item No.16 of the Sales Tax Act, 1990.

AGECO (Pvt.) Ltd., Islamabad v. The Collector Customs, Excise and Sales Tax (Appeals), Islamabad and others 2010 PTD (Trib.) 975 rel.

Muhammad Jamil Bhatti, D.R. for Appellant.

Khubaib Ahmad Taunsvi along with Rana Arshad ITP for Respondent.

Date of hearing: 29th August, 2013.

2014 P T D (Trib.) 589

[Inland Revenue Appellate Tribunal]

Before Munsif Khan Minhas, Judicial Member and Muhammad Riaz, Accountant Member

COMMISSIONER INLAND REVENUE, RTO, RAWALPINDI

Versus

Messrs GONDAL CNG STATION, SATELLITE TOWN, RAWALPINDI

M.A. (R) No. 2/IB and 3/IB of 2012, decided on 10th September, 2013.

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

----Ss. 221, 177(4) & 155(5)---Rectification of mistake---Revenue contended that High Court had issued directions for issuance of fresh notice with regard to selection of the case for audit under S.177(4) of the Income Tax Ordinance, 2001, whereas the Assessing Officer had amended the assessment under S.122(1) read with S.122(5) of the Income Tax Ordinance, 2001 on the basis of "definite information"; as such the Assessing Officer had not proceeded within the meanings of S.177(4) of the Income Tax Ordinance, 2001 and there was no need to issue fresh notice under S.177(4) of the Income Tax Ordinance, 2001; that Appellate Tribunal could not appreciate the exact nature of proceedings despite clear mention in the show-cause notice; and relied on the issuance of fresh notice under S.177(4) of the Income Tax Ordinance, 2001; that had the proceedings been conducted under S.177 of the Income Tax Ordinance, 2001 the directions of High Court would have become operative but quite contrary to that the Assessing Officer opted to directly proceed under S.122(5) of the Income Tax Ordinance, 2001 on the basis of definite information; and as such findings of Appellate Tribunal that High Court's decisions were not complied with were based on an omission which needed rectification---Validity---Issue raised that the amendment order passed under S.122(1) read with S.122(5) of the Income Tax Ordinance, 2001 was independent of the earlier proceedings initiated before the judgment of High Court was not found to be correct from the facts of the case---Notices issued under S.122(9) of the Income Tax Ordinance, 2001 were on the basis of same facts and figures during the course of proceedings started after the notice issued under S.177(4) of the Income Tax Ordinance, 2001---Notice issued under S.122(9) of the Income Tax Ordinance, 2001 as on 23-6-2010, had stated that the directions of High Court had duly been complied with whereas the judgment of High Court was delivered on 8-6-2009 i.e. after the issuance of said notice---Appellate Tribunal after considering and discussing in detail all the facts of the case had given its opinion on the issue---Revenue failed to point out any mistake floating on the surface of the record or the order of the Appellate Tribunal requiring rectification under S.221 of the Income Tax Ordinance, 2001---Miscellaneous application of the Department was rejected by the Appellate Tribunal.

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

----S.122 (5)---Amendment of assessment---Definite information---CNG Filling Station---Formula of Oil and Gas Regulatory Authority [OGRA]---Issue as to whether the OGRA formula was a "definite information" or not stood resolved against the department and in favour of the taxpayer by decision of High Court and Appellate Tribunal in favour of taxpayer.

Messrs Shaheen CNG Station, Rawalpindi and others's case I.T.A. No.359/IB of 2011 and CIR v. Khan CNG Filling Station and others I.T.R. No.31 of 2012 rel.

Jawad, D.R. for Applicant.

Atif Waheed for Respondent.

Date of hearing: 10th September, 2013.

2014 P T D (Trib.) 600

[Inland Revenue Appellate Tribunal]

Before Sohail Afzal Accountant Member and Ch. Anwaarul Haq Judicial Member

Messrs RAZA APPARELS, FAISALABAD

Versus

CIR, RTO, FAISALABAD

S.T.A. No.1127/LB of 2009, decided on 25th September, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 10(4), 11(2), 7, 8, 26 & 73----Sales Tax Refund Rules, 2002---Refund of input tax---Rejection of---Taxpayer contended that it was primarily confronted with the allegation of "invoice summary not submitted" in the show-cause notice whereas orders of adjudicating authority as well as First Appellate Authority provide rejection of refund on the charge of "scrutiny for verification of input tax" which was not only illegal but also beyond the scope, stance and contents of show-cause notice---Validity---Allegation against the taxpayer was "invoice summary not submitted" which primarily levelled in the show-cause notice while at the time of passing order, the Adjudicating Authority as well as First Appellate Authority deviated from the said allegation and rejected the refund on the ground of "scrutiny for verification of input tax" which was not only illegal and unlawful but also beyond the scope, stance and contents of the show-cause notice---Charge which was neither framed in the show-cause notice nor confronted during the course of adjudication proceedings could not be adjudged through an adjudication order---Order was not sustainable as charge or controversy of "scrutiny for verification of input tax" 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 sub-judice before them as a part of show-cause notice---Nobody should be a judge in his own cause, thus in absence of any notice regarding a disputed issue, the authorities were not legally competent to pass an order---Orders of both the authorities being illegal and void ab initio were cancelled by the Appellate Tribunal and appeal of the taxpayer was accepted as prayed for.

2011 PTD (Trib.) 2124; 2010 PTD (Trib.) 451 and New Jubilee Insurance Company Ltd., Karachi v. National Bank of Pakistan, Karachi PLD 1999 SC 1126 rel.

1987 SCMR 1840 ref.

Khubaib Ahmad Taunsvi for Appellant.

Muhammad Arif, D.R. for Respondent.

Date of hearing: 19th September, 2013.

2014 P T D (Trib.) 604

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Riaz, Accountant Member

ISLAMABAD ELECTRIC SUPPLY COMPANY LTD. (IESCO)

Versus

COMMISSIONER OF INLAND REVENUE, RTO, ISLAMABAD

S.T.As. Nos. 137/IB, 22/IB and 141/IB of 2013, decided on 26th August, 2013.

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

----Ss.46 & 48(1)(b)---Sales Tax Rules, 2006, R.71(2)(b)---Appeal to Appellate Tribunal---Stay application---Taxpayer had already availed stay period of 120 days granted by the Appellate Tribunal during the pendency of main appeal, but this fact was concealed in the present stay application---Main appeal had already been decided by the Appellate Tribunal and no appeal was pending adjudication---Application for stay was misconceived and the same was rejected by the Appellate Tribunal being devoid of merit.

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

----Ss.46, 2(18), 30 & 57---Income Tax Ordinance (XLIX of 2001), Ss.2(2) & 130---Appellate Tribunal Inland Revenue Rules, 2010, Rr.9 & 13---Civil Procedure Code (V of 1908), O.VI, R.15 & O.III, Rr.2---Court Fee Act (VII of 1870), Sched. II, Art. 1---Appeal to Appellate Tribunal---Stay application---Deficiencies in stay application were that application had been filed without any instructions from the registered person, as it was not supported by any Authority letter or Power-of-Attorney from registered person; that through letter filed by an unauthorized person, it was alleged that the hearing of appeal never took place, whereas the record reflects that the appeal was heard, that presumption of truth attached to the official record unless proved otherwise; that contents of the rectification application were not supported by any duly sworn affidavit of the registered person; that application had never been signed by the registered person nor the same bore the seal of the public limited company/registered person; that no court fee had been affixed on the face of the application/letter; that application/letter had been addressed to the Registrar of Appellate Tribunal, which was contrary to the provisions of Ss.2(2) & 130 of the Income Tax Ordinance, 2001 and Rules of Appellate Tribunal; that application had been filed without impleading the necessary and proper parties; that application had been filed without annexing the necessary documents as required under R.11 of the Appellate Tribunal Inland Revenue and that application was filed under S.57 of the Sales Tax Act, 1990 and at the relevant time such provisions related to correction of clerical or arithmetical error in any assessment, adjudication, order or decision passed by the Officer of Inland Revenue---Expression "Officer of Inland Revenue" had been defined in S.2(18) of the Sales Tax Act, 1990 which meant an officer appointed under S.30 of the Sales Tax Act, 1990---Order passed by the Appellate Tribunal Inland Revenue could not be considered as order passed by the Officer of Inland Revenue and did not come within the ambit of the provisions of S.57 of the Sales Tax Act, 1990---Appellate Tribunal held that, in such circumstances, the application had not been filed by the registered person in accordance with the provision of law and the rules made thereunder and the same was dismissed being "not maintainable" and misconceived---Applicant company, however, may file a fresh rectification application after complying with the statutory provisions and rules made thereunder.

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

----S.46---Civil Procedure Code (V of 1908), O.III, R.2---Appeal to Appellate Tribunal---Stay application was supported by an affidavit which concealed the fact of stay period of 120 days already granted by the Appellate Tribunal during the pendency of main appeal and failed to disclose the fact of another stay application pending before the Appellate Tribunal---No authority/power-of-attorney was given to the authorized representative to present before the Appellate Tribunal---Rectification application having been dismissed , present stay application had become in fructuous and disposed of accordingly.

(d) Appellate Tribunal Inland Revenue Rules, 2010---

----Rr.7, 11, 12, 13, 15, 17 & 18---Procedure for filing appeal before Appellate Tribunal---Compliance of Rules---Appellate Tribunal directed the Registrar and Assistant Registrar of Appellate Tribunal that at the time of receiving of any application or appeal, to examine the documents in the light of observations of present judgment and strictly complied the Rules of Appellate Tribunal Inland Revenue.

M.M. Faisal Banday, FCA for KPMG Taseer Hadi and Co. for Applicant.

Zia Ullah Khan, D.R. for Respondent.

Date of hearing: 23rd August, 2013.

2014 P T D (Trib.) 654

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs INDEPENDENT NEWSPAPER CORPORATION (PVT.) LTD.

Versus

DEPUTY COMMISSIONER (IR) UNIT-4, E&C, ZONE-II, LTU, KARACHI

S.T.As. No.333/K of 2009 and Old No.K-14 of 2005, decided on 20th September, 2011.

Sales Tax Act (VII of 1990)---

----Ss.3, 13 & Sixth Sched., Cl.21---Unsold/returned/old newspapers---Supply of such newspapers again in market---Demand of sales tax on such supply treating same to be taxable supply of waste paper---Validity---Newspapers, books, journals and periodicals except directories had been given exception under S.13 read with Cl.21 of Sixth Sched., of Sales Tax Act, 1990---Disputed newspapers contained public news or comments on public news and other printed periodical works notified by Government, which could not be said to be waste paper---Appellant had not made supplies of waste paper, but had supplied newspapers not falling within ambit of taxable supplies---Appellate Tribunal set aside impugned orders in circumstances.

Messrs Brother Enterprises v. Deputy Collector (Adjudication), Karachi-III, Karachi-vide Sales Tax Appeal No.136 of 2001, decided on 21-12-2001; Messrs Al-Hilal Motors Stress and others v. The Collector of Sales Tax and Central Excise (East) and others 2004 PTD 868; Sales Tax Appeals Nos. 99 and 100 of 2002; Messrs D.G. Khan Cement Co., Ltd., and others v. The Federation of Pakistan and others 2004 SCMR 456 = 2004 PTD 1179 and 2001 SCMR 838 ref.

Messrs Nabi Bux Khoso v. Pakistan Television Corporation PLD 1982 Kar. 725 rel.

Shafqat M. Sagar for Applicant.

Azhar Memon, D.R. and Javaid Nawab, IR-Audit Officer for Respondents.

Date of hearing: 22nd June, 2011.

2014 P T D (Trib.) 689

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Farzana Jabeen, Accountant Member

I.T.As. Nos. 725 and 726/KB of 2012, decided on 8th February, 2013.

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

----Second Sched: Part-IV, Cl. (57), Ss.113, 120, 122(5A) & 122(9)---Constitution of Pakistan, Art. 25---CBR Circular No.1 of 2005 dated 5-7-2005---Exemption from specific provisions---Large trading house---Waiver of payment of minimum tax---Revenue contended that exemption in question was available to a new entity fulfilling the requirements of the law and the existing taxpayers fulfilling the said requirements could not avail the exemption---Company, in the present case, was incorporated in 1992 and had passed the period of ten years when the business operations were commenced; and the taxpayer (a large trading house) had fulfilled all the requirements as required under Cl.(57) of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001, but exemption from payment of minimum tax in circumstances, could not be allowed---Validity---Clause (57) of Part IV of Second Schedule to the Income Tax Ordinance, 2001 was introduced vide Finance Act, 2005 which was explained vide Circular No.1 of 2005 dated 5-7-2005 with an aim to exclude the large trading houses from Presumptive Tax Regime---Waiver from payment of minimum tax in case of large trading houses was introduced vide Finance Act, 2006 and a proviso was added to the effect that said large trading houses had been exempted from the application of minimum tax for the first ten years starting from the tax year in which the business operations commenced which led to the controversy that such exemption was meant only for the new business and not to the old ones irrespective of the fact that they fulfilled all the conditions as set forth in Cl.(57) of Part IV of Second Schedule to the Income Tax Ordinance, 2001---Second proviso to Cl.(57) of Part IV of Second Schedule to the Income Tax Ordinance, 2001 led to absurdity that a class of persons had been exempted from the payment of minimum tax by fulfilling of certain conditions and a class of persons who were also fulfilling all the conditions as set forth in Cl.(57) of Part IV of Second Schedule to the Income Tax Ordinance, 2001 had been excluded from availing the exemption available under the said clause---Held, that main object of introducing Cl.(57) of Part IV of Second Schedule to the Income Tax Ordinance, 2001 was to exclude the Large Trading Houses from Presumptive Tax Regime and further giving the waiver from payment of minimum tax---Taxpayers, who regularly had been contributing revenue to the exchequer under Presumptive Tax Regime, had been excluded from the benefits, whereas new business were given the exclusion from Presumptive Tax Regime and also the waiver of minimum tax---Such an inequality on similarly placed persons was beyond any rational, justification, reason and also violates the intention of the legislature clearly mentioned in Circular No.1 of 2005 dated 5-7-2005---Order of First Appellate Authority deleting the payment of minimum tax under S.113 of the Income Tax Ordinance, 2001 in the light of fulfilling all the conditions of Cl. (57) of Part IV of Second Schedule to the Income Tax Ordinance, 2001 was not open to exception; and the same remained undisturbed and the departmental appeal was also dismissed as effect of the second proviso attached to the Cl. (57) of Part IV of Second Schedule to the Income Tax Ordinance, 2001 putting embargo on exemption from payment of minimum tax by the taxpayer, being a large trading house, who had fulfilled all the required conditions was discriminatory, unjust unreasonable, absurd mischievous and violative of Art. 25 of the Constitution and was not based on any reasonable classification or distinction---Appeals filed by the Department were dismissed and relief allowed by the First Appellate Authority was confirmed by the Appellate Tribunal.

2010 PTD 1924; Olympia Synthetic v. Secretary, Industries Department Punjab and others 2004 PTD 1949; Alkaram CNG and others v. Federation of Pakistan and others 2011 PTD 1; 2010 PTD 2502; 1080 SCC Tax 124; 2008 ITA 649; 2001 PTD 2258; 2001 PTD 2484 and N S Bindra's Interpretation of Statutes rel.

(b) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----S. 4---Mode of payment by, and recovery from, industrial establishment---Deletion of Workers Welfare Fund---First Appellate Authority had followed the precedent set forth by the High Court and followed by the Appellate Tribunal---No exception could be taken to the findings and relief allowed by the First Appellate Authority deleting the levy of Workers Welfare Fund was confirmed by the Appellate Tribunal.

Muhammad Aleem for Appellant.

Mumtaz Ali Bhaio, D.R. for Respondent.

Date of hearing: 8th February, 2013.

2014 P T D (Trib.) 703

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Sohail Afzal, Accountant Member

C.I.R., R.T.O. FAISALABAD

Versus

Messrs IHSAN YOUSAF TEXTILE (PVT.) LTD., FAISALABAD

S.T.A. No. 186/LB of 2010, decided on 23rd September, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 11, 2(14), 2(37), 4, 7, 8, 8A, 10, 22, 26, 33, 34, 36(1) & 73---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Department observed that taxpayer had illegally claimed/received refund of input tax against invoices of a supplier, who had been declared black-listed by the department and a show-cause notice was issued for recovery of refunded amount of sales tax along with default surcharge and penalty---Taxpayer contended that the order of black-listing of the supplier had been set aside and was not holding the field anymore and that recovery of already sanctioned amount of sales tax against his invoices was illegal, unlawful and unjustified as the blacklisting order of the supplier ceased to have any legal effect and remained no more in the field and could not be pressed into service for disallowing the input tax against invoices issued by him---Validity---Transactions of the taxpayer had taken place during the period when the alleged supplier was enjoying his status as an 'operative person' and was not a black-listed unit and his subsequent inclusion in that very list in the surpassing years could not be made applicable retrospectively---Since at the time of business transactions, the status of the supplier unit was operative, its subsequent inclusion as black listed/suspected one through an executive order could not be operative retrospectively---Grounds of appeal agitated by the revenue against the order of First Appellate Authority were not tenable in the eye of law---Order of First Appellate Authority was not suffering from any irregularity, illegality and infirmity and did not warrant any interference by the Appellate Tribunal and the same was confirmed and upheld---Appeal being devoid of any merit was rejected by the Appellate Tribunal.

2012 PTD (Trib.) 754; 2012 PTD (Trib.) 946 and 2012 PTD (Trib.) 1736 ref.

2005 SCMR 492; 2011 PTD (Trib.) 791 and 2010 PTD (Trib.) 1675 rel.

Muhammad Asif, D.R. for Appellant.

Khubaib Ahmad Taunsvi for Respondent.

Date of hearing: 19th September, 2013.

2014 P T D (Trib.) 707

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Sohail Afzal, Accountant Member

Dr. WAJID RAZA JAFRI, LAHORE

Versus

C.I.R. ZONE-IX, R.T.O., LAHORE

I.T.A. No.681/LB of 2013, decided on 5th September, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.121(1)(d), 177 & 120---Best judgment assessment---Tax year 2008---Taxpayer contended that assessing officer was not justified to pass order under S.121(1)(d) when a valid return had been filed; and First Appellate Authority was not right to remand the case for de novo proceedings---Validity---Prior to amendment brought about in Ss.121 & 177(10), through Finance Act, 2010, S.121(1)(d) of the Income Tax Ordinance, 2001 did not apply to cases where return of total income had been filed and it did not envisage a second assessment order---Appellate Tribunal in circumstances, annulled the orders of both the authorities below.

2013 PTD 837 and I.T.A. No.773-6/IB of 2012 rel.

Ch. Muhammad Saleem Jahangir for Appellant.

Muhammad Nazir Rizvi, D.R. for Respondent.

Date of hearing: 16th July, 2013.

2014 P T D (Trib.) 770

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Sohail Afzal, Accountant Member

BISMILLAH PACKAGES, LAHORE

Versus

COMMISSIONER OF INLAND REVENUE, R.T.O.-1, LAHORE

S.T.A. No.228/LB of 2012, decided on 7th October, 2013.

Sales Tax Act (VII of 1990)---

----Ss.8 (1)(ca), 2(37), 3(1), 6(2), 7(1), 7(2), 8(1)(d), 8A, 22(1), 23(1) & 26(1)---Tax credit not allowed---Joint liability---First Appellate Authority found that the suppliers of the taxpayer were blacklisted and they did not deposit the tax into the government treasury and taxpayer was not entitled to claim of input in terms of S.8(1)(ca) of the Sales Tax Act, 1990---Validity---Department was not within the ambit of law while passing the order against the taxpayer for the reason that the suppliers in question were operative during the period under consideration when the business/transaction took place---If such was allowed to happen then the business would come to halt because nobody would know with regard to fate of its business concern if the subsequent events like declaring a taxpayer blacklisted were allowed to cover the period when the other business concern with whom it was dealing with, was operative and the registered person who had been called upon to show-cause entered into business transaction with the subsequently blacklisted business in good faith and as per prevailing conditions at that time---Appeal of the taxpayer was allowed and orders passed by the lower officers were directed to be vacated.

2011 PTD 2332; 1993 PTD 713 and 2005 SCMR 492 ref.

Messrs D.G. Khan Cement Ltd. v. Federation of Pakistan and others Writ Petition No.3515 of 2012 rel.

M. Nazeer Chauhan for Appellant.

M. Asif, D.R. for Respondent.

Date of hearing: 23rd September, 2013.

2014 P T D (Trib.) 842

[Inland Revenue Appellate Tribunal]

Before Ch. Munir Sadiq, Judicial Member and Sohail Afzal, Accountant Member

I.T.As. Nos. 894 to 896/LB and 1147 to 1149/LB of 2012, decided on 24th October, 2012.

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

----Ss. 53, 70, Second Sched., Part 1, Clause (132)---Business of Electric Power Generation---Rental income---Taxation---Exemption, claim for---Taxpayer who was engaged in business of Power Generation, claimed exemption on rental amount recovered from employees in respect of accommodation facilities provided to employees---Department denied claim of taxpayer on the ground that rental income did not constitute profit and gain of Electric Power Project---Department charged rental amount of tax at full corporate tax rate---First Appellate Authority partly accepted the appeal of taxpayer holding that those amounts were properly chargeable to tax, but at rates applicable to property income---Taxpayer dissatisfied with said order of First Appellate Authority filed present appeal---Contention of taxpayer was that rental income constituted recoupment of salary expense, incurred in the form of payment of remuneration to employees; which for taxation purposes, under the provisions of S.70 of Income Tax Ordinance, 2001 was required to be excluded from the gross salary expenditure of the taxpayer for the respective years instead of being treated as separate source of income i.e. rental income---Validity---While determining charge of tax, the authorities must take into account the 'substance' of the transaction---Taxation on the basis of "form" of the transaction was deprecated by Superior Courts---In terms of "substance" of the transaction, present case was a case of recoupment of salary expenses, which under the law, was properly required to be dealt with under the head income from business regarding which the taxpayer would remain entitled to exemption---No tax could be separately levied on that amount; which for taxation purposes was required to be considered as a deduction from gross salary expenditure---Taxpayer was entitled to exemption under clause (132) of Part I of the Second schedule, in circumstances.

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

----Ss. 67 & 122(5-A)---Income Tax Rules, 2002, R.13---Non proration/ apportionment of common expenditure to the income charged to tax---Amendment of assessment---Taxpayer was aggrieved by non-allowing of proportionate common expenditure against income charged to tax by the Additional Commissioner, as required under S.67 of Income Tax Ordinance, 2001, read with provisions of R.13 of Income Tax Rules, 2002---Contention of Representative of the taxpayer was that it was not disputed that pursuance to issuance of amendment of assessment order, part of the income was held to be chargeable to tax; whereas business income was held to exempt from levy of tax---Plea of taxpayer was that Additional Commissioner was duty bound to apportion common expenditure as was contemplated in the said provisions of law---Representative of the department could not rebut the proposition---Provisions of law on the subject being clear, appeal of the taxpayer was accepted with the direction to Taxation Officer to allow deduction of common expenditure against income chargeable to tax in terms of mechanism provided in R.13 of the Income Tax Rules, 2002.

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

----S. 65---Tax credit, entitlement to---Terms and conditions as set out in provisions of S.65(a)(b) of Income Tax Ordinance, 2001 for relevant years were adequately met by the taxpayer---First Appellate Authority in the impugned order denied benefit of tax credit to taxpayer by observing that since income of the taxpayer from main operation had not been charged to tax, tax credits could not be allowed against income from other sources---Validity---Departmental retrospective could not bring anything contrary to the decisions relied upon by the taxpayer, which were even otherwise full of reasoning and justifications---Similar matter having already been decided in favour of the taxpayer at the level of the Tribunal (1989 PTD 1185) no exception could be taken to the same Appeals of the taxpayer were accepted on that point in terms of the said decision and it was held that full credit be allowed to the taxpayer under S.65(a)(b) of Income Tax Ordinance, 2001.

1989 PTD 1185 and I.T.A. No. 5862/LB of 2005 dated 7-11-2006 rel.

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

----Ss. 18, 72, Second Sched., Part I, Clauses 132 & 176---Taxation of insurance claim receivable by taxpayer on account of loss of capacity revenue---Taxpayer doing business of power generation was not capable of producing energy because its plant was hit by devasting flood, which made it non-operational---Taxpayer during such period was not maintaining the capacity as contemplated in the Power Purchase Agreement executed with the Government---Company of taxpayer was eligible to recover from the Government, the revenue on account of capacity purchase price---Amount on that account remained recoverable by the assessee company from an insurance company, as it had already insured its loss of profits on account of capacity payments---Amount being recoverable from the insurance company was recognized by the taxpayer in the financial statements---Said amount had been subjected to tax by the Additional Commissioner by holding the same to be income from other sources---No separate reason had been advanced by Additional Commissioner for bringing that amount to charge of tax---Said amount had been treated at par with other amounts already dealt with in said order---No exception could be taken to the exemption under clause 132 of Schedule Second, Part I which was available to income covered by S.18 of Income Tax Ordinance, 2001, dealing with "income from business"---Nature of the receipt of amount paid by the insurance company, was in no way different, or what it would have been, if the amount otherwise resulting into insurance claim had been received in ordinary course of transaction---Business income of the taxpayer enjoyed exemption under clause 132, insurance claim according to the taxpayer in circumstances, being a component of business income, remained exempt from levy of tax---First Appellate Authority had misdirected itself, when it observed that said amount did not constitute income from business---Orders of authorities below were vacated by Appellate Tribunal---Amount accruing to the taxpayer as insurance claim on account of loss of capacity, was rightly claimed as exempt by the taxpayer.

2007 PTD (Trib.) 2615; Uch Power Company Ltd. v. Income Tax Appellate Tribunal and others 2010 PTD 1809; I.R.C. v. J. Gliksten and Sons Ltd. (1929) 14 TC 364; 2006 PTD (Trib.) 288 and 1985 PTD 136 ref.

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

----Ss. 18, 22 & 131, Second Sched., Part I, Cl. (132), Part IV, Cl. (11-A)(v)---Income from business---Depreciation---Exemption---Department in its appeal filed before Appellate Tribunal had assailed the issues i.e. allowability of expense against interest income; taxation of gain on sale of fixed assets; taxation of exchange gain; taxation of liabilities written back; taxation of scrap sales; and minimum tax liability---Impugned order showed that first Appellate Authority, though agreed with the Additional Commissioner regarding non-availability of exemption under cl. (132) of Schedule Second, Part I of Income Tax Ordinance, 2001, but issued direction to the taxpayer that documentary evidence should be produced regarding interest expenses incurred in connection with earning of interest income and held that expense to that extent should be allowed---Said matter had already been decided in the taxpayer's own case by Appellate Tribunal which decision of the Tribunal, was to be followed---Appeals filed by the department on that issue, failed---Plea of department was that first Appellate Authority was not justified in holding that gain on sale of fixed assets remained covered by the exemption proviso---First Appellate Authority observed in the impugned order that since in terms of provisions of S.22 of Income Tax Ordinance, 2001 gain resulting from sale of fixed assets remained strictly, and exclusively chargeable to tax as income from business, exemption was fully applicable---In the present case subject gain fell within the scope of S.18 of Income Tax Ordinance, 2001 dealing with income from business---No exemption was allowed in the impugned order---Issue of taxation of liabilities written back having properly been dealt with by First Appellate Authority, no interference was warranted in the order of the First Appellate Authority which was upheld---Income from sale of scrap was again charged to tax by Additional Commissioner by relying upon the decision of Tribunal in case 2006 PTD (Trib.) 288---Basis for imposing tax was that Income was in the nature of ancillary income; First Appellate Authority decided the matter in favour of the taxpayer by relying upon the latter decision of the Tribunal in case 2011 PTD 2440, which being subsequent in time, would take lead over the one primarily relied upon by the Additional Commissioner---Decision of First Appellate Authority was found to be fair, and not open to any exception---Order of First Appellate Authority was upheld on that issue---Matter related to charge of minimum tax on capacity revenues and taxpayer being engaged exclusively in the business of sale of electricity, all other forms of revenue, contemplated in the Power Purchase Agreement, were nothing, but consideration for sale of electricity---All receipts under the Power Purchase Agreement would be treated as consideration for sale of electricity; since exemption from levy of minimum tax was available to sale revenue, same would also apply to other type of revenues---Appeal on that issue also failed.

2006 PTD (Trib.) 288; I.T.A. No.622/LB of 2008; I.T.A. No.742/IB of 2011 and 1994 PTD 1171 ref.

Asim Zulfiqar FCA for Appellant.

Mian Asghar Ali Gurdaspuri, LA and Aftab Alam D.R. for the Respondent.

Date of hearing: 24th October, 2012.

2014 P T D (Trib.) 920

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

Messrs ZEAL PAK CEMENT FACTORY LTD. HYDERABAD

Versus

COLLECTOR OF CUSTOMS, SALES TAX, HYDERABAD

C.E. No. 42/K of 2009, decided on 16th March, 2011.

(a) Central Excise Rules, 1944---

----R.10---Recovery of duty short-levied or erroneously refunded, etc.---Limitation---Damaged stock---Show-Cause Notice for recovery of duty---Contravention was related to production of 1996 which had been acknowledged by the department in their letter dated 9-2-2004---No Sub-rule of R.10 of Central Excise Rules, 1944 had been mentioned in the show-cause notice, which itself was an illegality---No date of contravention was mentioned in the show cause notice as well as at the time of hearing---Time limit prescribed under R.10(1) of Central Excise Rules, 1944 for issuance of notice was 3 years and under R.10(2) of Central Excise Rules, 1944 the time period prescribed was 5 years at the time of issuance of Show-Cause Notice, period of production being year 1996, show-cause notice issued on 13-5-2004 was clearly time barred---Show-Cause Notice being void ab initio and illegal order in original was annulled on this issue by the Appellate Tribunal.

2005 PTD 1378; 2003 PTD 1593; SPRA No.266 of 2008 and Zamindar Paper and Board Mills v. Collector and others 2003 PTD 1257 rel.

1992 SCMR 1898; Pattoki Sugar Mills v. Collector PTCL 2002 CL 12 (Pg 18) and Federation of Pakistan v. Ibrahim Textile Mills Ltd. 1992 SCMR 1989 ref.

(b) Central Excise Act ( 1 of 1944)---

----S.33---Power of adjudication---Limitation---Show-Cause Notice was issued on 13-5-2004---On the date of order departmental official was mandated to finalize the assessment within 45 days of the issuance of Show-Cause Notice---No extension was granted which was clear from the order-in-original and record---Order-in-Original was passed after about 13 months (404 days), therefore same was time barred---Where law prescribed period of time for recovery of money, after lapse of such prescribed period, recovery was not enforceable---Order-in-Original dated 23-6-2003 was time barred and not sustainable in law which was cancelled by the Appellate Tribunal.

Federation of Pakistan v. Ibrahim Textile Mills Ltd. 1992 SCMR 1989; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd., v. Collector of Sales Tax 2008 PTD 60; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others 2009 PTD 762; Hanif Straw Board v. Addl Collector 2008 PTD 578; Messrs Abbasi Enterprises v. Collector of Sales Tax, Peshawar 2008 PTD 2025; 2013 PTD (Trib.) 2252; 2008 PTD 2025 and 2011 PTD 454 (Trib.) rel.

(c) Constitution of Pakistan---

----Art. 254---Failure to comply with requirement as to time does not render an act invalid---Limitation---Application of---Article 254 was only applicable to act or thing required to be done by the Constitution and does not apply to ordinary laws.

(d) Central Excise Rules, 1944---

----R.56---Cement---Damaged stock---Laboratory report---Show-Cause Notice on the basis of incorrect laboratory report---Validity---Test report in respect of samples A & C had same Chemical constituents as sample B which the customs report mentioned that same might constitute cement---Chemical constituents were constituents of cement as per Pakistan standards 232 for cement---Customs Laboratory report did not comply with requirements of Pakistan standard PS 232-1983(R) "Chemical Composition" test i.e. Lime Saturation Factor (LSF)---Tax-payer contended that said test was never carried out; and major component of LSF were present in all three samples and clinker/cement had lost binding force/setting due to long exposure to atmosphere---Tax-payers in good faith had re-started the factory in February 1998 and had informed Central Excise authorities by their letter dated 5-3-1998---Even Collector (adjudication) was not convinced with the Customs Laboratory report and had directed to re-examine the damaged stock to ascertain if the same could be used to manufacture cement---Such re-examination was not carried out by the Collectorate---Report of Customs Laboratory supported the contention of the tax-payers that their cement/clinker had lost setting properties and was damaged---Such fact was confirmed by Customs Laboratory in respect of all three samples---Entire contravention report was based on misreading of report of customs laboratory and was mare presumption---Cement/clinker was damaged due to long exposure---No contrary evidence had been brought on recorded about the date of contravention or how such large quantity of cement/clinker was removed from factory specially when the factory was under fulltime supervised clearance and full time Excise Inspector was posted at the factory---Very basis of contravention report as mentioned in Show Cause Notice being report of Customs Laboratory was incorrect and contradictory and as such Show Cause Notice was illegal and was without any basis or evidence---Order-in-Original being consequence of said Show-Cause Notice was also illegal and was cancelled by the Appellate Tribunal.

Abid Shaban for Appellant.

Muhammad Ali Wasan, Assistant Director; Farhatullah Jaffiri SIO and Parviz Sadiq SIO for Respondents.

Date of hearing: 16th March, 2011.

2014 P T D 935

[Inland Revenue Appellate Tribunal]

Before Faheemul Haq Khan, Accountant Member and Muhammad Jawed Zakaria, Judicial Member

C.I.R. (LD), L.T.U., Karachi

Versus

Messrs PAKISTAN REFINERY LIMITED

I.T.A. No.74/KB of 2010, and 84, 178, 179 of 2011 decided on 2nd December, 2013.

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

----Ss.67 & 122(5A)---Income Tax Ordinance (XXXI of 1979), First Sched: Part-IV---Income Tax Rules, 2002, Rr.13 & 231---Income Tax Rules, 1982, R.216---S.R.O. 392(I)/2009 dated 19-5-2009---S.R.O. 58(I)/2010 dated 2-1-2010---Apportionment of deductions---Reasonable basis---Oil Refinery---Exports---Local sale---Taxpayer contended that reasonable basis, in the present case, would be the nature of activity i.e. processing of Crude Oil and size of activity in reference to input of material and output thereof; that expenses incurred whether direct or indirect be apportioned in reference to volume of activity, that output should be a basis of apportionment of all direct and indirect expenses; that this would be a reasonable basis in the context of price ceiling on the sales in the local market and free yield of exported items; that S.67 of the Income Tax Ordinance, 2001 required apportionment of deductions for common expenditure and such apportionment was to be made on a reasonable basis taking account of the relative nature and size of the activities; that though turnover basis of apportionment of deduction was mentioned in R.13(3) of the Income Tax Rules, 2002, a taxpayer could also adopt a different basis if the same was reasonable; that turnover was residuary basis for 'common expenses', mainly being costs other than raw materials, for which reasonable basis could not be ascertained; and in substance, sub-Rule 13(3) of Income Tax Rules, 2002 did not apply for the apportionment of 'cost of raw materials'; where there was almost a certain reasonable basis available for allocation of costs; and that in the return, for the purposes of apportionment of deductions , cost of crude oil was apportioned in the ratio of quantity sold as against the contention of the department that apportionment should have been made in the ratio of turnover---Validity---In the present case, a favourable position of tax payment was dependent upon the fundamental variables i.e. (i) Import price of Crude Oil (Price in the International market) (ii) Local Sale Price of Products (Percentage share of products with or without price ceilings) (iii) Export Sale Price of "Neptha" (iv) Yearly Tax rates applicable on FTR & NTR and (v) Volume of activity---All variables had a complete dependence on amount/currency---Any one of the variables will alter the tax burden on yearly basis/on periodical basis and in that scenario, there could be no permanent basis to apportion the expenses to work out the profits assessable under Presumptive Tax Regime and Normal Tax Regime because due to change in the said variables, one favourable basis would turn into adverse basis and every year a now basis could not be adopted to benefit the taxpayer---Which is highly for seeable in the volatile international oil market---Reasonable basis should have a life and reasonable permanence in it instead of a reasonable basis changing every year---Rupee (Currency) value of sales was the most reasonable denominator to apportion the direct and indirect common expenses---Appeal of the department was allowed by the Appellate Tribunal and that of the taxpayer failed on the issue.

2013 PTD 2095; PTD 1961 SC 375; (1999) 80 Tax 217; PLD 1997 SC 582 = 1997 PTD 1555; PLD 2002 Pesh. 118; PLD 2002 Lah. 369 and 2000 CLC 1583 ref.

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

----S.67---Income Tax Rules, 2002, Rr.13(3), 231(1)(a) & 231(1)(b)----Apportionment of deductions---Computation of export profits and tax attributable to export sales---Separate accounts---Separate books of accounts---Taxpayer contended that if separate accounts were maintained then the profit on export business was to be determined on the basis of such account, otherwise the profit for export business was to be taken to be an amount determined in the ratio of export sales to total sales; that the tax department was erroneously taking a view that the 'separate accounts' mean 'separate books of accounts'; that though the Refinery had not maintained separate books of accounts for export business, it had made separate accounts for the export business; and that its income for export business was to be determined on the basis of R.231(1)(a) and not R. 231(1)(b) of the Income Tax Rules, 2002---Validity---Question of separate account or separate books was not only irrelevant but also unable to lead towards a definite and undisputed conclusion---Maintenance of separate account of all heads of income, expenditure, assets, liabilities, profits, losses or equity for income derived from exports and income derived from local sales had neither been maintained by the taxpayer nor it was possible in the case of nature of business---Bifurcation of core activity assessable under Normal Tax Regime and Presumptive Tax Regime, ascertaining their mutual ratio, would ultimately provide the basis to allocate inseparable common expenses---In the absence of all "accounts" maintained separately, the methodology given in R.13(3) of the Income Tax Rules, 2002 read with S.67 of the Income Tax Ordinance, 2001 had its universal application.

(c) Income Tax---

----Accounting---Without mention of value of goods and sequences, the "account" communicate no meanings---Purpose of accounting was to provide the financial information that is needed for economic decision making---Four fundamental financial statement i.e. Balance Sheet, Income Statement, Statement of Owner's Equity and Statement of Cash flow would become meaningless if element of currency was taken out of them---Similarly, description, measurement, valuation and interpretations of economic activities budgetary and forecasts based on currency alone.

(d) Income Tax---

----Functional currency---Importance of---"Functional currency" as a bench work applicable to selling price, transactions with local or foreign markets, cash flow, financing, expenses and other inter-business transactions---"Currency" is universal and sole mode of measurement analysis, reporting, monitoring and projecting the organizational activity---On the contrary, an accounting presentation based on quantities would not only be quite absurd but also be unable to express some material areas of activity i.e. depreciation, intangibles, dividend, loan, work out equity, repair and maintenance etc.---Currency is common denominator indicating all the parts into which one whole is divided.

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

----S.67---Apportionment of deductions---"Reasonable"---"Reasonable" is a relative term and it donates sound thinking within the bond of common sense possessing the faculty of reason---Reasonability is contingent upon time, acts and aggregate facts---Reasonable basis is linked with relative nature and size of business activities as represented by the amount.

PLD 1997 582 = 1997 PTD 1555; PLD 2002 Pesh. 118; PLD 2002 Lah. 369 and 2000 CLC 1583 ref.

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

----S.67---Apportionment of deductions---Reasonability demands a method comprehendible to all, a basis having universal application at least upon the cases of identical nature, in accordance with all applicable laws, perpetualeteruality in it and prudently meaningful for all the stakeholders and in the context of S.67 of the Income Tax Ordinance, 2001, reasonability is dove-tailed with nature and size of the activities represented by the related amounts.

PLD 1997 SC 582 = 1997 PTD 1555; PLD 2002 Pesh. 118; PLD 2002 Lah. 369 and 2000 CLC 1583 ref.

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

----S.32---Method of accounting---Change in---Taxpayer agitated upon the change in method of accounting not allowed by the First Appellate Authority as the taxpayer failed to obtain the prior approval from the Commissioner---Provision of S.32 of the Income Tax Ordinance, 2001 were very clear on the issue---Permission from commissioner having not been obtained by the taxpayer, said change might have resulted in deferment of income or so and may not be material after five years.

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

----Ss.24 & 25---Consultancy expenses---Amortization of---Consultancy expenses (feasibility study) were amortized by the assessing officer as cost of intangible asset---In the case of any conflict among IAS-38 of S.24 or S.25 of the Income Tax Ordinance, 2001, the statutory provisions would prevail upon---Advantage of benefit of such expense beyond one year had not been denied by the taxpayer at any stage---Treatment meted out by the two officers below did not call for any interference and the addition was maintained by the Appellate Tribunal.

(i) Income Tax---

----Re-joinder/rebuttal---Non providing of opportunity to file re-joinder/ rebuttal on the comments---First Appellate Authority allowed due opportunity to both the parties and considered it sufficient not to have another round of cross arguments---Plea that further opportunities were not granted, was neither worth consideration neither material in the circumstances of the case---None of the parties was able to claim that it remained unheard---Appeal of the taxpayer was rejected on this count.

Zulfiqar Ali Memon, D.R. for Appellant (in I.T.A. No.74/KB of 2010).

Shabbar Zaidi, FCA for Respondent (in I.T.A. No.74/KB of 2010).

Shabbar Zaidi, FCA for Appellant (in I.T.As. Nos.84/KB, 178/KB and 179/KB of 2011).

Zulfiqar Ali Memon, D.R. for Respondent (in I.T.As. Nos.84/KB, 178/KB and 179/KB of 2011).

Date of hearing: 25th October, 2013.

2014 P T D 992

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, Judicial Member and Sajjad Ali, Accountant Member

Messrs MAGNA PROCESSING INDUSTRY (PVT.) LTD., FAISALABAD

Versus

COMMISSIONER INLAND REVENUE (ZONE-I), (R.T.O.), FAISALABAD

M.A. (Stay) No.27/LB of 2014 and S.T.A. No.1245/LB of 2013, decided on 8th January, 2014.

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

----S. 4---S.R.O. 1125(I)/2001 dated 31-12-2011---FBR Letter C.No.4 (6) Sales Tax Act, 1990-L&P/2001-50774 dated 7-4-2012---Zero rating---Sales tax on electricity bills---Creation of liability by the "CREST"---Application for grant of zero rating facility of sales tax on electricity bills was not recommended to the Federal Board of Revenue on the ground that sales tax liability on discrepancies pointed out by the "CREST" had been adjudged against the taxpayer---Validity---Taxpayer was duly entitled for zero-rating of sales tax facility on electricity bills as being manufacturer-cum-exporter engaged in zero-rated supplies of textile and textiles articles thereof under S.4 of the Sales Tax Act, 1990 and sales tax paid on electricity bills always become due for refund incurred in connection with such zero-rated exports under S.10 of the Sales Tax Act, 1990 causing undue blockage of money in the national exchequer for a protracted period of time---No reason what to say plausible, had been given that likewise manufacturer-cum-exporters engaged in exports of textile and textiles articles thereof including taxpayer's sister concern unit had already been availing this facility despite the fact that almost all of them had undergone a similar thresh of discrepancies pointed out by the "CREST" and such facility was still continuously available to them even the taxpayer himself had already been availing sales tax zero-rating in case of natural gas through STGO No.17/2007 dated 13-9-2007 whereby zero-percent sales tax was being charged on gas bills and by way of said zero-rating facility, the taxpayer was not to undergo the cumbersome process of refunds and his funds were not stuck up with the tax functionaries for a long period in case of natural gas conversely in case of electricity why the taxpayer was kept restrained from such facility---Similar facility of zero-rating sales tax in case of electric power as already available to likewise manufacturer-cum-exporters could be extended to the taxpayer as well because a facility allowed to some and denied to one was by all means a discrimination---Registered Person deserved for such relief as applied for grant of facility of zero-rating of sales tax on electric bills---Matter was remanded to First Appellate Authority by the Appellate Tribunal with the directions that taxpayer be given reasonable opportunity of being heard before passing a speaking order and should not be discriminated unlawfully.

Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 and Government of Punjab v. Naseer Ahmad Khan through L.Rs. and others 2010 SCMR 431 rel.

(b) Constitution of Pakistan---

----Art. 25---Equality of citizens---Doctrine of equality, as contained in Art. 25 of the Constitution, enshrines the golden rules of Islam; it states that every citizen, no matter how highsoever, must be accorded equal treatment with similarly situated persons---Basic rule for the exercise of such discretion and reasonable classification is that all persons placed in similar circumstances must be treated alike and the reasonable classification must be based on reasonable grounds in a given set of circumstances, but the same in any case must not offend the spirit of Art. 25 of the Constitution.

Khubaib Ahmad Taunsvi for Appellant.

M. Nazir Rizvi, D.R. for Respondent.

Date of hearing: 8th January, 2014.

2014 P T D 997

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, (Judicial Member)

C.I.R. ZONE-I, R.T.O., SIALKOT

Versus

Messrs ALBA ENGINEERING COMPANY, DASKA

I.T.A. No.1125/LB of 2011, decided on 28th January, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.39(c), 115(4) & 122(1)---Income from other sources---Compensation on delayed refund---Addition---First Appellate Authority asserted that compensation allowed by the department was receipt of capital nature and not chargeable to tax and deleted the addition made on account of compensation received on the delayed disbursement of refund---Revenue contended that in terms of S.39 of the Income Tax Ordinance, 2001, the taxpayer was liable to declare the compensation in return of income---Validity---No exception could be taken to the treatment as accorded by the First Appellate Authority which was found to be reasonable in the ambient circumstances of the case which was also consistent with the statutory stipulation obtaining in law at the relevant time---When compensation admittedly pertained to refund due to the assessee and not disbursed in time by the department, such compensation was capital in nature and hence not taxable---Provisions of S.39(c) of the Income Tax Ordinance, 2001, wherein it was provided that additional payment on delayed refund under any tax law come under the purview of "income from other sources", was not applicable to the period under reference i.e. tax year 2008, as the said provision of law was brought on the statute book through Finance Act, 2012---Order of First Appellate Authority was maintained by the Appellate Tribunal.

2006 PTD (Trib.) 1800 rel.

Farhat Hayat Shah, D.R. for Applicant.

Syed Abid Raza Kazmi along with Rauf Ahmed Butt for Respondent.

Date of hearing: 28th January, 2014.

2014 P T D 1004

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, Judicial Member and Muhammad Anwar Goraya, Accountant Member

Messrs HOSPITALITY ENTERPRISES (SALT N PAPER) LAHORE

Versus

ADDITIONAL COLLECTOR-III, CUSTOMS AND SALES TAX, LTU, LAHORE

M.As. Nos. 281/LB and 282/LB of 2012, decided on 8th November, 2013.

Sales Tax Act (VII of 1990)---

----S.46---Appellate Tribunal Inland Revenue Rules, 2010, Rr.9 & 13---Civil Procedure Code (V of 1908), O.VI, R.15---Appeal to Appellate Tribunal---Miscellaneous application for recalling of order---Maintainability---Representative of the taxpayer appeared and contended that case was adjourned for 21-6-2012, however in the diary he inadvertently noted the date of hearing as 22-6-2012 instead of 21-6-2012 and could not attend the hearing on 21-6-2012, his non-appearance was neither deliberate nor wilful; and that appeals of the taxpayer be recalled and decided on merits---Validity---Case was adjourned for 21-6-2012 and the adjourned date was duly noted by the Authorized Representative on the order sheet; miscellaneous application had been filed without any instructions from the taxpayer, as it was not supported by an Authority Letter or Power-of-Attorney from the taxpayer, matter being a fresh cause of action; application had neither been signed by the taxpayer nor it bore the seal of the registered person; contents of the application were not supported by an affidavit of the applicant as required under R. 13 of the Appellate Tribunal Inland Revenue, Rules, 2010 and the provisions of O. VI, R. 15 C.P.C. read with High Court (Lahore) Rules and Orders; applications had been filed without impleading the necessary and proper parties as required under R.9 of the Appellate Tribunal Inland Revenue, Rules, 2010; under the law only Commissioner Inland Revenue was necessary party in whose absence no effective adjudication could be made, whereas the applicant impleaded the Additional Collector, Customs and Sales Tax; it was alleged that "the titled appeal came up for hearing on 21-6-2012 which was dismissed, while the fact of the matter was that no appeal of the taxpayer was fixed for judicial scanning or dismissed on 21-6-2012 and original appeals were disposed off vide order dated 12-10-2011; actually, vide order dated 21-6-2012, taxpayer's miscellaneous applications were dismissed for want of prosecution; taxpayer's hands were smeared with suppression of material facts as main appeals were disposed of vide order dated 12-10-2011; and later on, the taxpayer moved application for recalling of order dated 12-10-2011, which was dismissed for non-prosecution on 6-2-2012; and taxpayer again filed miscellaneous application for recalling of such application, which was accepted and said miscellaneous application was restored to its original number vide order dated 16-4-2012; and miscellaneous application was again dismissed for non-prosecution vide order dated 21-6-2012; and all these important facts were not only withheld rather concealed by the taxpayer while institution of present miscellaneous application---Application had not been filed by the taxpayer in accordance with the mandatory and imperative provisions of law and rules made thereunder---Such application was dismissed by the Appellate Tribunal being "not maintainable" and misconceived.

Umer Gill for Appellant.

Muhammad Nazir Rizvi, D.R. for Respondent.

Date of hearing: 8th November, 2013.

2014 P T D 1007

[Inland Revenue Appellate Tribunal]

Before Abdul Nasir Butt, Accountant Member and Shahid Masood Manzar, Judicial Member

COMMISSIONER INLAND REVENUE, ZONE-III, LARGE TAXPAYERS UNIT, LAHORE

Versus

Messrs SARENA INDUSTRIES AND EMBROIDERY MILLS (PVT.) LTD.

I.T.A. No.109/LB of 2011, decided on 12th September, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122 (5A), 113 & 128(5)---Amendment of assessment---Gain on disposal of assets---Taxation ---Levy of minimum tax on aggregate turnover from all sources---Revenue contended that First Appellate Authority wrongly deleted the addition made on account of taxable gain on disposal of assets and levy of minimum tax under S.113 of the Income Tax Ordinance, 2001 on aggregate of turnover from all sources---Taxpayer contended that no accumulated depreciation had been claimed by the taxpayer as machinery was imported and leased back; thus, First Appellate Authority rightly deleted the addition made on account of taxable gain on disposal of assets as no accumulated depreciation had been claimed; and issue of charging of minimum tax had not been confronted, hence there was no justification to charge minimum tax---Validity---First Appellate Authority observed that "as per lease agreement imported machinery was leased out to leasing company and there was no figure of depreciation in the audited accounts as given by the Taxation Officer in the body of order; and as per schedule of fixed assets in the audited accounts, there was addition in machinery and subsequently this addition had been reduced; and accumulated depreciation had no concern with the machinery imported during the year; and addition made on account of taxable gain was without examination of record, it stands deleted"---First Appellate Authority had given full justification keeping in view the legal and factual position of the case and no interference was required---Order of First Appellate Authority was upheld by the Appellate Tribunal and departmental appeal was dismissed.

2003 PTD (Trib.) 1135 and I.T.A. No.6249/LB of 2004 ref.

Muhammad Tahir, D.R. for Appellant.

M. Iqbal Hashmi for Respondent.

Date of hearing: 12th September, 2013.

2014 P T D 1016

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, Judicial Member

Messrs COSLAB (PVT.) LTD., BOSAN ROAD, MULTAN

Versus

C.I.R., ZONE-II, R.T.O. MULTAN

I.T.A. No.291/LB of 2012, decided on 24th January, 2014.

Appellate Tribunal Inland Revenue Rules, 2010---

----R.15---Income Tax Ordinance (XLIX of 2001), Ss.161, 205 & 153---Defective appeals etc.---Assessing authority finalized the order under Ss.161/205 of the Income Tax Ordinance, 2001 by treating the company as taxpayer-in-default---Appeal was rejected by the First Appellate Authority in limine on the ground that the grounds of appeal and memo. of appeal were unsigned---Validity---Appeal of the taxpayer was dismissed in limine as the appeal papers including memo of appeal presented were unsigned---Defect pointed out by the First Appellate Authority was curable and the taxpayer should have been given an opportunity to make good the such deficiency---Although there were no express provisions of law for providing opportunity to taxpayer to remove the deficiencies in memorandum of appeal at first appeal stage; however, R.15 of the Appellate Tribunal Inland Revenue Rules, 2010, inter alia, provided that where a memorandum of appeal was not filed in the manner specified, the appellant shall be given time to make the same in conformity with the provisions of rules---Matter was remanded to First Appellate Authority with the direction to the taxpayer to remove the deficiency in memorandum of appeal; and to provide an opportunity to taxpayer to remove deficiency detected in appeals papers within 15 days---If the taxpayer failed to do so then the First Appellate Authority shall proceed against the taxpayer in accordance with law---Order of First Appellate Authority was vacated and the matter was remitted to him for fresh decision.

Waseem Ahmad Malik for Appellant.

None for Respondent.

Date of hearing: 24th January, 2014.

2014 P T D 1018

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Mian Masood Ahmad, Accountant Member

I.T.As. Nos.813/LB to 815/LB of 2010, decided on 22nd June, 2012.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122 (5A), 120(1), 210 & 2(13)---Amendment of assessment---Jurisdiction---Delegation of power---Original assessment was amended being erroneous and prejudicial to the interest of revenue---First Appellate Authority annulled the amended assessment passed under S.122(5A) of the Income Tax Ordinance, 2001 on legal point that assumption of jurisdiction by the Additional Commissioner was illegal---Revenue contended that at the time of passing the order, the Taxation Officer was holding jurisdiction through delegation of power under S.210 of the Income Tax Ordinance, 2001 by the Commissioner; and Taxation Officer was empowered to exercise jurisdiction under S.2(13) of the Income Tax Ordinance, 2001---Validity---Objection that the Commissioner could not delegate his authority to his subordinate was not correct for the reason that S. 211 of the Income Tax Ordinance, 2001 provided that the powers exercised by the Addl. Commissioner shall be deemed to be exercised by the Commissioner---When the Commissioner delegated powers to amend the assessment to the Addl. Commissioner; said powers would include the functions of the Commissioner i.e. scrutiny of the assessment, proper application of mind and then amending the Assessment Order---Order of First Appellate Authority annulling the amended assessment order passed under S.122 (5A) of the Income Tax Ordinance, 2001 on the legal point of jurisdiction, was not sustainable in law---Order was set aside and case was remanded to First Appellate Authority with the direction to decide the appeals of the taxpayer on other grounds taken as per memo of appeal by way of passing a speaking order.

Pakistan Tobacco Company Ltd. Islamabad v. Addl. Commissioner (Unit-II), Taxation Officer, Large Tax Payers, Unit, Islamabad Writ Petition No.2412 of 2009 rel.

Shazia Gull, D.R. for Appellant.

Iftikhar Ahmad, Advocate FCA, for Respondent.

Date of hearing: 22nd June, 2012.

2014 P T D 1022

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Muhammad Akram Tahir, Accountant Member

Messrs MAGNA TEXTILE INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

C.I.R., R.T.O., FAISALABAD

S.T.A. No.298/LB of 2012, decided on 1st November, 2013.

Sales Tax Act (VII of 1990)---

----Ss. 11(2), 8(1)(a), 21(3), 36(1) & 73---S.R.O. 555(I)/98 dated 1-7-1996---S.R.O. 1381(I)98 dated 28-11-1998---Assessment of tax---Tax period 2006-2007---Refund of input tax---Recovery of being input adjusted against blacklisted/suspended units---Taxpayer contended that adjudication order lacked jurisdiction in respect of cases beyond pecuniary limit of one million rupees; that provisions of S.73 of the Sales Tax Act, 1990 for bank payments had duly been complied with; and that input tax credit against invoices of black listed/suspended suppliers could not be denied after insertion of subsection (3) of S.21 of the Sales Tax Act, 1990 through Finance Act, 2011---Validity---Period of refund claim was 2006-2007 whereas the black listing/ suspension was made at later dates i.e. after the period refund claimed/ adjusted input tax---On the basis of suspension/blacklisting at later dates the refund claimed/adjusted input tax against the invoices issued by the units having blacklisted/blocked status could not be disallowed---Contention regarding retrospective application of the black-listing order/notification were quite convincing---Refund claimed/adjusted input tax was allowed---Case was remanded for checking as to whether or not the application of S.73 of the Sales Tax Act, 1990 had been affected properly---If the answer was in affirmative the registered person should be given effect accordingly and in case of non affirmation the registered person should be given an opportunity of hearing before passing the order.

Khubaib Ahmad for Appellant.

Mrs. Ghazala Hameed Razi, D.R. for Respondent.

Date of hearing: 30th September, 2013.

2014 P T D 1024

[Inland Revenue Appellate Tribunal]

Before Abdul Nasir Butt, Accountant Member and Shahid Masood Manzar, Judicial Member

Messrs KASB CAPITAL LIMITED, KARACHI

Versus

C.I.R., AUDIT DIVISION-I, R.T.O., KARACHI

I.T.As. Nos.707/KB and 708/KB of 2011, decided on 29th October, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.67, 114(4), 120, 122(5A), 210, 210(1A), & 211---Income Tax Ordinance (XXXI of 1979), Ss. 59(1), 62, 63, 65 & 66A---Income Tax Rules, 2002, R.13---Apportionment of deductions---Proportionate basis---Reasonability---Taxpayer contended that company was incorporated to undertake the business of money market activities, capital market activities, project finance activities, corporate finance services and general services; that for such activities, overall business plan was developed and expenditure paid for such development of business and consultancy fee did not relate to earning exempt/Final Tax Regime sources income and was specific to normal tax income and was not required to be apportioned at all being out of ambit of S.67 of the Income Tax Ordinance, 2001 read with R. 13 of the Income Tax Rules, 2002; that expenditure related to normal income and exempt/ Final Tax Regime income were furnished before Taxation Officer with all details and even before First Appellate Authority but both had not considered the details and evidence in this regard; that capital gain (exempt income) was earned in treasury department which made investment in equity; that said department was staffed with few people but had large turnover; and that on the basis of turnover, expenditure could not be allocated to said segment of income---Department contended that where taxpayer derive both Final Tax Regime income and Normal Tax Regime income or taxable income and exempt income, then the same had to be allowed on prorate basis between income covered under Final Tax Regime and Normal Tax Regime and similarly between taxable income and exempt income wherein allowance/deduction/expenditure (by whatever name it is called) was common, the same had to be prorated between the income assessable under Normal Tax Regime and Final Tax Regime on the basis of their ratio of turnover; that such principle was applicable to all types of expenditures where these expenses were common; and that expenses prorated by the Taxation Officer were common and these were to be prorated on the basis of principle of apportionment as envisaged in S.67 of the Income Tax Ordinance, 2001 read with R.13 of the Income Tax Rules, 2002 as where an expenditure/allowance/deduction was exclusively related to any particular head/source of income but wherein deduction/allowance/expenditure was common and it was inseparable the same had to be apportioned/allocated on prorate basis which exactly had been done by the Taxation Officer while allocating common expenses/deduction---Validity---Section 122(5A) of the Income Tax Ordinance, 2001 was invoked for the reason that taxpayer had wrongly apportioned the business expenses against income from other sources---Likewise, expenses had not been properly prorated between commission income and other revenues like fee/service charges which relate both to Final Tax Regime and non Final Tax Regime income and the computation of income had not been made in accordance with the provisions of S.67 of the Income Tax Ordinance, 2001 read with R.13 of the Income Tax Rules, 2002---Diminution in value of investment being a notional loss and merely a provision was not an allowable expenses but had been claimed as expense---Taxation Officer had rightly apportioned common expense/deduction in accordance with the provisions of law and rules---Taxpayer, admittedly did not allocate common expenses to Final Tax Regime and non Final Tax Regime income---First Appellate Authority had rightly found that by not allocating/prorating the common expense the deemed assessment for both the years were definitely erroneous which were also prejudicial to the interest of revenue as well and had rightly been maintained the order of the officer below---Order of First Appellate Authority was upheld and appeals filed by the taxpayer were dismissed by the Appellate Tribunal.

KASB Bank Ltd.'s case I.T.A. No.61/KB of 2005, 62/KB of 2006, 63/KB of 2007, 64/KB of 2008 and 65/KB of 2009; International Housing Finance Limited 's case I.T.A. No.229/KB/2009; 2002 PTD (Trib.) 1568; Dawood Capital Management's case 2010 PTD (Trib.) 25; Millat Tractors Limited's case 2012 PTD (Trib.) 1385; Writ Petition No.653 of 2009; Constitutional Petitions Nos.1664-1665 of 2009 and 2010 PTD (Trib.) 2306 ref.

Atlas Investment Bank' case 2005 PTD 2586; Messrs Crescent Investment Bank Limited v. ITAT 2005 PTD 2599; 2005 PTD 1850 and 1999 PTD (Trib.) 3880 rel.

Khurram Iqbal CA for Appellant.

Imtiaz Ahmed, D.R. for Respondent.

Date of hearing: 25th September, 2013.

2014 P T D 1032

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, Judicial Member

Mst. FARKHANDA FAROOQI

Versus

C.I.R., R.T.O., LAHORE

M.A. No.260/LB of 2012, decided on 27th January, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.221 & 121(1)---Rectification of mistakes---Scope---Best judgment assessment---Application for re-calling of order---Taxpayer contended that ex parte order under S.121 (1) of the Income Tax Ordinance, 2001 could only be passed where no return had been filed; and Appellate Tribunal while delivering decision had apparently lost sight of High Court Full Bench decision reported as 2013 PTD 837, on the issue and as such error of law had incurred which could be rectified by resorting to the provisions of S.221 of the Income Tax Ordinance, 2001---Validity---High Court, in the said Full Bench Judgment had held that "prior to the amendment brought about in Ss. 121 & 177(10), through Finance Act, 2010, S. 121(1)(d) did not apply to cases where return of total income had been filed and did not envisage a second assessment order"---Following the principle of consistency, applicant also deserved the same relief as accorded to other taxpayer---Order was modified by following the decision of the High Court and dismissed the departmental appeal for tax year 2008 and maintained the order passed by the First Appellate Authority.

2010 PTD (Trib.) 2602; 2009 PTD (Trib.) 30; I.T.A. No.697/LB of 2009 and M.A. No.123/LB of 2010 ref.

2013 PTD 837 and I.T.A. No.773-6/IB of 2012 rel.

None of Applicant.

Ms. Farhat Hayat Shah, D.R. for Respondent.

Date of hearing: 27th January, 2014.

2014 P T D 1034

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Zarina N. Zaidi, Accountant Member

F.E. Appeal No.24/H/2009, decided on 16th March, 2011.

(a) Central Excise Act ( I of 1944)---

----S. 33(3)---Central Excise Rules 1944, Rr. 10 & 226(2)---S.R.O. 499(I)/93 dated 14-6-1993---Power of adjudication---Limitation---Show-Cause Notice was issued on 5-7-2001---As per provision of S.33(3) of the Central Excise Act, 1944, as relevant, on the date the order was mandated to be finalized within 45 days of the issuance of Show-Cause Notice within such extended period for which reasons were to be recorded in writing and such extended period which was not to exceed ninety days in total---In the present case, no extension was granted as was clear from the Order-in-Original and the record---Order-in-Original had been passed after 3 years and 11 months (i.e. 1429 days) after issuance of Show-Cause Notice which was time barred---Where law prescribed period of time for recovery of money, recovery was not enforceable after lapse of such prescribed period---Order-in-Original being time barred and not sustainable in law was cancelled by the Appellate Tribunal.

Government of Pakistan v. Shahi Bottler 1987 SCMR 571; Collector Sales Tax v. Pattoki Sugar Mills 2005 PTD 1378; Atlas Tyre v. Assistant Collector 2003 PTD 1593; Zamindar Paper and Board v. Collector 2003 PTD 1257; Assistant Collector Customs v. Khyber Lamps 2001 SCMR 838; 64 Tax 230 (SHC) and 1991 PTD 658 ref.

Federation of Pakistan v. Ibrahim Textile Mills Ltd. 1992 SCMR 1898; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax 2008 PTD 60 LHC; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others 2009 PTD 762; Hanif Straw Board v. Additional Collector 2008 PTD 578; Messrs Abbasi Enterprises v. Collector of Sales Tax, Peshawar 2008 PTD 2025 and S.T.A. No.339/KB of 2009 dated 30-9-2010 rel.

(b) Constitution of Pakistan---

----Art. 254---Central Excise Act (1 of 1944) S.33(3)---Failure to comply with requirement as to time does not render an act invalid---Scope---Article 254 of the Constitution of Pakistan only relates to "any act or things required by Constitution to be done within a particular time period …….." and applies only to act or things required to be done by the Constitution and does not apply to ordinary laws.

(c) Central Excise Act (I of 1944)---

----S.33(3)----Cement factory---Contravention report of short production---Effect---Audit was conducted of 13 quarters and chose five quarters to work out contravention of alleged evasion of short production of Clinker---Senior Intelligence Officer (SIO) had made elementary mistake of accounting by not treating quantity in closing stock of one quarter as opening stock of the next quarter which led to absurd results for which the taxpayer had been accused---Chart submitted by the taxpayer clearly showed the absurdities---In case of quarter ending 31st December, 1998 selected closing stock was 15890 MT but in next quarter selected i.e. 31st December, 1999, the opening stock was taken at 2939 MT---Individual reconciliation of each of the five quarters and collectively of 13 quarters were submitted by the taxpayer to demonstrate that there was no evasion or suppression at all---Alleged use of gypsum calculated at 3% was purely on presumption, whereas depending on purity, gypsum usage had always been between 3% to 5% as this fact had been conceded by the department---Senior Intelligence Officer had taken the figure of Raw Mix (Slurry) produced at 6,12,920 MT and divided this by 1.7 to arrive at the presumed Clinker production of 3,60,541 MT instead of taking Raw Mix (Slurry) consumed and dividing the same by 1.7 to arrive at actual production of Clinker of 3,44,800 MT of these Five Quarters---Such 3,44,800 MT was actual production of Clinker declared in the books and to Excise authorities---Grave error made by the Senior Intelligence Officer was that he should have considered Raw Mix (Slurry) consumed at 5,68,160 MT and divided same by 1.7 to arrive at 3,44,800 MT which was exactly the quantity of Clinker produced and declared by the taxpayer---Report of Senior Intelligence Officer and the entire case had evidently been made in mala fide and on the basis of wrong calculations---Reconciliation carried out on the directions of Appellate Tribunal by the Senior Intelligence Officer and representative of the taxpayer showed that there was no suppression and figures were duly reconciled---Another joint reconciliation was carried out by four representatives of the department and two representatives of the company on the directions of Appellate Tribunal and it was reported that "as per record provided by the department and the appellants for reconciliation of Clinker production from Slurry was tallied and no difference was noted …."---Even the officers of the department confirmed that there was no evasion, suppression and figures duly reconciled---Subsequent report from department that as the record was misplaced by them hence genuineness of figures could not be verified was absolutely of no value as the appellant should not suffer if the department had misplaced the record of the appellant which they had impounded---No evasion of Clinker was noticed and figures duly reconciled and proper production of Clinker had been declared by the appellant/taxpayer---Absurdities, errors, accounting mistakes in the contravention report were clear and obvious and there was no suppression/evasion of Clinker production as alleged---Production figures therefore, stood reconciled---Appellate Tribunal held that there was no suppression/evasion in Clinker production as alleged---Addition made was not warranted and was deleted by the Appellate Tribunal.

Abid Shuban for Appellant.

Muhammad Ali Wasan, Assistant Director.

Farhatullah Jaffiri SIO and Parviz Sadiq SIO.

Date of hearing: 16th March, 2011.

2014 P T D 1063

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem, Ch. Judicial Member

Messrs ITTEFAQ CLOTH CENTRE, GUJRANWALA

Versus

C.I.R., R.T.O., GUJRANWALA

M.A. (Stay) No.1595/LB of 2013 and S.T.A. No.1235/LB of 2013, decided on 31st December, 2013.

Sales Tax Act (VII of 1990)---

----S.46---Income Tax Ordinance (XLIX of 2001), S.131(5)---Appeal to Appellate Tribunal---Stay application---Taxpayer contended that department was pressing hard for recovery and had issued notice showing intention to take coercive measures for the recovery of the outstanding tax demand; that in case the demand was not stayed, the taxpayer will suffer irreparable loss; and that taxpayer had full evidence to prove compliance of the law---Validity---Request for stay of demand was justified in circumstances---Recovery of tax demand was stayed by the Tribunal for a period of 30 days from the date of receipt of the order---Departmental order for recovery proceedings was vacated with the direction to the First Appellate Authority to preferably decide the pending appeal within 30 days as per law and facts of the case and till that time, the department was restrained from recovery proceedings---Application for stay was allowed without prejudice to the final outcome of the appeal which was pending before the First Appellate Authority.

Khubaib Ahmad Taunsvi for Applicant.

Taimour Kamal Malik, D.R. for Respondent.

Date of hearing: 31st December, 2013.

2014 P T D 1064

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Faheemul Haq Khan, Accountant Member

Messrs PARAZELSUS PAKISTAN (PVT.) LTD., KARACHI

Versus

DCIR AUDIT, UNIT-III AND IV, ZONE-II, KARACHI

I.T.As. Nos.282/KB and 284/KB of 2013, decided on 31st October, 2013.

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

----Ss.221 & 113---Rectification of mistake---Scope---Minimum tax on certain transaction---Gross loss---Order under S.221 of the Income Tax Ordinance, 2001 was passed to charge tax under S.113 of the Income Tax Ordinance, 2001 on declared net turnover---Taxpayer contended that it was not patent mistake apparent from the record rather levy of the minimum tax under S.113 involved interpretation of provisions of law, hence was beyond the scope of rectification---Validity---Failure of application of any provision of law fell under the purview of rectification---Scope of rectification could not be limited to arithmetical error and any mistake of law which was glaring and floating on the surface---Taxpayer could not take refuge to avoid application of law merely complicating or protracting the legal issue---Neither documents were called nor fishing enquiries were made prior to the order under S.221 of the Income Tax Ordinance, 2001---Accounting records accompanying the return were consulted to apply the relevant legal provisions---Departmental action to invoke the provisions of S.221 of the Income Tax Ordinance, 2001 was the correct treatment---Appeal on this issue was rejected by the Appellate Tribunal.

PLD 1999 Lah. 446 ref.

(b) Income Tax---

----"Gross profit"---Meanings of---Expenses---Base line---Illustration---"Gross profit" means gross income as reduced by all the expenses to acquire, produce, procure, convert, manufacture, import or even the input of human services or machine hours---After producing and possessing (including constructive possession), its further delivery for the purpose of earning would involve indirect expenses---Base line to identify expenses capable of selling and all indirect expenses would be incurred for the purpose of selling till the product reaches the consumer or buyer---Same principle was applied to distinguish and charge carriage inward (direct) carriage outward (indirect), wages (direct), salaries (indirect), import expenses (direct), export freight (indirect), depreciation on production machines (direct), depreciation on selling machines (fork lift) (indirect) and so on.

