PTD 2018 Judgments

2018 P T D (Trib.) 1831

[Anti-Dumping Appellate Tribunal]

Before Mian Fasih Ul Mulk, Chairman and Ahmed Owais Pirzada, Member

Messrs SIDDIQSONS TINPLATE LTD.

Versus

NATIONAL TARIFF COMMISSION and 2 others

Appeal No.103 of 2017, decided on 16th November, 2017.

Anti-Dumping Duties Act (XIV of 2015)---

----Ss. 18, 20, 23, 24, 27, 37, 39, 43 & 70---Anti-Dumping Duties Rules, 2001, R.7---Importing/dumping goods causing material injury to the domestic industry---Investigation for said dumping and injury---Imposition of anti-dumping duty---Respondent claimed to be the domestic manufacturer and moved application before 'National Tariff Commission' (NTC) to the effect that imported goods were being dumped in Pakistan, thereby causing material injury to the domestic industry---National Tarrif Commission, after investigation, found sufficient evidence of alleged dumping of goods in question and injury being caused to the domestic industry---Commission, after making final determination, concluded that imposition of anti-dumping duty was needed to prevent material injury being caused to domestic industry---Appellant had contended that provisional anti-dumping duty was imposed, without affording adequate hearing---National Tarrif Commission stated that ample opportunity was provided to all the parties including the appellant in accordance with rules and Anti-Dumping Law and plea of the appellant that preliminary determination was made without affording adequate hearing to the appellant, was not tenable---Appellant further contended that goods in question were two different products and were not liable to anti-dumping duties---No reason existed to accept that said goods were as two different products, especially when both were capable of serving the same purpose or similar end uses having their identical practical utility---Appellant also contended that manufacturers, were of not being capable of producing the goods in question---Manufacturer were not only capable of producing the goods of the specification required by the appellant/importer, but also produced and supplied the same to their Customers including to the appellant in commercial quantity---Said position was not only supported by the sale invoices provided by the respondents to the National Tarrif Commission and the Tribunal, but was also affirmed during Commission's team, on the spot investigation---No reason existed to accept the stance of the appellant that the domestic industry was not capable of manufacturing the goods of required thickness---Contention of the appellant that the dumped product was identical as the same was classified under one PCT headings, was not understandable---National Tarrif Commission in its detailed investigations, took into account various aspects of the case on the basis of the information collected in that behalf---Before imposing even provisional duty for only four months period, the Commission first ensured that goods produced by the domestic industry and imported were comparable in terms of physical and chemical characteristics, products' specifications, chemical formulation and usage and tariff classification of the goods etc.---Investigated product and domestic like products were technically and commercially identical---Anti-dumping duties were imposed on the basis of detailed investigation carried out by the Commission---Creation of separate PCT sub-heading for goods would not be having any impact with reference to levy of anti-dumping duty on the dumping products involved in the matter---Plea of the appellant that separate PCT Heading of goods could affect the outcome of investigation carried out by Commission had no substance---Issues raised by the appellant in its appeal before the Tribunal did not warrant any interference in the final determination report issued by the National Tariff Commission (NTC) in the matter---Appeal being devoid of merits was dismissed, in circumstances.

Najeeb ur Rehman Abbasi for Appellant.

Ahmed Sheraz, Chief Legal Advisor, NTC for Respondent No.1.

Saif Ullah Khan for Respondents Nos.2 and 3.

2018 P T D (Trib.) 36

[Customs Appellate Tribunal]

Before Tahir Zia, Member Judicial-II and Muhammad Nazim Saleem, Member Technical-II

Messrs WATERLINK PAKISTAN (PVT.) LTD. and others

Versus

COLLECTOR OF CUSTOMS and others

Customs Appeals Nos.K-1117 and K-1559 of 2014, decided on 30th July, 2016.

Customs Act (IV of 1969)---

----Ss. 128, 129, 156(1) & Cls.(63)(64)---Transport of goods across Pakistan to foreign territory---Pilferage/theft of goods---Under agreement between United States of America and Pakistan for handling military cargo to and from Pakistan, United States had nominated the appellant for providing logistical support services for transit of military cargo through Pakistan---Appellant had arranged truck/trawler for transporting the container---Said trawler/truck started its journey and reached Terminal at Post Qasim Karachi---Contents/material inside the Container did not match with the declared description---Police under interim challan had reported to have busted the gang and the investigation reveled that gangsters had made theft in transit container in connivance and with the concerned driver of the trawler---Additional Collector of Customs, passed order-in-original in which it was held that appellant being bonded carrier, was liable to pay duty and taxes etc.---Counsel for appellant had produced a copy of order-in-original passed by the Chief Collector of Customs, wherein it was stated that appellants, were themselves victims of pilferage enroute by miscreants which made them suffer heavily, therefore a lenient view was taken and a penalty of Rs.200,000 was imposed---Said order unambiguously confirmed that the charges of pilferage were not established against the appellants---Appellant lodged FIR at the concerned Police Station regarding enroute pilferage immediately after the containers reached the Port---Said FIR was lodged prior to the raid by Collector of Customs, M.C.C. (Preventive)---Case was under trial before Special Judge (Customs and Taxation)---Department had not been able to submit final challan in the said court, despite lapse of more than 2-1/2 years---Few accused persons were on bail, while others were behind the bars---Raid by Collector of Customs, M.C.C. (Preventive) at the Port where the trawlers were loaded had just was beyond their jurisdiction---Whole proceeding, as such, were ab initio nullity in the eyes of law---Directorate General of Transit Trade had exclusive jurisdiction over the present issue---Collector of Customs M.C.C. (Preventive) had no jurisdiction to conduct raid at the Port---Encroachment upon the jurisdiction of the Directorate General of Transit Trade, by the Collectorate Officials of M.C.C. (Preventive) and inaction on the part of the officers of the Directorate General, of was incomprehensible---Complete monitoring and tracking system to maintain movement of Transit Cargo was installed at the concerned Customs House---Department had failed to justify act of commission on the part of Collectorate of Customs M.C.C. (Preventive) and Directorate of Transit Trade---Officials of Directorate of Customs M.C.C. (Preventive) had no jurisdiction to conduct raid within the premises of the Port---Such action of the Directorate was declared to be without jurisdiction and legal sanctity---Impugned order-in-original having been issued consequent to illegal action on the part of Directorate of Customs MCC (Preventive), same was nullity in the eyes of law and was set aside being a void order---Fine and penalty adjudged in the impugned order-in-original were also ordered to be remitted.

S.M. Naqi son of Syed Muhammad Hussain Karachi v. Collector of Customs (Adjudication-I) and others Customs Reference No.157 of 2008; 2011 PTD (Trib.) 1978; 2001 SCMR 838; Messrs Inam Packages, Lahore v. Appellate Tribunal Lahore GST 2005 CL 239; Assistant Collector Customs and others v. Messrs (sic) 2007 PTD 2265; West Pakistan Tank Terminal (Pvt.) Ltd.'s case 2007 SCMR 1318; Paramount Sipinning Mills's case 2012 SCMR 1860; PLD 1971 SC 124 and Messrs Waterlink Pakistan (Pvt.) Ltd.'s case Customs Appeal No.K-513 of 2015 ref.

Pervaiz Iqbal Kasi, Ms. Naureen Naz and Imran Iqbal, for Appellants.

Parwaiz Ahmed, Malik Safdar, Preventive Officer, (MCC Preventive Karachi).

Shahid Dasti, Appraising Officer (MCC Appraisement (West), Karachi).

1. Altaf Ali Chandio, Appraising Officer (Directorate General, Transit Trade, Karachi).

2018 P T D (Trib.) 95

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I)

Messrs JAMIA DARUL ULOOM

Versus

ADDITIONAL COLLECTOR OF CUSTOMS and 2 others

Customs Appeal No. K-1612 of 2015, decided on 21st October, 2016.

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

----Ss. 19, 32, 32-A, 79 & 80---Exemption from customs duties---Mis-declaration---Importer/an educational institution, filed goods declaration declaring to contain "Cold Room Freezer and Chiller" under PCT 8418.5000, and determined its liability of payment of applicable duty and taxes and sought clearance under S.79(1) of the Customs Act, 1969---Same was cleared with exemption of duty and taxes under PCT 9915---During post clearance scrutiny of the goods declaration by audit of revenue receipt, it was observed that consignment was cleared under PCT 9915 without payment of customs duty and other taxes, and that claimed/availed exemption, was not admissible to the subject goods as benefit of PCT 9915 was extendable to the imported goods which had an educational and scientific character---Importer, along with its customs agent were alleged to have wilfully/malafidely committed offence under Ss.32 & 32-A of the Customs Act, 1969 punishable under cls.14 & 14-A of S.156(1) of the Customs Act, 1969---Additional Collector of Customs (Adjudication) passed order to the effect that the importer had violated the provisions of Ss.32(1)(2), 32-A of Customs Act, 1969 by short payment of customs duty---Validity---Importer, vide letter, explained to the Collector of Customs that they had imported the impugned goods, which were meant for installation for their Science Laboratory---Matter was duly deliberated upon up to the level of Additional Collector and the Customs department finally arrived at the conclusion that the impugned goods had educational and scientific character and eventually as a conscious decision they assessed the goods under S.80 of the Customs Act, 1969 and allowed release thereof under PCT heading 9915 at 0% customs duty---After release of the subject consignment, the department issued show-cause notice and charged the importer under Ss.32 & 32-A of the Customs Act, 1969---Department, had failed to produce any expert evidence to controvert the stance of the importer---Scientific Laboratory, could not run without proper cooling system and apparatus working thereunder, which was a necessary requirement for carring out experiments and analysis for getting true and accurate results---Keeping in view the said conditions, subject consignment rightly fell under the category of educational and scientific character---Executive or the Collectorate, who was responsible for assessment of goods, had to ensure before invoking the provisions of S.32 of the Customs Act, 1969, that, prima facie, an element of "mens rea" was present i.e. there should be an attempt of wilful and deliberate false declaration---Adequate breach of principles of natural justice had been equated with breach of law during the hierarchy of customs, and orders passed thereon by the department, including the issuance of show-cause notice and all subsequent proceedings and impugned actions were without any warrant of law, illegal, void ab initio which were set aside, having no legal effect on various accounts---Appeal was accordingly allowed.

Messrs Nadeem Electronics (Pvt.) Ltd. Hairpur District Haripur v. Collector of Customs and Central Excise Sales Tax, Jamrod Road Peshawar and 5 others 1999 PTD 1912; 2010 PTD (Trib.) 2086; D.G. Khan Cement Company Ltd. v. Federation of Pakistan 2004 SCMR 456; Akhtar Hussain v. Collector of Customs (Appraisement) and 3 others 2003 PTD 2090 and Waseem Ahmed and others v. FOP and another 2014 PTD 1733 ref.

(b) Administration of justice---

----Principles---To maintain the administration of justice, no one was to be prejudiced by any one; courts were required to do justice between the parties in accordance with the provisions of law, as the litigant, who approached the court for the relief, was bound to substantiate that, the procedure had been adopted by him in accordance with law; if a particular thing was required to be done in a particular manner, same must be done in that manner, otherwise it should not be done at all and that what had not been expressly written by legislature, could not be implied.

Muhammad Faheem for Appellant.

Rashid Khanzada, A.O. for Respondents.

2018 P T D (Trib.) 239

[Customs Appellate Tribunal]

Before Zulfiqar A. Kazmi, Member (Technical-I)

Messrs ZAIN SONS, KARACHI

Versus

DEPUTY COLLECTOR OF CUSTOMS and another

Customs Appeal No. K-1979 of 2016, decided on 29th May, 2017.

Customs Act (IV of 1969)---

----Ss. 32, 79, 80, 157 & 168---Filing of goods declaration and determination of liability of payment of duties and taxes---Mis-declaration---Confiscation of imported goods---Importer filed goods declaration and determined his liability of payment of applicable duties and taxes and sought clearance under S.79(1) of the Customs Act, 1969 under self-assessment system---In order to check as to whether the importer had correctly paid the legitimate amount of duties and taxes, goods declaration was selected for scrutiny in terms of S.80 of the Customs Act, 1969 and was referred to examination for confirmation of description, quantity and other physical attribute of the goods---Scrutiny of the goods declaration, revealed that the importer had mis-declared the description, PCT and quantity of the goods---Show-cause notice was served upon the importer and case was adjudicated vide order-in-original---Validity---Impugned goods had been adjudged as a "job lot" on the basis of being in different sizes and having different dates of manufacturing---Such goods being not importable, were confiscated---Contention of the importer was that though the paper they had imported was assorted, but not of inferior quality and was not hit by the provisions of "job lot", as neither the goods were factory rejects nor damaged left-overs---Paper imported was found to be not in Prime Packing, and was not 'job lot'; as same was in rolls of different colours---Outright confiscation of the impugned goods was not found justifiable on any count---Appeal was allowed and the goods were allowed to be released upon payment of due duty and taxes on the fair customs value and without any penal action---Customs Authorities were also directed to issue delay/detention certificate for available waiver of port and shipping charges.

Nadeem Mirza for Appellant.

Zulfiqar, P.A. for the Respondents.

2018 P T D (Trib.) 277

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial) and Khawaja Umar Mehdi, Member (Technical)

Messrs J.B. SHOES, KARACHI

Versus

SUPERINTENDENT DIRECTORATE OF INTELLIGENCE AND INVESTIGATION-FBR, LAHORE and others

Customs Appeal No. 105/LB of 2014, decided on 14th October, 2015.

(a) Interpretation of statutes---

----Harmonious construction---Act, in the normal course, was required to be read as a whole and while applying its various provisions, the principle of harmonious construction was required to be borne in mind.

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

----Ss. 2, 3, 4, 5 & 6---Customs authorities---Jurisdiction---Scope---Exercise of jurisdiction or power of customs authorities in respect of any action which was proposed to be taken, or had been taken, was required to be determined with reference to the operative/functional sections, read with Ss.2, 3, 4 or 6 or other relevant sections of the Customs Act, 1969.

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

----Ss. 3-A, 3-E, 4, 83, 157 & 168---S.R.O. No. 486(I)/2007, dated 9-6-2007---Jurisdiction of Directorate General of Intelligence and Investigation to seize any consignment---Scope---Officers of Directorate General of Intelligence and Investigation were appointed as Customs Officers under S.3-A of Customs Act, 1969 to exercise the function, jurisdiction and powers of Customs Officers; as notified by FBR under S.3-E of Act---Proviso to S.4 of the Customs Act, 1969, empowered the FBR to impose conditions/limitations on the powers exercised by the Authorized Officers under the relevant or functional sections of Customs Act, 1969---While exercising its powers ordained under Ss.3-E & 4 of the Customs Act, 1969, the Federal Board of Revenue had issued S.R.O. No.486(I)/2007, dated 9-6-2007; which assigned the jurisdiction upon officers of Directorate for the purpose of exercise of powers under the various operative/functional sections of Customs Act, 1969.