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

----S.113 (1), proviso---S.R.O. No.69(I)/2010 dated 3-2-2010---Minimum tax on the income of certain persons---Exemption from---Taxpayer contended that provisions of S.113 of the Income Tax Ordinance, 2001 were not attracted as he had declared gross loss before depreciation and other inadmissible expenses; and proviso to subsection (1) of S.113 of the Income Tax Ordinance, 2001 shall not apply in the case of a company which had declared 'gross loss' before depreciation and other inadmissible expenses; that the term 'loss' wherever appearing in the Income Tax Ordinance, 2001 required that loss had to be computed as per provisions of the Income Tax Ordinance, 2001 and not the loss as per the profit and loss accounts; that Fourth Schedule and the Seventh Schedule to the Income Tax Ordinance, 2001 specifically and expressly referred to the profit and gains as per accounts therefore loss as described in proviso to S.113 of the Income Tax Ordinance, 2001 could not be construed as accounting gross loss; that term gross loss was not defined in the Income Tax Ordinance, 2001; that as per general understanding it meant the gross loss as per the computation of income i.e. the accounting profit and loss adjusted by allowable deduction and inadmissible expenses; and that in view of proviso to S.113(1) of the Income Tax Ordinance, 2001, minimum tax could not have been levied as the taxpayer declared loss in the return of income and gross loss for the purpose of the proviso was not defined in the Income Tax Ordinance, 2001---Validity---Proviso to S.113 (1) of the Income Tax Ordinance, 2001 was concessional in nature and took into account the cases of hardship i.e. suffering from losses and accordingly granted exemption from minimum tax liability---Gross loss meant loss in business at earlier stage---Before depreciation meant that depreciation (direct) will further increase the loss and inadmissible expenses to be ignored outrightly---If business sustained loss at earlier stage, subsequent additions in the shape of depreciation (direct) or others indirect expense would further increase the losses and net loss be a higher amount---Concession would be for entities which suffered from gross loss (earlier stage) than net loss ( later stage)---Such was not the case of present taxpayer as it did not sustain loss at earlier stage---Taxpayer was a trader and as such; not involved in any manufacturing activity---Expenses of depreciation would be indirect in the case of taxpayer, on the contrary taxpayer claimed depreciation as a direct expense---If interpretation of tax payer to avail the exemption from S.113 of the Income Tax Ordinance, 2001 was followed, an amazing account presentation would emerge which would read as repudiating the meanings of word "gross" mentioned in the Ordinance at many places to denote/target the quantum---Taxpayer wanted that his indirect expense be adjusted to arrive at gross loss and gross loss would absorb all sort of expenses except the depreciation and inadmissible expenses---Since inadmissible expenses would not be worth consideration or legal sanction behind the claim, further deduction of depreciation would instantly work out the net loss or loss sustained from the entire business operation---Ground that gross profit (difference between net sales and cost of sales) be considered for the purpose of levy of tax under S.113 of the Income Tax Ordinance, 2001 was rejected by the Appellate Tribunal---Department had been just to the taxpayer by allowing 80% relief from the minimum tax rate of 1% in the light of S.R.O. No.69(I)/2010 dated 3-2-2010---Levy of minimum tax under S.113 of the Income Tax Ordinance, 2001 was upheld by the Appellate Tribunal.

(d) Income Tax---

----'Gross'---'Net'---Term 'gross' refers to the total amount received as result of some activity whereas 'net' refers to the amount left over after all deductions were made---Once net value is attained, nothing further is subtracted---Net value was not allowed to be made lower.

(e) Income Tax---

----Accounting---Gross profit---Taxation---Taxpayers, in some areas, adjusts gross profit and net profits in the context of legal admissibility or inadmissibility which is usually done by submitting an adjustment sheet which is read with the original accounts; in other words, the adjustment sheet is a bridge between accounting version and taxable income---Such situation also ensures the sustenance of accounting presentation as per standard for the use of other concerned parties besides flexing it for the purpose of taxation---In order to apply the law both the declaration would be worth consideration---No material difference existed between accounting gross profit/tax gross profit or accounting net loss/tax net loss.

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

----S.113(3)---Minimum tax on the income of certain person---Trading or Commission---Business of the taxpayer was of trading nature involving purchase and sale of the pharmaceutical products with all risks and rewards vested in the taxpayer that was the main criteria to differentiate between an agent and independent business entity---Declaration of debtors/creditors/inventory etc. fortify the findings of the officers below that taxpayer was a trader and not commission agent---For purpose of levy of minimum tax, turnover of the taxpayer should be the same as is defined vide S.113(3) of the Income Tax Ordinance, 2001.

Asif Haroon, FCA for Appellant.

Ghulam Murtaza, D.R. for Respondent.

Date of hearing: 12th June, 2013.

2014 P T D 1078

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Farzana Jabeen, Accountant Member

F.E.D. No.72/KB of 2012, decided on 14th February, 2013.

Federal Excise Act (VII of 2005)---

----Ss.3A, 10(a), 12(5), 14(2), 2 (45), 2(46)(g) & 42---Sales Tax Act (VII of 1990), S.72---S.R.O. 564(I)/2006 dated 5-6-2006---S.R.O. 655(I)/2007 dated 29-6-2007---S.R.O. 4(I)/2009 dated 2-1-2009---FBR Letter C. No. STM/2004(Pt-111)92346-R dated 24-6-2011---Special Excise Duty---Sugar---Notified price---Actual sale price---Revenue charged Special Excise Duty with reference to actual sale price whereas taxpayer paid the duty on the basis of notified price---Validity---S.R.O. 564(I)/2006 dated 5-6-2006 laid down the value of taxable supply of locally produced white crystalline Sugar which from time to time had been changed by the notifications issued by the Federal Board of Revenue---Rate of taxable supply of White Crystalline Sugar earlier fixed by the notification S.R.O. 4(I)/2009 dated 2-1-2009 had been fixed at Rs.28.88 per kg---Fixation of the rate was for the purpose of charging tax on the value of supply fixed by the amending S.R.O. irrespective of the value at which the supply was made---Taxpayer had been charging sales tax at the notified rate following the scheme of the notification S.R.O. 564(I)/2006 dated 5-6-2006---Federal Board of Revenue vide its letter C. No. STM/2004(Pt-111)92346-R dated 24-6-2011 had determined the value of sugar for the supply for the purpose of Special Excise Duty vide notification S.R.O. 564(I)/2006 dated 5-6-2006 which had been issued under S.2(45) of the Federal Excise Act, 2005---Value as applicable in the Act mutatis mutandis applied for the purpose of Special Excise Duty---First Appellate Authority had followed the decision of Appellate Tribunal in various cases, but in the case of taxpayer, the different view had been taken---Order of First Appellate Authority and the Order-in-Original was set aside by the Appellate Tribunal and the appeal filed by the taxpayer was allowed.

2008 PTD 60; 2008 PTD 758; 2008 PTD 2025; PTCL 2010 CL 1134; 2008 PTD 981; 2003 PTD 1797; 2007 PTD 2265; 2009 PTD (Trib.) 1263 and 2005 PTD 480 ref.

Messrs Haq Bahoo Sugar Mills Lahore vide FE No.11/LB/2011 Messrs Tharparkar Sugar Mills' case rel.

Muhammad Fahim Bhaio for Appellant.

Tariq Hussain, DCIR/DR, for the Respondent.

Date of hearing: 14th February, 2013.

2014 P T D 1085

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Sajjad Ali, Accountant Member

Messrs MUHAMMAD ARSHAD, CHICHAWATNI

Versus

C.I.R., R.T.O., MULTAN

I.T.As. Nos. 531/LB and 532/LB of 2013, decided on 27th February, 2014.

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

----Ss.121, 122C, 120 & 114(4)---Best judgment assessment---Notice under S.114(4) for submission of Income Tax Return was issued---Said notice was not complied with---Assessing Officer finalized the ex-parte assessment under S.121 of the Income Tax Ordinance, 2001---Validity---Clause (a) of subsection (1) of S.121 of the Income Tax Ordinance, 2001 was deleted and re-inserted in the Income Tax Ordinance, 2001 in the shape of S.122C of the Income Tax Ordinance, 2001 through Finance (Amendment) Ordinance, 2010, which provided that if a person failed to furnish return of income for any tax year, the Commissioner, on any available information or material and to the best of his judgment, make a provisional assessment of the taxable income and issue a provisional assessment order specifying the taxable income or income assessed to tax under subsection (2) of S.122C of the Income Tax Ordinance, 2001---Provisions of S.122C also provide that after the expiry of 60 days from the date of service of order of provisional assessment, it would be deemed as final assessment order; and final assessment would not be made if return of income along with wealth statement, wealth reconciliation statement and other documents required under subsection (2A) of S.116 of the Income Tax Ordinance, 2001 were filed by the taxpayer for the relevant tax year during the period of 60 days said period has now been reduced to 45 days through Finance Act, 2013)---Deletion of Cl.(a) of subsection (1) of S.121 of the Income Tax Ordinance, 2001 through Finance Act 2010, showed the intention of the Legislature that best judgment assessment could not be made under S. 121 of the Income Tax Ordinance, 2001 after 1-7-2010---To cater such eventualities S.122C of the Income Tax Ordinance, 2001 had been introduced in the Ordinance through Finance Act, 2010---Bare reading of provisions of S.122C of the Income Tax Ordinance, 2001 showed that where a person had failed to file return of income under S.120 or in compliance to notice under S.114 of the Income Tax Ordinance, 2001, the Assessing Officer could frame best judgment assessment under said section on the basis of available facts and material, assessment framed by the Assessing Officer was illegal and void ab-initio and order of First Appellate Authority was nullity in the eyes of law---Orders of both the authorities below were cancelled by the Appellate Tribunal.

CIR v. Islam-ud-Din and others 2013 PTD 914 rel.

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

----S.218---Civil Procedure Code (V of 1908), O.V, R.10-A---General Clauses Act (X of 1897), S.27---Service of notices and other documents---Legal validity of a notice issued under ordinary post---Notices were not issued under Registered Post or through Courier Service, which action of the Assessing Officer was in violation of provisions S.218 of the Income Tax Ordinance, 2001 read with S.27 of the General Clauses Act, 1897---Assessment order was passed by the Assessing Officer on 10-9-2012, whereas the notice dated 4-9-2012 was issued for compliance on 10-9-2012, on the basis of which assessment was completed, was delivered by the postal authorities on 18-9-2012---Copy of envelope stamped by the postal authorities dated 18th September, 2010 was provided to substantiate the plea that notice was not properly served and taxpayer was condemned unheard---Assessment order having been passed much before the receipt of notice by the taxpayer, assumption arose that notice was not properly served---Since, notice was issued in violation of provisions of S.218 of the Income Tax Ordinance, 2001 read with S.27 of the General Clauses Act, 1897 and there was nothing on record to show that it was properly served upon the taxpayer, the answer to question "whether First Appellate Authority was justified to hold that service of notices on the taxpayer were proper and under the law" was in negative i.e. in favour of the taxpayer and against the revenue.

PLD 1955 Lah. 417 and 2003 PTD 1516 rel.

Imtiaz Anjum, Ch. for Appellant.

Yasir Prizada, D.R. for Respondent.

Date of hearing: 20th February, 2014.

2014 P T D 1101

[Inland Revenue Appellate Tribunal]

Before Abdul Qayyoom Sheikh, Judicial Member and Zarina N. Zaidi, Accountant Member

I.T.As. Nos. 834/KB, 832/KB, 835/KB of 2010, 618/KB, 520/KB, of 2008 and 52/KB, 88/KB of 2009, decided on 20th November, 2013.

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

----S.21(g)---Deductions not allowed---Additional sales tax---Disallowance of, on the assumption of violation and being inadmissible---Assessee contended that sales tax liability for the current crushing season and also for the earlier years were payable, but could not be paid and although installments for payment of sales tax liability was allowed, but due to financial crises, the installments could not be paid; that for delayed payment, additional tax as surcharge was levied which the auditors had termed as penalty; that additional tax paid did not represent penalty for any violation for the reason that as per S.21(g) of the Income Tax Ordinance, 2001, the inadmissibility of any expenditure was restricted if the payment was in respect of fine or penalty or payable due to violation of any law or rule or regulation, but if there was no violation of any law, neither the provision of S.21(g) of the Income Tax Ordinance, 2001 could be invoked nor the claim could be disallowed as the same was an admissible deduction under S.21(1) of the Income Tax Ordinance, 2001; that although for non-payment of installment of sales tax, additional tax was levied and paid which was incorrectly termed as penalty, but in fact the payments had been made on the basis of amnesty scheme and concession allowed by the Federal Board of Revenue through various SROs whereby additional tax and penalty was exempted if the amount of sales tax not paid or adjustment of inadmissible input tax was paid along with 25% as additional tax; that the claim of additional tax and even penalty was an admissible deduction and could not be disallowed; that in view of S. 21(g) of the Income Tax Ordinance, 2001 which excludes the application of any other law for the time being force, the provision of S.21(g) of the Income Tax Ordinance, 2001 could not be invoked as there was no violation of any provisions of Income Tax Ordinance, 2001; that violation if any was that if Sales Tax Act, 1990 and not that of Income Tax Ordinance, 2001; that further, additional tax or even if termed as penalty for non-payment or delay in payment of sales tax liability could not be disallowed as there was neither criminal infraction, nor violation of any law, the deduction was held as an admissible deduction/ expenditure incurred wholly and exclusively for the purpose of business---Validity---Any expenditure incurred on account of criminal infringement or violation of law was not allowable as an admissible deduction and not otherwise---Auditors had used the word penalty which had been rebutted by the taxpayer---Provisions of S.21(g) of the Income Tax Ordinance, 2001 was wrongly invoked which was confirmed by the First Appellate Authority---Neither of the officers below could prove any violation, infraction or infringement of law---Addition was deleted by the Appellate Tribunal and order of First Appellate Authority was set aside.

1995 PTD 577; 1993 PTD 383; 2000 PTD 3741; 2006 PTD 2256; 2010 PTD 737; I.T.As. Nos. 1299 and 1058/KB of 2003; I.T.A. No. 968/KB of 2009 and C.I.T. v. Premier Bank Limited 1999 PTD 3005 rel.

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

----S.34 (5), Second Sched; Part-IV, Cl. (3A)---State Bank of Pakistan's Circular No.29 of 2002 dated 15-10-2002---Accrual-basis accounting---Tax year 2004---Financial charges and frozen mark up---Addition of, on the ground that provision of Cl.(3A) of Part-IV of Second Schedule of the Income Tax Ordinance, 2001 was inserted vide Finance Act, 2004, the concession and benefit was available from tax year 2005 onward---Taxpayer contended that although the provisions of Cl.(3A) of Part-IV of Second Schedule of the Income Tax Ordinance, 2001 was inserted by Finance Act, 2004, but the legislature had approved Circular No.29 of 2002 dated 15-10-2002 issued by the State Bank of Pakistan with retrospective effect and this aspect had been ignored; that application of Subsections (5), (5A) of S.34 & S.70 of the Income Tax Ordinance, 2001 had been excluded in respect of waiver of profit on debt or debt itself as approved by the State Bank of Pakistan in accordance with Circular No.29 of 2002 dated 15-10-2002; and that irrespective of the fact that Cl.(3) was brought on statute book at a later date, but the condition of waiver approved was from the date of issue of Circular No.29 of 2002 dated 15-10-2002---Revenue contended that Cl.(3A) of Part-IV of Second Schedule of the Income Tax Ordinance, 2001 was inserted in the Ordinance in income year relevant to tax year 2005, the benefit was not applicable in tax year 2004 and could not be applied retrospectively; and that addition was correctly made under S.34(5) of the Income Tax Ordinance, 2001 as the liability related to assessment year 2001-2002 and as it was not paid off till tax year 2004---Validity---Deduction allowed in respect of unpaid liabilities could always be taxed in accordance with the provisions of subsections (5) and (5A) of S.34 as well as S.70 of the Income Tax Ordinance, 2001 but its application was disputed on the basis of Circular No.29 of 2002 dated 15-10-2002 read with Cl.(3A) of Part-IV of Second Schedule of the Income Tax Ordinance, 2001, which was not only a beneficial concession but was accorded to sick industries---Clause (3A) of Part-IV of Second Schedule of the Income Tax Ordinance, 2001 had excluded the application of S.34(5), (5A) as well as S.70 of the Income Tax Ordinance, 2001 in respect of such debts and liabilities approved by the State Bank of Pakistan; it wholly and solely applied to such unpaid liabilities and Circular No.29 of 2002 dated 15-10-2002 issued by the State Bank of Pakistan---As Cl.(3A) had been brought on statute book to accord approval to the conditions specified in the said Circular, the benefit was to be granted from the date of such circular for the reason that the case was fairly within the scope of exemption accorded by Cl.(3A), the taxpayer could not be denied the benefit on the basis of any supposed intention to the contrary of the legislature or authority granting it as the bare perusal clearly indicated the waiver of profit on debt or the debt itself under the State Bank of Pakistan, Banking Policy Department's Circular No.29 of 2002 dated 15-10-2002---Claim of written off was correctly claimed as the benefit was available with retrospective effect from the date of Circular dated 15-10-2002---Order of First Appellate Authority was set aside and the addition made under S.34(5) of the Income Tax Ordinance, 2001 was deleted.

(1992) 66 Tax 238 and 2009 PTD 481 ref.

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

----S.21(k)---Deductions not allowed---Interest on outstanding loans to employees---Disallowance of---Taxpayer contended that loans had been allowed against credit balance in provident and gratuity funds of employees which had been deducted from wages and salaries; and provisions of S.21(g) of the Income Tax Ordinance, 2001 was not applicable---Revenue contended that as interest free loans had been advanced to employees, interest on these loans had been correctly charged and confirmed by the First Appellate Authority---Validity---After decisions of superior Courts the earlier decision of Appellate Tribunal, referred in the amended order, stood overruled and was not applicable---As the fact of the taxpayer's case and of the case decided by the Superior Court were the same which had not been disputed, by following the decision of superior courts, appeals were allowed---Additions were deleted by the Appellate Tribunal and order of First Appellate Authority confirming the addition were set aside.

Hong Kong Shanghai Banking Corporation, Karachi' case (sic) overruled.

Commissioner (Legal Division LTU), Karachi v. English Biscuit Manufacturer (Pvt.) Limited, Karachi ITRAs Nos. 306 and 207 of 2010 and Civil Petitions Nos. 503-K and 504-K of 2011 rel.

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

----Ss.39(3) & 122(5A)---Income from other sources---Loan---Addition of---As loan was received through banking channel from a person registered on national tax number, there was no violation of S.39(3) of the Income Tax Ordinance, 2001---Addition confirmed in appeal was neither justified , nor maintainable.

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

----Ss.34(5)---Income Tax Ordinance (XXXI of 1979), S. 25(c)---Accrual-basis accounting---Payable liability of road cess---Addition of under S.34(5) of the Income Tax Ordinance, 2001---Taxpayer contended that outstanding liability for income year ending 30-6-2000 relevant to assessment year 2001-2002 could be added back in tax year 2004 and not in tax year 2005 which was the fifth year and according to S.34(5) of the Income Tax Ordinance, 2001 the unpaid liability could be added back in the first tax year following the end of three years---Appellate Tribunal did not agree with the contention of taxpayer and found that finding of First Appellate Authority was correct and confirmed the order on said issue and appeal was dismissed.

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

----Ss.34(5),122(1) & Second Sched: Part-IV, Cl.(3A)---Income Tax Ordinance (XXXI of 1979), S.25(c)---State Bank of Pakistan Circular 29 of 2002 dated 15-10-2002---Accrual-basis accounting---Liability payable to Bank---Addition of---Admitted position was that outstanding liability was prior to 30-9-1998---Addition was incorrectly made in tax year 2005---Liability payable to Bank was outstanding prior to 30-9-1998 and such outstanding liability had been claimed in rescheduling and waiver, the provision of S.34(5) of the Income Tax Ordinance, 2001 was even otherwise not applicable in tax year in appeal---Provisions of S.34(5) of the Income Tax Ordinance, 2001 was even otherwise not applicable in view of specific exemption accorded through Cl.(3A) of Part-IV of Second Schedule of the Income Tax Ordinance, 2001 read with Circular of State Bank of Pakistan which also included the addition made in tax year 2003, the outstanding amount of interest payable could not be added back under S.34(5) of the Income Tax Ordinance, 2001---Addition was deleted and order of First Appellate Authority was set aside by the Appellate Tribunal.

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

----Ss.21 (e) & 122(5A)---Deductions not allowed---Provision for gratuity had been allowed in the amended order, which proved that S.21(e) of the Income Tax Ordinance, 2001 was wrongly invoked---Claim related to tax year 2005 and was recorded in cash flow for the said year---Disallowance made did not relate to tax year 2006---Disallowance made was deleted by the Appellate Tribunal and orders of lower forums were set aside.

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

----Ss. 34(3), 32 & 122(5A)---Accrual-basis accounting---Provision for gratuity---Disallowance of---Revenue contended that provisions for gratuity was correctly disallowed by the assessing officer as same were not admissible deduction; and that First Appellate Authority was not justified in deleting the addition, without appreciating that the actual payment made during the year was allowed---Taxpayer contended that claim of gratuity charged to cash flow statement was on the basis of actual and determined liability for the year which had been worked out on the basis of salary of each employee; that observations of assessing officer were neither correct, nor based on facts and law for the reason that the claim of gratuity being a determined and ascertained liability under Ss.32 & 34(3) of the Income Tax Ordinance, 2001, the claim was never disallowed---Appellate Tribunal confirmed the finding of First Appellate Authority and that of the Department was dismissed.

Commissioner of Income Tax v. Messrs Oriental Dyes and Chemicals Company Limited 1992 SCMR 763; Commissioner of Income Tax, Karachi v M/s. Pakistan Security Printing Corporation Limited Karachi 1985 PTD 413; Commissioner of Income Tax, Central Zone-A, Karachi v. Messrs Chemdyes Pakistan Limited, Karachi 1990 PTD 248; 1998 PTD (Trib.) 1103 and 2012 PTD (Trib.) 1385 rel.

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

----Ss. 34(5), 70 & Second Sched: Part-IV, Cl. (3A)---State Bank of Pakistan Circular No. 29 of 2002 dated 15-10-2002---Accrual-basis accounting---Write off and set-off of long term liability---Validity---Legislature had allowed a special concession to various industrial undertakings who were in financial difficulties whereby rescheduling of bank loans and debts were allowed as per specific directions of State Bank of Pakistan incorporated in Circular No.29 of 2002 dated 15-10-2002 under the progressive industrialization program---Insertion of Cl.(3A) of Part-IV in the Second Schedule of the Income Tax Ordinance, 2001 clearly signified a concession allowed to such industrial undertakings---Taxpayer had claimed set-off and adjustment representing waiver of long term liability from the application of provisions of law which was also obvious from the computation of income and such set off was permissible for the reason that even after adjustment the net result was a loss---Write off as waiver of long term liability was fully justified and was correctly claimed which was duly supported by Cl.(3A) of Part-IV of Second Schedule of the Income Tax Ordinance, 2001---Assessing officer was not justified in disallowing the claim of write off and set off of long term liability---Disallowance was deleted by the Appellate Tribunal.

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

----S. 34(5)---Income Tax Ordinance (XXXI of 1979), S.25(c)---Accrual-basis accounting---Tax year 2005---Unpaid liabilities of road cess---Addition of---Limitation---Addition made in respect of unpaid liabilities of road cess was deleted by the First Appellate Authority---Revenue contended that addition was correctly made as the unpaid liabilities were more than three years old---Validity---Unpaid liability of road cess for assessment years 1993-94 onward could not be added back under S.34(5) of the Income Tax Ordinance, 2001 in tax year 2005, but the provision of S.25(c) of the Income Tax Ordinance, 1979 could be invoked if permissible under the law---First Appellate Authority had correctly deleted the unpaid liability of road cess in tax year 2005 as it was beyond the limitation period specified under S.34(5) of the Income Tax Ordinance, 2001---Order of First Appellate Authority was confirmed and appeal for tax year 2005 was dismissed.

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

----S.122 (5A)---Income Tax Ordinance (XXXI of 1979), S.66A---Income Tax Act (XI of 1922), S.34A---Amendment of assessments---Pari materia provisions---Provision of S.34A of the Income Tax Act, 1922 and that of S.66A of the Income Tax Ordinance, 1979 and also S.122(5A) of the Income Tax Ordinance, 2001 are in pari materia but while dilating upon powers and the basis of review by Additional Commissioner, condition precedent was that, the order should be erroneous as well as prejudicial to the interest of revenue---Both such conditions were required to be fulfilled simultaneously and if either of the conditions is not fulfilled, the order could be reviewed or amended.

1969 PTD (Trib.) 144 rel.

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

----Ss. 122(5A)/122(9) & 210(1A)---Amendment of assessment---Delegation of power---Pre-conditions---Taxpayer contended that under the Income Tax Ordinance, 2001 besides the order being erroneous and prejudicial, before delegation under S.210(1A) of the Income Tax Ordinance, 2001, the Commissioner could delegate the authority only "if he considers" that the assessment order was erroneous in so far it was prejudicial to the interest of revenue; that in subsection (5A) of S.122 of the Income Tax Ordinance, 2001 special words "if he considers" had been used by the legislature, which meant that prior to delegation, the Commissioner had to examine the income tax return and apply his mind, but in neither of the amended orders passed under S.122(5A) of the Income Tax Ordinance, 2001 there was no such finding, nor any reason for assuming the deemed order being erroneous and prejudicial to the interest of revenue had been recorded, except for the opinion of Additional Commissioner mentioned in notice subsequently issued under Ss.122(9)/122(5A) of the Income Tax Ordinance, 2001; and that further proceedings initiated and amended order subsequently passed were neither sustainable in law, nor on facts as these proceedings were entirely based on fishing inquires, but neither of the conditions which were both to be fulfilled simultaneously had been complied with---Validity---Jurisdiction could be exercised only if order passed or the deemed order was erroneous and as well as prejudicial to the interest of revenue and not otherwise---After amendment of deemed orders, the end result was net loss---As there was no income assessable to tax or income which was liable to tax, there was no loss of revenue in that case---Contentions of taxpayer were not only copious but were also well founded---Contention of revenue that " addition made in the amended order reduced the net loss which may result in future tax liability" was not acceptable for the reason that prior to amendment the deemed orders were neither erroneous, nor prejudice to interest of revenue, nor such aspect had been proved at any stage---Even after passing of deemed orders, the treatment accorded had not resulted in tax liability---None of the orders passed under S.122(5A) of the Income Tax Ordinance, 2001 were either erroneous nor prejudicial to the interest of revenue---Deemed order may be erroneous from Departmental point of view which was also not correct as said contention had neither been proved, nor was accepted and even from discussion on merits, the deemed orders were neither erroneous, nor were prejudicial to the interest of revenue---Legal objections were not only valid but were also well founded---Orders passed under S.122(5A) of the Income Tax Ordinance, 2001 were cancelled by the Appellate Tribunal on legal objections as well.

1999 PTD (Trib.) 2051; 2004 PTD 330; 2008 PTD (Trib.) 1491; 2009 PTD (Trib.) 121; I.T.As. Nos. 61 and 62/KB of 2009 and I.T.A. No. 47/KB of 2011 ref.

Pakistan Mobile Communications Limited v. C.I.T. 2011 PTD 1506 and Shell (Pakistan) Limited's case 2013 PTD 1012 not applicable.

1969 PTD (Trib.) 144 rel.

Iqbal Salman Pasha and Naeem Ahmed Dawoodi for Appellant.

Shahid Iqbal Baloch D.R. for Respondent.

Date of hearing: 7th October 2013.

2014 P T D 1137

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaarul Haq, Judicial Member

Messrs ZAHID MEHMOOD

Versus

COMMISSIONER INLAND REVENUE, R.T.O., SIALKOT

I.T.A. No. 1079/LB of 2011, decided on 18th February, 2014.

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

----Ss.62 & 13(1) (aa)---Income Tax Ordinance (XLIX of 2001), S.239(2)---Assessment on production of books of accounts, etc.---Tax year 2001-2002---Assessment under the provisions of Income Tax Ordinance, 1979---Validity---Since the assessment related to the period ended on 30th June, 2001 relevant to assessment year 2001-02 the same shall be governed by the provisions of the Income Tax Ordinance, 1979 and for all intents and purposes it shall be considered that for the purposes of assessment, the Income Tax Ordinance, 2001 had not come into force---Assessment had rightly and correctly been made by applying the provisions of Income Tax Ordinance, 1979.

Commissioner of Income Tax v. Messrs Elli Lilly Pakistan (Pvt.) Limited and others 2009 PTD 1392 rel.

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

----Ss.120, 121, 122, 122(c), 123, 124, 124-A, 125, 126, 114, 210 & 210A---Assessments---Powers of Commissioner---Elaborated.

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

----Ss.239 (2), 210(1) & 210(1A)---Savings---Tax year ending after 30th June, 2002---Assessment year 2001-2002---Authority of assessment---Power of assessment, amended assessment, revision of assessment, best judgment assessment or making a provisional assessment in respect of tax year vested with the Commissioner---Commissioner was the authority competent under the Income Tax Ordinance, 2001 to make an assessment in relation to a Tax Year ending after 30th June, 2002 and in view of the provisions of S.239(2) of the Income Tax Ordinance, 2001 assessment in respect of pre-repeal period of the Income Tax Ordinance, 1979 shall fall within the authority of the Commissioner---Provisions of Ss.210(1) & 210(1A) of the Income Tax Ordinance, 2001 empowered the Commissioner to delegate his powers of assessment to the authorities subordinate to him but the fact remained that unless such delegation was made, no power could be exercised by the subordinate authority---Commissioner was the authority competent to make assessment.

Messrs Allied Motors v. The Commissioner of Income Tax 2004 PTD 1173 rel.

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

----Ss.13 (1)(aa) & 5---Un-explained investment etc., deemed to be income---Competent authority to grant statutory approval subsequent to repeal of Income Tax Ordinance, 1979 and enforcement of Income Tax Ordinance, 2001---Commissioner was the authority competent to complete an assessment so long as the periods falling within the ambit and scope of the repealed Income Tax Ordinance, 1979---In view of S.13(1)(aa) of the Income Tax Ordinance, 1979, the supervisory authority to a Taxation Officer being an Inspecting Additional Commissioner, was the statutory authority to grant approval for an addition made or sought to be made by the Taxation Officer under S.13(1)(aa) of the Income Tax Ordinance, 1979---Section 5 of the Income Tax Ordinance, 1979 dealt with the jurisdiction of various income tax authorities---Wherever an assessment was required to be made, it was the sole prerogative and powers of the Commissioner and in case it was delegated to an authority subordinate to him by exercising powers as contained under Ss.210(1) & 210(1A) of the Income Tax Ordinance, 2001, the power as to grant of statutory approval shall vest with the Commissioner alone---Authority competent to grant statutory approval under S.13(1)(aa) of the Income Tax Ordinance, 1979 subsequent to its repeal and enforcement of the Income Tax Ordinance, 2001 vested with the Commissioner---In the present case, power of assessment in respect of pre-repeal period of Income Tax Ordinance, 1979 were delegated by the Commissioner to the Taxation Officer and any addition sought to be made under S.13(1)(aa) of the Income Tax Ordinance, 1979, had to be subjected to statutory approval of the Commissioner, notwithstanding the fact that the Commissioner may have delegated such powers of approval to an authority subordinate to him other than the Taxation Officer.

Messrs Sandal Engineering (Pvt.) Limited, Faisalabad v. The Inspecting Additional Commissioner of Income Tax, Range-I, Companies Zone-7, Faisalabad and 2 others 2001 PTD 1467 rel.

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

----S.13 (1)(aa)---Un-explained investment etc., deemed to be income---Grant of statutory approval for addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 by the Additional Commissioner---Validity---Power to complete assessment under Income Tax Ordinance, 1979 were delegated to the Taxation Officer and necessarily approval for addition was required to be granted by the Commissioner himself---Where any such delegation had been made by the Commissioner then the Additional Commissioner may exercise powers of approval---Since in the present case, no such delegation was made by the Commissioner, no approval was lawfully granted by the Additional Commissioner in absence of delegation of powers.

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

----S.5(1)(a)---Income Tax Ordinance (XLIX of 2001), S.209---General Clauses Act (X of 1897), S.6(e)---Jurisdiction of Income Tax authorities---Powers of Regional Commissioner to issue jurisdiction order---Scheme of exercise of jurisdiction as contained in S.5 of the Income Tax Ordinance, 1979 was quite distinguishable from the scheme of jurisdiction provided under the provision of S.209 of the Income Tax Ordinance, 2001 ---Provisions of S.6(e) of the General Clauses Act, 1897 shall come into play because of the repeal---Regional Commissioner had rightfully invoked the powers as contained under S.5(1)(a) of the Income Tax Ordinance, 1979 in consonance with the provisions of S.6(e) of the General Clauses Act, 1897---Provisions contained in S.6(e) of the General Clauses Act, 1897 supported the exercise of powers by the Regional Commissioner of Income Tax under S.5(1)(a) of the Income Tax Ordinance, 1979---Jurisdiction order had lawfully been passed by the Regional Commissioner with the reservation as to its retrospective effect given as from 01st August, 2005. [pp. 1156, 1157] H, I & J

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

----S.5(1)(a)---Income Tax Ordinance (XLIX of 2001), S.209---General Clauses Act (X of 1897), S.6 (e)---Jurisdiction of Income Tax authorities---Issuance of jurisdiction order by the Regional Commissioner on 08th May, 2006 with retrospective effect from 01st August, 2005---Validity---Commissioner had competently issued jurisdiction order dated 8th May, 2006, in exercise of powers conferred upon him under S.5(1)(a) of the Income Tax Ordinance, 1979 read with S.6(e) of the General Clauses Act, 1897---Jurisdiction of the Income Tax Authorities under the Income Tax Ordinance, 1979 was regulated through the provisions of S.5 of the Income Tax Ordinance, 1979, whereby the competent authorities could assign jurisdiction to their respective subordinate authorities through a general order---Such order was primarily and predominantly for the purposes of administration and carrying out the purposes of the enactment under which their appointment was made---Through an administrative and an executive order, the superior authorities, assign, define and provide scope of job, assignment and the area of work to their incumbents---Such order was for administering and carrying out purpose of enactment vis-à-vis appointment---Order in question was administrative and executive in nature---Such order could not be given retrospective effect---Administrative or executive order could not be made retroactive or given retrospective effect.

2005 SCMR 492; 2004 PTD 2928 and 2011 PTD (Trib.) (sic) rel.

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

----Ss.13(1)(aa) & 5---Un-explained investment etc., deemed to be income---Grant of approval by the Inspecting Additional Commissioner for the purpose of addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 prior to the jurisdiction order empowering the Additional Commissioner to accord statutory approval as Inspecting Additional Commissioner---Validity---Ex parte assessment was made on 28-6-2005 and approval for making addition was accorded by the Additional Commissioner as on 28-6-2005, meaning thereby that at the relevant time jurisdiction on the Additional Commissioner to act as a statutory authority of approval as Inspecting Additional Commissioner of Income Tax in terms of S.13(1)(aa) of the Income Tax Ordinance, 1979 was not in field---Power to grant approval was accorded by virtue of jurisdiction order had taken effect from 1st August, 2005 even then the approval for addition having been accorded on 28th June 2005 the same was not granted by a competent authority---Statutory approval made by the Additional Commissioner was held to be without jurisdiction and not lawful---Statutory approval as required under S.13(1)(aa) of the Income Tax Ordinance, 2001 was granted by an authority without having such power of approval, the same was held to be granted unlawfully, without jurisdiction and consequently the addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979 by the Assessing Officer merited deletion for want of statutory approval from a competent authority---Addition made was deleted by the Appellate Tribunal because of non-observance of the statutory requirements.

Shahbaz Butt ASC for Appellant.

Shahbana Aziz, D.R. for Respondent.

Date of hearing: 11th February, 2014.

2014 P T D 1173

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Sajjad Ali, Accountant Member

Messrs DOLLAR EAST EXCHANGE CO. (PVT.) LTD., GUJRANWALA

Versus

C.I.R, R.T.O, GUJRANWALA

I.T.As. Nos. 773/LB to 776/LB of 2013, decided on 20th February, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5A), 120(1), 24, 39, 56 & 57---State Bank Circular FE 9 of 2002, dated 2007-2012, Cl.4---Amendment of assessments---Interest income on maintenance of 25% of paid up capital as statutory liquidity reserve (SLR) with State Bank of Pakistan---Rate difference income---Assessment under the head "income from other sources"---Taxpayer contended that as per rules/regulation issued as State Bank Circular FE 9 of 2002, the taxpayer company was mandatorily required to maintain 25% of its paid up capital as statutory liquidity reserve with the State Bank in the form of un-encumbered approved Government Securities and State bank would extend current account and SGLA facilities to it, along with interest amount accrued to the taxpayer on such deposit maintained with the State Bank of Pakistan; and as per Circular FE 9 the taxpayer company could not do any other business except the business authorized by the State Bank of Pakistan which were enumerated in the Memorandum and Articles of Association of the company; and without maintenance of statutory liquidity reserve with State Bank of Pakistan, company could not even conduct business of currency exchange; and since, interest accrued and arose to the taxpayer as well as "Rate Difference Income" was an integral part of its business activities permitted by the State Bank of Pakistan, being a regulatory authority, such income was its business income and could not be assessed under the head 'income from other sources' under S.39 of the Income Tax Ordinance, 2001; and its income from all sources fell under the head "income from business"; and any business loss incurred to the taxpayer could not be denied to him to be set off against its interest income as well as 'rate difference' income; taxpayer was also entitled under S.57 of the Income Tax Ordinance, 2001 to carry forward and set off said loss against income arising and accrued in the succeeding tax year---Validity---Income from interest driven by the taxpayer from statutory liquidity reserve as well as "rate difference income" was business income of the tax payer for all purposes like other normal business income derived by the foreign exchange company---Such income could not be deemed as mere investment in approved government securities---Interest income earned from statutory liquidity reserve /government securities and from "rate difference income" was its business income and not income from other sources---Since it was held that taxpayer derived business income only which fell under the head "income from business" and not under any other head of income as specified under S.11 of the Income Tax Ordinance, 2001, Appellate Tribunal directed that loss set off as claimed by the taxpayer was to be allowed against income from interest on securities statutory liquidity reserve and "rate difference income" and that assessed losses for the tax years 2004 and 2005 should be carried forward to the succeeding tax years i.e. tax year 2006 and onward and brought forward losses should be allowed to be set off against the assessed income of the taxpayer as stipulated under Ss.56 & 57 of the Income Tax Ordinance, 2001.

Sham Progetti S.P.A. v. Addl: C.I.T. (1982) 10 Taxman 86 (Delhi); C.I.T. v. P. Industrial Infrastructure Corporation Ltd., (1989) 175 ITR 361 (AP); C.I.T. v. Madras Refineries Limited (1997) 228 ITR 354; Snam Progetti S.P.A. v. Addl: CIT (1981) 132 ITR 70 (Delhi); Collis Lines Private Ltd. v. I.T.O. (1982) 135 ITR 390 (Ker.) C.I.T. v. Seshasayee Paper and Board Limited (1994) 207 ITR 80 (Mad.); English Electric Co. of India Ltd., v. CIT (1987) 168 ITR 513 (Mad.); C.I.T. v. Dunlop India Ltd., (1992) 197 ITR 34 (Cal.); CIT v. Production (Pvt.) Ltd. (2010) 322 ITR 270 and (2010) 327 ITR 142 (P&H) rel.

Dawood Iqbal, I.T.P. for Appellant.

Yasir Pirzada, D.R. for Respondent.

Date of hearing: 17th February, 2014.

2014 P T D (Trib.) 1187

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaarul Haq, Judicial Member and Sikandar Aslam, Accountant Member

Messrs SARWAR & CO. (PVT.) LTD., LAHORE

Versus

COMMISSIONER INLAND REVENUE, R.T.O, ZONE-I, LAHORE

I.T.As. Nos. 402/LB to 404/LB of 2014, decided on 28th February, 2014.

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

----Ss.122(5A), 113, 153(1)(c), 169 & Second Sched., Part-1, Cl-126F---FBR letter C.No.4(1)ITP/2010-113914 dated 19-8-2010---FBR letter C.No.4(4)ITP/2012 dated 19-8-2010---FBR letter C.No.4(4)ITP/2009 dated 6-10-2011---FBR Circular No. 14 of 2011 dated 6-10-2011---FBR Circular C.No.4(4)ITP/2010 dated 7-6-2013---Amendment of assessment---Contractual receipts---Claim of exemption from Final Tax Regime and Minimum tax---Taxation Officer taxed contractual receipt after disallowing claim of exemption on the ground that taxpayer wrongly claimed exemption from tax under Cl.(126F) of Part-1 of the Second Schedule of the Income Tax Ordinance, 2001 on its contractual receipts which were otherwise chargeable to tax under S.153(1)(c) of the Income Tax Ordinance, 2001 read with S.169 of the Income Tax Ordinance, 2001---Validity---Total income of a person comprised of income under all heads including income from business under S.18(1)(a) of the Income Tax Ordinance, 2001 which clearly mentioned the term "profits and gains" and this term had been used in Cl.(126F) of the Second Schedule of the Income Tax Ordinance, 2001 which granted exemption to profits and gains and not to the income covered under S.169 of the Income Tax Ordinance, 2001---Section 169(2) of the Income Tax Ordinance, 2001, in turn, excluded all the incomes which were chargeable under any head of income meaning thereby that income subjected to final taxation did not fall within the scope of business income and profits and gains, hence, not exempt under Cl.(126F) of the Second Schedule of the Income Tax Ordinance, 2001---Only those profit and gains which were taxable within the meaning of S.18(1)(a) of the Income Tax Ordinance, 2001 had been given exemption in Cl.(126F) of the Second Schedule of the Income Tax Ordinance, 2001 whereas the case of the taxpayer fell under S.169(2)(a) of the Income Tax Ordinance, 2001 which states that "the income shall not be chargeable to tax under any head of income in computing the taxable income of the person"---Case of the taxpayer did not fall under S.18 of the Income Tax Ordinance, 2001 rather it fell under separate block of income which was not covered under S.18 of the Income Tax Ordinance, 2001 and, in turn, did not qualify for exemption under Cl.(126F) of the Second Schedule of the Income Tax Ordinance, 2001---Action of the Officer of Inland Revenue was based on correct interpretation of exemption Cl.(126F) of the Second Schedule of the Income Tax Ordinance, 2001 and justifiably invoked S.122(5A) of the Income Tax Ordinance, 2001, which was squarely in accordance with law---Order passed by both the authorities below were upheld by the Appellate Tribunal and appeals of the taxpayer rejected being devoid of any merit.

2010 PTD 1809; 1993 PTD 306; PLD 1966 SC 828; PLD 1966 Dacca 523; 1998 PTD 3835; 1973 PTD 361; 2003 PTD 1805; 2002 PTD (Trib.) 783 and 1998 SCMR 1950 ref.

I.T.A. No.157(PB) of 2012 rel.

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

----Second Sched: Part-1, Cl.(126F)---Exemption---Applicability of the provisions---Scope---Intention of the legislature was to give fiscal relief to the taxpayers of Khyber Pakhtunkhwa, Federal Administered Tribal Areas and Provincially Administered Tribal Areas---Taxpayer was a private limited company whose office was located in Lahore and had been executing construction contracts of billion of rupees---By any stretch of imagination, this fiscal relief was not meant for such type of company, which had not even remotely been affected by the on-going strife in Khyber Pakhtunkhwa, Federal Administered Tribal Areas and Provincially Administered Tribal Areas.

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

----Ss.153 (1)(c) & Second Sched: Part-1, Cl.(126F)---Payments for goods, services and contracts---Exemption from tax---Claim of refund---Validity---Refund of the taxpayer claimed/issued on the basis of deemed assessment orders was not admissible due to the fact that Cl.(126F) of Part-1 of the Second Schedule of the Income Tax Ordinance, 2001 provided exemption to profits and gains of the taxpayer and not to the contractors---No provision in the Income Tax Ordinance, 2001 existed which provided exemption to contractors which otherwise fell under S.153(1)(c) of the Income Tax Ordinance, 2001 by virtue of their contractual receipts which were subjected to final taxation---Taxpayer who was a contractor, and wanted to claim refund under Cl.(126F) of Part-1 of the Second Schedule of the Income Tax Ordinance, 2001, must file return of income declaring profits or gains, as the case may be, along with audited accounts as required under the law and then his claim of refund could be processed in accordance with Cl.(126F) of Part-1 of the Second Schedule of the Income Tax Ordinance, 2001---In the present case, the taxpayer had neither declared any taxable income in the relevant columns of the returns i.e. column No.74 nor filed audited accounts at any stage to substantiate his claim---Order accordingly.

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

----S.206---Federal Board of Revenue---Issuance of circulars and interpretation of fiscal statute---Scope---Federal Board of Revenue may issue circulars to provide guidance to the taxpayers and its functionaries---Circulars shall be binding on Federal Board of Revenue functionaries but not be binding on a taxpayer---Similarly any circular/clarification issued by the Federal Board of Revenue was not binding on the Appellate Tribunal being a judicial authority---Federal Board of Revenue was not empowered by the statute to clarify, interpret and explain the legal provisions of the Income Tax Ordinance, 2001; that is why taxpayers had intentionally been excluded from the domain of circular/clarification venture of Federal Board of Revenue---Power vested under S.206 of the Income Tax Ordinance, 2001 were of administrative nature having clear restriction to explain the legal issues---Statute was required to be read as a whole and not in a piecemeal manner---Even otherwise Federal Board of Revenue had no power to alter the tax liability of a person by issuing S.R.O. or Circular or by making a 'clarification' that was actually an "interpretation of law" in the garb of "clarification" which was also unwarranted under the law---Tax liability of a person could only be determined/altered/re-determined by competent legislature---Interpretation of law was the sole prerogative of the courts.

(e) Interpretation of Statutes---

---Taxing statute---One can only look at the language, since there is no room for intendment or presumption in a taxing statute---Person sought to be taxed can only be taxed when he came within the letter of law which was squarely applicable---Where law required an act to be done in a particular manner, it had to be done in that manner alone and such dictate of law could not be termed as a technicality---Where an order passed by any forum/authority or court is patently illegal or against express provisions of law, if allowed to stay intact that tantamount to cause prejudice and serious breach of legal rights of taxpayers/citizens---To enjoy the protection of law and to be treated in accordance with law is the inalienable right of every citizen which of course included taxpayer as general citizenry.

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

----Second Sched: Part-1 Cl. (126F)---Exemption---Conflicting circulars by Federal Board of Revenue---Scope---Interpretation provided by the Federal Board of Revenue conflicting with the statutory provisions of Cl.(126F) of Part 1 of the Second Schedule of the Income Tax Ordinance, 2001 was patently illegal and a nullity in the eye of law.

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

----Ss.153(1)(c), 53(1)(d) & Second Sched: Part-1, Cl.(126F)---Payments for goods, services and contracts---Exemption---Income taxable under normal tax regime---Receipts subject to final discharge of tax liability---Exemption given under Cl.(126F) of Part 1 of the Second Schedule of the Income Tax Ordinance, 2001 was applicable only to the income taxable under the normal tax regime of taxation---If the legislature had intended to allow exemption to such like persons, who were admittedly subject to the final tax regime then a suitable provision should have been made in Part IV of the Second Schedule of the Income Tax Ordinance, 2001 read with Cl.(d) of Subsection(1) of S.53 of the Income Tax Ordinance, 2001---Said provisions stipulated that income or class of income or person or class of persons specified in Part IV of the Second Schedule of the Income Tax Ordinance, 2001 be exempted from the operation of any provision of the Ordinance, subject to any condition and to the extent specified therein---Case of the taxpayer fell under Cl.(c) of subsections (1) and (3) of S.153 of the Income Tax Ordinance, 2001---Said provisions dealt with the payment on account of contracts etc. and which were treated as final tax---Taxpayer had not been exempted from the applicability of any of these provisions---Claim of exemption in terms of Cl.(126F) of Part 1 of the 2nd Schedule of the Income Tax Ordinance, 2001 could not be entertained.

Rana Muhammad Afzal for Appellant.

Yassis Pirzada, ACIR/DR for Respondent.

Date of hearing: 26th February, 2014.

2014 P T D (Trib.) 1207

[Inland Revenue Appellate Tribunal]

Before Zafar Iqbal, Judicial Member and Zarina N. Zaidi, Accountant Member

M.A.Rs. Nos.422 and 423/KB of 2010, decided on 6th February, 2012.

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

----Ss.221 & 121---Rectification of mistake---Bad debts---Deletion of bad debts by the First Appellate Authority---Appellate Tribunal held that First Appellate Authority was not justified in deleting the same as no legal efforts had been made by the assessee to recover the amount so that bad debts could not be held to be "bad" and irrecoverable; and in absence of proper efforts to recover the same the disallowance made by the Taxation Officer was restored and order of First Appellate Authority was vacated---Rectification of such order---Validity---Omission to decide the issue on the part of the earlier Benches of Appellate Tribunal was not correct and proper as per facts and in law, while in the order of the first appeal before the First Appellate Authority it was found that litigation was not considered to be proper and germane in view of the high cost of litigation and non-cooperation of the debtors and for other objections which had not been repelled---Order of Appellate Tribunal was recalled and rectified and that of First Appellate Authority was approved and restored---Addition of bad debts stood corrected, revised and allowed by the Appellate Tribunal.

(1979) 39 Taxation 51 (Trib.) (para. 7); 1987 PTD (Trib.) 527; (1979) 120 ITR 792, 819 (Bombay); (1983) 143 ITR 166 (Gujrat) and (1981) 129 ITR 467 (Allahabad) ref.

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

----Ss.221, 111, & 29---Income Tax Appellate Tribunal Rules, R.13---Rectification of mistake---Voluntary contribution by the foreign sister concern---Addition on the grounds that (a) taxpayer acted in "collusion" with the associated concern and had made the arrangements to lessen the legitimate tax liability (b) term "income" not only included those things which were included in S.29 of the Income Tax Ordinance, 2001 but covered all such things which the term signified according to its general and natural meaning (c) "voluntary contribution from foreign associated undertaking was declared as income as per the Audited Accounts whereas it was excluded from the income in the computation of income" and (d) that the claim of voluntary contribution was only supported by a photocopy of credit advice of Bank and was not supported by the Audited Accounts of foreign donor company---Validity---Taxation Officer was not entitled to make any requisition in respect of the audited accounts of the foreign donors which were not maintained and kept by the assessee and could not have been demanded---Certificate of the bank which was based on the monitoring of State Bank of Pakistan was authentic and complete proof of the foreign remittance---Remittance of foreign exchange from abroad was encouraged for long by the Economic Reforms Act, 1992 and later specific instructions of the Federal Board of Revenue---Receipts in foreign exchange were exempted from the Income Tax Ordinance, 1979 and was further acknowledged, well guarded and specifically provided in S.111 of the Income Tax Ordinance, 2001 which seemed to have escaped consideration by the assessing officer and the Appellate Tribunal altogether---Omission in not considering a specific provision of the statute appeared to be a fatal mistake---Such was not income liable to be taxed and it was not a revenue receipt---Earlier order was rectified by the Appellate Tribunal and restored the treatment meted out by the First Appellate Authority.

Rani Armit Kunwar v. CIT UP & CP 14 ITR 561; Webster's Dictionary; Oxford Dictionary and Oxford Concise Dictionary; CIT v. Shah Wallace & Co. (9 ITR 78), (AIR 1932 PC 138); CIT v. Smith Kline and 2 others 1991 SCMR 2347 = 1991 PTD 999; (1958) 33 ITR 644 and PIAC v. CIT. (1975) 32 Taxation 225 ref.

CIT Bombay v. Messrs Shoorji Vallabldas & Co. 46 ITR 144 and CIT Bombay v. Moghul Lines Limited 46 ITR 590 rel.

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

----S.221---Rectification of mistake---Profit and loss expenses---Addition of travelling and conveyance and in entertainment expenses was made on the ground of self-made vouchers---Taxpayer contended that expenses related to local travelling of employees and other miscellaneous small labour, small entertainment and other expenses based on the claims of the employees and labour engaged though employees for which it was an accepted principle that the taxi drivers and labour did not issue a printed receipt; and expenses were in consonance with the past history---Validity---Expenses were disallowed on stock phrases, without properly identifying any defect in the maintenance of accounts and against past history---Similar addition made was retrenched by the Appellate Tribunal in the previous year---Addition of expenses retrenched and disallowed on account of travelling and conveyance and entertainment had not been justifiably established---Order of the Bench not attending to the correct facts and the legal apposition deserved richly to be rectified, amended and withdrawn---Appellate Tribunal ordered accordingly and treatment of First Appellate Authority was restored on the issue.

1996 PTD (Trib) 890; 1974 PTD 45; I.T.As. Nos. 715/KB and 716/KB of 1982-83; 2005 PTD (Trib) 814 ref.

(1966) 14 Taxation 161; 1987 PTD (Trib.) 427; 1989 PTD (Trib.) 39; 1990 PTD (Trib.) 925 and (2004) 90 Tax 1 (Trib.) rel.

Muhammad Naseem for Appellant.

M.A. Jafri, D.R. for Respondent.

Date of hearing: 15th September, 2011.

2014 P T D 1224

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Abdul Nasir Butt, Accountant Member

Messrs SARENA INDUSTRIES AND EMBROIDERY MILLS (PVT.) LIMITED, LAHORE

Versus

COMMISSIONER INLAND REVENUE, ZONE-III, LAHORE

I.T.As. Nos. 991/LB and 913/LB of 2011, decided on 9th September, 2013.

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

----Ss.161, 205 & 101---Failure to pay tax collected or deducted---Payment of Foreign Commission---Non-deduction of tax---Taxpayer contended that demand of tax on account of payment to Foreign Commission Agent was wrongly created as the taxpayer was not required to deduct tax on account of such payment made to non-residents because the income of foreign agents was not chargeable to tax in Pakistan; that the name of the persons on whose behalf tax had not been deducted were not mentioned in the assessment order; that question would arise as to who will get credit of this amount as it was an advance tax of the person on whose behalf it was recovered or tax had not been deducted; that Assessing Officer wrongly charged tax on account of payment made to forwarding agents and First Appellate Authority had wrongly remanded back the issue of charging of tax on account of freight and forwarding as the taxpayer had duly deducted and deposited the tax on account of services rendered by the clearing agents and other payments on which tax had not been deducted related to duties and taxes etc. on which the provision of withholding tax was not applicable; and that the same was liable to be deleted---Validity---Tax had wrongly been charged on account of foreign commission paid to non-residents and on account of freight and forwarding agents---First Appellate Authority was not justified to remand the case which was ordered to be deleted as the issue had already been decided by the High Court and Appellate Tribunal.

2010 PTD 1159 and I.T.As. Nos.207/LB of 2009 and 629/LB of 2010 ref.

2012 PTD (Trib.) 122 rel.

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

----Ss.129 & 21---Decision in appeal---Remand of order---Deductions not allowed---Department contended that First Appellate Authority was not justified to remand the issue on account of payment to forwarding agents that as the power of remand had been withdrawn by Finance Act, 2005; that deletion of tax charged on account of repair and maintenance, travelling and conveyance allowance and entertainment, the Assessing Officer had already given margin to the taxpayer regarding below taxable limit purchases; that order was fully justified and reasonable; and that with regard to deletion of tax charged on account of newspaper and periodicals and purchase of Yarn, Assessing Officer had rightly charged tax @ 5% which had wrongly been deleted by the First Appellate Authority without giving any reasons---Taxpayer contended that assessing officer wrongly disallowed 30% of the claim in any arbitrary manner on account of repair and maintenance, travelling and conveyance allowance and entertainment expense which had rightly been deleted by the First Appellate Authority; and tax charged on account of newspaper and periodical and purchase of yarn @ 5% had also rightly been deleted as the payments did not come under the category of services as the assessing officer charged tax under the head services---Validity---Order of First Appellate Authority on the issue of Repair and Maintenance, Travelling and Conveyance and Entertainment and Newspapers was well reasoned and did not require any interference being justified and Taxation Officer had made the additions without legal reasons.

M. Iqbal Hashmi for Appellant (in I.T.A. No.991/LB of 2011).

Muhammad Tahir, D.R. for Respondent (in I.T.A. No.991/LB of 2011).

Muhammad Tahir, D.R. for Appellant (in I.T.A. No.913/LB of 2011).

M. Iqbal Hashmi for Respondent (in I.T.A. No.913/LB of 2011).

Date of hearing: 9th September, 2013.

2014 P T D (Trib.) 1233

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Sajjad Ali, Accountant Member

Messrs ELAHI TRADERS, FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, R.T.O, FAISALABAD

M.A. (AG) No. 48 of 2013 and S.T.A. No.357/LB of 2009, decided on 11th February, 2014.

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

----Ss.73, 7, 11(4), 36(3) & 47-A---Sales Tax Ruling/instruction No.53/2002, issued by Revenue Division vide letter C. No. 3(36) STP/99(PT-1), dated 13-7-2002---Order Under S.47-A Sales Tax Act, 1990----Sales Tax Ruling/instruction No.5/2004 dated 31-3-2004---Certain transactions not admissible---Payments through crossed travellers cheques---Input tax adjustment was rejected on the ground that payments to the supplier were not made from the business/bank account of the registered person---Registered person contended that payments were made through crossed travellers cheques and the supplier company also confirmed said contention that the said travellers cheques were enchased in their business bank account---Validity---Word "bank" was inserted through Finance Act, 2003 much after the period for which the audit of the registered person was conducted---Language of the provisions before such amendment, indicated the words "business account" and not "business bank account"---Assessing authority erred in considering the "business account" as "business bank account" for the period prior to the insertion of the word "bank" account i.e. 1-7-2003---Payments made to supplier were in accordance with the procedure as provided in the Sales Tax Act, 1990 for the relevant period---Violation of provisions of S.73 of the Sales Tax Act, 1990 even after the Finance Act, 2003, were procedural in nature and the provision was to streamline the transactions of registered person through banks and also to avoid the input tax adjustment from the fake and forged sales tax invoices---Admittedly, the revenue had verified all the invoices provided by the registered person as sales tax return, purchase invoices, bill of entry and purchase register which were declared genuine and no allegation of fraud or bogus invoices had been levelled---Registered person may not be deprived from his legal money due against the government, when there was particularly no mis-statement, forgery, collusion, cheating, fraudulent activity were alleged or any false claim was submitted by the registered person with the view to obtain the illegal gain or causing loss to the government---Contravention of S.73 of the Sales Tax Act, 1990 did not debar the registered person to claim the input tax adjustment, if there was no allegation of fraud, cheating, collusion, fake and bogus invoices had been levelled against the registered person---Registered person could not be deprived from claiming input tax adjustment on the plea of non-compliance of S.73 of the Sales Tax Act, 1990 "alone" was illegal, arbitrary and against the natural justice.

2006 PTD 2902 and S.T.A. No.116/LB of 2011 ref.

2010 PTD (Trib.) 975 and 2010 PTD (Trib.) 2656 rel.

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

----Ss.11(4) & 36(3)---Assessment of tax and recovery of tax not levied or short-levied or erroneously refunded---Limitation---After issuance of Show-Cause Notice, the Authority was legally bound to pass Order-in-Original within 45 days of the issuance of Show-Cause Notice to the registered person and if due to any reason, the Collector failed to pass the order, then he was legally bound to seek extension for further period, which shall not in any case exceed 90 days and such extension must be in writing and the reason for delay must be incorporated in the order---Show-Cause Notice was issued on 3-1-2003 to the registered person and the Order-in-Original was passed by the Collector on 28-4-2004 (the date on which the judgment was signed) while time limitation of 45 days as per Ss.11 & 36(3) of the Sales Tax Act, 1990 stood expired on 17-2-2003---Order-in-Original was passed by the Collector beyond the prescribed limit of 45 days even the extended period of 90 days---Adjudication authority had neither fixed any extended period nor recorded any reason for passing the order after 45 days---Order-in-Original was passed by the Collector after 480 days from the issuance of Show Cause Notice to the Registered Person---Order-in-Original was declared as time barred and was cancelled by the Appellate Tribunal.

2009 PTD 2004; 2009 PTD 762 and 2012 PTD 1092 rel.

Abdul Ghafoor for Appellant.

M. Jamil Bhatti, D.R. for Respondent.

Date of hearing: 7th February, 2014.

2014 P T D (Trib.) 1241

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Sajjad Ali, Accountant Member

Messrs BAJWA & CO. (PVT.) LTD., GUJRANWALA

Versus

COMMISSIONER INLAND REVENUE, ZONE-II, R.T.O., GUJRANWALA

I.T.A. No. 401/LB of 2014, decided on 26th February, 2014.

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

----S.122(5A)---Amendment of assessment---Fishing Inquiry---Inquiry could not be conducted while proceeding under S.122(5A) of the Income Tax Ordinance, 2001.

1999 PTD (Trib.) 2851; 2009 PTD (Trib.) 121 and 2010 PTD (Trib.) 111 rel.

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

----S.122---Amendment of assessment---Repeated notices---Assessing Officer issued repeated notices i.e. first notice was issued on 2-9-2013 and other notice on 10-10-2013, order passed in consequence was not maintainable.

2010 PTD (Trib.) 111 rel.

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

----Ss. 21(c) & 153---F.B.R. Circular No. 1(29)IT-1/79.PT.III dated 7-1-1982---S.R.O. 586(I)/91 dated 30-6-1991---Withholding tax, deduction of---Scope---Payment of freight to truck owners---Non-deduction of tax---Addition---Validity---As per instructions of Federal Board of Revenue, deduction of tax on payment of freight to truck owner for single journey was not required---In the present case, it had not been mentioned as to from whom tax was required to be deducted and deposited in the Government treasury and names of parties had also not been confronted to the taxpayer on whose behalf tax was required to be deducted---Taxpayer had paid freight directly to individual truck drivers and documentary evidence in support had been produced---Taxpayer, in circumstances was not required to withhold the tax---Withholding of tax being not required as per provision of S.153 of the Income Tax Ordinance, 2001 read with S.R.O. 586(I)/91 dated 30-6-1991, invoking of provision of S.21(c) of the Income Tax Ordinance, 2001 on the payments made under the head "freight" was not sustainable.

2012 PTD (Trib.) 122 rel.

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

----Ss.21(c) & 153---Withholding tax, deduction of---Scope---Vehicle running and maintenance expenses---Machinery repair---Building repair---Packing expenses---Addition due to non-deduction of tax---Taxpayer contended that such expenses required the use of stores and articles which were essential ingredients of the expenses incurred under these heads, such expenses were not "services" as contemplated under S.153 of the Income Tax Ordinance, 2001; and amount expended under these heads were petty amounts, meaning thereby that each transaction was below the basic threshold of transaction which did not attract the provisions of S.153 of the Income Tax Ordinance, 2001---Details and documentary evidence were produced to substantiate the plea---Documents showed that expenses incurred were not "services" in the strict sense of the expression as defined in S.153 of the Income Tax Ordinance, 2001---Payments made under these heads did not attract the withholding provisions of S.153 of the Income Tax Ordinance, 2001---Provisions of S.21(c) of the Income Tax Ordinance, 2001 were not attracted---Appellate Tribunal ordered to delete the additions made by the Assessing Officer and First Appellate Authority as being illegal and not sustainable in the eyes of law.

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

----Ss.21(c) & 153---Withholding tax deduction of---Scope---Publicity and advertisement expenses---Party-wise details and vouchers were produced which indicated that these expenses pertained to petty expenses i.e. each transaction was less than Rs.10000---Payments made under said head did not attract the provisions of withholding tax under S.153 of the Income Tax Ordinance, 2001---Invoking of provision of S.21(c) of the Income Tax Ordinance, 2001 was illegal and void ab initio.

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

----Ss.21(c) & 153---Withholding tax, deduction of---Scope---Loading and Unloading expenses---Such payments were made to poor labourers, who were paid very small amounts of Rs.500 to Rs.1000 for each transaction which being below the basic threshold of Rs.10000 did not attract the provisions of S.153 of the Income Tax Ordinance, 2001---Receipts and CNICs of ;the person concerned were produced---Single transaction of payments being very nominal did not attract withholding tax as provided under S.153 of the Income Tax Ordinance, 2001---Since payments made under the head "loading and unloading" did not attract withholding provisions of S.153 of the Income Tax Ordinance, 2001, invoking of provisions of S.21(c) of the Income Tax Ordinance, 2001 was illegal and not sustainable in the eyes of law.

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

----S.122---Amendment of assessment---Adjournment was refused with the observation that 'adjournment was not a matter of right'---Validity---Such judgment or obiter was against the maxim "audi alteram partem" i.e. nobody should be condemned unheard and hearing could not be denied to a person against whom any proceedings were started or intended to be started---Violation of principles of natural justice, amounted to violation of law---Giving a proper opportunity of being heard was the essential ingredient of natural justice---Provisions of notice to a person against whom any authority proposed to proceed would be read in every statute irrespective of absence of such provision therein---Power to pass an order or give any direction conferred on authority, had to be exercised fairly, justly and for the advancement of the purpose of an enactment---Order passed against an assessee, detrimental to his interest without providing him an opportunity, in no manner could be termed as having been passed fairly and justly---No taxpayer could be condemned unheard---Before levy of tax or completion of assessment, taxpayer should be provided proper opportunity of being heard---Adjournment could not be denied, on the basis that it was not the right of the taxpayer---Denying of adjournment, based on reasonable ground, by any authority was against the law of natural justice and violation of principles of natural justice---Every taxpayer had a fundamental right of adequate opportunity of being heard before completion of his assessment and adjournment based on reasonable ground was an essential part of the proper opportunity of being heard as well as law of natural justice---Adjournment refused to taxpayer by the assessing or appellate authority in an arbitrary or unjust manner was nullity in law.

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

----Ss. 128(5) & 131(4)---FBR Circular No.5/1954---FBR Circular No.6/1956---Procedure in appeal---Terms "not produced before the Commissioner" and "Sufficient cause"---Explained.

Circular No. 5/1954 and 6/1956 (quoted in Huzamia & Ikram's Law practice of Income Tax Vol. 11, P 128) ref.

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

----Ss.128(5), 153 & 21(c)---Procedure in appeal---Requisition of material or evidence from taxpayer---Assessing Officer did not requisite any material or evidence from the taxpayer, rather Assessing Officer had given unambiguous decision without requisitioning any material or evidence from the taxpayer that the taxpayer had failed to deduct tax under S.153 of the Income Tax Ordinance, 2001---Payment made on different heads of accounts were inadmissible in view of provision of S.21(c) of the Income Tax Ordinance, 2001---Action of Assessing Officer was in violation of the instructions issued to the Assessing Officer by the Federal Board of Revenue through circulars---Undisputed fact being that Assessing Officer had not requisitioned any material or documents as envisaged in S.128(5) of the Income Tax Ordinance, 2001, said provisions were not attracted---First Appellate Authority was not justified to dismiss the appeal of the taxpayer on this sole ground.

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

----S. 128(5)---Procedure in appeal---"Sufficient cause"---Connotation.

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

----S. 153---Withholding tax deduction of---Scope---Adjournment---Filing of Income Tax Return---"Sufficient cause" for seeking adjournment---Authorized representative of the taxpayer had filed application for adjournment, as he was busy with preparation and filing of Income Tax Returns of his clients for at that point of time---Such was a sufficient cause for seeking adjournment and generally the departmental officers allowed adjournments liberally during said period---Taxpayer, in the present case, was prevented by "sufficient cause" from producing material and evidence before the Commissioner---Action of First Appellate Authority to refuse to entertain the material and evidence produced before him in respect of withholding of tax was not justified rather it was illegal and not sustainable in the eye of law.

M. Iqbal Hashmi along with Qadeer Ahmad for Appellant.

Nouman Malik, D.R. for Respondent.

Date of hearing: 26th February, 2014.

2014 P T D (Trib.) 1268

[Inland Revenue Appellate Tribunal]

Before Ch. Anwwar ul Haq., Judicial Member and Sajjad Ali, Accountant Member

Messrs FAWAD TEXTILE MILLS LIMITED, LAHORE

Versus

COMMISSIONER INLAND REVENUE, R.T.O., LAHORE

I.T.As. Nos. 1842/LB and 1843/LB of 2012, decided on 21st January, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.161 & 128(5)---Failure to pay tax collected or deducted---Taxpayer in default---Assessing officer treated the company as taxpayer-in-default as the company failed to deduct required tax under the heads: local raw material, salaries and wages, store/spare, repair and maintenance, others, travelling/conveyance, communication, repair and maintenance, professional charges and selling expenses; and proceeded ex parte as the taxpayer had failed to file the requisite information---Taxpayer contended that notices issued were never served upon the taxpayer; and assessing officer while determining default under different heads of expenditure had acted merely on guesswork which was not permissible under the law; and proper opportunity as envisaged under the law was not provided to explain his case; and taxpayer submitted the requisite information/documentation---First Appellate Authority upheld the ex parte action of the assessing officer and refuse to entertain the documentary evidences produced by the taxpayer in terms of S.128(5) of the Income Tax Ordinance, 2001---Validity---Assessing officer had issued notices under S.161 of the Income Tax Ordinance, 2001 on the basis of amounts appearing in the accounts of the company and somehow failed to engage the taxpayer in the proceedings to present their case---Proper opportunity, as envisaged under the law, was not accorded to the taxpayer to substantiate their stance that the payments made under the different heads of expenditure were mostly below the threshold limit of withholding tax and that tax wherever required was duly deducted / deposited and necessary documentary evidences were available with the taxpayer---Such documentary evidences available with the taxpayer needed scrutiny / verification / thorough examination and the assessing authority was best placed for the purpose---Matter was remanded to the assessing authority for de novo decision with direction that every effort should be made to engage the taxpayer in the proceedings and matter be decided in accordance with law---Taxpayer was directed to cooperate with the department in the re-assessment proceedings in his own interest.

Muhammad Shabbir Sh. for Appellant.

Muhammad Nazir Rizvi, D.R. for Respondent.

Date of hearing: 21st January, 2014.

2014 P T D (Trib.) 1293

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Fiza Muzaffar, Accountant Member

Messrs SUN TUBE (PVT.) LTD., LAHORE

Versus

C.I.R., R.T.O., LAHORE

M.A. (AG) No.67/LB of 2013 and S.T.A. No.121/LB of 2011, decided on 11th March, 2014.

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

----S.30A---Audit---Jurisdictions---Registered person contended that Directorate of Intelligence and Investigation had travelled beyond its jurisdiction by conducting audit as Federal Board of Revenue had not yet notified through official Gazette the said Directorate under S.30A of the Sales Tax Act, 1990, which rendered its action as illegal as Gazatted notification was condition precedent for the constitution of the Directorate---Directorate of Intelligence and Investigation could not assume jurisdiction until or unless notified in the official Gazette---Gazette Notification was the mandatory requirement of law, which had not been fulfilled before proceeding for audit---Audit conducted was not legal.

Messrs Ibrahim Steel Casting v. CIR(A) S.T.A. No.55/LB/2012; 2013 PTD (Trib.) 1189 and Plum Qingqi (Private) Limited v. Federation of Pakistan, Writ Petition No.8695 of 2011 rel.

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

----Ss.38 & 25---Sales Tax General Order No.3 of 2004 dated 12-6-2004, Paragraph 42(b)---Authorized officers to have access to premises, stocks, accounts and records---Audit of record---Validity---Registered person contended that condition precedent for conducting an audit under S.38 of the Sales Tax Act, 1990 read with S.25 of the Sales Tax Act, 1990, was that the person conducting the audit was specifically authorized in that behalf; that approval of the Federal Board of Revenue was never confronted to ascertain the parameters of the authorization of the officers conducting the investigative audit; that as per paragraph No.42(b) of the Sales Tax General Order No.3 of 2004 dated 12-6-2004, the person whose audit was to be conducted should be informed about the audit and the details of the records to be audited at least fifteen (15) days before the scheduled date of audit; that no prescribed notice was issued; that since officers of Directorate had asserted a fact that it had the requisite authorization, as per Art. 117 of the Qanun-e-Shahadat, 1984, the officers of the Directorate were under burden to prove the fact---Validity---No provision existed for conducting an audit of a taxpayer in S. 38 of the Sales Tax Act, 1990---Authority to conduct an audit by an authorized officer was provided under S.25(3) of the Sales Tax Act, 1990, read with General Order No.3 of 2004---Assertions made at bar were forceful being self explanatory---Audit conducted was not on legal footing.

PTCL 2009 CL 671 ref.

Messrs A.M.Z. Spinning and Weaving Mills (Pvt.) Ltd. v. FOP, 2009 PTD 1083 rel.

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

----S.38---Authorized officers to have access to premises, stocks, accounts and records---Provision of S.38, elaborated.

Messrs A.M.Z. Spinning and Weaving Mills (Pvt.) Ltd. v. FOP, 2009 PTD 1083 rel.

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

----S.36---Customs Act (IV of 1969), S.32---Recovery of tax not levied or short-levied or erroneously refunded---Non-specification of subsection of S.36 of the Show-cause notice---Effect---Registered person contended that Show-Cause Notice was defective as it did not specify the Subsection of S.36 of the Sales Tax Act, 1990 as different time limits were prescribed under Ss. 36(1) & 36(2) of the Sales Tax Act, 1990, therefore mentioning of Subsection was mandatory; that if Show-Cause Notice was issued under S.36(1) of the Sales Tax Act, 1990, then burden was on the Revenue to establish "collusion" or "deliberate act" on part of the registered person; and Deputy Commissioner never even used the expression "collusion" or "deliberate act" in Show-Cause Notice lest to support it with reasons or evidence; that if Show-Cause Notice was under S.36(2) of the Sales Tax Act, 1990, investigative audit could not have been conducted beyond May 2007 in view of limitation of three years; and that no evidence/ documents information/record identified in Show-Cause Notice leading the Revenue to conclusion that the refund was illegally claimed---Validity---Allegations of collusion and deliberate act should be specific and particularized and must notice contain allegation of collusion and deliberate act otherwise Show-Cause Notice was void and illegal---Revenue should be seized of sufficient and tangible evidence to assume jurisdiction under S.36 of the Sales Tax Act, 1990---Show-Cause Notice should be comprehensive to made out a case with facts, reasons and evidence---Collusion required more than one person, a predetermined/ preplanned scheme to defraud---Reasons/causes for alleging evasion must be stated in Show-Cause Notice and validity of Show-Cause Notice was fundamental to assume jurisdiction under S.36 of the Sales Tax Act, 1990---Show-Cause Notice was null and void in circumstances---Orders passed by both the authorities below were annulled being not maintainable in the eye of law.

Assistant Collector v. Khyber Electronics 2001 SCMR 838 ref.

Messrs Caltex Oil (Pakistan) Ltd. v. Collector 2006 SCMR 1519 rel.

Majid Jahangir for Applicant (in M.A. No.(AG) No.67/LB of 2013).

Dr.Qurratulain, D.R. for Respondent (in M.A. No.(AG) No.67/LB of 2013).

Majid Jahangir for Applicant (in S.T.A. No.121/LB of 2011).

Dr.Qurratulain, D.R. for Respondent (in S.T.A. No.121/LB of 2011).

Date of hearing: 4th December, 2013.

2014 P T D (Trib.) 1303

[Inland Revenue Appellate Tribunal]

Before Abdul Qayyoom Shaikh, Judicial Member and Abdul Nasir Butt, Accountant Member

Messrs PACKAGES LTD. KARACHI

Versus

C.I.R., ZONE-III, L.T.U, KARACHI

I.T.As. Nos. 194/KB, 793/KB and 800 of 2011, decided on 18th February, 2014.

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

----Ss.122(5A), 122(4), 114(6), 114(6A), 124(2) & 120(1)---Amendment of assessment---Deemed assessment order was considered erroneous insofar as prejudicial to the interest of revenue and required amendment under S.122(5A) of the Income Tax Ordinance, 2001---Subsequently, taxpayer filed revised return, claiming amortization on computer soft wares---Revised return was taken to be as deemed amended assessment order under S.122(3) of the Income Tax Ordinance, 2001---In continuation of proceedings under S.122(5A) of the Income Tax Ordinance, 2001, taxation authority also considered said deemed amended assessment order as to be erroneous insofar as prejudicial to the interest of revenue and considered it also to require amendment under S.122(5A) of the Income Tax Ordinance, 2001 and passed the order-in-original, purported to be an order under S.122(5A) of the Income Tax Ordinance, 2001, amending an amended assessment order---Validity---Taxpayer filed 'revised return' in terms of S.114(6) of the Income Tax Ordinance, 2001 claiming the amortization on computer soft ware---Revised return was deemed to have been assessed under S.122(3) of the Income Tax Ordinance, 2001 and such deemed assessment order was considered as being erroneous insofar as prejudicial to the interest of revenue, requiring amendment under S.122(5A) of the Income Tax Ordinance, 2001---Fresh notice under S.122(9) of the Income Tax Ordinance, 2001 was issued with intention to amend its revised return or revised assessment order and ultimately passed order by exercising powers under S.122(5A) of the Income Tax Ordinance, 2001---Proceedings in such manner and form were inconsistent with law for the reasons (a) 'revised return' did not show that the same was filed in conformity and compliance with the notice under S.122(9) read with S.122(5A) of the Income Tax Ordinance, 2001; (b) 'revised return' filed was not in conformity with the condition (c) of subsection (6) of S.114 of the Income Tax Ordinance, 2001; (c) 'revised return' was not in conformity with subsection (6A) of S.114 of the Income Tax Ordinance, 2001 and the provisions thereof had not been complied with---Concept of 'revised return' as laid down under S.114(6) or 114(6A) of the Income Tax Ordinance, 2001, was provided to facilitate a taxpayer to cater a situation anticipating default surcharge and penalties, arising from and after a determination was made or intended to be made against the taxpayer; in effect that the taxpayer had paid less tax than due or had omitted to pay correct amount of tax due, which was determined as being greater than the amount of tax paid and such situation was believed to culminate in entailing upon the taxpayer greater amount of default surcharge and penalties---'Revised return' filed under subsection (6) or (6A) of S.114 of the Income Tax Ordinance, 2001, was required always, to be treated as deemed amended assessment order in terms of S.122(3) of the Income Tax Ordinance, 2001---'Revised return' treated as deemed amended assessment order could not be amended under S.122(5A) of the Income Tax Ordinance, 2001 and it could be amended under S.122(4) of the Income Tax Ordinance, 2001---Officer of Inland Revenue had acted with material irregularity by diverting the proceedings from original return to revised return and conducting the proceedings upon legally defective revised return filed under S.114(6) of the Income Tax Ordinance, 2001 after the commencement of proceedings under S.122(5A) of the Income Tax Ordinance, 2001, and was required to treated as non-existing for being inconsistent with law---Officer of Inland Revenue acted with material irregularity by amending a deemed amended assessment order by exercising powers under S.122(5A) of the Income Tax Ordinance, 2001 instead of exercising powers under S.122(4) of the Income Tax Ordinance, 2001---First Appellate Authority also failed to exercise the jurisdiction vested in him under Ss.127 to 129 of the Income Tax Ordinance, 2001 by not taking the notice of such material irregularity---Both the orders below were vacated by the Appellate Tribunal and case was remanded back to assessing authority for conducting de novo proceedings and determining all the issues afresh and pass fresh amended assessment order in accordance with law, within the time limit provided under S.124(2) of the Income Tax Ordinance, 2001; by affording adequate opportunity of being heard to the taxpayer.

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

----Ss.122(5A) & 120---Amendment of assessment---Delegation of power---Taxpayer contended that Assistant Commissioner Inland Revenue being junior and subordinate to the Commissioner could not amend the assessment order taken to have been made by the Commissioner; and it was only the Commissioner who could pass an amended order under S.122(5A) of the Income Tax Ordinance, 2001 as the provisions of S.122(5A) of the Income Tax Ordinance, 2001 envisaged application of mental faculty and independent mind by the Commissioner which could not be delegated; and there was also no finding in effect that the deemed assessment order was erroneous and prejudicial to the interest of revenue; and issue raised could not be considered as prejudicial to the interest of revenue---Validity---Additional Commissioner of Inland Revenue under delegated authority was empowered to amend the deemed assessment order by invoking the provisions of subsections (1), (5) and (5A) of S.122 of the Income Tax Ordinance, 2001---Section 210 of the Income Tax Ordinance, 2001 visualized the delegation of any or all powers vested in and exercisable by Commissioner under the Income Tax Ordinance, 2001 except the power to delegate further---First Appellate Authority had exhaustively discussed the issue in proper manner---Order to the corresponding extent was maintained by the Appellate Tribunal and finding of First Appellate Authority was not interfered with.

2013 PTD 1012 and 2013 PTD 747 rel.

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

----Ss.67 & 169---Income Tax Rules, 2002, R.13---Apportionment of deductions---Administrative expenses was allocated between dividend income, fee for technical services and insurance in the manner and on the ground (a) that dividend was a separate class of income against which the common expenses could be prorated (b) that technical fee was an exempt income and also the regular source of income; that said income could not be earned without incurring of the expenses (c) and that commission income also required proration of expenses under the said provisions of law as the said income was covered under S.169 of the Income Tax Ordinance, 2001---Taxpayer contended that S.67 of the Income Tax Ordinance, 2001 provided that expenditure should be apportioned on any reasonable basis taking account of the relative nature and size of the activities to which the amount related; that only expenditure which related to more than one activity would be regarded as common expenditure for allocation under the provisions for S.67 of the Income Tax Ordinance, 2001 read with R.13 of the Income Tax Rules, 2002; that any expenditure which had no nexus to the activity or was exclusively related to a particular class of income could not be regarded as common expenses for allocation under S.67 of the Income Tax Ordinance, 2001 and R.13 of the Income Tax Rules, 2002; that there were only nine transactions of receipt and deposit of dividend warrant during the two tax years for which the expenses of Rs.347,030,000 could not be regarded to have incurred by any stretch of imagination; that in respect of expenses attributed to technical services, the personnel through which services were rendered were stationed outside Pakistan and that all expenses incurred were to be borne by the service recipient in view of specific clause in the agreement; that in respect of expenses attributed to insurance premium, insurance premium was paid by the company on insurance of its assets; and at the time of payment of annual insurance premium to the insurance company; a percentage of the premium was paid back which was recorded as insurance commission; thus, no expenditure was incurred to earn commission income; and that according to provision of S.233 of the Income Tax Ordinance, 2001, as was applicable to tax year 2004, there was no provision available whereby tax deducted on commission income could be considered das final tax---Validity---First Appellate Authority had maintained the order of assessing authority to the extent of apportionment of the expenses against the fee for technical services and commission income---Income attributed to dividends was vaguely represented by the tax payer and First Appellate Authority had also not made any attempt to explore any such details---First Appellate Authority conceded to the extent that apportioning expenditure on dividend income in terms of S.67 of the Income Tax Ordinance, 2001 read with R.13(3) of the Income Tax Rules, 2002, was not appropriate as no investment was made during the particular tax year in subject assessment---First Appellate Authority observed that expenditure under said head was incurred by the organization, which allowed such dividend---Apportionment of expense equally to the ratio of dividend income would not be justified under the attending circumstances---First Appellate Authority had directed the Officer of Inland Revenue to exclude the dividend income and modify the order by revising the proration of expenses---Finding of First Appellate Authority showed that he had logically and rationally upheld the act and decision of assessing authority on the issues of apportionment of expenses by prorating the expenses on fee for technical services and commission income---No reason existed to upset the finding of First Appellate Authority, which was accordingly maintained by the Appellate Tribunal.

2010 PTD (Trib.) 1568 ref.

Messrs Atlas Investment Bank Ltd. v. CIT 2005 PTD 2586; Messrs Crescent Investment Bank Ltd. v. ITAT 2005 PTD 2599; 2005 PTD 1881 and 1999 PTD (Trib.) 3880 rel.

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

----S.67---Income Tax Rules, 2002, Rr.13(3)(a) & 13(4)---Apportionment of deductions---Receipt of technical fee---Insurance commission---Administrative expenses---Apportionment of---Taxpayer contended that administration expenses were not allocable as it did not relate to the receipt of technical fee and insurance commission; that if held to be allocable then these should be prorated by taking into account gross receipts from sale of products instead of gross profit from sale of products as mentioned in R.13(3)(a) of the Income Tax Rules, 2002: and S.67 of the Income Tax Ordinance, 2001 specifically required that the expenditure should be apportioned on any reasonable basis taking into account the relative nature and size of activity to which the amount may relate; that contention of assessing authority that no other basis could adopted when formula for proration had been prescribed in R.13(3)(a) of the Income Tax Rules, 2002, was also contrary to the provision of S.67 of the Income Tax Ordinance, 2001 and R.13(4) of the Income Tax Rules, 2002 which required proration of common expenses in any manner considering the nature and size of activity to which such income relates; that formula provided in R.13(3)(a) of the Income Tax Rules, 2002 could not be applied blindly; that provisions of R.13(3)(b) of the Income Tax Rules, 2002 were an exception to R.13(3)(a) of the Income Tax Rules, 2002 which was of general and wide application; that R.13(3)(b) of the Income Tax Rules, 2002 could only be invoked in specific situations where common expenditures were also to be apportioned against net gains (gross receipts minus direct expenditure) declared by the taxpayer; and that consequently, it was envisaged in R.13(3)(b) of the Income Tax Rules, 2002 that in case of net gains the ratio for apportionment should be of "relevant net gains" and "total net gains and gross profit"---Validity---Technical fees and insurance commission represent gross receipts without deduction of expenses and as such could only be compared with total gross receipts of the taxpayer for the purpose of allocation of common expenses (administration expenses) thereagainst---No net gain being involved, R.13(3)(b) of the Income Tax Rules, 2002 was not applicable---Like should be compared with like---Gross receipts from business (i.e. sales receipts) should be compared with receipts of insurance commission and exempt technical fees which were also gross receipts---Dividend, fee for technical services and insurance commission were gross receipt which could only be compared with total gross receipts and not the gross profit---Assessing authority was directed to make calculations afresh.

(2010) 101 Tax 422 (Trib.) rel.

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

----S.23---FBR Circular No.4 of 1963 dated 15-11-1963---Initial allowance---Heavy vehicles---Suzuki van---Fork lifter---Taxpayer contended that initial allowance was allowable on heavy vehicles used for the purpose of business; and was added during the year; and otherwise fork lifter was an item of the category of 'plant and machinery' and the same was eligible for initial allowance under S.23 of the Income Tax Ordinance, 2001---Validity---F.B.R. Circular No.4 of 1963 had been issued under the repealed Income Tax Act and was protected under the repealed Income Tax Ordinance, 1979---No such protection was available under the Income Tax Ordinance, 2001---Initial depreciation was not allowable on Suzuki van---Fork lifter was not a road transport vehicle but was plant and machinery directly plied and used for business purpose and allowance as provided under S.23 of the Income Tax Ordinance, 2001 was applicable---Appellate Tribunal directed to allow initial depreciation on fork lifter.

Amin A. Malik, FCA for Appellant (in I.T.As. Nos. 194/KB and 793/KB of 2011).

Zulfiqar Ali Memon D.R. for Respondent (in I.T.As. Nos.194/KB and 793/KB of 2011).

Zulfiqar Ali Memon D.R. for Appellant (in I.T.A. No.800/KB of 2011).

Amin A. Malik, FCA for Respondent (in I.T.A. No.800/KB of 2011).

Date of hearing: 9th December, 2013.

2014 P T D (Trib.) 1323

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Faheemul Haq Khan, Accountant Member

Messrs SUPERNET LIMITED KARACHI

Versus

C.I.R., ZONE-II, L.T.U., ISLAMABAD

I.T.As. Nos. 783/IB, 784/IB of 2011 and 107/IB of 2012, decided on 21st October, 2013.

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

----Ss.127 & 152---Payment to non-resident by domestic company---Demand of Tax by department on such remittance---Commissioner of Inland Revenue dismissed the appeal of taxpayer on ground that same was out of his jurisdiction---Validity---Commissioner Inland Revenue was legally empowered to adjudicate the grievance of the taxpayer and the same was not out of its jurisdiction---Initial opinion given under S.152(6) of the Income Tax Ordinance, 2001 should not deprive the taxpayer of his fundamental legal privileges or ignore significant aspects subsequently revealed at the time of levy.

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

----Ss.127 & 152---Usage of technical facility of the satellite---Payment made to non-resident---Avoidance of double taxation---Department treated the payments of taxpayer as "royalties" instead of "industrial/ commercial profits"---Scope---Contention of the appellant was that he had not used intellectual property of any kind like use of equipment as hardware, software, infrastructure and network as royalty rather a satellite receiver owned by the non-resident placed in the upper space and anyone could buy the technical facility of the satellite who possessed compatible ground facility as local recipient, therefore such payment could not be treated as "royalties"---Validity---Payments made by the taxpayer were quite distinguishable from "royalty" as the satellite in the upper space installed by anyone and its usage would not attract usage of intellectual property i.e. trademark, copyright or patents---Commissioner had not taken cognizance of frequency, intensity, duration and focus of activities accrued between the two contracting parties or alternate options available to taxpayer i.e. presence of other parties in the open market---Ownership of technical equipment and control over operational management was performed by the taxpayer in Pakistan despite the higher degree of interdependence---Disbursement of amount was to be treated as "normal business expense".

Nadeem Yaseen for Appellant.

Tahir Khan, D.R. for Respondent.

Date of hearing: 5th September, 2013.

2014 P T D (Trib.) 1343

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Muhammad Akram Tahir, Accountant Member

Messrs XTREME THRILL F-I TRAXX ADJACENT, MINI GOLF NATIONAL BANK PARK, GULBERG, LAHORE

Versus

C.I.R., R.T.O., LAHORE

M.A. (Stay) No.381/LB of 2014, decided on 12th March, 2014.

Income Tax Ordinance (XLIX of 2001)---

----S.131(5)---Appeal to Appellate Tribunal---Miscellaneous application for stay---Recovery of tax---Application was filed for further stay against the recovery of tax demand on the ground that earlier stay was granted for a period of 30 days---Appellate Tribunal observed that registered person had already availed stay for a period of 210 days---Taxpayer had already availed complete period of stay to restrain the coercive measures; in fact, registered person was seeking stay by misrepresentation and dishonestly, which could not be considered as reasonable ground for, further grant of stay---Stay sought for, was rejected by way of dismissal of miscellaneous application by the Appellate Tribunal and office was directed to fix the appeal at an early date as per roster arrangement.

M. M Akram for Applicant.

None for Respondent.

Date of hearing: 12th March, 2014.

2014 P T D (Trib.) 1357

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Sajjad Ali, Accountant Member

Messrs MILD STEEL TRADERS, LAHORE

Versus

C.I.R., R.T.O.-II, Lahore

I.T.A. No.223/B of 2011, decided on 31st January, 2014.

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

----S.177---General Clauses Act (X of 1897), S.24A---Selection of cases for audit---Recording of reasons---Necessity---When provision of S.177 of the Income Tax Ordinance, 2001 is read with S.24A of the General Clauses Act, 1897, no doubt is left that an order under S.177 of the Income Tax Ordinance, 2001 selecting a case for audit is required to be made within the parameters of the factors enumerated therein and the Commissioner while making the order is required to assign specific reasons having regard to the factors prescribed under S.177 of the Income Tax Ordinance, 2001 read with provision contained in S.24A of the General Clauses Act, 1897.

(b) Discretion---

----Principles for structuring discretion: open plans; open policy statements; open rules; open findings; open reasons; open precedents and fair informal procedure.

PLD 1990 SC 1092; 1997 SCMR 1804 and PLD 2001 SC 1 rel.

(c) Discretion

----Exercise of---Discretionary decision had to be made according to rational reasons which meant finding of primary facts based on good evidence and that whenever wide-worded powers conferring the discretion existed, there remained always the need to structure the discretion which meant regularizing of the so created discretion by organizing it, requiring the exercising authority to give reasons, so that decision may achieve the high quality of justice.

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

----Ss. 177 & 122(5)---Audit---For all practical purposes S.177 of the Income Tax Ordinance, 2001 was a just process to reach to a conclusion as to from where the assessing officer could further modify an already assessed income for which law had very clearly provided the provision in terms of S.122(5) of the Income Tax Ordinance, 2001.

2010 PTD (Trib.) 1705 rel.

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

----Ss. 177, 120, 121, 122 & 122C---Audit---Independent order for selection of tax affairs---Selection of tax affairs of a person by the Commissioner Inland Revenue for the purposes of audit was a separate and independent order passed under S.177 of the Income Tax Ordinance, 2001---Before selection of taxpayer's affairs for audit (i) a notice should be issued to the taxpayer (ii) a reasonable opportunity of being heard should also be provided to the taxpayer and (iii) a speaking order should be issued by the Commissioner---Such were the essential ingredients for completion of assessment proceedings and passing of a judicial speaking order---Selection of case under S.177 of the Income Tax Ordinance, 2001 by the Commissioner was an order independent and distinct from assessment order passed under S.120 or 122 or 121 or 122C of the Income Tax Ordinance, 2001.

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

----Ss.127 & 122C---Appeal to Commissioner (Appeals)---Whether word "or" used between "Commissioner or Taxation Officer" was disjunctive or conjunctive---Word "or" is a disjunctive particle that marks an alternative, generally corresponding to "either" as "either is or that," a connective that marks an alternative as "you may read or may write that is, you may do one of the things at your pleasure, but not both---Word "or" is often used to express an alternative of terms, definitions or explanation of the same thing in different words, as wilful or malicious prosecution "or" is sometimes used as an explanation of the preceding term, as, intoxicating or malt liquors, in which case, it has been held equivalent to "to-wit".

Law Lexicon Second Edition 2009 P.1369 rel.

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

----S.127---Appeal to Commissioner (Appeals)---Word "or" must be read as used consistently in S. 127, Income Tax Ordinance, 2001 disjunctively---Two parts were connected by the conjunction "or" which was capable of two constructions; in one sense, it was a particle co-coordinating the two parts of the clause and creating an alternative between them while in the other sense, which was akin to the sense of "and" which could be construed as conjoining and combining the first part of the clause with the second.

Super Agrotech Ltd. v. State of U.P. (2006) 9 SCC 203 and Razik Ram v. J.S. Chauhan (1975) 4 SCC 769 rel.

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

----Ss.127 & 177---Appeal to Commissioner (Appeals)---"Any order passed"---Word "or" used in S.127 of the Income Tax Ordinance, 2001 was disjunctive and it could not be construed as conjunctive---While construing the word "or" as conjunctive that will result into absurdity, meaning thereby that same will restrict the benefit/right of the taxpayer to file appeal against "any order passed" by the Commissioner, to only the orders passed under sections mentioned in S.127 of the Income Tax Ordinance, 2001---Such would be deemed to be a narrow interpretation of the provisions of law which was not the purpose of the legislature---Interpretation that advances the object and purpose of legislation shall be accepted---Since right of appeal was substantive and valuable right of any taxpayer, who was normally a person aggrieved by the decision, the central idea behind filing of an appeal revolved around the right as contra distinguished from the procedure laid down in Civil Procedure Code, 1908---Right of appeal under the Code was statutory right of appeal, where it existed, as a matter of substance and not of procedure---Intention of the legislature could be gathered from the document---Word "or" used in S.127(1) of the Income Tax Ordinance, 2001 was used in disjunctive sense and appeal against the order passed by the Commissioner under S.177 of the Income Tax Ordinance, 2001 was appealable before Commissioner (Appeals) under S.127 of the Income Tax Ordinance, 2001---Order passed under S.177 of the Income Tax Ordinance, 2001 by the Commissioner Inland Revenue for selection of tax affairs of a person was an independent order, which was appealable before the Commissioner Inland Revenue under S.127 of the Income Tax Ordinance, 2001.

Law Lexicon Second Edition 2009 P 1369; Super Agrotech Ltd. v. State of U.P. (2006) 9 SCC 203; Razik Ram v. J.S. Chauhan (1975) 4 SCC 769; C.E. Gibbar v. Pakistan and others PLD 1957 Kar. 956; Muhammad Hussain v. The Additional District Judge Lahore PLD 1966 Lah. 128; Kala Ghazi v. Abdul Ghafoor Bhaiyan and others PLD 1960 DACCA 808; Salhon and others v. State PLD 1969 SC 267 at 268 and Khadim Hussain and others v. The Additional District Judge, Faisalabad PLD 1990 SC 632 ref.

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

----Ss.122 & 177---Amendment of assessment---Add back out of profit and loss account---Taxpayer could not make out a case that additions out of Profit & loss account made by the assessing officer as well as the decision of First Appellate Authority had any infirmity or error---Taxpayer also failed to produce any documentary evidence to substantiate his plea that expenses claimed were supported by documents/receipts and were completely verifiable---In absence of such material evidence, appeal of the taxpayer was dismissed by the Appellate Tribunal and upheld the order of First Appellate Authority---Revenue also failed to convince as to how the order of First Appellate Authority was against the spirit of law and facts of the case---Such was an estimate against another estimate which did not warrant any interference by the Appellate Tribunal---Departmental appeal being devoid of any merit was also dismissed and order of First Appellate Authority was confirmed by the Appellate Tribunal.

Ijaz Ali Bhatti for Appellant (in I.T.A. No.223/B of 2011).

M. Jamil Bhatti, D.R. for Respondent (in I.T.A. No.223/B of 2011).

M. Jamil Bhatti, D.R. for Appellant (in I.T.A. No.500/B of 2011).

Ijaz Ali Bhatti for Respondent (in I.T.A. No.500/B of 2011).

Date of hearing: 24th January, 2014.

2014 P T D (Trib.) 1369

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Fiza Muzaffar, Accountant Member

MEHDI KHAN

Versus

C.I.R., R.T.O, GUJRANWALA

I.T.As. Nos.345/LB and 346/LB of 2013, decided on 13th February, 2014.

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

----Ss.4 & 13---Income Tax Ordinance (XLIX of 2001), Ss.162, 205, 148 & Second Sched., Part-II, Cls. 9 & 13(G)---Customs Act (IV of 1969), S.25---S.R.O. 549(I) 2008 (Sales Tax) dated 11-6-2008---S.R.O. 575(I)/2006 dated 5-6-2006---S.R.O. 567(I)/2008 dated 11-6-2008---Recovery of tax from the person from whom tax was not collected or deducted---Import of machinery---Reduce rate of tax---Demand was created on the ground that reduced rate @ 1% as envisaged under Cl.(9) of Part-II of the Second Schedule to the Income Tax Ordinance, 2001 did not apply in the present case as the goods were not zero rated under Sales Tax Regime but were exempt from the payment of sales tax and that rate of tax should be charged @ 4% or 5% as the case may be---Validity---Rate of tax under S.148 of the Income Tax Ordinance, 2001 at import stage of machinery remained 1% also before the issuance of S.R.O. 549(I)/2008 dated 11-6-2008, under Cl.13G(i, ii, iii) were rescinded vide S.R.O. 567(I)/2008 dated 11-6-2008---Board on the same date issued S.R.O. 549(I)/2008 under S.4 of the Sales Tax Act, 1990 and declared machinery zero rated---All the machinery without any classification qualified to fall under clause 9 of the Second Schedule of the Income Tax Ordinance, 2001 for the purpose of charging the income tax @ 1% under S.148 of the Income Tax Ordinance, 2001 at the import stage---To promote the business and industry, the rate of sales tax on the import of machinery was maintained @ zero % and the rate of income tax was to be charged @ 1%---S.R.O. 575(I)/2006 dated 5-6-2006 issued under the provisions of Customs Act, 1969 and S.13, Sale Tax Act, 1990 (exemption of goods) did not apply on the imported goods (machinery) of the taxpayer which were declared zero rated under S.R.O. 549(I)/2008 issued under S.4 of the Sales Tax Act, 1990---Zero rated machinery could not be treated as exempt---Rate of income tax will be charged @ 1% as per Cl.9 of Part-II of the Second Schedule of the Income Tax Ordinance, 2001---Tax deducted on machinery at import stage @ 1% by considering the zero rated sales tax regime was absolutely correct and in accordance with law---Order passed under Ss.162/205 of the Income Tax Ordinance, 2001 being illegal, arbitrary against the law and void ab initio were annulled by the Appellate Tribunal.

2010 PTD 451; 2010 PTD 451; 2009 PTD 1978 and 2009 PTD 774 ref.

2007 PTD 921 and 2013 PTD 420 rel.

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

----Ss. 4 & 13---S.R.O. 549(I)/2008 dated 11-6-2008---Zero rating---All types of machinery come under S.R.O. 549(I)/2008 dated 11-6-2008 which had been declared zero rated in Sales Tax Regime.

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

----S.148---Sales Tax Act (VII of 1990), S.4---S.R.O. 575(I)/2006 dated 5-6-2006---Import of machinery---S.R.O. 575(I)/2006 dated 5-6-2006 determines whether the imported machinery was exempt or zero rated under the Sales Tax Act, 1990 and said S.R.O. did not apply to the case in hand for the purpose of levy of income tax at import stage.

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

----S.13---S.R.O. 575(I) 2006 dated 5-6-2006---Sales Tax Ruling/ Instructions No.49/2002---FBR letter C.No.3 (15) STP/99/VOL-1, dated 11-7-2002---"Exemptions"---"Zero rating"---Distinction---S.R.O. 575(I)/2006 dated 5-6-2006 was basically about the exemptions from customs and provides the exemptions of sales tax under S.13 of the Sales Tax Act, 1990 on limited items---Issue of exemption under S.13 of the Sales Tax Act, 1990 and zero rating under S.4 of the said Act had been clearly differentiated and elaborated by the Federal Board of Revenue vide Sales Tax Ruling/Instructions No.49/2002, Letter C.No.3 (15) STP/99/VOL-1, dated 11-7-2002.

Abid Hafeez Abid for Appellant.

Farhat Hayat Shah, DR for Respondent.

Date of hearing: 5th November, 2013.

2014 P T D (Trib.) 1383

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Sohail Afzal, Accountant Member

FAROOQ ALTAF

Versus

C.I.R., R.T.O., SIALKOT

I.T.A. No.1069/LB of 2010, decided on 13th December, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.111(1)(b), 111(2), 122 & 176---Un-explained income or assets---Addition ought to be made in the immediate preceding year of the financial year in which discovery was made---Discovery in tax years 2007/2008---Addition in tax year 2004---Taxpayer contended that since notices were admittedly issued firstly on 15th September, 2007 and secondly on 02nd June, 2009, the relevant financial year respectively came to 2007-2008 (Tax year 2008) or financial year 2008-2009 (Tax Year 2009), the addition could have lawfully been made either in tax year 2007 or 2008 as the case may be; that consequently, the addition made in tax year 2004 was wholly unlawful for the reason that the law itself required that any such addition could be made in the immediate preceding year of the financial year in which discovery was made and that by no stretch of imagination the addition made in the tax year 2004 could be held as lawful addition and the same be deleted---Validity---Assessment was competed on 30th June, 2009 and at the relevant time the additions could only be made in the tax year immediately preceding the financial year in which the discovery was made as un-amended law was available on statute book at that time---First notice under S.111 of the Income Tax Ordinance, 2001 was issued on 15th September, 2007, which fell within the financial year 2007-2008 (i.e. Tax Year 2008)---Final notice under S.111(1)(b) read with S.111(2) of the Income Tax Ordinance, 2001 was issued on 2nd June, 2009, which fell within the financial year 2008-2009 (i.e. tax year 2009)---Date of discovery had to be reckoned from the date on which the notice under S.111(1)(b) of the Income Tax Ordinance, 2001 was issued---Taxation Officer and First Appellate Authority were not right in reckoning the date of discovery from the date of investigation letter---Date of discovery for the purposes of addition under S.111 of the Income Tax Ordinance, 2001 had to be reckoned from the date of issuance of notice under S.111(1)(b) of the Income Tax Ordinance, 2001---Addition could not lawfully be made in the tax year 2004---Orders of both the authorities below were vacated on said issue by the Appellate Tribunal and other grounds were not adjudicated.

I.T.A. No. 1054/LB/2010 and 1055/LB/2010 dated 9th August, 2011; 2011 PTD 693 and 2011 PTD 321 rel.

Shahbaz Butt for Appellant.

Muhammad Nazir Rizvi, D.R. for Respondent.

Date of hearing: 13th December, 2013.

2014 P T D (Trib.) 1400

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Taher Bhatti, Chairman and Haroon M.K. Tareen, Accountant Member

I.T.As. Nos. 813 and 814/LB of 2001 and 698, 699 of 2013, decided on 17th May, 2013.

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

----Ss. 128(5), 161 & 205---Procedure in appeal---Evidence---Entertainment of---Sufficient cause for which taxpayer was prevented to produce evidence---Revenue contended that First Appellate Authority was not justified to entertain the documents/evidences which were not produced before the Taxation Officer and that First Appellate Authority was not justified to delete and reduce the tax charged under Ss.161/205 of the Income Tax Ordinance, 2001 on the basis of documents/evidence which were not produced before the Taxation Officer---Taxpayer contended that he was busy in obtaining visa of foreign countries to participate in international convention of Rotary Club and applied for adjournment; and produced (i) copy of letter of adjournment (ii) copy of passport showing affixation of visa (iii) and copy of air ticket showing departure; and also contended that Taxation Officer was in hurry in disposing of the case which was just 9 days after issuance of Show Cause Notice---Validity---Taxpayer was prevented by sufficient cause due to which he could not submit material/evidence before Taxation Officer---First Appellate Authority had rightly entertained material documents which could not be produced before the Taxation Officer---Order of First Appellate Authority was upheld by the Appellate Tribunal and appeals of the department were accordingly rejected.

2007 PTD 333 rel.

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

----Ss.161(1)(a), 205, 149, 151, 155 & 153(1)(b)---SRO 586(I)/91 dated 30-6-1991---Failure to pay tax collected or deducted---First Appellate Authority partially upheld the order of Taxation Officer by which he had found the taxpayer liable to withholding tax---Taxpayer contended that First Appellate Authority had observed that withholding tax was duly deducted and paid or the amount remained below the monetary threshold, still partial amount was retained liable to withholding tax in 6 heads of manufacturing expenses and of 10 heads of expenses of Profit and Loss expenses; and Assessing Officer had found the taxpayer defaulter of all the 17 heads of expenses claimed under manufacturing expenses and 35 heads of expenses claimed under profit and loss expenses, including depreciation, Bank mark-up, Electricity, Sui gas, Insurance, Customs and regularity Duty, Telephone expenses, Mobile expenses and Salary which, otherwise were exempt from withholding tax under various provision of the Income Tax Ordinance, 2001 and SROs; that Taxation Officer had made withholding tax default on consolidated amount of manufacturing expenses which were incurred under 17 different head of expense; and similarly Taxation Officer had made withholding tax default on consolidated amount of profit and loss expenses which were claimed in 35 different head of expense; that taxpayer was made defaulter of withholding tax under S.153(1)(b) of the Income Tax Ordinance, 2001 and charged tax @ 6% which related to the services rendered only; and that without identifying name and address of the parties or person from whom and how much tax was to be deducted, provision of S.161 of the Income Tax Ordinance, 2001 could not be invoked ; otherwise no-one could get credit of tax recoverable under S.161 of the Income Tax Ordinance, 2001---Validity---Order of Taxation Officer holding the taxpayer as defaulter of withholding tax, without identifying name and address of the parties or persons from whom and how much tax was to be deducted, was not maintainable in the eye of law---Order of First Appellate Authority by which he had upheld partial amount of expense liable to withholding tax from 6 heads of expenses of manufacturing expenses and from 10 heads of expenses of profit and loss expenses was against the dictum of law and was vacated by the Appellate Tribunal---Appeals filed by the taxpayer were allowed while the cross appeals filed by the department were dismissed. [pp. 1409, 1410] D & E

CIT v. Ravi Plastic Industries 2008 PTD 1227; I.T.A. No.4575/LB of 2004; 2010 PTD 1904; 2008 PTD 787; 2008 PTD (Trib.) 787 and 2012 PTD 122 rel.

Muhammad Younas Ghazi FCA for the Taxpayer.

Syed Bahadur Ali D.R. for the Department.

Date of hearing: 16th May, 2013.

2014 P T D (Trib.) 1428

[Inland Revenue Appellate Tribunal]

Before Abdul Qayyoom Sheikh, Judicial Member and Abdul Nasir Butt, Accountant Member

C.I.R., ZONE-I, LTU, KARACHI

Versus

Messrs KARACHI PORT TRUST, KARACHI

F.E.A. No.14/KB of 2011, decided on 7th February, 2014.

(a) Federal Excise Act (VII of 2005)---

----S.2(12a)---Federal Excise Rules, 2005, R.43A---"Franchise"---"Royalty"---Taxation of "royalty" by treating same as "franchise fee"---Taxpayer contended that Assessing Officer failed to make out a case to treat and consider royalty as franchise fee; that royalty was not liable to Federal Excise Duty; and that payment as per contract was royalty and Assessing Officer had no power to rewrite a contract entered between two responsible contracting parties---Validity---Held, in the machinery of government, an administrative department was an official governmental body empowered with the authority to direct and supervise the implementation of particular laws, rules and regulations---Taxation authorities in their administrative and executor capacity were empowered to manage all the affairs related to tax collection in respect of all the taxes imposed under law, thereby taking all required steps in the manner as provided, and authorized or sanctioned by law---Administrative department, in the discharge of their duty and function, at times the officials/department may be thrown in a vocabulary entangle that might had come with the dark arts of tax evasion; it was very unusual that tax avoidance became one of the main objects or purposes of the parties to a contract of commercial nature---In order to avoid tax the parties try to depict the distorted picture of a transaction as to enable them for tax advantages to be obtained---Such object was usually achieved by abusage of words and bending the rules and by manipulating the system in order to get desired outcome---Tax authorities in such a situation could not be supposed to be totally ab agendo to let such situation to persist without taking any step in order to coup with and overcome the situation---Clearly one had a duty to do something about this absurd and unjust situation created due to the use of arcane terminology with obscure purpose or intent---Solution to said problem, if not clearly provided by law, was naturally found ab intra by traversing through record of the case itself or by precedents---Such power was always considered admin per se in every authority---Contract between Port Trust and Terminal Operating Companies exactly in their same, original and nature form as they stand in the very contract---Assessing Officer had simply decided that amount received by Port Trust from Terminal Operating Companies under the name of "Royalty" as shown in the contract, was subject to Federal Excise Duty in view of provisions of S.2(12a) of Federal Excise Act, 2005, read with R.43A of Federal Excise Rules, 2005---Assessing Officer had neither changed any word of the contract nor had he rewritten any of the terms and conditions of the contract---Order accordingly.

(b) Federal Excise Act (VII of 2005)---

----S.2(1)---Taxation authorities in all their tiers were administrative and executory authorities having no judicial or legislative power---Power of judicial interpretation, judicial adjudication and to pronounce judicial verdicts was not vested in the taxation authorities.

(c) Federal Excise Act (VII of 2005)---

----S.2(1)---Contract---Interpretation of contract between the parties (tax-payers) by taxation authorities---Scope.

(d) Federal Excise Act (VII of 2005)---

----Ss.2(1) & 34---Interpretation of agreement between the tax-payer and a party---Scope---Administrative or executory authority---Power to interpret a contract between tax-payer and other party---Scope---Department simply performed its duty owed by law to determine the taxability of the payments received by Port Trust under the name of 'royalty payments'---Every individual, AOP and company was bound by law to account for its receipts and payments as income, earning returns or endowments etc---Department's act did not amount to bring/introduce any change in the terms and conditions of the contract between Port Trust and Terminal Operating Companies nor did it mean to claim the accrual of any right or obligation for department on the basis of terms and conditions of the contract---Department's act was purely administrative and it had not performed any judicial act of interpretation of the contract to determine or declare the rights, duties, obligations or privileges of the parties, assigned to them or arising out the contract and to enforce any such rights, duties, obligations or privileges upon the parties by pronouncement of judicial verdict or to make it in any way, the rule of law, etc.---Taxation authorities as of their duty to break open the corporate secret, were empowered to look into and read out the contents of any private agreement/contract to classify it for the sole purpose of determining the tax liability of the parties therein and that so specially when the parties claim any exemption or exception by relying on such agreement---Taxation authorities, in their endeavour to classify any agreement/contract, were justified to measure, determine, translate, equalize and fix the nature or character or genre or genus of the activity/transaction shown or to be spelt out in any private agreement/contract for the sole purpose of determining the tax liability of the parties therein with respect to their capacity and activity, assigned in the said agreement/contract---Performance of such acts, by the taxation authorities in their administrative capacity, could not tantamount to a judicial act of interpretation for enforcement of contract upon the parties.

(e) Federal Excise Act (VII of 2005)---

----Ss.2(1) & 34---Interpretation of agreement/Contract---Contract---Islamic principle of privacy of contract between the parties---In Islamic economic system, man was encouraged to work, was free to enterprise, was entitled to earn and possess---Islam enjoins the necessary measures to ensure proper handling of one's possessions---Every individual had authority to earn, to invest and to spend---Yet in so doing he was guided by high principles to save him from going astray---Proprietors were not unreservedly free to spend their money or handle their properties, the way they please without thinking about the negative impacts of extravaganza on the society---Certain rules of expenditure existed which were to be followed---God enjoins upon the proprietor to fulfill his financial obligations towards the society or his fellow men, and to be moderate in his private spending---Principle of privacy of contract had been adopted by modern economic scientists, which in present legal terminology is known as "Privity of Contract"---Islamic Jurisprudence provided a rule that a person not being a party to a contract, could not claim any right from him on the basis of such contract, nor he could claim to perform any act appurtenant there to the terms of such contract nor any person not being a party to the contract could sue the parties in a court of law for any action on the basis of the contents of such contract.

(f) Contract---

----Privity of Contract---Definition.

(g) Federal Excise Act (VII of 2005)---

----S.34---'Privity of Contract' or 'Privy to Contract'---Question involved in the appeal before the Appellate Tribunal or before the First Appellate Authority had no nexus with the concepts of 'Privity of Contract' or 'Privy to Contract'---Order passed by the Assessing Officer was not in contravention or violation of the concepts of 'privy to a contract' and 'privity of a contract'.

1991 PTD 488 distinguished.

(h) Federal Excise Act (VII of 2005)---

----First Schedule---Excisable goods and services---Order was annulled by the First Appellate Authority on the basis of case-law which related to the chargeability of income tax on income under Income Tax Ordinance, 2001---Federal Excise Duty was not levied on income but on goods and services---Validity---Department had simply performed its duty owed by law to determine the taxability of the payments received by Port Trust under the name of 'royalty payments'---Order passed by the First Appellate Authority was bad in law and contrary to the facts of the case and was not justified to annul the decision of Assessing Officer on the basis of case-law which related to the chargeability of income on income under Income Tax Ordinance, 2001, as the Federal Excise Duty was not levied on income but on goods and services as mentioned in the First Schedule to the Federal Excise Act, 2005---Order to that extent, was inconsistent with facts and law , not sustainable up to the corresponding extent and was accordingly annulled.

(i) Interpretation of document---

----Agreements between Port Trust (KPT) and Terminal Operating Companies (TOCs)---Facts transpired from the contents of agreements recorded.

(j) Words and Phrases---

----'Franchise' and 'Franchise agreement'---Meanings and scope of.

(k) Federal Excise Act (VII of 2005)---

----Ss.2(1) & 34---Agreements between Port Trust and Terminal Operating Companies (TOCs)---Terms and contents of the agreements---Franchise agreements---Taxpayer was reluctant to accept agreements as the one resembling to "franchise agreement"---Taxpayer had termed these agreements as rent agreements while these agreements named themselves as 'implementation agreements'---Law of rent was a self contained law wherein the rent of a site was equal to the economic advantage obtained by using the site in its optimal or most productive use---Word 'rent' had its specific legal identity and specifications---Taxpayer had not been able to give any justification for using the word royalty in place of well recognized legal term "rent"---Attempt of introducing these types of factual disagreements or conflicting proposals for interpretations of a contract would mean to attribute to the parties, an act to commit a commercial non-sense by allowing the execution of a contract worth billions in an oblivious manner---Contract should not be interpreted in a manner that may produce absurd results, because, it was hardly believable that the parties viewed to be rational persons pursuing rational ends, would have agreed to seek such results---Even otherwise in cases of doubt an ambiguity in a contract should be resolved against the drafter of the contract---Such agreements could safely be classified as franchise agreements as the same had almost all the features of a franchise agreement which was even true without needing to make any attempt to disambiguate any of the words or terms of these agreements---Word "royalty" given as an equivalent of "franchise" payments (fee or share in the income) was not a totally alien feature to a franchise agreement.

(l) Admiralty Law---

----Admiralty or maritime activity is a distinct subject, comprising of both domestic law governing maritime activities, and private international law which deals with matters including marine commerce, marine navigation, shipping, sailors, and the transportation of passengers and goods by sea---Admiralty also covers some land based commercial activities that are maritime in character.

(m) Words and phrases---

-----"Royalty"---Meaning.

(n) Federal Excise Act (VII of 2005)---

----Preamble---Nature of transaction---Authority to examine---Authorities, in taxation matters always had the authority to examine the true nature of every transaction and payment, without regard to what parties call it, and the liability of tax eventually rested upon what the authorities determine to be the true nature of the transaction or payment, and not to its mere form or name.

1948 16 ITR 101; Gosalia Shipping (Pvt.) Ltd.'s case 1978 AIR 1196; Gamon (Pak) Ltd.'s case (1966) 14 Tax 304 and Kika Bhai Premchand's case 1953-24 ITR 506 ref.

(o) Federal Excise Act (VII of 2005)---

----S.2(12a)---"Franchise"---"Royalty"---Agreements between Port Trust and Terminal Operating Companies (TOCs)---Taxpayer Port Trust had given/assigned the rights to Terminal Operating Companies to engage in the business activity of providing services related to port facilities on the assigned berths of terminal and in lieu thereof the Port Trust had been receiving a fee from the licensees/authorized Terminal Operating Companies which had been referred to as 'royalty' in the business agreements between Port Trust and Terminal Operating Companies---In all the fours of law and fact, the Port Trust was liable to pay Federal Excise Duty on amounts received by it from Terminal Operating Companies as royalty besides any fee in addition thereof---Appellate Tribunal held (a) that order passed by the First Appellate Authority was bad in law and facts, not sustainable and the same was annulled for not being just and proper in facts and law (b) that agreement executed by Port Trust with Terminal Operating Companies contained almost all the main features of franchise and the same could be safely classified as franchise agreement---Agreement between Port Trust and Terminal Operating Companies was fully covered within and under the definition of "franchise" contained in S.2(12a) of Federal Excise Act, 2005 and the amounts received by Port Trust as royalty for the services/facilities/rights provided and performed at or concerned with the port were chargeable as mentioned in Table II of First Schedule to the Federal Excise Act, 2005.

AIR 1928 Lah. 325 and 2010 SCMR 1778 ref.

1991 PTD 488 not applicable.

1948 16 ITR 101; Gosalia Shipping (Pvt.) Ltd.'s case 1978 AIR 1196 and Gamon (Pak) Ltd.'s case (1966) 14 Tax 304 rel.

(p) Federal Excise Act (VII of 2005)---

----S.2(20)---Registered person---Non-filer---Jurisdiction of audit---Taxpayer contended that Deputy Commissioner Inland Revenue had no jurisdiction to pass the order in original as the subject company was not a registered person under Federal Excise Act, 2005; its case pertained to a "non-filer" and as such was not within the domain of any audit function---Validity---Definition of "registered person" also included the person required to be registered or registerable person as well---Contention about jurisdiction was repelled by the Appellate Tribunal and it was held that the issue involved in the present matter pertained to the question of determination of duty and thus the jurisdiction fell within the domain of "Audit division" and same had been validly exercised by the said Division.

(q) Federal Excise Act (VII of 2005)---

----S.34----Opportunity of being heard---Taxpayer company had availed appropriate opportunity of hearing and all its material objections had been substantially dealt with and replied by the Deputy Commissioner Inland Revenue---Question regarding affording opportunity of hearing was rejected by the Appellate Tribunal.

(r) Federal Excise Act (VII of 2005)---

----Ss.46 & 14---Departmental audit---Non-issuance of notice---Validity---Provisions of S.46 of the Federal Excise Act, 2005, pertained to the cases of routine departmental annual audit for verification of record of the cases of registered person whose Returns had been filed and not that of unregistered or registerable persons, who had not filed any return under Federal Excise Act, 2005---Taxpayer/company had been proceeded to under the provisions of S.14 of the Federal Excise Act, 2005, which was the proper and appropriate provision in the circumstances of the case---Taxpayer/company on the one hand had claimed the relief under concept of limitation on the basis of time period provided under S.14(1) of the Federal Excise Act, 2005 and at the same time had also claimed the right of having notice issued to him under S.46 of the Federal Excise Act, 2005---Taxpayer/company also claimed on the one hand to be treated as un-registered person (non-filer) and on the other hand claimed to be treated as a registered person---Said conflicting pleas were not permissible under the law---Provisions of S.46 of the Federal Excise Act, 2005 was inapplicable to the present case and thus contentions regarding the question of issuance of notice under S.46 of the Federal Excise Act, 2005 was rejected.

(s) Federal Excise Act (VII of 2005)---

----Ss.14 & 46---Recovery of unpaid duty or of erroneously refunded duty or arrears of duty, etc.---Limitation---Admittedly Show-Cause Notice under S.14 (1) of the Federal Excise Act, 2005, was issued on 21-5-2010 and the period of default/non levy was from May, 2007---Section 14(1) of the Federal Excise Act, 2005 laid down time limit of three year, hence, notice under S.14(1) of the Federal Excise Act, 2005, was held to be within time---Contention regarding question of limitation was rejected by the Appellate Tribunal being untenable.

(t) Federal Excise Act (VII of 2005)---

----S.34---Violation of mandatory provisions of law---Appellate Tribunal had not noticed any violation attributable to Officer of Inland Revenue in the course of passing the order in original---Order accordingly.

Abdul Hameed Memon, D.R. LTU for Appellant.

Arif Muhammad Khan for Respondent.

Date of hearing: 17th January, 2014.

2014 P T D (Trib.) 1467

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Muhammad Anwar Goraya, Accountant Member

Messrs DILPASAND TEXTILE MILLS, FAISALABAD

Versus

C.I.R., R.T.O., FAISALABAD

I.T.A. No.1658/LB of 2012, decided on 3rd February, 2014.

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

----Ss.122(5A), 111(1)(b) & 120---Amendment of assessment---Suppression of sale---Declared sales in income tax return was less than the sales declared in the sales tax return---Due to suppression of sales, assessment was found to be erroneous and prejudicial to the interest of revenue; and sales not declared in the income tax return were treated as un-explained money---Taxpayer contended that neither he had concealed nor suppressed any sales and difference of sales declared in the income tax return and sales tax return was in the sale price of machinery which was sold; and sale receipt of machinery was duly produced before the authorities below which was unjustifiably discarded; and rejection of documentary evidence by the assessing authority in connection with sales of fixed assets and receipt of sale of machinery through normal banking channel without bringing evidence on record was illegal and not tenable in the eye of law---Validity---Taxpayer duly produced the sales receipt of machinery sold before the Appellate Tribunal and the said amount was duly reflected in the bank account maintained by the taxpayer---Copy of bank statement along with copy of cheque, deposit slip, sales tax invoices and sales register were also duly produced---Addition on account of suppressed sales fell under S.111(1)(d)(i) of the Income Tax Ordinance, 2001 which was effective from tax year 2012 as the amendment was inserted in the section vide Finance Act, 2011, whereas the case under appeal pertained to tax year 2008---Addition, in circumstances, was not tenable in the eyes of law---Case at its entirety, was a case of incorrect application of law on account of retrospective application of charging section when no provision had been enacted by the legislative on that score---If addition was to be made on account of suppressed sale, it was covered under S.111(1)(d)(i) of the Income Tax Ordinance, 2001 instead of S.111(1)(b) of the Income Tax Ordinance, 2001---Order of Assessing authority was not maintainable in the eye of law as well as facts of the case and the same was annulled by the Appellate Tribunal---Order of First Appellate Authority was vacated.

Messrs Brother Enterprises Karachi's case 2013 PTD (Trib.) 1557 rel.

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

----Ss.37(5)(b) & 18---Capital gains---Sale of machinery---Addition on the ground that taxpayer had not declared the same in relevant column of return of income---Validity---Column for declaration of capital gain as per form of return of total income i.e. 26 & 36 pertained to gain on sale of capital assets as provided in S.37 of the Income Tax Ordinance, 2001---Capital assets meant property of any kind held by the person, whether or not connected with a business, but did not include "any property with respect to which the person is entitled to a depreciation deduction under S. 22 or amortization under S. 24; or"---Taxpayer had sold machinery; and machinery did not fell in the ambit of capital asset---Gain on disposal of the same was not required to be declared in the return income as per column 26 or 27, whereas gain on sale of the machinery fell in normal income as per S.18 of the Income Tax Ordinance, 2001.

Muhammad Aleem Irshad for Appellant.

M. Nazir Rizvi, D.R. for Respondent.

Date of hearing: 8th November, 2013.

2014 P T D (Trib.) 1476

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member

C.I.R., ZONE-VI, R.T.O., LAHORE

Versus

SANAWAR HUSSAIN, SHEIKHUPURA

I.T.A. No.874/LB of 2012, decided on 7th March, 2014.

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

----Ss.129, 122(1)(5) & 111(1)(b)---Decision in appeal---Remand of case by the First Appellate Authority to assessing officer for de novo proceedings---Validity---First Appellate Authority observed that order had been passed without providing adequate opportunity of being heard to the taxpayer and case was remanded to the assessing authority for de novo proceedings---Proper opportunity, as envisaged under the law, seemed to be not accorded to the taxpayer to explain his case by the assessing officer---In order to ascertain that the taxpayer had sufficient sources to make investment for purchase of motor-vehicles the assessing authority was best placed to verify the genuineness of the documentary evidences available with the taxpayer---First Appellate Authority had rightly remanded the case to the assessing officer for de novo proceedings in circumstances---Appellate Tribunal directed that every effort should be made to engage the taxpayer in the proceedings and matter be decided in accordance with law---Taxpayer was also directed to co-operate with the department in the proceedings in his own interest.

(b) Income Tax Appellate Tribunal Rules, 2010---

----Rr.27 & 22---Adjournment of appeal---Application for adjournment---Refusal of---Appellate Tribunal may, if sufficient cause was shown, adjourned the hearing of appeal or application on a request being made by the party or authorized representative and no request for adjournment sent through post or fax may be entertained---No one on behalf of the taxpayer had appeared at the time of hearing, the application seeking adjournment was refused and case was proceeded ex-parte under R.22 of the Appellate Tribunal Inland Revenue Rules, 2010 and decided the case on merit on the basis of available record.

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

----S.132 (3)---Appellate Tribunal Inland Revenue Rules, 2010, R.28---Disposal of appeal by the Appellate Tribunal---Remand of case---In terms of S.132 (3) of the Income Tax Ordinance, 2001, read with R.28 of the Appellate Tribunal Inland Revenue Rules, 2010, the Appellate Tribunal was fully empowered to remand the case to the competent authority, as it may deem fit.

Ms. Shabana Aziz, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 7th March, 2014.

ORDEDR

CH. ANWAAR UL HAQ (JUDICIAL MEMBER).---The titled appeal pertaining to tax year 2006, has been preferred at the instance of Revenue, calling in question the impugned order dated 14-3-2012, passed by the learned CIR(A), Lahore on the following ground:-

"That the learned CIR (Appeals-IV) Lahore has no power to remand back the case to the Assessing Officer for de novo proceedings."

1. At the time of hearing it was pointed out by the Court Clerk that today an application for adjournment on behalf of the respondent has been received through fax which is signed by one Ms. Maleeha Athar, Advocate stating that she could not prepare the case due to shortage of time and prayed for adjournment of the case for some other date.

2. Rule 27 of the Appellate Tribunal Rules, 2010 provides that the Tribunal may, if sufficient cause is shown, adjourn the hearing of appeal or application on a request being made by the party or authorized representative and no request for adjournment sent through post or fax may be entertained. Since no one on behalf of the respondent was appeared at the time of hearing. Hence the application seeking adjournment is refused and I proceed the case ex parte under Rule 22 of the ATIR Rules, 2010 and decide the case on merits on the basis of available record.

3. Briefly stated, the relevant facts in brief are that taxpayer, an individual, deriving income from Oil Lubricant business filed his return declaring income at Rs.102,000 which was deemed to be treated as an assessment in terms of section 120 of the Income Tax Ordinance, 2001. Subsequently, the department received an information, that the taxpayer had purchased a motor-vehicle for a total consideration of Rs.318,427 in the period relevant to tax year 2006. Accordingly, the assessing authority issued statutory notices for furnishing of certain information/ documentation in order to probe the sources of investment but allegedly no response was made by the taxpayer. Consequently, the assessing authority amended the assessment for the tax year 2008 under section 122(1)(5) and made addition under section 111(1)(b) amounting to Rs.906,800. Being aggrieved, the taxpayer went in appeal before the CIR(A) and assailed the treatment meted out at assessment stage. The learned CIR(A) observed that the order has been passed without providing adequate opportunity of being heard to the taxpayer and remanded the case to the assessing authority for de novo proceedings in the following words:--

"In view of the above, it would meet the ends of justice if the impugned order passed by the Assessing Officer under section 122(1)(5) of the Ordinance dated 7-10-2010 is remanded back to the assessing officer, for which the attending AR has given his consent, for de novo proceedings in the light of facts discussed above and with the directions to consider the evidence furnished by the taxpayer, provide adequate opportunity of being heard to the appellant and then pass a speaking and a judicious order in accordance with law."

1. Learned DR on behalf of the appellant/revenue argued the case in the light of grounds of appeal. She agitated that the order passed by the learned CIR(A) is contrary to law and facts of the case and vehemently urged for vacation of the same and restoration of the order passed by the assessing officer. No one is present on behalf of the respondent/taxpayer to controvert the arguments advanced by learned DR.

2. I have heard the arguments put forth by the learned DR and have carefully gone through the available record. It reveals that proper opportunity, as envisaged under the law, seems to be not accorded to the taxpayer to explain his case by the concerned assessing officer. In order to ascertain that the taxpayer has sufficient sources to make investment for purchase of motor-vehicles the assessing authority is best placed to verify the genuineness of the documentary evidences available with the taxpayer. Under such circumstances, I feel that learned CIR(A) has rightly remanded the case to the assessing officer for de novo proceedings. I find no reason to disturb the same. Further, it is strictly directed that every effort should be made to engage the taxpayer in the proceedings and matter be decided in accordance with law. It is also directed to the taxpayer to cooperate with the department in the proceedings in his own interest.

2014 P T D (Trib.) 1492

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member

Messrs NAMCO ASSOCIATES (PVT.) LTD., LAHORE

Versus

C.I.R. ZONE-VII, R.T.O-II, LAHORE

I.T.A. No.1019/LB of 2012, decided on 6th March, 2014.

(a) Income Tax Appellate Tribunal Rules, 2010---

----R.27---Adjournment of appeal---Application for adjournment---Refusal of---Appellate Tribunal may, if sufficient cause was shown, adjourn the hearing of appeal or application on a request being made by the party or authorized representative and no request for adjournment sent through post or fax may be entertained---No one, on behalf of the appellant, having appeared at the time of hearing, the application seeking adjournment was refused and case was proceeded ex-parte on merit.

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

----Ss.161 & 205---Failure to pay tax collected or deducted---Profit and loss expenses---Addition due to non-deduction of tax---Taxpayer contended that assessing officer was not justified in charging tax on payments made under the head "stationery/office supplies" without particularly pointing the payments made which were liable to tax deduction and failed to cite any single instance or identifying the parties to whom the taxpayer had been treated as in default of withholding tax---Validity---Taxpayer filed relevant record/details before the assessing officer, but not a single transaction was pointed out by the assessing officer which attracted S.161 of the Income Tax Ordinance, 2001---On the contrary, assessing officer had charged tax @ 3.5% on the gross amount of claimed expenses under the head Stationery/Office Supplies---Assessing officer had failed to point out any specific amount of transaction on which tax was required and not deducted---No justification existed in charging tax under S.161 of the Income Tax Ordinance, 2001.

2001 PTD (Trib.) 2605 and 2004 PTD (Trib.) 1293 rel.

Nemo for Appellant.

Ms. Shabana Aziz, D.R. for Respondent.

Date of hearing: 6th March, 2014.

2014 P T D (Trib.) 1509

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member and Sikandar Aslam, Accountant Member

Messrs LION STEEL INDUSTRIES (PVT.) LTD. LAHORE

Versus

C.I.R., R.T.O., LAHORE

M.A. No.172/LB of 2013 in S.T.A. No.383/LB of 2009, decided on 26th February, 2014.

Income Tax Ordinance (XLIX of 2001)---

----S.221---Rectification of mistake---Application for recall of order---Appellate Tribunal had recalled its order twice for the same cause---Every time after getting recall of the order the applicant had kept sleep---Such attitude of the applicant was evident of his utmost desire to keep the matter pending unnecessarily as long as possible---Said type of behavior was not tolerable, however, for the sake of justice and fair play, Appellate Tribunal afforded a last chance to applicant to represent his case---Prayer was allowed and main order was restored to its original number---Counsel of the taxpayer was burdened with special cost of Rs.500 for filing frivolous applications and irresponsible attitude, which caused wastage of precious time of the Tribunal and also to curb wrong practice---Appellate Tribunal directed that the amount of costs be deposited in the account of Lahore Tax Bar Association for Tribunal's Bar Renovation Fund Account.

Imran Rasool for Applicant.

M. Asif, D.R. for Respondent.

Date of hearing: 26th February, 2014.

2014 P T D (Trib.) 1542

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Abdul Nasir Butt, Accountant Member

I.T.As. Nos. 2087/LB and 2456/LB of 2013, decided on 23rd December, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.161, 205 & 153---Failure to pay tax collected or deducted---Order passed under S.161 of the Income Tax Ordinance, 2001 by ignoring all the details and record submitted by the taxpayer and without identifying the names and addresses of the parties from whom tax was to be deducted---First Appellate Authority disregarded/disapproved the treatment of the assessing officer but finally remanded the case back for passing a speaking order---Validity---Without identifying names and addresses of the parties or persons from whom and how much tax was to be deducted, provisions of S.161 of the Income Tax Ordinance, 2001 could not be invoked, where taxpayer had duly submitted complete data/record/documents---Data/record with supporting documents were provided---Assessing officer was in surreptitious frame of mind and could not appreciate that the tax referred to be deducted under S.161 of the Income Tax Ordinance, 2001 had to be of some identified taxpayer/person and a taxpayer could be declared personally liable only after establishing that he was a withholding agent, who failed to withhold the tax from a transaction, liable to such tax---Details and documentary evidence about the transaction in question was disbelieved and discarded by the assessing officer for his own flimsy reasons, which was mal-administration of justice at the part of assessing officer---Assessing officer intentionally misunderstood the spirit of S.161 of the Income Tax Ordinance, 2001, he could only see whether withholdings, as per return and statutory statements, were made or not escaped taxation---No transaction could be held to have escaped deduction under S.161 of the Income Tax Ordinance, 2001, unless it was established that (i) taxpayer was a withholding agent, (ii) a particular transaction was liable to deduction/withholding and (iii) that a specified tax of a specific person was to be withheld, who could tax credit of the tax recoverable under S.161 of the Income Tax Ordinance, 2001---Subsection (2) of S.161 of the Income Tax Ordinance, 2001 provided that a person held personally liable under S.161(1) of the Income Tax Ordinance, 2001 shall be entitled to recover the tax from the person, from whom the tax should have been collected or deducted---Such provisions shall become redundant, if a person was held personally liable without identifying the person whose tax was not collected or deducted and without identifying the amount of such tax---Show Cause Notice was vague, having no effect in the eyes of law and did not stand the test of appeal---Invocation of S.161 of the Income Tax Ordinance, 2001 without specifying/highlighting the deficiencies in withholding tax deduction was legally indefensible when complete data/ record was presented---Allegation against the taxpayer was both outlandish and baseless, however the grave defects in the order had made no impression on the First Appellate Authority, rather, he had gone a step further and had mobilized evidence against the taxpayer by remanding back the case to assessing officer for fresh proceedings to pass speaking order solely to give another chance to fill up the lacunas and covering his negligence and incompetency while framing order under Ss.161/205 of the Income Tax Ordinance, 2001---Under the Constitution all functionaries of the Government were expected to work within the permissible norms of law and justice and where law had been properly interpreted by the superior forums, undue and harsh action by the functionaries against a taxpayer spoke volumes of mala fide on the part of functionaries as a flagrant violation of law and procedure---Action of First Appellate Authority as well as assessing officer was highhanded and illegal---Remand order of First Appellate Authority was squarely in conflict with statutory stipulation and applicable binding verdicts of higher appellate fora, the same must be struck down decisively---Order passed by both the authorities below were held to be illegal, which was vacated and annulled respectively;, being without lawful authority and overstepping the lawful jurisdiction vested with authorities---Under the given facts and circumstances, First Appellate Authority was not legally justified to remand the void order passed by the assessing officer---Appeal filed by the taxpayer would succeed and cross appeal filed by the department was dismissed, being without any merits.

2012 PTD 122; CIT v. Ravi Plastic Industries 2008 PTD 1227; 2008 PTD 787; I.T.A. No. 4575/LB of 2004 dated 4-5-2005 Vol. 10/7TF34; 1971 SCMR 681; 1997 SCMR 524; 1997 SCMR 1849; 2002 PTD 407 and 2003 PTD 593 rel.

I.T.A. No.1461/LB of 2013; I.T.A. No.1183/LB of 2013 dated 19-9-2013; I.T.A. No.1490/LB of 2013 dated 21-11-2013; 2002 PTD 407; 1997 SCMR 524 and 1997 SCMR 1849 ref.

Waheed Shahzad Butt for Taxpayer.

Tasleem, D.R., for the Department.

Date of hearing: 23rd December, 2013.

2014 P T D (Trib.) 1629

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Judicial Member and Fiza Muzaffar, Accountant Member

Messrs FAISALABAD ELECTRIC COMPANY---Appellant

Versus

C.I.R, ZONE-I, R.T.O., FAISALABAD---Respondent

S.T.As. Nos. 874/LB and 950/LB of 2013, decided on 19th May, 2014.

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

----Ss.36(2) & 3---Recovery of tax not levied or short-levied or erroneously refunded---Show-cause notice---Roving enquiry---Jurisdiction---Taxpayer was informed by department that there was no month-wise break-up available with the revenue and was asked to produce the same as it was obligatory on the part of taxpayer to provide all the documentary evidence particularly prescribed record including month wise break up---Validity---Stand of the revenue was that such working should have been provided by the taxpayer as the adjudication officer had no material on the subject and record was self destructive---Such admission evidently proved that the show-cause notice was nothing but a casual correspondence and a roving enquiry which was prohibited by law---Adjudication officer failed to specify transactions for determination of chargeability of such transactions, as charge under S.3 of the Sales Tax Act, 1990 was with reference to transactions covered under it and not on guess estimates and averages---Adjudication officer resorted to guess work and inferences instead of evidence, which was not sustainable under the law.

2011 PTD 808 (Trib.); PLD 1976 Lah. 703 = 1976 PTD 347; 2011 PTD (Trib.) 773; 2004 PTD 868; 1999 PTD 1892 and 1996 SCMR 1470 ref.

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

----S.36---Recovery of tax not levied or short-levied or erroneously refunded---Show-cause notice---Characteristics---Show-cause notice was a foundational document, which was to comprehensively describe the case made out against the taxpayer by making reference to the evidence collected in support of the same---Such notice was the narration of acts along with the supporting evidence which determined the offence attracted in a particular case---Show-cause notice was not a casual correspondence or a tool or license to commence a roving inquiry into the affairs of the taxpayer based on assumptions and speculations but was a fundamental document that carried definitive legal and factual position of the revenue against the taxpayer---Revenue grossly erred by proportionately working out the defaults on average basis---No lawful life could be given to a show-cause notice which violated all norms of justice and fair play.

2011 PTD (Trib.) 808; PLD 1990 SC 399; 2013 PTD (Trib.) 2344; Abdul Rauf and others v. Abdul Hanif Khan and others PLD 1965 SC 671 and Attock Cement Pakistan Ltd. v. The Collector of Customs 1999 PTD 1892 ref.

2013 PTD 1536 rel.

(c) Jurisdiction---

----Question of jurisdiction may be raised at any stage---Such question being very important and fundamental in nature, if a forum had no jurisdiction, the same could not be conferred upon it by consent of parties---Court had to consider the question of jurisdiction even though not raised by the parties---Point of jurisdiction is one which is not barred even at the ultimate stage before Supreme Court.

Pir Sabir Shah v. Shad Muhammad Khan and another PLD 1995 SC 66 and Messrs Sutlej Cotton Mills Ltd. Okara v. The Commissioner of Income Tax PLD 1965 SC 443 rel.

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

----S.36(2)---Recovery of tax not levied or short-levied or erroneously refunded---Remand of case---After remand, the matter was to be reassessed in its entirety with the only legal presumption that the show-cause notice was issued under S.36 (2) of the Sales Tax Act, 1990 subject to all legal requirements for issuance of such notice as assumption of jurisdiction could not be conferred by the consent of the parties.

1999 PTD 4158 rel.

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

----Ss.7(1) & 26(5)---Sales Tax Special Procedure Rules, 2007---Determination of tax liability---Adjustment of input tax---Disallowance of---Input tax was held inadmissible on the ground that supplier (WAPDA) had not shown/declared sales to the registered person (a power distribution company) in their summaries---Taxpayer contended that input tax could be claimed in the return for any of the six succeeding tax periods; that comparison based on the returns of the suppliers and the registered person for one month was misconceived as comparison of 7 (seven) months returns would be required to reconcile the amounts declared by the suppliers and the taxpayer; that allegation was self-destructive because, having no generation capacity, company could not supply electricity to its consumers if the said purchases were not made; and purchases were made by the taxpayer from National Transmission and Despatch Company and necessary certificate, issued by WAPDA in support of such purchases along with reconciliation statements was also filed with the taxation officer; and that certificate was rejected without verification and such rejection of the certificate along with reconciliation statement was arbitrary and capricious---Revenue contended that declaration of sales in the returns of WAPDA was missing which meant that company was not eligible for said input tax; and that valid document was the return filed by WAPDA instead of any certificate---Validity---Taxpayer could not be burdened with tax liability---Some procedural or technical lapses had taken place by the supplier---Default made out by the revenue was all the more absurd and illogical in a sense that if the taxpayer had not purchased electricity how come company (taxpayer) it so engaged in the business of sale of electricity on which the revenue undoubtedly had collected sales tax---Discrepancy between the sales declared by the suppliers and the purchases made by the registered person, investigation had to be undertaken which of the two parties was at fault---Such investigation should precede the issuance of show-cause notice---Revenue unlawfully disregarded the irrefutable documentary evidence submitted in form of certificates issued by WAPDA, reconciliation statements and audited financial statements---Taxpayer had made bulk of purchases from WAPDA---If such purchases were not made, the sales on which output tax had been received by the Department, were not possible as the taxpayer had no generation capacity as it was just a Power Distribution Company---Disregard of documentary evidence was not only capricious, arbitrary but also unreasonable and self destructive proposition---Taxpayer could not be penalized for any act of omission or commission by the WAPDA/supplier---Certificate issued by the supplier and its financial statements constituted irrefutable evidence that these were bona fide purchases in respect of which the registered person was lawfully entitled to claim the input tax adjustment---Supplier, in the present case, was a Government entity which could not be treated to be involved in issuing fake certificates---Revenue had failed to make out valid case for input tax disallowance---Input tax was admissible to the taxpayer, however, the matter was remanded to the taxation officer with directions to obtain necessary evidence from the taxpayer in respect of input tax adjustment---In the event the taxpayer could not prove from its record that amount constituted bona fide adjustment only then the adjustment shall be denied---No amount shall be held to be inadmissible if proper evidence and compliance existed with the registered person.