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

----Ss. 2(b), 3-E, 4, 168 & 171---S.R.O. No. 486(I)/2007, dated 9-6-2007---Jurisdiction/power of Directorate General of Intelligence and Investigation to detain or seize goods, documents and other things---Scope---Directorate General of Intelligence and Investigation had unfettered jurisdiction/powers to detain or seize any goods, documents and things within their territorial jurisdiction, if the appropriate officers of Directorate General of Intelligence and Investigation had grounds to believe that any goods were liable to confiscation under the Act---Only legal obligation on the appropriate officer of the Directorate was to show/communicate the grounds under S.171 of the Customs Act, 1969; on the basis of which the seized goods were liable to confiscation---Director of Customs Intelligence and Investigation and the appropriate officers working under it had the jurisdiction to take action under Ss.168, 171 of the Customs Act, 1969 in respect of any goods liable to confiscation; found within his territorial jurisdiction at any time irrespective of the place of importation of goods.

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

----Ss. 83, 157, 168 & 194-A---Proceedings for confiscation of seized goods---Proceedings for confiscation of seized goods under the Customs Act, 1969 were necessarily an action in rem, which pertained to the goods per se---Scrutiny of record, had revealed that cross-matching of consignment with goods declaration, revealed that there was mis-declaration on part of the importer in as much as the merchandise that was actually imported was not "Joggers", but some other goods---Complete mismatch of nomenclature of goods cleared under S.83 of the Customs Act, 1969 by the Officer of Customs Collectorate, with the goods seized by the Officer of Directorate General of Intelligence and Investigation, proved that there was no nexus between the clearance under S.83 of the Customs Act, 1969 and the impugned merchandise---Misdeclaration of the merchandise had the effect of breaking the nexus between the goods declaration and the seized goods---Cause of action arose within the territorial jurisdiction of the Collectorate where seizure of impugned merchandise was made---Collectorate of Customs, had ipso facto attained jurisdiction over the matter---Appropriate Officers having territorial jurisdiction over the sites of the seized goods, did not lose their authority to initiate proceedings for assessment, confiscation or penalty, merely because the goods were initially cleared for home consumption by other appropriate officer---Plea raised by appellant regarding the impugned show-cause notice and resultant confiscatory order being improper and not legal for the reason of lack of jurisdiction on the part of the department, could not be accepted---Appeal being devoid of merits was dismissed, in circumstances.

Messrs Zeb Traders v. Federation of Pakistan 2004 PTD 369 and Messrs Yousaf Re-rolling Mills v. Collector of Customs (appraisement) Karachi 1986 CLC 77 ref.

Nemo for Appellant.

2018 P T D (Trib.) 326

[Customs Appellate Tribunal]

Before Ch. Muhammad Shabbir Gujjar, Member (Judicial)

QUTBUDDIN

Versus

COLLECTOR OF CUSTOMS, MCC, ISLAMABAD and 2 others

Customs Appeal No. 355/PB of 2014, decided on 18th October, 2016.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 139, 156(1)(8)(70)(89) & 194-A---Smuggling of foreign currency---Seizure and confiscation of foreign currency and imposition of penalty---Appellant who was going abroad, was searched by Airport Security Force and allegedly recovered foreign currency amount from him and appellant was handed over along with recovered amount to Customs Official for initiation of further legal proceedings---Appellant was arrested and FIR was lodged against him---Collector Customs (Adjudication) vide order-in-original ordered outright confiscation of said amount and penalty of Rs.100,000 was also imposed on the appellant---Validity---Recovery, in the present case, had been effected by the Staff of Airport Security Force, who handed over the appellant with currency to the Customs Officials---Such action totally negated the fact that appellant failed to declare the said currency before the Customs Officials---Investigating Officer as well as the Seizing Officer, had admitted that no chance of declaration of said currency was provided to the appellant---Appellant had already been acquitted by the Special Judge Customs with the findings that no chance was given to the appellant for written or verbal declaration within the meaning of S.139 of the Customs Act, 1969---Admitted position being that no concealment of currency or facts, were made by the appellant, case against appellant/accused attempting to export currency, could not be said to have been proved---Investigating Officer had admitted that appellant did not belong to any money laundering group nor he was previous convict or remained involved in such cases---Findings of the Trial Court, were totally based on the evidence produced by the Customs Authorities regarding the involvement and violation of law by the appellant, which had not been proved---Appellate Tribunal being last fact finding forum, could overlook the judgment passed by Trial Court in the case, but could not ignore the evidence and facts available on record in the shape of statements of the Investigating Authorities---Appellant could not be said to have violated the law---Impugned order-in-original passed by the Trial Court/Adjudicating Authority, was set aside and appeal was accepted with the direction to the concerned authorities to return the foreign currency to the appellant---Order accordingly.

1984 PCr.LJ 1133; 1991 PCr.LJ 644; 1989 MLD 4051 and PLD 1986 SC 1992 ref.

Irshad Ahmad Durrani for Appellants.

Alhaj Gul, Superintendent Customs for Respondents.

2018 P T D (Trib.) 341

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II), Sheikh FAHEEM AHMED

Versus

DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION-FBR

Appeal No.K-1074 of 2016, decided on 27th March, 2017.

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

----S. 194-A(1)(4)---Appeal against order-in-original passed by Collector of Customs (Adjudication)---Non-submission of counter affidavit by the (respondent) Authority---Effect---Appeal, in circumstances, could be allowed on the short point of not controverting the affidavit submitted by the appellant on the facts and grounds of the case, confirming that the deposition made by and on behalf of the appellant in the memo. of appeal and affidavit were deemed to be true and correct and no controversy was left behind with regard to the fact of the case---Non-submission of counter affidavit whether by will or default, therefore, would forfeit the respondent's right to deny assertion made in the affidavit.

[Case-law referred]

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

----Ss. 2(s), 9, 10, 168 & 177---SRO No.486(I)/2007, dated 9-6-2007---SRO No.188(I)/83, dated 12-2-1983---"Smuggling"---Delegated powers of Officials of Directorate General of Intelligence and Investigation---Scope and extent---Officials of Director, Directorate General of Intelligence and Investigation, were delegated powers through SRO No.486(I)/2007, dated 9-6-2007 for functioning as Officer of Customs within the territory of Pakistan for thwarting smuggling---Said powers were not unfettered; their jurisdiction was in fact restricted to the area falling outside the area expressed in Ss.9 & 19 of the Customs Act, 1969 and beyond 5 Kilometers of the border of India and Iran as expressed in S.177 of the Customs Act, 1969 and Notification S.R.O. No.188(I)/83, dated 12-2-1983---In the present case, officials seized the goods from an open warehouse situated within the city---Goods stored in warehouse, did not fall within the ambit of "smuggling" as only either imported or purchased goods were invariably stored in the warehouse, well supported with valid and lawful legal import documents and purchase receipt/bills, available with the person, who warehoused the goods---Seizure of goods from open warehouse, was without any lawful authority/jurisdiction which being of no legal effect, was void and ab initio.

[Case-law referred]

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

----Ss. 162 & 163---Power to issue search warrant and to search and arrest without warrant---Search of an open ware house under S.163, Customs Act, 1969---Scope---Search under S.163 of the Customs Act, 1969 of open warehouse where appellant/importer's goods were warehoused---Every search under S.163 of the Customs Act, 1969, had to be made by the Officer concerned strictly in accordance with the spirit of its expression after exhausting recourse of obtaining a search warrant in terms of S.162 of Customs Act, 1969 from the Judicial Magistrate on the basis of application by Gazetted Officer of the Customs, stating the grounds of his belief that the goods liable to be confiscated or documents or things, while in his opinion, would be useful as evidence in proceeding under the Act and those were hidden in some secret place where search had to be made after having knowledge of the place which was earlier a guarded secret---Judicial Magistrate, after going through the application if felt appropriate, would issue search warrant which had to be executed in the same manner having the same effect as of search warrant issued under the Criminal Procedure Code, 1898---Requirement of issue of search warrant by the Magistrate, could be dispensed with under S.163 of the Customs Act, 1969, which empowered Assistant Collector of Customs or the other officer of like rank to make search without warrant, if he was satisfied that there was danger of removal of goods, if search warrant was obtained; further he had to record such reason in the statement so prepared in writing containing the ground of his belief with regard to danger he apprehended that the goods would be removed before search could be made on the basis of search warrant and secondly about the goods or documents or things for which the search was to be made---In the present case, the search had been conducted at the warehouse under S.163 of the Customs Act, 1969 by the subordinates of Directorate General of Intelligence and Investigation FBR (Anti-Smuggling) without recourse to the mandated requirement of S.162 of the Customs Act, 1969---Obtaining of search warrant under S.162 of the Customs Act, 1969, was pre-requisite without exception---Search conducted under S.163 of the Customs Act, 1969, without recourse to the mandated requirement of S.162, would render the same without lawful authority and jurisdiction and no superstructure could be built upon such search---Seizure notice and subsequent preparation of contravention report by the officer of Directorate General and issuance of show-cause notice and passing of order-in-original by Collector of Customs was as of no legal effect and as such void, ab initio.

[Case-law referred]

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

----Ss. 91, 92, 168 & 171---Powers of Officials of the Directorate General of Intelligence and Investigation to inspect private warehouse---Scope---In the absence of enabling provision in the law, said officials were barred by law to ask or demand about the Goods Declaration or purchase bills/receipts of the warehouse goods---Proceedings, right from seizure to passing of order-in-original suffered from legal infirmity and as such were void ab initio.

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

----Ss. 2(s), 9, 10 & 177---Notification No. S.R.O. 118(I)/83, dated 12-2-1983---"Smuggling"---Scope---Goods in question should have been brought into or taken out of Pakistan either in breach of any prohibition or restriction for the time being, or by evading payment of customs duty and other taxes leviable thereon; goods should be either those specifically listed in the definition, or be notified by the Federal Government in the official gazette in case those were not freely available in the local market for purchase by the general public, or be brought into or taken out of Pakistan by a route other than one declared under Ss.9, 10 of the Customs Act, 1969 or from a place other than a customs station---In the absence of such perquisites case would not fall within the definition of "smuggling".

Nadeem Ahmed Mirza(Consultant) for Petitioner.

Arif Maqsood, S.I.O (for respondents)

2018 P T D (Trib.) 422

[Customs Appellate Tribunal]

Before Tahir Zia, Member Judicial-II

Messrs ISHAL ENTERPRISES, KARACHI

Versus

ASSISTANT COLLECTOR OF CUSTOMS and another

Cus. Appeal No.K-971 of 2015, decided on 8th October, 2016.

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

----Ss. 25 & 193---Customs Rules, 2001, R.117---General Clauses Act (X of 1897), S.24-A---Appeal against assessment order passed by Assistant Collector Customs (Adjudicating Authority) before Collector of Customs (Appeals)/Appellate Authority---Issue was "whether order passed by Appellate Authority against assessment order passed by Adjudicating Authority, conformed to mandatory requirements of S.24-A of the General Clauses Act, 1897 and the settled law---Appellate authority had declared assessment order passed by Adjudicating Authority as invalid and without lawful authority being in derogation of provisions of S.25(5) of the Customs Act, 1969 and R.117 of the Customs Rules, 2001---Order of Appellate authority was completely silent in regard to the arguments, rendering the order as perfunctory, sketchy, slipshod, bald and devoid of any reason and did not conform to the mandated requirements of S.24-A of the General Clauses Act, 1897---Orders which did not contain rebuttal on the ground advanced by appellant and not containing substantial reasons, would show that same had not been passed on "objective consideration"---Said type of order, was treated as illegal, void, arbitrary and result of misuse of authority vested in a public functionary---Such illegal, void and arbitrary order was not acceptable in any system of law---If any authority, court or tribunal gave a finding of fact which was not based on material available on record, same was illegal, arbitrary, perverse and in violation of established principles of appreciation of evidence on record and was not sustainable in law---Principle, that every judicial or quasi judicial finding should be based on reasons, containing the justification for the finding in the order itself, was an established principle of dispensation of justice---Order-in-appeal passed by appellate authority, being in violation of basic principle of good governance and mandatory requirement of S.24-A of the General Clauses Act, 1897, was not only illegal and void, but also not sustainable---Issue was answered in the negative.

[Case-law referred].

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

----Ss. 25, 32, 80 & 81---Customs Rules, 2001, Rr.107, 109, 117 & 438---SRO No.499(I)/2009, dated 13-6-2009---Reliance on goods declaration for passing assessment order---Issue was "whether reliance on goods declaration for passing assessment order under S.80 of the Customs Act, 1969 and R.438 of Customs Rules, 2001 by adjudicating authority was valid/legal and would pass the test of judicial scrutiny"---Adjudicating authority, rejected transaction value as defined in S.25(1) of the Customs Act, 1969, without making recourse to S.25(4) of the Act and R.109(1) of the Rules---By adopting said method, adjucating authority, shifted the onus on itself for proving the declared value of the appellant/importer, as not fair and intimation to the said effect under R.109(3) of the Rules in consonance with the direction contained in Para. 78 of General Customs Order 12 of 2002 dated 15-6-2002 after omitting the name of the local importers of the identical goods---Adjucating authority ignored the provisions of S.32 of the Customs Act, 1969 and SRO No.499(I)/2009, dated 13-6-2009 and failed to analyze the imported goods of the importer, not even on the basis of quantity factor, commercial level factor or both commercial level and quantity factor---Adjucating Authority had not attempted to carry out an exercise as enunciated in Cls.(b)(c) of subsection (5) of S.25 of the Customs Act, 1969, resorting to seller price list and opted for assessing the goods purportedly under S.25(5) of the Customs Act, 1969, but not under R.117---Said Authority took steps under prohibited Cl.(iii) of R.110, rendering the assessment patently perfunctory, whimsical and arbitrary in derogation of S.25(5) and R.117 of the Act/Rules, hence void ab initio---In the absence of valid evidence and attempt of determination of value under S.25(5) of the Act and R.117 of the Rules, Adjucating Authority had no other alternative but to rely upon the goods declaration---Issue was answered in negative.

[Case-law referred].