2011 PTD (Trib.) 808 rel.

2011 PTD (Trib.) 773 and D.G. Khan Cement Company Ltd. v. The Federation of Pakistan and others PLD 2013 Lah. 93 ref.

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

----S.3---Scope of tax---Charge of sales on PTV fees; repair; testing and inspection; non utility operations; reconnection fee; amounts received for deposit works; deposit works in progress and on consideration for new connections---Taxpayer contended that such amounts constituted consideration for services which, being a Provincial subject, were not conceived in the statute to be liable to levy of sales tax---Validity---As the subject of services and immovable property was unambiguously excluded from the purview of sales tax by the Federation, such subjects could not be taxed and was contrary to S.3 of the Sales Tax Act, 1990 itself---Orders of the authorities below on the point were vacated being unlawful and unsustainable.

2011 PTD (Trib.) 808 rel.

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

----S.3---Sales Tax Special Procedure Rules, 2007, R.13 (2)(b)---Scope of tax---Sales tax on services---Revenue contended that levy of sales tax on service charges and on receipts for immoveable infrastructure was justified on the basis of R.13(2)(b) of the Sales Tax Special Procedure Rules, 2007; and all charges and surcharges, rent commissions and all duties and taxes were chargeable to tax, if there was no specific exemption available under the law---Validity---Contention was not out of context, misplaced and irrelevant---Expression "all charges…" could not be read in isolation or for that matter divorced, detached, or de-linked with basic scope provided for in body of the Act and/or Rule i.e. supply of electric power---Consideration, including all charges etc. had to be in respect of supply of electric power---In case the consideration/ amount had no nexus with supply of electric power that did not fall in the scope of tax---While constructing provisions of fiscal statutes one had to adhere to what was expressly provided in the statute and one could not be allowed to go beyond what was stated therein---Benefit of doubt, if any, had to be resolved in favour of taxpayer---No lawful mandate existed for putting a charge of sales tax on subject service charges and receipts for immoveable infrastructure as these did not, even remotely, had any nexus with the supply of electric power.

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

----S.3---Scope of tax---Constitution of Pakistan, Federal Legislative List, Entry No.49---Services and immovable property---Taxation of---Validity---Since the primary law prescribed charge exclusively in relation to supply of goods, the secondary legislation had to be construed and constructed accordingly---Section 3 of the Sales Tax Act, 1990 charged sales tax on supply of goods only as the supply of services and immovable property were excluded from the purview of sales tax by Federation under the Constitution vide entry No.49 of the Federal Legislative List---Levy of tax on services and immovable property was beyond the taxing power of the Federation.

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

----Ss.3 & 13---Scope of tax---Exemption---Item not coming under the ambit of taxation specified in the statute could not be brought through implication etc. or indirectly---Averment that unless there was specific provision under the law granting exemption, every supply was taxable was contrary to established law that exemption was the waiver of the charge and came into play only if a transaction was chargeable to tax---If a transaction was not chargeable to tax, question of exemption would not arise and the liability to pay tax arises by charging section alone.

1992 SCMR 250 and PLD 1990 SC 1156 = 1990 PTD 768 rel.

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

----Ss.3 & 2(46)---Income Tax Ordinance (XLIX of 2001), S.235---Sales Tax Special Procedure Rules, 2007, R.13 (2)(b)---Scope of tax---Collection of Income Tax under S.235 of the Income Tax Ordinance, 2001---Charge of sales tax thereon---Taxpayer contended that S.2(46) of the Sales Tax Act, 1990 defined the value of supply which included all federal and provincial duties and taxes which the supplier received from the recipient for that supply; that Income Tax being personal tax was not received from the supplier and it was an independent charge on the income of the consumer and adjustable against his assessment; that duties and taxes "for that supply" included only trading taxes which were included in the price of the supply and were passed onto the consumer; that income tax was not included in the price of the supply but it was collected on behalf of Federal Government in the independent capacity as withholding agent and such Income Tax was deposited in the Government Exchequers against which credit was independently claimed by the consumer; that there was no nexus between the value of supply and the Advance Income Tax adjustable in the personal assessment of the consumer as independent liability; and that R.13(2)(b) of the Sales Tax Special Procedure Rules, 2007 laid down that sales tax was leviable on the price of electric power; and since income tax was not includable in the price of electric power, the allegation of short payment of sales tax on advance income tax collected from the customers on behalf of the Federal Government was ex-facie contrary to law and liable to be deleted---Revenue contended that R.13(2)(b) of the Sales Tax Special Procedure Rules, 2007 for Collection and payment of Sales Tax on Electric Power was very clear that all Federal taxes (including Income Tax) were included in the value of supply---Validity---Default adjudged was based on misreading and mis-appreciation of provisions of R.13(2)(b) of the Sales Tax Special Procedure Rules, 2007---Income tax was not covered in the definition of "value of supply" under S.2(46) of the Sales Tax Act, 1990 as it had no nexus with the supply---Such was personal tax of the consumer which was collected on behlf of the Federal Government by the Registered Person as withholding agent and was not hit by the charging provisions of Sales Tax Law, including R.13 of the Sales Tax Special Procedure Rules, 2007---Similarly, reference to subsection (4) of S.22 of the Sales Tax Act, 1990 had no relevance to the present case as annual audited accounts were not available at the time of submission of month-wise tax returns which were based on the prescribed record under S.22(1) of the Sales Tax Act, 1990---Amount of income tax, collected as withholding agent, was not required to be considered/ included while determining the incidence of sales tax under the provisions of the Sales Tax Act, 1990 as well as the Sales Tax Special Procedure Rules, 2007---Orders of the authorities below were vacated by the Appellate Tribunal.

2004 PTD (Trib.) 2026 ref.

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

----S.22(4)---Sales Tax Special Procedure Rules, 2007, R.14---Record---Mismatch between consolidated Financial statements prepared for Income Tax matters and Sales Tax Returns---Suppression of sales---Taxation of---Registered Person contended that the alleged mismatch between the consolidated Financial Statements prepared for Income Tax/Company matters and the Sales Tax Returns resulted from the different scheme of charge of tax under the Income Tax Law and the Sales Tax Law---Validity---Such matter required mere reconciliation and re-examination of records---Matter was remanded back to the taxation officer to examine the matter afresh in the light of legal framework, referred to be the taxpayer vis-à-vis the mechanism of taxation---Taxation officer shall afford adequate opportunity to the taxpayer during remand proceedings and shall pass a speaking order in this respect.

2008 PTD (Trib.) 541 ref.

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

----Ss. 7, 8 & 2(3)---Sales Tax Special Procedure Rules, 2007, R.13(2)(b)---Determination of tax liability---Transmission and distribution losses---Adjustment of input tax---Disallowance of---Registered Person a power distribution company contended that neither S.7 nor S.8 of the Sales Tax Act, 1990 placed any embargo on the admissibility of input tax which was paid for the purposes of taxable supplies; and that purpose of supply was the crucial test; that transmission and distribution losses were integral part of supplies of electric power in terms of R.13(2)(b) of the Sales Tax Special Procedure Rules, 2007; that since charging provisions charge tax on actual supplies and losses were unavoidable for making such supplies, the adjudication officer lacked lawful authority to indirectly levy tax, through curtailment/disallowance of input tax, principally on the basis of capacity i.e. actual supplies + the line losses and distribution losses; and that demand raised on the allegation of inadmissibility of input tax claimed/adjusted against transmission and distribution losses was liable to be deleted as such losses were admitted and allowed by NEPRA as part of natural process of transmission and distribution---Revenue contended that line losses had not been taxed but the input tax claimed against units lost was disallowed mainly due to theft and bad infrastructure of distribution; that difference between charging the losses and disallowing the input tax which was not used in taxable supplies, were two different things; that the registered person was a distributor carrying on production activities; and that its distribution losses were due to weak transmission lines and theft etc. i.e. due to bad administration instead of technical reasons, hence disallowed---Validity---Electricity was purchased by the registered person exclusively for onward taxable supply to consumers---Registered person was lawfully entitled to claim the adjustment under S.7 read with S.8 of the Sales Tax Act, 1990---Transmission and distribution losses did not affect such adjustment, which remained fully allowable under the law---Very design and structure of the tariff approved by NEPRA was such that it in-builds such losses, did not cause any loss to the exchequer vis-a-vis taxes, because the output tax collected on tariff duly accounted for such losses---Authorities below erred in law in disallowing/restricting the input tax adjustment---Orders of the authorities below were vacated by the Tribunal and input tax adjustment claimed by the taxpayer was held to be in accordance with law.

PLD 1997 SC 582 (683) and Messrs Peshawar Electric Supply Company (Pvt.) Ltd. (PESCO) in Complaint No.170/ISD of 2010 ref.

Sales Tax Appeal No.K84 of 2002, decided on 20-5-2002 and Mayfair Spinning Mills Ltd. v. Customs, Excise and Sales Tax Appellate Tribunal and 2 others PTCL 2002 Cl. 115 rel.

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

----S.7---Determination of tax liability---Adjustment of input tax---Principle---Allowability/adjustment of input tax remained exclusively dependent upon the intention of the taxpayer at the time of acquisition of tax-paid goods, and if the acquisition was for the "purpose" of taxable supplies made, or to be made, by the registered person, the said registered person would be lawfully justified to claim the adjustment even if due to some unfortunate event or otherwise, did not actually make taxable supplies.

Mayfair Spinning Mills Ltd. v. Customs, Excise and Sales Tax Appellate Tribunal and 2 others PTCL 2002 Cl. 115 rel.

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

----Ss.3, 2(11), 8(2) & 13---Sales Tax Special Procedure Rules, 2007, R.14---Scope of tax---Subsidy---Exemption---Tax was imposed on amount which the taxpayer received from Government of Pakistan in the form of subsidy---Taxpayer a power supply company contended that sales tax was chargeable under R.14 of the Sales Tax Special Procedure Rules, 2007 on the amount of sales tax actually billed to the consumers; that subsidy was not billed to the consumers and was not covered in the charge of sales tax under charging provisions; that tax on subsidy clearly fell out of the purview of the charging provisions; that under S.3 of the Sales Tax Act, 1990, existence of two ingredients, taxable supply in the furtherance of taxable activity, were must to attract the charge of sales tax; that subsidy was neither a supply to the Federal Government nor it was allowed in the furtherance of taxable activity; and that subsidy was provided by the Federal Government as welfare activity which was not taxable---Revenue contended that subsidy came under the "value of supply" in terms of S.2(46) of the Sales Tax Act, 1990 read with R.13(2) of Chapter-III of Sales Tax Special Procedures Rules, 2007 which was received by the registered person against the supply of electricity (goods) and was actually the part of price fixed by NEPRA and was properly booked under the head of "sales in audited financial statements of the taxpayer"---Validity---Disallowance of proportionate input tax to subsidy was misplaced---Concessional charge of Sales Tax did not mean that supplies were exempt from sales tax---Provision of S.2(11) of the Sales Tax Act, 1990 defines "exempt supply" as supply which was exempt from tax under S.13"---Supplies in the taxpayer's case were not exempt under S.13 of the Sales Tax Act, 1990---Under S.2(11) of the Sales Tax Act, 1990, even zero rated supplies were taxable supplies---Mere concession in the charge did not make supply as exempt supply---Section 8(2) of the Sales Tax Act, 1990 was not attracted to disallow purported proportionate input tax---Revenue was reading imaginary things in the legal provisions which were contrary to their plain and explicit meanings---Input tax was allowed with reference to the purpose of the supply and the revenue was inserting their view in S.7 of the Sales Tax Act, 1990 that input tax should correspond to the actual supply instead of the "purpose of supply"---Revenue had erred in law in subjecting to tax the subsidy received from the Government which was not consideration for supply electricity and not chargeable to tax---Orders of the authorities below, on this point, were vacated by the Appellate Tribunal being unlawful.

1996 SCMR 1470 (1475); 2001 PTD 2097 = 2001 SCMR 1376; Tax Law Design and Drafting Volume-I Page-197; Messrs PIALC v. CIT PLD 1975 Kar. 924; I.T.As. Nos.39 and 40/1B of 1992-93 dated 30-10-1995 and I.T.As. Nos.354/LB of 2006 and 355/LB of 2006 ref.

PLD 2007 SC 517 Irrelevant.

PLD 1990 SC 68 and PLD 1985 SC 109 rel.

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

----Ss.13 & 3---Exemption---Principles---Averment raised on behalf of the revenue that there was no specific provision of law giving exemption of subsidy granted by the Federal Government, in the form of tariff differential, was grossly misplaced---Specification of exemption in law was necessary where the amount was otherwise chargeable to tax under the law---If the amount was not chargeable to tax there was no point in providing for exemption in the statute.

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

---Ss.3 & 23---Sales Tax Special Procedure Rules, 2007, R.14---Scope of tax---Subsidy---Federal government granted subsidy to the consumers and not to the taxpayer, an electric supply company---Differential tariff subsidy was directly passed on to the consumers as it was not made part of Bill (invoice in terms of S.23 of the Sales Tax Act, 1990) and charge of Sales Tax was curtailed to the "Sales Tax actually billed to the consumer or purchasers" under R.14 of the Sales Tax Special Procedure Rules, 2007.

PLD 1990 SC 68 rel.

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

----Ss.3 & 13---Regulation of Generation Transmission and Distribution of Electric Power Act (XL of 1997), S.31 (1)---Scope of tax---Concession policy---Exemption---Concession to the consumers such as social policy of the Federal Government meant concessional charge of sales tax to the consumers and concessional charge including zero rated charge was not tantamount to exemptions under S.13 of the Sales Tax Act, 1990.

PLD 2007 SC 517 Irrelevant.

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

----Ss. 23 & 3---Sales Tax Special Procedure Rules, 2007, R.14---Tax invoice---Charge of sales tax---Subsidy---Under S.23 of the Sales Tax Act, 1990, a registered person was required to issue invoice in the name of the recipient---Such invoices were issued in the form of electricity bills and under R.14 of the Sales Tax Special Procedure Rules, 2007, tax was "to be deposited on accrual basis i.e. the amount of sales tax actually billed to the consumer or purchasers for that tax period'---Charge of sales tax was confined to the amount of price of electricity billed to the consumer---Subsidy was not part of that price billed to the consumer and fell out of the purview of the charge of Sales Tax.

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

----S.7---Determination of tax liability---Suspended registration and black listed/non-filer units---Adjustment of input tax against invoices issued by such units---Disallowance of---Taxpayer contended that at the time when transactions were executed with the respective suppliers they were fully active ; and any subsequent status assigned to such suppliers by the revenue could not disturb past and closed transactions---Revenue contended that invoices (i) against which no goods were received would be treated as fake/flying invoices (ii) against which the taxpayer could not produce any convincing evidence to prove that the goods were actually transferred from the supplier's account to buyer's account; the input tax adjustment could not be allowed merely on the point that the suppliers were operative at the time of transaction---Validity---Assertion of the revenue could not be endorsed as the show-cause notice fell short of that allegation---Even otherwise, it would not only create a chaos but would lead to end-less controversy---Taxpayer negotiating a transaction was expected to comply with law at the time of executing the transaction and could not possibly forecast what would be the fate of the supplier in future---Orders of the authorities below were vacated by the Appellate Tribunal and matter was remanded for re-examination; in the event the suppliers were active at the time of execution of the transaction, no adverse inference shall be drawn against the subject taxpayer.

Galaxy Textile Mills Ltd., v. Federation of Pakistan and others Writ Petition No.17185 of 2013 ref.

2010 PTD (Trib.) 2248 Irrelevant.

Mian Ashiq Hussain for Appellant (in S.T.A. No.874/LB of 2013).

Muhammad Asif Hashmi, LA for Respondent (in S.T.A. No.874/LB of 2013).

Muhammad Asif Hashmi, LA for Appellate (in S.T.A. No.950/LB of 2013).

Mian Ashiq Hussain for Respondent (in S.T.A. No.950/LB of 2013).

Date of hearing: 7th April of 2014.

2014 P T D (Trib.) 1692

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Abdul Nasir Butt, Accountant Member

Messrs EPLA LABORATORIES (PVT.) LTD.

Versus

COMMISSIONER INLAND REVENUE, KARACHI

I.T.A. No.239/KB of 2014, decided on 17th April, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.29, 21(1), 122(5A) & 120(1)---Bad debt---Addition on the ground that no legal action was taken against the debtors---Taxpayer contended that First Appellate Authority was not justified to confirm the disallowance with the reason that the conditionalties of S.29 of the Income Tax Ordinance, 2001 were not fulfilled, and the legal action was not taken against the debtors in default as there were three conditions laid down in it for writing of which were (a) the amount of debt was previously included in the person's income from business chargeable to tax (b) the debit or part of the debit was written off in the accounts of the person in the tax year and (c) there were reasonable grounds that the debit was irrecoverable and that all these conditions were fulfilled; and that was not a word about "legal action" to be taken against the defaulters which appeared to be mere presumption of the officers below---Validity---Officers below were not justified in focusing only on the legal action as a condition, which evidently was not a specific condition under S.29 of the Income Tax Ordinance, 2001---Two conditions i.e. amount of debt had been previously included in the person's income and also actually written off were verbatim fulfilled and certified by the company's auditors and G.M. Finance---All parties were well known persons and old customers of the taxpayer with whom business had been transacted for several years and apparently these business relations were adversely affected due to non-payments of dues after the business ties were snapped there was no recourse but to write off---In many cases particularly Government departments record of correspondence mainly reminders for payments were presented before the Tribunal to support the claim that the third and last condition was also fulfilled---Assessing Officer did not examine the books of accounts, and relied only on the details submitted before him---Assessing Officer should have examined ledger accounts of all the defaulters with a specific purpose before arriving at any conclusion---Addition of "bad debts" was ordered to be deleted---As regards addition out of salaries, salaries of the employees were below taxable limit, before addition of medical allowance was exempt---Said addition was also ordered to be deleted.

Agha Kafeel Barik for Appellant.

Zulfiqar Ali Memon, D.R. for Respondent.

Date of hearing: 17th April, 2014.

2014 P T D (Trib.) 1698

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaarul Haq, Judicial Member and Sikandar Aslam, Accountant Member

Messrs HUDA SUGAR MILLS LIMITED, FAISALABAD

Versus

C.I.R., R.T.O., FAISALABAD---Respondent

F.E.A. No.20/LB of 2013, decided on 28th February, 2014.

Federal Excise Act (VII of 2005)---

----Ss.14 (1), 8 & 19(1)---Sales Tax Act (VII of 1990), Ss. 3, 6, 7, 11(6), 22, 23 & 26---STGO No.03/2004 dated 12-4-2004, Para (i), Cl.21 (a)---Recovery of unpaid duty or of erroneously refunded duty or arrears of duty, etc.---Taxpayer failed to file monthly sales tax/federal excise returns within due date---Minimum tax liability in respect of such tax periods was determined and confronted on the basis of "highest amount of tax paid in any of the previous twelve months"---Taxpayer having failed to furnish any plausible reason for late payment as well as late filing of returns, he was directed to pay default surcharge and penalty being 5% of duty involved---Taxpayer contended that assessing authority had erred in law by simultaneously invoking the provisions of S.14(1) of the Federal Excise Act, 2005 and provisions of S.11(6) of the Sales Tax Act, 1990, for recovery of default surcharge and penalty; and delay in tax payments and late filing of returns was on account of circumstances beyond the control of the taxpayer; and delay was to be viewed objectively for condonation provided under the law---Validity---Default on the part of taxpayer was patent as admittedly he had failed to pay the government taxes into government treasury within due date and had also failed to file the requisite returns within the time prescribed under the law---Returns were filed and taxes were paid belatedly after issuance of Show-Cause Notice and after fixation of minimum tax liability---Assessing authority had rightly charged default surcharge and penalty which action was later on upheld by the First Appellate Authority---Taxpayer had not denied the charges of late payment of due tax and late filing of returns rather they were seeking shelter through technicalities that the assessing officer had simultaneously invoked the provisions of two different Acts---First Appellate Authority had rightly observed that no prejudice had been caused to the taxpayer as substantial compliance had been made by making reference of the relevant provisions---Order of First Appellate Authority was maintained by the Appellate Tribunal and appeal of the taxpayer being devoid of any merit was rejected.

2008 SCMR 615 rel.

Mudassar Shuja for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 28th February, 2014.

2014 P T D (Trib.) 1702

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Faheemul Haq Khan, Accountant Member

Messrs SAFMARINE CONTAINER LINE NV BELGIUME, KARACHI

Versus

C.I.R. ZONE-IV, R.T.O.-III, KARACHI

I.T.As. Nos. 802/KB to 815/KB of 2013, decided on 20th February, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.7, 124 & 143(2)---S.R.O. No.231(I)/59 dated 4-6-1959---Agreement for avoidance of double taxation between Pakistan and Belgium, Art.8---Vienna Convention of the Law of Treaties---Tax on shipping and air transport income of a non-resident person---Taxpayer company claimed "exemption" from tax on the declared receipts derived from Container Service Charges, Terminal Handling Charges and Container Detention Charges under the provisions of Art. 8 Para 3 of the Agreement for avoidance of Double Taxation entered into between Pakistan and Belgium without any tax liability in respect of collection on account of container service Charges, Terminal Handling Charges and Container Detention Charges---Such receipts were held subject to taxation @ 8% under S.7 of the Income Tax Ordinance, 2001 by the Taxation Officer---Validity---Tax department entered in a MOU dated 26-5-1997 with the Shipping Agents Association wherein it was resolved that if the ancillary income was not covered by bilateral treaty, it shall be taxed in terms of S.7 of the Income Tax Ordinance, 2001 at the specified rate of 8% of gross receipts---Said MOU was being implemented by the contracting parties without any controversy and the taxpayer had not repudiated the other existing benefits from the accepted interpretation of double taxation treaties---No substance was found in the appeals of the taxpayer and these were accordingly rejected by the Appellate Tribunal.

I.T.A. No.1236/KB of 2006; I.T.As. Nos.305, 208, 311 etc./KB of 2009; I.T.As. Nos. 85, 87, 91, 94, 131 to 133, 370 to 382, 945, 948 and 951/KB of 2009 and 2010; 1966 PTD 664; PLD 2008 SC 446 = 2008 PTD 1157 and 2004 PTD (Trib.) 2326 ref.

Saqib Masood, FCA for Applicant.

Dr. Shamsuddin Qazi D.R. for Respondent.

Date of hearing: 10th December, 2013.

2014 P T D (Trib.) 1714

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar ul Haq, Judicial Member

C.I.R., R.T.O., BAHAWALPUR

Versus

ABRAR HUSSAIN, PROP: AL-RAHMAT SECONDARY SCHOOL, DUNYAPUR

I.T.As. Nos.1386/LB to 1387/LB of 2012, decided on 2nd May, 2014.

Income Tax Ordinance (XLIX of 2001)---

----S.182---Offences and penalties---No tax payable---No loss of revenue---Levy of minimum penalty of Rs.5000---Validity---Penalty under S, 182(1) of the Income Tax Ordinance, 2001, could be charged up to 0.1% of the tax payable or Rs.5,000 whichever was higher---Section 182(1) of the Income Tax Ordinance, 2001 specifically provided that penalty shall be imposed on the basis of tax payable, whereas in the present case, no tax had become payable on deemed assessment completed for tax years 2010 and 2011---For imposing penalty for default under S.114 of the Income Tax Ordinance, 2001, the pre-requisite was the "tax payable" by a taxpayer which was missing in this case---Levy of penalty was illegal and unjustified---Law should not be used to penalize a taxpayer unless it could be shown that the default on the part of taxpayer had resulted in any loss of revenue---In the present case, no such loss of revenue was evident---First Appellate Authority had rightly deleted the levy of penalty under S.182 of the Income Tax Ordinance, 2001 for tax years 2010 and 2011 which action was maintained by the Appellate Tribunal---Departmental appeal being filed without any merit or substance was rejected.

2010 PTD (Trib.) 184 rel.

None for Appellant.

None for Respondent.

Date of hearing: 2nd May, 2014.

2014 P T D (Trib.) 1717

[Inland Revenue Appellate Tribunal]

Before Javid Iqbal, Judicial Member and Muhammad Pervez Alam, Accountant Member

S.T.A. No.5(PB) of 2013 of 2013 and M.A. (Addl. Ground) No.9(PB) of 2013, decided on 28th August, 2013.

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

----S.57---Correction of clerical errors, etc.---Correction in assessment without issuance of notice---Validity---No notice under S.57 of the Sales Tax Act, 1990 was issued to the registered person for making correction of clerical errors, etc, which was absolutely mandatory and without issuance of such a notice the corrigendum issued regarding assessment order by calculating and enhancing default surcharge was illegal---Taxation Officer was directed to recalculate the default surcharge as directed by the First Appellate Authority by providing opportunity of being heard positively to the registered person in view of the contents of S.57 of the Sales Tax Act, 1990.

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

----Ss.11, 3, 6, 26, 33 & 34---Assessment of tax---Non-mentioning of subsection in the Show-Cause Notice---Effect---Correct subsection of S.11 of the Sales Tax Act, 1990 had not been mentioned in the Show-Cause Notice as S.11 of the Sales Tax Act, 1990 had seven subsections and each subsection dealt with different situation---Requirement was that correct subsection was to be mentioned in the Show-Cause Notice as well as in the assessment order but contrary to that the original adjudicating authority had not done so---Appellate Tribunal directed that re-assessment be framed and the correct subsection be positively reflected in the assessment order, in legal matters, every "comma", "inverted commas"; "semi colon" and subsection had different meaning/interpretation.

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

----Ss. 26, 33 & 34---Sales Tax Special Procedure Rules, 2007---Return----Penalty for non-filing of return---Status of the taxpayer---Retailer or normal Sales Tax Registered Person---Taxpayer had been enrolled as retailer under Sales Tax Special Procedure Rules but later on was compulsorily registered and sales tax registration number was allotted---Proper procedure was to cancel the registration of the taxpayer as retailer first and then it was to be followed by compulsory registration but it appeared that the original adjudicating authority had not done so, which had created confusion and had made the order of the adjudicating authority much more vulnerable as far as legal and procedural norms were concerned---While framing re-assessment the adjudicating authority was required to keep in view such aspect of the case, as presently prima facia the status of the taxpayer was standing on retailer tax roll under Special Procedure Rules, 2007 as well as on Sales Tax Registration Number of compulsory registration---Appellate Tribunal directed that proper procedure regarding compulsory registration be adopted.

Babar Nazir for Appellant.

M. Tariq Arbab D.R. and Ajmal Khan IRAO, for Respondent.

Date of hearing: 28th May, 2013.

2014 P T D (Trib.) 1926

[Inland Revenue Appellate Tribunal]

Before Muhammad Akram Tahir, Accountant Member, Munsif Khan Minhas, Judicial Member and Nazir Ahmad, Judicial Member

M. As. Nos. 76 & 77/LB of 2012, decided on 3rd September, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.22, 118 & 239(10)---FBR Circular No.20 of 1992 dated 1-7-1992---Rectification of mistake---Export---Local Sale---20% of local sales of exporters as export sales was denied---Appellate Tribunal observed that "notifications, notices, orders or rules issued under the Income Tax Ordinance, 1979 which were inconsistent with the corresponding provision of the Income Tax Ordinance, 2001 had been repealed; and since S.18 of the Income Tax Ordinance, 2001 itself said that the local business was to be taxed under normal law the Circular relied upon under Income Tax Ordinance, 1979 being inconsistent had no application whatsoever"---Taxpayer contended that benefit of Circular No.20 of 1992, regarding direction to treat 20% of local sales of exporters as export sales, was denied despite the fact that it was still intact and very much in existence and was still in field; that constitution guarantees equal protection of law among persons who were equally placed and that persons similarly placed had equal rights and they could not be treated differentially and discriminatorily; that department itself had treated local sales of exporters as export sales in many cases, charging tax on local sales and in the present case nothing except a discriminatory treatment would occur---Validity---No doubt Circular had instructions to treat 20% of local sales of exporter as export sales was still in field---In number of cases it had been held that Circular/instructions issued by the Federal Board of Revenue were not binding on the Appellate Tribunal---Circular in question embodied instructions which were quite contrary to law---Board had no authority to issue directions to treat 20% of local sales as export sales of exporters---Appellate Tribunal could not give any findings/directions on the basis of such unlawful instructions, however, departmental officers were under legal obligation to follow the instructions of the Board---Where departmental officer had not followed the Circular instructions, it was for the Board to held such officer accountable, however, similar treatment should be accorded to all the taxpayers---If the department on the basis of Circular/instructions of Federal Board of Revenue had treated less than 20% of local sales (of exporter) as exports, then similar treatment should also be given to the taxpayer---Case could not be decided in favour of the taxpayer on the basis of Circular which was contrary to law and on the same issue, discriminatory treatment could not be favoured to different taxpayers---Case was remanded back to the Taxation Officer with the directions to settle the issue and give the same treatment as was given to the exporters in respect of their local sales in similar circumstances---Order passed was rectified/modified to such extent by the Appellate Tribunal.

PLD 2004 SC 77 = 2004 PLC (C.S.) 34; 2002 SCMR 71; 2002 CLC 1555; 2007 SCMR 410 and 2011 YLR 2705 rel.

Javed Iqbal Qazi for Appellant.

Muhammad Idrees, D.R. for Respondent.

Date of hearing: 19th June, 2013.

2014 P T D (Trib.) 2009

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch. Judicial Member and Muhammad Akram Tahir, Accountant Member

Mst. UZMA NASIM, LAHORE

Versus

C.I.R., ZONE-X, R.T.O.-II, LAHORE

I.T.A. No.2334/LB of 2013, decided on 15th April, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.111(1)(b), 122(5) & 182---Unexplained income or assets---Investment made by tax-payer's deceased father---Claim of the taxpayer was that investment having been made by her late father which she received as inheritance was rejected and she was asked to furnish details of legal heirs of her father and the evidence regarding making of investment by her father; and addition was made on non-production of such evidence---Taxpayer contended that she was the sole nominee and there was no dispute amongst the legal heirs; and point raised by the Taxation Officer had no validity at all; the investment in question was received as a nominee after the death of her father---Validity---Re-assessment was finalized without appreciating the facts and examining the evidence produced by the taxpayer---Taxpayer had enough evidence in support of his contention that she had received the amount in question as inheritance being nominee of the investment made by her father and the objection raised by the Taxation Officer that nothing had been adduced to substantiate the contention was also contrary to the facts and circumstance of the case---Investment was made out of explainable sources which she had received as inheritance after the death of her father---Documentary evidence produced by her at the assessment stage was deliberately ignored in order to burden her with a huge amount of tax liability which could not be termed as justified by any stretch of imagination---First Appellate Authority had also upheld the treatment accorded by the Taxation Officer in a summary manner without consulting the evidence produced before him---Addition made by the Taxation Officer was not sustainable and the First Appellate Authority had erred in law to upheld the same---Addition made under S.111(1)(b) of the Income Tax Ordinance, 2001 was deleted by the Appellate Tribunal and the appeal of the taxpayer was accepted.

Mian Mansoor Ahmad for Appellant.

M. Jamil Bhatti, D.R. for Respondent.

Date of hearing: 15th April, 2014.

2014 P T D (Trib.) 2066

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Akram Tahir, Accountant Member

Messrs ABDULLAH PLASTIC, FAISALABAD

Versus

C.I.R. ZON-II, R.T.O.

S.T.A. No.220/LB of 2013, decided on 20th June, 2014.

Sales Tax Act (VII of 1990)---

----Ss.21(2) & 2(14)---Sales Tax Rules, 2006, R.12---Sales Tax General Order No.3 of 2004 dated 12-6-2004, Cl. 'N'---Sales Tax General Order No.35 of 2012 dated 22-2-2012---De-registration, blacklisting and suspension of registration---Revenue observed that taxpayer had claimed input tax adjustment against the invoices issued by suspended/blacklisted and non-filer units; that no goods were ever physically transferred from the business premises to the supplier's business territory; that taxpayer apparently made a tax fraud; and registration of the taxpayer was suspended; and that Show-Cause Notice was issued; and since no reply was furnished, the taxpayer was declared blacklisted---Registered Person contended that registration was suspended on the basis of presumptions without bringing any material evidence on record; that if the authorities satisfied that fake invoices had been issued, tax had been evaded or tax fraud had been committed, suspension of registration should have been made through a written order; that Commissioner should have issued a Show-Cause Notice within seven days of the issuance of such order; that Show-Cause Notice had been issued after lapse of seven days which was clearly violative of Cl.(37) of the STGO No.35/2012 dated 30-6-2012; and according to Cl.38 of the said Sales Tax General Order, in case the Show-Cause Notice was not issued within (07) days of the order of suspension, the order of suspension shall become void ab initio; that the suspension order as well as the Show-Cause Notice had already been set aside by the Appellate Tribunal; that where the basic order was void ab initio, illegal and without lawful authority, the whole superstructure built thereon would fall on the ground automatically and whatsoever proceedings in its consequences in the shape of any Show-Cause Notice and blacklisting order thereon shall also become void, illegal, unlawful and without jurisdiction; that since Appellate Tribunal had set aside the order of suspension, the Commissioner was not justified to pass the order; that if required, fresh proceedings could be initiated; that since the order was passed in accordance with the earlier Show-Cause Notice, the whole proceedings were void ab initio and illegal; and that after giving an opportunity of hearing, the order of blacklisting should have been passed within 90 days of the issuance of Show-Cause Notice---Validity---Order of blacklisting was made on the basis of presumptions without bringing any material evidence on record---Even legal requirements as envisaged in STGO No.35/2012 had not been fulfilled---Subsequent blacklisting/suspension of a supplier could not be made tool to deprive the Registered Person of a valuable right accrued in his favour for purchases or transactions made prior to the suspension/blacklisting of registration of such supplier---Record showed that blacklisting/suspension was made on the much later dates---Order was not sustainable and the same was annulled for the reasons that (i) the Show-Cause Notice was issued beyond the prescribed period of seven days (ii) the order of blacklisting was passed beyond the time limit of 90 days and (iii) at the material time all the suppliers from whom the purchases made were active and they were suspended/blacklisted subsequently on much later dates---Appellate Tribunal set aside the Show-Cause Notice as well as order of suspension of registration---Order of blacklisting passed with reference to the said Show-Cause Notice was declared to be void ab initio.

2010 PTD (Trib.) 1631 rel.

M. Imran Rashid for Appellant.

Ch. Jaffar Nawaz, D.R. for Respondent.

Date of hearing: 20th June, 2014.

2014 P T D (Trib.) 2085

[Inland Revenue Appellate Tribunal]

Before Jawaid Masood Tahir Bhatti, Chairman and Sajjad Hayder Khan, Accountant Member

M.A (AG) Nos.46/KB and 45/KB of 2013 and I.T.As. Nos. 768/KB of 2010, 163/KB of 2013 (Tax Years 2006 and 2012), decided on 30th April, 2013.

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

----S.122(5A)---Amendment of assessment---Challenge of vires of action---Legal grounds---Legal grounds striking at the very basis of an action could be taken at any forum of appeal---Where vires of action under S.122(5A) of the Income Tax Ordinance, 2001 had already been challenged, there was no need of taking additional grounds---Entertainment of an additional ground should be a rule not an exception---Legal issue, if it arises from the order of the assessing authority or appellate authority could be taken up at any stage of appeal even without filing formal application for additional ground---Even otherwise grounds of appeal sufficiently covered the issues agitated through additional grounds---Additional grounds were allowed in the circumstances.

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

----Ss.122(5A)/(9) & 120---Amendment of assessment---Call for details, documents, explanations and record for examination and verification---Fishing and roving inquiries ---Erroneous and prejudicial to the interest of revenue---Taxpayer had contended that through the proceedings under S.122(5A) of the Income Tax Ordinance, 2001, the taxpayer was required by the Assessing Authority to file various details, documents, explanations and record for his examination and verification; that this had been done without pin pointing anything erroneous and prejudicial to the interest of revenue in the deemed order under S.120 of the Income Tax Ordinance, 2001 sought to be amended and whatever adverse inference drawn in the end had been drawn on the basis of details, documents, explanations and record provided during the proceedings; that S.122(5A) of the Income Tax Ordinance, 2001 did not permit the assessing officer to indulge in seeking details, documents, record and explanation as the same constituted fishing and roving inquiries; that documents could at the had most be called under S.120(3) of the Income Tax Ordinance, 2001 which related to making up deficiencies but did not constitute erroneousness and prejudice to the interest of revenue; that erroneousness and prejudice to the interest of revenue, if any, should be definitive and visible from the plain reading of the order sought to be amended by the assessing officer which was not the case here otherwise he would not have issued a series of notices calling for details, documents, record and explanations to establish erroneousness and prejudice in the order sought to be amended: that if the Additional Commissioner was of the view that a certain claim or transaction in an assessment order was erroneous and prejudicial to the interest of revenue, he could make inquiries at his end without seeking information, details , documents and evidences from the taxpayer; that if inquiries conducted by him fortify his resolve that the claim or transaction in the assessment order was erroneous and prejudicial to the interest of revenue only then he would proceed for issuance of notices under S.122(5A) of the Income Tax Ordinance, 2001; that methodology adopted by the assessing authority in his order under S.122(5A) of the Income Tax Ordinance, 2001 was against the spirit of the amendment brought about in S.122(5A) of the Income Tax Ordinance, 2001 by Finance Act, 2012; and that order under S.122(5A) of the Income Tax Ordinance, 2001 was not maintainable on this score alone---Validity---From the perusal of notices issued by the assessing authority, order under S.122(5A) of the Income Tax Ordinance, 2001 and marathon details, documents and replies filed during the proceedings under S.122(5A) of the Income Tax Ordinance, 2001, there was no doubt that the assessing authority was indulged in seeking details documents, information and evidences on whims, surmises, assumptions, suspicion, guesswork and apprehension which supported the contention of the taxpayer that order sought to be amended was not erroneous in so far it was prejudicial to the interest of revenue---Assessing authority failed to establish erroneousness or prejudice to the revenue through his initial notice---Assessing authority not only issued/made multiple notices/requests but required the taxpayer to file supporting evidences and justify the allowability of claim which suggested that he had not been able to identify any erroneousness or prejudice to the interest of revenue in the order under S.120 of the Income Tax Ordinance, 2001 sought to be amended---Additional data, information, documents or record were required to establish erroneousness and prejudice to the interest of revenue which fell out of the scope of S.122(5A) of the Income Tax Ordinance, 2001.

2011 PTD 2042 and CIR Legal RTO v. Muneer Associates, Karachi I.T.R.A. No.38 of 2010 ref.

I.T.As. Nos. 1696, 1697, 1698, 1825, 1826, 1827/LB of 2012; 1999 PTD (Trib.) 2851; 2009 PTD (Trib.) 121; 2012 PTD (Trib.) 1593 and 2010 PTD (Trib.) 111 rel.

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

----S.122 (5A)---Amendment of assessment---Words "after making, or causing to be made, such inquiries as he may deem necessary"---Explanation---Revenue contended that the amendment adding words "after making, or causing to be made, such inquiries as he may deem necessary" in S.122(5A) of the Income Tax Ordinance, 2001 by Finance Act, 2012 had retrospective character being procedural in nature and had not put any extra burden or charge on the taxpayer but simply enlarged the scope of existing provision---Validity---Substantive change had been made by the legislature in S.122(5A) of the Income Tax Ordinance, 2001 by adding the words "after making, or causing to be made, such inquiries as he may deem necessary"---If a substantive provision was inserted enlarging or extending the scope of existing provision same shall not have retrospective effect until and unless specifically specified by the legislature---Purpose of amendment in S.122(5A) of the Income Tax Ordinance, 2001 enabling the Additional Commissioner to make or cause to make inquiry did not mean that he could make inquiry from the taxpayer; he instead, should have made independent inquiries at his own end to strengthen that order sought to be amended or the same was erroneous and prejudicial to the interest of revenue and then embark upon issuing the notice---Making inquiries or seeking information, details, documents and record from the taxpayer was against the spirit of S.122(5A) of the Income Tax Ordinance, 2001 even after the amendment by Finance Act, 2012.

2004 PTD 921 rel.

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

----Ss.122(5A) & 177---Income Tax Rules 2002, R.68---Amendment of assessment---Calling of books of accounts, records and documents during proceedings under S.122(5A) of the Income Tax Ordinance, 2001---Revenue contended that notice prescribed under R.68 of the Income Tax Rules, 2002 mandatorily allowed calling of books of accounts, records and documents during proceedings under S.122(5A) of the Income Tax Ordinance, 2001; and that R.68 of the Income Tax Rules, 2002 referred to a notice prescribed under Part-II of First Schedule to the Income Tax Rules, 2002---Validity---Notice prescribed under R.68 of the Income Tax Rules, 2002 was a format of a notice/letter under S.122 of the Income Tax Ordinance, 2001 and was not specific to S.122(5A) of the Income Tax Ordinance, 2001 ----Purpose of the notice was to bring uniformity in the language to be used by field officers in notice under S.122 of the Income Tax Ordinance, 2001---Said format could not be termed as mandatory by any stretch of imagination nor the Revenue had been able to identify any provision of law or rule which could be said to have granted this format the status of a mandatory notice being prescribed under a schedule of the Income Tax Rules---Even otherwise said prescribed notice/letter did not override the provisions of main or principal statute i.e. S.122(5A) of the Income Tax Ordinance, 2001, which did not require production of books of accounts, record, documents and evidence---Such a notice/letter did not empowered the assessing officers to call for books of accounts, record and documents and examination thereof under the provisions of S.122(5A) of the Income Tax Ordinance, 2001, which would come into play only when erroneousness and prejudice to the interest of revenue was visible and definitive from the plain reading of the order sought to be amended---If practice of calling for record, details, documents and evidence in the proceedings under S.122(5A) of the Income Tax Ordinance, 2001 was allowed to carry on, the provisions of S.177 of the Income Tax Ordinance, 2001 would become redundant which could never be the purpose of legislature---Since assessing authority had been undoubtedly indulged in calling for record, details, documents and evidence for examination, which constituted fishing inquiries the very notice issued was void ab-initio and illegal---Order framed on this score was also without lawful authority and not sustainable in the eyes of law.

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

----S.100A & Seventh Sched: ---Special provisions relating to banking business---Provision for diminution in value of investment---Disallowance of, on the grounds that it was a notional loss and that it was capital in nature and even if it was actual it would have been set off against capital gain only---Taxpayer contended that when customer of Bank to whom the bank gives loan and advances make default in repayment of such loan and advances some of the customers issue shares of their own company or debentures or term finance certificates to discharge the debt; that in such case, the loan and advances to such customers was replaced by investment in shares and debentures; that value of such investments decreased due to bad performance of such companies as well as due to market forces if the shares of such company were listed; that and when value of such investment decreased, the bank record a provision for such loss on the basis of prudent accounting principles; that under no stretch of imagination, a businessman of an ordinary prudence specially a bank would write off amounts only to save the taxes as this way he loses more than what he appeared to gain and that the fact that provision had been claimed in the audited accounts of the bank proved that the claim had been made on account of genuine loss suffered by the bank---Validity---Both officers below had failed to look into the issue in the perspective of the explanation offered by the taxpayer---As the provision in question was proved to be ascertainable same should have been allowed as an "admissible deduction".

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

----S.100A & Seventh Sched: ---Special provisions relating to banking business---Provision for diminution in value of investment---Diminution in value of investment---Disallowance of and add back in earlier assessment/tax years---First Appellate Authority held that amounts which were earlier disallowed by the Department as provisions should not be disallowed again at the time of claim of write off or reversal of provision as the same constitute double taxation of the same amount---Such finding had been accepted and had not been agitated by the Department and the same had attained finality---Such being the admitted position, it was directed by the Appellate Tribunal that the claim of write off against diminution in value of investment if already disallowed and add back as provision in earlier assessment/tax years the claim of the same amount should not be disallowed at the time of write off as the same constituted double disallowance/taxation of the same amount.

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

----Ss.20 & 34(3)---Deductions in computing income chargeable under the head "Income from business"---Other net provisions---Disallowance of, on the ground that same were not admissible under S.20 of the Income Tax Ordinance, 2001 being mere provision and First Appellate Authority upheld the disallowance---Validity---Both the authorities below fell in error in disallowing the claim under S.20 of the Income Tax Ordinance, 2001 which states that only those expenses were to be allowed which had been incurred wholly and exclusively for the purposes of business; in case same fulfilled the requirements of S.34(3) of the Income Tax Ordinance, 2001 the claim should be allowed.

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

----S.20---Deductions in computing income chargeable under the head "Income from business"---Provision against balance sheet items---Assessing authority disallowed such provision with the observation that the same were not admissible under S.20 of the Income Tax Ordinance, 2001 being mere provision and the same were upheld by the First Appellate Authority---Validity---Both the authorities fell in error in disallowing the claim under S.20 of the Income Tax Ordinance, 2001 which states that only those expenses were to be allowed which had been incurred wholly and exclusively for the purposes of business---Expenditure would be disallowed merely for the reason that it had been claimed as a provision.

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

----S.67---Apportionment of deductions---Allocation of expenses against exempt capital gain and to dividend income and non-consideration of common expenses against dividend income---Assessing authority allocated expenses to exempt capital gain and dividend---Expenses allocated included financial and administrative expenses---Formula based allocation and the quantum of disallowances made showed that the allocation had not been made in accordance with S.67 of the Income Tax Ordinance, 2001 which envisage that allocation should be on reasonable basis taking account of the relates---Such hypothetical basis to allocate expenses on whole sale basis could not be approved---Taxpayer had already allocated expenses to the income from capital gain, dividend, property and other sources and common expenses against dividend income in accordance with S.67 of the Income Tax Ordinance, 2001---Such allocation was reasonable.

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

----S.103---Foreign tax credit---Foreign tax credit in respect of Azad Jammu and Kashmir operations was disallowed---Validity---Admittedly that income declared in return was enhanced to certain level by the tax authorities of Azad Jammu and Kashmir and taxes were paid on such declared/assessed income in Azad Jammu and Kashmir ---Taxpayer on the other hand declared its global income in Pakistan which included income that had been declared/assessed in Azad Jammu and Kashmir with taxes paid thereon---Additional Commissioner by refusing to allow tax credit on account of taxes paid on income declared in Azad Jammu and Kashmir had in fact caused a triple jeopardy to the taxpayer---On the one hand assessing authority was not accepting the income declared in Azad Jammu and Kashmir as foreign income and treating same as Pakistan source income and intended to tax entire global income including income declared/assessed in Azad Jammu and Kashmir in Pakistan; secondly he had disallowed the foreign tax credit for the taxes paid in Azad Jammu and Kashmir and thirdly if income declared in Azad Jammu and Kashmir was not foreign source income then there was no justification for payment of taxes there and the assessing authority should have advised some mechanism to refund the taxes paid in Azad Jammu and Kashmir by the taxpayer/bank---Committee/ technical group set up to look into the difficulties faced by the banks in Azad Jammu and Kashmir in respect of payments of taxes was constituted with the consent of the Government of Pakistan and Government of Azad Jammu and Kashmir and its recommendations had the approval of the Federal Board of Revenue and were binding on the assessing officers of the two countries---Any attempt on part of any officer to unsettle the arrangement arrived at between the two countries primarily aimed a resolving the old issues could not be approved---Keeping in view the past practice and treatment meted out in other cases of banks, Appellate Tribunal directed that "foreign tax credit" as claimed by the appellant be allowed.

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

----Ss.100A, 34(3), 122(5A) & Seventh Sched. R.1(a) to (h)---Special provisions relating to banking business---Computation of profits and gains of a banking company---Taxpayer contended that after insertion of the Seventh Schedule of the Income Tax Ordinance, 2001 read with S.100A of the Income Tax Ordinance, 2001, department could not make add-back disallowance/additions except adjustments to the income, profits and gains declared by a banking company in accordance with the provisions of Seventh Schedule of the Income Tax Ordinance, 2001; that income, profits and gains declared for the purposes of the Seventh Schedule had to be accepted by the Department; and that First Appellate Authority maintained that due to presence of R.9, the Seventh Schedule was different from Fourth and Fifth Schedules of the Income Tax Ordinance, 2001 and had confirmed the action of the Assessing Officer to make various additions/ disallowances to declared income of the taxpayer---Revenue contended that sanctity of the accounts was not contested; that assessing officer had made adjustments in the computation of income submitted by the taxpayer to the Department which was not submitted to the State Bank of Pakistan; that addition had been made under S.34(3) of the Income Tax Ordinance, 2001 and other relevant provisions of the Income Tax Ordinance, 2001 read with R.9 of the Seventh Schedule of the Income Tax Ordinance, 2001---Validity---On the one hand Revenue stated that sanctity granted by Rule of Seventh Schedule to the accounts of the taxpayer was respected and on the other hand insisted that additions had been rightly made under S.34(3) of the Income Tax Ordinance, 2001 and other relevant provisions of the Income Tax Ordinance, 2001 read with R.9 of Seventh Schedule of the Income Tax Ordinance, 2001---Assertion of the revenue that "assessing officer had made adjustments in the computation of income submitted by the taxpayer to the Department which was not submitted to the State Bank of Pakistan i.e. adjustments were made in a document which was not part of the accounts, sanctity of which was accepted" was vague and unacceptable---If revenue thought that computation was not part of the return and accounts which constituted deemed assessment order under S.120 of the Income Tax Ordinance, 2001 then the entire exercise to amend the deemed order under S.122(5A) of the Income Tax Ordinance, 2001 through adjustment in computation would become illegal and void ab-initio and order under S.122(5A) of the Income Tax Ordinance, 2001 became invalid---Accounts prepared for State Bank of Pakistan for the purposes of the schedule read with S.100A of the Income Tax Ordinance, 2001 had sanctity and department was under obligation to accept those accounts---Revenue was under obligation to accept the accounts prepared by the taxpayer for purposes of Seventh Schedule of the Income Tax Ordinance, 2001.

CIR (Legal) v. EFU Insurance Company Ltd. 2011 PTD 2042 different/distinguished.

2012 PTR 124 and 2011 PTR 222 rel.

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

----Seventh Sched., R.1(c)---Rules for the computation of the profits and gains of a banking company and tax payable thereon---Non-performing loan---Total advances---Net advances---Taxpayer contended that Additional Commissioner while determining the charge for non performing loans in terms of R.1(c) of the Seventh Schedule to the Income Tax Ordinance, 2001 had worked out the same on the basis of one percent of corporate and 5% of consumer and SME "net advances" instead of 1% and 5% respectively of "total advances" as provided in R.1(c) of the Seventh Schedule to the Income Tax Ordinance, 2001 which had resulted in an addition to the income assessed; and assessing authority while assigning an arbitrary interpretation to the word "total advances" had maintained that advances appearing in balance sheet only had to be considered for the purposes of R.1(c) of the Seventh Schedule to the Income Tax Ordinance, 2001; and restricted the claim to the "net advances"---Validity---Assertion of the assessing authority that while allowing provisions as per R.1(c) of the Seventh Schedule to the Income Tax Ordinance, 2001 only balance sheet items were to be taken into account was misconceived and against the expressed provisions of R.1(c) of the Seventh Schedule to the Income Tax Ordinance, 2001---Due weightage had to be given to the off balance sheet items as well---Where under R.1(c) of the Seventh Schedule to the Income Tax Ordinance, 2001 provisions for advances and off balance sheet items was available up to maximum of 1% of "total advances" Appellate Tribunal directed that provision be computed accordingly on the value of total advances as per accounts---No justification was available for disallowance of the claim.

2012 PTR 124 rel.

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

----Seventh Sched: R.8A---Rules for the computation of the profits and gains of a banking company and tax payable thereon---Transitional provisions---Reversal of provisions---Disallowance of the difference between the gross and net provisions of non-performing loans claimed by the taxpayer as reversal within the meaning of R.8A of the Seventh Schedule to the Income Tax Ordinance, 2001---Taxpayer contended that amounts were claimed earlier as provisions and were disallowed by the Department; that now the same had been claimed as reversal; that assessing authority had admitted in its order that after disallowance of provisions the amounts in question had been written off and claimed as reversal; and that same was not allowed on the ground that matter was in appeal---Validity---Bad debts written off were admissible deduction---Amount of receivable could be written off by only creating the provision without actually crediting the accounts of debtors---Provision for receivables is an admissible deduction under S. 29 of the Income Tax Ordinance, 2001 without crediting the said provision to the individual debtor's account---Even otherwise the amount pertaining to the periods prior to tax year 2008 qualified to be treated as admissible deductions within the meaning of R.8A of the Seventh Schedule to the Income Tax Ordinance, 2001.

2012 PTR 124 and 2011 PTR 222 ref.

I.T.R.A. No.219 of 2008 rel.

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

----S.122(5A)---Amendment of assessment---Provision of impairment loss---Taxpayer contended that disallowance was made assigning various reasons as per order under S.122(5A) of the Income Tax Ordinance, 2001 which were neither assigned at the time of original disallowance of the provisions in tax years 2009 to 2001 nor were confronted during the proceedings under S.122(5A) of the Income Tax Ordinance, 2001; that reasons assigned constituted after-thought; that disallowance was made in the years prior to tax year 2012 as provision of impairment loss; and that the same could not be disallowed again assigning together different reasons---Validity---Aggregate amount for tax years 2009, 2010 and 2011 was earlier disallowed as "provision of impairment loss"---Similar claim of reversal was allowed by the Department in tax year 2010---Taxpayer undisputedly had claimed the same amount which had been earlier disallowed by the Department as "provision for impairment"; this time disallowance was being made for reasons different than those assigned at the time of original disallowance---Reasons assigned were an afterthought---Same amount could not be disallowed again with a different connotation, reason or nomenclature---Department could not be allowed to disallow the provision for one reason and reversal for another---Disallowance was not maintainable and the same was deleted by the Appellate Tribunal---Even otherwise First Appellate Authority had directed to allow the reversals if provisions had already been taxed earlier by the Department---By not agitating the directions of First Appellate Authority Department had accepted the findings---Directions of the First Appellate Authority were squarely applicable on this disallowance as amount was admittedly disallowed earlier as provision.

Messrs Gears Hobbings v. CIT and others (2003) 88 Tax 38 not relevant.

(o) Income Tax Act (XLIX of 2001)---

----S.128---Remand---Provision for diminution in value of investment---First Appellate Authority if had remanded the issue back to the assessing authority to examine if the reversal was being made out of disallowed provision for diminution in value of investment, then the reversal should be allowed as provision as already taxed---Taxpayer contended that in view of clear findings of assessing authority to the effect that contention of taxpayer was as per law i.e. the amount was disallowed as provision and had now been claimed as reversal there was no need to remand the matter to assessing authority---Validity---In presence of admission of assessing authority in his order that amount was earlier disallowed as provision there was no need to remand the matter to assessing authority.

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

----Ss.21(e), (f) & 34(3)---Deductions not allowed---Accrual-basis accounting---Disallowance on account of post employment medical benefits plan---Taxpayer contended that accounts were maintained on mercantile basis and every year certain contributions were made to the employees' retirement medical benefits plan as an ascertained liability; and that disallowance was made more than the confronted amount after considering the reply---Validity---Addition was not maintainable for the simple reason that the taxpayer was never confronted for the addition of the disallowed amount.

2011 PTR 222 rel.

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

----S. 34(3)---Accrual-basis accounting---Provision against other assets---Disallowance was made for the reason that it was not an ascertainable liability---Taxpayer contended that provisions had been determined in accordance with the reasonable accuracy; and that provision against other assets was an allowable deduction---Validity---Held, keeping in view the facts and circumstances of the case the addition on account of provision against other assets was deleted by the Appellate Tribunal.

2011 PTR 222 rel.

(r) Income Tax Act (XLIX of 2001)---

----S.102---Foreign tax credit in respect of Azad Jammu and Kashmir operations by Banking company---Disallowance of---Taxpayer contended that credit of tax was disallowed on the basis of order for tax year 2006; that disallowance in tax year 2006 was made for different reasons whereas in tax years 2011 and prior to that in the circumstances similar to tax year 2012 the claim of foreign tax credit in respect of Azad Jammu and Kashmir operation had been allowed by the department not only in taxpayer's case but also in all other banks' cases; that even in tax year 2006 foreign tax credit in respect of Azad Jammu and Kashmir had been allowed to all other banks; and that discriminatory treatment had been accorded to the taxpayer not only in tax year 2006 but also in the year in appeal---Validity---No reason was available to treat said tax year differently if under the similar circumstances foreign tax credit in respect of Azad Jammu and Kashmir operations was allowed in earlier tax years in the taxpayer's case and in other banks' cases.

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

----Ss.20, 21(c), 21(g), 21(n), 122(5A) & Seventh Sched: R.9---Deductions in computing income chargeable under the head "Income from business"---Legal and professional charges---Litigation on behalf of client to protect its interest, reputation , goodwill and confidence---Disallowance of being non-business expenses---Taxpayer, a banking company, explained that direction was received from USA to block bank account of one of its clients and transfer the amount to USA; that it was decided to contest such direction in US Court and ultimately won the case; that by contesting the case, bank not only protected its own interest, reputation and goodwill but also won the confidence of its entire clientele at large in long run to assure them that bank did not succumb to any wrong pressures from any quarters and did also not leave its clients alone at the time when they need its help; that this was done for the purpose of business of the bank while such expenses were disallowed as non-business expense; that in addition to it, huge expenses were incurred in another court case as bank's interest, reputation and goodwill were also at stake in that case; that all the expenses were essentially related to business of the bank and allowable deductions; and that further query made by the assessing authority in respect of such disallowance did not point out any erroneousness and prejudice to the interest of revenue while on the contrary there were elements of suspicion, guesswork, apprehension, assumption and surmise in the query made by the officer---Revenue contended that blockage of account/transfer of money was required to be defended by the said person(s) and not by the bank/taxpayer; that incurring of huge legal expenses by the bank for not transferring the amount had no nexus with the business particularly when the profit on debt/interest earned on the said depositor's earned on the said deposit were more or less than the expenses incurred; and that said expense was not allowable within the meaning S.20 read with R.9 of the Seventh Schedule to the Income Tax Ordinance, 2001---Validity---Query in respect of legal and professional charges primarily was the outcome of a suspicion that arose due to abnormal increase in the quantum of expense compared to last year---Nothing definite with regard to erroneousness or prejudice to the interest of revenue was pointed out in the notice under S.122(5A) of the Income Tax Ordinance, 2001---Suspicion was raised in the notice as to whether it was in the nature of capital expenditure or fine or penalty---Assessing authority was not sure as to which provision of law was violated by the taxpayer and assessing authority was proceeding on assumption and suspicion---Provision of S.122(5A) of the Income Tax Ordinance, 2001 could not be invoked on suspicious, guesswork, surmise, conjecture and assumption---All these elements were abundantly present in the initial notice---Contention that the inquiries from taxpayer under S.122(5A) of the Income Tax Ordinance, 2001 could be made was misconceived as inquiries if any had to be made by the assessing authority at its end and S.122(5A) did not allow to seek information from details and data from the taxpayer and then utilize same against it---Assessing authority admittedly based its adverse findings on the write-up/information provided by the taxpayer which established that there was nothing erroneous and prejudicial to the interest of revenue so far as the order under S.120 of the Income Tax Ordinance, 2001 was concerned---Assessing authority had made a disallowance out of legal and professional charges on the ground that the same were not related to business of the taxpayer/bank as well as were not admissible under S.21(c) of the Income Tax Ordinance, 2001 as evidence of tax deduction was not provided---Order of assessing authority clearly showed that in its notice under S.122(5A) of the Income Tax Ordinance, 2001 it expressed his apprehension that amount claimed as legal and professional charges was either inadmissible under S.21(n) or under S.21(g) of the Income Tax Ordinance, 2001 but ended up disallowing a sum as not related to business and/or inadmissible under S.21(c) of the Income Tax Ordinance, 2001 for which taxpayer was not confronted---Such constituted a blatant violation of principles of natural justice/audi alteram partem---Taxpayer had been condemned unheard---Order affecting the rights of a party could not be passed without opportunity of hearing---Failure to comply with such requirement rendered the order void and the entire proceedings became illegal---First Appellate Authority was not justified to upheld the disallowance made by the assessing officer in violation of the provisions of S.122(5A) of the Income Tax Ordinance, 2001 and principles of natural justice---Expenses incurred on law-suit filed in New York and legal expenses incurred in defending bank's position in another case were related to business of the bank as by contesting these cases the bank had been able to protect its own interest, reputation and goodwill as well to win confidence and trust of its clients in the long run---Addition was not sustainable in the eyes of law and the same was deleted by the Appellate Tribunal.

2012 PTR 124 and 2011 PTR 222 ref.

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

----Ss.60A, 21(a), 2(63), 4 & 122(5A)---Workers' Welfare Fund Ordinance ( XXXVI of 1971), S.2(ha)---Workers' Welfare Fund---Taxation Officer---Additional Commissioner---Taxpayer contended that Workers Welfare Fund was to be charged on total income to be assessed and it was to be charged by the "Taxation Officer; and Additional Commissioner was not a "Taxation Officer"; and term "Taxation Officer" ceased to exist in the Income Tax Ordinance, 2001 by virtue of amendments brought about by the Finance (Amendment) Ordinance 2009; that no corresponding amendment had been brought in the Workers Welfare Fund Ordinance, 1971 which still authorized only a "Taxation Officer" to charge Workers Welfare Fund; that Additional Commissioner was not legally competent to charge Workers Welfare Fund; that Workers Welfare Fund was a "tax"; and S.2(63) of the Income Tax Ordinance, 2001 defined the word "tax" envisaging that "tax" meant any tax imposed under Chapter II of the Income Tax Ordinance, 2001, and included any penalty, fee or other charge or any sum or amount leviable or payable under the Income Tax Ordinance, 2001; that in order to charge Workers Welfare Fund as tax amendments had to be made in the Income Tax Ordinance, 2001; that no Workers Welfare Fund could be charged unless S.4 of the Income Tax Ordinance, 2001 provided for charging Workers Welfare Fund as tax; that S.60A of the Income Tax Ordinance, 2001 provided that a person shall be entitled to a deductible allowance for the amount of any Workers Welfare Fund paid under Workers Welfare Fund Ordinance, 1971 and at the same time S.21(a) of the Income Tax Ordinance, 2001 envisaged that any cess, rate or tax paid or payable by the person that was levied on the profits of gains of the business or assessed as a percentage or otherwise on the basis of such profits or gains shall not be allowed as deduction; that there was a conflict between the provisions of Ss.60A & 21(a) of the Income Tax Ordinance, 2001; and that if Workers Welfare Fund was to be treated as tax it could not be allowed as deduction in terms of S.60A of the Income Tax Ordinance, 2001 in view of provisions of S.21(a) of the Income Tax Ordinance, 2001---Validity---Appellate Tribunal, in circumstances, held that there was no justification for invoking the provisions of S.122(5A) of the Income Tax Ordinance, 2001 in the manner as the Taxation Officer had done---Appeals on legal issues and on the facts of the case were allowed---Orders of authorities below were vacated and the order of the Taxation Officer under S.122(5A) of the Income Tax Ordinance, 2001 were annulled.

MUFAP v. Federation of Pakistan and others 2010 PLC 2003; Shahbaz Garments (Pvt.) Ltd. v. Pakistan and others Constitutional Petition No.D-2753 of 2009 and (2011) 103 Tax 363 (Trib.) ref.

Syed Riazuddin and Ch. Nazir Ahmed along with Nauman Zuberi ITP and Nadir Butt Deputy GM Taxation, HBL for Appellant.

Kafeel Ahmed Abbasi Legal Advisor and Shafqat Hussain Kehar D.R., for Respondent.

Date of hearing: 25th March, 2013.

2014 P T D (Trib.) 2144

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Akram Tahir, Accountant Member

Messrs MOON PACKAGES, FAISALABAD

Versus

C.I.R. ZONE-II, R.T.O., FAISALABAD

S.T.A. No.1222/LB of 2013, decided on 20th June, 2014.

Sales Tax Act (VII of 1990)---

----Ss.21(2) & 2(37)---Sales Tax Rules, 2006, R.12(5)---Sales Tax General Order No.3 of 2004 dated 12-6-2004, Cl. 'N'---Sales Tax General Order No.35 of 2012 dated 22-2-2012---De-registration, blacklisting and suspension of registration---Directorate of Intelligence and Investigation, Federal Board of Revenue had reported that an inquiry was under process against certain units who were involved in tax fraud; and on the basis of such report, criminal proceedings had been initiated and F.I.R. was lodged; and most of unites were got registered by using CNICs of innocent persons, user IDs, Pin Codes and passwords of some units were also misused by gang of fraudsters; and on the basis of such allegations, the registration of the Registered Person in the present case, was suspended---Registered Person contended that registration was suspended on the basis of presumptions without bringing any material evidence on record; that Federal Board of Revenue vide Sales Tax General Order No. 35 of 2012 dated 22-2-2012 had issued a uniform policy for suspension and blacklisting of the Registered Persons; that if the Commissioner was satisfied that fake invoices had been issued, tax had been evaded or tax fraud had been committed, suspension of registration should be made through a written order; that Commissioner should have issued a Show-Cause Notice within seven days of the issuance of such order; that after passing order of suspension Show-Cause Notice was to be issued within 07 days and order of blacklisting had to be passed within 90 days; that despite lapse of almost three years neither any Show Cause Notice was issued nor any order of blacklisting was passed; that order of blacklisting was liable to be set aside on said legal ground alone---Validity---Order of suspension of registration was passed on the basis of presumptions without bringing any material evidence on record---Even the legal requirements as envisaged in Sales Tax General Order No. 35/2012 had not been fulfilled---Despite lapse of almost three years neither any Show Cause Notice was issued nor any order of blacklisting was passed---Action of Commissioner merited nothing but annulment---Order was annulled by the Appellate Tribunal and appeal of the Registered Person was accepted.

2013 PTD 1705 rel.

M. Imran Rashid for Appellant.

Ch. Jaffar Nawaz, D.R. for Respondent.

Date of hearing: 20th June, 2014.

2014 P T D (Trib.) 472

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad Judicial Member and Fiza Muzaffar Accountant Member

Messrs PAK PANTHER SPINNING MILLS LTD., Versus

The CIR, ZONE-III, LTU, LAHORE

I.T.A. No.759/LB of 2013, decided on 5th September, 2013.

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

----Ss.113 (2)(b) proviso, 120(3), 221 & 205---FBR Circular No.3 of 2009 dated 17-7-2009---Minimum tax on the income of certain persons---Taxpayer contended that since he had declared gross loss before set off of depreciation and other inadmissible expenses, the minimum tax along with default surcharge was not leviable as per proviso to S.113 of the Income Tax Ordinance, 2001---Revenue stated that the taxpayer had declared net loss instead of gross loss as was evident from the return whereas depreciation was claimed as per serial No.29 of the return---Validity---Taxpayer had declared a "gross loss" and this "gross loss" had been arrived at after the taxpayer had included an amount of 'depreciation charges' under the head 'cost of sales'---Such "gross loss" situation did not entitle the taxpayer to claim exclusion from ambit of minimum tax---When one determined the 'cost of sales' before accounting for depreciation, that converted the situation to "gross profit", in which situation the exception was not applicable---Charge on account of depreciation was always a "non-cash" item---If an entity ends up into a "gross loss" scenario prior to account for depreciation, it would not be absolutely unjustified to conclude about enterprise's inability to pay minimum tax in such a situation---Legislature had created an exit that those enterprises should be excused from payment of minimum tax where there was "gross loss" prior to account for depreciation---If gross loss was arrived at after deducting depreciation charge, which was a non-cash item, an enterprise could still have surplus cash to discharge minimum tax liability---Such enterprises were liable to minimum tax under the law---Order of authorities below being in accordance with law were upheld by the Appellate Tribunal and taxpayer's appeal being devoid of any merit was dismissed.

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

----S.113---Minimum tax on the income of certain persons---Expression "gross loss"---Meaning and scope of---Expression "gross loss" had been used in accounting parlance [i.e. generally accepted account principles] where it refers to difference between sales and cost of sales in a manner that latter exceeds the former---Under generally accepted accounting principles, "gross loss" refers to a situation where 'cost of sales' exceeds the 'sales'---Alternatively, where 'cost of sales' remains less than 'sales' the resultant amount was denoted by "gross profit"---"Gross loss" was opposite to "gross profit"; in such accounting parlance both "gross loss" and "gross profit", as the case might be, was determined before accounting for administration expenses, selling expenses, financial charges and other charges etc..

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

----S.113, proviso---Minimum tax on the income of certain persons---Exception---Legislature, through the proviso, had created an exception with regard to imposition of minimum tax---Under said proviso, such companies which declared "gross loss" could be excused from levy of minimum tax provided such "gross loss" emerged before set off of depreciation and other inadmissible expenses; in other words, under these provisions, only such companies were not entitled to minimum tax where "cost of sales" exceeds the "sales" before and that too without accounting for depreciation and inadmissible expenses---For determination of entitlement to exception, one had to see that "cost of sales" even prior to accounting for depreciation charge and other inadmissible expenses exceed the "sales".

Javed Iqbal Qazi for Appellant.

Muhammad Tahir, D.R. for Respondent.

Date of hearing: 5th September, 2013.

2014 P T D 393

[Islamabad High Court]

Before Noor-ul-Haq N. Qureshi, J

Mian MUHAMMAD YOUSUF ZIA---Petitioner

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and 3 others

Writ Petition No.1677 of 2006, decided on 23rd May, 2012.

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

----S.3---S.R.O. No.951(I)/2005 dated 14-9-2005---Constitution of Pakistan, Art. 199---Constitutional petition---Sales invoice of vehicle showing payment of sales tax @ 15% of its value---Demand of sales tax by Motor Registration Authority while registering such vehicle---Validity---Neither Notification S.R.O. 951(I)/2005 dated 14-9-2005 nor any other provision of law empowered Motor Registration Authority to raise impugned demand---High Court accepted constitutional petition while declaring impugned act of Registration Authority as illegal and without jurisdiction.

(b) Constitution of Pakistan---

----Art.199---Constitutional petition challenging an illegal act of Government functionary---Maintainable.

Arshad Zaman Kiyani for Petitioner.

Nazir Abbasi, Standing Counsel.

Malik Itaat Hussain and Miss Nazeeran Malik for Respondents.

2014 P T D 752

[Islamabad High Court]

Before Shaukat Aziz Siddiqui, J

WARID TELECOM (PVT.) LTD. and others

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.2957 of 2012, decided on 8th January, 2014.

(a) Federal Excise Act (VIII of 2005)---

----Ss.2(21a), 3(1)(d) & 7---Federal Excise Rules, 2005, R. 43---Notification No. S.R.O. 550(I)/2006 dated 5th June 2006---Constitution of Pakistan, Art. 199---Constitutional petition---Petitioners, who were licensed telecommunication operators assailed the demand of the Federal Board of Revenue (FBR) whereby it sought to recover excise duty on interconnect charges on cross network calls---Held, that pursuant to S. 2(21a) and S. 7 of the Federal Excise Act, 2005 read with R. 43 of the Federal Excise Rules, 2005, in the case of "telecommunication services"; Federal Excise Duty ("FED") was required to be collected as if it were "sales tax" hence initially the whole amount of such Federal Excise Duty, at the rate of 19.5% was recovered from the call initiator's network on the full amount charged for the entire "cross network call"; that is, the "call charges" and the "interconnect charges"---Federal Board of Revenue in the present case, had sought to levy the said Federal Excise Duty twice on the second part of the call, which was the "interconnect charges," from both the calling party's telecom operator, as well as from the receiving party's telecom operator, which was entirely unreasonable and unjustified---When Federal Excise Duty had already been charged and deducted on "interconnect charges"; under the name of "telecommunication services" from the subscriber of the calling party's telecom operator, then the added demand of charging the FED on interconnect charges from the receiving party's operator, under the same classification and marque of "telecommunication services" was utterly unfounded and yielded double liability amounting to double taxation---No legal justification, therefore, existed to receive FED from the calling party's operator against the share of the other party and the Federal Board of Revenue had therefore wrongly held the view that "interconnect services" were available to be taxed twice as the same would amount to double taxation as the incidence of tax was the same in both circumstances, that was, rendering of "interconnect services" for the same phone call---Legislative intention to tax telecommunication operators twice on interconnect charges was not visible from the applicable law; and was in fact the otherwise and therefore, any interpretation of the law which warranted double taxation in the present case, was to be strongly dispelled---Impugned demand of levying and demanding FED on interconnect charges from receiving party's telecom operator was declared illegal, without lawful authority and offensive to Constitutional guarantees---Constitutional petition was allowed, in circumstances.