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

----Ss. 25, 79, 80 & 81---SRO No.494(I)/2007, dated 9-6-2007---Provisional assessment of duty---Issue was 'whether denial of completing the assessment of the appellant/importer's consignment under the provisions of S.81 of the Customs Act, 1969 by the Collector of Customs and Assistant Collector of Customs was in consonance with the expression of said section and the settled law---Section 81 of the Customs Act, 1969, expressed that where it was not possible for the officer of Customs during the checking of goods declaration to satisfy himself of the correctness of the assessment of the goods made under S.79 of the Customs Act, 1969 for reason that the goods required chemical or other test or a further inquiry, an officer not below the rank of Assistant Collector Customs, could order the duty, taxes and other charges payable on such goods provisionally---Law was silent on the point as to what was meant by "provisional determination" and how it was to be made---In the present case provisional determination of value could have been made while securing differential amount of duty, taxes and other charges between the value of identical goods available in Data and payable on the value on which Adjudicating Authority desired to assess subject to finalization upon issuance of valuation advice by the Directorate General of Valuation under the provisions of S.25 of the Customs Act, 1969; in that manner the interest of revenue was fully protected and no undue harassment would be caused to the importer---Purpose of Ss.25 & 81 of the Customs Act, 1969 was to protect the State Revenue in a manner that the Trade and Industry was allowed to run smoothly---Collector of Customs, had not been vested with powers under any provision of the Customs Act, 1969 or any other law to ignore the requirement of the S.81 of the Customs Act, 1969 nor could interpret in accordance with ones whims and wishes---Issuance of direction to Adjudicating Authority to adhere to the provisions of S.81 and complete the assessment of the importer's consignment after securing pay order between the differential amount---Denying completion of goods declaration of the importer by the Adjudicating Authority and direction of the Collector of Customs to Adjudicating Authority not to exercise the powers vested in him under S.81 of the Customs Act, 1969, were patently illegal and without lawful authority/jurisdiction being a derogation of express provisions of S.81 of the Customs Act, 1969---Direction of Collector of Customs, was ab initio void, in circumstances---Issue was answered in the negative---Assessment order passed by Adjudicating Authority and order-in-appeal, which suffered from grave legal infirmities, were declared to be illegal, null and void and against the norms of justice.

[Case-law referred].

Nadeem Ahmed Mirza for Appellant.

Noor Muhammad, Appraiser for Respondent.

2018 P T D (Trib.) 460

[Custom Appellate Tribunal]

Before Tahir Zia, Member Judicial-II and Muhammad Nazim Saleem, Member Technical-II

MUBASHIR ENTERPRISES, KARACHI

Versus

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE APPRAISEMENT (WEST) CUSTOMS HOUSE, KARACHI and 2 others

Customs Appeals Nos.K-988 to 992 of 2015, decided on 3rd January, 2017.

Customs Act (IV of 1969)---

----Ss. 25, 32(5)(e), 79, 80 & First Schedule, R.2(a)---Determination of customs value and classification of imported goods---Import of "Compact LCD/LED Display Panel 32 inch" and declaring same under PCT Heading 8529.9090 at the unit price US$ 29.00; whereas same were assessed by the department at the unit price US$ 72.00 under PCT Heading 8528.7212---Goods declaration was placed before the Classification Committee, which decided that the goods were classifiable under PCT Sub-Heading 8528.7212, in terms of R.2(a) to the General Rules for interpretation to First Schedule to Customs Act, 1969---Appeal filed by the importer against said decision of Classification Committee, had been dismissed by the Collector of Customs (Appeals)/Appellate Authority below---Contentions of importer were that; LED/LCD panels, could not display any image or video and even, could not amplify any sound, therefore those panels were used in the manufacturing of television sets; that importer itself was manufacturer of television sets and in order to develop aforesaid parts into television sets, importer separately imports built-in-system card (Receiving apparatus) back cover, speakers etc.---"Compact LCD/LED Panels" were always assessed and cleared by the Customs Authorities under PCT Heading 8529.9090, and that consignments of other importers were cleared under said PCT Heading---Stance taken by the Department was that in the light of R.2(a) of the General Rules for Interpretation to the First Schedule to Customs Act, 1969 "LCD/LED" had essential character of a television and was qualified to be classified under PCT Heading 8528.7212---Contradictory position taken by the department was incomprehensible---Importer was also importer-cum-manufacturer, who had been issued provisional certificate by Directorate of Input Output Co-efficient Organization to import "Compact Panel PDP/LCD/LED---Said provisional certificate was adequate evidence that the importer was a manufacturing unit and Department's contention that importer was not manufacturer, was incorrect---Two sets of classifications could not exist one for importers-cum-manufacturers and other for the commercial importers---Value was to be determined in the light of methods as prescribed under S.25 of the Customs Act, 1969---Department, in the present case, had not highlighted as to what were the basis of assessing of goods of the importer at value US$ 73.80 per piece---Held, value of US $ 73.80 per piece was arbitrary and without any legal basis---Discriminatory treatment had been meted out to the importer by the Department---If the "Compact LCD/LED Panels" imported by importers-cum-manufacturers, were classified under PCT Heading 8529.9090, there was neither any legal ground nor rationale as to why the same item imported by the appellant/importer should not be classified in the same PCT Heading---Article 10-A of the Constitution, guaranteed fair trial which also included non-discriminatory approach by the competent authority for the contesting parties---No doubt, preferential treatment was given to importers-cum-manufacturers in order to promote industry; however that could not be allocated by different classification headings in Pakistan Customs Tariff for the commercial importers and for the importers-cum-manufacturers---Imported "Compact LCD/LED Display Panels" were without television reception apparatus and were not television sets, hence, were classifiable under PCT Heading 8529.9090 as claimed by the importer---Impugned order being sketchy and non-speaking was set aside, in circumstances.

1989 SCMR 353 and 2011 PTD (Trib.) 110 ref.

Atif Zia for Appellant.

2018 P T D (Trib.) 495

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial) and Imran Tariq, Member (Technical)

NAUMAN KHAN

Versus

DIRECTORATE OF INTELLIGENCE AND INVESTIGATION-FBR, LAHORE and 2 others

C.A. No.443/LB of 2015, decided on 18th May, 2016.

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

----S. 194-A---Appeal to Appellate Tribunal---Persons entitled to file appeal---"Person aggrieved"---Connotation---Customs Tribunal was a creature of statute having been formed under the Customs Act, 1969---Right of appeal, had to be exercised only by a person permitted by the statute subject to the condition laid therein---Expression "person aggrieved" employed in S.194-A of the Customs Act, 1969, had a wider connotation than the expression "party aggrieved"---Expression "person aggrieved" had to be construed only in the context of the statutory scheme of the Customs Act, 1969 particular in the context of S.194-A.

(b) Words and phrases---

----"Person aggrieved", Connotation explained.

Wesbster's Comprehensive Dictionary International Edn. at page 28; Stroud's Judicial Dictionary, 5th Edn., Vol.1, Pages 83-84 and Black Law's Dictionary 6th Edn. Page 65 ref.

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

----Ss. 2(s), 16, 157, 168 & 194-A---"Smuggling"---Seizure and confiscation of vehicle, allegedly used in smuggling---Judicial redress, availability of---Judicial redress was available only to a person who had suffered a legal injury by reason of violation of his legal right to property, body or reputation---Appellant, in the present case, was the driver of impugned bus---Nothing was on record to show that the appellant had any proprietary rights over the said bus---Appellate Tribunal was barred under the law to extend such rights, unless he established his ownership in a manner known to law---Appellant having failed to prove his ownership of confiscated bus, was not an "aggrieved person" as envisaged under S.194-A of Customs Act, 1969 and in circumstances had no locus standi to file appeal against confiscation.

Ahsan Baqer Ali for appellant.

Ch. Imtiaz Elahi for Respondents.

2018 P T D (Trib.) 511

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs ARIF ASSOCIATES and another

Versus

PRINCIPAL APPRAISER and others

Customs Appeals Nos. K-1287 and K-1288 to 1291 of 2015, decided on 5th January, 2017.

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

----Ss. 3, 32, 127, 128, 129, 156(1)(63)(64), 180, 209 & 215---Customs Rules, 2001, Rr. 472, 473 & 484---SRO No. 121(I)/2014, dated 24-7-2014---Transfer of goods across Pakistan to a foreign territory---Mis-declaration---Appellant, a registered clearing forwarding agent with the Customs Department, received document from a foreign company for clearance of a consignment stuffed in container in transit to Afghanistan against invoice---Appellant on the strength of those documents transmitted Goods Declaration, and Appraiser instead of inspecting container and the seal affixed thereon (as declared in Goods Declaration), got it scanned and weighed---Despite finding the weight as declared after, Appraiser opted to get the goods examined, which was not warranted, as no discrepancy was visible, nor the container fell within the selectively criteria of 5% at the relevant time---Examination transpired that goods stuffed in the container were infact 23 in as 4 as shown---Said discrepancy was reported to the Principal Appraiser, who termed said discrepancy as a contravention of the Transit Rules---Deputy Collector of Customs who issued show-cause notice observed that foreign company had concealed the quantity of 19 transit goods and opined that the case was that of "misdeclaration", being in violation of Rr.473 and 484/Q of Transit Rules embodied in Sub-Chapter VII of Chapter XXI of Customs Rules, 2001, read with Ss.127, 128, 129 & 209 of the Customs Act, 1969 punishable under sub-clauses (63)(64) of S.156(1) of the Customs Act, 1969---Deputy Collector of Customs, being dissatisfied from the reply to show-cause notice, validated the charges levelled in the show-cause notice---Appeal against the impugned order was rejected by the appellate authority---Validity---No evidence had been adduced in the show-cause notice for substantiating the alleged connivance of clearing Agent nor any incriminating tangible evidence had been placed before the Tribunal---Clearing Agent, in circumstances, could not be penalized for any wrong of importer of Afghanistan---Appeal was allowed.

[Case-law referred].

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

----Ss. 156, 157, 168 & 180---Seizure and confiscation of goods---Issuance of show-cause notice---Objective---No penal action, could be taken in the absence of compliance of pre-requisite condition to issue a show-cause notice under S.180 of the Customs Act, 1969---Lapse in that respect, could not be simply ignored as procedural irregularity, issuance of show-cause notice was pre-requisite as the show-cause notice contained the brief facts, the offence being 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 objective of show-cause notice was that the person to whom notice was given was unable as to what were the charges levelled against him---No order could be passed without issuance of show-cause notice as it was mandatory under law and under any condition---Neither Deputy Collector of Customs nor any judicial forum was empowered to dispense with that---No show-cause notice in the present case had been either transmitted or served, rendering the order passed by the Deputy Collector of Customs, followed by the order of Collector of Customs Appeals, as void ab initio---Same was coram non judice and of no legal effect and jurisdiction.

[Case-law referred].

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

----Ss. 3, 32 & 179---Notification 886(I)/2012, dated 18-7-2012---Mis-declaration---Power of adjudication---Federal Board of Revenue, in exercise of the powers conferred upon it under S.3 of the Customs Act, 1969, established a separate forum namely 'Collector of Customs Adjudication' through Notification No.886(I)/2012, dated 18-7-2012---Object of said forum was adjudication of the cases of misdeclaration, causing revenue loss under S.179 of the Customs Act, 1969---Word 'mis-declaration' though was used in the show-cause notice, but provisions of S.32 of the Customs Act, 1969 had not been invoked; neither any revenue loss had been incorporated, rendering the case outside the purview of the Collectorate of Customs, Adjudication and same would fall within the cases pertaining to contravention of technical violation of import or export restriction, without involving of any evasion of duty and taxes---Case of the appellant, at the most would fall under para 3(d) of Notification and the power to adjudicate such type of cases would rest with to Executive Collectorate.

[Case-law referred].

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

----Ss. 207, 208 & 209---Liability of clearing agent for goods for transit trade---Scope---Liability of a clearing agent during the course of clearance of the consignment, had to be evaluated under the provisions of Ss.207, 208 & 209 of the Customs Act, 1969; which indicated that an agent would represent his principal only in such cases, where clearance had been sought for home consumption or warehousing as agent, the case of transit trade, wherein goods had to be allowed to the country of import and an agent undertaking the said job although represent his principal, could not be held responsible for any wrong doing of the importer, until and unless any criminal intent was established on his part---Clearing Agent could not be penalized under the general provision of Customs Act, 1969, unless he would violate the governing conditions of his licence.

[Case-law referred].

Nadeem Ahmed Mirza and Mirza Muhammad Abeer (Consultants) and Obaydullah Mirza for Appellants.

Tariq Mahesar, Appraiser for Respondents.

2018 P T D (Trib.) 541

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial) and Khawaja Umar Mehdi, Member (Technical)

ARSHAD HUSSAIN KHAN

Versus

COLLECTOR OF CUSTOMS (APPEALS), LAHORE and 5 others

C.A. No.203/LB of 2014, decided on 19th February, 2016.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 156(1)(89) & 168---"Smuggling"---Seizure and confiscation of alleged smuggled vehicle---Vehicle---Driver of the vehicle on interception failed to produce any documentary evidence regarding legal import of the vehicle---No Registration Book was produced by the driver---Vehicle in question was detained and during detention period neither the driver/owner, nor any other person approached the Seizing Agency to join the investigation or to submit any documentary evidence regarding payment of customs duty and other taxes---Ample reasons were available to believe that the detained vehicle had been brought into the country without payment of leviable duty and taxes---Vehicle was seized in terms of S.168 of the Customs Act, 1969, after adopting all the legal and procedural formalities for violation of S.16 of the Customs Act, 1969 punishable under Cl.89(1) of S.156(1) of the Customs Act, 1969---Deputy Collector of Customs (Adjudication), found that seized vehicle was smuggled---Appeal filed against order of Adjudicating Authority was dismissed by appellate authority---Validity---Appellant had claimed that vehicle in question was impounded by Police under S.550, Cr.P.C., and was sold in open auction; that the appellant was an auction purchaser of said vehicle---Vehicle in question was a "smuggled" one bearing a cut and weld chassis number which could not be auctioned under the provisions of Cr.P.C., due to overriding effect of Customs Act, 1969---Auction by Police, was illegal and non-existent---Orders passed by the forums below were well founded---No illegality or infirmity was found therein---Appeals were dismissed by Appellate Tribunal in circumstances.

PTCL 2003 CL 716 ref.

Syed Mohib-ul-Hassan for Appellant.

2018 P T D (Trib.) 580

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member Judicial-I and Khalid Mahmood, Member Technical-I

Messrs MIAN SHAFIQ BUSINESS INTERNATIONAL

Versus

DEPUTY COLLECTOR (APPRAISEMENT WEST) and another

Customs Appeal No.K-207 of 2015, decided on 6th April, 2015.

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

----Ss.181, 15, 16, 32 & 32A---Allegation of misdeclaration of value of imported goods---Exercise of discretion---Goods imported in the present case neither fell within the category of S.15 nor within any notification issued under S.16 of the Customs Act, 1969---Sections 32 & 32A of Customs Act, 1969 were attracted in the present case, for which Federal Board of Revenue was not empowered to issue notification regarding fixation of pitch of fine under S.181 of Customs Act, 1969---Legislature intentionally left the imposition of fine on the discretion of the Adjudicating Authority who had to use such discretion sparingly and in the benefit of tax payer.

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.