PLD 2011 Lah. 402; Stevens v. The Durban-Roddepoort Gold Mining Co. Ltd. (1909) 5 Tax Cas 402; Sri Krishna Das v. Town Area Committee 1991 AIR 2096 and Chirgaon and Radhakishan Rathi v. Additional Collector, Durg and others AIR 1995 SC 1540 JJ 1995 (6) SC 166 rel.

(b) Interpretation of statutes---

----Double taxation---Statutory construction---Scope---Rule of avoidance of double taxation was merely a rule of construction, therefore, it ceased to have application when the Legislature expressly enacted a law which resulted in double taxation of the same income, however, in the absence of clear provisions stipulating double or multiple levies, the courts must lean in favour of avoiding double taxation---While there could be double taxation if the Legislature had distinctly and expressly enacted it, however, in the absence of such an enactment, where there were general words of taxation, then the Court had to interpret the provisions in a manner where they could not be so interpreted as to tax the subject twice over same---In absence of any impediment specifically created in the Constitution of a country or the Legislative enactment itself, there was a desirability or need to otherwise to avoid such double liability therefore the court, unless there was clear and specific mandate of law in favour of multiple levies, in construing general statutory provisions, must lean in favour of an interpretation as to avoid double taxation.

PLD 2011 Lah. 402; in Stevens v. The Durban-Roddepoort Gold Mining Co. Ltd. (1909) 5 Tax Cas 402; Sri Krishna Das v. Town Area Committee 1991 AIR 2096 and Chirgaon and Radhakishan Rathi v. Additional Collector, Durg and others AIR 1995 SC 1540 JJ 1995 (6) SC 166 rel.

(c) Double Taxation---

----Taxation on telecommunication activities / services---Double taxation---Tax practices---Use of "Universal sourcing formula" to avoid double taxation---Scope stated.

Khalid Anwar, Sr. Advocate Supreme Court, Iftikhar Ahmed Bashir, M. Raza Qureshi and Muhammad Anas Makhdoom for Petitioners.

Qazi Rafi-ud-Din Babar, learned D.A.G., Shabbir Abbasi, Standing Counsel and Saeed Ahmad Zaidi for Respondents Nos. 1 and 2.

M. Bilal, Sr. A.S.C., Babber Bilal, Shazia Bilal, Sajid Ejaz Hotiana and Hafiz Munawar Iqbal for Respondents Nos.3 and 4.

Ch. Muhammad Tariq, Commission, LTU, Razzaq A. Mirza, Additional A.G. (Punjab) for Respondent No.6.

Afzal Hussain, Advocate for Punjab Revenue Authority.

Dates of hearing: 14th March and 7th November, 2013.

2014 P T D 1531

[Islamabad High Court]

Before Riaz Ahmed Khan and Noor-ul-Haq N. Qureshi, JJ

FEDERAL BOARD OF REVENUE and another

Versus

Kh. SAAD SALEEM

I.C.A. No.950 of 2013, decided on 21st April, 2014.

(a) Constitution of Pakistan---

----Art.199---Constitutional jurisdiction---Scope---Interpretation of law---High Court has only jurisdiction to interpret law but has no authority to take the role of policy-maker.

Zafar Iqbal and another v. Director, Secondary Education, Multan Division and 3 others 2006 SCMR 1427 rel.

(b) Constitution of Pakistan---

----Art.25---Equality---Principle---All people are equal before law, however government can make reasonable classification.

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

----Ss.19 & 181---Sales Tax Act (VII of 1990), S.13(2)---Income Tax Ordinance (XLIX of 2001), Ss.53(1), 148 and Second. Sched.----Constitution of Pakistan, Arts.25---Notification S.R.O. 172 (I)/2013, dated 5-3-2013---Law Reforms Ordinance (XII of 1972), S.3---Intra-court appeal---Amnesty scheme---Discrimination---Government introduced amnesty scheme for registration of smuggled vehicles upon payment of customs duty along with redemption fine but Single Judge of High Court declared the scheme as discriminatory in nature---Validity---Amnesty scheme was not for a particular set of society, rather it was for general public---Discrimination could be taken into consideration if it was provided in the policy that the policy would be applicable to such and such class of people and was not applicable to such and such class of people---No differentiation existed and it was applicable to all people in the same manner, therefore, the policy was not discriminatory---Government had authority to make classification and people who had not such vehicle, which were unregistered and regarding which no duty was paid, were not discriminated against those who had such vehicles---Division Bench of High Court set aside the judgment passed by Single Judge---Intra-court appeal was allowed in circumstances.

Syeda Shazia Irshad Bokhari v. Government of Punjab through Secretary Health and another PLD 2005 Lah. 428; Salahuddin Dharaj v. Province of Sindh through Secretary, Local Government Department and 4 others PLD 2013 Sindh 236; Punjab Public Service Commission and another v. Mst. Aisha Nawaz and others 2011 SCMR 1602; Secretary Economic Affairs Division, Islamabad and others v. Anwarul Haq Ahmed and others 2013 SCMR 1687; Dossani Travels (Pvt.) Ltd. and 4 others v. Messrs Travelling Shop (Pvt.) Ltd and others 2013 SCMR 1749; Wattan Party through President v. Federation of Pakistan through Cabinet Committee of Privatization, Islamabad and others PLD 2006 SC 697 and I.A. Sharwani and others v. Government of Pakistan through Secretary, Finance Division, Islamabad and others 1991 SCMR 1041 ref.

Athar Minallah for Appellants.

Syed Javaid Akbar Shah for Respondent.

2014 P T D 1915

[Islamabad High Court]

Before Athar Minallah and Noor-ul-Haq N. Qureshi, JJ

Messrs WIN PIPE INDUSTRIES (PVT.) LTD.

Versus

ADDITIONAL COLLECTOR and others

Customs Reference Application No.8 of 2014, decided on 3rd July, 2014.

Customs Act (IV of 1969)---

----S.196---Expression 'arising out of such order'---Scope---Reference---Maintainability---Questions formulated by importer did not arise out of judgment passed by Appellate Tribunal nor were raised in pleadings at any stage---Validity---Expression 'arising out of such order' in S.196 of Customs Act, 1969, created a nexus of questions of law with judgment of Appellate Tribunal---No question of law had arisen out of order passed by Appellate Tribunal, nor question of law was pleaded and argued before any forum below---High Court in its reference jurisdiction declined to interfere in the order passed by Appellate Tribunal---Reference was dismissed in circumstances.

Messrs Ahmed Karachi Halva Merchants and Ahmed Food Products v. The Commissioner of Income-Tax, South Zone, Karachi 1982 SCMR 489; Messrs Sarwar International through Proprietor and others v. Additional Collector of Customs MCC Preventive, AFU JIAP Karachi and others 2013 PTD 813; Collector of Customs through Additional Collector of Customs, Karachi v. Messrs Qasim International Container Terminal (Pak) Ltd. 2013 PTD 392; Messrs Gold Trade Impex through partner and another v. Appellate Tribunal Customs, Excise and Sale Tax through Collector Customs, and 2 others 2012 PTD 377; Collector of Customs, Karachi v. Mazhar-ul-Islam 2011 PTD 2577; Collector of Customs, Port Muhammad Bin Qasim, Karachi v. Messrs Kaghan Ghee Mills (Pvt.) Ltd. 2008 SCMR 1538; Collector of Customs (Appraisement) v. Messrs Shahbaz International 2007 PTD 202; Pakistan State Oil Company Ltd. v. Collector of Customs, E&ST (Adjudication-II) and others 2006 SCMR 425; Collector of Customs, Port Muhammad Bin Qasim, Karachi v. Messrs Kaghan Ghee Mills (Pvt.) Ltd. 2006 PTD 541; Messrs Zarghoor Zarai Corporation v. Collector of Customs and another 2006 PTD 534 and Collector of Customs and others v. Tahir Dawood and others 2005 PTD 1988 rel.

Shaukat Ali Qureshi for Applicant.

2014 P T D 2003

[Islamabad High Court]

Before Noor-ul-Haq N. Qureshi, J

ASAD HAFEEZ

Versus

FEDERAL BOARD OF REVENUE, ISLAMABAD

Writ Petition No.1412 of 2013, decided on 5th April, 2013.

Customs Act (IV of 1969)---

----S. 171---S.R.O. No. 172(I)/2013 dated 5-3-2013---Constitution of Pakistan, Art. 199---Constitutional petition---Tax Amnesty Scheme---Non-customs paid vehicle---Release of such vehicle on payment of redemption fine along with duties and taxes---Importer/petitioner imported a vehicle in the year 2002, and did not pay customs duty on the same, as he believed the same to be an ambulance, which was exempted from customs duties---Vehicle in question was seized by customs authorities---Meantime, the Government introduced a Tax Amnesty Scheme vide S.R.O. No. 172(I)/2013 dated 5-3-2013 for non-custom paid vehicles, by which such vehicles could be released on payment of redemption fine along with duties and taxes specified in the said S.R.O.---Petitioner applied to the customs authorities to avail benefit of said SRO, but his application was not entertained---Validity---Admittedly vehicle in question which was seized by customs authorities came within the criteria of vehicles provided in S.R.O. No.172(I)/2013 dated 5-3-2013, but customs authorities did not pay any heed to the request made by the petitioner---High Court directed customs authorities to issue estimate cost of customs duty as per Tax Amnesty Scheme and process it further in accordance with law---Constitutional petition was dispose of accordingly.

Kh. Shahid Rasool Siddiqui for Petitioner.

Raja Muhammad Shakeel Abbasi and Malik Zahoor Akhtar Awan, Standing Counsel.

2014 P T D 2007

[Islamabad High Court]

Before Shaukat Aziz Siddiqui and Noor-ul-Haq N. Qureshi, JJ

COLLECTOR CUSTOMS, MODEL CUSTOMS COLLECTORATE, ISLAMABAD

Versus

MUBARAK SHAH and 2 others

Customs Reference No.15 of 2012, decided on 11th June, 2014.

Customs Act (IV of 1969)---

----Ss. 168 & 196---Reference---Maintainability---No "question of law" raised---Smuggling of goods through truck---Seizure of goods and truck by customs authorities---Customs Appellate Tribunal ordered release of goods and truck on the basis that goods had been brought by the respondent from an open customs auction---Plea of petitioner/Collector Customs that Customs Appellate Tribunal did not take into account the fact that goods purchased by respondent from open customs auction did not tally with the goods seized, and were being transported under the pretext of the ones sold in the open auction---Validity---Plea/question raised by the petitioner through Reference did not constitute any "question of law", but was based on facts---Reference was dismissed in limine accordingly.

Rehan Seeral for Petitioner.

2014 P T D 2014

[Islamabad High Court]

Before Muhammad Anwar Khan Kasi, C.J.

COLLECTOR OF CUSTOMS, ISLAMABAD

Versus

CHAIRMAN, CUSTOMS APPELLATE TRIBUNAL and 6 others

Writ Petition No.2478 of 2013, decided on 20th December, 2013.

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

---S. 194-C(3)---Constitution of Pakistan, Art. 199---Constitutional petition---Customs Appellate Tribunal---Constitution of Bench---Objection---Non-inclusion of Member (Technical) from the nearest tribunal---Allegation of mala fides against Chairman, Customs Appellate Tribunal---Petitioner/Collector Customs contended that Chairman, Customs Appellate Tribunal had constituted a Bench without recording reasons for avoiding to include a Member (Technical) from nearest tribunal i.e. Peshawar and inducted a Member from farther part of the country i.e. Karachi; that Chairman had constituted the Bench in a hasty manner, which cast doubt upon his intentions---Validity---Perusal of record showed that through a written application, the petitioner (Collector of Customs) requested inclusion of a Member (Technical) in the Bench, which was allowed by the Chairman and the Bench was reconstituted by inducting Member (Technical)---Petitioner now again sought inclusion of a specific Member from Peshawar instead of Karachi---Such claim of petitioner did not find support from the law on the subject, as S. 194-C of Customs Act, 1969 empowered the Chairman to constitute Benches---None of the parties to a judicial or quasi-judicial proceedings could claim hearing by a Bench of his choice---Constitutional petition was dismissed accordingly.

(b) Discretion---

----Every authority vested with discretion was under an obligation to exercise the same transparently and judiciously.

(c) Administration of justice---

----Bench---Preference of litigant---None of the parties to a judicial or quasi-judicial proceedings could claim hearing by a Bench of his choice.

Rehan Seerat for Petitioner.

Babar Ali for Respondent No.1.

Muhammad Naeem Qazi for Respondents Nos.2 and 3.

2014 P T D 42

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

SHOUKAT ALI

Versus

SPECIAL JUDGE (CUSTOMS AND TAXATION) and 3 others

Constitutional Petition No.D-2352 of 2012, decided on 2nd November, 2013.

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

----Ss.156(1), 179, 181 & 185-Constitution of Pakistan, Art. 199---Constitutional petition---Seizure of Oil Tanker carrying foreign origin High Speed Diesel---Registration of F.I.R. against three persons including Driver---Conviction of such persons by Special Judge (Customs and Taxation) while ordering confiscation and auctioning of Oil Tanker---Order-in-Original passed subsequently by Adjudicating Authority giving option to owner of Oil Tanker to redeem same on payment of redemption fine---Validity---Power to confiscate goods for violation of Customs Act, 1969 and allow its redemption on payment of fine vested in Adjudicating Authority under Ss.179 & 181 thereof---Department had not assailed order of Adjudicating Authority---Special Judge could only convict and sentence a smuggler and impose fine upon him, but had no jurisdiction to confiscate Oil Tanker---High Court directed release of Oil Tanker subject to compliance of order of Adjudicating Order.

Adam v. Collector of Customs, Karachi and another PLD 1969 SC 446; Muhammad Sarwar v. Federal Government of Pakistan and others 1998 PCr.LJ 213; State through Director-General, Pakistan Coast Guards, Turbat v. Sabro and another 1992 PCr.LJ 1795; Government of Pakistan thorugh Additional Secretary (Customs), Ministry of Finance, Islamabad and another v. Mahmood Ahmed Qureshi and another 2002 SCMR 1527 and Kifayatullah v. The Special Judge (Customs and Taxation), Karachi Spl. Criminal Appeal No.5 of 2012 rel.

(b) Constitution of Pakistan---

----Art.199---Constitutional petition---Alternate statutory remedy, availability of---Effect---Non-exercise of jurisdiction by High Court when alternate statutory available, not an absolute rule---Principles.

Where alternate remedy is provided for under any law, constitutional jurisdiction under Article 199 of the Constitution should be exercised with restraint, but such rule is not absolute. If an order is challenged on the ground that the same was wholly without jurisdiction or the person who had passed such order, was not at all competent to do so, an aggrieved person can invoke the constitutional of High Court.

Gatron (Industries) Ltd. v. Government of Pakistan and others 1999 SCMR 1072 and Collector of Customs (Valuation) and another v. Karachi Bulk Storage and Terminal Ltd. 2007 SCMR 1357 rel.

Aqeel Ahmed for Petitioner.

Ashiq Ali Anwar Rana for Respondent No.3.

Mohsin Imam, D.A.G. for Respondent No.2.

Date of hearing: 28th October, 2013.

2014 P T D 136

[Sindh High Court]

Before Mushir Alam, C.J. and Syed Muhammad Farooq Shah, J

RISHAD CHOUDRI and another

Versus

CANTONMENT BOARD, KARACHI through Chief Executive and another

Constitutional Petition No.D-2083 of 2006, decided on 9th September, 2013.

(a) Cantonments Act (II of 1924)---

----S. 99(2)(b)---Property tax in case of building---Exemption---Scope.

According to section 99 of the Cantonments Act, 1924, no building other than that used for educational purpose or the public libraries which are open to public and no income is derived therefrom or hospitals and dispensaries maintained wholly by charitable contributions shall be exempted from payment of property tax.

(b) Cantonments Act (II of 1924)---

----Ss. 77, 99(2)(b) & 259---Constitution of Pakistan, Art.199---Constitutional petition---Trust property being used for charitable activities---Remission of property tax and conservancy tax on such property granted by Cantonment Board from 1-7-1987 to 30-6-2004---Withdrawal of such remission on 23-11-2003 by Cantonment Board and demand of such remitted tax from petitioner-trust on basis of audit objection raised by Departmental Accounts Committee---Validity---Trust property was being used for sponsoring FDMR and other charitable activities, whereas rent of its Hall was charged from parties for arranging program therein---Nothing on record was available to show that petitioner-trust was deriving reasonable income from its property, thus, was not entitled for exemption under S.99(2)(b) of Cantonments Act, 1924---Exemption once granted would be given a wider and liberal construction---Impugned refusal of exempted tax had been raised after 14 years finding the petitioner to be a charitable trust and exempt from levy of tax---Exemption granted for years could be regarded as a right---Petitioner-trust had acquired vested right in such exemption and they remained entitled even if same was withdrawn---Tax exempted earlier by Cantonment Board could not be claimed retrospectively, otherwise same would amount to re-opening of past, closed and completed transactions affecting vested right---Legislature had not given retrospective effect to Cantonments Act, 1924---High Court declared impugned demand as illegal and of no legal effect in circumstances.

Shah Nawaz v. Government of Pakistan 2011 PTD 1558; State Bank of Pakistan v. The Director, Military Lands and Cantonments. Rawalpindi and others PLD 1990 SC 827; Chief Administrator of Auqaf, Government of Punjab, Auqaf Department and another v. Cantonment Board, Bahawalpur through Officer Commanding and 2 others 2001 MLD 1660 and Shagufta Begum v. The Income Tax Officer, Circle-XI, Zone-B, Lahore PLD 1989 SC 360 ref.

Black's Law Dictionary 6th Edn; Corpus Juris Secundum 1954 Edn. Vol. 84, Para 215, p.411; Al-Samrez Enterprize v. Federation of Pakistan 1986 SCMR 1917; Collector of Central Excise and Land Customs and others v. Azizuddin Industries Chittagong PLD 1970 SC 439 and Molasses Trading and Export v. Federation of Pakistan 1993 SCMR 1905 rel.

(c) Taxation---

----Exemption---Retrospective demand of such exempted tax---Scope.

Once exception or exemption becomes applicable, no rule or principle requires it to be construed strictly and against the subject and once exemption is granted, then it should be given a wider and liberal construction.

Retrospective demand of exempted tax amounts to reopening of past, closed and completed transactions, effecting accrued vested rights and remedies, unless there is something specifically provided in the enactment. Annulment of exemption certainly shall affect existing rights and liabilities or vested rights or obligations already acquired under the provisions of law, it does affect the existing right as well. If an enactment expressly provides that it should be deemed to have come into effect on a past date, it is retrospective in nature, it then operates to effect existing rights and obligations, and is construed to take away a vested right which had been acquired under some existing law.

Black's Law Dictionary 6th Edn; Corpus Juris Secundum 1954 Edn. Vol. 84, Para 215, p.411; Al-Samrez Enterprize v. Federation of Pakistan 1986 SCMR 1917; Collector of Central Excise and Land Customs and others v. Azizuddin Industries Chittagong PLD 1970 SC 439 and Molasses Trading and Export v. Federation of Pakistan 1993 SCMR 1905 rel.

(d) Constitution of Pakistan-

----Art. 199---Constitutional petition based on important question of law of public importance---Maintainability---Such question could be raised directly before High Court and constitutional petition was maintainable in circumstances.

Abdul Rehman for Petitioners.

Sohail H.K. Rana for Respondents.

Date of hearing: 16th August, 2013.

2014 P T D 176

[Sindh High Court]

Before Munib Akhtar and Mrs. Ashraf Jahan, JJ

Messrs GOODWILL TRADERS, KARACHI through Sole Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division and 6 others

Constitutional Petition No.D-1118 of 2011, decided on 1st November, 2013.

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

----Ss. 25(9) & 25-A [as inserted by Finance Act (III of 2006) and substituted by Finance Act (IV of 2007)]---Customs Rules, 2001, Rr.110 & 121---Imported goods---Valuation Ruling, application of---Procedure/ Method stated.

Subsection (9) of Section 25 of Customs Act, 1969 comprises of following elements:

Firstly it is to apply only if it is determined that the valuation methods contained in subsections (1), (5), (6), (7) and (8) cannot be applied; Secondly, its application is subject to "rules", which at present means the Customs Rules, 2001 ("Rules"); Thirdly the basic framework of how value is to be determined in terms of the subsection has also been specified. The value must be determined on a basis that is "derived" from among the valuation methods specified in subsections (1), (5), (6), (7) and (8). However, it is permissible to apply these subsections in a "flexible manner". Two points may be noted regarding the basic framework that has been laid down. Firstly, it does not permit a complete abandonment of the valuation methods specified in sub-sections (1), (5), (6), (7) and (8). These cannot simply be pushed aside and ignored altogether. Rather, what subsection (9) envisages is a value derived on the basis of any one of the other valuation methods, flexibly applied or a suitable blending of elements from two or more of the other valuation methods, again applied flexibly. The fall-back method as contained in subsection (9), therefore, envisages the application of a method that must recognizably be referable back to any one of the other valuation methods or to a combination of the elements of two or more of them. The Second point to be noted with regard to the basic framework is that it ties subsection (9) much more closely and strictly to the other valuation methods than does Article 7 of the WTO Valuation Agreement. The latter allows the use of "reasonable" means, which are required only to be "consistent" with the "principles" and "general provisions" of the Valuation Agreement and also of Article VII of GATT, 1994. Thus, Article 7 allows for greater latitude and may possibly make permissible a larger departure from the other valuation methods. This, however, is not permissible under subsection (9). It is more rigidly structured. Rather than leaving the matter rather open-ended, for the value to be determined by customs authorities essentially at their discretion under loosely worded guidelines (as would have been the case had the language of Article 7 been used), the legislature has chosen to draw the boundaries more tightly. The requirement is not of reasonableness or of consistency with principles and provisions generally. The procedure or method to be followed is laid down with much greater specificity and expressly tied to the other valuation methods.

The reference to "subsection (4) of section 25" in Rule 110(iv) of Customs Rules, 2001 is actually a typographical error; the reference ought to have been to subsection (14), which however was omitted by the Finance Act, 2005. Thus, it is permissible, without exception, to establish minimum values. Secondly, Rules 110 clearly states that if the value cannot be determined in accordance with the valuation methods laid down in subsections (1), (5), (6), (7) and (8) (i.e. resort must be had to the fall-back method under subsection (9), then the import data available with the Department must be used. Thirdly, sub-rule (1) of Rule 121 required that "to the maximum extent", values under sub-section (9) must be based on "previously determined customs values of identical goods assessed within ninety days". Lastly, the work "may" as used in sub-rule (2) of Rule 121 must be understood and applied contextually. The work "may" is to be understood in the context of the basic framework provided by the legislature for purposes of sub-section (9). It certainly does not, and cannot, be regarded as conferring a discretion on the customs authorities to abandon the other valuation methods altogether.

The forgoing Rules are not, sensu stricto, applicable to section 25-A. However, the manner in which that section interacts with the various subsection of section 25 means that whenever a valuation ruling is to be issued under section 25-A with reference to the fall-back method, the concerned authority is duty bound also to keep in mind and take into consideration the relevant Rules. The valuation rule must be issued in a manner that is not inconsistent with the Rules.

Section 25-A confers a statutory power on the concerned authority. That power must be lawfully exercised. If it is not, then it is no answer to the importer's case that he brought in his goods by accepting the value given in the ruling. To hold otherwise would, e.g., make it permissible for the concerned authority to issue a valuation ruling on the basis of an understanding or agreement with one or more concerned importers or an association or other trade body. Such a ruling would be unlawful as it would in negation of the mandate of law.

It would not be open for the Department to apply a ruling issued in a manner contrary to law.

Sadia Jabbar and others v. Federation of Pakistan and others 2012 SCMR 617; 2012 PTD 898 and Ayesha Impex v. Federation of Pakistan 2012 PTD 1 ref.

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

----Ss. 25(9) & 25-A---Customs Rules, 2001, Rr. 110 & 121---Constitution of Pakistan, Art. 199---Constitutional petition---Imported goods---Issuance of Valuation Ruling by authority on basis of market survey of prices of such goods---Department's objection that such petition was not maintainable as petitioner had not availed alternate statutory remedies---Validity---Questions raised in such petition were of general importance and determination thereof would necessarily be an extension of analysis and discussion in earlier judgment of High Court, which was itself of general application---Conclusions and observations to be made by High Court in such petition would apply to all manner of imports and valuation rulings issued or to be issued in future---High Court repelled such objection in circumstances.

Ammar Yasar for Petitioner.

S. Mohsin Imam along with Ilyas Ahsan, Departmental representative for Respondents.

Date of hearing: 11th September, 2013.

2014 P T D 225

[Sindh]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

IMRAN AHMED

Versus

FEDERATION OF PAKISTAN through Ministry of Law and 3 others

Constitutional Petition No. D-2342 of 2013, decided on 25th October, 2013.

(a) Constitution of Pakistan---

----Arts.73, 184, 199 & Fourth Schedule, Entry No. 47---Imposition of taxes---Judicial review---Principles---Legislature has vast powers to levy and impose tax on income of persons, pursuant to Entry No.47 of Federal Legislative List of Fourth Schedule to the Constitution and to prescribe tax rates thereon by introducing Bill in terms of Art. 73 of the Constitution---Such legislation has to undergo test of Constitutional constraints---Legislative competence of imposing taxes is also subject to scrutiny by High Court under Art. 199 of the Constitution and by Supreme Court under Art. 184 of the Constitution, particularly if a levy or enactment has been challenged for being discriminatory, confiscatory or violative of fundamental rights as guaranteed under the Constitution---Concept of absolute authority to impose tax by rulers on their subjects, without having any representation of people in such legislation, is no more available under the Modern Democratic System of Governments, which are run by elected representatives of people under their respective Constitutions---Unbridled powers and authority to impose tax arbitrarily, without having any rationale or reasonableness, is now being regulated under Constitutional restraints, whereby taxes are to be imposed reasonably, without discrimination and in such manner that those may not encroach upon fundamental rights of a person as guaranteed under the Constitution.

The Wealth of Nations (1776) rel.

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

----Ss.4, 149 & First Schedule, Serial Nos.4, 5, 6 of Clause 1-A, Division-1, Part-1 [as amended by Finance Act (XVII of 2012)]---Constitution of Pakistan, Art.199---Constitutional petition---Taxable salary---Rates of tax---Refund of tax---Petitioner was salaried person who was an income tax assessee and his grievance was that table "B" inserted through Finance Act, 2012, in Cl. (1A) of Division-1 of Part-1 of First Schedule to Income Tax Ordinance, 2001, was illegal and ultra vires of the Constitution---Validity---Amount of tax as calculated under slabs of taxable income at Serial Nos.4, 5 and 6 of table "B" was without any conscious application of mind, which lacked certainty of charge and was devoid of any rational basis and had resulted in creation of additional burden of tax upon a particular group of salaried individuals without legal sanction---Such anomaly in tax calculation for salaried individuals neither existed for earlier tax years, whereas by Finance Act, 2013, it had been rectified for the tax year 2014 in similar set pattern of tax calculation on the basis of continued gradual increase of tax rate---Table inserted by Finance Act, 2012, for the tax year, 2013, in respect of rates of tax for salaried individuals with particular reference to amount of tax calculated under slabs of income at Serial Nos. 4, 5 & 6 of table "B" was ultra vires of the Constitution, Income Tax Ordinance, 2001, and also inconsistent with slabs of taxable income of table "B" itself, hence of no legal effect---High Court directed the authorities to issue refund of tax to all salaried individuals whose tax had been withheld and deposited in treasury pursuant to incorrect amount of tax as prescribed under table "B", which was introduced by Finance Act, 2012---Petition was allowed accordingly.

Bindra's Interpretation of Statutes 2012 Edition at P. 1282 ref.

Naveed A. Andrabi, Anwar Kashif Mumtaz, Ammar Athar Saeed and M. Usman Alam, for Petitioners.

Amjad Javaid Hashmi for Respondents.

Shaikh Liaquat Hussain, Standing Counsel.

2014 P T D 284

[Sindh High Court]

Before Munib Akhtar and Mrs. Ashraf Jahan, JJ

Messrs CITIBANK NA

Versus

COMMISSIONER INLAND REVENUE and another

Federal Excise Reference Application No.D-152 of 2012, decided on 30th October, 2013.

(a) Federal Excise Act (VII of 2005)---

----Ss. 2(16a)(23), 3, 16(1) & First Sched. Table-II, Entry No.8---Customs Act (IV of 1969), First Sched. Heading No. 98.13---Services provided by Financial Institutions i.e. transactions of insurance commission---Liability to pay excise duty on such transaction for period from January to June 2007---Validity---Services specified only in First Sched. of Federal Excise Act, 2005 would be liable to excise duty, while all other unspecified services, though falling within ambit of S.2(23) thereof, would be exempt from excise duty---Such transaction would not be liable to excise duty for not having been mentioned in twelve services listed in Entry-8 of First Sched. of Federal Excise Act, 2005.

(b) Federal Excise Act (VII of 2005)---

----Ss. 2(16a)(23), 3, 16(1) & First Sched. Table-II, Entry No. 8---Customs Act (IV of 1969), First Sched. Heading No. 98.13---Services provided by Bank i.e. merchant discounts on use of credit-card by its holder---Liability to pay excise duty on such services for period from January to June 2007---Validity---Services only specified in First Sched. of Federal Excise Act, 2005 would be liable to excise duty, while all other unspecified services, though falling within ambit of S.2(23) thereof, would be exempt from excise duty---Period from January to June, 2007 had nothing to do with "non-fund banking services"---Merchant discount, thus, paid by retailers to Bank could not be regarded as services of "credit card….. processing".

(c) Federal Excise Act (VII of 2005)---

----Ss. 2(16a)(23), 3, 16(1) & First Sched. Table-II, Entry No. 8--Services provided by Bank i.e. merchant discounts on use of credit-card by its holder---Liability to pay excise duty on such services for period from July, 2007 to December, 2008---Validity---Service No. 11 listed in Entry 8 of First Sched. of Federal Excise Act, 2005 related to "credit and debit card issuance, processing and renewal"---Credit card "processing" would apply only in relation to credit card and/or its holder, but would not apply in relation to commission earned by Bank from retailers for having kept credit card machines at its business place---Objective sought to be achieved by Bank for keeping credit card machine was to enhance sales of merchant on account of credit card sales---Retailers were paying for privilege of having such machine by Bank---Bank would, thus, not be liable to pay excise duty in respect of such "merchant discount".

(d) Interpretation of statutes---

----Fiscal statutes---Charging provision would be applied as same stood, and there would be no intendment or equity regarding thereto.

(e) Interpretation of statutes---

----Fiscal statutes---Two reasonable interpretations of a provision being possible---Effect---Interpretation favoring taxpayer would be adopted in such case.

(f) Federal Excise Act (VII of 2005)---

----Ss. 2(16a)(23), 3, 16(1) & First Sched. Table-II, Entry No.8---State Bank of Pakistan Circular Letter No.21/EPP-1(96) Poly-2000 dated 28-7-2000---State Bank of Pakistan Foreign Exchange Circular No.40 dated 29-11-2000---Services provided by Bank in respect of speedy cash home remittances received in Pakistan from abroad---Liability of Bank to pay excise duty on such services---Validity---Bank for such remittances had not charged anything from remitters, but had received amount from State Bank in pursuance of its directives contained in Circular Letter No. 21/EPP-1(96)poly2000, dated 28-7-2000 read with Foreign Exchange Circular Letter No. 40, dated 29-11-2000---Such amount received from State Bank could be shared between Bank and its foreign originator of remittances as per agreement between them--Purpose of such Scheme of State Bank was to encourage remittances through official banking channels in order to increase its foreign currency reserves, thus, reimbursement of expenses of such remittances to Bank by State Bank could not be regarded as "charges" for purposes of Entry-8 of First Sched. of Federal Excise Act, 2005---Bank, in such circumstances would not be liable to pay excise duty in respect of such services---Principles.

Arshad Siraj for Applicant.

S. Mohsin Imam for Respondents.

2014 P T D 339

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Sadiq Hussain Bhatti, JJ

Messrs KURDISTAN TRADING COMPANY (Partnership, firm) through Authorized Attorney

Versus

COMMISSIONER INLAND REVENUE

I.T.R.A. No.411 of 2010, decided on 15th August, 2013.

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

----Ss. 34(5)(5A), 70, 114, 118, 120(1), 122(9) & Second Sched., Part-IV, Cl. (3A)---BPD Circular 29 of 2002 dated 15-10-2002---Income from mark-up declared in return---Exemption claimed on such income vide State Bank Banking Policy Department Circular No. 29 of 2002, dated 15-10-2002---Such exemption declined under S. 70 of Income Tax Ordinance, 2001 while treated and taxed mark-up as income from business---Plea of taxpayer was that return filed on 15-10-2004 was pending, when Cl. (3A) of Part-IV of Second Sched. of the Ordinance was inserted by Finance Act, 2004 from July, 2004 onwards, thus, he was entitled to benefit of Cl. (3A)---Validity---Taxpayer was required to file return of his total income for tax year 2004 by 30-9-2004, but after seeking extention, he filed same on 15-10-2004---Deemed assessment under of S. 120(1) of the Ordinance, would come into existence on date of filing of return of income in terms of S. 114 read with S. 118 thereof---Assessment for tax year 2004 in case of taxpayer was pending when Cl. (3A) was inserted in Part-IV of Second Sched. of the Ordinance, provisions whereof being remedial and beneficial giving relief to taxpayer by excluding benefit derived by way of waiver of profit and debt or debt itself from chargeability of tax---Legislature while inserting Cl. (3A) in Part-IV of Second Sched. of Income Tax Ordinance, 2001 had extended its benefit retrospectively by referring to BPD Circular No. 29 of 2002, dated 15-10-2002---Accounts for taxpayer for tax year 2004 were closed by 30-6-2004, but assessment, which included calculation, computation, application of tax rates and exemption etc., if any, was not finalized in terms of S.120(1) of the Ordinance---Taxpayer was, entitled to benefit of Cl. (3A), in circumstances.

CIT Karachi v. BRR Investment (Pvt.) Ltd., Karachi 2011 PTD 2148; Commissioner of Income Tax v. Shahnawaz and others 1993 SCMR 73 and Commissioner of Income Tax v. Humayun Elahi Shaikh 2011 PTD 145 ref.

(b) Interpretation of statutes---

----Fiscal statute, amendments in --- Applicability---Scope.

Normally amendments introduced in fiscal statute through Finance Act apply prospectively in the year in which it has been inserted, unless some retrospective effect has been given by the legislature.

In cases where the amendment introduced is remedial and beneficial in nature, it has to be given retrospective effect and also to apply to all pending cases on the date of amendment/enactment as well, unless some prospective effect is given by the legislature or it is made prospective by its implication.

Unless and until any amendment introduced by Finance Act, creating any charge or additional burden upon a taxpayer is given retrospective effect by express words by the legislature, it cannot be applied retrospectively to the disadvantage of the taxpayer.

Aminuddin Ansari for Applicant.

Amjad Jawaid Hashmi for Respondent.

2014 P T D 370

[Sindh High Court]

Before Munib Akhtar and Mrs. Ashraf Jahan, JJ

Messrs AL AMNA INTERNATIONAL through Proprietor and others

Versus

FEDERATION OF PAKISTAN through Secretary/ Chairman, Federal Board of Revenue and others

Constitutional Petitions. Nos.D-1249, D-1456, D-1715, D-1817, and Miscellaneous No.19487, 10059, 88870 of 2013, decided on 21st October, 2013.

(a) Constitution of Pakistan---

----Art. 199---Constitutional petition---Alternate statutory remedy against impugned order, availability of---Effect---Constitutional petition in such situation would not be maintainable---Principles.

Article 199 of the Constitution reveals that it is an extraordinary jurisdiction, which can be availed only when no alternate remedy is provided under the law. By this time it is the established legal position that constitutional petition is not maintainable in presence of statutory remedy provided under the relevant law. To invoke the constitutional jurisdiction, condition precedent is non-availability of equally efficacious alternate remedy.

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

----Sixth Sched. Table-1, Sr. No. 15---Customs Act (IV of 1969), Ss.33, 79, 80, 179 & 193---Constitution of Pakistan, Art. 199 --Constitutional petition---Tinned/bottled or canned fruits, import of---Importer got such goods released without payment of sales tax by wrongly claiming exemption under Sr. No. 15 of Table-I to Sixth Sched., of Sales Tax Act, 1990---Issuance of contravention report to importer for initiating against him adjudication process---Validity---Non-availability of equally efficacious alternate remedy would be condition precedent for invoking constitutional jurisdiction---Petitioner could challenge such action of customs authorities in appeal before Appellate Authority under S. 193 of Customs Act, 1969, but he had neither availed such remedy nor offered any justification therefor---Exemption of sales tax under Column No.(2) of Sr. No.15 of Table-1 of Sixth Sched., of Sales Tax Act, 1990 would be available to edible fruits excluding imported fruits with exception of fruits imported from Afghanistan either fresh, frozen or preserved---No such exemption would be available to tinned/bottled or canned fruits---High Court dismissed constitutional petition for being not maintainable in circumstances.

Ziaul Hassan for Petitioner.

S. Mohsin Imam Wasti D.A.G. for Respondent.

Zain A. Jatoi for Respondents Nos.2 and 3.

Kashif Nazeer for Respondents Nos. 4 and 5.

2014 P T D 438

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

Messrs SALMAN TIN MERCHANT, KARACHI

Versus

COLLECTOR OF CUSTOMS, KARACHI

Special Customs R.As. Nos.117 to 121 of 2010, decided on 29th November, 2013.

Customs Act (IV of 1969)---

----Ss.80 & 81---Import of Silicon Steel Sheets secondary quality---Release of such goods after making provisional assessment on submission of postdated cheque for difference of duty/taxes while sending its samples by Authority to laboratory for confirmation of its physical description---Issuance of laboratory report on 8-3-2007 and issuance of show-cause notice on 16-11-2007 to importer by Authority---Validity---Authority had retained postdated cheque subject to finalization of provisional assessment---Had impugned assessment been made under S. 80 of Customs Act, 1969, then Authority would have not demanded postdated cheque nor would have been justified to send such samples for verification of its physical description---Impugned assessment had been done under S. 81, but not under S. 80 of the Act----Authority was required to finalize assessment within six months from date of provisional assessment after having received laboratory report within such time---Authority had issued show-cause notice after period of six months without finalizing initial assessment---Provisional assessment made on basis of goods declaration made by importer in such circumstances had attained finality---Importer was entitled to release or discharge of postdated cheque issued by it.

Messrs Hassan Trading Company v. Central Board of Revenue, Government of Pakistan, Islamabad and others 2004 PTD 1979; Messrs Dewan Farooque Motors Ltd., Karachi v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi and others 2006 PTD 1276; Sus Motors (Pvt.) Ltd., Karachi v. Federation of Pakistan and others 2011 PTD 235 and Collector of Customs (Appraisement), Karachi v. Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116 rel.

Sattar Silat for Applicant.

Ghulam Haider Shaikh for Respondent.

2014 P T D 465

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

Messrs BILAL INTERNATIONAL through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division/Chairman and 3 others

Constitutional Petition No.D-4268 of 2013, decided on 19th December, 2013.

Customs Act (IV of 1969)---

---S.80---Import Policy Order, 2013---Constitution of Pakistan, Art.199--Constitutional petition---Factual controversy---Goods declaration---Scrutiny---Importer was aggrieved by customs examination report as his goods declaration was selected for security---Plea raised by importer was that old and used rubber conveyor belts were exempted from import duty---Validity---Question raised by importer could not be decided as it involved a factual controversy, which High Court could not look into in its Constitutional jurisdiction---Question that as to whether goods in question were for "ground handling equipment" or not was to be determined by Adjudicating Collectorate and before such factual determination was done, question of interpreting applicability of restricted list of Import Policy Order, 2013, could not be decided---Petition was dismissed in circumstances.

Iqbal Hussain v. Federation of Pakistan 2010 PTD 2338; Commissioner of Income Tax v. Messrs Eli-Lilly Pakistan Private Ltd., 2009 PTD 1392; Collector of Customs, Custom House Lahore v. S. M. Ahmed and Co (Pvt.) Limited, 1999 SCMR 138 and Kamran Industries v. Collector of Customs (Exports) PLD 1996 Kar. 68 distinguished.

Commissioner of Income Tax, Companies-II and another v. Hamdard Dawakhana (WAQF), Karachi PLD 1992 SC 847; The Commissioner of Income Tax, Karachi and 2 others v. Messrs N.V. Philip's Gloeilampenfabriaken PLD 1993 SC 434; Messrs Bulk Shipping and Trading (Pvt.) Ltd., v. Collector of Customs and others 2004 PTD 509; Arshad Hussain v. Collector of Customs and 2 others 2010 PTD 104; BP Pakistan Exploration and Production Inc., Karachi v. Additional Commissioner, Inland Revenue-B Enforcement and Collection Division-I, Karachi and another 2011 PTD 647 and Messrs Pak Saudi Fertilizers Ltd., v. Federation of Pakistan 2002 PTD 679 ref.

Faisal Rasheed Ghouri for Petitioner.

Saeed A. Memon Standing Counsel.

Kashif Nazeer for Respondents Nos. 2 to 4.

Date of hearing: 27th November, 2013.

2014 P T D 498

[Sindh High Court]

Before Munib Akhtar and Mrs. Ashraf Jahan, JJ

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE APPEAL, KARACHI

Versus

Messrs NIZAM IMPEX (PVT.) LTD.

Special Sales Tax Reference Applications Nos. 36 and 37 of 2007, decided on 23rd September, 2013.

Sales Tax Act (VII of 1990)---

----S.34---Imposition of penalty of additional tax---Scope---Provision of S.34 of Sales Tax Act, 1990 not mandatory, but discretionary---Deliberate non-payment or evasion of sales tax would attract provisions of S.34 of Sales Tax Act, 1990, but not otherwise.

D.G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others 2004 SCMR 456; Messrs Lone China (Pvt.) Ltd. v. Additional Secretary, Government of Pakistan PTCL 1995 CL 415 and Additional Collector Sales Tax Collectorate of Sales Tax Multan v. Messrs Nestle Milk Pak Ltd. Kabirwala and another 2005 PTD 1850 ref.

Dilharram Shaheen for Appellant.

Abdul Sattar Silat for Respondent.

Date of hearing: 6th September, 2013.

2014 P T D 535

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

COLLECTOR OF CUSTOMS

Versus

WATER AND POWER DEVELOPMENT AUTHORITY (WAPDA) through Chief Residence Representative

Special Customs Reference Application No.149 of 2010, decided on 19th December, 2013.

Customs Act (IV of 1969)---

----Ss.33 & 196---Notification S.R.O. 462(I)/1995, dated 4-6-1995---Refund---Customs Reference---Customs Authorities assailed order passed by Customs, Excise and Sales Tax Appellate Tribunal, whereby appeal filed by importer was allowed---Validity---Provisions of S. 33 of Customs Act, 1969, were only applicable when duty and charges were paid through inadvertence, error or misconstruction---Importer claimed exemption from duty and taxes at the very outset at the time of filing of goods declaration and the same was denied by authorities, thus no inadvertence, error or misconstruction was involved---Owing to persistent efforts on the part of importer, certain refund claims were settled in its favour, which also included three time barred claims---Case of authorities was not governed by the provisions of S. 33 of Customs Act, 1969, as neither there was any inadvertence nor error or misconstruction on the part of importer in claiming refunds from authorities---Importer had claimed exemption under S.R.O. 462(I)/ 1995, dated 4-6-1995, from the day one and the same had been denied by authorities but subsequently it was granted by sanctioning 12 claims including 3 time barred claims vide letter dated 12-11-1998---Question of grant of exemption on merits of the case was never in dispute, once Central Board of Revenue had categorically decided issue in favour of importer---Reference was dismissed in circumstances.

Pakistan Telecommunications Corporation v. Federation of Pakistan 2011 PTD 2175; Ghulam Abbas v. C.B.R. 1994 CLC 1612; Messrs Century Insurance Co. v. CBR and others 1993 SCMR 1232 and Pfizer Laboratories Ltd. v. Federation of Pakistan PLD 1998 SC 64 ref.

Muhammad Sarfaraz Ali Metlo for Applicant.

Badar Alam for Respondent.

Date of hearing: 21st November, 2013.

2014 P T D 582

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

AMIR SIDDIQUI

Versus

FEDERATION OF PAKISTAN and 3 others

Constitutional Petitions Nos.D-5183 and D-5184 of 2013, decided on 10th January, 2014.

Customs Act (IV of 1969)---

----Ss.186 & 202---Constitution of Pakistan, Art. 199---Constitutional petition---Detention of goods---Pendency of inquiry---Change of address---User identity, cancellation/blocking of---Petitioner was importer of goods from abroad who had dispute with customs authorities over one consignment and pending inquiry, authorities had also detained other consignments of the importer and blocked his user's identity---Validity---Authorities could detain such goods, in respect of which inquiry or investigation was pending and not the goods which had been or were being imported by a person---Subsequent imported goods belonging to same owner could only be detained once a fine or penalty had allegedly been imposed in respect of any other goods and the same remained unpaid---All subsequent imports could not be detained or withheld clearance on the premise that some inquiry or investigation was pending in respect of some other goods---Such action was not permitted under S. 186 of Customs Act, 1969---Authorities were only authorized to take action for issuance of a detention notice in terms of S. 202 of Customs Act, 1969, once the amount alleged to have been evaded was finally adjudicated and decided against a person---Procedure and mechanism provided in terms of S. 202 of Customs Act, 1969, was entirely independent of any action taken in terms of S. 186 of Customs Act, 1969---Change of address of importer was no ground for detention of goods, as change of addresses were not updated in record of Federal Board of Revenue due to a very difficult and cumbersome procedure---No notice for cancellation of user-ID or blocking name of importer was issued and all duties and taxes had been collected from importer despite the fact that allegedly his address was not correct---Consignments in question were unlawfully detained as provisions of S. 186 of Customs Act, 1969, did not empower the authorities to do so---Petition was allowed accordingly.

Syed Muhammad Razi v. Collector of Customs, (Appraisement) Karachi 2003 PTD 2821 ref.

Zain A. Jatoi for Petitioner.

S. Mohsin Imam Wasti D.A.G. for Respondent No.1.

Ms. Masooda Siraj for Respondent No.2.

Kashif Nazeer for Respondents Nos. 3 and 4.

Date of hearing: 24th December, 2013.

2014 P T D 593

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Mrs. Ashraf Jahan, JJ

COMMISSIONER INLAND REVENUE, ZONE-I, RTO, KARACHI

Versus

Messrs ALLIED RENTAL MODARABA

I.T.R.As. Nos. 23, 24 and 25 of 2013, decided on 11th December, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5A), 133 (1) & Second Sched., Part-I, Cl. (100)---Reference to High Court---Scope---Nature of business, determination of---Trading receipts---Concurrent findings of fact by two forums below---Controversy related to receipts which were earned by assessee on account of operational and maintenance of generators' service provided by it to its customers, without being involved into any trading activity---Neither there was any sale transaction involved nor any goods or property was transferred by assessee to its customers---Validity---Authorities did not assign any reason while treating the receipts earned from operation and maintenance of generators' services as trading activity and his order was based on mere presumption and mis-interpretation of a decision which did not relate to subject controversy---Finality was attached to all judicial and quasi-judicial orders and unless all conditions which might be provided under law to recall, amend and modify such order, such order could not be recalled, amended or modified on mere presumption or by merely given a different interpretation to facts of the case---Controversy was decided by recording concurrent finding on facts of the case and the same could not be interfered with by High Court while exercising its reference jurisdiction under S. 133(1) of Income Tax Ordinance, 2001, unless such concurrent finding on facts was perverse or some grave illegality had been pointed out---Authorities failed to point out any such error or illegality in order passed by Appellate Tribunal, which otherwise depicted correct factual and legal position and did not require any interference by High Court in its reference jurisdiction, as the same was limited only to the extent of deciding question of law which could arise from the order passed by Appellate Tribunal---Reference was dismissed in circumstances.

Messrs Tanveer Textile Mills Ltd. v. Commissioner of Income Tax, Central Zone 'C', Karachi 1989 PTD 1137 distinguished.

Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income-Tax, South Zone, Karachi 1982 SCMR 489 and Messrs Japan Storage Battery v. Commissioner of Income Tax 2003 PTD 2849 rel.

Amjad Javaid Hashmi for Applicant.

Arif Muhammad Khan and Riazuddin for Respondent.

Date of hearing: 11th December, 2013.

2014 P T D 612

[Sindh High Court]

Before Sadiq Hussain Bhatti, J

Chaudari SHABBIR HUSSAIN

Versus

The STATE

Special Criminal Bail Application No.17 of 2013, decided on 11th November, 2013.

Sales Tax Act (VII of 1990)---

----Ss.2(37), 3, 6, 7, 8, 22, 23, 26, 33, 34, 37-A & 73---S.R.O. 1125(I)/2011, dated 31-12-2011---Criminal Procedure Code (V of 1898), S.497---Tax fraud---Bail, grant of---Accused was alleged to have been engaged in tax fraud by facilitating different manufacturers/ importers of textile related items by misusing provisions of S.R.O. 1125(I)/2011, dated 31-12-2011---Validity---Company of accused was not genuine taxpayer and not doing business in textile industry but on the basis of paper transactions had facilitated textile manufacturers to evade tax liabilities by declaring zero-rated supplies under S.R.O. 1125(I)/2011, dated 31-12-2011, while the same were chargeable at 5%---Returns filed by the company of accused showed unlawful adjustment of input tax/refund against invoices of those units/importers who were engaged in import of steel, in such a manner accused caused huge loss of millions of Rupees to national exchequer---Bail was refused, in circumstances.

Black's Law Dictionary; Legal Terms and Phrases 2013 Edition by M. Ilyas Khan; Khawaja Shahbaz Ahmed v. Deputy Director, Directorate General of Intelligence and Investigation, Range Officer, Gujranwala and another 2012 PTD 1361; GMH Traders and Manufacturers v. Deputy Director/Investigating Officer, Directorate of Intelligence and Investigation, Lahore 2009 PTD 1894; Zaheer Hussain v. The State PLD 2006 Kar. 397 and Imtiaz Ahmed v. The State PLD 1997 SC 545 ref.

Muhammad Kokab Sabahuddin for Applicant.

S. Mohsin Imam for Federal Board of Revenue.

Dilawar Hussain, Standing Counsel.

Saeed Khan, Investigating Officer and Muhammad Azam Nafees ROA/DR, Directorate of ISI/IB, Karachi. present.

2014 P T D 644

[Sindh High Court]

Before Syed Hassan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

COLLECTOR OF CUSTOMS, KARACHI

Versus

Messrs FAISAL ENTERPRISES, KARACHI

Special Customs Reference Application No.69 of 2010, decided on 3rd January, 2014.

Customs Act (IV of 1969)---

----Ss. 25, 27 & 196---Transactional value---Deteriorated goods---Assessment of goods was assailed by authorities on the ground that transactional value should have been applied---Validity---Assessment of goods at the time of ex-bonding was not made on transactional value of goods but at the rate which was less than the declared transactional value of importer, though not substantially---Assessment was made on the basis of an agreed value between Pakistan Iron and Steel Merchants Association and Customs Authorities for the period in question---After making assessment of goods on the basis of ascertained value, the authorities subsequently could not plead that assessment ought to have been made on the basis of transactional value of the goods---Customs authorities at the very first instance accepted plea of importer that goods which were not in accordance with the contract, were liable to be assessed in terms of S. 25(5) of Customs Act, 1969, on the basis of values of identical goods and not in terms, of S. 25(1) of Customs Act, 1969, on the basis of transactional value of the goods---High Court declined to interfere in the order passed by Customs, Excise and Sales Tax Appellate Tribunal---Reference was dismissed in circumstances.

Messrs Flying Board and Paper Products v. Deputy Collector, Customs 2006 SCMR 864 distinguished.

Shakeel Ahmed for Applicant.

Haider Waheed for Respondent.

Date of hearing: 4th December, 2013.

2014 P T D 661

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

Messrs PAK AFGHAN CARGO SERVICE (PVT.) LTD. through Director, Versus

DEPUTY COLLECTOR OF CUSTOMS and 5 others

Constitutional Petition No.D-4031 of 2013, decided on 9th December, 2013.

Customs Act (IV of 1969)---

----S.13(4)---Customs Agents (Licensing) Rules, 1971, R.21---Customs Rules, 2001, Rr. 102(4), 599, 638, 639 & 641---Constitution of Pakistan, Art. 199---Constitutional petition---Afghan-Pakistan Transit Trade---User ID, blocking of by customs authorities---Petitioner company was holding license to act as customs bonded carrier/transport operator for Afghan Transit Trade---Grievance of petitioner was that customs authorities had blocked its user ID resulting in suspending its business---Validity---Rules governing issuance of license to transport operators did not provide for any action of suspension of license pending any action under Customs Rules, 2001, or Customs Act, 1969, against such licensees, as were available in S. 13(4) of Customs Act, 1969, as well as in R. 21 of Customs Agents (Licensing) Rules, 1971, and R. 102(4), Chapter VIII, of Customs Rules, 2001---Despite such license of petitioner was blocked/suspended, even in Customs Act, 1969, there was no provision of blocking a person's name or registration number or it's user ID---High Court did not appreciate blocking of name or user ID of a person in computer, and observed that there was no provision under Customs Act, 1969, or Customs Rules, 2001, and department must have acted strictly in accordance with law and procedure while dealing with such sensitive issue---Authorities did not have any lawful authority to suspend/block operations of petitioner as a transport company to handle Afghan Transit Goods---High Court directed the authorities to restore license and allow petitioner to conduct its business operations as a transport operator duly registered under Rr. 638 & 639 of Customs Rules, 2001---Petition was allowed accordingly.

Messrs K.G. Traders and another v. Deputy Collector of Customs and 4 others PLD 1997 Kar. 541; Japan Shipper v. Deputy Collector of Customs (Appraisement) and another 1989 CLC 74; Saman Diplomatic Duty Free Bonded Warehouse v. Central Board of Revenue and others PLD 1999 Kar. 170 and Messrs A.H. International (Pvt.) Ltd. Karachi v. Assistant Collector of Customs and 3 others 2003 PTD 2798 ref.

Shakeel Ahmed for Petitioner.

Ms. Masooda Siraj along with Kausar Hussain for Respondents.

Saeed Ahmed Memon, Standing Counsel on behalf of Federation of Pakistan.

Dates of hearing: 6th and 7th November, 2013.

2014 P T D 742

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

Messrs SALMAN TIN MERCHANT

Versus

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE, KARACHI

Special Custom Reference Applications Nos.117 to 121 of 2010, decided on 29th November, 2013.

Customs Act (IV of 1969)---

----Ss.32, 81 & 196---Provisional assessment, finalization of---Limitation---Importer assailed notice of final assessment which was issued 12 months after provisional assessment---Validity---Assessment was required to be finalized within a period of six months from the date of provisional assessment and even though customs authorities had received test report within the period of such limitation---Authorities failed to either issue show-cause notice or finalize provisional assessment as required under the law within stipulated period and the same was issued after expiry of such limitation---Initial assessment was made under S. 81 of Customs Act, 1969, but was not finalized within the stipulated period as required under S.81(2) of Customs Act, 1969---Provisional assessment made on the basis of declaration made by importer had attained finality---Importer was entitled for release/ discharge of postdated cheques submitted/deposited at the time of such provisional assessment---High Court modified order passed by Customs Appellate Tribunal---Reference was disposed of accordingly.

Messrs Hassan Trading Company v. Central Board of Revenue, Government of Pakistan, Islamabad and others 2004 PTD 1979; Messrs Dewan Farooque Motors Ltd., Karachi v. Customs, Excise and Sales Tax Appellate Tribunal, Karachi and others 2006 PTD 1276; Sus Motors (Pvt.) Ltd., Karachi v. Federation of Pakistan and others 2011 PTD 235 and Collector of Customs (Appraisement), Karachi v. Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116 ref.

Sattar Silat for Applicant.

Ghulam Haider Shaikh for Respondent.

Date of hearing: 19th November, 2013.

2014 P T D 796

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

Messrs POWER LINKS

Versus

DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION, F.B.R. and another

Special Custom Reference Application No.122 of 2013, decided on 24th December, 2013.

Customs Act (IV of 1969)---

----Ss. 32(1)(2), 32-A & 196---Notification S.R.O. 575(I)/2006, dated 5-6-2006, Serial No. 35-A(6) of Table---Exemption from customs duty---Alternate Energy Development Board, certificate of---Goods in question were batteries imported for solar panels and other alternate resources of energy and authorities had imposed duty on them---Importer sought exemption from customs duties and other taxes under Serial No. 35-A(6) to the table of S.R.O. 575(I)/2006, dated 5-6-2006---Validity---In serial No. 35-A (6) to the Table of S.R.O. 575(I)/2006, dated 5-6-2006, clarifications issued by Cabinet Division dated 4-4-2012, and by Federal Board of Revenue dated 12-4-2012, held the field and could not be brushed aside---Exemption on import of batteries and other equipment mentioned in Serial No. 35-A (6) to the Table of S.R.O. 575(I)/2006, dated 5-6-2006, could not be denied merely on the ground that the same had been imported separately and not with PV Modules---Clarification of Alternate Energy Development Board was issued in favour of importer whereby it had been clarified that items in question were not being manufactured locally and equipment was for dedicated use for solar energy purposes and was not to be re-exported and diverted to other uses---Shipment in question was entitled for exemption from customs duty and sales tax according to Serial No.35-A(6) to the Table of S.R.O. 575(I)/2006, dated 5-6-2006---High Court set aside order passed by Appellate Tribunal and all questions were answered in favour of importer and against the authorities---Reference was allowed in circumstances.

Moro Textile Mills Ltd. v. Central Board of Revenue 2007 PTD 60; D.G. Khan Cement Company Limited v. Deputy Collector of Customs 2003 PTD 986; Collector of Customs v. Fauji Fertilizer Co. Ltd. 2005 PTD 2178; Filters Pakistan (Pvt.) Ltd. v. Federal Board of Revenue 2010 PTD 2036; Shaikh Rashid Ahmed v. Assistant Collector, 2006 PTD 1207; Pakland Cement Limited v. Collector of Customs and C.E, 2008 PTD 406; Alm Traders v. Collector of Customs and others, 2008 PTD 362; Hashwani Hotels Ltd. v. Government of Pakistan 2004 PTD 901 and The Collector of Customs and Central Excise v. Rahim Din 1987 SCMR 1840 ref.

Muhammad Rafi Kamboh for Applicant.

Zain A. Jatoi for Respondent No.1.

Khalid Mahmood Dhoon for Respondent No.2.

Saeed Ahmed Memon Standing Counsel.

Ilys Ahsan, Departmental Representative of Respondent No.2 and Saud Hasan Khan, I.O. for Respondent No.1.

Date of hearing: 12th November, 2013.

2014 P T D 824

[Sindh High Court]

Before Nazar Akbar, J

WEAVE AND KNIT (PVT.) LTD.

Versus

FREIGHT SYSTEMS CO. LTD., L.L.C. through Country Manager and 3 others

Suit No.519 of 2008, decided on 28th January, 2014.

Customs Act (IV of 1969)---

----S. 217(2)---Civil Procedure Code (V of 1908), O. VII, R. 11---Interpretation of S. 217 of the Customs Act, 1969---Bar of S. 217 of the Customs Act, 1969---Scope---Suit for damages---Rejection of plaint---Plaintiff availed services of the defendants for shipping of consignments to its customers, and when certain consignments could not reach their destinations, plaintiff made complaint before Customs Authorities under provisions of the Customs Act, 1969, which were disposed of---Plaintiff subsequently filed, suit for damages against defendants---Contention of defendants was that the present suit was not maintainable, inter alia on the ground that it was barred under provisions of S. 217(2) of the Customs Act, 1969---Validity---Under S.217(2) of the Customs Act, 1969 a suit was barred only on "questions raised" before, and decided by the Customs Authorities---Bar contained in S. 217(2) of the Customs Act, 1969 did not include rights of a party to claim damages on account of losses sustained by it during course of business and litigation as well as future losses on accounts of loss of clients etc---Defendant had failed to show any order of Customs Authorities accepting or declining damages of the nature claimed by plaintiff in the suit nor were such claims raised by the plaintiff before the Customs Authorities---Bar of S. 217(2) of the Customs Act, 1969 was in respect of a challenge to orders passed by Customs Authorities whereby an assessment had been made, a tax had been levied or a penalty had been imposed under the provisions of the Customs Act, 1969; whereas the present suit was for damages on account of mental torture and stress due to cancellation of consignments sent by plaintiff to its customers---Plaintiff had not prayed for setting aside of any order or modification of any order of Customs Authorities---Suit of plaintiff was therefore, maintainable---Application under O.VII, R.11, C.P.C. for rejection of plaint was dismissed, in circumstances.

Messrs Rohi Ghee Industries (Pvt.) Ltd. v. Collector of Customs 2007 PTD 878; Mrs. Hashmi Nazar v. Sakhidad PLD 1973 Kar. (Note) 139; Messrs Dewan Scrap (Pvt.) Limited v. Customs, Central Excise and Sales Tax Appellate Tribunal 2003 PTD 2127; Syed Imtiaz H. Rizvi v. Abdul Wahab 2007 CLC 483; Ghous Bux v. Muhammad Suleman 2001 MLD 1159; Mst. Hajiani Khatija Bai v. Haji Dawood 2003 MLD 828; Muhammad Tufail v. Atta Shabir PLD 1977 SC 220; Punoo Khan v. Mst. Iqbal Begum 2012 MLD 1678; Muhammad Yasin Khan v. Azad Government of Jammu and Kashmir 1991 MLD 2295 and Mst. Sharifan Begum v. Muhammad Shahbaz 2000 CLC 63 distinguished.

Jehanzeb Awan for Plaintiff.

Usman Hadi for Defendants Nos. 1 and 2.

Rehan Aziz Malik for Defendant No.3.

2014 P T D 859

[Sindh High Court]

Before Syed Hassan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

Mrs. SURAYYA BEGUM through Attorney

Versus

DEPUTY COLLECTOR OF CUSTOMS and 2 others

Special Customs Reference Application No.90 of 2012, decided on 3rd January, 2014.

Customs Act (IV of 1969)---

----Ss. 32, 79, 80 & 196---Goods declaration---Assessment---Scrutiny of goods---Authorities after scrutiny declared that importer had mis-declared and goods were different from those mentioned in goods declaration---Assessing officer confiscated the goods and penalty was also imposed upon importer---Order-in-original was maintained by Collector (Appeals) as well as by Customs Appellate Tribunal---Validity---Importer in terms of S. 79(1) of Customs Act, 1969, was duty bound to file true declaration of goods, giving therein complete and correct particulars of such goods, duly supported by commercial invoice, bill of lading or airway bill, packing list or any other document required for clearance of such goods in such form and manner as prescribed---Format of goods declaration was already prescribed for such declaration by the Board---Importer was required to make complete and true declaration and if for some reason she was not sure about description of goods imported, there was no compulsion on importer to claim assessment of entire consignment against a particular serial number of valuation ruling---If importer was of the view that valuation ruling was not specifically clear and was ambiguous, then she was herself duty bound not to claim assessment against any specific serial number of ruling, which was only applicable in respect of specific goods---Order-in-original was correctly passed against importer and her act was fully covered under S. 32 of Customs Act, 1969---Questions raised in reference were answered against importer and in favour of authorities and order passed by Appellate Tribunal was maintained---Reference was dismissed in circumstances.

Collector of Customs v. Shaikh Shakeel Ahmed 2011 PTD 495 and Messrs Lever Brothers Pakistan v. Customs, Sales Tax and Excise Appellate Tribunal 2005 PTD 246 ref.

Muhammad Khalid Hayat for Applicant.

Kashif Nazeer for Respondents.

Date of hearing: 12th December, 2013.

2014 P T D 894

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

UMER FAROOQ

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 5 others

Constitutional Petition No.D-2899 of 2013, decided on 27th November, 2013.

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

----Ss.25 (15), 26, 32 & 131---Constitution of Pakistan, Art. 199---Constitutional petition---Mis-declaration---Exporting of goods---Customs authorities, powers of---Authorities detained goods of exporter on the allegation that shipment was undervalued and notice to initiate proceedings against the exporter were issued---Validity---No goods could be allowed to be loaded for exportation unless owner of goods had filed declaration in manner as prescribed by the Board; claim of duty drawback had been calculated and mentioned in Goods Declaration---If on filing of such Goods Declaration, Customs authorities were "satisfied" regarding correctness of particulars of export, which also included declaration in all respects, assessment and payment of taxes and other charges and verification of duty drawback claimed if any---Authorities could refuse exportation of goods until they were "satisfied" regarding correctness of declaration made by exporters, which also included assessment---Customs authorities had jurisdiction to satisfy themselves regarding correctness of assessment, including value of exported consignments in terms of S. 25 (15) read with S. 131 (1)(c) of Customs Act, 1969---No penal action in terms of S. 32 of Customs Act, 1969, could be initiated against exporter in case of its failure to agree with such determination, except refusal to allow shipment of consignment---High Court set aside notices under S. 26 of Customs Act, 1969, issued to exporter---Petition was allowed accordingly.

Union Sport Playing Cards Company v. Collector of Customs and another 2002 MLD 130; Assistant Director, Intelligence and Investigation, Karachi v. Messrs B.R. Herman and others PLD 1992 SC 485 and Messrs Kamran Industries v. The Collector of Customs (Exports) and others PLD 1996 Kar. 68 ref.

Toolsidass Jewraj v. Additional Collector of Customs and others AIR 1991 Supreme Court 1061 and Messrs Om Prakash Bhatia v. Commissioner of Customs, Delhi AIR 2003 SC 3581 distinguished.

Messrs Mehmood-Ul-Hassan v. The Additional Collector of Customs Customs Reference Application No.319 of 2012 rel.

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

----S.32---Untrue statement and errors etc.---Penal-consequences---Principle---If there is no loss of revenue or is not a case where any duty or charge has not been levied or short levied, then no notice can be issued in terms of S. 32 of Customs Act, 1969---No penal action can be initiated on such false or untrue declaration, which has not resulted in a short levy of duty or charge.

Messrs Al Hmad Edible Oil Mills Ltd. v. Collector of Customs 2003 PTD 552; Messrs A.R. Hosiery Works v. Collector of Customs Exports 2004 PTD 2977 and Collector of Customs Exports v. A.R. Hosiery Works 2007 PTD 2215 rel.

(c) Foreign Exchange Regulation Act (VII of 1947)---

----S.12---Payment for exported goods---Incorrect value of goods---Customs authorities--Jurisdiction---Customs authorities figure nowhere and it is only the State Bank of Pakistan and concerned bank and that too only to the extent of holding shipping documents---State Bank of Pakistan can raise objection in respect of consignment being exported and if the Bank feels that value declared in Form-E is not correct or true, then it can ask corresponding bank in Pakistan to withhold documents and that is all---No mechanism has been provided whereby any penal action can be initiated against such exporter nor it devolves or delegates any authority to Customs authorities to initiate any action in case of violation of provisions of S. 12(5) of Foreign Exchange Regulation Act, 1947.

Muhammad Kaukab Sabahuddin for Petitioner.

Kashif Nazeer, for Respondents Nos.2 to 6 along with Ilyas Ahsan, (Law Officer) and Saeed Ahmed Memon, Standing Counsel.

Dates of hearing: 29th and 31st October, 2013.

2014 P T D 951

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Mrs. Ashraf Jahan, JJ

COMMISSIONER INLAND REVENUE, ZONE-I, RTO, HYDERABAD

Versus

Messrs HYDERABAD ELECTRIC SUPPLY (HESCO), HYDERABAD

Income Tax Reference Application No.68 of 2012, decided on 4th December, 2013.

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

----Ss. 235(1), 235(2) & First Sched. (Part IV)---Interpretation of S.235 of the Income Tax Ordinance, 2001---Electricity consumption---Distinction between "electricity consumption bill" and the "gross electricity bill"---Question before the High Court was whether advance income tax was to be deducted on the electricity consumption charges only or on the gross amount of the electricity bill---Held, that distinction existed between "electricity consumption bill" and the "gross electricity bill" and advance income tax was required to be charged on basis of electricity consumption only in the manner in which electricity consumption was charged, and therefore the gross electricity bill, which included Excise Duty, Income Tax, and General Sales Tax was not relevant for the purposes of charging advance tax at the rates specified in Part IV of the First Schedule of the Income Tax Ordinance, 2001---No ambiguity or conflict existed between Ss.235(1) & 235(2) of the Income Tax Ordinance, 2001, which were to be read in harmony and not in isolation.

(b) Interpretation of Statutes---

----Provisions of a statute would have to be construed harmoniously so as to advance the purpose of a substantive provision of law and to avoid conflict, and no provision was to be read in isolation---Court was duty bound to attempt to interpret a statute as a whole so as to avoid conflict between its various provisions.

Abdul Rahim Lakho, Advocate for Applicant.

Syed Riazuddin, Advocate for Respondent.

Date of hearing: 26th November, 2013.

2014 P T D 966

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

Messrs KHATRI BROTHERS

Versus

FEDERATION OF PAKISTAN and 3 others

C.P. No.D-304 of 2008, decided on 30th January, 2014.

Customs Act (IV of 1969)---

----Ss.156 & 180---Customs Rules, 2001, R.103---Constitution of Pakistan, Art. 199---Constitutional petition---Restoration of customs license---Penalty, imposition of---Petitioner was licensed customs house agent and his license was suspended on the allegation of filing forged and fabricated shipping bills and attempt to obtain export rebate/duty draw back on the goods which were never exported---Authorities imposed penalty for a sum of Rs.500,000 and license was restored subject to payment of penalty---Validity---No power under R.103(2) of Customs Rules, 2001, was conferred upon Licensing Authority to impose penalty for violation of any of Licensing Rules, as penalty could not be imposed through and under the Rules---Penalty was only permissible once adjudicating authority, after proper show-cause notice, with specific allegations and alleged violations of relevant provisions of Customs Act, 1969, punishable under S.156(1) of Customs Act, 1969, passed order after following requirement as contemplated under S.180 of Customs Act, 1969---None of such actions had been followed and penalty was imposed while exercising jurisdiction under altogether irrelevant provision/rule and petitioner had been penalized without any lawful authority---Imposition of penalty on petitioner was without any lawful authority and jurisdiction conferred upon licensing Authority and the same could not be sustained and was set aside---High Court directed the authorities to restore license of petitioner and order-in-original and order-in-appeal were set side---Petition was allowed accordingly.

Ghulam Hyder Shaikh for Petitioner.

Muhammad Sarfraz Ali Metlo for Respondents Nos.2 and 3.

Date of hearing: 17th January, 2014.

2014 P T D 982

[Sindh High Court]

Before Syed Hasan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs PAK ARAB PIPE LINE COMPANY LTD.

I.T.R.As. Nos. 159 to 162 of 2011, decided on 19th February, 2014.

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

----Ss. 133, 132(10) & 122---Reference to High Court---Jurisdiction of High Court under S.133 of the Income Tax Ordinance, 2001---Scope---Adjudication on issues not framed as questions of law---Limitation---Department impugned order of Appellate Tribunal in favour of respondent taxpayer and framed only one question of law with regard to interpretation of S. 57 of the Income Tax Ordinance, 2001---Contention of respondent taxpayer was that in addition to finding in favour of taxpayer with regard to S. 57 of the Income Tax Ordinance, 2001 the Tribunal had also held that assumption of jurisdiction by officer of the Department who passed amended assessment order under S.122 of the Income Tax Ordinance, 2001 was without lawful authority; and said finding of Appellate Tribunal had not been challenged by Department in the present reference, therefore, the same had attained finality---Held, that Appellate Tribunal had dealt with the merits of the case and had arrived at a definite finding in favour of the taxpayer, which had been challenged by the Department by proposing the question of law regarding S. 57 of the Ordinance, however, the Appellate Tribunal also held that the officer who had assumed jurisdiction in terms of S. 122(5A) of the Income Tax Ordinance, 2001 to amend the assessment order had no lawful authority to do so under the Ordinance hence, the amended assessment order stood vacated---Since the question of assumption of jurisdiction by officer who had passed the amended assessment order had been decided against the Department, which per se seemed to be accepted by the Department by not referring to the issue in any question of law in this regard in the present reference; therefore, finding of Appellate Tribunal in regard to issue of jurisdiction had attained finality in terms of S. 132(10) of the Income Tax Ordnance, 2001---By not referring to said issue in any question of law, the Department had therefore waived its right under the Income Tax Ordinance, 2001---Contention that the Department be allowed to raise the issue of jurisdiction at such this stage to meet ends of justice, could not be entertained at such belated stage of proceedings as no additional questions could be entertained after expiry of limitation period for filing the reference expired---Since question of jurisdiction which went to the roots of the case, had not been raised by the Department, any exercise of answering the question with regard to S.57 of the Income Tax Ordinance, would be futile---High Court refused to answer question referred to it under S. 133 of the Income Tax Ordinance, 2001.

Messrs Lasani Brothers v. Commissioner of Income Tax PLD 1985 SC 387; CIT, Lahore Zone v. S.H. Muhammad Ismail and Co. Ltd. 1986 SCMR 968; K. Ravindranthan Nair v. Commissioner of Income Tax 247 ITR 178 SC Ind and Commissioner Inland Revenue-II, v. Royal International Exchange Company Ltd. 2013 PTD 1614 rel.

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

----S. 133---Reference to High Court---Jurisdiction of High Court under S. 133 of the Income Tax Ordinance, 2001---Scope---Jurisdiction of High Court under S. 133 of the Income Tax Ordinance, 2001 being advisory in nature was very limited and not plenary; unlike its ordinary appellate jurisdiction.

Amjad Javaid Hashmi for Applicant.

Arshad Siraj for Respondent.

Date of hearing: 6th February, 2014.

2014 P T D 999

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Mrs. Ashraf Jahan, JJ

COMMISSIONER INLAND REVENUE, ZONE-V, LARGE TAXPAYER, KARACHI

Versus

Messrs FARAN SUGAR MILLS LTD., KARACHI

I.T.R.A. No.221 of 2012, decided on 9th December, 2013.

Federal Excise Act (VII of 2005)---

----S. 34-A---Reference to High Court---Jurisdiction of High Court under S. 34A of the Federal Excise Act, 2005---Scope---While exercising jurisdiction under S. 34A of the Federal Excise Act, 2005 only such questions could be answered by the High Court which were questions of law and arose from the order of the Appellate Tribunal---Any externous arguments or issues raised for the first time before the High Court by merely formulating question in such a manner to give an impression that such question was a question of law, could not be taken into consideration by the High Court under the limited jurisdiction vested in it under S. 34-A of the Federal Excise Act, 2005.

Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income-Tax, South Zone, Karachi 1982 SCMR 489 and Dr. Muhammad Yousuf v. Commissioner of Income Tax 2006 PTD 590 rel.

Muhammad Saleem Mangrio for Applicant.

Date of hearing: 9th December, 2013.

2014 P T D 1011

[Sindh High Court]

Before Munib Akhtar and Mrs. Ashraf Jahan, JJ

Messrs AL AMNA INTERNATIONAL through Proprietor

Versus

FEDERATION OF PAKISTAN, through Secretary/Chairman, Federal Board of Revenue and 4 others

Constitutional Petitions Nos.D-1249, D-1456, D-1715 and D-1817 of 2013, decided on 11th November, 2013.

(a) Constitution of Pakistan---

----Art. 199---Sales Tax Act (VII of 1990), Sixth Sched. Table 1, Sr. No.15 & 61---Constitutional jurisdiction---Scope---Exemption from Sales Tax---Constitutional jurisdiction is an extraordinary jurisdiction, which can be availed only when no alternate remedy is provided under the law.

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

----Sixth Sched., Table 1, Sr. Nos. 15 & 61---Constitution of Pakistan, Art.199---Constitutional petition---Exemption from sales tax---Importer sought exemption of sales tax on import of tinned/bottled or canned fruits---Validity---Exemption of sales tax was only available to edible fruits excluding imported fruits, with exception of fruits imported from Afghanistan whether fresh, frozen or otherwise preserved but excluding those bottled or canned for which no exemption was available---Neither constitutional petition was maintainable under law nor there was any exemption available for subject consignment as per Sr. No.15 of Table 1 to Sixth Schedule of Sales Tax Act, 1990---Petition was dismissed in circumstances.

Ziaul Hassan for Petitioner.

S. Mohsin Imam Wasti D.A.G. for Respondent.

Zain A. Jatoi for Respondents Nos. 2 and 3.

Kashif Nazeer for Respondents Nos. 4 and 5.

Saud Hassan Khan I.O. for the State.

2014 P T D 1057

[Sindh High Court]

Before Syed Hassan Azhar Rizvi and Muhammad Junaid Ghaffar, J

Messrs ASIF TRADERS and another---Applicants

Versus

COLLECTOR OF CUSTOMS through Assistant Collector and another---Respondents

Special Custom Reference Applications Nos.D-1 and D-2 of 2013, decided on 24th December, 2013.

(a) Notification---

----Retrospective effect---Principle---Notification which confers a benefit or right to a person can be given retrospective effect, whereas the notification which disturbs or impairs a vested right of a person or creates new liability cannot be applied retrospectively in absence of legal sanction to such effect.

Collector of Customs, Lahore and others v. Mrs. Shahida Anwar 2012 SCMR 1698 rel.

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

----Ss.181 & 196---Notification S.R.O. 794(I)/2011, dated 25-8-2011---Confiscation of goods---Old and used spare parts---Retrospective effect of notification---Goods imported were used circuit breakers and adjudication officer confiscated the same and also imposed fine on the ground that importer had deliberately imported banned items---Collector (Appeals) extended benefit of Notification S.R.O. 794(I)/ 2011, dated 25-8-2011, to importer and ordered release of goods subject to payment of fine equal to 20% of the value but appellate Tribunal set aside the order passed by Collector (Appeals)---Validity---Notification S.R.O. 794(I)/2011, dated 25-8-2011, was a beneficial notification whereby it had allowed redemption of confiscated goods on payment of fine, therefore, it could be given retrospective effect as the case of importer was pending at appellate stage---Collector (Appeals) had correctly allowed benefit of the notification to importer---Provision of notification S.R.O. 794(I)/2011, dated 25-8-2011, was applicable on old and used spare parts for use in second hand plant and machinery used in manufacturing of goods---Benefit was on parts which were used in machinery and which in turn was used in manufacture of goods---No restriction was imposed that notification S.R.O. 794(I)/2011, dated 25-8-2011, was only applicable if such parts were imported by manufacturers for their machinery exclusively---Machinery was a freely importable item generally and could be imported by a manufacturer as well as by a commercial importer---High Court set aside the order passed by Appellate Tribunal---Reference was allowed in circumstances.

Messrs Hashwani Hotels Limited v. Government of Pakistan and others 2007 PTD 1473; 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 ref.

Muhammad Afzal Awan for Applicants.

Kashif Nazeer for Respondents.

Date of hearing: 26th November, 2013.

2014 P T D 1094

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Zafar Ahmed Rajput, JJ

Messrs FOUNDATION FOR HIGHER EDUCATION, KARACHI

Versus

COMMISSIONER, REGIONAL TAX OFFICE, KARACHI

I.T.R.As. Nos. 127, 128, 129 and 130 of 2010, decided on 11th April, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 80(2)(b) & 153(9)---Interpretation of S. 80(2) of the Income Tax Ordinance, 2001---"Company" definition of---Society formed by individuals and only thereafter registered under any law for the time being in force, did not fall within the definition of "company" or "prescribed person" under the Income Tax Ordinance, 2001---Assessee Society impugned the order of Appellate Tribunal whereby it was held to be a company within the definition given in S. 80(2) of the Income Tax Ordinance, 2001---Appellate Tribunal had observed that since the words "any society" in S. 80(2) Of the Income Tax Ordinance, 2001 had been included in the definition of the company, therefore the assessee Society fell within definition of "company" and "prescribed person" under the Income Tax Ordinance, 2001---Held, that the Appellate Tribunal failed to examine the controlling words "established or constituted by or any law for the time being in force" attached with the words "any society" in S. 80(2) of the Income Tax Ordinance, 2001---Distinction existed between a body corporate/society formed, established or constituted by or under any law for the time being in force and a body corporate/society which may be formed by individuals and thereafter may be registered under some law for the time being in force---Assessee Society in the present case was established by individuals and only thereafter had been duly registered under the Societies Act, 1860 and therefore did not fall within the definition of "company" and "prescribed person" under the Income Tax Ordinance, 2001 and hence was not liable to withholding tax in terms of S.153(9)(b) of the Income Tax Ordinance, 2001---Reference was answered accordingly.

Commissioner of Income Tax v. Messrs Lahore Cantt. Cooperative Housing Society 2009 SCMR 715; The Commissioner of Income Tax/Wealth Tax v. Messrs Engineering Cooperative Housing Society, Lahore 2000 PTD 3388 and Commissioner of Income Tax v. Messrs Spring Field Secondary School, Karachi 2003 PTD 1264 ref.

Commissioner of Income Tax v. Messrs Lahore Cantt. Cooperative Housing Society 2009 SCMR 715 rel.

Arshad Siraj for Applicant.

Amjad Javaid Hashmi for Respondent.

Date of hearing: 31st March, 2014.

2014 P T D 1159

[Sindh High Court]

Before Syed Hassan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

MKB ENTERPRISES (PVT.) LIMITED through Director

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division (F.B.R.) and 2 others

C.P. No. D-2166 of 2013, decided on 17th March, 2014.

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

----Ss. 32(1), (2), 32A, 79, 80, 156(1), (14), (14A), 168 & 219---Customs Rules, 2001, Rr.300, 305, 307A, 307-E & 307-G---Constitution of Pakistan, Art.199---Constitutional petition---Violation of concession granted under Duty and Tax Remission for Export (DTRE)---Input imported goods stored at station (Karachi) other than of manufacturing one (Peshawar)---Seizure of input goods---Lodging of F.I.R.---Scope---Petitioner/importer was manufacturer of plastic mats and for such manufacturing and export, he was granted various DTRE approvals for acquiring input goods (Polypropylene, polyester yarn and pigment/master batch)---Customs authorities found the importer/ manufacturer (petitioner) involved in the illegal disposal/selling of the imported input goods in local market in violation of DTRE rules---Customs authorities seized the input goods in question stored in a warehouse at a station (Karachi) other than of the station of manufacturing (Peshawar) and lodged F.I.R. against the importer/ manufacturer (petitioner)---Petitioner/manufacturer challenged the validity of actions of Customs authorities---Validity---Consignment imported for exclusive use in manufacturing of export goods, could be kept and stored in a warehouse locally, only as a matter of convenience and not for any other purposes---Importer/manufacturer (petitioner) had failed to satisfy as to why the goods were kept and stored in a local godown for a long period after its clearance---Exporter had been given an extended period of utilization and consumption of input goods with a view to facilitate him to first acquire input goods, then manufacture it, and then export it for foreign exchange earnings, but such facility could not be allowed to be used as a tool, not to utilize and or consume the input goods timely---Importer/manufacturer (petitioner) was required to show its bona fide by having intimated the Regulatory Collector regarding such storage of goods at Karachi (other station) though temporarily---Any grant of exemption or deferment of payment of duty and taxes was an incentive based on relationship of mutual trust and such trust must not be betrayed---Although, the importer/manufacturer (petitioner), under the rules was not required to give any information to the Regulatory Collector, but it was obligatory upon him to inform the Regulatory Collector regarding storage of goods and the indirect transportation of the input goods to the manufacturing premises---F.I.R. transpired that godown keeper had given incriminating evidence against the petitioner/importer, whereby the storage and local disposal of the goods in question had been disclosed to the investigating agency---Conduct of the petitioner was also not in accordance with the normal procedure in vogue, which a normal manufacturing concern was needed to evolve---Goods imported and acquired for consumption at Peshawar had been stored at warehouse in Karachi, for a much longer period than expected normally---Petitioner had failed to controvert the statements and the record provided by the warehouse keeper to Customs authorities regarding storage as well as sale of the goods in question---Constitutional petition was dismissed.

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

----Ss. 32 (1), (2), 32A, 79, 80, 156(1), (14), (14A), 168 & 219---Customs Rules, 2001, Rr.300, 305, 307A, 307-E & 307-G---S.R.O. 886(I)/2012 dated 18-7-2012---Constitution of Pakistan, Art.199---Constitutional petition---Violation of concession granted under Duty and Tax Remission for Export (DTRE)---Input imported goods were seized/confiscated and F.I.R. was lodged by the Customs intelligence officials instead of Regulatory Collector---Effect---Contention of the petitioner/manufacturer was that under the DTRE scheme Regulatory Collector was the only lawful authority to initiate any action, therefore the impugned actions were coram non judice---Validity---Rule 307-A of DTRE Rules had provided concession to exporters and independent provisions of R. 307-E of DTRE Rules had also been incorporated to take care of a situation wherein such concession was misused---DTRE Rules had not overriding effect entirely to the exclusion of the Customs Act, 1969, including the specific provisions for recovery of duty and taxes---Merely the fact that DTRE Rules had been provided that the Regulatory Collector would conduct audit and monitor the conduct of the person to whom a DTRE concession was accorded, would not mean to confer, even the jurisdiction of adjudication which otherwise in case of any alleged misuse of the DTRE concession happened or taken place in the territorial jurisdiction of any Collectorate other than the Regulatory Collector was being regulated independently under S.R.O. 886(I)/2012 dated 18-7-2012---Rule 307-E (4) of DTRE Rules had also been provided that any violation of the provisions by a DTRE user, should be reported to the adjudication officer of competent jurisdiction, therefore, even under the DTRE Rules, the Regulatory Collector could not assume the role of an adjudicating officer by itself, and had to refer the same to an adjudicating authority in terms of the S.R.O. 886(I)/2012 dated 18-7-2012---Goods in question were cleared from the Collectorarte at Karachi, were stored in a private godown at the same station, therefore the Customs officials at Karachi would have jurisdiction to see that as to whether the goods being sold in the market were infact goods which ought to have been stored in Peshawar, and whether, the goods being sold were actually duty paid goods or not---Action initiated by the Customs officials was within their jurisdiction---Constitutional petition was dismissed.

(c) Interpretation of statutes---

----Rules must yield to the Act and not vice versa.

Zain A. Jatoi for Appellant.

S. Mohsin Imam Wasti D.A.G. for Respondent No.1.

Kashif Nazeer for Respondents Nos. 2 and 3.

Date hearing: 28th January 2014.

2014 P T D 1256

[Sindh High Court]

Before S. Hassan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

Messrs PARAMOUNT INTERNATIONAL (PVT.) LTD., KARACHI

Versus

PAKISTAN through Secretary Revenue Division Chairman Federal Board of Revenue, Islamabad and 2 others

Constitutional Petition No.D-353 of 2014, decided on 14th March, 2014.

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

----Ss.179, 193 & 195---Pakistan Customs Tariff Heading No. 4813 of 2000---Constitution of Pakistan, Art.199---Constitutional petition---Second show-cause notice---Re-opening of decided matter---Scope---Petitioner/manufacturer of "cigarette filter rods" imported a consignment of "plug wrap paper" and sought clearance of the same under Pakistan Customs Tariff Heading No.4813.2000---Petitioner/ manufacturer was served with a show-cause notice, alleging that the goods in question were not freely importable and were hit by the provisions of Import Policy Order---In pursuance of show-cause notice, the adjudicating authority decided the matter in favour of petitioner/ manufacturer and allowed the goods in question to release against payment of leviable duty/taxes---After passing the first order in original in favour of petitioner/manufacturer, instead of releasing the goods in question, he was served with another show-cause notice stating that the case has been re-opened by the Collector of Customs under S. 195 of the Customs Act, 1969---In pursuance of second show-cause notice, the goods in question imported by the petitioner were ordered to be confiscated besides imposition of a penalty---Contention of the petitioner was that Collector was not justified in exercising powers for re-opening the first order-in-original and failed to show as to what illegality or impropriety was found in the first order in original---Validity---While passing the order of re-opening, nothing had been recorded or shown as to what circumstances prevailed upon the Collector, to exercise power under S. 195 of the Customs Act, 1969 for re-opening of the first order in original---Collector had not disclosed any reason for issuance of second show-cause notice, except that the earlier order had been re-opened---Condition prescribed under S. 195 of the Customs Act, 1969 had not been met or fulfilled which could justify the exercise of power---Impugned order was set aside and the respondent customs authorities were directed to release the goods of petitioner---Constitutional petition was allowed.

Messrs Zibtec (Private) Limited v. Collector of Customs, Model Customs Collectorate and 3 others 2009 PTD 246; E.V. Evans v. Muhammad Ashraf PLD 1964 SC 536; Assistant Collector of Customs v. Khyber Electric Lamps 2001 SCMR 838 and MAN and Company through Proprietor v. Collector of Customs 2011 PTD 561 ref.

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

----Ss.179, 193, 194-A & 195---S.R.O. 886(I)/2012 dated 18-7-2012---Constitution of Pakistan, Art.199---Constitutional petition---Order passed by adjudicating authority---Appealable---Re-opening of adjudicated matter---Scope---Petitioner/manufacturer of "cigarette filter rods" imported a consignment of "plug wrap paper" and sought clearance of the same---Petitioner/manufacturer was served with a show-cause notice, alleging that the goods in question were not freely importable and hit by the provisions of Import Policy Order---Adjudicating authority decided the matter in favour of petitioner/ manufacturer and allowed to release the goods in question---Instead of releasing the goods in question, the Collector re-opened the matter and after serving another show-cause notice ordered for confiscation of goods besides imposition of a penalty---Contention of the petitioner was that first order in original was appealable one and if the Collector was not satisfied, he was required to file appeal against the same, therefore second order on the adjudicated matter was not legal---Validity---Act of adjudication was an independent act, and could not be supervised, re-examined or re-opened by the Collector, who in the subject matter was working as an executive or an administrative Collector---Concept of independent adjudication of cases had been introduced in the year 2012 by carrying out amendment in S. 179 of the Customs Act, 1969 through issuance of S.R.O. 886(I)/2012 dated 18-7-2012---As per the new amendment made under S. 194-A of the Customs Act, 1969, the department or an officer of Customs, if aggrieved, by any decision or order passed by an officer of Customs below the rank of an Additional Collector, could prefer an appeal before the Collector (Appeals)---First order in original passed in the subject matter was an appealable order for both the parties, therefore option to re-open an order passed under the adjudicating hierarchy was not available to the Collector---Even the Collector of Customs adjudication could not oversee or exercise any right of re-opening of an order which had been passed by an officer lower in rank, but acting as an adjudicating authority---Impugned order was set aside---Constitutional petition was allowed.

Khan Trading Company, Gujranwala v. Collector of Customs, Excise and Sales Tax (Adjudication), Lahore 2002 CLC 705 and Collector of Customs v. Customs, Excise and Sales Tax Appellate Tribunal, Custom House, Lahore and another 2002 MLD 556 rel.

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

----Ss.179, 193, 194-A, 195 & 195-A--Constitution of Pakistan, Art.199---Constitutional petition---Maintainability---Re-opening of matter---Powers of Collector to delegate the matter to subordinate officer---Scope---Collector of Customs after re-opening the matter, remanded the case to Deputy Collector to decide the same---Effect---No authority or provision of law existed for collector for delegating or remanding of a matter to a sub-ordinate officer---If the order which had been re-opened in terms of S. 195-A of the Customs Act, 1969 was with a lawful authority and in which there were justifiable reasons for enhancement of fine, penalty, duty, etc. or for an intent to confiscate the goods which had not been confiscated earlier, Collector was required to issue notice by himself, and after hearing the aggrieved person, pass a necessary order as deemed fit---Collector could not re-open the matter, and then delegate it to some other officer---If an order was re-opened under S. 195-A of the Customs Act, 1969, then it was the Collector who had to pass the order after re-opening, which could further be assailed before the Appellate Tribunal---In the present case, Collector after reopening the case, had sent the same to a Deputy Collector, whose order was not an order within the contemplation of S.195-A of the Customs Act, 1969 and was not therefore appealable before the Appellate Tribunal, rather the same was appealable before the Collector Appeals under S. 193 of the Customs Act, 1969---Collector had failed to apply independent mind as to the legal implications of reopening of an order, therefore the second order in original was passed without lawful authority---Objection with regard to availability of alternate remedy was misconceived in circumstances---Constitutional petition was held maintainable and the same was allowed.

Pervaiz Iqbal Kansi for Petitioner.

Mohsin Imam, D.A.-G. for Respondent. No.1.

Mrs. Masooda Siraj for Respondents Nos.2 and 3.

Date of hearing: 6th March, 2014.

2014 P T D 1332

[Sindh High Court]

Before Nisar Muhammad Shaikh and Shahnawaz Tariq, JJ

MIRZA KHAN---Petitioner

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 2 others---Respondents

Constitutional Petition No.D-2312 of 2013, decided on 29th October, 2013.

Customs Act (IV of 1969)---

----S.171---Constitution of Pakistan, Art.199---Constitutional petition---Factual controversy---Alternate remedy---Petitioner claimed that goods seized by authorities were not smuggled but were legally imported---Validity---After receiving show-cause notice, petitioner or any other claimant whoever could be, should have replied the show-cause notice to rebut allegations levelled therein with all available documentary evidence---In case concerned authorities were not satisfied with their reply, petitioner had an adequate remedy of challenging order in question before customs authorities to adjudicate such matter but he did not avail alternate remedy---To resolve issues whether confiscated goods were imported or smuggled or who was the actual importer, evidence had to be recorded being the issues related to factual controversy which could not be decided in extra constitutional jurisdiction---High Court declined to interfere in the matter as it was beyond its ambit---Petition was dismissed in circumstances.

Khalid Mehmood v. Collector of Customs, House, Lahore, 1999 SCMR 1881; Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and 3 others 2001 SCMR 838; Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 PTD 1392; Manoo Gul and others v. Pakistan and others PTCL 1990 CL. 406; Collector of Customs v. Haji Noor-ul-Haq Lahore and others PTCL 2003 CL. 716; Assistant Collector of Central Excise and Land Customs v. Mst. Siddiqan Afzal and others 2007 SCMR 1149; Joint Secretary, Central Board of Revenue (Customs) and others v. Raja Nazar Hussain and another 1991 SCMR 647; Syed Muhammad Razi v. Collector of Customs (Appraisement), Custom House, Karachi and 2 others 2003 PTD 2821; Messrs Latif Trading Company v. Government of Pakistan through Secretary, Ministry of Finance, Islamabad and 2 others 1993 CLC 1663; Messrs Al-Rukiya Traders v. Central Board of Revenue Government of Pakistan, Islamabad and 2 others 1995 CLC 1456; Messrs Everluck Enterprises Proprietorship Kamran Wahid Khan, Karachi and others v. Federation of Pakistan through Secretary, Revenue Division (FBR), Islamabad and others 2013 PTD 471; Muhammad Javed and others v. Customs Central Excise and Sales Tax Appellate Tribunal Lahore Bench, Lahore 2001 YLR 635 and Messrs Salim Industries Ltd. v. Central Board of Revenue and others 1987 MLD 234 ref.

Muhammad Imran Shamsi and Isaac Ali Qazi for Petitioner.

Muhammad Iqbal Mahar for Respondents.

Ghulam Murtaza Korai for the State.

Date of hearing: 17th September, 2013.

2014 P T D 1398

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Farooq Ali Channa, JJ

Messrs KARACHI TAX BAR ASSOCIATION, KARACHI and 3 others

Versus

PROVINCE OF SINDH through Finance Secretary, Karachi and another

Constitutional Petition No.D-3392 of 2013, decided on 27th August, 2013.

Sindh Sales Tax on Services Act (XII of 2011)---

----Ss. 2(35), 3, First Sched., PTC heading 98.15---Constitution of Pakistan, Art. 199---Constitutional petition---Levy of sales tax on services provided by members of Tax Bar Association---Stay---Petitioner/Tax Bar Association contended that its members did not fall within the category of persons as referred to in the (First) Schedule of Sindh Sales Tax on Services Act, 2011; that under similar circumstances in a constitutional petition filed by High Court Bar Association, restraining orders had been passed against revenue authorities---Validity---High Court adjourned the case to be taken up along with the other constitutional petition filed by High Court Bar Association, and directed that in the meanwhile no adverse inference may be drawn against Tax Bar Association pursuant to PTC Clause 98.15 of Sindh Sales Tax on Services Act, 2011---Order accordingly.

Mansoor Ahemd Khan for Petitioner.

2014 P T D 1615

[Sindh High Court]

Before Syed Hassan Azhar Rizvi and Muhammad Junaid Ghaffar, JJ

SAADAT KHAN

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division, Islamabad and 2 others

Constitutional Petition No. D-5033 of 2013, decided on 30th April, 2014.

Customs Act (IV of 1969)---

----Ss. 17, 25, 168 & 171---Notification S.R.O. 486(I)/2007, dated 9-6-2007---Constitution of Pakistan, Art.199---Constitutional petition---Misdeclaration---Seizure of goods---Additional demand of duty and taxes---Procedure---Authorities did not accept goods declaration submitted by importer and demanded additional duty and taxes---Plea raised by importer was that under Notification S.R.O. 486(I)/2007, dated 9-6-2007, goods could only be detained under S. 17 of Customs Act, 1969---Validity---Interpretation of notification as well as classification of goods did not fall within definition of "mis-declaration"---When goods were intercepted and seized, officials had credible information and prima facie evidence to the effect that there was some mis-declaration involved in description and or of quantity of goods, hence goods became liable for confiscation and powers under S.168 of Customs Act, 1969, could be lawfully exercised by authorities---After detention and seizure of goods a show-cause notice under S.171 of Customs Act, 1969, was issued to importer and matter was pending before competent authority, before whom importer had not chosen to proceed with---Officials did not act without jurisdiction and detention/ seizure of goods was with lawful authority and subsequent to such detention/seizure proper show-cause notice was issued to importer---Petition was dismissed in circumstances.

Syed Muhammad Razi v. Collector of Customs (Appraisement), Custom House, Karachi and 2 others 2003 PTD 2821; Shahzad Ahmed Corporation through Shahzad Ahmed v. Federation of Pakistan through Secretary, Ministry of Finance, Government of Pakistan, Islamabad and 2 others 2005 PTD 23; Muhammad Sarwar v. Federation of Pakistan through Secretary Revenue Division and others 2005 PTD 2554; Mazhar Iqbal v. Collector of Customs (Preventive) Karachi and 2 others 2004 PTD 2994; Messrs Zaib Traders through Proprietor v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 3 others 2004 PTD 369; Messrs Sunny Traders through Proprietor v. Federation of Pakistan through Secretary, Revenue Division (FBR), Islamabad and 4 others 2009 PTD 281; Messrs Safe Way through Proprietor v. Deputy Collector Customs, (Appraisement Group-I), Lahore and others 2009 PTD 201; Muhammad Ali v. Federation of Pakistan through Secretary, Revenue Division and another 2013 PTD 628; Baba Khan v. Collector of Customs Quetta and 2 others 2000 CLC 688, C.Ps. Nos. D-1751 and 1751 of 1992 Arif Javed and another v. Mumtaz Hussain Butta and others and dated 29-11-2005 in C.Ps. Nos. D-1374 to 1378 of 2005 ref.

Mrs. Ismat Mehdi, for Petitioner.

S. Mohsim Imam Wasti D.A.G. for Respondent No. 1.

Kashif Nazeer for Respondent No. 2.

Date of hearing: 29th January, 2014.

2014 P T D 1733

[Sindh High Court]

Before Ghulam Sarwar Korai and Munib Akhtar, JJ

WASEEM AHMED and another

Versus

FEDERATION OF PAKISTAN through Chairman and 4 others

Constitution Petition No.D-2273 of 2011, decided on 20th March, 2011.

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

----Ss. 30, 30A, 30E, 33 (clause 13) & 37---S.R.O. 48(I)/2008 dated 15-1-2008---S.R.O. 56(I)/2010 dated 2-2-2010---S.R.O. 775(I)/2011 dated 19-8-2011---S.R.O. 776/2011 dated 19-8-2011---Constitution of Pakistan, Art.199---Constitutional petition---"Fake"/"flying" invoices---Tax fraud---Registration of F.I.R.---Submission of challan before Special Judge---Sending of notice under S.37 of Sales Tax Act, 1990---Question as to officers of which Tax Directorate were competent to send notice, lodge F.I.Rs. and submit challan before Special Judge---Plea of accused that F.I.Rs. in question were registered by officers of the Directorate General of Intelligence and Investigation-Federal Board of Revenue ["DG (I&I)-FBR"]; that said F.I.Rs. could only have been registered by officers of Directorate General of Intelligence and Investigation-Inland Revenue ["DG (I&I)-IR"], who were authorized to act in terms of the relevant sections, thus the F.I.Rs. and proceedings taken in relation to them were invalid---Validity---S.R.O. 48(I)/2008 dated 15-1-2008 appointed the designated officers of Directorate General of Intelligence and Investigation-Federal Board of Revenue ("DG (I&I)-FBR") to be officers of Sales Tax and conferred jurisdiction and powers on them in respect of the various sections as set out therein---Said notification was therefore properly issued and effective accordingly---Subsequent to S.R.O. 48(I)/2008; S.R.O. 56(I)/2010, S.R.O. 775(I)/2011 and S.R.O. 776/2011 were issued respectively---S.R.O. 56(I)/2010 and S.R.O. 776/2011 were invalid, while S.R.O. 775(I)/2011 was ultra vires the Sales Tax Act, 1990, which meant that S.R.O. 48(I)/2008 still held the field---S.R.O. 48(I)/2008 was issued with reference to the DG (I&I)-FBR, who were functionaries under S. 30A of the Sales Tax Act, 1990 as it then stood---Such references must be taken to refer equally to their successors under the Sales Tax Act, 1990 in terms of the amended S. 30A, i.e., the DG (I&I)-IR---S.R.O. 48(I)/2008 therefore remained valid and effective after the changes made by the Finance Act, 2011, though of course presently the reference therein to the DG(I&I)-FBR was to be read as a reference to the DG(I&I)-IR, and reference therein to officers of Sales Tax became a reference to officers of Inland Revenue---Since S.R.O. 775/2011 was ultra vires the Sales Tax Act, 1990, the officers of the DG (I&I)-FBR could not now proceed further with the F.I.Rs./criminal cases in question---Any further investigation or inquiry and any other act in the proceedings pending before the Special Judge now had to be done by the officers of the DG (I&I)-IR, which was why it was appropriate that Federal Board of Revenue, in supersession of previous notifications, should issue a fresh notification under Ss. 30 & 30E of the Sales Tax Act, 1990, that declared the officers of the DG (I&I)-IR "to be" officers of Inland Revenue (section 30) and established their jurisdiction, etc. in relation to specified provisions (section 30E)---F.I.Rs. in question were registered before the Finance Act, 2011, by officers of the DG (I&I)-FBR at a time when S.R.O. 48(I)/2008 was operative---F.I.Rs. were thus registered by officers who were lawfully entitled to do so and there could be no jurisdictional objection thereto---F.I.Rs., and the challans submitted and notices issued on or before 30-6-2011 and any investigation carried out by or before such date were validly issued and undertaken by the officers of the DG(I&I)-FBR and within jurisdiction---Challans submitted and notices issued on or after 1-7-2011 by officers of the DG(I&I)-FBR were irregular as such Directorate General had ceased to be of relevance for the Sales Tax Act, 1990 on and after that date, but such irregularity did not vitiate their validity nor invalidate any investigation or inquiry nor rendered defective or invalid any proceedings taken before the Special Judge by such officers---All acts and proceedings with regard to the criminal cases (including by way of any further investigation) could now be done and/or continued only by officers of the DG(I&I)-IR, duly authorized and empowered under S.R.O. 48(I)/2008 dated 15-1-2008 or any subsequent validly issued notification---Constitutional petition was disposed of accordingly.

Director, Investigation and Intelligence Customs, Excise and Sales Tax v. Muhammad Nawaz and another PLD 2003 Lah. 493(DB) and Umar Din v. Superintendent of Police, Incharge Anti-corruption Establishment and others PLD 1980 Kar. 158 ref.

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

----S. 18(1)---Successor-in-office, reference to---Scope---If in any Act there was a reference to a functionary X (appointed under or with reference to some other statute or in exercise of other power), who was succeeded by functionary Y, then references to the former in the Act first mentioned would be taken to be references to the latter---In any subordinate legislation (such as a notification) issued under an Act in relation to functionaries of or under the said Act, references to such functionaries shall be a reference to any successors of such functionaries of or under the said Act resulting from an amendment thereof.

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

----Ss. 33, 37E & 37A---Special Judge---Jurisdiction---Offences carrying a criminal conviction---With respect to a penalty that could be imposed for an "offence" under S. 33 of the Sales Tax Act, 1990, it was within the jurisdiction of the officers of Inland Revenue---On the other hand, with respect to criminal offences, it was only if the "offence" could result in a criminal conviction that it came within the jurisdiction of the Special Judge---Special Judge had jurisdiction only in relation to those clauses of S. 33 of the Sales Tax Act, 1990 which created criminal offences.

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

----Ss. 33, 37A & 37B---Criminal Procedure Code (V of 1898), Ss.4(1)(h), (k) & (l)---Offences under S. 33 of Sales Tax Act, 1990---Arrest and prosecution, procedure of---Applicability of Cr.P.C.---Problems in harmonious application of provisions of Cr.P.C. to procedure of arrest and prosecution provided under S. 37A & 37B of Sales Tax Act, 1990, detailed.

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

----Ss.33, 37A & 37B---Criminal Procedure Code (V of 1898), S.5(2)---Investigation and criminal prosecution for an offence under S. 33 of Sales Tax Act, 1990---Arrest not necessary---Duly empowered officer of Inland Revenue could launch the investigation and proceed with the criminal prosecution without any arrest being made at all.

(f) Criminal trial---

----Prosecution, duty of---Offence comprising of different elements or ingredients---Prosecution must establish each element or ingredient before it could be said that the offence had been committed.

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

----S. 2(37)---"Tax fraud"---Definition.

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

----Ss. 2(37)& 33 (clause 13)---"Tax fraud"---Not an offence of strict liability---Necessary for prosecution to show 'intent'---In tax fraud there must both be an act or omission, and such act or omission must result in certain consequences---Both must have an aspect of intent---Act/omission done in contravention of a duty or obligation must be done knowingly, dishonestly or fraudulently and with the intent of achieving the result---Prosecution had to show the necessary intent aspect on both said counts---Such intent need not be established directly; it may stand proved from all the attendant facts and circumstances.

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

----Ss. 2(37) & 33 (clause 13)---"Tax fraud"---Supply chain---Role and culpability of each supplier in a chain to be considered separately---Merely because tax fraud had occurred in a particular supply chain, it did not mean that all the suppliers in the chain were necessarily guilty---Role and culpability of each (supplier) had to be carefully considered and tested against the definition of tax fraud, especially in situations mentioned under S. 2(37)(iii) of the Sales Tax Act, 1990, i.e. where there was understating or underpaying of the tax liability for two consecutive tax periods, or where there was overstating of the entitlement to tax credit or tax refund---In respect of said situations, while the middle supplier (in a chain of three supliers) could himself commit the offence, but if two suppliers were involved they must be directly connected, i.e., be a "link" on the chain---Of course, there could also be a grand conspiracy involving many suppliers, but if so each must be part of successive "links" on the chain---As soon as such nexus was broken, i.e., one came upon a supplier who was innocent though "linked" to one who was part of the conspiracy, then not only was such supplier himself not culpable, all succeeding (or preceding, as the case may be) suppliers on the supply chain were also not guilty, because the supply chain could not be "jumped"---Suppliers who did not stand in a "linked" relationship cannot establish a direct connection with other suppliers on that supply chain; they must go through (i.e., be "linked" because of) one or more successive suppliers that came in between---Question as to whether one or more than one supplier in a chain were guilty of tax fraud, was matter to be determined by a careful consideration of the facts, and the circumstances of each supplier.

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

----Ss. 2(37) & 33 (clause 13)---Constitution of Pakistan, Art. 199---Constitutional petition---Supply chain---"Fake"/"flying" invoices---Tax fraud---Registration of F.I.Rs.---Role and culpability of each supplier in a chain to be considered separately---Linkage between each supplier in a supply chain---F.I.Rs. were registered against the petitioners for committing tax fraud---Petitioners sought quashment of F.I.Rs. by way of present constitutional petition---Held, that most fundamental requirement, namely of rigorously and unambiguously establishing the relevant supply chains, had not been met by officers who had conducted the cases so far---Such exercise had either not been carried out at all or at best had been undertaken in a haphazard manner---Officers of tax Directorate seemingly were under the misapprehension that once a tax fraud had occurred on a supply chain (whether in one or more successive "blocks" in a supply chain), then all suppliers on that supply chain were culpable, i.e., had "benefited" from the fraud---Officers of Tax Directorate had sought to expand the investigation to all persons along a supply chain who were "connected" with a fraudster in such sense---Such approach was patently incorrect and fundamentally flawed as the supply chain had not been properly mapped and established---Instead of going "link" by "link" and determining whether there was culpability at each such juncture in respect of a particular "block" (in the supply chain), the officers had proceeded in a haphazard manner, jumping from one person to the next without a proper determination of connection or linkage---Supply chain could not be "jumped"---As one moved along the supply chain ("link" by "link", taking up each "block" successively), as soon as an innocent supplier was reached, the nexus with the suppliers committing the tax fraud was broken and this was so even if such supplier was "linked" to one who was part of the fraud---All subsequent (or antecedent, as the case may be) suppliers on such supply chain were innocent---Serious, and in many ways basic, errors had been made in the investigation of the present F.I.Rs., and the fundamental principles involved had either not been appreciated at all or had been imperfectly understood and/or applied---However, at the same time, it could not be said that the record did not show any tax fraud at all---Material on record did indicate that tax fraud may well have been committed, because of which the proceedings in the present case could not be quashed---F.I.Rs. could also not be quashed for the reason that challans had been submitted---Record indicated that the allegations were of a very serious nature which could not be lightly dismissed---Furthermore, the allegations suggested that the tax fraud was not limited to or the work of a few suppliers on one supply chain---Present cases were before the Special Judge and must be allowed to proceed to the appropriate conclusion---High Court directed that prosecution shall, within eight weeks, or such further time as may be granted by the Special Judge distinguish, identify, isolate and establish the relevant supply chains in respect of the transactions in relation to which challans have been submitted, in the first instance limiting the exercise only to those persons nominated in the challans, clearly showing the various suppliers along each supply chain and identifying the other persons (if any) who were accused of tax fraud as abettors, or connivers or were otherwise alleged to be involved in respect of any transaction along any supply chain amounting to any criminal offence under the clauses of S.33 of Sales Tax Act, 1990; that once the supply chains had been established as such, the prosecution shall in respect of each such chain satisfy the Special Judge, "link" by "link", "block" by "block", as to the alleged culpability of each person appearing on the supply chain and every other person (if any) alleged to be an abettor, conniver or otherwise involved in the tax fraud or any other criminal offence under the clauses of S.33 of the Sales Tax Act, 1990; that nothing shall preclude the Special Judge from considering in accordance with law an application moved by an accused under S. 265-K, Cr.P.C at or during such trial; that the accused on each supply chain shall be tried together but separately from the accused of another supply chain unless the Special Judge, for reasons to be recorded in writing, concluded that it would be appropriate to hold one trial in respect of more than one supply chain---Constitutional petition was disposed of accordingly.

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

----Ss. 2(37) & 33 (clause 13)---Value Added Tax (VAT)---General Sales Tax (GST)---Supply chain---Tax fraud---Sanction of criminal law necessary---Sales Tax Act, 1990 was dependant on the various payers honestly paying their portion of the tax or claiming only such refund as was warranted (as the case may)---Value Added Tax (VAT) system was so heavily dependent on the supply chain functioning properly with each "link" (in the supply chain) properly submitting the necessary documents and invoices that it was imperative that any serious breach be visited with the sanction of the criminal law; otherwise the whole system would be undermined.

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

----Ss. 2(37) & 33 (clauses 11(c) & 13)---Supply chain---Tax fraud---Issuance or use of a false or forged document---Offences under S. 33, clauses 11(c) & 13, inter-related but distinct---Section 33, clause (11)(c) of the Sales Tax Act, 1990 criminalized (among other acts) the "issuance" or "use" of a false or forged document---Section 33, clause 13 of the Sales Tax Act, 1990, which dealt with tax fraud required the use of false or forged documents as one of its elements because the output-input mechanism was central to such crime, and that required the use of sales tax invoices, i.e., documents---Any person committing tax fraud, thus, could be charged with both said offences and tried accordingly---However under S. 33, clause (11)(c) of the Sales Tax Act, 1990, the relevant offence(s) may well be proved even if, in the end, the prosecution was unable to prove either tax fraud (or its attempt) or even establish the relevant supply chain---Important to keep in mind that although the offences under S. 33, clauses (11)(c) & (13) were inter-related, they were nonetheless distinct.

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

---Ss. 21 & 33 (clause 13)---Tax fraud---De-registration, blacklisting and suspension of registration---Standard of proof---Civil standard of proof---Section 21 of the Sales Tax Act, 1990 was not concerned with tax fraud as a criminal offence---When tax fraud was dealt with as a criminal offence (under S. 33 of the Sales Tax Act, 1990), it must be proved beyond reasonable doubt---However, when it was being dealt with in terms of S. 21 of the Sales Tax Act, 1990, it must be established only to the civil standard---Differences in the standards of proof required for S. 33 on the one hand and S. 21 of the Sales Tax Act, 1990 on the other could have important consequences---If at the end of the proceedings under S. 21, the Commissioner concludes that the concerned person had not committed tax fraud, or made such a finding but it was negated on the merits in any appellate or other such proceedings, then clearly the person could not be held liable on the same facts for the criminal offence of tax fraud---Reason was that if something could not be proved on the (lower) civil standard of proof, it certainly could not be established beyond reasonable doubt (the criminal standard)---Of course, the reverse was not true---Even if something could not be established beyond reasonable doubt, it may yet be established on the civil standard---If a petitioner was proceeded against in terms of S. 21 of the Sales Tax Act, 1990 in the same terms as alleged in the criminal cases, and the former proceedings concluded (either at first instance or ultimately) in his favour then he could not further be proceeded against before the Special Judge in the criminal cases---No case having been made out against him in terms of the civil standard, it necessarily follows that such a case could not be established beyond reasonable doubt.

Junaid Ghaffar; Khalid Jawed Khan; M. Afzal Awan; Anwar Hussain, M. Kaukab Shahabuddin; Muhammad Raza, Umar Lakhani, Muhammad Zeeshan, Farogh Naseem, Ms. Ismatunnisa, Mazharul Hasan, Haider Waheed, Fouzia Rasheed, Nazar Akbar, Usman Shaikh, Ms. Sofia Saeed, Waseem Shaikh, Aga Zafar Ahmed, Muhammad Aslam, Imdad Khan, Ali Mumtaz Shaikh, Raja Qasit Nawaz, M. Idrees Sukhera, Saleem Akhtar, Aqil Ahmed, Saadat Yar Khan, Noman Jamali, Amjad Javed Hashmi, Abdul Ghaffar, Shahjahan Jalbani, M. Ali Merchant, Abdul Rahim Lakhani, S. Irshad ur Rehman, M. Faraz Merchant, Ms. Zaibunnisa, M. Altaf Mun, Mukesh Kumar Khatri, Irfan Ahmed Memon, Faisal Siddiqui, Adnan Chaudhry, Sami Ahsan, Abdul Majeed Khoso, Abdul Majeed Khan, Khaleeq Ahmed, Ms. Lubna Parvez, Mansoor Ali Khan, M. Ilyas Khan, Zaheeruddin Jatoi, Zamir Hussain Ghumro, Naeem Iqbal, Waqar Ahmed, Shahab Sarki, Khalid Mahmood Siddiqui, Muhammad Khalid, Siraj Ali Khan, Ms. Syeda Sara Kanwal, Haider Naqi, Zahid F. Ebrahim, Ghazain Magsi, Muhammad Aslam, Faiz ul Hassan Shah and Ashiq Ali Anwar Rana for Petitioners in respective Petitions.

Dr. Rana Muhammad Shamim, Sibtain Mehmud, Shakeel Ahmed, Jawaid Farooqui DAG, Mohsin Imam DAG, Ms. Masooda Siraj, Ghulam Haider Shaikh and Haider Iqbal Wahniwal for Respondents. In respective Petitions.

Farhatullah Jafri, Senior Intelligence Officer, Ghulam Younus Khan, Superintendent, Azam Nafees, Audit Officer, Asadullah Shaikh, Auditor and M. Ashfaq Khan, Audit Officer along with Officers from DG(I&I)-FBR and DG(I&I)-IR.

Dates of hearing: 23rd, 24th, 25th, 26 and 30th, April and 3rd and 7th May, 2013.

2014 P T D 1833

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

AL IHSAN ELECTRONICS TRADING (LLC)

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division and 3 others

Constitutional Petition No. D-1616 of 2014, decided on 27th June, 2014.

Customs Act (IV of 1969)---

----S.138---Constitution of Pakistan, Art. 199---Constitutional petition---Frustrated cargo---Re-export of consignment---At the time of examination of goods by Customs authorities it transpired that goods were different than those mentioned in Goods Declaration Form---Importer claimed that consignment in question had mistakenly arrived in Pakistan and he sought permission to re-export the same---Request of importer to treat the goods as "frustrated cargo" and to allow its re­-export in terms of S. 138 of Customs Act, 1969, was duly accepted and order had also been passed in such regard by concerned authority---Order under S. 138 of Customs Act, 1969, was not recalled till date--­Effect---High Court directed the authorities to act upon such order in its letter and spirit which was valid and in field---Petition was allowed in circumstances.

Zain A. Jatoi for Petitioner.

Khalid Mahmood Dhoon, Ilyas Ahsan Law Officer Customs and

Fayyaz Rasool, Additional Collector of Customs for Respondents.

Ashfaq Rafiq Janjua Standing Counsel.

Date of hearing: 11th June, 2014.

2014 P T D 1897

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

MUHAMMAD ASIM and another

Versus

FEDERATION OF PAKISTAN through Chairman Federal Board of Revenue and 3 others

Constitutional Petition No. D-3027 of 2014, decided on 16th June, 2014.

Income Tax Rules, 2002---

----R.183(1) & (2)---Constitution of Pakistan, Art.199---Constitutional petition---Warrants of arrest---Fiscal matter---Stay of recovery---Assessee raised the plea that none of the ingredients as mentioned in R.183(2) of Income Tax Rules, 2002, were attracted and authorities had mala fidely rushed up with issuance of his warrants of arrest for recovery of demand---Validity---Public functionaries, particularly Revenue Officers who were responsible to administer taxing laws, were required to perform their duties and administer revenue laws in such manner, which could promote the purpose of statute and not to frustrate the same---Recovery of demand in question towards taxes by Revenue Officers during pendency of appeals, references or petitions before proper forum as provided under the statute or before Court of competent jurisdiction, when such recovery of demand had been stayed, did not only reflect upon mala fides on the part of revenue officers but also amounted to showing disrespect to higher forums provided under statute as well as to Courts---High Court expressed its desire that such tendency was required to be discontinued---Income tax authorities had withdrawn warrants of arrest issued against assessee, who intended not to press the petition---Petition was disposed of accordingly.

Mushtaque Hussain Qazi for Petitioner.

Shaikh Liaquat Hussain, Standing Counsel.

Date of hearing: 16th June, 2014.

2014 P T D 1963

[Sindh High Court]

Before Aziz-ur-Rehman, J

Messrs SHUJABAD AGRO INDUSTRIES (PVT.) LTD. through Chief Executive Officer

Versus

COLLECTOR OF CUSTOMS and 8 others

Suit No.1544 of 2012, decided on 16th May, 2014.

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

----S.217---Bar of jurisdiction of Civil Courts---Applicability---Bar of jurisdiction of civil Court in terms of provisions of S. 217 of Customs Act, 1969, can only be attracted when action taken is found to be within four corners of statute under which it was taken---If the order suffers from taint of mala fide or lack of jurisdiction then such ouster of jurisdiction is not applicable.

(b) Specific Relief Act (I of 1877)---

----S.56(d)---Official acts---Bar to issue injunction---Principle---Officials are required to perform their duties strictly in accordance with law---If officials proceed to violate law, then such action taken cannot fall within the scope of "public duties" or be treated as performance of public duties and bar contained in S. 56(d) of Specific Relief Act, 1877, is not applicable.

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

----S.148(1)(5), (8) & First Sched., Part-II, Clause 9 (A)---Advance income tax---Duty of collection---Scope---Customs authorities are empowered to collect 'Advance Tax' on behalf of Inland Revenue at specified rate of 3% in view of 'Rate Reduction Certificate'.

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

----S.202---Income Tax Ordinance (XLIX of 2001), S.148 (1)(5) & (8), First Sched., Part-II, clause 9 (A)---Specific Relief Act (I of 1877), Ss.42 & 54---Suit for declaration and injunction---Advance income tax---Duty of Customs authorities---Grievance of plaintiff was that despite payment of all duties and taxes, Customs authorities did not clear its consignment---Customs authorities withheld the consignment of plaintiff on the plea that imported goods were liable to be assessed at the rate of 5% of 'advance tax' and not at reduced rate---Validity---Plaintiff paid all lawful 'taxes', 'duties' and 'cess' as provided for under various fiscal statutes including 'advance tax' at applicable rate of 3% upon production of 'Exemption Certificate'---Customs authorities, upon payment of taxes and duties were duty bound to allow release of duty paid consignment to plaintiff---Customs authorities had no power under law to restrict release of 'duty paid consignment' on the plea that imported goods were liable to be assessed at the rate of 5% of 'advance tax' [prescribed for one's own manufacturing use] and not at reduced rate of 3% of 'advance tax' [prescribed for industrial use]---Such act of Customs authorities was without jurisdiction and lawful authority in view of existing valid 'Reduced Rate Certificate'---Customs authorities under law were merely 'collection agents' acting on behalf of Inland Revenue Department for collection of 'advance tax', at prescribed and applicable rate of 3% and had no jurisdiction or authority to undertake any fishing and roving inquiry as it was 'Commissioner Inland Revenue' who was the only competent authority for determination of 'advance tax' vis-à-vis imports made by plaintiff---Customs authorities had no jurisdiction to withhold plaintiff's 'duty paid consignment' on the basis of so called 'credible information'---Action of Customs authorities was not only arbitrary, mala fide but also without any jurisdiction---Such refusal on the part of Customs authorities on the basis of so-called 'credible information' was also in violation of principles of natural justice liable to be declared as such---Suit filed by plaintiff was maintainable and Customs authorities wrongly assumed jurisdiction regarding 'differential amount' of advance tax of 2% [i.e. 5%-3%]---Action / procedure adopted for recovery of differential amount of 'Advance Tax' i.e. 2% from plaintiff was illegal, void ab-initio, without any legal jurisdiction / authority and the same was also against the law of natural jurisdiction---Suit was decreed in circumstances.

Messrs Shadman Cotton Mills Ltd. v. Federation of Pakistan and others 2009 PTD 193; Messrs Shafiq Textile Mills Ltd. v. Federation of Pakistan and others 2007 PTD 1480; Messrs Rohi Ghee Industries v. Collector of Customs 2007 PTD 878; Messrs Binaco Traders v. Federation of Pakistan and others 2006 PTD 1491; Usman Punjwani and another v. Government of Sindh and another 1996 CLC 311; Messrs K. G. Traders and another v. Deputy Collector of Customs and 4 others PLD 1997 Kar. 541; Abbasia Cooperative Bank (Now Punjab Provincial Cooperative Bank Ltd.) through Manager and another v. Hakeem Hafiz Muhammad Ghaus and 5 others PLD 1997 SC 3; Messrs AGP (Pvt.) Ltd. v. Additional Collector of Customs, Karachi 2011 PTD (Trib.) 110; Messrs Al-Haj Industrial Corporation (Pvt.) Ltd., Peshawar v. Collector of Customs (Appraisement), Customs House, Karachi 2004 PTD 801; Assistant Director, Intelligence and Investigation, Karachi v. Messrs B.R. Herman and others PLD 1992 SC 485; Ch. Abdul Majid v. Sadaqat Saeed Malik and others 2004 SCMR 1325; Mst. Fehmida Begum v. Muhammad Khalid 1992 SCMR 1908; Malik Muhammad Saeed v. Federation of Pakistan and others 2006 PTD 2167; Al Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal 1993 SCMR 29; Ghulam Dastgir v. Special Tribunal, Sindh and 2 others PLD 1977 Kar. 440; Customs, Federal Excise and Sales Tax Appellate Tribunal's case 2010 PTD (Trib.) 2086; Shabir Ahmed v. Kiran Khursheed and others 2012 CLC 1236; Babar Hussain Shah and another v. Mujeeb Ahmed Khan and another 2012 SCMR 1235; Hakimuddin v. Faiz Bux 2007 SCMR 874; Malik Umar Aslam v. Sumaira Malik and another PLD 2007 SC 362 and Ghulam Rasool through L.Rs. and others v. Muhammad Hussain and others PLD 2011 SC 119 ref.

Abid Shahid Zuberi, along with Muhammad Haseeb Jamali and Rasheed Ashraf for Plaintiff.

Syed Tariq Ali for Defendants Nos. 1 to 4.

Mazhar Imtiaz Lari for Defendants Nos. 6 and 7.

Nemo for Defendants Nos.5, 8 and 9.

Date of hearing: 30th April, 2014.

2014 P T D 2048

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

Messrs PAKISTAN MOBILE COMMUNICATIONS LTD.

Versus

SINDH REVENUE BOARD through Chairman, Karachi and 2 others

Constitutional Petitions Nos.D-2948 and 3042 of 2014, decided on 16th June, 2014.

Sindh Sales Tax on Services Rules, 2011---

----R. 22(1)---Constitution of Pakistan, Art.199---Constitutional petition---Show cause notice---Effect---Petitioners assailed show cause notices issued by authorities making certain queries with regard to claim of input deduction / adjustment during relevant tax period---Grievance of petitioners was only to the extent of proposed treatment by authorities to claim input adjustment by them in terms of R. 22(1) of Sindh Sales Tax on Service Rules, 2011, whereas authorities had not finally decided legal issue nor passed any final order in such regard---Validity---Petitioners were at liberty to make their submissions, which would be decided by authorities strictly in accordance with law and applying the relevant rules---Show cause notices in question did not suffer from any jurisdictional error nor petitioners had been able to point out any patent illegality in the notices, whereby, an opportunity of being heard had been provided to petitioners---Petition was pre-mature and tantamount to pre-empting decision on the subject controversy thus was not maintainable---Petition was dismissed in circumstances.

Messrs Maritime Agencies (Private) Ltd. v. The Assistant Commissioner-II of Sindh Revenue Board and others Constitutional Petition No.D-769/2014; Roche Pakistan Ltd. v. Deputy Commissioner of Income-Tax and others 2001 PTD 3090 and Sitara Chemical Industries Ltd. v. Deputy Commissioner of Income Tax 2003 PTD 1285 rel.

Ayyaz Shaukat and Waqar Ahmed for Petitioners.

Sharafuddin Mangi, Counsel for the State.

Shaikh Liaquat Hussain, Standing Counsel.

Zamir Ali Khalid, Deputy Commissioner (Legal), Syed Zainul Abdin Shah, Assistant Commissioner and Nida Noor, Assistant Commissioner, Sindh Revenue Board.

Date of hearing: 16th June, 2014.

2014 P T D 2073

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

CRYSTAL ENTERPRISES and 63 others

Versus

FEDERATION OF PAKISTAN through Secretary and 3 others

Constitutional Petition No. D-1753 of 2013, heard on 7th August, 2014.

Customs Act (IV of 1969)---

----S.179(3)---Constitution of Pakistan, Art.199---Constitutional petition---Adjudication, power of---Unauthorized filing of constitutional petitions ---Petitioners were importers of goods who assailed notices of hearing issued to them pursuant to order passed by Customs Appellate Tribunal---Validity---After issuance of show cause notice case was to be decided by Adjudication Authority within one hundred and twenty days of issuance of such show cause notice (prior to 2009, it was from the date of contravention report) or within such period as extended by Collector for which reasons should be recorded in writing but such extended period was in no case to exceed sixty days---Grievance of petitioners was not that matter had not been decided within stipulated period from the date of issuance of show cause notice but from the date of judgment of Customs Appellate Tribunal---Such contention of petitioners was misconceived and was repelled by High Court---Petition was filed unauthorizedly on behalf of large number of petitioners as neither they had signed or sworn petition or affidavit nor any power of attorney or authority letter had been issued and placed on record inspite of specific objection by office in such regard---High Court deprecated such conduct of petitioners as through misrepresentation of facts and without filing relevant documents, petitioners obtained ex-parte restraining order, whereby adjudication proceedings had been suspended in respect of all persons who were not petitioners before High Court in legal terms---Petition was dismissed in circumstances with costs.

Afzal Awan for Petitioners.

Iqbal M. Khurram and Ainuddin Khan D.A.G. for Respondents.

Date of hearing: 7th August, 2014.

2014 P T D 2140

[Sindh High Court]

Before Ahmed Ali M. Shaikh, J

MUHAMMAD ASHRAF

Versus

The STATE

Special Criminal Revision Application No.3 of 2012, decided on 25th April, 2014.

Customs Act (IV of 1969)---

----Ss.19, 32, 156 (1)(10-A)(14)(77)(86)(90) & 192---Sales Tax Act (VII of 1990), Ss. 3 & 33---Income Tax Ordinance (XLIX of 2001), Ss.148, 192, 195, 199 & 200---Criminal Procedure Code (V of 1898), Ss.265-K & 439---Quashing of proceedings---Clearance of consignments without duties and taxes---Proof---Accused was alleged to have been getting his commercial consignments cleared under the garb of consignments of gifts and donations to charitable and non-profit making hospitals---Validity---Accused was not alleged to be importer or beneficiary of alleged consignments and had no nexus whatsoever in the nature, with importer of the consignments---None amongst prosecution witnesses implicated accused in their statements---Investigating officer admitted that there was no evidence against accused nor he had any concern with episode in question---In absence of any material, accused could not be compelled to face proceedings and remain under the Sword of Damocles indefinitely---In absence of any evidence, proceedings pending against accused would amount to abuse of process of law as well as Court---High Court, in exercise of revisional jurisdiction, set aside the order passed by Trial Court and quashed the proceedings pending against accused---Revision was allowed in circumstances.

Mian Abdul Ghaffar for Applicant.

Waleed Ansari, D.A.G. for the State.

Ashiq Ali Anwar Rana, Advocate/Special Prosecutor.

2014 P T D 199

[Lahore High Court]

Before Ayesha A. Malik and Abid Aziz Sheikh, JJ

COLLECTOR OF CUSTOMS, LAHORE

Versus

SOUTH EAST TRADING

Custom Appeal No.54 of 2000, decided on 6th May, 2013.

Customs Act (IV of 1969)---

----Ss.179 & 2(a)---Adjudicating authority---Power of adjudication---Import of goods---Enhancement of value---Scope---Issue of valuation was adjudicated upon by Assistant Collector who found that the value of goods had been understated and directed the respondent / importer to pay different amount for customs duties and taxes---Said order of Assistant Collector was set aside by Appellate Tribunal on the ground that under S.179(1) of the Customs Act, 1969 the Assistant Collector did not have jurisdiction to adjudicate upon the matter---Customs Department impugned said order of Appellate Tribunal---Validity---Perusal of S.179 of the Customs Act, 1969 revealed that each authority working under the hierarchy of the customs department had been assigned a job to perform its duties within the parameter as specifically provided under the law and said hierarchy did not include Assistant Collector---Admitted on the record that adjudication was done by Assistant Collector regarding an amount of Rupees 28,876,294 whereas under S.179(1) of the Customs Act, 1969 the authority to adjudicate upon the case exceeding Rupees 15,000,00 vested only with the Collector----Order-in-original was therefore, without jurisdiction making the entire proceedings coram non judice---Any transgression to the responsibility assigned within the parameters of S.179(1) of the Customs Act, 1969 would render the entire exercise of authority ab initio void and illegal----Findings of Appellate Tribunal could not be interfered with---Appeal was dismissed, in circumstances.

Mansab Ali v. Amir PLD 1971 SC 124; Faqir Abdul Majeed Khan v. District Returning Officer and others 2006 SCMR 1713 Yousaf Ali v. Muhammad Aslam Zia and 2 others PLD 1958 SC 104; Saeed Farooq v. State and 2 others 1996 MLD 434 and Collector of Customs, Model Customs Collectorate of PACCS, Karachi v. Messrs Kapron Overseas Supplies Co. (Pvt.) Ltd. Karachi 2010 PTD 465 rel.

Miss Amna Warsi for Appellant.

Mian Abdul Ghaffar for Respondent.

Date of hearing: 18th April, 2013.

2014 P T D 320

[Lahore High Court]

Before Syed Mansoor Ali Shah and Mamoon Rashid Sheikh, JJ

COMMISSIONER INLAND REVENUE ZONE-II, REGIONAL TAX OFFICE, MULTAN

Versus

Mrs. AMBREEN FAWAD CO. PAK ARAB FERTILIZERS LIMITED, MULTAN

T.R. No.51 of 2011, heard on 4th November, 2013.

(a) Interpretation of statutes---

----"Beneficial legislation"---Meaning and scope of---Principles of interpretation, explained.

N. S. Bindra, Interpretation of Statutes, Tenth Edition, pp.341-342 & 348 ref.

(b) Interpretation of statutes---

----"Remedial or curative statutes"---Meaning and scope of---Principles of interpretation, explained.

N. S. Bindra, Interpretation of Statutes, Tenth Edition, pp.341-342 & 348 and Antonin Scalia & Bryan A. Garner, Reading Law, The Interpretation of Legal Texts, 2012, p.365 ref.

(c) Interpretation of statutes---

----Retroative legislation--- Retrospective effect of legislation---Principles of interpretation---Scope---Retroactive legislation was looked upon with disfavour, as a general rule, and properly so because of its tendency to be unjust and oppressive---In the absence of any indication in the statute that the Legislature intended for it to operate retroactively, it must not be given retrospective effect---Where a statute however, was procedural, declaratory or explanatory or where a statute was passed for the purpose of supply an obvious omission in a former statute, it was to operative retrospectively obviously because it did not affect vested rights.

Earl T. Crawford, The Construction of Statutes, 1940 pp.562-563; Taxmann Interpretation of Taxing Statutes, p.475 and 1993 SCMR 73 at 78 rel.

(d) Interpretation of statutes---

----Retrospective effect of beneficial, remedial or curative legislation---Meaning, object, scope and principles of interpretation for such statutes explained.

N. S. Bindra, Interpretation of Statutes, Tenth Edition, pp.341-342 & 348; Antonin Scalia and Bryan A. Garner, Reading Law, The Interpretation of Legal Texts, 2012, p.365; Earl T. Crawford, The Construction of Statutes, 1940 pp 562-563; Taxmann Interpretation of Taxing Statutes, p.475; Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73 and State Bank of Pakistan v. Messrs Faisal Spinning Mills Limited 1997 SCMR 1244 rel.

(e) Interpretation of statutes---

----Beneficial legislation---Retrospective effect of beneficial legislation---Liberal interpretation---Scope---Beneficial legislation, generally, was to be given a liberal interpretation, however for the said legislation to have a retrospective effect, beneficial legislation must carry curative or remedial content---Such legislation must, therefore, either clarify an ambiguity or an omission in the existing law and must be explanatory or clarificatory in nature---While beneficial legislation was to be liberally interpreted, in order to advance the beneficent object of the statute, it in no manner meant that "beneficial legislation" or "liberal interpretation" necessarily included or interchangeably meant retrospective application of the statute---Unless the legislation was remedial, curative, explanatory or clarificatory, it could not be interpreted retrospectively merely on the ground that the legislation is generically beneficial in nature.

Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73 and State Bank of Pakistan v Messrs Faisal Spinning Mills Limited 1997 SCMR 1244 rel.

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

----Second Sched. Part I, Cl. (103B) & S.150---Deduction of tax at source---Dividends---Dividends in specie---Conditional exemption on payment of tax on dividends in specie by virtue of Cl.(103B) of the Second Schedule to the Income Tax Ordinance, 2001---Retrospective application of such exemption---Scope---Contention of the taxpayer was that Cl.(103B) of Part I of the Second Schedule to the Income Tax Ordinance, which was introduced in the year 2010, applied retrospectively to the tax year 2008; therefore, the taxpayer was not liable to tax on payment of dividends in specie, for the tax year, 2008---Validity---Section 5 of the Income Tax Ordinance, 2001 was the charging section for the imposition of tax on dividends, and Cl. (103B) of Part I of the Second schedule to the Ordinance simply introduced a conditional exemption in the year, 2010 which did not remedy or cure any ambiguity or omission in the law, and on the contrary, provided an exemption from tax for the first time which was not in existence in the year 2008---Labeling said Cl. (103B) Part I of the Second Schedule to the Income Tax Ordinance, 2001 as remedial or curative legislation, was therefore, misconceived and it did not have a retrospective effect and had therefore, had no application to the tax year 2008---Reference was answered, accordingly.

Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73 and Dawood Cotton Mills v. Commissioner of Income Tax 2000 PTD 285 distinguished.

(g) Words and phrases---

----"Deduct", meaning of---Word "deduct" meant to take away money, points, etc. from a total amount; or to take away, separate, or remove, in numbering or estimating, to subtract often with from or out of, and to take away an amount from a total or take away or subtract from a sum.

Oxford Advanced Learner's Dictionary, 8th Edition, p.395; Webster's new International Dictionary, Second Edition, p.684; Merriam-Webster's Collegiate Dictionary, Eleventh Edition, p.324 and The Major Law Lexicon, 4th Edition 2010, p.1841 rel.

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

----Ss. 150, 156(2) & 233(2)---Deduction of tax at source---Dividends---Dividends in specie---Deduction of tax in terms of S.150, Income Tax Ordinance, 2001 on payment of dividend in specie---Question before the High Court was whether a company paying dividend in specie to its directors was entitled to deduct tax in terms of S.150 of the Income Tax Ordinance, 2001---Held, that S.150 of the Income Tax Ordinance, 2001 implied that dividend should in such a form that deduction of tax therefrom was possible from the person paying the dividend---In case of dividend in specie, such deduction was not practically possible---Reference was to be made to S.156(2) of the Ordinance which stated that in case prize was not in cash, the person while giving the prize shall collect tax on the fair market value of the prize; which was similar to the case of Brokerage and Commission under S.233(2) of the Income Tax Ordinance, 2001---Therefore, unless S.150 of the Income Tax Ordinance, 2001 separately provided for collection of tax from assessee at the time of deduction of tax, the same section could not be applied to "dividend in specie"---Reference was answered, accordingly.

Agha Muhammad Akmal Khan and Tariq Manzoor Sial, along with Asif Rasool, Addl. Commissioner, Inland Revenue, Multan for Petitioner.

Rana Muhammad Afzal for Respondent-Assessee

2014 P T D 420

[Lahore High Court]

Before Syed Mansoor Ali Shah and Mamoon Rashid Sheikh, JJ

COMMISSIONER INLAND REVENUE (LEGAL DIVISION), MULTAN

Versus

Messrs MULTAN EDUCATIONAL TRUST, MULTAN

T.R. No. 1 of 2011, heard on 1st November, 2013.

(a) Income Tax Ordinance (XLIX of 2001)

----Ss. 80(2)(b)(v) & 113---Societies Registration Act (XXI of 1860) S.1---Categories of "persons" under the Income Tax Ordinance, 2001---"Company" definition of---Society registered under the Societies Registration Act, 1860 to mean to be a "company" for the purpose of the Income Tax Ordinance, 2001---Scope---Contention of the assessee Society was that it did not fall within the definition of "Company" under S.80(2)(b)(v) of the Income Tax Ordinance, 2001 as it was merely registered under the Societies Act, 1860 and was not "established or constituted under any law for the time being in force"---Validity---Under S.80(2)(b)(v) of the Income Tax Ordinance, 2001 a Society established or constituted by or under any law for the time being in force shall mean to be a "company" for the purposes of the Income Tax Ordinance, 2001----Society, in the present case, was registered under the Societies Act, 1860---Society formed by the Societies Act, 1860 meant that the entity was the creation of the statute itself, in other words, the primary legislation itself established the Society, and the source being the Legislature itself; and the phrase "under an Act" meant that an entity was formed by complying with the procedure set out in the Societies Act, 1860 and not directly by the Societies Act, 1860---Society was formed under the umbrella of the Societies Act, 1860 by complying with the procedure under S.1 of the Societies Act, 1860 and did not have legal existence prior to it---Assessee Society, therefore, squarely fell within the definition of "company" under S.80(2)(b)(v) of the Income Tax Ordinance, 2001---Society, registered under the Societies Registration Act, 1860 was a body corporate established and constituted "under the Societies Registration Act, 1860" and therefore fell within the definition of "company" under the Income Tax Ordinance, 2001; hence the respondent Society was liable to pay minimum tax under S.113 of the Income Tax Ordinance, 2001---Reference was answered in negative, in circumstances.

Commissioner of Income Tax/Wealth Tax Companies Zone-II Lahore v. Messrs Lahore Cantt. Cooperative Housing Society, Lahore and 7 others 2009 SCMR 715 = 2009 PTD 799 distinguished.

(b) Words and Phrases---

----"Formed", meaning of---"Formed" meant to constitute or to come into existence and also meant the set up, establish, found or bring into being.

Chamber's 21st Century Dictionary and Concises Oxford Thesaurus rel.

(c) Interpretation of statutes---

----"Established or constituted by or under the Act" or any other law being in force for the time being---Meaning and connotation---"By an Act" would mean by a provision directly enacted in the statute in question and which is gatherable from its express language or by necessary implication therefrom---Words "under an Act" would, in that context, signify what was not directly to be found in the statute itself but was conferred or imposed by virtue of powers enabling this to be done; in other words, by laws made by a subordinate law-making authority which was empowered to do so by the parent Act.

Dr. Indramani Pyarelal Gupta and others v. W.R. Natu and others AIR 1963 SC 271 rel.