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

----Ss.25, 179 & 181---Confiscation of imported goods---Option to pay fine in lieu of confiscation---S.R.O. 499(I)/2009, dated 13.06.2009---"Customs Value"---According to S.179 of Customs Act, 1969, "value" meant the amount short paid/evaded and fine was to be imposed in accordance with the evaded amount---In case of confiscation of goods, the redemption fine was to be worked out with reference to the duty and taxes attempted to be evaded and not the duty and taxes leviable on the whole consignment---Notification S.R.O. No.499(I)/2009, dated 18-6-2009 though was amended from time to time, but, no drastic changes were made---"Customs value" determined under S.25 of Customs Act, 1969 did not mean the value determined for levy of fine---According to S.181, for levy of fine, the value has to be taken under S.179 of the Customs Act, 1969.

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

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

----S. 32---Untrue statement and misdeclaration, of---According to S. 32(2) of Customs Act, 1969, in case of untrue statement and mis-declaration there had to be evidence of mens-rea and that of collusion, for the person to be liable to be charged under S.32---No evidence of mens rea as well as collusion was submitted nor placed in show-cause notice---According to S. 32, the quest for mens-rea was not mandatory, it is only to be seen when a criminal liability is to be established against a person and not for the cases in which assessment of even duty/taxes has been detected.

Messrs Liver Brothers of Pakistan Ltd. v. Customs Sales Tax and Central Excise Appellate Tribunal and others 2005 PTD 2462 rel.

Monnoo Industries Ltd. v. Government of Pakistan 2003 PTD (Trib.) 293 ref.

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

----S.32---Word "False" occurring in S.32 of Customs Act, 1969---Connotation, scope and applicability---Section 32 of Customs Act, 1969 provides that any declaration regarding communication or answer to question put by Department, if found wrong in material terms do qualify to constitute an offence within the framework of said section---In order to bring an act, or action within the framework of word "false" as used in S.32 of the Act, the act should either be a conscious wrong, or culpable negligence and should be untrue either unknowingly or negligently.

Omalsons Corporation v. The Deputy Collector of Customs (Adjudication), Karachi 2002 PTD (Trib.) 3053 rel.

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

----S.32---Imposition of penalty---Scope---In order to invoke S.32 of Customs Act, 1969 it had to be seen that whether mens-rea which is essential element for the purpose of S.32(1) had been proved and whether a demand for short recovery can be made under S.32(2) of the Act, without proving any guilty intention, knowledge or mens-rea on part of the maker of statement.

Union Sport Playing Cards Co. v. Collector 2002 YLR 2651; Al-Hamd Edible Oil Limited v. Collector 2003 PTD 552; A.R. Hosiery Works v. Collector of Customs (Export) 2004 PTD 2977; Ibrahim Textile Mills Limited 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. No.43 of 1999 and Cargill Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26 rel.

Mohabbat Hussain Awan for Appellant.

S.M. Wasi, A.O. for Respondents.

2018 P T D (Trib.) 638

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs MSMS TRADING COMPANY, KARACHI

Versus

ASSISTANT COLLECTOR OF CUSTOMS, AFU, MCC and 2 others

Customs Appeal No.K-1075 of 2016, decided on 6th May, 2017.

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

----Ss. 3-DD & 26-A---S.R.O. No.500(I)/2009, dated 13-6-2009---Post clearance scrutiny of record of importer---Officials of Directorate of Post Clearance Audit were delegated the powers under different sections of the Customs Act, 1969 through S.R.O. No.500(I)/2009, dated 13-6-2009---No power, either post clearance scrutiny on audit of the imported consignment was available to the Clearance Collectorate in the presence of Directorate General of Post Clearance Audit---Assistant Collector Customs, while scrutinizing the declaration of the importer, conducted audit while usurping the powers of the Directorate of Post Clearance Audit; which was ab initio, void and coram non judice.

[Case law referred.]

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

----S. 179---Powers of adjudication---Section 179 of the Customs Act, 1969 was clear with regard to determination of the powers of the adjudicating authority on the basis of "amount of duty and taxes involved"---Case involving Rs.1,142,980.00 for obtaining clearance of goods---Competent authority to adjudicate on such a case was Additional Collector of Customs under Cl.(ii) of S.179(1) of Customs Act, 1969---Collectorate of Customs could not issue show-cause notice---Authority defined in S.179(1) of the Customs Act, 1969, had to exercise powers accordingly---In the present case, no notification of the Federal Board of Revenue was presented, empowering the Collectorate of Customs for exercising powers of the Board itself in negation of subsection (2) of S.179 of the Customs Act, 1969, which could not be assumed under any pretext/circumstances---Said lapse rendered order of the Collectorate as without lawful authority and jurisdiction; hence ab initio void superstructure thereupon, had to crumbled down.

[Case law referred.]

(c) Interpretation of statutes---

----Fiscal statute---Such law was to be applied with full authority and given its natural meaning---One had to look merely at what was clearly said and there was no room for any intendment; neither there was equity about a tax nor presumption as to tax; nothing was to be read in, nothing was to be implied---One could only look fairly at the language used.

[Case law referred.]

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

----Ss. 2(a), 80, 83, 193 & 195---Customs Rules, 2001, Rr.438 & 442---Notification S.R.O. No.371(I)/2002, dated 15-6-2002---Assessment of duty---Assessment order passed under S.80, of the Customs Act, 1969 and R.438 Customs Rules, 2001 and clearance order under S.83 of the Customs Act, 1969 and R.442 of Customs Rules, 2001 by the Authorities defined in S.2(a) of the Customs Act, 1969 and Notification S.R.O. No.371(I)/2002, dated 15-6-2002, could not be disturbed by any Authority including Collecorate of Customs for preparing contravention report for adjudication proceedings---Only course available under law for Assistant Collector of Customs (Preventive) was to challenge the assessment order before the Collector of Customs (Appeals) under S.193 of the Customs Act, 1969---Assistant Collector of Customs was empowered to incorporate all the apprehensions, misreading of the facts and contraventions of provisions of the Act/Rules---Assistant Collectorate of Customs (Preventive), instead of following the prescribed method, reopened the assessment/clearance order under S.195 of the Customs Act, 1969---When the right had been conferred on the officer of Customs by the legislature under the provisions of S.197 of the Customs Act, 1969, provisions of S.195 of the said Act, could not be invoked.

[Case law referred.]

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

----Ss. 179 & 180---Powers of adjudication---Issuance of show-cause notice---In presence of appealable order, fresh order could not be passed even in the shape of reassessment order or through issuance of show-cause notice under S.180 of the Customs Act, 1969 while exercising powers under the provisions of S.179 of the Customs Act, 1969---In case of non-filing of appeal against the assessment order, the transaction became past and closed one and attained finality, and could not be disturbed---Impugned show-cause notice was vacated and order passed by the forum below being illegal, void ab initio to the extent of appellant/importer, was set aside.

[Case law referred.]

Nadeem Ahmed Mirza for Appellant.

Ashiq Ali, A.O. for Respondent.

Date of hearing: 31st January, 2017.

ORDER

TAHIR ZIA (MEMBER JUDICIAL-II).---Through this order, I intend to dispose off appeal directed against Orders-in-Original No. 632/2015-2016 dated 20.04.2016 passed by the Additional Collector of Customs (Adjudication-I) Custom House, Karachi.

1. Briefly facts of the case are that appellant imported a consignment of computer hardware components and upon receipt of documents delivered those to his clearing agent Messrs Khurram Brother, Karachi for filing Goods Declaration with the MCC of Preventive under the provision of Section 79(1) of the Customs Act, 1969 (here-in-after to be referred as Act) which he did and was numbered as KAFU-HC-550-05102015, which was selected for examination in terms of Section 198 of the Act and Rule 435 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001 (here-in-after to be referred as Rules). The official posted at Gerry's Shed situated at JIAP confirmed the declaration with the exception of clear marking reading as "invoice not found", consequent to which the Assistant Collector of Customs, Examination transmitted show-cause notice for contravention of Rule 389 of Rules, which was accepted by the appellant in the system and the Assistant Collector of Customs, Examination imposed penalty of Rs. 5,000.00 through a valid order-in-original. Thereafter, the competent authority in exercise of the powers vested through S.R.O No. 371(I)/ 2002 dated 15.06.2002 passed assessment order under Section 80 and Rule 438 of the Act/Rules and directed the appellant to pay leviable duty and taxes of Rs. 125,618.00, which appellant paid on 08.10.2015, consequent to which the Principal Appraiser passed clearance order section 83 and Rule 442 of the Act/Rules and the appellant clearing agent obtained delivery from Gerry's Shed and transported that to the appellant warehouse. After lapse of more than 02 months from the date of clearance the Assistant Collector of Customs, AFU, JIAP (here-in-after to be referred as respondent No.1) prepared contravention report on the pretext that M/s. Gerry's delivered a pouch containing documents of the goods imported arrived on the aircraft corresponding to IGM No. KPAF-9162 dated 21.09.2015 to his office, from which an invoice of US$. 32,124.00 is found as against declared and assessed. This lapse of non timely scrutinizing the pouch by respondent No. 1 was construed as a lapse on the part of appellant and was termed as an act of misdeclaration instrumental in causing loss to the exchequer to the extent of Rs. 1,017,362.00 attracting the provisions of Sections 32 and 32A of the Act and Section 11(3) of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001 and forwarded that to respondent No. 2 for issuance of show-cause notice by the authority competent to do so under Section 179 of the Act, The respondent No. 2 instead of forwarding that to the Additional Collector (here-in-after to be referred as respondent No.3) issued show-cause notice dated 15.12.2015 himself containing the fact and Section narrated/incorporated by the respondent No. 1 in the contravention report. The appellant consultant, replied to the allegation vide letter dated 25.03.2016 through which he challenged his powers under the provision of Section 179 of the Act and Section 11(3) of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001, in addition to controverting the charge of misdeclaration under the provision of sections 32 and 32A of the Act. The respondent No. 3 ignored the submission made therein and passed order-in-original dated 11.04.2016 through which we held the charges leveled in the show-cause notice established against the appellant and ordered to pay/deposit the evaded/short paid amount of duty and taxes of Rs. 1017362.00 along with default surcharge to be calculated at the time of payment failing to which recovery proceeding may be initiated against the appellant under Section 202 of the Act and Chapter IX (Recovery Rules) of the Rules. Additionally, a penalty of Rs. 500,000.00 was also imposed on the appellant and the clearing agent under Section 156(14) of the Act on the plea that it was mandated upon them under Section 192(1) of the Act to report the availability of invoice in the pouch delivered by Messrs Gerry's in the office of respondent No. 1.

2. The appellants filed the appeals on the basis of grounds enumerated therein. No cross-objection under subsection (4) of section 194A of the Act have been filed within the stipulated period of 30 days by the respondent No. 1 himself or through his subordinate, instead comments were filed by him, which are placed on record of the case for consideration and perusal.

3. Rival parties heard case record examined. Upon scrutinizing of the show-cause notice I have observed that the respondent No. 1 in para 2 inscribed the phrase "during the Post Clearance Audit, it was observed that the invoice of US$ attached with GD was suspicious a pouch of invoice delivered by Gerry's Shed to the office of Assistant Collector examination was scrutinized and the original invoice of the said consignment was found valuing to US$. 32,124.00". It is astounding that instead of inquiring from the Assistant Collector, Examination that as to why pouch delivered in his office by the Gerry's was not scrutinized and the invoice corresponding to the consignment under scrutiny was not delivered to the examining officials and taking him and the examining official to task that in the presence of availability of invoice in the office of Assistant Collector Examination, he failed to obtain that prior to examination and why he adduced remarks reading as "invoice not found", on the strength of which the Assistant Collector Examination issued show-cause notice to the appellant for the contravention of Rule 389 of the Rule and why he impose penalty of Rs. 5000.00 through a valid legal order-in-original, in the absence of which penalty cannot be imposed. The entire lapse in the light of the aforesaid observation lies either on the part of Assistant Collector of Customs, Examination or on the examining official and even on respondent No. 1 for causing loss to the exchequer due to negligent and wonton attitude, which cannot be condoned or ignored under any circumstances. The show-cause notice would had been issued to the negligent officials instead of appellant or his clearing agent. I am also at loss to observe that under which authority the respondent No. 1 did post clearance scrutiny falling under the provision of Section 26A of the Act. For post clearance scrutiny of the record of the importer the Federal Government inserted section 3DD in the Act, wherein Directorate of Post Clearance Audit was established and officials of which were delegated powers under different sections of the Act through S.R.O. 500(I)/2009 dated 13.06.2009. No power either post clearance scrutiny or audit of the imported consignment is available to any Clearance Collectorate in the presence of Directorate General of Post Clearance Audit. The respondent No. 1 while scrutinizing the Goods Declaration of the appellant infact conducted audit while usurping the powers of the Directorate General of Post Clearance Audit. Rendering his act suffer from jurisdiction and powers. Hence ab-initio, void and as such coram non judice as held by the Superior Judicial Fora in countless reported judgments relied upon the appellant namely 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), PLD 1976 Supreme Court 514 Ali Muhammad v. Hussain Buksh and others and PLD 2001 Supreme Court 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.

4. The expression of Section 179 of the Act is very clear in regards to determination of the powers of the adjudicating authority on the basis of "amount of duty and taxes involved excluding the conveyance." Not "amount of evaded duty and taxes". In this case the amount involved is Rs.1,142,980.00 (paid Rs. 125,618.00 for obtaining clearance on 08.10.2015 vide cash No. 214 + shown evaded amount of Rs. 1,017,365.00 in the show-cause notice. The competent authority to adjudicate the said case under clause (ii) of section 179(1) is Additional Collector of Customs. To the contrary, respondent No. 2 has issued the show-cause notice while usurping the powers of the Subordinate. This is not permitted under law. The plea advanced in the comments by the respondent No. 1 that due to non availability of Additional Collector, the respondent No. 2 assumed his powers and issued show-cause notice is without any substance and in derogation of the explicit provision of Section 179(1), for better appreciation verbatim of the same is reproduced here-in-under:--

179 Power of adjudication:---(1) Subject to subsection (2) in cases involving confiscation of goods or recovery of duty and other taxes not levied, short levied or erroneously refunded, imposition of penalty or any other contravention under this Act or the rules made there-under, the jurisdiction and powers of the officers of Customs in terms of amount of duties and other taxes involved, excluding the conveyance, shall be as follows, namely:-

(i) Collector no limit

(ii) Additional Collector not exceeding three million rupees

(iii) Deputy Collector not exceeding one million rupees

(iv) Assistant Collector not exceeding five hundred thousand rupees

(v) Superintendent not exceeding fifty thousand rupees

(vi) Principal Appraiser not exceeding fifty thousand rupees.

[Provided that in cases of goods to be exported, the above officers of customs shall have their jurisdiction and powers in terms of FOB value and twice their respective monetary limit.]