Ch. Muhammad Asghar Saroha for Petitioner (in T.Rs. Nos.1, 5, 6, 7 and 8 of 2011).

Agha Muhammad Akmal Khan and Tariq Manzoor Sial, for Petitioner (in T.Rs. Nos. 34, 35, 36, 37 and 38 of 2011).

Asif Rasool, Additional Commissioner and Dr. Athar Ishaq, Deputy Commissioner, Inland Revenue, Multan for Petitioner.

Muhammad Usman Hadi from M.A. Hadi and Company, Accountants and Auditors for Respondent.

2014 P T D 478

[Lahore High Court]

Before Abdus Sattar Asghar, J

D.G. KHAN CEMENT COMPANY LTD., through Chief Financial Officer and another

Versus

PROVINCE OF PUNJAB through Chief Secretary and 3 others

Writ Petition No.23384 of 2013, heard on 19th November, 2013.

Excise Duty on Minerals (Labour Welfare) Act (VIII of 1967)---

----Ss.3 & 10---Notifications S.R.O. 1168(X)/68, dated 10-7-1968, issued by Federal Government and SO(T) M&MD8-21/2011, dated 30-4-2013, issued by Punjab Government---Constitution of Pakistan, Arts. 143 & 199---Constitutional petition---Delegation of power---"Cess" and "tax"---Distinction---Petitioner assailed Notification SO(T) M&MD 8-21/2011, dated 30-4-2013, issued by Punjab Government, whereby an amendment was made in Schedule available in Excise Duty on Minerals (Labour Welfare) Act, 1967---Plea raised by petitioner was that central excise duty in the form of cess or tax rested within the exclusive domain of Federal Government---Validity---Cess was a tax confined to local area for specific object or particular purpose---Imposition of cess was co-related to the object for which it was to be used---Tax was compulsory exaction of money by public authority for public purposes enforceable by law---Tax realized, formed part of general revenue of the State, whereas cess imposed for specific object and purpose was not part of general revenue---Cess must be utilized for attainment of the purpose and object of imposition---Object of levy in question was welfare of labour employed in mining industry and the declared object fell within the purview of larger pubic interest---Petitioner failed to establish that notification in question did not advance public interest i.e. welfare of labour employed in mining industry or caused any harm to petitioner's fundamental right of freedom of trade or business---Both the notifications were neither ulra Constitutional nor illegal---Petition was dismissed in circumstances.

Shaheryar Kasuri for Petitioners.

Imtiaz Ahmed Kaifi, Additional Advocate General for Respondents.

Date of hearing: 19th November, 2013.

2014 P T D 501

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

LAHORE ELECTRIC SUPPLY COMPANY LTD. through Director Legal---Petitioner

Versus

FEDERAL BOARD OF REVENUE through Chairman and 2 others---Respondents

Writ Petitions Nos.29138, 30678 and 30782 of 2013, decided on 16th January, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 11-A & 48-----Constitution of Pakistan, Art. 199---Constitutional petition---Short-paid amounts of Sales Tax recoverable without notice---Expression "as indicated in its return"---Exercise of power under S.11-A of the Sales Tax Act, 1990---Scope----Petitioners were Electricity Supply Companies and impugned notices issued to them under S. 11-A of the Sales Tax Act, 1990 with regard to short paid amount of sales tax---Contention of the petitioners' was inter alia, that the Federal Board of Revenue ("FBR") relied on externous documents (electricity bills placed on the petitioners' websites) and on such information had claimed that the petitioners' had short paid tax---Validity---Petitioners had provided with their returns, the details of units consumed by each supplier and the FBR had verified the number of units consumed by each supplier from the information found on petitioners' websites---Information had already been annexed by the petitioners with their return, and the respondent FBR had merely verified the information with regard to units consumed by electricity consumers and determined that the petitioners had short-paid sales tax---Section 11-A of the Sales Tax Act,1990 did not prohibit verification process undertaken by the FBR---Contention that the system for filing returns was electronic, and would only accept returns if liability was fully discharged, was misconceived, as e-filing of return along with required information did not take away the ability or requirement to verify the information to determine whether less tax had been paid---For purposes of S. 11-A of the Sales Tax Act, 1990, electricity bills relied upon did form part of the returns filed, and the action initiated under S. 11-A of the Act, therefore, was based on information provided by the petitioners in their returns---Constitutional Petitions were dismissed, in circumstances.

Micro Corporation through Managing Partner v. Deputy Collector, Customs, Sialkot 2006 PTD 378; Messrs G.M.H. Traders and Manufacturers through Proprietor/Chief Executive v. Deputy Director/Investigating Officer, Directorate of Intelligence/Investigation, Lahore 2009 PTD 1894; Province of the Punjab through Secretary Health Department v. Dr. S. Muhammad Zafar Bukhari PLD 1997 SC 351; Atta Muhammad and 16 others v. Modern Textile Mills (Pvt.) Ltd., and 2 others 2004 PLC 137 and 'Tufail Muhammad and others v. Raja Muhammad Zia Ullah Khan, Claims Commissioner, Lahore and Director of Enforcement, Evacuee Property and Claims, South Zone, Lahore PLD 1965 SC 269 ref.

Shahbaz Butt for Petitioner.

Ch. Muhammad Zafar Iqbal, Muhammad Yahya Johar, Shafqat Mehmood Chief Commissioner RTO, Asim Majeed, Commissioner Zone-IV, RTO, Lahore, Nadeem Rizvi, Commissioner, Zone-I, RTO, Lahore and Raza Ashfaq Sheikh, Deputy Commissioner, Zone-I, RTO, Lahore for Respondents.

Date of hearing: 5th December, 2013.

2014 P T D 525

[Lahore High Court]

Before Shezada Mazhar, J

Messrs WASIM RADIO TRADERS through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division Islamabad and others

Writ Petitions Nos.31010 and 31013 of 2013, decided on 3rd December, 2013.

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

---S. 81---Customs Rules, 2001, R. 125---Constitution of Pakistan, Art.199---Constitutional petition---"Declared value" and "value under the Valuation Rulings"---Distinction---Provisional determination of liability---Non-release of consignment by the Customs Authorities---Provisional release of goods---Scope---Customs Authorities refused to assess imported goods on the basis of declared value and petitioners sought clearance of goods---Validity---Difference between the "declared value" and "value under the Valuation Rulings" had to be secured by way of bank guarantee to the satisfaction of the Collector concerned---Purpose of such provision was not only to protect the revenue of the State but also to provide smooth flow of trade---Importer had right for provisional release of his goods if the value of the imported goods being valued was disputed.

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

---S. 25---Value of imported and exported goods, determination of---Scope---Customs Authorities were bound to assess the imported goods and if authorities were not agreeable to the declared value, then they were required to follow certain procedure and only after following said procedure, they could proceed to assess the value of goods---Provisions of Customs Act, 1969 were "subject to the Customs Rules, 2001".

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

---Ss. 25-A & 25---Power to determine customs value---Scope---Collector as well as Director of Customs Valuation had power to determine the customs value of any goods or category of goods after following the method laid down in S. 25 of Customs Act, 1969 or whichever was applicable---Customs Rules, 2001 were applicable to S.25-A of the Customs Act, 1969.

Mian Abdul Ghaffar for Petitioner.

Amir Hussain Cheema for Respondents.

2014 P T D 706

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

UNION LOCAL LOOP (PVT.) LTD.

Versus

FEDERAL BOARD OF REVENUE and others

Writ Petition No. 20783 of 2012, decided on 30th May, 2013.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(1), (5), 124 & 127---Constitution of Pakistan, Art. 199---Constitutional petition---Maintainability---Availability of adequate statutory remedy---Effect---Petitioner-company impugned amended assessment order under Ss. 122(1) & (5) read with S. 124 of Income Tax Ordinance, 2001---Plea of respondent Authority that present constitutional petition was not maintainable as adequate remedy was available to petitioner-company against assessment order, which statutory remedy must be availed under S. 127 of Income Tax Ordinance, 2001---Validity---Statutory remedy of appeal was available to petitioner-company---Impugned order had been issued under Ss.122(1) & (5) read with S. 124 of Income Tax Ordinance, 2001, against which an appeal lay under S. 127 of the same Ordinance---Petitioner-company participated in the audit proceedings, which led to the amendment in the assessment, and at that time petitioner-company did not raise any objection with respect to selection for audit---No case of illegality was made out---Constitutional petition was dismissed accordingly.

Muhammad Zafar Iqbal for Petitioner.

Muhammad Ilyas Khan for Respondents.

2014 P T D 841

[Lahore High Court]

Before Abid Aziz Sheikh, J

Messrs MAGNA PROCESSING INDUSTRIES (PVT.) LTD., FAISALABAD through Chief Executive---Petitioner

Versus

FEDERATION OF PAKISTAN through Secretary and others---Respondents

Writ Petition No.1461 of 2014, decided on 21st January, 2014.

Sales Tax Act (VII of 1990)---

----S. 46(1)---Constitution of Pakistan, Art. 199---Constitutional petition---Recovery of sales tax on electricity bills---Stay against disconnection of electricity connection till disposal of appeal by Appellate forum---Scope---Petitioner-company filed application before Commissioner Inland Revenue for zero-rating of sales tax facility on electricity bill, however same was rejected on basis of certain alleged discrepancies regarding supplies made by petitioner-company in violation of S.R.O.---Said discrepancies were communicated to petitioner-company and it was ordered to pay its outstanding sales tax on electricity bill---Petitioner-company filed appeal against order of Commissioner Inland Revenue before Appellate Tribunal Inland Revenue---During pendency of said appeal, concerned Electric Supply Company threatened to disconnect electricity connection of petitioner-company---Pleas on behalf of petitioner-company were that Electric Supply Company was threatening to disconnect its electricity connection during pendency of appeal before the Appellate Tribunal; that it was settled law that unless appeal was decided by atleast one independent forum, coercive measures for recovery of disputed amount could not be made---Validity---Pleas raised by petitioner-company was tenable---High Court directed that Appellate Tribunal should decide the appeal of petitioner-company within a period of 30 days, and till decision of the appeal, electric supply company should not disconnect electricity connection of petitioner-company---Constitutional petition was disposed of accordingly.

Sun-Rise Bottling Co. (Pvt.) Ltd. through Chief Executive v. Federation of Pakistan and 4 others GST 2003 CL 283 and Messrs Z.N. Exports (Pvt.) Ltd. v. The Collector of Sales Tax 2006 PTD 535 ref.

Khubaib Ahmad for Petitioner.

2014 P T D 883

[Lahore High Court]

Before Shezada Mazhar, J

Haji ABDUL RAZZAQ KHAN

Versus

FEDERATION OF PAKISTAN through Secretary and 5 others

Writ Petition No.32554 of 2013, decided on 21st January, 2014.

Import Policy, 2013---

----Cl. 4, proviso---Notification S.R.O. 193(I)/2013, dated 8-3-2013---Constitution of Pakistan, Art. 199---Constitutional petition---Violation of import policy---Grievance of petitioner was that he lawfully imported vehicle in question but authorities had illegally seized the same---Validity---After change in Import Policy vide S.R.O. 193(I)/2013, dated 8-3-2013, letter of credit could not be amended by bank for import of vehicles which were older than five years, as the same would be in violation of Import Policy, 2013---Petitioner did not place on record any document with regard to alleged enhancement of letter of credit dated 23-1-2013---Authorities had made seizure in accordance with law and facts of the case---High Court declined to declare that vehicle in question had been imported under letter of credit dated 23-1-2013---Petition was dismissed in circumstances.

Messrs S.T. Enterprises through Proprietor v. Federation of Pakistan through Secretary, (Revenue Division/FBR) Islamabad and 4 others 2009 PTD 467 and Messrs Zeb Traders through Proprietor v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 3 others 2004 PTD 369 distinguished.

Mian Abdul Ghaffar for Petitioner.

Ch. Muhammad Zafar Iqbal for Respondents.

Zahid Saleem Mirza, Senior Intelligence Officer.

Muhammad Ilyas Intelligence Officer.

2014 P T D 1051

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

HASHIM ASLAM BUTT

Versus

FEDERATION OF PAKISTAN through Ministry of Finance and 4 others

Writ Petition No.16001 of 2013, decided on 16th January, 2014.

Sales Tax Act (VII of 1990)---

----S.37---Qanun-e-Shahadat (10 of 1984), Art.9---Constitution of Pakistan, Art.199---Constitutional petition---Privileged communication---Address of client---Petitioner was advocate who represented his client before Commissioner Inland Revenue---Investigating authorities summoned petitioner under S. 37 of Sales Tax Act, 1990, to obtain information from him with regard to his client---Plea raised by petitioner was that communication between counsel and client were privileged and protected under Art. 9(2) of Qanun-e-Shahadat, 1984---Validity---Petitioner was called upon to disclose identity of his client because petitioner was engaged by his client in a case and investigating authorities wanted to use that information which petitioner had about his client in furtherance of his investigation---Client did not reveal its identity to investigating authorities in its ongoing investigation, in such a situation identity of client had become privileged communication under Art. 9 of Qanun-e-Shahadat, 1984---Investigating authorities could not use machinery available to them for the purposes of investigation to compel an advocate engaged by a client to disclose whereabouts of his client when the whereabouts and identity of client were under investigation---Investigating authorities could not compel petitioner to disclose identity of his client on the grounds that he was representing his client before some other forum or in some other case---Identity of client was privileged communication under Art.9 of Qanun-e-Shahadat, 1984---High Court declared the summons issued in the name of petitioner as illegal---Petition was allowed in circumstances.

Muhammad Maqsood Sabir Ansari v. District Returning Officer, Kasur and others PLD 2009 SC 28 and Syed Ali Nawaz Gardezi v. Lt. Co. Muhammad Yusuf PLD 1963 SC 51 ref.

Khurram Saeed for Petitioner.

Salman Faisal for Respondents.

Date of hearing: 4th December, 2013.

2014 P T D 1285

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

TREET CORPORATION LTD. through Company Secretary and others

Versus

FEDERATION OF PAKISTAN through Ministry of Finance and others

Writ Petitions Nos.28287, 28917, 31630, 29398, 29404, 39408, 30625, 31964, 29402, 30070, 29473, 28920, 29712, 29707, 28356, 28354, 28355, 30617, 31629, 31429, 30060 and 31390 of 2013, 430, 2604, 634, 1401, 1196, 313, 2392, 500, 1941, 999, 3894, 5505, 5288, 5292, 5496, 4700 and 5643 of 2014, decided on 7th March, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 2(22A), 7, 2(20)(c) & 2(4)---Constitution of Pakistan, Art. 199---Constitutional petition---Interpretation of Ss. 2(22A) and 7 of the Sales Tax Act, 1990---Provincial sales tax---Adjustment of provincial input tax by the taxpayer under S. 7(1) of the Sales Tax Act, 1990---Specific nature of right of adjustment of input tax---Determination of sales tax liability---Petitioner / taxpayer impugned denial of input tax adjustment on provincial sales tax paid by petitioner---Such adjustment was denied to the petitioner by the Department on the ground that notwithstanding promulgation of provincial sales tax law in three Provinces, the same were not recognized as provincial sales tax law for the purpose of input tax adjustment by the Department---Department further contended that S. 2(22A) of the Sales Tax Act, 1990 provided a discretion to decide as to which provincial sales tax should be allowed for adjustment of input tax under S. 7 of the Sales Tax Act, 1990----Held, that basic right of the petitioner was provided under S. 7(1) of the Sales Tax Act, 1990 wherein taxpayer was entitled to adjustment of input tax from their output tax for a given tax period---Sales Tax Act, 1990 had clearly defined input tax under S. 2(14) and output tax under S. 2(20)(c) to mean provincial sales tax levied on services rendered or provided to the person---Section 2(22A) of the Sales Tax Act, 1990 defined provincial sales tax to mean tax levied under provincial laws which meant provincial sales tax as promulgated in any or all of the Provinces of Pakistan and further defined that for purposes of the Islamabad Capital Territory, provincial sales tax would be that which was declared by the Federal Government to be a provincial sales tax for purposes of input tax adjustment, which declaration was required in the Official Gazette only for the purpose of Islamabad Capital Territory---Respondent Department, in the present case, had assumed under the cover of S.2(22A) of the Sales Tax Act, 1990 a discretionary power to decide as to which provincial sales tax should be allowed for input tax adjustment, and such discretion had the effect that S. 7 of the Sales Tax Act, 1990 had become subject to the discretion of the Department and the Federal Government; which clearly was not within the scheme of the Sales Tax Act, 1990 which on the contrary, provided a specific right of adjustment of input tax---Section 2(22A) of the Sales Tax Act, 1990 could not be used to deny the right of input tax adjustment by a declaration in the Official Gazette---High Court directed the Department to accept sales tax return filed by the petitioner by allowing adjustment claimed by the petitioner of provincial sales tax on services under provincial laws---Constitutional petition was allowed, accordingly.

Shahzad A. Elahi and Shoaib Rashid, for Petitioners.

Muhammad Zakria Sheikh, D.A.G. and Nadeem Mahmood Mian for Respondent No.1/FOP.

Ch. Muhammad Zafar Iqbal, Mian Qamar ud Din Ahmad, Siraj Ahmad and Muhammad Ilyas Khan for Respondent No.2./FBR.

Sarfraz Ahmad Cheema, Mrs. Kausar Parveen, Tariq Saleem Sheikh and M. Zafar Iqbal Mian, and Nadeem Salah-ud-Din, Deputy Commissioner (Legal) Punjab Revenue Authority for Respondent No.3/CIR.

Date of hearing: 7th March, 2014.

2014 P T D 1377

[Lahore High Court]

Before Syed Mansoor Ali Shah and Shahid Jamil Khan, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs BASHIR BROTHERS

I.T.A No.178 of 2000, decided on 25th March, 2014.

Income Tax Ordinance (XXXI of 1979)---

----Ss.59 & 62---Circular No.5 of 1990, 22 of 1991---Circular No. 16 of 1992 dated 1-7-1992---Self Assessment Scheme---Selection for total audit---Appellate forums setting aside decision of Assessing Officer, whereby cases of assessees were selected for total audit---Plea raised by authorities was that action by Assessing Officer was within the mandate of Circulars and suspicion was sufficient for selecting case for total audit---Validity---Definite information could become basis of setting apart a case before its finalization under S. 59(1) of Income Tax Ordinance, 1979, however the same definite information could become cause of an action under S. 65 of Income Tax Ordinance, 1979, if the case was finalized---Contention that mere suspicion was required for setting apart a case for audit, was negated by Circular itself---'State does not cheat the citizens' is the doctrine which leads subjects to follow schemes/invitation by government---Any unscrupulous action by a department under such schemes would lead to mistrust and result anarchy---Requirement of definite information was not met by authorities, therefore, High Court answered question of authorities in the affirmative---Reference was replied accordingly.

Income-Tax Officer and another v Messrs Chappal Builders 1993 PTD 1108 = 1993 SCMR 1108 ref.

Muhammad Irshad Chaudhary and Qazi Ghulam Dastgir, for Appellant.

Faisal Jaffar Khan for Respondent.

Date of hearing: 25th March, 2014.

2014 P T D 1419

[Lahore High Court]

Before Syed Mansoor Ali Shah and Shahid Jamil Khan, JJ

COMMISSIONER OF INCOME TAX (LEGAL)

Versus

Messrs BEEPS AND BELLS COMMUNICATION (PVT.) LTD.

I.T.R. No.35 of 2011, decided on 25th March, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss.161, 236(I)(b)(3) & 236(I)(c), (3A)---Advance income tax---"Pre-paid telephone cards" and "pay-phone companies"---Distinguished---Advisory jurisdiction of High Court---Mixed question of law and fact---Scope---Income Tax Appellate Tribunal annulled order passed under S.161 of Income Tax Ordinance, 2001, for default of non-deduction of advance income tax under S.236(I)(b)(3) of Income Tax Ordinance, 2001---Plea raised by authorities was that nature and business of pre-paid telephone cards and pay-phone companies was identical---Validity---In year 2004-2005, liability to deduct advance tax was restricted to pay-phone companies dealing in sale of pre-paid cards only---Business of selling pre-paid cards was different from selling of units as had been highlighted by legislature through amendment brought about in S.236(I)(c) and (3A) of Income Tax Ordinance, 2001---Mixed questions of law and facts could be answered in advisory jurisdiction of High Court---In year, 2004-2005, provision of S.236(I) of Income Tax Ordinance, 2001, was not applicable to case of pay-phone dealing with sale of units---Questions of law raised in reference were answered in affirmative---Reference decided accordingly.

Call Tell (Pvt.) Ltd., and another v. Federation of Pakistan and others 2004 PTD 3032; Union Cosmic Communications (Pvt.) Ltd. Karachi v. Central Board of Revenue and another 2006 PTD 1678 and Naseer A. Sheikh and 4 others v. The Commissioner of Income-Tax (Investigation), Lahore and others PLD 1992 SC 276 ref.

Ms. Shahina Akbar for Applicant.

Nemo for Respondent.

Date of hearing: 25th March, 2014.

2014 P T D 1472

[Lahore High Court]

Before Syed Mansoor Ali Shah and Shujaat Ali Khan, JJ

COMMISSIONER INLAND REVENUE, LARGE TAXPAYERS UNIT, ZONE-II, LAHORE

Versus

Messrs NESTLE PAKISTAN LTD.---Respondent

Sales Tax Reference Application No.14 of 2013, heard on 11th March, 2014.

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

----Ss. 30 & 31---Scheme of administrative tax governance under the Sales Tax Act, 1990---Specific nature of jurisdiction of sales tax officers under the Sales Tax Act, 1990---Section 30 of the Sales Tax Act, 1990 provided a list of officers of Sales Tax (or Inland Revenue) who were appointed by the Federal Board of Revenue in relation to any area, person or class of persons----Officers mentioned in S. 30 had a specific jurisdiction co-related to an area or person or class of persons and such specific nature of jurisdiction was reaffirmed in S. 31 of the Sales Tax Act, 1990 where an officer of Inland Revenue was under an obligation to exercise such powers and discharge such duties as were conferred or imposed on him under the Sales Tax Act, 1990---In order to achieve an architecture of effective tax governance in the country, officers of the Inland Revenue had been assigned specific jurisdictions based on area or person or class of persons and they could only operate within the said specified domain and even though the officers enjoy a generic nomenclature such as, "Commissioner of Inland Revenue", but they exercised power only within their delineated sphere permitted under the Act---Specific circle of power assigned to each officer went to the root of effective tax governance under the Sale Tax Act, 1990---Structure of governance under Ss. 30 & 31 of the Sales Tax Act, 1990 had to be strictly followed.

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

----Ss. 47, 30 & 31---Reference to High Court---Persons authorized to file sales tax reference to High Court---Nature of jurisdiction of Commissioner under S. 47(1) of the sales Tax Act, 1990---Scope---Contention of taxpayer was that person who signed the reference, inter alia, at the time of filing of present reference, was no longer the Commissioner Inland Revenue, and was not the Commissioner exercising jurisdiction over the case of the taxpayer---Held, that S.47(1) of the Sales Tax Act, 1990 authorized a "Commissioner" to prefer an application/reference against the order of the Appellate Tribunal before the High Court and it also authorized the said "Commissioner" to delegate the said power to an officer of Inland Revenue not below the rank of Additional Commissioner---Reading of S.47(1) along with Ss. 30 & 31 of the Sales Tax Act, 1990 and notification issued thereunder meant that "Commissioner" under S.47(1), was "Commissioner" enjoying jurisdiction over the taxpayer company; and therefore, it was only the said "Commissioner" who could prefer an application/reference against the order of the Appellate Tribunal in the case of the taxpayer before the High Court and no other "Commissioner"---Such structure of governance had to be strictly followed in terms of Ss. 30 & 31 of the Sales Tax Act, 1990 and it could not be said that any "Commissioner" in the country could assume jurisdiction over the case of the taxpayer and file a reference against the decision of the Appellate Tribunal passed in favour of the taxpayer as any such step would lead to chaos and demolish the structure of tax administration built under Ss. 30 & 31 of the Sales Tax Act, 1990---Section 47(1) of the Act specifically envisaged "Commissioner" as the highest authority authorized to file a reference and no other officer of Inland Revenue, even higher in rank, could file a reference under the said provision---Section 47(1) of the Sales Tax Act, 1990 also showed that the authorization has to be valid at the time when the application/reference was preferred before the High Court and the cutoff date for validation of such authorization was the date of the filing of the reference---On the date of filing of the present reference, the person who signed the power of attorney was no more the Commissioner Inland Revenue but had actually become the Chief Commissioner Inland Revenue, Regional Tax Office---Contention that the said person signed the power of attorney, as well as the affidavit while he was the "Commissioner" Inland Revenue and, therefore, the instant reference was maintainable, was without force because the cutoff point is the time when the reference was filed before the High Court and, admittedly, at the time of the filing of the said reference, the said officer was not the "Commissioner" Inland Revenue enjoying territorial jurisdiction over the petitioner Company---Reference, having been filed by unauthorized person, was dismissed, in circumstances.

Mrs. Kausar Perveen and Ch. Muhammad Zafar Iqbal for Petitioner.

Imtiaz Rasheed Siddiqui, Shehryar Kasuri and Asim Zulfiqar, Chartered Accountant for Respondents.

Date of hearing: 11th March, 2014.

2014 P T D 1506

[Lahore High Court]

Before Shezada Mazhar, J

ASHRAF STEEL MILLS---Petitioner

Versus

DIRECTOR INTELLIGENCE and others---Respondents

Writ Petition No.13270 of 2013, decided on 7th June, 2013.

Sales Tax Act (VII of 1990)---

----Ss.38, 37A, 37B & 37C---Constitution of Pakistan Art.199---Constitutional petition---Investigative audit under S.38 of the Sales Tax Act, 1990---Adoption of coercive measures against taxpayer before completion of such audit---Contention of taxpayer/petitioner was that investigative audit of taxpayer was initiated by the Department under S.38 of the Sales Tax Act, 1990 and without completing said audit, F.I.R. against petitioner/taxpayer was registered---Held, that Department had not submitted anything regarding determination of taxpayer's sales tax liability and even in the F.I.R. it was only alleged that the taxpayer had made taxable supplies without registering itself with the department, and liability was mentioned on prima facie basis---No show-cause notice had been issued to the taxpayer nor any adjudicating proceedings were carried out against the taxpayer---Only on basis that the taxpayer was "prima facie involved in tax fraud and massive tax evasion as defined under S.2(37) of the Sales Tax Act, 1990", an F.I.R. was registered---High Court directed respondent Department to complete investigative audit initiated under S.38 of the Sales Tax Act, 1990 first, and only after adjudicating liability of taxpayer, coercive measures may be adopted against him---Constitutional petition was disposed of, accordingly.

Messrs G.M.H. Traders and Manufacturers v. Deputy Director/Investigating Offices, Directorate of Intelligence/Investigation, Lahore 2009 PTD 1894 ref.

Micro Corporation through Managing Partner v. Deputy Collector Customs, Sialkot 2006 PTD 378 rel.

Muhammad Akram Nizami for Petitioner.

Ch. Muhammad Imtiaz Elahi for Respondents.

2014 P T D 1530

[Lahore High Court]

Before Mrs. Ayesha A. Malik and Shams Mahmood Mirza, JJ

COMMISSIONER INLAND REVENUE

Versus

Rana RIASAT TUFAIL and others

I.C.A. No.770 of 2013, decided on 26th March, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 6 & 73---Sales Tax Rules, 2006. R. 12(5)---Tax refund---Entitlement to---Invoices of blacklisted entities/units---Tax authorities contended that respondent was not entitled to refund on the invoices of certain blacklisted units---Validity---Respondent was initially allowed to claim refund by tax authorities, which order was never challenged and had attained finality---Blacklisting of units was subsequent to the period for which refund was being claimed---At the time of the transaction the units/entities in question were admittedly not blacklisted---Presently there was no final order against the blacklisted units---Single Judge of High Court had rightly allowed respondent to claim refund for the invoices of units in question---Intra-court appeal was dismissed accordingly.

Sarfraz Ahmad Cheema for Appellant.

Sh. Shoaib Ahmad for Respondents.

2014 P T D 1549

[Lahore High Court]

Before Mrs. Ayesha A. Malik, J

FESCO

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.24140 of 2013, heard on 3rd December, 2013.

Sales Tax Act (VII of 1990)---

----S.48(I)(ca)---Constitution of Pakistan, Art. 199---Constitutional petition---Recovery during restraining order---Grievance of petitioner was that authorities made recovery of demand notice from its bank accounts despite issuance of restraining order by Appellate Tribunal---Validity---Notices under S.48(I)(ca) of Sales Tax Act, 1990, were issued on 11-9-2013, and authorities on the same day ensured its compliance by respondents---Undue haste was demonstrated on the part of authorities to recover amounts from petitioner---Authorities acted in total disregard of orders passed by Appellate Tribunal and due process---High Court directed the authorities to look into the matter and to ensure that such an act was not repeated---High Court further directed the authorities to refund amounts recovered from accounts of petitioner by authorities as the same were illegal---Petition was dismissed in circumstances.

Attock Cement Pakistan Ltd. v. Collector of Customs, Collectorate of Customs and Central Excise, Quetta and 4 others 1999 PTD 1982 rel.

Mian Ashiq Hussain for Petitioner.

Mian Asif Hashmi for Respondents Nos. 2 to 6.

Mansoor Baig for Respondent No.9.

Date of hearing: 3rd December, 2013.

2014 P T D 1563

[Lahore High Court]

Before Sh. Najam-ul-Hasan, J

Ms. FARRAH NOOR and another---Petitioner

Versus

The STATE and another---Respondents

Criminal Miscellaneous Nos. 4256-B and 4255-B of 2013, decided on 14th June, 2013.

(a) Criminal Procedure Code (V of 1898)---

----S. 498---Customs Act (IV of 1969), Ss. 2(s), 16, 18, 32(1) & (2), 156(1), (9), (14), & (82) & 178---Ad interim pre-arrest bail, confirmation of---Preparing false inspection report---Female customs inspector accused of preparing a false inspection report of a container regarding its contents, causing huge loss to the Government exchequer---Customs department and investigating officer were unable to produce any original documents/report containing signatures of accused---Accused was a lady and a government servant having service record of 25 years and apparently there was no criminal case against her except the present one---Offence alleged against accused was punishable with imprisonment of up to three years or fine or both, as such it did not fall within the prohibitory clause of S. 497(1), Cr.P.C.---Accused was also not required for any further investigation---Interim pre-arrest bail already granted to accused was confirmed in circumstances.

(b) Criminal Procedure Code (V of 1898)---

----S. 498---Customs Act (IV of 1969), Ss. 2(s), 16, 18, 32(1) & (2), 156(1), (9), (14), & (82) & 178---Ad interim pre-arrest bail, confirmation of---Evasion of customs duty---Company belonging to accused lady allegedly cleared a container from Customs in connivance with a customs inspector causing a huge loss to the Government Exchequer---Accused subsequently paid the relevant duty, penalty and even the fine and her container had been released by Customs department---Clearing agent who had submitted documents in place of accused was still at large---Offence alleged against accused was punishable with imprisonment of up to three years or fine or both, as such it did not fall within the prohibitoryclause of S. 497(1), Cr.P.C---Accused was also not required for any further investigation---Interim pre-arrest bail already granted to accused was confirmed in circumstances.

Muhammad Inayat Ullah Cheema Noor for Petitioner with Petitioner in person

Mian Abdul Ghaffar for Petitioner with Petitioner in person. (in Criminal Miscellaneous No.4255-B of 2013).

Nadeem Mahmood Mian, Legal Advisor for Customs Department with Iftikhar Ali Shah Inspector/Investigator for Respondents.

2014 P T D 1807

[Lahore High Court]

Before Syed Mansoor Ali Shah and Mamoon Rashid Sheikh, JJ

TAJ INTERNATIONAL (PVT.) LTD. and others

Versus

FEDERAL BOARD OF REVENUE and others

Writ Petition No.5047 of 2012, decided on 19th September, 2013.

(a) Taxation---

----Tax law---Purpose---Civil and criminal---Collection of tax---Punishment/deterrence---Tax was a fiscal tool to regulate the monetary policy of the State, hence, the primary focus of a tax law was the levy and collection of tax, however, as a white collar crime, tax evasion, etc had also been criminalized with the collateral effect of retribution and deterrence, in addition to achieving the fiscal incentives of the State---While assessment of tax liability was characteristically a civil proceeding, tax evasion or tax fraud, etc. could also be a tax crime and attracted both civil, as well as, criminal penalties---Under civil proceedings the tax was assessed and recovered as a compensation along with monetary penalties, while under criminal prosecution, tax evader was punished with imprisonment of fine or both.

(b) Administration of justice---

----Concurrent civil and criminal proceedings---Stay of criminal proceedings---Scope---Criminal and civil proceedings could co-exist and proceed side by side, in cases where the subject matter of both the proceedings was so closely interrelated, so that the outcome of the civil proceedings could have a material bearing on the criminal proceedings---Safer course, however in such a situation was to stay the criminal proceedings till the finalisation of the civil matter.

Akhlaq Hussain Kayani v. Zafar Iqbal Kiyani and others 2010 SCMR 1835 and Muhammad Akbar v. The State and others PLD 1968 SC 281 rel.

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

----Ss. 11, 37A & 72B---Self-assessed taxpayer---Tax evasion---Selection for criminal prosecution---Scope---Section 37A of the Sales Tax Act, 1990 could be employed to select or pick a taxpayer out of the pool of self-assessed taxpayers to undergo criminal prosecution without first carrying out an objective selection process of audit followed by assessment of tax under S. 11 of the Sales Tax Act, 1990---Criminal prosecution, generally, had no nexus with assessment of tax liability and could not be equated with cases selected for audit---While self-assessment scheme guarded the sanctity of self-assessed sales tax returns it afforded no protection to a criminal act committed by the tax payer---Audit was a tool that was primarily geared to decipher tax evasion from amongst the pool of taxpayers; it was a departmental surveillance tool for sniffing out tax that had gone unpaid---Criminality behind any such tax evasion was a separate matter.

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

----Ss. 33 & 37A(4)---Tax evasion---Criminal prosecution under S. 33 of Sales Tax Act, 1990---Principal purpose---Recovery of tax---Penalties provided under S. 33 of Sales Tax Act, 1990, clearly showed that the measure of sentence was linked with the "amount or loss of tax involved."---Said linkage, used the tool of penalty as a mode of recovery of tax---If the purpose (of criminalization) was simple retribution and deterrence, there was no need to load/link the fine with the amount or loss of tax involved---Hence, criminalization under the Sales Tax Act, 1990, went beyond the pale of retribution and deterrence and appeared to be principally focused on recovery of tax---Criminalization of recovery of tax was also evident from S. 37A(4) of the Sales Tax Act, 1990---Said provision permitted compoundability of the offence if the amount of tax due and penalties as determined under the Sales Tax Act, 1990 were paid at any stage of the criminal proceedings---Tax assessment became doubly necessary, when recovery (of tax) stood criminalized and entailed criminal consequences.

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

----Ss. 11, 25(5), 33, 37A & 37B---Constitution of Pakistan, Arts. 4, 10A & 199---Constitutional petition---Tax fraud---Criminal prosecution under the Sales Tax Act, 1990---Pre-condition---Tax assessment under S. 11 of Sales Tax Act, 1990 mandatory before initiation of criminal prosecution---Petitioners in the present case, were accused of tax fraud and criminal proceedings were initiated against them by registration of F.I.Rs.---Validity---Sales Tax Act, 1990 criminalised recovery of tax in addition to retribution and deterrence, thus tax assessment had to take place first under the provisions of the said Act---Criminal prosecution followed adjudication and assessment of tax under S. 11 of the Sales Tax Act, 1990---Pre-trial steps including arrest and detention could not be given effect to unless the tax liability of the taxpayer was determined (first) in accordance with S. 11 of the Sales Tax Act, 1990---Under S.33 of the Sales Tax Act, 1990, the fine under criminal prosecution was linked/loaded with the amount or loss of tax, thus such a criminal construct must (first) be prefaced with the mandatory requirement of assessment of tax through civil adjudication provided under S. 11 of the Sales Tax Act, 1990---Such precondition of assessment of tax was the minimum constitutional requirement to ensure fair trial and due process under Arts. 4 & 10A of the Constitution---Special Judge could not compound or award a sentence including a fine unless the loss of tax or amount of tax was first assessed---In the absence of tax assessment under S. 11 of the Sales Tax Act, 1990 and without knowing the "amount or loss of tax involved," neither compoundability was possible nor the award of sentence against the tax payer---Criminal proceeding initiated against the petitioners in the present case, and documented as F.I.Rs. were quashed as being unconstitutional, violative of fundamental rights, ultra vires the Sales Tax Act, 1990 and hence illegal and without lawful authority---Constitutional petition was allowed accordingly.

(f) Constitution of Pakistan---

----Art. 10A---Right to fair trial---Scope---Pre-trial steps---Right to fair trial under Art. 10A of the Constitution encompassed the whole trial including all the pre-trial steps like arrest, compoundability, etc.

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

----Ss. 30A, 33 & 37A---Constitution of Pakistan, Arts. 4 & 10A---Tax fraud---Criminal prosecution under the Sales Tax Act, 1990 on basis of "material evidence"---"Material evidence"---Scope---"Material evidence" must be credible and definite---"Material evidence" collected under S. 37A of the Sales Tax Act, 1990, needed to be credible and could best pass the test of fair trial and due process if it was an outcome of an inquiry or investigation envisaged under the proviso to S. 25(2) of the Sales Tax Act, 1990---Outcome of any such inquiry and investigation must be placed before an independent forum like the Directorate General (Intelligence and Investigation), Inland Revenue established under S. 30A of the Sales Tax Act, 1990 to first review the inquiry and investigation and the material evidence and then proceed under the law---Anything short of such process would not only lead to persecution of the tax payers, it would also make a mockery of the Fundamental Right of fair trial.

Imtiaz Rashid Siddiqui, Shehryar Kasuri, Ali Sibtain Fazli, Mirza Nasar Ahmad, Mian Abdul Ghaffar, Muhammad Akram Nizami, Muhammad Mansha Sukhera, M. M. Akram, Mian Masood Ahmed, Ch. Anwaar-ul-Haq, Muhammad Ajmal Khan, Sheikh Muhammad Farooq, Amir Umer Khan, Ch. Ishtiaq Ahmad Khan, Rana Muhammad Afzal, Khurram Shahbaz Butt, Muhammad Mohsin Virk, Umer Ahmed Khan, Waseem Ahmed Malik, Muhammad Ijaz, Rana Hammad Aslam, Hashim Aslam Butt, Muhammad Ejaz, Shahbaz Siddique, Zahid Ateeq, Asad Ihsan, Shabbir Ali Khokhar vice Mian Sultan Tanvir Ahmad, Mirza Yahya Farid, Ms. Khalida Abid, Khurram Ahmed Saeed, Hasnain Naveed Raja, Atif Muhtashim Khan, Talih Hussain , Syed Ali Zubair, Muhammad Ijaz Ali Bhatti, Naeem Khan, Mazhar Hayat, Sami Ullah Zia, Syed Naeem-ud-Din Shah, Amjad Farouck Bismill Rajpout, Shakeel Ahmad Basra, Muhammad Aamir Qadeer, Zia Shahid Waseer, Rana Munir Hussain, Raja M. Akhtar Zaman Khan, Javaid Anwar Janjua; Hassan Kamran Bashir, Muhammad Ayyaz Butt, Hafiz Saif-ur-Rehman, Ch. Muhammad Ali, Kamran Khalil, S.M. Masud, Ch. Saeed Ashraf, Khawaja Adnan Ahmed, Muhammad Amin Goraya, Shakeel-ur-Rehman Khan, Omer Farooq Khan, Shahid Umar Khan, Shezada Muhammad Zeeshan Mirza, Junaid Qayyum, Umar Ahmed Khan, Muhammad Shahid Baig, Iftikhar Ullah Malik, Mirza Nasir Hussain Shahid Baig, Syed Ali Zafar, Asad Manzoor Butt, Ch. Muhammad Ali, Kashif Khurshid, Muhammad Yousuf Khan, Rai Abid Ali Kharal, Muhammad Aamir Qadir, Qari Habib-ur-Rehman Zubairi, Javed Iqbal Sheikh, Muhammad Saeed Ch., Muhammad Sohail Naeem, Hasnain Naveed Raja, Ikram-ul-Haq Sheikh, Muhammad Saad Khan, Saood Nasrullah Cheema, Iqbal Khursheed Mughal, Saleem Akram Ch. and Muhammad Riaz Anjum for Petitioners.

Messrs Naveed Inayat Malik, Ch. Muhammad Ishaque, Deputy Attorney Generals for Pakistan; Messrs Salman Akram Raja, Malik Ahsan Mehmood, Ch. Zafar Iqbal, Dr. Rana Muhammad Shamim, Mian Qamar-ud-Din Ahmed, Sarfraz Ahmad Cheema, Ch. Imtiaz Elahi, Izhar-ul-Haque, Asjad Saeed, Ch. Faisal Nawaz, Muhammad Yahya Johar, Sultan Mahmood, Muhammad Asif Hashmi, Sajjad H. Rizvi, Muhammad Amir Malik, Ehsan-ur-Rehman, Nadeem Mahmood Mian, Mrs. Kausar Parveen,Tahir Zia Mahar, Nadeem Mahmood Mian, Shahid Masood Manzoor Bhatti, Mian Yusuf Umar, Muhammad Khalid Ch. and Khawar Ikram Bhatti for Respondents.

Messrs Sher Hassan Pervaiz, Nadeem Ahmad Sohail Cheema, Qaisar Abbas and Mohsin Mumtaz, Research Associates, Lahore High Court Research Centre for Research.

Dates of hearing: 9th, 12th, 17th, 18th and 19th September, 2013.

2014 P T D 1837

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

PAKISTAN FRUIT JUICES CO. (PVT.) LTD., and others

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.17893 of 2013, decided on 19th May, 2014.

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

----S. 3(1B)---Federal Excise Act (VII of 2005), S. 3(3)(a)--- Constitution of Pakistan, Fourth Sched. Part I, entry No. 52--- Capacity tax-Scope-Incidence of "Capacity Tax" was on the production capacity of a plant, machinery, establishment, etc.---Federal Legislature enjoyed the legislative competence to replace the existing sales tax, federal excise duty, income tax, tax on corporations, with a new singular tax known as the "Capacity tax"---Capacity tax, therefore, replaced or substituted, the earlier levy in force, under the laws on sales ..tax, federal excise duty, income tax and tax on corporations-Capacity tax was not to co-exist with the existing tax(es) but infact supplanted and replaced the existing taxing regime and its philosophy with the new taxation theme of production capacity.- Existing tax was thus rendered dysfunctional and ineffective along with its supporting legal framework comprising the statute, rules, notifications, etc and the new tax regime of Capacity tax took over, us if repealing the existing tax regime---Capacity tax may substitute the entire existing tax(es) or restrict the substitution to a particular specie of tax within the existing taxes.

Central Board of Revenue and 3 others v. SEVEN-UP Bottling Company (Pvt.) Ltd. 1996 SCMR 700 ref.

(b) Words and phrases----

"In lieu of"---Definition and meaning.

Words and Phrases, Permanent Edition, Volume 21A p.187 and Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 ref.

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

----S. 3(1B)---Federal Excise Act (VII of 2005), S. 3(3)(a)---Federal Excise Duty and Sales Tax on Production Capacity (Aerated Waters) Rules, 2013, R.4 & Preamble---S.R.O.No.649(I)/2013 dated 9-7-2013-- S.R.O. No. 140(1)/2014 dated 28-2-2014---Constitution of Pakistan, Arts. 199 & Fourth Sched. Part I, entry No. 52---Constitutional petition---Federal Excise Duty and Sales Tax on Production Capacity (Aerated Waters) Rules, 2013---Vires of---Capacity tax under S. 3(1B) of the Sales Tax Act, 1990 only replaced sales tax imposed under S.3(1) of the said Act i.e. on the basis of VALUE of taxable supplies, and did not extend or replace the other sections charging sales tax, including S. 3(2) (a) of the said Act, where taxable supplies were taxed on RETAIL PRICE---Federal Excise Duty and Sales Tax on Production Capacity (Aerated Waters) Rules, 2013 ("impugned Rules") stated that Capacity Tax was in lieu of (in place of) tax imposed under S. 3(2) of Sales Tax Act, 1990, when S. 3(1B) of the said Act unambiguously limited the substitution to S. 3(1) of said Act---Capacity tax, therefore, under the impugned Rules did not extend to sales tax being charged under S. 3(2)(a) of Sales Tax Act, 1990---Consequently the impugned Rules, transgressed the limits provided under S. 3(1B) of Sales Tax Act, 1990---Federal Excise Duty and Sales Tax on Production Capacity (Aerated Waters) Rules, 2013(SRO No. 649(1)/2013 and [S.R.O. No.140 (I)/2013)] were ultra vires S. 3(1B) of the Sales Tax Act, 199° and could not be extended to the taxing regime based on RETAIL PRICE provided under S. 3(2)(a) of said Act and were, therefore, illegal and without lawful authority---Said impugned Rules imposed Capacity tax in lieu of sales tax and federal excise duty jointly in a consolidated manner, therefore, the Rules were not severable and hence were equally ineffective and invalid under the Federal Excise Act 2005---High Court observed that there were other questions in respect of the impugned Rules that needed to be deliberated upon by the Federal Board of Revenue, namely whether the imposition of Capacity tax under S. 3(1B) of Sales Tax Act, 1990 or S. 3(3)(a) Federal Excise Act, 2005 replaced sales tax or federal excise duty along with its supporting statutory legal framework whether S. 3(1B) of Sales Tax Act, 1990 or S. 3(3)(a) of Federal Excise Act, 2005 carried sufficient guidelines for the selection of plant of aerated waters or other plants and whether S. 3(6) of Sales Tax Act, 1990, was available to the new Capacity tax or was it a separate charging section under the Sales Tax Act, 1990, authorizing Federal Government or the Federal Board of Revenue to levy a new specie of tax in lieu of S. 3(1) of the Sales Tax Act, 1990---Constitutional petition was allowed accordingly with the direction that petitioner-companies shall, continue paying Sales Tax and Excise Duty under the provisions of Sales Tax Act, 1990 and Federal Excise Act, 2005 in accordance with law.

Salman Akram Raja, Sameer Khosa, Munawar-us-Salam, Rana Muhammad Afzal, Waseem Ahmad Malik and Majid Ali Wajid Petitioners.

Naseer Ahmad Bhutta, Additional Attorney General for Pakistan along with Muhammad Mahmood Khan and Mian Irfan Akram, Deputy Attorney Generals for Pakistan for Respondents.

Nadeem Mahmood Mian, Standing Counsel.

Muhammad Ilyas Khan, Abdul Hafeez Pirzada, Jawad Hassan, Mian Gul Hassan Aurangzeb, Hamid Ahmad, Shahid Pervaiz Jami, Tariq Saleem Sheikh, Muhammad Asif Hashmi, and Ch. Muhammad Anwar Bhor for Respondents.

Dr. Hamid Ateeq, Commissioner Inland Revenue, LTU, Lahore.

Date of hearing: 19th May, 2014.

2014 P T D 1874

[Lahore High Court]

Before Syed Mansoor Ali Shah and Atir Mahmood, JJ

Messrs MCB BANK LTD.

Versus

COMMISSIONER INLAND REVENUE

P.T.R. No.237 of 2013, heard on 23rd June, 2014.

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

----Ss.33, 34, 100-A, Sixth Schedule, Part-II, R.4 & Seventh Schedule, R.1---Approved Pension Fund---Surplus under Pension Fund---Income chargeable to tax---Methods of accounting---Petitioner bank had established a Pension Fund through Trust Deed for benefit of its employees---Plea raised by petitioner-bank was that it enjoyed exemption under R.4 of Part-II of Sixth Schedule to Income Tax Ordinance, 2001, and surplus under Pension Fund could not be considered to be income of petitioner-bank unless repaid to petitioner---Validity---Under cash basis accounting, a taxpayer derived income when it was received and incurred expenditure when it had been paid---While under accrual basis accounting, taxpayer derived income when it was payable by that person---Two principal methods of keeping track of income and expenses of business: cash method and accrual method---Surplus amount was deemed to be income of taxpayer for the purposes of tax only when it was repaid to employer---Word 'repaid' signified actual repayment or pay back and fell under the scheme of cash basis accounting---Tax accounting was governed by R.4 of Part-II of Sixth Schedule to Income Tax Ordinance, 2001, which took preference over rules under Seventh Schedule to Income Tax Ordinance, 2001---Lower forums failed to appreciate such difference between tax accounting and financial accounting and had given undue importance to method of accounting over principles of taxation under Income Tax Ordinance, 2001---As surplus was not repaid to bank, it could not be deemed to be the income of petitioner bank and offered to tax---Reference was allowed in circumstances.

Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 PTD 766; Commissioner (Legal) Inland Revenue v. Messrs EFU General Insurance Ltd. 2011 PTD 2042; Commissioner of Income-Tax v. Habib Insurance Co. Ltd. 1975 PTD 234; Messrs Habib Insurance Co. Ltd. and another v. Commissioner of Income Tax, Central, Karachi 1990 PTD 196; ECC Quarries Ltd v. Watkis (Inspector of Taxes) [1975] 3 All ER 843 and Kedarnath Jute Mfg Co. Ltd. v. Commissioner of Income Tax (Central), Calcutta (1971) 82 ITR 363 ref.

(b) Mutatis mutandis---

----Connotation---'Mutatis mutandis' means necessary changes having been made---Phrase 'apply mutatis mutandis' means applicability of any other provision of law, which also includes and brings with it all necessary changes required to make that provision of law functional under law.

(c) Interpretation of statutes---

----Schedule---Scope---Schedule is part of statute and falls within the meaning of 'the provisions of the law'.

(d) Interpretation of statutes---

----Special law prevails over general law.

A. Qutubuddin Khan v. Chec Millwala Dredging Co. (Pvt.) Ltd., 2014 CLD 824; Hafeez Ahmed and others v. Civil Judge, Lahore PLD 2012 SC 400 and The State v. Zia ur Rehman and others PLD 1973 SC 49 rel.

Mansoor Usman Awan for Petitioner.

Liaquat Ali Ch. for Respondent.

Date of hearing: 23rd June, 2014.

2014 P T D 1919

[Lahore High Court]

Before Ijaz ul Ahsan, J

MUHAMMAD AFZAL SHAHEEN

Versus

FEDERATION OF PAKISTAN through Secretary, Islamabad and 5 others

Writ Petition No.21378 of 2012, heard on 10th April, 2014.

Customs Act (IV of 1969)---

----S.207---Finance Act (IV of 1999), S.18 (I)(c) & Table-III---Constitution of Pakistan, Art.199---Constitutional petition---Amendment-in-law---Extending of benefit---Petitioner was customs clearing agent who filed import documents of respondent for clearance---Customs authorities cleared the consignment against Zero rating, by extending benefit of amendment in law before it was applicable---Petitioner raised the plea that later on authorities could not demand duty and taxes from him---Validity---No wilful act or negligence or default on the part of petitioner was on record and benefit of Zero tax was given by appraising officer---In view of express and un-ambiguous language of the proviso to S.209(3), Customs Act, 1969 amount being claimed from petitioner was not recoverable from him---Letter of appraising officer also showed that neither petitioner made any request nor applied for exemption---Department itself extended benefit of S. 18 of Finance Act, 1999, on the basis of Finance Bill prior to coming it into force, by following the practice adopted by Customs House (Karachi) and the same could not be termed as wilful act or negligence or default on the part of petitioner---High Court declared, attachment order issued by authorities and adopting coercive measures for recovery of amounts claimed from petitioner which were adjudged against importer by adjudicating authority and direction to Chairman International Airport for deducting such amount from the shares or as the case might be profit/dividend of petitioner, illegal, without lawful authority and of no legal effect---Petition was allowed in circumstances.

Mian Abdul Ghaffar and Raza Ahmad Cheema for Petitioner.

Ch. Zafar Iqbal for Respondents.

Date of hearing: 10th April, 2014.

2014 P T D 1939

[Lahore High Court]

Before Syed Mansoor Ali Shah, J

SUI NORTHERN GAS PIPELINES

Versus

DEPUTY COMMISSIONER INLAND REVENUE and others

Writ Petitions Nos. 14832 and 16046 of 2014, heard on 24th June, 2014.

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

----S. 147---Advance tax---Concept and meaning.

Messrs Riaz Bottlers (Pvt.) Ltd. through Tax Manager v. Lahore Electric Supply Company (LESCO) through Chief Executive and 3 others 2010 PTD 1295 ref.

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

----Ss. 147, 152(2A) & 161(1B)---Constitution of Pakistan, Art. 199---Constitutional petition---Advance tax---Meaning and scope---Unjust enrichment---Tax-payer failing to make deduction of/collect tax from payments made to payee---Payee paying such tax itself in the form of advance tax and not availing any tax credit---Effect---No recovery of non-deducted/non-collected tax from tax-payer except for default surcharge---Sui Northern Gas Pipeline Limited ("SNGPL") was served with show-cause notice under S.161(1A) of the Income Tax Ordinance, 2001 for non-deduction of tax from the payments made to certain companies from which it purchased gas---SNGPL was held to be personally liable to pay the said tax under S. 161 of the Income Tax Ordinance, 2001---Contention on behalf of SNGPL was that lapse on the part of SNGPL to deduct tax under S. 152(2A) of the Ordinance was inconsequential as the tax had already been duly paid by the companies in the form of Advance Tax for the quarter; that the companies had neither availed any tax credit nor had adjusted or deducted any amount from the quarterly payment of advance tax, hence the amount of tax in question was the tax paid in terms of S. 161(1B) of the Ordinance and the deductible amount of tax could not be recovered from SNGPL or the companies; that SNGPL could best be penalized only with a default surcharge under S. 161(1B) of the Income Tax Ordinance, 2001 but could not be held liable to pay the deductible amount of tax under S. 152(2A) of the said Ordinance---Validity---Question for determination was whether advance tax paid for a quarter by the companies passed for payment of tax in terms of S. 161(1B) Income Tax Ordinance, 2001, especially when the companies had not availed any tax credit in the said quarter---Amount of advance tax paid by the companies in a quarter, for all practical purposes, attained the status of final amount of tax due in that quarter as it was a definite amount calculable on the basis of a statutory formula---Once the companies had paid advance tax for the quarter and categorically stated that no tax credit had been availed for the deduction of tax at source, it would be assumed that the amount of tax to be deducted by SNGPL had been duly paid and would qualify to be the payment paid in the meanwhile under S. 161(1B) of the Income Tax Ordinance, 2001---Once the payment (of advance tax) had been made by the companies, the amount of tax that SNGPL failed to deduct could not be recovered from SNGPL, except the imposition of default surcharge penalizing the failure to deduct---Recovering deductible tax from SNGPL after the companies had paid the advance tax for that quarter, would tarnish the veracity and sanctity of the concept of advance tax and more importantly the foundational theme of self-assessment on which the Income Tax Ordinance, 2001, rested---Impugned notice for recovery from SNGPL promoted unjust enrichment and offended the constitutional principle of economic justice---SNGPL was only liable for default surcharge (under S. 161(1B) of the Income Tax Ordinance, 2001) but not for the amount of tax as the advance tax had been paid by the companies---High Court set aside the show-cause notice and subsequent Assessment Order as being unconstitutional and without lawful authority---Constitutional petition was allowed accordingly.

CIT, Zone-C, Lahore v. Messrs Marghalla Textile Mills Ltd., Lahore 2008 PTD 1982; Messrs Continental Chemical Co. (Pvt.) Ltd. v. Pakistan and others 2001 PTD 570; Karachi Port Trust, Karachi v. Commissioner Inland Revenue, Karachi 2011 PTD 1996; Jagran Prakashan Ltd. v. DCIT 345 ITR 288 and Hindustan Coca Cola Beverages (P.) Ltd. v CIT, AIR 2007 SC 2930 ref.

(c) Income tax---

----Unjust enrichment, doctrine of---Meaning---Test for unjust enrichment---Unjust enrichment was retention of a benefit by a person that was unjust or inequitable---For recovery under the concept of unjust enrichment, something must have been given, whether goods, services or money; the thing which was given must have been received and retained by the defendant, and the retention must be without juristic justification.

Garland v. Consumers' Gas Co. 2004 SCC 25; Moses v. Macferlan; Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd.; Peel (Regional Municipality) v. Canada (1992), 98 D.L.R. (4th) 140 (S.C.C.) at P.154; Messrs Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64 and Goff and Jones, The Law of Restitution, 6th Ed., (London: Sweet and Maxwell, 2002) p.17, para 1-016 ref.

(d) Constitution of Pakistan---

----S. 3 & Preamble---Unjust enrichment---In the Constitution of Pakistan unjust enrichment was anchored in the fundamental premabular constitutional value of economic justice---Constitution of Pakistan abhorred any form of economic exploitation.

Ikram Bari and 524 others v. National Bank of Pakistan through President and another 2005 SCMR 100 and Pakistan Tobacco Company Ltd. and another v. Federation of Pakistan through Secretary, Ministry of Commerce, Islamabad and 3 others 1999 SCMR 382 ref.

Mansoor Usman Awan, for Petitioner (in Writ Petition No.14832 of 2014).

Muhammad Raheel Kamran Sheikh for Petitioner (in Writ Petition No.16046 of 2014).

Muhammad Ilyas Khan, Shahid Hussain Asad, Member Inland Revenue Policy, Federal Board of Revenue. Mustafa Ashraf, Chief Commissioner, LTU, Lahore. Imran Raza Kazmi, Commissioner Inland Revenue, LTU, Lahore. Neelam Ifzal, Deputy Commissioner Inland Revenue, LTU, Lahore for Respondents.

Dates of hearing: 23rd and 24th June, 2014.

2014 P T D 2005

[Lahore High Court]

Before Atir Mahmood, J

Messrs MAGNA PROCESSING INDUSTRIES (PVT.) LTD., FAISALABAD through Chief Executive

Versus

FEDERATION OF PAKISTAN through SECRETARY, (REVENUE DIVISION) MINISTRY OF FINANCE and 2 others

Writ Petition No.21824 of 2014, decided on 11th August, 2014.

Sales Tax Act (VII of 1990)---

----Ss. 45B & 48---Constitution of Pakistan, Art. 199---Constitutional petition---Illegally claimed/received refund of input tax---Recovery notices---Pendency of appeal before Commissioner (Appeals), Inland Revenue---Suspension of recovery notices during pendency of appeal---High Court directed that revenue authorities could not recover the tax amount demanded from petitioner/tax payer till decision of his appeal before the Commissioner (Appeals); that Commissioner (Appeals) should decide the pending appeal of petitioner within 30 days in accordance with law through a speaking order after hearing all the necessary parties and that till such time the appeal was decided, the recovery notices shall remain suspended---Order accordingly.

Central Board of Revenue v. Chanda Motors 1993 SCMR 39 and Sun Rise Bottling Co. (Pvt.) Ltd., v. Federation of Pakistan 2006 PTD 535 ref.

Khubaib Ahmad for Petitioner.

2014 P T D 2043

[Lahore High Court]

Before Mrs. Ayesha A. Malik and Shezada Mazhar, JJ

COMMISSIONER OF INCOME TAX, COMPANIES ZONE-I, LAHORE

Versus

CRESCENT INVESTMENT BANK

I.T.A. No.626 of 2000, decided on 30th April, 2014.

Income Tax Ordinance (XXXI of 1979)---

----Ss.62 & 66-A---Banking Companies Ordinance (LVII of 1962), Ss.2(10) & 5(b)---Dividend income---Composite banking income---Income Tax Appellate Tribunal directed that dividend income of assessee should be taxed at reduced rate, whereas the same formed a part of composite banking income and separate rate of tax was prescribed for income from banking business---Validity---Assessee was involved in banking business as defined in Banking Companies Ordinance, 1962---Profits/dividends earned by assessee were nothing but earning from its business which was banking business and therefore, it should have been assessed as normal business and not as separate block of income from other sources---Income Tax Appellate Tribunal was not justified in directing that dividend income should be taxed at a reduced rate as dividend income formed part of composite banking income---Income Tax Appellate Tribunal had power under the provisions of S. 66-A of Income Tax Ordinance, 1979, to consider order passed under the law time and again subject to condition that the order under review was erroneous or prejudicial to the interest of revenue---Appeal was disposed of accordingly.

Sh.Abdul Sattar v. Commissioner of Income Tax Zone 'C' and 2 others 1995 PTD 882; Commissioner of Income Tax and Wealth Tax Sargodha Zone Sargodha v. Messrs Irshad Anwar & Co. 2002 PTD 750 and Commissioner of Income Tax Lahore v. National Fertilizer Corporation, Lahore 1996 PTD 276 ref.

Syed Sajjad Haider Rizvi for Appellant.

Naveed Amjad Andrabi Syed for Respondent.

Date of hearing: 17th March, 2014.

2014 P T D 2063

[Lahore High Court]

Before Muhammad Tariq Abbasi and Shahid Jamil Khan, JJ

COMMISSIONER OF WEALTH TAX, RAWALPINDI

Versus

Hafiz S.A. RAHMAN, RAWALPINDI

I.T.A. No.54 of 1999, heard on 18th August, 2014.

Wealth Tax Act (XV of 1963)---

----Ss.2(1)(10), 8, 16 & 27(1)---Assistant Commissioner---Status---Grievance of Income Tax Authorities was that Appellate Tribunal Inland Revenue was not justified in holding Assistant Commissioner as not an Authority under Ss. 2(1)(10) & 8 of Wealth Tax Act, 1963---Validity---Finding of Appellate Tribunal Inland Revenue lacked collective reading of relevant provisions of law---Word 'Deputy Commissioner' was read in isolation and was misconstrued as a designated simplicator---Despite reproducing definition of Deputy Commissioner in its order, Appellate Tribunal was swayed by the fact that Assistant Commissioner was not listed in S. 8 of Wealth Tax Act, 1963---Appellate Tribunal recorded concession of Departmental Representative that there was lacuna in law but any concession on erroneous interpretation of law could not operate as estoppel, as there was no estoppel against law---Question answered in negative.

Commissioner of Income-Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570 ref.

Muhammad Irshad Chaudhry for Appellant.

Ch. Naeem-ul-Haq for Respondent.

Date of hearing: 18th August, 2014.

2014 P T D 2078

[Lahore High Court]

Before Umar Ata Bandial, C.J.

Messrs NISHAT CHUNIAN LTD.---Petitioner

Versus

FEDERAL BOARD OF REVENUE and others---Respondents

Writ Petition No.9015 of 2011, heard on 5th June, 214.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 161, 165 & 205(3)---Income Tax Rules, 2002, R. 44(4)---Constitution of Pakistan, Art. 199---Constitutional petition---Withholding tax---Deduction of withholding tax by taxpayer-company---Notices sent to company under Ss. 161 read with S. 205(3) of Income Tax Ordinance, 2001---Purpose---Collection of relevant information for reconciling the accounts of the company with its statements filed under the Income Tax Ordinance, 2001---Plea of company was that impugned notice under Ss. 161 & 205(3) of Income Tax Ordinance, 2001 demanded information which had been already provided to tax authorities in monthly, quarterly and annual statements filed by the company under S. 165 of the Income Tax Ordinance,2001; that tax authorities were threatening the company with a declaration of being made an "assessee in default" unless further information was provided to explain that withholding tax had been deducted in entirety upon payment made by the company to the suppliers---Plea of tax authorities that impugned notice was only intended to collect information for reconciling the accounts of the company in order to establish that the expenses incurred by the company had been simultaneously subjected to deduction of corresponding withholding tax at the applicable rate---Validity---Tax authorities had pre-emptorily issued notice under S. 205 of the Income Tax Ordinance, 2001 to the company in respect of the present matter, which in essence concerned reconciliation of the amounts contained in the statutory statements filed by the company under the Income Tax Ordinance, 2001 with the amounts given in their audited accounts---Requirement for such reconciliation could not be presumed to be a default in deduction of withholding tax by the company---Penalty in default of deduction of withholding tax had wrongly been threatened by the tax authorities in the impugned notice whereas in fact no material to sustain such threat was available with the tax authorities---Equally the company, instead of providing the requisite information for reconciliation of the amounts regarding deduction of withholding tax in its statements with its accounts, prematurely approached the High Court on an apprehension, which was without any concrete evidence of penalization---High Court observed that appropriate course of action was to restrain the tax authorities from taking any action against the company under S. 205 of the Income Tax Ordinance, 2001 without first issuing notices for reconciliation of records in respect of deposit of withholding tax by the company; that such notice must contain the precise query/material in respect of which reconciliation of amounts was required; that if such reconciliation was avoided by the company or was negated by its records, only then must the tax authorities proceed to take further action against the company based on a finding of fact to the effect that the company had defaulted in deduction of withholding tax---Constitutional petition was disposed of accordingly.

Shahbaz Butt, Senior Advocate and Tariq Rasheed for Petitioner.

Syed Naveed Amjad Andrabi, Muhammad Ajmal Khan, Asghar Ahmad Kharl, Mudassar Shuja Ud Din, Jan Muhammad Ch., Syed Nadeem Saqlain, Rana Munir Hussain, Ch. Muhammad Anwar Khan Mayo, Muhammad Shabbir Hussain, Malik Abdullah Raza, Ch. Muhammad Mohsin Virk, Muhammad Younas Khalid, Advocates in connected petitions.

Syed Sajjad Haider Rizvi for Respondents.

Muhammad Ilyas Khan, Muhammad Yahya Johar, Afzal Hussain, Sarfraz Ahmad Cheema, Ibrar Ahmed, Raja Sikandar Khan, Muhammad Asif Hashmi and Khadim Husain Zahid, Advocates in connected petitions.

2014 P T D 2135

[Lahore High Court]

Before Ijaz-ul-Ahsan and Mrs. Ayesha A. Malik, JJ

Messrs SUN TUBE (PVT.) LTD. through Manager

Versus

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

Custom Reference No.93 of 2013, decided on 12th November, 2013.

Customs Act (IV of 1969)---

----Ss. 26 & 196---General Clauses Act (X of 1897), S. 24-A---Constitution of Pakistan, Art. 10-A---Decision of appeal without notice---Condemning unheard---Due process of law, principle of---Applicability---Grievance of importer was that Customs Appellate Tribunal set aside order in original without ensuring service of process---Validity---Authorities should have adopted all lawful modes to ensure that importer was duly served---Tribunal had acted with undue haste in deciding appeal filed by authorities without due process of law and giving an opportunity to importer to defend its position, as such the same constituted Fundamental Right enshrined in Art. 10-A of the Constitution---Customs Appellate Tribunal did not examine the matter closely nor it recorded any reasons for setting aside order of adjudicating officer---Tribunal also did not record any reasons for disbelieving documentation submitted by importer showing that entire consignment was lawfully imported and requisite documentation showing lawful import and payment of all leviable duties and taxes were available---Such defect in the order passed by Appellate Tribunal was hard to ignore and furnished good reason for setting it aside---Tribunal disregarded documentary evidence in order to rely on an unsubstantiated statement made by manager of importer, which was disowned on the ground that the same had been procured under coercion---After setting aside order passed by adjudicating authority, the Tribunal did not issue any direction on the question whether goods in question were to be confiscated or released on payment of duties---Such technical omission in the order of Appellate Tribunal also rendered it unsustainable---Order passed by Customs Appellate Tribunal was set aside---Reference decided in affirmative.

Mian Abdul Ghaffar for Petitioner.

Nadeem Mehmood Mian for Respondents.

2014 P T D 281

[Peshawar High Court]

Before Qaiser Rashid Khan and Musarrat Hilali, JJ

BAKHTIAR

Versus

DEPUTY COLLECTOR CUSTOMS and others

Writ Petition No.4272 of 2010, decided on 23rd October, 2013.

Customs Act (IV of 1969)---

----Ss.169 & 201---Constitution of Pakistan, Art.199---Constitutional petition---Auction of seized/confiscated vehicle, during pendency of appeal---Auction/sale proceeds, payment to owner of vehicle---Scope---Deduction of certain amount from such sale proceeds---Scope---Petitioner's vehicle was seized by the Customs Officials, thereafter issuing show-cause notice the same vehicle was confiscated---Petitioner preferred appeal before Collector of Customs (Appeals) who ordered for the release of vehicle on payment of redemption fine---During pendency of appeal, the Customs authorities auctioned/seized vehicle for a sum of Rupees 15,70,000---On application of petitioner, the Customs authorities refunded only a sum of Rupees 7,61,749---Contention of the petitioner was that Customs authorities could not deduct a substantial amount from sale proceeds and as such Customs authorities be directed to refund entire sale proceeds to the petitioner/owner of vehicle after deduction only auctioneer charges---Validity---Appellate authority had ordered the release of seized vehicle in favour of the petitioner against payment of redemption fine and re-export of the same vehicle to Afghanistan---Customs authorities had not challenged the appellate order before higher forum and the same had become final---Customs authorities were well within their legal right to put the seized/confiscated vehicle to auction even during the pendency of appeal---Sale proceeds of auction during pendency of appeal had to be kept deposited and could not be appropriated by Customs authorities by way of taxes, etc., considering themselves to be the final arbiter in the matter---Petitioner was entitled for sale proceeds of vehicle after the deduction of the amount of redemption fine only---Constitutional petition was allowed accordingly.

Danish Ali Qazi for Petitioner.

Muhammad Ali for Respondents.

2014 P T D 383

[Peshawar High Court]

Before Yahya Afridi and Nisar Hussain Khan, JJ

COLLECTOR OF CUSTOMS

Versus

Messrs LUCKY CEMENT LTD.

Custom Reference No.102 of 2011, decided on 4th July, 2013.

Customs Act (IV of 1969)---

----S. 196---Limitation Act (IX of 1908), S.5---Reference to High Court---Time barred---Condonation of delay---Scope---Government on question of limitation could not be treated differently from ordinary litigant---Where, government in spite of enormous resources and facilities at its disposal, continued to delay filing of cases in time, detrimental to its own interest, opposite party could not be penalized for such negligence---Each day of limitation must satisfactorily be explained which petitioner had failed to do---Customs Reference filed by Collector of Customs /petitioner was hopelessly barred by time and reasons provided for the condonation of delay had not been accepted---Reference was not entertained by High Court.

Central Board of Revenue Islamabad through Collector of Customs, Sialkot, Dry Post, Samberial District Sialkot and others v. Messrs Raja Industries (Pvt.) Ltd. through General Manager and 3 others 1998 SCMR 307 and Food Department, Gujranwala through Deputy Director and others v. Ghulam Farid Awan 2010 SCMR 1899 rel.

Abdul Rauf Rohaila for Appellant.

Isacc Ali Qazi for Respondent.

2014 P T D 552

[Peshawar High Court]

Before Mazhar Alam Khan Miankhel and Yahya Afridi, JJ

Messrs ASSOCIATED INDUSTRIES LTD.

Versus

FEDERATION OF PAKISTAN through Secretary Economic Affairs, and 2 others

Writ Petition No.2412-P of 2013, decided on 24th October, 2013.

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

----Ss. 47A & 47(A)(4A)---Constitution of Pakistan, Art. 199---Constitutional jurisdiction of High Court---Scope---Alternate Dispute Resolution under S. 47A of the Sales Tax Act, 1990---Alternate remedy---Petitioner/taxpayer sought direction to the effect that the Federal Board of Revenue amend its final assessment order according to the recommendations of the Alternative Dispute Resolution Committee, constituted under S. 47A of the Sales Tax Act, 1990---Validity---Issues raised by the petitioner/taxpayer could be decided before the Chairman or Member Federal Board of Revenue under S.47(A)(4A) of the Sales Tax Act, 1990 which alternate remedy, being adequate and efficaious, was available to the petitioner and could serve the purpose of the petitioner---Where a particular statute provided a self-contained mechanism and well defined forum of redressal for the determination of questions of law or fact by way of appeal or revision, or representation to another Tribunal/Committee or authority or officer, the petitioner without exhausting such remedy could not be allowed to invoke the Constitutional jurisdiction of High Court---Relevant provisions for "in-house" determination of matters of fiscal nature could not be abandoned without any reasonable or just cause---Constitutional petition, being not maintainable, was dismissed, in circumstances.