(2) Notwithstanding the provisions of subsection (1), the Board may, by notification in the officials Gazette, fix or vary the jurisdiction and powers of any officer of Customs or a class of officers, and may also assigns or transfer {by an order} any case to any {officer} of customs, irrespective of the territorial jurisdiction. (emphasis supplied)

From conscientious study of section 179(1) of the Act, it is abundantly clear that the authority defined therein has to exercise powers, neither superior nor subordinate is empowered to assume the powers of his superior or subordinates, unless Board is desirous of fixing or varying the jurisdiction and powers of any Officer of Customs or a class of Officers, through a notification in official Gazette as per the expression of subsection (2) of section 179 assign or transfer any case to any Officer of Customs irrespective of designation or territorial jurisdiction. In the instant case no notification of the Board was/is presented under subsection (2) of Section 179 of the Act empowering respondent No. 2 for exercising powers of his subordinate. He assumed the powers of the Board himself in negation of subsection (2) of Section 179 ibid., which he could not assume under any pretext/ circumstances by virtue of the fact that while performing their duties as quasi judicial authorities they cannot be termed as subordinate to the higher officer and they are quite independent in performing their officials duties as adjudicating officers. This lapse render the order without lawful authority and jurisdiction. Hence, ab-initio, void and ab-initio wrong and the superstructure built there upon no matter how strong it may be has to crumble down. Meaning thereby order-in-original passed by the respondent No. 3 on the show-cause notice issued by the respondent No. 2 as well ab-initio void. The second illegality noticed by me in the instant case is that the respondent No. 3 passed order on the show-cause notice issued by respondent No. 2, which he could not do, unless respondent No. 2 withdraw the show-cause notice and respondent No. 3 issues a fresh show-cause notice under his signature. When the show-cause notice is issued by respondent No. 2 order has to be issued by him only, respondent No. 3 has no mandate to pass order on that. Respondents Nos. 2 and 3 simultaneously acted without lawful authority and jurisdiction by encroaching each other jurisdiction, which is ab-initio wrong and renders the show-cause notice and order-in-original without powers/jurisdiction. Hence, ab-initio void and coram non judice and as such of no legal effect.

1. The respondent No. 2 issued show-cause notice while incorporating therein Section 11(3) of the Sales Tax Act, 1990 and Section 148 without realizing that these are neither charging sections nor penal clauses, cognizance under Section 11(3) could only be taken by the Officer of Inland Revenue and Section 148 of the Income Tax Ordinance, 2001 contains the procedure for collection of Income Tax at import stage by the authorities referred therein. Meaning thereby that the said sections are independent under which no charge can be leveled. Therefore, no show-cause notice can be issued under these sections either by respondent No. 2 or order could be passed by respondent No. 3. Issuance of show-cause notice and passing of order-in-original on the basis of irrelevant sections, renders these ab-initio, void and of no legal effect as held in reported judgment judgments Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275, D.G. Khan Cement v. Collector of Customs 2005 PTD 480, Caltex v. Collector (2003) 88 Taxation 128 (Lah), 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, Rose Color v. Chairman, CBR and 2013 PTD 813 Sarwar International v. Addl. Collector of Customs.

2. That it has also been contended by the Consultant/ Advocate of the appellant that Respondents Nos.2 and 3 have no mandate to issue show-cause notice or pass order-in-original in the matter of Sales Tax/Income Tax. Whereas, respondents are of the view that incorporation of the word "tax" in sections 32(2) and (3) and 179 of the Act and the clarification issued by the Board vide C.No.3(32)Tar-1/90 dated 06.08.2012 and legal opinion of Ministry of Law vide No. F.242/2012-Law.I dated 11.07.2012 is sufficient for assuming powers under the charging Sections of Section 11 of the Sales Tax Act, 1990 and 162(1) of Income Tax Ordinance, 2001. Upon perusal of section 32(2) and (3) of the Act, I have observed that although the word "tax" is available, this does not empowers the respondents Nos. 2 and 3 to assume powers under the provision of Section 11(2) & (3) of the Sales Tax Act, 1990 and 162(1) of the Income Tax Ordinance, 2001 unless Legislature appoint them as "Officer of Inland Revenue/Commissioner of Income Tax", who have powers under these Sections to take cognizance in the matter relating to Sales Tax and Income Tax, it is to be noted that the word "tax" therein is used for exercising jurisdiction under the said Section on the basis of involved amount of duty and taxes by the appropriate adjudicating authority defined in subsection (1). Therefore despite of insertion of the word taxes, the adjudicating authority including the Respondents Nos. 2 and 3 have to issue show-cause notice and pass order-in-original within the respective applicable provision of the Act and not under the charging provision of Section 11 of the Sales Tax Act, 1990 and section 162(1) of the Income Tax Ordinance, 2001, which are otherwise non existence in the show-cause notice and charge against the appellant has been leveled under Sections 11(3) and 148 ibid, which are irrelevant. Even otherwise, the Respondents Nos. 2 and 3 have also relied upon clauses (14) and (14A) of Section 156(1) of the Act, applicable in the case of mis-declaration falling within the ambit of Section 32 of the Act. These clauses cannot invoked in the matter of Sales Tax and Income Tax falling under section 11 of the Sales Tax Act, 1990 and Section 162(1) of the Income Tax Ordinance, 2001.

3. For further clarity of the issue I have scrupulously gone through the provision of Section 30 of the Sales Tax Act, 1990 and Section 207 of the Income Tax Ordinance, 2001 and observed that Respondents Nos. 2 and 3 have not been appointed as an Officer of Inland Revenue under these Sections. Resultant, they are not empowered to exercise the powers under Section 11 of the Sales Tax Act, 1990 and Section 162 (1) of the Income Tax Ordinance, 2001, which empowers Officer of Inland Revenue/Commissioner of Income Tax to initiate adjudication proceeding for recovery of short collected/paid Sales Tax/ Income Tax either due to collusion or connivance or inadvertent, error or misconstruction. Hence, Respondents Nos. 2 and 3 are not empowered to lay hands on any matter falling under the ambit of Section 11 of the Sales Tax Act, 1990 and Section 162 (1) of the Income Tax Ordinance, 2001. Reliance of Respondents on the clarification of the Board vide C.No.3(32)Tar-1/90 dated 06.08.2012 and opinion of the Ministry of Law vide No. O.M. No. F.242/2012-Law-I dated 11.07.2012 lend no help to the Respondent No. 1 as Board and Ministry of Law and Justice have no mandate to interpret the provision of the Act or amend the provision. It can only give opinion, it is for the judicial fora to interpret the provision of statute and our opinion stood validated from the reported judgment 2005 PTD 2462 Messrs Lever Brother Pakistan Ltd., v. Customs Sales Tax and Central Excise Appellate Tribunal, Karachi that "CBR has no place to in the Scheme of Law, conferred with the jurisdiction to interpret any law, statutory or in exercise of any deliberate authority i.e. subordinate legislation". Whereas in reported judgment 2016 PTD (Trib.) 107 Qazi CNG Station, Gujrat and another v. Directorate General of Intelligence and Investigation-FBR, Karachi and 2 others, this Tribunal held that "statute can be amended by the Parliament and a notification through a notification not through any communication. In the absence of amendment of notification, clarification issued by the department could only be termed as opinion and it would not at all amend the notification". Assuming powers on the strength of letter of the Ministry of Law and Justice is palpably illegal beside fatal to the health of the case. Even otherwise, the letter of the Ministry of Law and Justice speaks about collection of Federal Excise Duty at import stage in the same manner and at the same time, as if it is a duty of customs payable under the Customs Act, 1969 (IV of 1969) and for collection of the same the provision of Section 31A also apply. Reference of Section 7 of the Federal Excise Act, 2005 has also been given simply for clarification i.e. for collection of import duty provision of Sales Tax 1990 is applicable. The emphasis in the O.M. is levy and collection. Therefore, to further elaborate and settling the issue to its logical conclusion, I add while referring to Section 6 of the Sales Tax Act, 1990 and 148 of the Income Tax Ordinance, 2001 through which the Clearance Collectorates are empowered to collect the taxes on the imported goods as like custom duty. These sections least empowers the Officers of Customs including Respondents Nos. 2 and 3 to initiate adjudication/recovery proceeding for the short collected/paid, Sales Tax and Income Tax either due to collusion or connivance or inadvertent, error or misconstruction. For proceeding with these type of recoveries a show-cause notice has to be issued under the Provision of, Section 11 of the Sales Tax Act, 1990 and section 162(1) of the Income Tax Ordinance, 2001, by the authority expressed therein i.e. Officer of Inland Revenue/Commissioner of Income Tax under subsections (3) and (4) of section 11 of the Sales Tax Act, 1990 and section 162(1) of the Income Tax Ordinance, 2001. In these sections neither Officer of Customs and Respondents Nos. 2 and 3 figures anywhere. They assumed the powers not vested with them under the provision of sections 11 and 162(1) of the Sales Tax Act, 1990 and Income Tax Ordinance, 2001. Confirming that the Customs Collectorates does have powers to collect, Sales Tax and Income Tax as duty at import stage, conversantly, to the plea that Customs is empowered to recover the short paid amount of sales tax and income tax at the import stage under Section 202 of the Act, is based on mistaken belief, infact the customs Collectorate could recover the amount of Sales Tax and Income Tax upon receipt of notice from the Officer of Inland Revenue and Commissioner of Income Tax in terms Section 48 of the Sales Tax Act, 1990 and Section 140 of the Income Tax Ordinance for recovery of the adjudged amount of Sales Tax and Income Tax after due process of law. Therefore, it is my considered opinion that the Clearance Collectorates does have the authority to collect Sales Tax and Income Tax at import stage in the capacity of collecting agent and can recover escaped/short payment paid Custom Duty and Regulatory Duty levied on the imported goods under Section 18 of the Act under Section 202 ibid., after due process of law, but have no powers to adjudicate the cases of short recovery of Sales Tax and Income Tax under sections 11 and 162(1) ibid. and this stood validated from reported/unreported judgments listed below:

(i) 2011 PTD (Trib.) 110 Messrs AGP (Pvt.). Ltd. v. Additional Collector of Customs, Karachi.

(ii) 2010 PTD (Trib.) 2086 Messrs Global Marketing Services and another v. Model Customs Collectorate and another.

(iii) SCRA No. 01/2010 Collector of Customs, Islamabad v. Global Marketing Services and another v. Model Customs Collectorate and another.

(iv) 2004 PTD 801 Al-Haaj Industrial Corporation (Pvt.) Ltd., Peshawar v. Collector of Customs (Appraisement).

(v) C.P. No. D-216/2013 Messrs Lucky Cement Ltd., v. Federation of Pakistan and others

(vi) 2014 PTD 1963 Shujabad Agro Industry (Pvt.) Ltd. v. Collector of Customs and 8 others

(vii) 2015 PTD 702 Muhammad Measum and others v. FOP and 2 others.

(viii) 2016 PTD (Trib.) 1008 Phillip Morris (Pakistan) Ltd, Karachi v. Additional Collector of Customs.

(ix) 2016 PTD (Trib.) 2125 Al-Fajer Associates v. Directorate General of Intelligence and Investigations-FBR.

(x) Appeal No. K-1635/2014 Pepsi Cola Export Corporation, Karachi v. Directorate General of Post Clearance Audit and 2 others.

(xi) Appeal No.K-1029/2016 Messrs M.R. Sons, Karachi v. Directorate General of Intelligence and Investigations-FBR.

(xii) Appeal No.K-1030/2016 Messrs Muhammad Imran, Karachi v. Directorate General of Intelligence and Investigations-FBR.

(xiii) Appeal No. K-1343/2015 Messrs Rightway Trading Company, Karachi v. Deputy Collector of Customs, MCC of Appraisement-West and 3 others

The opinion formed by me also have the validation of the judgments reported at 1994 CLC 1612, 1990 PTD 29, 2005 PTD 23 and 2007 PTD 250 titled as Collector of Sales Tax and Federal Excise v. Messrs Qasim International Container Terminal Pakistan Ltd., wherein it has been held that "There is a clear distinction between the charging provision of Statute and the machinery part thereof. It is axiomatic that mode of manner of recovery does not alter, the nature of tax nor a tax can be introduced or import by implication." In 2008 PTD 1973 Xen Shahpur Division v. Collector of Sales Tax (Appeal), Collectorate of Customs, Federal Excise and Sales Tax, Faisalabad, for clarity of the Rule of Interpretation of Statute, golden principle was outlined in so many words reading as "That fiscal law is to be applied with full authority and its natural meaning-one has to look merely at what is clearly said and there is no room for any intendment-neither there is equity about a tax nor presumptions as to tax - nothing is to be read in, nothing is to be implied -- one can only look fairly at the language used" The Hon'ble Supreme Court of Pakistan in reported judgment 2006 SCMR 12 titled as DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others held that:--

"If the law have prescribed method for doing a thing in a particular manner such provision of law is to be followed in letter and spirit and achieving or retaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted--- each and every words appearing in a Section is to be given effect and no other word is to be rendered as redundant or surplus - when the legislature required the doing of a thing in a particular manner then it is to be done in that manner and all other manner or modes of doing or performing that things are barred -- if the doing of a thing is made lawful in a particular manner the doing of that thing in conflict with the manner prescribed will be unlawful as per maxim "Expression facit cessare tacitum"

I, therefore hold in the light of the law laid down in the referred in above and cases reported at that the exercise of jurisdiction on this point by Respondents Nos. 2 and 3 are without lawful authority and jurisdiction. Hence, issuance of show-cause notice and passing of Order-in-Original are ab-initio void and as such coram non judice.

1. That in the presence of admitted fact by the respondent No. 1 that the carrier after discharge of goods, delivered the pouch of the corresponding documents of the import arrived on the carrier to the office of Assistant Collector of Examination, in which the impugned invoice was also available lapse rest on the part of Assistant Collector of Examination of not opening the pouch for delivering the invoice of the consignment under scrutiny and remaining arrived consignment to the examining officials. If that would had been done promptly and diligently, such ignoble situation would not had been emerged and the examining official would had inscribed in the examination report "invoice found" for US$. 32,124.00 as against clear inscription "invoice not found" on the strength of which the competent adjudicating authority defined in Section 2(a) passed assessment order under Section 80 and Rule 438 of the Act/Rules in exercise of the powers vested upon him through S.R.O. 371(I)/2002 dated 15.06.2002. In the presence of these vital apparent/ admitted fact deliberate act or connivance of the appellant either with the clearing agent or Customs Officials of examination/processing is not visible. Resultant, invoking of Section 32(2) or 32A of the Act is out of context. Hence, the case in question at the most could be termed as " inadvertence, error, omission and mis-construction" falling under the ambit of Section 32(3) of the Act, the appropriate authority to issue show-cause notice and pass order order-in-original rest with the Principal Appraiser in terms of Serial No. 3(ii) of S.R.O. 371(I)/2002 dated 15.06.2002. To the contrary, in the instant case show-cause notice/ order-in-original were issued/passed by respondents Nos. 2 and 3 respectively, while encroaching the explicit notified powers of Principal Appraiser which is not permitted in the absence of availability of notification issued by the Board in terms of subsection (2) of Section 179 of the Act or amending S.R.O. of the existing and infield S.R.O. 371(I)/2002 dated 15.06.2002. It is settled principle of law that no superior authority is allowed to usurp the powers of his subordinates as held by the Hon'ble Supreme Court of Pakistan in reported judgment PLD 1973 Supreme Court 49 The State v. Zia-ur-Rehman and others and 2009 PTD 1083 that "Superior authority cannot exercise the power of his subordinates for adjudication purpose …..powers of sub-ordinate exercised by superior authority is held as without jurisdiction beside usurpation". Rendering the act of issuance of show-cause notice and passing of order-in-original in the instant case without power/ jurisdiction, hence, ab-initio, null and void and coram non judice. It is also settled principle that the exercise of jurisdiction by an authority is mandatory requirement and its non fulfillment would entail the entire proceeding to be coram non judice. Ref: PLD 1963 SC 663, PLD 1971 SC 184, PLD 1976 Supreme Court 514, 1983 SCMR 1232, 1984 CLC 1517, PLD 1995 Kar. 587, PLD 1992 SC 486, 2001 SCMR 103, 2004 CLD 373, PLD 2004 Supreme Court 600, PLD 2005 Supreme Court (sic), PLD 2005 Supreme Court 842, 2009 PTD (Trib.) 1996, [(2009) 100 Tax 24 (H.C. Lah.)], 2010 PTD (Trib.) 832, 2010 PTD 465, 2010 PTD (Trib.) 1636, 2011 PTD (Trib.) 2114, 2011 PTD (Trib.) 2557 and 2014 Supreme Court 514.

2. That while passing order-in-original, it is mandated upon the adjudicating authority to examine the charter of show-cause notice and remain within its ambit. In case order so passed is beyond the charter of the show-cause notice, it is deems to be illegal and the Appellate Authority is left with no other option except to declare it suffering from legal infirmity and as such void. While examining order passed by Respondent No. 3, I have noted that he made a reference in para 4 reading as "the respondents were asked to show any communication/ correspondence which must have taken place between him and the supplier regarding the value of the goods before the arrival of the consignment so that the correct/actual value could be ascertained. However, no such correspondence was provided" has been made, despite of the fact that these narration/grounds are not available in the show-cause notice. This confirms that order has been passed beyond the charter of show-cause notice. Such type of the orders are always declared by the Superior Judicial Fora in reported judgments namely Collector Excise and Land Customs and others v. Rehm Din reported at 1987 SCMR 1840 and Adam v. Collector of Customs, Karachi PLD 1969 Supreme Court 446, Muhammad Sadqain v. Collector of Customs (Appraisement) 2006 PTD 2742 and Messrs Exide Pakistan Ltd., v. Deputy Collector of Customs (Adjudication-III), Karachi, 2004 PTD 1449, wherein it has been held that "Order of adjudication, being ultimately based on a ground which was mentioned in the show-cause notice is palpably illegal on the face of it".

3. Notwithstanding, now it is well settled law that upon passing of assessment order under Section 80 and Rule 438 of the Act/Rules and thereafter passing of clearance order under Section 83 and Rule 442 ibid by the authority defined in Section 2(a) of the Act and Notification No. 371(I)/2001 dated 15.06.2001, it cannot be disturbed by any authority including respondents for preparing contravention report for adjudication proceeding, which respondent No. 1 did on the strength of which respondent No. 2 issued show-cause notice and respondent No. 3 passed order-in-original. The only course available under law for the respondent No. 1 was to challenge the assessment order dated 07.10.2015 before the Collector of Customs (Appeals) under section 193 of the Act in exercise of the powers delegated upon them. In the filed appeal the respondent No. 1 is empowered to incorporate all the apprehension, misreading of the facts and contravention of the provision of the Act/Rules. The Collector of Customs, upon receipt of the appeal and going through the facts and grounds if thinks fit that the contention of the respondent No. 1 seems to be correct and the duty and taxes has not been either not levied or short paid on the basis of the goods found subsequent to clearance, is empowered to issue show-cause notice to the importer (appellant) as expressed in 3rd proviso to the subsection (3) of Section 193A of the Act. Instead of the adhering the prescribed method available in the Act the respondents reopened the assessment/clearance order under section 195 of the Act under which no powers are vested either of them. When the right of appeal has been accorded to the officer of Customs by the legislature in the provision of Section 193 of the Act, the provision of Section 195 is un-operational and cannot be exercised even by the authority defined therein and this has been validated by the Hon'ble High Court of Sindh in reported judgment 2014 PTD 1256 Messrs Paramount International (Pvt.) Ltd., Karachi v. Secretary Revenue Division that " department or an Officer of Customs, if aggrieved, by any decision or order passed by an officer of customs below the rank of additional collector could prefer an appeal before the Collector (Appeal)---1st order-in-original passed in the subject matter was an appealable order for both the parties, therefore option to reopen and order pass under the adjudication hierarchy was not available to the Collector. Even the Collector of Customs Adjudication could not oversee or exercise any right of re-opening of any order which has been passed by an officer lower in rank but acting as an adjudicating authority. Impugned order was set-aside and Constitution Petition was allowed."

4. It is also settled proposition of law that in the presence of an appealable order, fresh order cannot be passed even in the shape of reassessment order or through issuance of show-cause notice under section 180, while exercising powers under the provision of Section 179 ibid. These act is piling upon multiple orders on the existing appealable order not permitted under law as held by Hon'ble High Court of Sindh in reported judgment 2004 PTD 3020 Messrs Smith Kline French v. Pakistan that "once an order is passed, which attain finality the same cannot be subject to a show-cause notice again, considering that no appeal or revision is filed against the first order". By virtue of non filing of appeal against the assessment order dated 07.10.2015 as elaborated above by the respondent No. 1 on or before 14.11.2015 . The transaction stood past and closed and attain finality and cannot be disturbed. For reaching at the decision we have gained strength from the reported judgment 1989 MLD 4310 Messrs World Trade Corporation v. Central Board of Revenue, wherein their lordship of High Court held that "if the order has attained finality through limitation. A fortiori; the Central Board of Revenue could not open up an order that has attained finality, under the Sea Customs Act, 1878 and against which suo motu revision." Beside, the act of issuance of show-cause notice and passing of order-in-original by respondent No. 3 falls under the ambit of "double jeopardy" not permitted under Article 13 of the Constitution of Islamic Republic of Pakistan. Rendering the order dated 11.04.2016 passed by respondent No. 3 for piling upon an existing appealable order is without lawful authority and jurisdiction and as such void and ab-initio and of no legal effect.

5. I have also observed with great concern that the order passed by respondent No. 3 is in derogation of the provision of the Act/Rules as it is not a speaking order and least conform to the mandated requirement of section 24-A of the General Clauses Act, 1897 and this stood validated from the fact that the appellant in grounds Nos. (a) to (d) of the reply to the show-cause notice dated 25.03.2016 challenged the jurisdiction of respondent No. 2 and even his, in addition to other illegalities apparently floating on the surface of show-cause notice, which he completely ignored despite of the fact that it is settled proposition of law that the question of jurisdiction has to be decided first prior to proceeding in the merit of the case. Non deciding the question of jurisdiction is tantamount to admission, which he intentionally left undecided being correct and within the mandate of law. He intentionally, opted to take up the case for decision on his personal pre-determined opinion, despite nullity to the fact and law and that also without rebutting a single ground advanced by the appellant consultant in the reply. For this type of order the Division Bench of the Hon'ble High Court of Sindh held in reported judgment 2002 CLC 825. Wherein, the Hon'ble Division Bench of the High Court held that:

"Failure to give decision on each issue---Trial Court while deciding the suit had framed six issues but did not extend reasons separately on all issues and decreed the suit.---while deciding appeal the Appellate Court had also not decided the suit---while deciding appeal the Appellate Court had also not deciding the appeal issue-wise. Both the Courts below had disregarded mandatory provision of O.XX, R 5 C.P.C. and O.XLI, Rule 31, C.P.C. respectively. Where in the judgment the Appellate Court had not stated points for determination, decision thereon and the reasons for its findings, the same was not a "judgment" according to law---- Trial Court and Appellate Court having acted in exercise of its jurisdiction with material irregularity". The Division Bench also held that "Good judgment must be self evident and self explanatory---In other words it must contain reasons which should justify conclusion arrived at and the reasons should be such that a disinterested readers can find same convincing or at least reasonable".

As aforesaid, it is my considered opinion that such type of orders are deem to be illegal, void, arbitrary and are result of misuse of authority vested in public functionary. No room was available for such illegal, void and arbitrarily order in any system of law. If any authority Court or Tribunal gave a finding of fact which was not based on material available on record as of the instant case, i.e. without any exception illegal arbitrary perverse and a perverse finding of fact which is violative of the established principle of appreciation of evidence on record was not sustainable in law. The principle that every judicial or quasi-judicial finding should be based on reasons containing the justification for the finding in the order itself is an established principle of dispensation of justice. The Adjudication order is without any ambiguity is in violation of basic principle of the good governance and mandatory requirement of Section 24A of the General Clauses Act, is not only illegal and void but also not sustainable under law, further stood fortified from the judgments of Superior Courts reported as 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, 2003 PTD 2369, PLD 1995 SC (Pak) 272, PLD 1970 SC 158, PLD 1970 SC 173, 1984 SCMR 1014, 2012 PTD (Trib.) 619 and 2016 PTD 589.

1. What have been discussed here in above, particularly the interpretation of law, legal propositions and observations made thereon and to follow the ratio decidendi. I hereby vacate the impugned show-cause notice and set aside the order passed by the forum below being illegal, void and ab-initio to the extent of appellant. The appeal is accordingly allowed.

2. Orders passed accordingly with no order as to cost.

HBT/36/Tax(Trib.) Appeal allowed.

2018 P T D (Trib.) 700

[Customs Appellate Tribunal]

Before Tahir Zia, Member Judicial-II

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE OF EXPORTS

Versus

Messrs ASCO INTERNATIONAL (PVT.) LTD. and another

Custom Appeal No.K-1732 of 2016, decided on 5th March, 2017.

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

----S. 194-A---Appeal by officer of customs---Scope, limitation and procedure---Officer of customs, could prefer appeal against an order passed by the officer of customs not below the rank of Additional Collector, with due authority executed in writing---Appeal so drafted/presented should be accompanied by fee of one thousand rupees---In the present case, no fee challan confirming deposit of one thousand rupees on account of the appellant was available---Appeal was presented in the name of Assistant Collector of Customs, MCC Export, who was not appellant---Said vital lapse, rendered the appeal not validly filed and was infructuous---Said deficiency could not be cured in the absence of availability enabling subsection in S.194-A or in other provisions of Customs Act, 1969---If the law had prescribed method for doing a thing in a particular manner, such provision of law was to be followed in letter and spirit and achieving and attaining the object of performing or doing of a thing in a manner other than provided by law, would not be permitted---Section 194-A of Customs Act, 1969, prescribed the time of 60 days within which an appeal was to be filed from the date on which the decision or order sought to be appealed against was communicated to the Collector---Appeal in the case had not been filed in accordance with law and there was contravention and violation of the mandatory provision of law---Said appeal was nothing, but nullity having no legal existence---Filing of appeal after lapse of 60 days from the date of which the order under S.179 of the Customs Act, 1969 was served on Collector, appeal would be barred by time---Appeal not validly and legally filed, was not maintainable under law---Appeal was filed despite non-availability of any ground as validated in the grounds given in memo of appeal, having no substance being of stereotypical and general nature---Appellant had urged that the order passed by Collector of Customs be overturned in accordance with its wishes and on inapt interpretation of the phrase "input goods"---Appeal was not maintainable in terms of provision of S.194-A(1) of the Customs Act, 1969 being without merit and substance which was dismissed, in circumstances.

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

----Ss. 3-DD, 26-A, 32(3A)---SRO No.500(I)/2009, dated 13-6-2009---Audit---Power to frame contravention report---Sections 26-A & 32(3-A) of the Customs Act, 1969 had been inserted in the Act after creation of Directorate General of Post Clearance Audit through insertion of S.3-DD in the Act; officials of which were delegated powers under different provisions of said Act, including Ss.26-A & 32(3-A), through S.R.O. No.500(I)/2009, dated 13-6-2009---Officials of the Directorate of Post Clearance Audit were empowered to conduct audit of the goods declarations of the importer; post clearance and upon finding any discrepancy or misdeclaration were empowered to issue audit observation to the importer for justification---If the importer failed to justify the pointed out discrepancy/misdeclaration, the Director of Post Clearance Audit was empowered to frame contravention report under the provision of S.32(3-A) of the Customs Act, 1969 and forward the same to the respective-Collector of Customs, (Adjudication) for commencing proceedings---In the present case, officials of customs conducted the audit under S.26-A and prepared contravention report under S.32(3-A), while usurping the powers of the Directorate General of Post Clearance Audit, which was not permitted under law---Appellate Tribunal observed that any such act, if committed, had to be discouraged in the beginning because, if allowed, it would create anarchy and compromise the independence of the different organs of the Revenue Division, empowered to act and operate within the specific sphere without any interference---Customs officials, in circumstances, had acted without power/jurisdiction, rendering the conduction of audit, preparation of contravention report, ab initio void and of no legal effect.

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, Noshehra and others v. Sarfraz Khan and others PLD 2001 SC 514; Pak Suzuki Motors Company Ltd, Karachi v. Collector of Customs, Karachi 2006 PTD 2237; 2009 PTD (Trib.) 1996 ; 2010 PTD (Trib.) 832; All Pakistan Newspaper Society v. FOP PLD 2004 SC 600 and Khyber Tractors (Pvt.) Ltd., v. FOP PLD 2005 SC 842 ref.

(c) Interpretation of statutes---

----Taxing statute---Definition or phrase in a statute and notification had to be interpreted in liberal and rationale manner for achieving the object---Rules were to be used as "stepping stones" instead of "stumbling blocks" and they could not be applied to harass the taxpayer on the basis of technicalities instead of advancing the purpose for which they were framed.

Messrs Nishat Mills Ltd. v. Superintendent of Central Excise Circle-II PLD 1989 SC 222 and Ayesha Steel Mills Ltd. v. Federation of Pakistan 2011 PTD 569 ref.

Ghulam Yasin for Appellant.

Nadeem Ahmed Mirza for Respondents.

Date of hearing: 13th February, 2017.

ORDER

TAHIR ZIA, MEMBER (JUDICIAL-II).---Through this order, I intend to dispose off appeal No. K-1732/2016 directed against the Order-in-Original No.186-2015-16 dated 30.06.2016 passed by Collector of Customs, Adjudication-II, Customs House, Karachi.