(b) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Alternate remedy---Scope---Where a particular statute provided a self-contained mechanism and a well-defined forum of redressal for the determination of questions of law or fact by way of appeal or revision, or representation to another Tribunal/Committee or authority or officer, petitioner without exhausting such remedy could not be allowed to invoke the Constitutional jurisdiction of High Court---Such jurisdictional restraint on a Constitutional Court to take cognizance of matter, when there was an alterative remedy provided under a statute, was that the said restraint was not an absolute bar to be applied in all cases and the general principle of restraint was to guide the Constitutional Court in exercising its jurisdiction in deciding matters---Case-law examined.

Ali Muhammad's case PLD 1996 SC 37; Ali Abbas's case PLD 1967 SC 294; Khalid Mehmood's case 1999 SCMR 1881; Amanullah's case PLD 1990 SC 1092; Nizamuddin's case 1999 SCMR 467; Abdullah Muhammad Peer's case PLD 1971 SC 130 and Tariq Transport Company's case PLD 1958 SC 437 rel.

(c) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High court---Essential requirements for High Court to take cognizance of a plea of mala fide in its Constitutional jurisdiction, enumerated.

Muhammad Umar Khan's case 1992 SCMR 4554; Subedar Muhammad Ashraf's case PLD 2002 SC 706; Lanvin Traders' case 2013 SCMR 1419; Qazi Hussain Ahmed's case PLD 2002 SC 583; Israrul Haq's case 2005 SCMR 558; Mst. Qaisra Elahi's case 2005 SCMR 678; Dr. Akhtar Hussain Khan and others v. Federation of Pakistan and others 2012 SCMR 455; Saeed Ahmad Khan's case PLD 1974 SC 151 and Begum Agha Abdul Karim Shorish Kashmiri PLD 1969 SC 14 rel.

Ishtiaq Ahmad for Appellant.

Nemo for Respondents.

Date of hearing: 24th October, 2013.

2014 P T D 1345

[Peshawar High Court]

Before Yahya Afridi and Musarrat Hilali, JJ

SHAFIULLAH KHAN, VICE PRESIDENT and 79 others

Versus

ZARAI TARAQIATI BANK LTD. through President, ZTBL and 5 others

Writ Petitions Nos.3535 of 2011, and 263-A, 977-P, 758-P, 1577, 3161-P, 294, 2734-P of 2012, decided on 13th February, 2014.

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

----Ss. 161, 162,149 & 127---Constitution of Pakistan Art. 199---Constitutional petition---Zari Taraqiati Bank Ltd., Circular No.HDR/33/2011---S.R.O. 647(I)/2011 dated 25-6-2011---Failure of Collecting agent to pay tax collected or deducted---Power of employer "collecting agent" to demand payment of tax already paid by the employer in the name of its employees---Scope---Respondent Bank (Employer) after issuance of S.R.O. 647(I)/2011 dated 25-6-2011, availed amnesty provided by the said S.R.O., and was assessed by Income Tax Authorities, to be liable to pay an amount for default in not deducting withholding tax on payments made under computation of pension schemes to its employees---Subsequently Circular No.HDR/33/2011 was issued by respondent Bank demanding withholding tax from its employees, including petitioners, who had availed scheme for computation of person---Contention of petitioner/employees was that the impugned Circular No.HDR/33/2011 was illegal and without lawful authority---Held, that under the scheme of the law, if revenue opted to seek withholding tax from employer, who under S. 149 of the Income Tax Ordinance, 2001 was acting as a "collecting agent" on behalf of the revenue, and deposited tax due from its employees, in the treasury, then the said employer may recover the paid tax from its employees under authority vested in its under S.161(2) of the Income Tax Ordinance, 2001---Authority of respondent Bank to issue impugned circular demanding from the petitioners the withholding tax, had express backing of the law as provided under S.161(2) of the Income Tax Ordinance, 2001---Provision of appeal under S. 127 of the Income Tax Ordinance, 2001 granted a right of an appeal to any person who had been aggrieved of an order passed under the Income Tax Ordinance, 2001, and although petitioners were not party before the Assessing Officer who had passed assessment order against the respondent Bank , however, the petitioners being adversely affected by the same had a right of appeal under S. 127 of the Income Tax Ordinance, 2001----Entertainment of direct constitutional petitions were to be discouraged when fiscal issue could be resolved in the revenue appellate hierarchy provided by the Legislature, as in the present case----Issues of limitation and exemption of withholding tax in view of the Income Tax Ordinance, 2001 and contest regarding amount of tax were all contentious issues between the parties and could not be resolved by the High Court from the available record, therefore it would just and fair for the Revenue hierarchy to resolve the same---High Court held the impugned Circular No.HDR/33/2011 as intra vires of S. 161(2) of the Income Tax Ordinance, 2001 and declared the constitutional petitions of the petitioners to be converted into appeals under S. 127 of the Income Tax Ordinance, 2001 and directed the petitioners to appear before Commissioner (Appeals), Inland Revenue---High Court further restrained the respondent Bank from recovering withholding tax from petitioners employees till legal determination had been made by the competent appellate forum---Constitutional petitions were disposed of, accordingly.

BP Pakistan Exploration and Production Inc's case 2011 PTD 647; Syed Muhammad Zamin's case 2002 PLC 1538; Syed Match Company's case 2003 SCMR 1493 and Khalid Mahmood's case 1999 SCMR 1881 rel.

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

----S. 127---Appeal to the Commissioner (Appeals)---Interpretation of S.127 of the Income Tax Ordinance, 2001---Scope of appeal provided under S. 127 of the Income Tax Ordinance, 2001---Section 127 of the Income Tax Ordinance, 2001 granted a statutory right of appeal to any person who was aggrieved of an order passed under the Ordinance and said right was without any express requirement of the person to be a party to the original proceedings, for him to invoke the right of appeal under S. 127 of the Income Tax Ordinance, 2001.

(c) Constitution of Pakistan---

----Art.199---Constitutional jurisdiction of High Court---Scope---Fiscal/ tax matters----Alternate remedy available---Entertainment of direct Constitutional petitions were to be discouraged when fiscal issue could be resolved in the revenue appellate hierarchy provided by the Legislature.

BP Pakistan Exploration and Production Inc's case 2011 PTD 647; Syed Muhammad Zamin's case 2002 PLC 1538; Syed Match Company's case 2003 SCMR 1493 and Khalid Mahmood's case 1999 SCMR 1881 rel.

Rehmanullah Shah and Ibrahim Shah for Petitioner.

Qazi Ghulam Dastagir, Rehmanullah and Ishtiaq Ahmad for Respondents.

Date of hearing: 13th February, 2014.

2014 P T D 1495

[Peshawar High Court]

Before Mazhar Alam Khan Miankhel and Yahya Afridi, JJ

Messrs SYNTRONICS LTD.

Versus

COLLECTOR SALES TAX AND FEDERAL EXCISE and another

Sales Tax Reference Application No.114 of 2006, decided on 23rd January, 2014.

(a) Sales Tax---

----"Stock-in-trade"---Scope---Machinery, including a generator, which is imported, installed and made to use in manufacturing proceedings by importer, is considered to be as 'plant and machinery' and thereby comes within the definition of term 'stock-in-trade'.

Attock Cements's case 1999 PTD 1892 rel.

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

----Ss.7, 8, 13, 47, 66 & 74---S.R.O. No.578(I)/98 dated 12-6-1998---S.R.O. No.978(I)/99 dated 30-8-1999 [Sales Tax General Order 2]---Input and output tax---Adjustment---Plant and machinery---Term 'stock-in-trade'---Applicability---Petitioner assailed show cause notice, whereby claim of Rs.1.020 million was refused to be allowed as input adjustment under notification S.R.O. No.578(I)/98, dated 12-6-1998---Validity---Generators in question were imported, installed and made to use in manufacturing process by petitioner and the same were considered as 'plant and machinery' and had come within the definition of term 'stock-in-trade' and fell outside the mischief of excluding provision provided under notification S.R.O. No.578(I)/98, dated 12-6-1998---Show-cause notice, whereby claim of Rs.1.020 million was refused to be allowed as input adjustment under notification S.R.O. No.578(I)/98, dated 12-6-1998, was not legally correct---Generator in question was in fact a 'stock-in-trade' and could not be excluded from the goods which could not avail input adjustment as provided under Show cause notice, whereby claim of Rs.1.020 million was refused to be allowed as input adjustment under notification S.R.O. No.578(I)/98, dated 12-6-1998---Authorities failed to consider such crucial legal issue---Input tax adjustment on generator which was used for manufacturing purpose could be adjusted in output tax of petitioner, as it did not fall within mischief of show cause notice, whereby claim of Rs.1.020 million was refused to be allowed as input adjustment under notification S.R.O. No.578(I)98, dated 12-6-1998---High Court directed the authorities to revisit claim of input adjustment of Rs.1.020 million made by petitioner, in view of 1st proviso to S. 66 read with 74 of Sales Tax Act, 1990, and guidelines provided under STGO No.2 and notification S.R.O. 978(I)/99, dated 30-8-1999---Reference was disposed of accordingly.

Attock Cements's case 1999 PTD 1892 rel.

Issac Ali Qazi for Petitioner.

Rahmanullah for Respondent.

Date of hearing: 23rd January, 2014.

2014 P T D 1931

[Peshawar High Court]

Before Yahya Afridi and Musarrat Hilali, J

COMMISSIONER INLAND REVENUE

Versus

Messrs SANA ALUMINUM INDUSTRIES (PVT.) LTD.

Income Tax Reference Nos.35-P & 36, of 2013, heard on 3rd June, 2016.

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

----S.21(1)---Expression 'any expenditure'---Scope---Word 'any' used before 'expenditure' in S.21(1) of Income Tax Ordinance, 2001, expands the nature and scope of 'expenditure' incurred by taxpayer.

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

----S. 20 (2)---'Expenditure' to fall within the category of 'asset'---Principle---For any 'expenditure' to fall within the category enhancing the 'asset' of taxpayer, the same has to be made on an item which should have a useful life of more than one year and is also depreciable with time, as provided under S.20(2) Income Tax Ordinance, 2001.

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

----Ss.21(1), 111, 133(1) & 177(4)(d)---Selection of case for audit---Payments made outside banking channels---After conducting audit of assessee, the original assessment order was amended but Commissioner Inland Revenue (Appeals) deleted addition of Rs.6.123 million made under the head of 'unexplained sundry creditors' on the ground that amount had been taxed twice---Appellate Tribunal Inland Revenue maintained the order passed by Commissioner Inland Revenue (Appeals)---Validity---Questions of law were based on certain jurisdictional facts, which had been decided in consonance by two appellate forums---Two appellate forums concurred that Rs.6.123 million in 'Sundry Credit Account' were taken twice by Assessing Officer; firstly, for being outside the 'banking channel' and secondly, that they were un-explained under S.111 of Income Tax Ordinance, 2001---High Court declined to disturb conclusion reached by two appellate forums, as it was surely beyond the pale of jurisdiction of High Court, while entertaining a Reference under section 133(1) of Income Tax Ordinance, 2001---Appellate Tribunal Inland Revenue was correct in deletion of Rs.6.123 million on account of Sundry credits, having been accounted for twice, as decided by Commissioner (appeals) and the Tribunal---Provision of S.21(1) of Income Tax Ordinance, 2001, was duly applicable to purchases made by respondent company for its expenditures on raw materials on payment made to two companies---Such payment were made outside the 'banking channels' as was the requirement under S.21(1) of Income Tax Ordinance, 2001, were correctly refused deductions---Reference was answered accordingly.

Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 KB 69; Messrs Idrees Cloth's case 2008 PTD 1420; Messrs Ali Brics Company's case 2009 PTD 1; Inamur Rehman's case 1992 SCMR 563; Ch. Tanvir Khan's case 1999 MLD 721 and Mst. Niaz Parwarah's case PLD 1995 SC 282 ref.

Rahmanullah for Petitioner.

Hilal Ahmad Durrani for Respondent.

Date of hearing: 21st May, 2014.

2014 P T D 1959

[Peshawar High Court]

Before Mrs. Irshad Qaiser, J

MUHAMMAD AFTAB SULTAN through Authorized Agent

Versus

GOVERNMENT OF PAKISTAN, MINISTRY OF FINANCE through Secretary Finance 7 others

Writ Petition No.372-A of 2014, decided on 10th June, 2014.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111, 114(4) & 122(C)---Protection of Economic Reforms Act (XII of 1992), S. 5---Constitution of Pakistan, Art. 199---Constitutional petition---Unexplained income or assets---Foreign exchange remitted from outside Pakistan---Tax demand---Not based on proper information or material evidence---Notice of tax demand---Deficiencies---Foreign currency account maintained by citizens of Pakistan residing abroad---Exempt from tax and inquiries---Petitioner was a national of Pakistan, settled abroad and he had made various foreign currency remittances to Pakistan for purchase of property in Pakistan---Income tax department passed ex parte order against petitioner under S. 122(C) of Income Tax Ordinance, 2011 and attached his foreign currency bank account for recovery of tax---Legality---First notice sent by income tax department under S. 114 of Income Tax Ordinance, 2001 was addressed to one of the properties, which meant that Tax Officer was ignorant of the fact that income tax was on persons and not on the property, moreover there was a lot of tampering on the said notice---No evidence was available of the proper service of remaining notices---Tax Officer had not made any proper base for the assessment as required under the provisions of S. 122(C) of Income Tax Ordinance, 2001---Tax Officer was required to base the order on available information or material evidence, which was not available in the present case---Tax Officer failed to conduct a spot inquiry and to obtain blue-prints of the building and completion certificate from the building control authority and statement of tenants and rent deeds in relation to properties belonging to petitioner---Instead of assessing the total income of the petitioner from all heads, the Taxation Officer had separately assessed and calculated tax from various heads, which was against the basic principle of taxation---Under the Protection of Economic Reforms Act, 1992, there was immunity to foreign currency accounts maintained by citizens of Pakistan residing abroad, from any type of inquiry by the taxation department and was exempt from tax and inquiries---Taxation department was aware that petitioner was maintaining a foreign currency account, thus it was not required to attach it and initiate recovery proceedings from the said account, as it was a violation of the Protection of Economic Reforms Act, 1992---Additionally under S.111(4)(a) of Income Tax Ordinance, 2001 investments made to the extent of foreign currency remitted through banking channels, encahsed in Pakistan rupees was not be probed and taxed---Petitioner was deprived of the opportunity of being heard, which was against the doctrine of audi alteram partem---High Court set aside the proforma assessment order and remanded the matter to tax authorities for de novo consideration with the direction to provide proper opportunity of being heard to the petitioner and to pass a proper speaking assessment order after conducting proper inquiries and to bring solid material evidence and information on record and also to give consideration to the Protection of Economic Reforms Act, 1992 and S. 111(4)(a) of Income Tax Ordinance, 2001---Constitutional petition was allowed accordingly.

Sardar Aman Khan for Appellant.

Nemo for Respondents.

Date of hearing: 10th June, 2014.

2014 P T D 1847

[Balochistan High Court]

Before Qazi Faez Isa, C.J. and Muhammad Ejaz Sawati, J

FAZAL BARI

Versus

MODEL CUSTOM COLLECTOR, CUSTOM HOUSE, QUETTA and 2 others

Constitutional Petition No.613 of 2012, decided on 5th May, 2014.

Customs Act (IV of 1969)----

----S.171---Constitution of Pakistan, Art.199---Constitutional petition-- Seizure of vehicle---Rahdari receipt---Grievance of petitioner was that despite having valid Rahdari receipt issued by Deputy Commissioner, customs authorities had seized his vehicle---Validity---No concept of Rahdari existed either in Customs Act, 1969, or in Provincial Motor Vehicles Ordinance, 1965, and without payment of customs duty and other applicable taxes and without possessing a valid registration number no vehicle could be driven as the same was in contravention of the laws---Both Provincial and Federal Governments through departments and agencies under their respective control were issuing such type of Rahdaris, which practice was illegal for number of reasons---Holder of Rahdari in respect of a vehicle was facilitated to break law by plying his vehicle without payment of applicable customs duties and taxes under Customs Act, 1969, and without registration number issued by Registration authorities under Provincial Motor Vehicles Ordinance, 1965---Under the cover of Rahdari, holder relying upon his special status as acknowledged by issuing authority could also resort to illegal activities, such as, smuggling of drugs or transporting of arms, ammunition or explosives---High Court declined to interfere in the seizure of vehicle made by customs authorities---Petition was disposed of in circumstances.

Nemo for Petitioner.

Sher Shah Kasi, Deputy Attorney General (D.A.G.) and Tariq Ali Tahir, Additional Advocate General (A.A.-G.) for Respondents.

Date of hearing: 5th May, 2014.

2014 P T D 1881

[Balochistan High Court]

Before Qazi Faez Isa, C.J. and Muhammad Ejaz Swati, J

MUHAMMAD RAFIQUE and others

Versus

FEDERATION OF PAKISTAN and others

Constitutional Petitions Nos. 517 to 521, 528 to 540, 560, 565 to 569, 582, 615, 622, 639 and 640 of 2013, decided on 17th July, 2014.

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

----S. 53(2) & Second Sched.---Exemptions and tax concessions in the Second Schedule of Income Tax Ordinance, 2001---Amendments---Authority delegated by Parliament to the Federal Government---Section 53(2) of the Income Tax Ordinance, 2001 specifically granted to the Federal Government complete authority to amend the Second Schedule of the Income Tax Ordinance, 2001, by adding, omitting or changing any clause or condition therein---Legislature/Parliament had delegated such explicit authority to the Federal Government, therefore, it would be incorrect to say that Parliament alone could change applicable rate of (any) tax mentioned in the Second Schedule of Income Tax Ordinance, 2001.

Ashfaq Ahmad Khan v. Custodian of Evacuee Property PLD 1966 Kar. 597; Pakistan v. Muhammad Himayatullah Farukhi PLD 1969 SC 407; Dacca Picture Palace Ltd. v. Pakistan PLD 1969 Dacca 1 and Muhammad Aslam Khokhar v. The State 2000 SCMR 1797 distinguished.

Zaibtun Textile Mills Ltd. v. Central Board of Revenue PLD 1983 SC 358; Abdul Ghaffar Bhundhi v. Collector of Custom 2006 PTD 1566; Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 and Iqbal Zafar Jhagra v. Federation of Pakistan 2013 PTD 1491 rel.

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

----Ss. 53(2) & (3)---Amendments made in Second Schedule of Income Tax Ordinance, 2001---Not laid before Parliament---Effect---Section 53(3) of Income Tax Ordinance, 2001, stated that the Federal Government shall place before the National Assembly all amendments made by it to the Second Schedule in a financial year---Said section, however, did not mention the consequences for not abiding therewith---Coming into effect of amendments made by the Federal Government in the Second Schedule to the Income Tax Ordinance, 2001, was not made dependent upon placing the same before the National Assembly, nor was it stipulated that the same would come into effect after they had been so placed---Legislature wanted the amendments made pursuant to the authority delegated by it to have immediate effect and in the same financial year in which the notification was issued---Any such amendment must be given effect whether it was placed before the National Assembly or not.

Naveed Textile Mills Ltd v. Assistant Collector PLD 1985 SC 92 and Zia Haider Rizvi v. Deputy Commissioner of Wealth Tax 2011 SCMR 420 ref.

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

----S. 53(2)---Federal Board of Revenue Act (IV of 2007), S. 4(1)(k)---Rules of Business, 1973, R. 7(2) &Sched. IV, item 1---Constitution of Pakistan, Art. 199---S.R.O. 140(I)/2013, dated 26-2-2013---Constitutional petition---Amendment made to Second Schedule of Income Tax Ordinance, 2001---Notification S.R.O making such amendment issued by the Federal Board of Revenue ("Board") and signed by the Additional Secretary, Revenue---Legality---Even if notification in question was issued by the Board, and not by the Federal Government, it could not be said that the exercise of power by the Board was unauthorized or illegal---Notification in question did not usurp the power of the Parliament and it was issued by a competent authority (Federal Board of Revenue) and must be given effect---Constitutional petition was disposed of accordingly.

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

----Ss. 53(2), 148(1), (5) & (6)& First Sched. Part II & Second Sched. Part II, clause 9---Constitution of Pakistan, Art.199---S.R.O. 549(I)/2008, dated 11-6-2008---S.R.O. 140(I)/2013, dated 26-2-2013---Constitutional petition---Enactment or notification prejudicially affecting vested rights or legality of past transaction---Not to be given retrospective effect---Vessels imported by petitioners for demolition and turning into scrap---Advance income tax---Change in rate of advance income tax after conclusion of contract but before vessels arriving at shipyard---Petitioner-companies concluded agreements for purchase of vessels at a time when rate of advance income tax was 1% of the invoice value of the vessel [S.R.O. 549(I)/2008, dated 11-6-2008]---Before the said vessels reached at the ship breaking yard, rate of advance income tax was increased to 5% by virtue of S.R.O. 140(I)/2013, dated 26-2-2013---Plea of petitioner-companies that increased rate of advance income tax should not be made applicable to the import of vessels in respect of which valid and binding agreements had already been executed before the issuance of notification S.R.O. 140(I)/2013, dated 26-2-2013, i.e. change in rate of advance income tax---Plea of customs authorities that material date for consideration was the date of opening or establishing the letter of credit in favour of the seller of the vessel, and not the date of agreement, as an agreement could be manipulated, and that in most of the agreements letter of credit was opened after the change in rate of advance income tax---Validity---Enactment which prejudicially affected vested rights or legality of past transactions or impaired contracts could not be given retrospective effect---Retrospective operation could not be given to executive orders so as to destroy contractual rights and obligations already accrued---Would be inequitable and unjust to deprive a person who acted upon an assurance of the right to exemption and exposed himself to unforeseen loss in the business transaction by suddenly withdrawing the exemption after he had made legal commitments---Subsequent withdrawal of exemption could not be given retrospective operation by an executive act to destroy a right created in favour of a party---Without proof it could not be presumed that any petitioner-company resorted to tampering or manipulation of documents, and even otherwise customs authorities were empowered to satisfy themselves with regard to the genuineness of documents that were presented by the petitioner-companies---High Court directed that with regard to agreements that were entered into for purchase of vessels before the issuance of S.R.O. 140(I)/2013, dated 26-2-2013, i.e. before the change in rate of advance income tax, the petitioner-companies would be liable to pay advance income tax at the rate specified in Second Sched. Part II, clause 9 of Income Tax Ordinance, 2001 i.e. 1% of the invoice value of the vessel, within fifteen days, provided the same had already not been paid---Constitutional petition was disposed of accordingly.

Al-Samrez Enterprise v. Federation of Pakistan 1986 SCMR 1917 ref.

Ameen Bandukda for Petitioners (in C.Ps. Nos.517 to 521 and 622 of 2013).

Sher Shah Kasi, Deputy Attorney General for Respondents Nos.1 and 2 (in C.Ps. Nos.517 to 521, 528 to 540, 560, 565 to 569, 582, 615, 622, 639 and 640 of 2013).

Kashif Nazeer for Respondent No.3 (in C.Ps. Nos.517 to 521, 528 to 540, 560, 565 to 569, 582, 615, 622, 639 and 640 of 2013).

H. Shakil Ahmed and Tanveer Ashraf for Petitioners (in C.Ps. Nos.528 to 540 of 2013).

Khushal Khan Kasi for Petitioners (in C.Ps. Nos.560 and 582 of 2013).

Ishrat Zahid Alvi for Petitioners (in C.Ps. Nos.565 to 569 of 2013).

Tanveer Ashraf, Ishrat Zahid Alvi and Rehmatullah Barrich for Petitioners (in C.P. No.615 of 2013).

H. Shakil Ahmed, Tanveer Ashraf and Ishrat Zahid Alvi for Petitioners (in C.Ps. Nos.639 and 640 of 2013).

Dates of hearings; 7th 8th, 13th and 14h May, 2014.

2014 P T D 174

[Supreme Court of Pakistan]

Present: Anwar Zaheer Jamali, Asif Saeed Khan Khosa and Amir Hani Muslim, JJ

D.G. CUSTOMS VALUATION, KARACHI and another

Versus

Messrs TRADE INTERNATIONAL, LAHORE and others

Civil Appeals Nos.371 to 379 of 2013, decided on 14th June, 2013.

(On appeal against the order dated 23-5-2012 passed by Islamabad High Court, Islamabad, in Writ Petitions Nos.2732, 2822, 2879, 2880, 2956, 3432 of 2011 in 99, 370 and 2782 of 2012.)

Customs Act (IV of 1969)---

----Ss. 25A & 25D---Constitution of Pakistan, Art.199---Constitutional petition---Territorial jurisdiction of Islamabad High Court---Scope---Imported consignment of goods arriving at Karachi port for clearance---Customs duty, valuation of---Customs duty valuation ruling issued by concerned officer of Customs at Karachi challenged before the Islamabad High Court by way of a constitutional petition---Islamabad High Court allowed said constitutional petition and extended interim relief to the petitioners in terms that their goods were ordered to be released subject to production of post-dated cheques regarding disputed customs duty---Validity---Perusal of impugned order of Islamabad High Court revealed that question of jurisdiction had not at all been attended to by the court---Impugned order was set aside in circumstances and case was remanded to the Islamabad High Court to first decide the question of jurisdiction---Appeal was allowed accordingly.

Raja Muhammad Iqbal, Advocate Supreme Court for Appellants (in all cases).

Shafqat Mehmood Chohan, Advocate Supreme Court for Respondents (in all cases).

Date of hearing: 14th June, 2013.

2014 P T D 215

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar and Muhammad Ather Saeed, JJ

COMMISSIONER OF INCOME TAX, NOW COMMISSIONER INLAND REVENUE, LAHORE

Versus

Messrs AYESHA WOOLEN MILLS (PVT.) LIMITED

Civil Petitions Nos. 241-L to 245-L of 2012, decided on 18th June, 2013.

(On appeal from the judgment dated 9-12-2011 passed by the Lahore High Court, Lahore in I.T.As. Nos. 45, 46, 47, 48 and 49 of 1998.)

Income Tax Ordinance (XXXI of 1979)---

----S. 62(1), proviso---Constitution of Pakistan, Art. 185(3)---Statutory notice, non-issuance of---Defect in books of accounts---Proof---Authorities were aggrieved of order passed by High Court, whereby trading accounts of assessee were accepted---Validity---No notice as specified under proviso to S.62(1) of Income Tax Ordinance, 1979, was issued and assessing officer without pointing out any defects in books of accounts rejected the same---No discussion had been made by assessing officer on alleged qualification of auditor's report and on the basis of such disqualifications no addition was made and question which was raised before High Court was not properly framed---Judgment passed by High Court was well written and was unexceptionable and no interference was called from Supreme Court---Petition was dismissed.

Muhammad Ilyas Khan, Advocate Supreme Court and A.H. Masood, Advocate-on-Record for Petitioner (in all cases).

Mian Ashiq Hussain, Advocate Supreme Court for Respondent No.1 (in all cases).

Date of hearing: 18th June, 2013.

2014 P T D 243

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, C.J. Jawwad S. Khawaja and Amir Hani Muslim, JJ

HUMAN RIGHTS CASE NO. 14392 OF 2013

(Action taken on a news clipping published in Daily Pakistan dated 17-4-2013 regarding Unprecedented load-shedding in the Country).

AND

HUMAN RIGHTS CASE NO. 790-G OF 2009

(Action taken on a News clipping published in Daily Jinnah, Islamabad dated 14-4-2009 Regarding increase in the electricity prices.).

AND

SUO MOTU CASE NO.1 of 2013

(Action against grant of 450 and 200 illegal CNG stations licenses during the tenure of two Ex-Prime Ministers, namely, Syed Yousaf Raza Gillani and Raja Pervez Ashraf)

AND

CIVIL PETITION NO.455 of 2013

OGRA through Secretary

Versus

Messrs MIDWAY II, CNG STATION and others

(On appeal from the order dated 28-3-2013 of the Lahore High Court, Rawalpindi Bench passed in I.C.A. No.189 of 2012.)

CONSTITUTIONAL PETITIONS NOS.33 AND 34 OF 2005

Engineer IQBAL ZAFAR JHAGRA AND SENATOR RUKHSANA ZUBERI---Petitioners

Versus

FEDERATION OF PAKISTAN and others---Respondents

C.M.As. 5962 OF 2013 IN C.R.P. NIL OF 2013 IN C.M.A. 3821 OF 2013 IN CONSTITUTIONAL PETITION 33 OF 2005 ETC.: In the matter of

(for permission to file C.R.P.)

Human Rights Cases Nos.14392 of 2013, 790-G of 2009, Suo Motu Case No.1 of 2013, Civil Petition No.455 of 2013, Constitutional Petitions Nos. 33, 34 of 2005 and C.M.As. Nos.5962 of 2013 in C.R.P. Nil of 2013 in C.M.A. No.3821 of 2013 in Constitutional Petition No.33 of 2005 etc., decided on 26th November, 2013.

(a) Constitution of Pakistan---

----Art. 38---Promotion of social and economic well-being of the people---Energy, availability of---Significance---Availability of energy and the progress of a nation/State were inextricably linked---Article 38 of the Constitution commanded that, "The State shall... secure the well-being of the people... by raising their standard of living..."---Supreme Court observed that without energy, there could be no progress, no development which could raise the standard of living of the people as commanded by Art.38 of the Constitution.

(b) Constitution of Pakistan---

----Art. 9---Right to life---Scope---Electricity---Provision of electricity come under the guarantee of right to life enshrined in Art.9 of the Constitution.

Alleged Corruption in Rental Power Plants: In the matter of; 2012 SCMR 773 and Shehla Zia v. Federation of Pakistan PLD 1994 SC 694 ref.

(c) Constitution of Pakistan---

----Arts. 9 & 184(3)---Human rights case---Right to life---Exercise of Jurisdiction under Art. 184(3) of the Constitution by the Supreme Court on news paper clippings regarding unprecedented load-shedding in the country and increase in electricity prices---Validity---Right to life---Scope---Electricity and gas load-shedding---Provision of electricity came under the guarantee of right to life enshrined in Art. 9 of the Constitution---Any country without energy was a country paralysed---Pakistan was constantly faced with massive load-shedding, particularly of electricity in the summer season and of gas in the winter season---Thriving industries of the country were presently reduced to a state of non-functionality---Every day life of the common man was hampered by massive load-shedding---Economic sector could not be expected to run without the provision of energy---Present matter was thus one of public importance concerning the fundamental rights of the people---Supreme Court had jurisdiction to adjudicate on the provision of energy to the people---Human rights case was held to be maintainable accordingly.

Alleged Corruption in Rental Power Plants: In the matter of; 2012 SCMR 773 and Shehla Zia v. Federation of Pakistan PLD 1994 SC 694 ref.

(d) Constitution of Pakistan---

----Arts. 9 & 184(3)---Human rights case---Right to life---Exercise of jurisdiction under Art. 184(3) of the Constitution by the Supreme Court on news paper clippings regarding unprecedented load-shedding in the country and increase in electricity prices---Gap between demand and supply of electricity---Electricity theft---Non-availability of Residual Fuel Oil (RFO) and gas---Power plants performing below-capacity---Non-preference of hydro-power---Mismanagement---Factors responsible for electricity short-fall in the country and solution therefor stated.

Supreme Court outlined various factors which were responsible for electricity shortfall in the country and observed that existing resources of electricity generation, including hydel and thermal, etc., were not sufficient to cater for basic electricity requirements. Independent Power Producers (IPPs) were installed for generation of electricity but they had not proved sufficient. Despite failure of Rental Power Projects (RPPs) in the past, the Government in the year 2008 again adopted mode of generating electricity through such projects.

One of the core problems was electricity theft. Large sections of population, especially rural farms with hundreds of tube wells, government departments, residents of Federally Administered Tribal Areas (FATA), Karachi, Sindh, Seraiki belt, Khyber Pakhtunkhwa (KPK) and Balochistan, and many industrial and production units, etc., were either not paying electricity bills at all or not according to cost of electricity they consumed. In such regard, during the last year a loss of around Rs.750 billion was caused. Consumers in the country were facing electricity shortages of the worst order whereas nothing was being done about electricity theft. Consumer was made to pay exorbitant bills to cover-up the losses that were caused by electricity theft. Electricity theft amounted to stealing a valuable natural resource from the people with impunity. Government had to take strict action against such thieves to end the load-shedding crisis.

There was a stark difference between the producing capacity of power plants and the amount of electricity that they were actually generating. Existing resources/capacity at the system's disposal were sufficient to overcome electricity shortfall faced by the country. Problem of load shedding was a result of mismanagement or want of administrative control by relevant functionaries. Admittedly average minimum amount of load-shedding was ten hours per day, and if such figure was taken at face value, it meant that for nearly half of the day, there was no provision of electricity to all sectors, most important of all industry and agriculture. It was difficult to envision how the commercial sector could grow and develop when there was such a gap between supply and demand of a basic commodity like electricity. State of affairs in the country was so derelict that people had to time their (daily) activities on the basis of when electricity was available.

Another reason for load shedding crisis was the non-availability of Residual Fuel Oil (RFO) and gas. Plants operating on such fuel and gas were not producing electricity in consonance with their full potential.

Independent Power Producers (IPPs) were not abiding by the terms of agreements that they were bound by Seemingly IPPs were taking undue and deleterious advantage of the weak financial position of Pakistan Electric Power Company Limited (PEPCO). IPPs slowed down their production and assigned various reasons for non-payment of electricity. One reason that could be countenanced as valid in such regard was the non-availability of Residual Fuel Oil (RFO) and gas. However, it was also the duty of IPPs to take steps to generate electricity to help boost the commercial, industrial and agricultural sectors rather than continuously pass the buck to PEPCO.

Water and Power Development Authority (WAPDA) was responsible to generate hydro-electricity, which was to account for 33% of the total electricity produced. WAPDA was, however, only performing at 60% of its own capacity in such regard. Reasons for such (below capacity) performance were inter alia, the decentralisation of WAPDA into different generation companies (GENCOs) providing for a possible gap in administrative efficiency, the increased reliance on Residual Fuel Oil (RFO) and gas powered IPPs, and the seasonal constraints on hydro-electric power. Rather than increasing the number of facilities available to harness hydro-electric power such as dams, barrages etc., the Government seemed to be engaged in a policy of promoting Residual Fuel Oil (RFO) as a basis for producing electricity. Average cost of hydel energy generation in the country was Re.1 to 1.5 per kilowatt hour. On the other hand the cost of thermal power was around Rs.5 on Compressed Natural Gas and around Rs.15 on Residual Fuel Oil (RFO), therefore, the increased reliance on fuel oil was unwarranted. Reason for non-production of electricity to maximum installed capacity was thus, to a large extent, financial. Seventy (70)% of the country's oil needs were met through imports. Further, the projected lifetime of existing natural gas and oil resources in the country was just over fifteen and nine years respectively, therefore, simple increase in production by new expensive thermal units would not solve the issue of electricity shortfall. However, the identified hydro-power potential in the country was approximately 41,722 MW, therefore, the best solution to country's energy/electricity crisis was hydro-power. Use of existing resources, while giving priority to capacity building of hydro-electric power, could help in overcoming the problem of load-shedding Human rights case was disposed of accordingly.

(e) Constitution of Pakistan---

----Arts. 9 & 184(3)---Human rights case---Exercise of jurisdiction under Art. 184(3) of the Constitution by the Supreme Court on news paper clippings regarding unprecedented load-shedding in the country and increase in electricity prices---Supreme Court observed that load-shedding of electricity in the country was manageable subject to dedicated and committed efforts to ensure the maximum possible generation of electricity which was sufficient to cater to the requirement of all categories of stakeholders/consumers; that competent authority must concentrate on efforts to minimise suffering of consumers by endeavouring to provide uninterrupted supply of electricity; that if, however, load-shedding was the only way out, it must be administered without having distinction between rural and urban areas as well as domestic, commercial and industrial sectors; that a formula must be put in place to ensure the distribution of electricity on an equitable basis; that it was responsibility of National Electric Power Regulatory Authority (NEPRA) and Pakistan Electric Power Company Limited (PEPCO) to reduce prices of electricity while ensuring that electricity was generated through less-costing hydel power---Supreme Court directed that the competent authority should take steps to control all kinds of losses after supply of generation like line losses, theft, etc., by using modern devices like introducing smart meters and supplying electricity only to consumers, who were ready and willing to make payment; that efforts should be made to persuade all kinds of unauthorized consumers to make payments of bills, failing which action under relevant laws/rules should be taken against them; that a policy should be announced by the National Transmission and Despatch Company Limited (NTDC) and distribution companies (DISCOS) under which the supply of electricity to consumers, who believed in law and made payment in time, was encouraged and supply to unauthorized consumers was discouraged; that preference must be given to generate electricity by using coal and gas, and unless there was no compulsion, electricity should not be generated from Residual Fuel Oil (RFO) as it was costly, and that renewable sources for generating electricity including wind and solar power must be utilized---Human rights case was disposed of accordingly.

(f) Constitution of Pakistan---

----Arts. 38 & 184(3)--- Human rights case---Exercise of jurisdiction under Art. 184(3) of the Constitution by the Supreme Court on news paper clippings regarding unprecedented load-shedding in the country and increase in electricity prices---Concessions and subsidies granted by State---Scope---Captive Power Plants supplied gas at subsidized rates---Propriety---Captive Power Plants received gas at subsidized rates whereas they sold electricity at marked-up prices to the National Transmission and Despatch Company (NTDC)---Such electricity was thus more expensive than normal rates and was often used to give an uninterrupted supply of electricity to affluent cooperative societies---Concessions and subsidies should not ordinarily be withdrawn as envisioned in Art.38 of the Constitution, however, concessions and subsidies must be focused on what was most important to the downtrodden classes---Concessions and subsidies in case of Captive Power Plants were not being made with the interest of the common man as the goal---Such subsidies were also against the gas allocation policy of the Government---Supreme Court observed that the Government must revise its policy in relation to Captive Power Plants and without any justification such plants could not be supplied gas to produce electricity, as they supplied electricity at a much higher rate to National Transmission and Despatch Company Limited (NTDC)---Supreme Court directed that supply of gas to Captive Power Plants should be revised to a lower priority and not at a subsidized rate---Human rights case was disposed of accordingly.

(g) Constitution of Pakistan---

----Arts. 9 & 184(3)---Human rights case---Exercise of jurisdiction under Art. 184(3) of the Constitution by the Supreme Court on news paper clippings regarding unprecedented load-shedding in the country and increase in electricity prices---Lack of availability of gas for production of electricity---Gas load-management policy of the Government---Priority list of Government regarding supply of gas to different sectors---Fertilizer companies were supplied gas at subsidized rates and in priority to some other sectors--- Plea that major reason for lack of availability of gas for production of electricity was that bulk of the gas was being supplied to fertilizer companies at subsidized rates---Plea on behalf of fertilizer companies that by providing cheaper gas to fertilizer companies, such companies were able to price their products independently of international market forces so as to make fertilizer available at cheaper rates to local farmers; that scientifically it was proven that gas was utilised with greater efficiency in the production of urea---Validity---Court exercised judicial restraint in matters of Government policy except where fundamental rights were violated---Government should follow the priority list for allocation of gas and provide the fertilizer sector with gas at the No. 3 priority instead of supplying more gas to the Compressed Natural Gas (CNG) sector, which was clearly against the policy set out by the Government itself---Providing gas to power generation sector at No. 2 priority was necessary due to the acute load-shedding problem currently faced by the country---Supreme Court observed that supply of gas at subsidized rates to fertilizer companies may continue but at the same time there must be a policy to ensure that production of fertilizers like urea etc. was sold in the market to farmers at a subsidized rate---Human rights case was disposed of accordingly.

(h) Constitution of Pakistan---

----Pt. II, Ch. 1 [Arts. 8 to 28] & 184(3)---Jurisdiction of Supreme Court under Art. 184(3) of the Constitution---Government policy, interference in---Judicial restraint---Scope---Court exercised judicial restraint in matters of government policy except where fundamental rights were violated.

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

----Ss. 3(1), 3(8) [as added by Finance Act (XXII of 2013] & 2(46)---Constitution of Pakistan, Arts. 9 & 184(3)---Human rights case---Exercise of jurisdiction under Art. 184(3) of the Constitution by the Supreme Court---Additional sales tax of 9% imposed on Compressed Natural Gas (CNG) by way of S. 3(8) of the Sales Tax Act, 1990 (added by the Finance Act, 2013)---Legality---Additional sales tax of 9%, which was not prescribed under S.3(1) of the Sales Tax, 1990, was being recovered on CNG---Sale price of CNG was increased by virtue of the added 9% sales tax---Held, only a charging section could be used to impute taxes---Section 3(1) of the Sales Tax Act, 1990 was a charging section, and under S. 2(46) no other section of the Sales Tax Act, 1990 could be utilised to charge tax other than a charging section---Section 3(8) of the Sales Tax Act, 1990 (added by the Finance Act, 2013) was thus contradictory with respect to S. 3(1) of the Sales Tax Act, 1990---Levy of extra tax at the rate of 9% could not be charged except the rate which had been fixed under S.3(1) of the Sales Tax Act, 1990---Supreme Court declared S.3(8) of Sales Tax Act, 1990 as ultra vires of S.3(1) of the same Act and struck it down---Supreme Court directed that Oil and Gas Regulatory Authority (OGRA) should issue a revised notification to recover only 16% or 17% sales tax on CNG as early as possible but not beyond the period of seven days; that extra sales tax (recovered on CNG) should be deposited by Federal Board of Revenue within three months in the manner as directed in the judgment of Iqbal Zafar Jhagra v. Federation of Pakistan (2013 SCMR 1337)---Human rights case was disposed of accordingly.

Collector of Sales Tax and Central Excise, Lahore v. WAPDA 2007 SCMR 1736; Sheikhoo Sugar Mills v. Government of Pakistan 2001 SCMR 1376 and Iqbal Zafar Jhagra v. Federation of Pakistan 2013 SCMR 1337 ref.

(j) Constitution of Pakistan---

----Arts. 38, 9 & 184(3)---Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997), S. 21---Human rights case---Exercise of jurisdiction under Art. 184(3) of the Constitution by the Supreme Court on news paper clippings regarding unprecedented load-shedding in the country and increase in electricity prices---Electricity tariff---Subsidy on electricity tariff taken-away by the Government---Constitutionality---Subsidy that was afforded to consumers was taken-away under S. 31 of Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997---Although the Government had the power to take away subsidies, however, such power must be exercised in consonance with the command of Art. 38 of the Constitution---Article 38 of the Constitution commanded the State to act for the welfare of its citizens---Large part of population in the country was living below the poverty line, therefore, it was difficult to comprehend as to how a raised electricity tariff which did not afford any subsidy, was in the benefit of the people---Provision of electricity was a substantive part of the right to life---Due to load-shedding and high electricity tariffs, government policy in regard to taking away subsidy was violative of Art.9 of the Constitution---Supreme Court observed that subsidy already being given to consumers should not have been withdrawn; that although subsidy was not the right of consumers, the Government might consider in near future to increase the rate of subsidy by extending its benefits to consumers who were not in a position to pay high charges of the electricity.

(k) Oil and Gas Regulatory Authority Ordinance (XVII of 2002)---

----S. 7---Constitution of Pakistan, Arts. 38 & 184(3)---Human rights case---Exercise of jurisdiction under Art. 184(3) of the Constitution by the Supreme Court on news paper clippings regarding unprecedented load-shedding in the country and increase in electricity prices---Price of petroleum products, fixing of---Increase in domestic price of petrol despite steady decrease in petrol prices in the international market---Constitutionality---No policy justification existed for such an increase---Prices of petrol, diesel, petroleum products, etc. were being fixed arbitrarily by Oil and Gas Regulatory Authority without taking into consideration the rate in the international market---Petrol prices should be set in consonance with the international market---Petrol and diesel were of imperative need to the economy and to the populace---Article 38 of the Constitution directed the State to act for the welfare of the people---Fixing high petrol/diesel rates without justification was clearly not in the welfare of the people---Supreme Court directed that in future all necessary steps should be taken in such behalf to fix prices strictly in accordance with the prevailing rates in the international market.

Aamir Malik, Advocate Supreme Court for Applicant (Hajveri CNG).

Zulfiqar Khalid Maluka, Advocate Supreme Court for Applicant (Shahwani CNG and Renala Petroleum CNG).

Hassan Raza Pasha, Advocate Supreme Court for Applicant (Raees and Chinnar CNG).

Syed Nayab Hassan Gardezi, Advocate Supreme Court for Applicant (TMG, CNG).

Miangul Hassan Aurangzeb, Advocate Supreme Court for Applicant (Bukhari, CNG).

Shahid Kamal Khan, Advocate Supreme Court for Applicant (Midway and Liaquat CNG).

Raja Amir Abbas, Advocate Supreme Court for Applicant (Messrs Energy Comforts).

M. Munir Paracha, Senior Advocate Supreme Court for Applicant (Bugti CNG).

Salam Akram Raja, Advocate Supreme Court with Mehmood A. Sh., Advocate-on-Record for Applicant (in C.M.A. 3399 of 2013).

Kowkab Iqbal, Advocate Supreme Court for Applicant (in C.M.A. 5527 of 2013).

Raja Abdul Ghafoor, Advocate Supreme Court/Advocate-on-Record for Applicant (in C.M.A. No.6459 of 2013).

Muhammad Azhar Siddique, Advocate Supreme Court with Arshad Ali Chaudhry, Advocate-on-Record for Applicant (in C.M.A. 6738 of 2013).

Tariq Javed, Advocate Supreme Court for Applicant (in C.M.A. 6699 of 2013).

Nemo for Applicant (in C.M.A. No.3671 of 2013).

Muneer A. Malik, Attorney-General for Pakistan on Court's Notice.

Muhammad Farid Dogar, A.A.-G. for Government of Balochistan.

Zahid Yousaf Qureshi, Additional A.-G. for Government of Khyber Pakhtunkhwa.

M. Hanif Khatana, Additional A.-G. and Ms. Afifa Jabeen, Assistant Manager, Energy Department for Government of Punjab.

Qasim Mirjat, Additional A.-G. and Karim Bakhsh Sheikh, Additional Secretary (Energy) for Government of Sindh.

Syed Iftikhar Hussain Gillani, Senior Advocate Supreme Court, Syed Safdar Hussain, Advocate-on-Record, Zargham Eshaq, Acting MD, PEPCO, Saeed Ahmed Khan, Chairman, OGRA, Abdul Basit Qureshi, PLO, Rizwan-ul-Haq, ED (Legal), Ms. Mishab Yaqboob, JED and Noor-ul-Haq, JED for PEPCO, NTDC and OGRA.

Moazam Ali Rizvi, Advocate Supreme Court and Manzoor Hussain, CE (Hydel) for WAPDA.

Asim Hafeez, Advocate Supreme Court, Faisal Iqbal GM(F) and Amjad Latif, SGM(D) for SNGPL.

Asim Iqbal, Advocate Supreme Court, Shoaib Warsi, Senior G.M., Ejaz Ahmed, Senior G.M. and Syed Shehyar Kazmi, D.G.M. for SSGC.

Abid Zubairi, Advocate Supreme Court for KESC.

Rashideen Nawaz Qasuri, Advocate Supreme Court, Ch. Akhtar Ali, Advocate-on-Record and Kh. Muhammad Naeem, Acting Chairman for NEPRA.

Barrister Asghar Khan, Senior Law Officer for PPIB.

Waqar Rana, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for IRSA.

Nemo for AEDB.

Saqib Mushtaq, Assistant Director for PHYDO.

Muhammad Ilyas Khan, Senior Advocate Supreme Court and Mehr Khan Malik, Advocate-on-Record for DISCO's.

Nazir Malik, Dir (L) for M/o Petroleum.

Javaid Iqbal Jadoon, G.M. (Operations) for Mari Petroleum Co.

Khalid Anwar, Senior Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Pak Arab and Fatima Fertilizer.

Muhammad Munir Peracha, Senior Advocate Supreme Court and Sheraz Ahmed, Manager (Legal) for Fauji Fertilizer Co.

Imtiaz Rashid Siddiqui, Advocate Supreme Court and Iqbal Hashmi, Legal Advisor for Fauji Fertilizer Bin Qasim.

Feisal Naqvi, Advocate Supreme Court and Andaleeb Alvi, Legal Advisor for DH Fertilizer and Engro.

Abrar Hassan, Senior Advocate Supreme Court and Masood Ahmad Alvi, Advocate Supreme Court for KW and SB.

Nemo for FIA.

Nemo for FBR.

M. Ikram Ch. Advocate Supreme Court for Petitioners (in Constitutional Petition No.33 of 2005).

Nemo for Petitioners (in Constitutional Petition No.34 of 2005).

Dr. Rana M. Shamim, Advocate Supreme Court for Applicant (in C.M.A. 5962 of 2013).

Muneer A. Malik, Attorney-General for Pakistan, Raja Abdul Ghafoor, Advocate-on-Record assisted by Faisal Siddiqui for the Federation.

Shakeel ur Rehman, Advocate Supreme Court and Arshad Ali Chaudhry, Advocate-on-Record for FBR.

Salman Akram Raja, Advocate Supreme Court, Saeed Ahmad Khan, Chairman, Abdul Basit, Law Officer and Ms. Misbah Yaqoob, JED(F) for OGRA.

Ch. Akhtar Ali, Advocate-on-Record for M/o. Petroleum.

Nemo for M/o Finance.

Dilawar Khan, Dy. Director for M/o Climate Change.

Nemo for OCAC.

2014 P T D 1231

[Supreme Court of Pakistan]

Present: Tassaduq Hussain Jillani, C.J., Khilji Arif Hussain and Sh. Azmat Saeed, JJ

SANDOZ PAK LTD.

Versus

GOVERNMENT OF PAKISTAN and others

Civil Review Petition No.44 of 2006, decided on 23rd January, 2014.

(For review of the judgment dated 19-12-2005 passed by this Court in Civil Appeal No.863 of 2000)

Central Excises Act (I of 1944)---

----S.3 & First Sched. Entry 04.03---Constitution of Pakistan, Art.188---Review of Supreme Court Judgment---Scope---Levy of excise duty on a chemical called "Leucophor"---Petitioner-company manufactured a product/chemical called "Leucophor"---Customs and revenue authorities demanded excise duty from the petitioner-company in respect of the said product---Petitioner filed a constitutional petition before the High Court praying that "Leucophor" was not classifiable under Entry 04.03 of the First Schedule to the Central Excises and Salt Act, 1944; that demand of excise duty by customs and revenue authorities was an afterthought and such belated demand had been raised after the goods had been cleared and sold---High Court allowed said constitutional petition, relying on one of its earlier judgments on the subject passed in Constitution Petition No. D-865 of 1992 and set aside orders of customs and revenue authorities---Customs and revenue authorities preferred an appeal before the Supreme Court, which appeal was allowed and order passed by High Court was set aside on the basis that chemical which was subject matter of Constitution Petition No. D-865 of 1992 was different than the chemical in the present case---Petitioner-company filed present review petition seeking review of the judgment passed by the Supreme Court and contended that the Supreme Court while passing its judgment did not take into consideration some of the judgments passed by the High Court on the subject---Validity---Supreme Court passed its judgment (i.e. judgment under review) after hearing the parties at considerable length, taking into consideration the evidence available on record, and it also took note of the judgment of the High Court on the subject on which High Court had placed reliance i.e. Constitution Petition No. D-865 of 1992---Petitioner-company failed to point out any error floating on record in the judgment under review, which being just, did not call for any interference---Review petition was dismissed accordingly with costs.

Constitution Petition No.D-865 of 1992 ref.

M. Siddique Mirza, Advocate Supreme Court for Petitioner.

M. Bilal, Senior Advocate Supreme Court for Respondent No.2.

Date of hearing: 23rd January, 2014.

2014 P T D 1511

[Supreme Court of Pakistan]

Present: Sarmad Jalal Osmany, Muhammad Ather Saeed and Mushir Alam, JJ

Messrs F.M.Y. INDUSTRIES LTD.

Versus

DEPUTY COMMISSIONER INCOME TAX and another

Civil Petition No.332-K of 2013, decided on 27th February, 2014.

(Against the order dated 3-5-2013 of the High Court of Sindh, Karachi passed in I.T.A. No.161 of 1998)

(a) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 136 & 137---Reference to High Court against judgment of Income Tax Appellate Tribunal---Appeal to Supreme Court---Questions of fact---High Court and Supreme Court cannot entertain any question on a finding of fact given by the Income Tax (Appellate) Tribunal.

(b) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 136---Reference to High Court against judgment of Income Tax Appellate Tribunal---Scope---Questions of law---High Court only had to give opinion on questions of law raised before it---Only those questions could be raised before the High Court which were questions of law and arose from the order of the (Appellate) Tribunal---Questions of law included questions argued before the Tribunal on which finding had either been given or not given by the Tribunal, and also those questions which were never argued but had been adjudicated upon by the Tribunal.

Commissioner of Income Tax, Companies-III, Karachi v. Krudd Sons Ltd. 1994 SCMR 229 = 1994 PTD 174 ref.

(c) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 136 & 137---Reference to High Court against judgment of Income Tax Appellate Tribunal---Scope---Appeal to Supreme Court---Scope---Questions of law neither agitated before the Appellate Tribunal nor adjudicated upon by the Tribunal---Such questions could not be raised before the High Court or Supreme Court.

Collector of Customs E&ST and Sales Tax v. Pakistan State Oil Company Ltd. 2005 SCMR 1636 ref.

Syed Shahanshah Hussain, Advocate Supreme Court for Petitioner.

Muhammad Saleem Mangrio, Advocate Supreme Court for Respondents.

Date of hearing: 27th February, 2014.

2014 P T D 1861

[Supreme Court of Pakistan]

Present: Tassaduq Hussain Jillani, Anwar Zaheer Jamali, Asif Saeed Khan Khosa, Amir Hani Muslim and Muhammad Ather Saeed, JJ

CENTRAL BOARD OF REVENUE, ISLAMABAD and another

Versus

WAPDA and another

Civil Appeals Nos. 1033 to 1037 of 2004, decided on 30th May, 2013.

(On appeal against the judgment dated 22-1-2004 of the Lahore High Court, Lahore passed in Writ Petitions Nos. 166, 19483, 19895, 3501 and 3522 of 1996).

(a) Pakistan Water and Power Development Authority Act (XXXI of 1958)---

----Ss. 3 & 8---Pakistan Water and Power Development Authority (WAPDA)---Independent entity---Although WAPDA's affairs to some extent were controlled by the Government but for all practical purposes it was an independent entity authorized to carry out the business of utilization of water and power resources of the country and to generate electricity.

(b) Interpretation of statutes---

----Exemption clause---Interpretation and scope---Exemption clause had to be strictly construed---Person claiming an exemption had to bring his case within the four corners of the exemption and unless he did so he could not be granted exemption.

(c) Central Excise Act (I of 1944)---

----S. 12A & First Sched., Item No.14.14---Pakistan Water and Power Development Authority Act (XXXI of 1958), S.3---Constitution of Pakistan, Arts.165 & 165-A---S.R.O. No.519(I)/1992, dated 25-5-1992---Pakistan Water and Power Development Authority (WAPDA)---Not exempted from levy of excise duty---Whether WAPDA was exempted from excise duty on loans and advances---WAPDA could not claim exemption (from levy of excise duty) on loans and advances made by Banking Companies, Financial Institutions, Insurance Companies, Cooperative Financing Securities and other lending banks or Institutions under item (g) of S.R.O. No.519(I)/1992 dated 25-5-1992 issued under S.12A of Central Excise Act, 1944.

Central Board of Revenue v. SITE PLD 1985 SC 97; Messrs Rice Export Corporation of Pakistan v. Karachi Metropolitan Corporation PLD 1990 Kar. 186; Messrs Gadoon Textile Mills and 814 others v. WAPDA and others 1997 SCMR 641 and Water and Power Development Authority and another v. Administrator, District Council, Swabi and others NLR 2000 Tax 136 distinguished.

Union Council, Ali Wahan Sukkur v. Associated Cement (Pvt.) Limited 1993 SCMR 468; KDA's case 2005 PTD 2131 and Commissioner Sales Tax and Central Excise v. WAPDA 2007 SCMR 1736 ref.

Sh. Izhar ul Haq, Senior Advocate Supreme Court for Appellants.

Mian Ashiq Hussain, Advocate Supreme Court for Respondent No.1.

Raja M. Aleem Khan Abbasi,D.A.G. On Court notice.

Date of hearing: 30th May, 2013.

2014 P T D 2016

[Supreme Court of Pakistan]

Present: Nasir-ul-Mulk, C.J., Amir Hani Muslim and Muhammad Ather Saeed, JJ

FEDERATION OF PAKISTAN through Secretary M/o Petroleum and Natural Resources and another

Versus

DURRANI CERAMICS and others

Civil Appeals Nos. 1540 - 1599 of 2013 and Civil Appeal No.21 of 2014, decided on 22nd August, 2014.

(On appeal from the judgment/order of the Peshawar High Court, Peshawar dated 13-6-2013 in Writ Petitions Nos.2582-P, 2880-P, 2457-P, 2546-P, 2578-P, 2653-P, 2804-P, 3050-P, 3156-P, 2654-P, 2579-P, 2750-P, 2831-P, 3022-P, 3023-P, 3089-P, 2454-P, 2455-P, 2459-P, 2738-P, 2740-P, 2801-P, 3051, 2581-P, 2583-P, 2584-P, 2613-P, 2728-P, 2802-P, 3087-P, 2456-P, 2523-P, 2585-P, 2611-P, 3380-P, 3088-P, 3090-P, 2577-P, 2580-P, 2739-P, 2881-P, 2941-P, 2976-P, 3270-P, 2612-P, 2911-P, 2913-P, 2940-P, 2987-P, 3104-P, 3228-P, 2395-P, 2424-P, 2910-P, 2974, 3214-P, 3227-P, 3229-P, 3271-P, 2514-P of 2012 and judgment dated 24-10-2013 passed by Peshawar High Court, Abbottabad Bench in Writ Petition No.788-A of 2012)

(a) Cess---

----Whether levy of a cess was a "tax" or a "fee"---Determination---Question whether a particular levy was a "tax" or a "fee" was decided by the courts upon examining the facts and circumstances of each case keeping in mind the criteria for holding the levy a "fee" or "tax"---Cess had been defined as a tax which raised revenue to be applied for a specific purpose---Nomenclature, however, would not be relevant and whether the imposition of a particular cess could be termed as a tax or fee would depend upon the nature of a levy---When cess was levied for a particular purpose; it could either be tax or fee depending upon the nature of the levy---Both were compulsory exaction of money by public authorities---Whereas "tax" was a common burden for raising revenue and upon collection became part of public revenue of the State, "fee" was exacted for a specific purpose and for rendering services or providing privilege to particular individuals or a class or a community or a specific area---However, the benefit so accrued may not be measurable in exactitude---So long as the "levy" was to the advantage of the payers, consequential benefit to the community at large would not render the levy a tax.

Vijayalashmi Rice Mill and others v. Commercial Tax Officers Palakol (2006) 6 SCC 763; Jindal Stainless Ltd. and others v. State of Haryana and others AIR 2006 SC 2550; Australian Tape Manufacturers Association Limited v. Common Wealth of Australia (1993) 176 CLR 480; Sreenivasa General Traders v. State of Andhra Pradesh AIR 1983 SC 1246; Messrs Shivalik Agro Poly Products AIR 2004 SC 4393; Luton v. Lessels (2002) HCA 13 and Roy Morgan Research (Pvt.) Ltd. v. Commissioner of Taxation (2011) HCA 35 ref.

(b) Gas Infrastructure Development Cess Act (XXI of 2011)---

----Ss. 3, 4 & Second Sched.---Gas Infrastructure Development Cess ("the Cess"), levy of---Whether levy of said cess was a "tax" or a "fee"---Cess in question was to be utilized for specific purposes, namely, development of infrastructure of certain (gas) pipeline projects, Liquefied Natural Gas (LNG) or for price equalization of other imported alternative fuels including Liquefied Petroleum Gas (LPG)---Cess in question was not a common burden for raising revenue generally---Money so collected from levy of said cess was to be utilized for a specific purpose for the advantage and benefit of the consumers of gas---Cess in question was basically to be levied on all consumers of gas with certain exemptions, mainly domestic consumers, who only consumed 20.3 % of the total gas, whereas 76 % of the total gas was consumed by those from whom the cess in question was collected---Latter sector would mainly benefit from the said cess, as it would ensure continuous and increased supply of gas to such sector---Other consumers or the country as a whole would also benefit from the (gas pipeline) projects but the same was inconsequential compared to the advantage that would accrue to the payers i.e. those not exempted from the cess---In the Annual Budget Statement (Federal Budget 2013-14), Gas Infrastructure Development Cess had been listed as Non-Tax Revenue, thus on the Government's own showing, cess in question was not a tax---Appeal was dismissed accordingly.

(c) Gas Infrastructure Development Cess Act (XXI of 2011)---

----S. 3---Constitution of Pakistan, Art. 73 & Fourth Sched. Part I, Entries Nos. 43 to 53---Money Bill---Gas Infrastructure Development Cess Act, 2011 introduced (in the Parliament) as a Money Bill---Legality---Gas Infrastructure Development Cess was not a "tax" but a "fee"---Cess in question was not a tax covered by any Entry relating to imposition or levy of tax under Part-I of the Federal Legislative List, thus the Gas Infrastructure Development Cess Act, 2011, could not have been introduced as a money bill under Art. 73 of the Constitution---Gas Infrastructure Development Cess was, therefore, not validly levied in accordance with the Constitution---Appeal was dismissed accordingly.

(d) Interpretation of statutes---

----Words in a statute---Disjunctive meaning---Scope---Courts could assign disjunctive meaning to particular words in a statute---Such construction was permissible if it reflected the true intention of the Legislature and if to hold otherwise would render particular words in the statute either meaningless or lead to absurdity.

Abdul Razak v. Karachi Building Control Authority PLD 1994 SC 512 ref.

(e) Interpretation of statutes---

----Words in a statute---Meaning assigned---Scope---Ordinary and natural meaning---Basic rule for interpretation of statutes was to give the words their ordinary and natural meaning---Deviation from such rule was permissible only when it became necessary, for example to avoid or overcome absurdity or render certain words meaningless---Such exercise was undertaken when assigning the words their ordinary meaning did not reflect the true intention of the Legislature.

(f) Constitution of Pakistan---

----Fourth Sched. Part I, Entry No. 51---Federal Legislative List---"Taxes on mineral oil, natural gas and minerals for use in generation of nuclear energy"---Word "and", interpretation of---Conjunctive meaning---Plea that word "and" in Entry No.51 (Part I, Fourth Sched. to the Constitution) should be read as "or" for bringing out the true meaning of it as intended by the framers of the Constitution---Validity---By the use of "and" in between "natural gas" and "minerals" in Entry No.51 (Part I, Fourth Sched. to the Constitution), all the three items were to be read conjunctively with the words following them---In the said Entry "and" could have been substituted by "or" only if without the change absurd consequences would have followed---Restricting "mineral oil" or "natural gas" to their use in the generation of nuclear energy would not lead to any absurdity, thus Entry No.51 could only be accorded its natural meaning and the same should be read conjunctively.

(g) Constitution---

----Living document---Constitution was a living document which catered for future development and progress.

(h) Taxation---

----Double taxation, imposition of---Scope---Double taxation could be imposed only by clear and specific language and not by implication.

Pakistan Industrial Development Corporation v. Pakistan through Secretary Ministry of Finance 1992 SCMR 891 ref.

(i) Constitution of Pakistan---

----Art. 160(3)---Taxes "raised" under the authority of Parliament---Meaning---Word "raise" appearing in Art. 160(3) of the Constitution referred to taxes levied by or under the authority of Parliament---Said Article did not provide for imposition of "tax" but referred to taxes that were collected and gathered under the authority of the Parliament.

Salman Aslam Butt, AGP, Muhammad Waqar Rana, Advocate Supreme Court assisted by Sardar Dil Nawaz Cheema, Advocate, Nazir Malik, Director (Law) M/o Petroleum, Hassan Mehmood, Director (Gas) and Salman Akram Raja, Advocate Supreme Court assisted by Husnain Arshad, Bilal Bashir, Ms. Zainab Qureshi, Neshay Aqueel and Muhammad Shakeel Mughal, Advocates for Appellants.

Abid S. Zuberi, Advocate Supreme Court assisted by Ayan Memon and M. Munir Khan, Advocates for Respondent No.4 (in C.A. 1540 of 2013).

Ahmed Nawaz Chaudhry, Advocate-on-Record/Advocate Supreme Court for Respondent No.5 (in C.A. No.1540 of 2013).

Syed Iftikhar Hussain Gillani, Senior Advocate Supreme Court assisted by Saad Buttar, Advocate for Respondents Nos.4 to 29 (in C.A. No. 1541 of 2013).

Athar Minallah, Advocate Supreme Court for Respondent No.1 (in C.As. Nos.1542, 1544, 1549, 1551, 1558, 1563 to 1565, 1567, 1568, 1570, 1571, 1577 of 2013).

Athar Minallah, Advocate Supreme Court for Respondent No.2 (in C.As. Nos.1568 and 1592 of 2013).

Atif Ali Khan, Advocate Supreme Court for Respondents Nos.1 and 2 (in C.A. 1546 of 2013).

Haroon-ur-Rashid, Advocate Supreme Court for Respondent No.1 (in C.As. Nos.1552 and 1559 of 2013).

Haroon-ur-Rashid, Advocate Supreme Court for Respondents Nos.1, 4 to 13 (in C.A. No.1591 of 2013).

Haroon-ur-Rashid, Advocate Supreme Court for Respondent No.7 (C.A. No.1592 of 2013).

Makhdoom Ali Khan, Senior Advocate Supreme Court assisted by Khurram Hashmi, Umair Malik, Saad Hashmi, Tanveer Niaz, Nader Mehboob, Zarnab and Shoaib, Advocates for Respondent No.1 (in C.As. Nos.1555, 1580 and 1587 of 2013).

Makhdoom Ali Khan, Senior Advocate Supreme Court assisted by Khurram Hashmi, Umair Malik, Saad Hashmi, Tanveer Niaz, Nader Mehboob, Zarnab and Shoaib, Advocates for Respondent No.2 (in C.A. No.1553 of 2013).

Makhdoom Ali Khan, Senior Advocate Supreme Court assisted by Khurram Hashmi, Umair Malik, Saad Hashmi, Tanveer Niaz, Nader Mehboob, Zarnab and Shoaib, Advocates for Respondents Nos.1 and 2 (in C.A. No.1554 of 2013).

Makhdoom Ali Khan, Senior Advocate Supreme Court assisted by Khurram Hashmi, Umair Malik, Saad Hashmi, Tanveer Niaz, Nader Mehboob, Zarnab and Shoaib, Advocates for Respondents Nos.6 and 15 (in C.A. No.1560 of 2013).

Makhdoom Ali Khan, Senior Advocate Supreme Court assisted by Khurram Hashmi, Umair Malik, Saad Hashmi, Tanveer Niaz, Nader Mehboob, Zarnab and Shoaib, Advocates for Respondents Nos.1 to 5 (in C.A. No.1562 of 2013).

Makhdoom Ali Khan, Senior Advocate Supreme Court assisted by Khurram Hashmi, Umair Malik, Saad Hashmi, Tanveer Niaz, Nader Mehboob, Zarnab and Shoaib, Advocates for Respondents Nos.1 to 15 (in C.A. 1569 of 2013).

Makhdoom Ali Khan, Senior Advocate Supreme Court assisted by Khurram Hashmi, Umair Malik, Saad Hashmi, Tanveer Niaz, Nader Mehboob, Zarnab and Shoaib, Advocates for Respondent No.2 (in C.As. Nos.1581 and 1585 of 2013).

Makhdoom Ali Khan, Senior Advocate Supreme Court assisted by Khurram Hashmi, Umair Malik, Saad Hashmi, Tanveer Niaz, Nader Mehboob, Zarnab and Shoaib, Advocates for Respondents Nos.2 to 7 (in C.A. No.1588 of 2013).

Makhdoom Ali Khan, Senior Advocate Supreme Court assisted by Khurram Hashmi, Umair Malik, Saad Hashmi, Tanveer Niaz, Nader Mehboob, Zarnab and Shoaib, Advocates for Respondents Nos.1, 2, 3, 7, 9 and 10 (in C.A. 1597 of 2013).

Sardar Muhammad Ghazi, Advocate Supreme Court for Respondent No.1 (in C.As. Nos.1556 and 1557 of 2013).

Ijaz Anwar, Advocate Supreme Court for Respondents Nos.7, 8, 12 to 14 and 18 (in C.A. No.1560 of 2013).

Tasleem Hussain, Advocate-on-Record/Advocate Supreme Court for Respondent No.1 (in C.A. No.1572 of 2013).

Tasleem Hussain, Advocate-on-Record/Advocate Supreme Court for Respondents Nos.1 and 3 (in C.A. No.1592 of 2013).

Tariq Mahmood, Senior Advocate Supreme Court for Respondent No.1 (in C.A. No.1576 of 2013).

Syed Arshad Ali, Advocate Supreme Court for Respondent No.6 (in C.A. No.1592 of 2013).

Nemo for Respondents (in C.As. Nos.1543, 1545, 1547, 1548, 1550, 1561, 1562, 1566, 1569, 1573 to 1575, 1578, 1579, 1582 to 1584, 1586, 1589, 1590, 1593 to 1596, 1598, 1599 of 2013 and 21 of 2014).

Zulfiqar Khalid Maluka, Advocate Supreme Court (in C.M.As. Nos.970 to 972 in C.A. No.1540 of 2013).

Issac Ali Qazi, Advocate Supreme Court (in C.M.A. No.1066 of 2014).

Ali Ahmed Khan Rana, Advocate Supreme Court (in C.M.A. No.1091 of 2014).

Dates of hearing: 12th, 14th, 17th to 19th February 4th and 5th March, 2014.

2014 P T D 2053

[Supreme Court of Pakistan]

Present: Jawwad S. Khawaja, Iqbal Hameedur Rahman and Mushir Alam, JJ

Messrs FAUJI CEMENT COMPANY LIMITED

Versus

GOVERNMENT OF PAKISTAN through Secretary, Customs, Board of Revenue, Islamabad and others

Civil Appeal No.1801 of 2005, decided on 7th March, 2014.

(On appeal from the judgment dated 24-7-2001 passed by the High Court of Sindh, Karachi in Spl. C.A. No.66 of 1998)

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

----S. 31A---Effective rate of duty on goods, determination of---Date of import---According to S. 31A of Customs Act, 1969 date of import of goods determined the applicability of customs duty---Date on which a Letter of Credit was established or steps were taken in respect of the import of goods were not relevant for such purpose.

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

----S. 19---Concession available under a notification/Statutory Regulatory Order(S.R.O.)---Expiry of such notification/S.R.O.---Effect---After expiry a notification/S.R.O. the benefits thereunder could not be claimed.

Khawaja M. Farooq, Advocate Supreme Court for Appellant.

Raja Abdul Ghafoor, Advocate-on-Record for Respondent No.1.

M. Bilal, Senior Advocate Supreme Court and Raja Muhammad Iqbal, Advocate Supreme Court for Respondent No.2.

Date of hearing: 7th March, 2014.