1. Brief, facts of the case are that Messrs ASCO International (Pvt.) Ltd., Karachi (here-in-after to be referred as respondent No.1) is a manufacturing unit and was granted license No. PWL-11/2008 on 27.11.2008, under Rule 3(2) of S.R.O. 327(I)/2008 dated 29.03.2008, (here-in-after to be referred as SRO) which they are entitled to import machinery accessories and raw material for setting up or modernizing the unit for manufacturing of the goods from the imported raw material for export free of duty and taxes upon submission of post dated cheques and indemnity bonds equivalent to leviable duty and taxes on the goods imported for home consumption through Goods Declaration (here-in-after to be referred as GD) filed under the provision of section 79(1) of the Customs Act, 1969, (here-in-after to be referred as Act) and Rule 433 of Sub-Chapter III of Chapter XXI of Customs Rules, 2001(here-in-after to be referred as Rules), subject to their return upon submission of Goods Declaration of Export ((here-in-after to be referred as GDE) confirming consumption of the raw material in the exported goods and in case of non utilization encashment of the cheques, in addition to proceeding for contravention of the provision of the Act and the conditions of SRO. The appellant upon application from the respondent No. 1 allowed import of "Lubricant Oil" as input goods for using for lubricating the knitting machines, needles shanks, and Analysis Cards against each GD was also approved to the extent of quantum of use by the appellant. Thereafter, respondent No. 1 imported that and after consuming in the knitting of the fabric for making/manufacturing of exported goods from the knitting machines, wherein the oil was used for lubrication of the needles of machines so that those should not break during the process of knitting and fabric so obtained be spot free, submitted respective GDE with the subordinate of appellant, who after verification about the utilization of the lubricant oil released the post dated cheques and indemnity bonds after cancellation.

2. The subordinate of appellant conducted audit carried out under the provision of section 26A of the Act of the unit of the respondent No.1 and found that the lubricating oil imported under PCT 2710.1210-9900 for manufacture of knitted garments from the knitting machine is infact utilized for lubrication of needle knitting cam (tooth) needle shanks to reduce friction of needle scam and shanks in knitting process, use of Vickers spotless CN 22 Oil was preferred by the unit to other lubricating oil due to it characteristics of being easily removable when spotted from the knitted fabric. It was therefore, opined that lubricating oil was being used as consumable which does not add value in the knitted garments and is not covered under the definition of input goods specified in Rule 2(1)(f) or capital goods in terms of Rule 10(1)(e) of SRO and thus the same stand not admissible for duty and taxes free import under the SRO. Resultant, the respondent No. 1 imported the impugned lubricating oil through 8 GD's between 11.09.2009 to 16.04.2015 without lawful authority in the absence of entitlement and thus an audit observation was served on respondent No.1 for justification and for payment of duty and taxes of Rs.4,298,985.00, reply to audit observation was submitted, which fail to find acceptance of the subordinates of the appellant. Contravention was framed with the allegation that since the lubricating oil stands ousted from the definition of "input or capital goods and is not covered under the aforesaid rules of the SRO, this act of the respondent No. 1 is instrumental in non-payment of leviable duty and taxes on the goods imported for home consumption, through which lubricating oil should had been imported by the respondent No. 1 instead of importing under the license of regime of Export Oriented Unit, through the said act the respondent No. 1 deprived the exchequer from the revenue of Rs.4,298,985.00 and thus contravened the provision of sections 19, 32(1)(2), 32(3A) of the Act, section 11 of the Sales Tax Act, 1990 and section 148 of the Income Tax Ordinance, 2001 punishable under section 33 of the Sales Tax Act, 1990 and section 148 of the Income Tax Ordinance, 2001 and forwarded that to the appellant, who after giving his assent forwarded it to respondent No. 2, who issued show-cause notice dated 26.02.2016 to the respondent No. 1, who submitted reply, denying the charges on which the appellant subordinate submitted comments, consequent to which consultant of the respondent No. 1 vide letter dated 04.05.2016 submitted addendum to the reply to the show-cause notice, which was provided to the subordinate of the appellant, who submitted comments on which consultant vide letter dated 25.05.2016, submitted rebuttal, on which the appellant subordinate submitted additional parawise comments. Consequent to which the respondent No. 2 forwarded letter dated 08.06.2016, to appellant for clarification of the formed opinion in regards to the definition of Input Goods, verbatim of which is reproduced here-in-under:

GOVERNMENT OF PAKSITAN

COLLECTORATE OF CUSTOMS (ADJUDICATION-II)

11TH FLOOR, CUSTOM HOUSE, KARACHI

No. Adj-II. Coll.SCN- 188/MCC-EXP-2008/MFG.BOND/ASCO/2016 Dated 08.06.2016

Collector, Model Customs Collectorate of Exports, 3rd Floor, Custom House, Karachi.

Subject: HEARING IN SHOW-CAUSE NOTICE NO. ADJ-II. COLL. SCN-188/MCC-EXP-2008 / MFG.BOND / ASCO-INT/ 2016 AGAINST M/S. ASCO INTERNATIONAL (PVT) LTD.

Kindly refer to the hearing of the case held on 06.06.2016 in the subject SCN.

1. While arguing the case the Departmental Representation has taken the stand that although the definiiton of "Input Goods" as defined under clause (f) of Sub-Rule(1) of Rule 2 of S.R.O. 327(I)/2008 dated 29.03.2008 includes "all goods….. used in the manufacture of output goods as approved by the Collector in the analysis card" yet the input goods in the subject case i.e. lubricating oil was approved by the Collector in the analysis card "wrongly/ mistakenly and hence inadmissible. This position has not been stated in the Contravention Report and may have consequences while disposing off the case. It is therefore, requested that viewpoint of the Departmental Representative may be endorsed or otherwise so that the case may be decided in the light of stated positions. The next date of hearing in this case has been fixed on 16.06.2016.

Sd/-

(Ch. Muhammad Javaid)

Collector

Since no endorsement to the stance of the representative of the appellant was received by the respondent No. 2 despite lapse of more than 3 weeks, he passed order dated 30.06.2016 vacated the show-cause notice wile holding that the charge leveled in the show-cause notice are not established on the basis of opinion formed in paras 22 and 23, which read as follows:--

1. Bare perusal of Rule 2(1)(f) of SRO 327(I)/2008 dated 29.03.2008, which defined the term Input Goods and states Input Goods means all goods whether imported or procured locally by an Export Oriented Unit from the Tariff area such as raw material accessories, sub-components, component, assembly sub-assemblies used in the manufacturing of output goods as approved by the Collector in the Analysis Card. It shows that there are two basic conditions for any goods to qualify as Input Goods (i) the goods must be used in the manufacturing of output goods and (ii) these must be approved by the Collector in the Analysis Card. Now these goods may be raw material, accessories, sub-components, components, assemblies, and sub-assemblies or any other goods but if these meet the two conditions mentioned above then these would be considered as input goods under S.R.O. 327(I)/2008 dated 29.03.2008, the definition of Input Goods as noted earlier never required that the input goods must add value to the output goods or these should not be consumable and these must be some of the raw material as fixation of such a condition to the definition of Input Goods would mean imposing a condition neither intended by the law maker or required under law. The word mentioned is "used in the manufacture of out goods" without pre-fixing condition that how these would be used, and it has been left for Collector to finally decide in the Analysis Card that what goods will be allowed concession as input goods under S.R.O. 327(I)/2008 dated 29.03.2008. There may be mistake in adding the wrong goods as Input Goods but in that scenario the Analysis Card must be immediately amended to rectify such mistake. It is an admitted fact that the lubricant oil Vickers spotless C.N. 22 is used in the machine for manufacturing of output goods and it has also been approved by the Collector in the analysis Card which had not been amended by the Model Customs Collectorate of (Export), Karachi till to-date for disallowing the same on the strength of Analysis Card for future import. Therefore, by fulfilling both the condition as mentioned above the lubricated oil certainly falls within the definition of input goods as defined in Rule 2(1)(f) of S.R.O. 327(I)/2008 dated 29.03.2008 and is entitled for concession under the SRO.

2. Moreover, the respondent has been alleged with the violation of Sections 32(1), 32(2) and 32(3A) which are attracted in case of misdeclaration or submission of untrue documents. However, in this case it has been established that where such a misdeclaration has been committed by the unite. It has imported exactly the same goods which has been approved by the Collector through the Analysis Card and the goods were imported after the unit was allowed import. Therefore, invoking all these sections is totally irrelevant and GD's contain only those goods which were approved by the Department.

3. The appellant filed the appeal on the basis of grounds enumerated therein. No cross objection under subsection (4) of section 194A has been filed within the stipulated period of 30 days by the respondent No. 1, instead the consultants/advocate during the course of hearing replied upon para 9 para 10 and para 12 and para 14 of the order dated 30.06.2016 and stated further that the appeal is not maintainable in terms of sub section (6) of section 194A of the Customs Act, 1969, which express that every appeal filed under section 194A(1) of the Customs Act, 1969 before the Customs Appellate Tribunal be accompanied by a fee of Rupees One thousand only, which is not available in the appeal. Instead of Assistant Collector of Customs, M.C.C. Export, Karachi, who is not appellant. The lapse rendered the appeal not validly filed within the stipulated period of 60 days in terms of subsection (3) ibid, therefore, not maintainable.

4. Rival parties heard and case record perused along with the citations relied upon.

5. The subject appeal can be disposed off simply on the basis of maintainability and jurisdiction of conducting audit by the subordinate of appellant under the provision of section 26A and thereafter framing contravention report in terms of the provision of section 32(3A) of the Act. I will dilate upon first on the question of maintainability and for reaching at a just decision it is beneficial to reproduce verbatim of section 194A of the Customs Act, 1969.

"194A- Appeals to the Appellate Tribunal:---(1) Any person or an officer of Customs aggrieved by any of the following orders may appeal to the Appellate Tribunal against such orders:-

(a) A decision or order passed by an officer of Customs not below the rank of Additional Collector under section 179.

(ab) An order passed by the Collector (Appeals) under section 193;

(c) An order passed under section 193, as it stood immediately before appointed day;

(d) An order passed by the Board or the Collector of Customs under section 195

(e) An order passed in revision by the director General Customs Valuation under section 25D, provided that such appeal shall be heard by a Special Bench consisting of one Technical Member and one Judicial Member.

Provided that the Appellate Tribunal may, in its discretion, refuse to admit an appeal in respect of an order referred to in subsection (1) where --

(i)

(ii)

(iii)

(2) Where the Board or Collector of Customs by an order passed by the Collector Appeals, it or as the case may be, he may prefer an appeal to the Appellate Tribunal. Such appeal shall be preferred by an officer, not below the rank of Assistant Collector of Assistant Director so authorized in writing by the Board or the Collector or the Director as the case may be.

(3) Every appeal under this section shall be filed within 60 days from the date on which decision or the order sought to be appealed against is communicated to the Board or the Collector of Customs, or as the case may be, the other party preferring the appeal.

(4) On receipt of notice that an appeal has been preferred under this Section, the party against whom appeal has been preferred may, notwithstanding that he may not have appealed against such order or any part thereof, file within thirty days of the receipt of the notice, a memorandum of cross-objections verified in such a manner as may be specified by the Rules made in this behalf against any part of the order appealed against and such memorandum shall be disposed off by the Appellate Tribunal as if it were an appeal presented within the time specified in subsection (3).

(5)

(6) An appeal to the Appellate Tribunal shall be in such form and shall be verified in such manner as may be specified by the Rules made in this behalf and shall, accept in the case of a memorandum of cross-objection referred to in subsection (4), be accompanied by a fee of one thousand rupees.

(7)

(8)

Upon bare reading of subsection (1) of section 194A of the Act, it is clear that an officer of Customs can prefer an appeal against an order passed by the Officer of Customs not below the rank of Additional Collector, with due authority executed in writing as expressed in subsection (2) and the appeal so drafted/presented should be accompanied by a fee of one thousand rupees as enunciated in sub-section (6). In the instant case no fee challan confirming deposit of one thousand rupees on account of the appellant is available, instead in the name of Assistant Collector of Customs, MCC Export, Karachi, who is not an appellant as evident from the file of appeal and of the connected. This vital lapse renders the appeal not validly filed and therefore, in-fructuous. This deficiency could not be cured in the absence of availability of enabling subsection in section 194A or any other section in the Act. It is settled proposition of law that if the law had prescribed method for doing a thing in a particular manner, such provision of law is to be followed in letter and spirit and achieving and attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted. Section 194A of the Act prescribes the time limit of 60 days within which an appeal is to be filed from the date on which the decision or order sought to be appeal against is communicated to the Collector. This appeal has not been filed in accordance with law and there was contravention and violation of the mandatory provision of law. Resultant, this appeal is nothing but nullity having no legal existence. Filing of the appeal after lapse of 60 days from the date of which the order under section 179 of the Act was served on Collector, the appeal will be barred by time. It would be deem to have been properly filed when annexed with Challan of one thousand rupees, deposited in the National Bank of Pakistan by the appellant, which is not available. Rendering the appeal not validly and legally filed and therefore, is not maintainable under law. I would like to express my extreme dissatisfaction, discontentment and displeasure on the manner in which officer of the Customs Department involved in filing appeal, least took due care, rather act in most negligent, careless, casual and imprudent manner despite of clear dictates of law.

1. Notwithstanding, to the observation made here-in-above the reference made in the contravention report/show-cause notice and order-in-original to sections 26A and 32(3A) of the Act is out of proportion as invoking of the said section also render the conduction of audit and framing of contravention report without lawful authority and jurisdiction. The section 26A and section 32(3A) of the Act have been inserted in the Act after creating of Directorate General of Post Clearance Audit through insertion of section 3DD in the Act and official of which were delegated power under the different section of the Act including 26A and 32(3A) through S.R.O. 500(I)/2009 dated 13.06.2009 and Official of the Directorate of Post Clearance Audit are empowered to conduct audit of the GD's of the importer Post Clearance and upon finding any discrepancy or misdeclaration are empowered to issue audit observation to the importer for justification. In case the importer failed to justify the pointed out discrepancy/misdeclaration, the Director of Post Clearance Audit is empowered to frame contravention report under the provision of section 32(3A) of the Act and forward that to the respective Collector of Customs, Adjudication for commencing adjudication proceedings. In the instant case of the appellant subordinates conducted audit under section 26A and prepared contravention report under the provision of section 32(3A) while usurping the powers of the Officer of Directorate General of Post Clearance Audit, which is not permitted under law. Any such act if committed has to be discouraged in the beginning because if allowed, it will create anarchy and compromise the independence of the different organs of the Revenue Division, empowered to act and operate within the specific sphere without any interference. I am therefore of the irresistible considered opinion that the appellant subordinates acted without power/jurisdiction, rendering the conduction of audit, preparation of contravention report are ab-initio, void and as such of no legal effect. 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), PLD 1976 Supreme Court 514 Ali Muhammad v. Hussain Buksh and others and PLD 2001 Supreme Court 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, PLD 2004 Supreme Court 600 All Pakistan Newspaper Society v. FOP, PLD 2005 Supreme Court 842 Khyber Tractors (Pvt.) Ltd., v. FOP.

2. Reverting back to the core issue of the case that as to whether imported Vickers Spotless CN22 Oil falls within the ambit of input goods or not as defined in Rule 2(1)(f) of SRO . Although the issue has been laid to rest through well worded observation in para 22 of the order by the respondent No. 2 and no substance or reasoning were available with the appellant or his subordinate to dispute the rationale and just interpretation adduced by the respondent No. 2. The appellant filed the subject appeal despite non availability of any valid ground, validated from the grounds given in memo. of appeal having no substance being of stereotypical and general nature and desired that the order passed by respondent No. 2 be overturned in accordance with their wishes and inapt interpretation of the phrase "Input Goods" defined in Rule 2(i)(f)/ essence and spirit of SRO and the intention of the legislature. It is settled principle of law that the definition of phrase available in statute and SRO has to be interpreted in liberal and rationale manner for achieving the object as Rules are to be used as "stepping stones" instead of "stumbling blocks" and they may also not to be employed to harass the taxpayer on the basis of technicalities instead of advancing the purpose for which they are framed as held by Supreme Court of Pakistan in its reported judgment PLD 1989 Supreme Court 222 in the case of Messrs Nishat Mills Ltd. v. Superintendent of Central Excise Circle-II. I am in full agreement with the adopted definition of the word "Input Goods" by the respondent No. 2 in its order that "It shows that there are two basic conditions for any goods to qualify as Input Goods (i) the goods must be used in the manufacturing of output goods and (ii) these must be approved by the Collector in the Analysis Card. Now these goods may be raw material, accessories, sub-components, components, assemblies, and sub-assemblies or any other goods but if these meet the two conditions mentioned above then these would be considered as input goods under SRO 327(I)/2008 dated 29.03.2008. The definition of Input Goods as noted earlier never required that the input goods must add value to the output goods or these should not be consumable and these must be some of the raw material as fixation of such a condition to the definition of Input Goods would mean imposing a condition neither intended by the law maker or required under law. The word mentioned is "used in the manufacture of out goods" without pre-fixing condition that how these would be used, and it has been left for Collector to finally decide in the Analysis Card that what goods will be allowed concession as input goods under SRO 327(I)/2008 dated 29.03.2008". Notwithstanding, for further crystallizing the definition of "Input goods" I am indebted to refer the judgment of Hon'ble Supreme Court of Pakistan 2003 PTD 1986 Messrs D.G. Khan Cement Company, Ltd v. Deputy Collector of Customs Appraisement-Group-VII, Customs House, Karachi and 2011 PTD 569 Ayesha Steel Mills Ltd v. FOP, wherein real estate and including lands and building and pre-fabricated factory building and shed were termed to be falling within the definition of "Plant and Equipment/Machinery" despite having different literal meanings while holding that "the said word Plant even encompasses real state and include lands and building only subject to the qualification that while ground occupied by factory or mill or even that part or joining the factory and use for office or warehouses may be treated as part of plant but a large tract of land many miles from the plant which is used for raising raw material for the factory ordinarily will not be considered a part of the plant" and "pre-fabricated factory building and shed imported by the petitioner falls within the definition of Plant, equipment/machinery" In 2016 SCMR 1448 Messrs D.G Khan Cement Co., Ltd. v. Collector of Customs again held that off highway dump truck if used in industrial process of the cement company and their utility found an integral function in the manufacturing of the cement, direct nexus existed between the use off highway dump truck at the quarry of the cement manufacturing factory with its industrial process. Such nexus brought the off way highway truck within the definition of plant". In consideration of the liberal/rationale and legal interpretation adopted in the aforesaid judgments by the Hon'ble Supreme Court of Pakistan, I hold that the "Input Goods" are not restricted to the item specified in Rule 2(1)(f) of the SRO, rather all raw material, whether from those are nothing can be manufactured but are used ancillary to the manufacturing process, whether that is in the shape of oil or lubricant or Vicker Spotless CN 22 Oil imported in the Export Oriented Unit by the respondent No. 1 after due approval by the appellant of that and of Analysis Card for consumption falls without any exception within the definition of input goods, no illegality has been committed by the respondent No. 1 nor by the appellant in importing allowing Vickers Spotless CN 22 Oil used for lubricating the needle knitting cam (tooth) needle shanks of knitting machine in the past and if imported in future, for which permission should be granted to them, in addition to issuance of Analysis Card.

3. In view of foregoing, the appeal is not maintainable in terms of the provision of section 194A(1) of the Act and even without merit and substance. Therefore fails the judicial scrutiny as such stands dismissed. Order accordingly.

HBT/20/Tax(Trib.) Appeal dismissed.

2018 P T D (Trib.) 726

[Customs Appellate Tribunal]

Before Ch. Muhammad Shabbir Gujjar, Member (Judicial)

Messrs KHYBER TEA AND FOOD COMPANY, KATCHERY GATE, PESHAWAR

Versus

COLLECTOR OF CUSTOMS (APPEALS), MODEL CUSTOMS COLLECTORATE, PESHAWAR and 2 others

Cus. No.327/PB of 2014, decided on 26th April, 2017.

(a) Customs, Excise and Sales Tax Appellate Tribunal Procedure Rules, 2006---

----Rr.2(b) & 17(1)(2)(3)---Customs Act (IV of 1969), Ss. 180(c), 195(1) & 208(2)---Appearance of authorized representative in appeal---Departmental representative raised objection that authorized representatives/consultants in the appeal could not appear as authorized representatives/consultants as they were not licensed advocates---Said objection seemed to be based on some misconception, misapprehension and mis-reading of provisions of Ss.180(c), 195(1) & 208(2) of Customs Act, 1969, which did not place any embargo on appearance as an authorized representatives/consultants before the adjudicating forum and before the Collector of Customs (Appeals) provided written authority had been given by the person concerned---Rule 2(b) of Customs, Excise and Sales Tax Appellate Tribunal Procedure Rules, 2006; (issued vide Notification No. S.R.O. 897(I)/2006, dated 1-9-2006), entitled an authorized representative to appears before the Appellate Tribunal---Rule 17(1)(2) & (3) of said Rules also prescribed a procedure for authorized representative---Person affected by the orders passed by the lower forum could appear in the court of law personally or through any person, irrespective of the fact that such person was licensed advocate, provided written authority, permission was given by him to such person.

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

----S. 180---Issuance of show-cause notice---Purpose---Purpose of show-cause notice, was that accused should know about the allegation levelled against him and prepare his defence---Right of appellant/accused to defend himself and produce the evidence of legal import and lawful possession of the goods---Scope---No provision existed in the Customs Act, 1969 that accused could not produce documentary evidence or his version at any stage in appeal.

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

----Ss. 2(s), 16, 157 & 156(1)(8)(89)---Allegation of smuggling---Outright confiscation of seized goods---Truck was intercepted---Search of said truck resulted into recovery of foreign original tea in the vehicle---Occupants of the vehicle failed to produce any legal documents/lawful possession of the said goods so recovered---Customs Staff seized the foreign origin smuggled goods and the said vehicle---Deputy Collector Adjudication Customs ordered outright confiscation of the seized goods and released vehicle against 20% redemption fine---Collector Customs (Appeal) dismissed appeal of the appellant/ accused---Bill of Entries and all other documents produced by the appellant had shown that goods in question were imported by him---Department could not prove its case against the appellant regarding violation of Ss.2(s), 16 & 157 of the Customs Act, 1969---Appellant being manufacturer, could change the original packing after mixing and blending the tea---Goods, in question having been loaded on a truck were seized within the country which could not be treated as smuggled---Locally manufactured goods and imported goods purchased from the local markets, were not liable to confiscation---Once the goods were imported into the country for home consumption and issued a sales tax invoice in respect of imported goods, and goods after process or provisions of Customs Act, 1969, were not applicable to such goods assembling, cutting, mixing and preparation, were repacked---Department having failed to prove its case against appellant, appeal was allowed and department was directed to immediately work out the entire sales proceeds that were payable to the appellant accordingly, and release the vehicle unconditionally---Redemption fine imposed on the vehicle, was also ordered to be remitted.

1995 SCMR 387; 2004 PTD 791; 2012 PTD 1343; 2012 PTD 1632; 2002 MLD 700; 2001 SCMR 1376 = 2001 PTD 2097; 2001 PTD 2982; 2004 PTD 788; 2013 PTD (Trib.) 600; 2016 PTD 80 and 2012 PTD 428 ref.

Syed Pir Alam Shah Legal Consultant and Fakhr-e-Alam Paracha Managing Director for Appellant.

Naseer Khan Afridi Superintendent Customs for Respondents.

Date of hearing: 25th April, 2017.

JUDGMENT

CH. MUHAMMAD SHABBIR GUJJAR, MEMBER (JUDICIAL).---This appeal filed by M/s Khyber Tea and Food Company against the Order-in-Appeal No. 33/2014 dated 13.06.2014 passed by the Collector of Customs (Appeals), MCC, Peshawar whereby he while maintaining the Order-in-Original No. 25/2014 dated 22.02.2014 dismissed the appeal.

1. Brief facts of the case are that the Customs Mobile Squad D.I. Khan on 05.01.2014, in pursuance of prior information, a Truck bearing Registration No. P-3334 Peshawar was intercepted at DI Khan. Search of the vehicle resulted into foreign origin goods (as detailed in the recovery Memo 03/2014 dated 05.1.2014). On demand, the occupants of the vehicle namely (1) Zahid Gul son of Haji Gul R/o Peshawar (2) Naseer son of Waheed R/o Multan failed to produce any legal documents/lawful possession of the said goods so recovered. Therefore, the Customs staff seized the foreign origin smuggled goods along with the said vehicle under section 168 of the Customs Act, 1969 for violation of sections 2(s), 16 and 157 ibid read with section 3(1) of the Imports and Exports (Control) Act, 1950 punishable under section 156(1) (8), (89) of the Customs Act, 1969 read-with section 3(3) of the Imports and Exports (Control) Act, 1950.

2. Subsequently; after completion of the requisite formalities, the matter was placed before the Deputy Collector Adjudication Customs Kohat, who vide Order-in-Original No.25 of 2014 dated 22.2.2014 ordered outright confiscation of the seized goods and released the vehicle against 20% redemption fine @ Rs.100000/-

3. Appeal was filed against the Order-in-Original No. 25/2014 dated 22.2.2014 before the Collector Appeal Customs Peshawar, who dismissed the appeal vide Order-in-Appeal No. 33/2014 dated 13.6.2014.

4. Aggrieved from the Order-in-Original No. 25 of 2014 dated 22.02.2014 and Order-in-Appeal No. 33 of 2014 dated 13.06.2014, the appellant filed appeal before this Tribunal with the following grounds.

5. That the seized/confiscated goods were lawfully imported legitimately purchased and bonafidely transported duly supported with GDs, Sales Tax Invoices and Bilities. The appellant registered as manufacturer, income tax department as well as sales tax department. The seized goods after mixing, blending, cutting, processing and assembling packed in plastic bags and cartons bearing appellant's firm address and monogram. The Customs department seized the imported goods without detention under section 17 and no notice issued under section 26 of the Customs Act, 1969.

6. That respondent No. 2, never enquired from the detecting staff as to how the CIF value of the seized goods amounting to Rs.2500000/- was determined and did not bother to know the reasons of 2nd valuation and assessment in one and same case.

7. That respondent No. 2, did not bother to call for the appraiser to know as to how he evaluated the seized goods and why he did not associate the respondent (now appellant) at the time of evaluation and assessment of seized goods.

8. That the value determined by the appraiser is not a fair value having no legal sanctity as the same has not been approved by the competent authority.

9. That contents of the Affidavits given by the appellant are to be admitted as the prosecution has failed to give counter affidavits.

10. That the provisions of section 2(s) of the Customs Act, 1969 are not applicable in this case.

11. That the provisions of section 16 of the Customs Act, 1969 are not applicable in this case because;

(i) the seized/confiscated goods are freely importable.

(ii) there is no prohibition or restriction on the import of the seized/confiscated goods.

(iii) The seized/confiscated goods were supported with legal documents.

1. That the provisions of section 157 of the Customs Act, 1969 are not applicable in this case because;

(i) the owner of the vehicle was not travelling with the seized vehicle. When intercepted.

(ii) The prosecution did not bring any evidence on record which proves any criminal link or association with the owner of the seize goods.

(iii) The owner of the vehicle was never issued show-cause notice and in absence thereof no penal or punitive action can be taken against the owner of the vehicle nor any redemption fine could be imposed on the vehicle.

1. In rebuttal, the respondent-department filed their parawise comments as under:--

2. Incorrect. At the time of interception of the vehicle the owner/driver did not produce any GDs, Sales Tax invoices, Bilties to the seizing officer from the recovery memo. The seizing officer accordingly got signature from the owner/driver on recovery memo.

3. No comments

4. Incorrect. The appraiser was not under obligation to associate the accused person while assessing the duty and taxes. The Collector or Director valuation has the power to re-examine the assessment made under section 80 of the Customs Act, 1969 if he is not satisfied. Section 25D of the Customs Act, 1969 empower the Director General valuation to hear appeal if filed by an aggrieved person.

5. Incorrect.

6. Incorrect.

7. Incorrect.

(ii) Incorrect.

(iii) Incorrect.

1. During the hearing departmental representative (DR) raised objection that Mr. Syed Pir Alam Shah who are authorized representatives/consultants in the appeal could not appear as authorized representatives/consultants because they are not licensed advocate. The said objection seems to be based on some misconception, misapprehension and mis-reading of provisions of sections 180(c), 195(1) and 208(2) of the Customs Act, 1969 which do not place any embargo on his appearance as an authorized representatives/consultants before the adjudicating fora and before the Collector of Customs (Appeals) provided written authority has been given by the person concerned. In addition to the above, Rule 2(b) of Customs, Excise and Sales Tax Appellate Tribunal Procedure Rules, 2006 issued vide Notification No. S.R.O. 897(I)/2006 dated 1.9.2006 entitles an authorized representative to appear before the appellate tribunal in relation to a person who is liable to pay customs duty or sales tax or excise duty or any other tax to appear, plead and act on behalf of that person before the Appellate Tribunal. Still further, Rule 17(1), (2) and (3) of the above rules also prescribes a procedure for authorized representative as per which there is no bar for the authorized representative to appear, plead and act on behalf of the appellants provided a written authority is given by him. Nonetheless, a person affected by the orders passed by the lower forum can appear in the court of law personally or through any person irrespective of the fact that such person is a licensed advocate provided written authority/permission is given by him to such person.

2. The order-in-original didn't show that the documents produced by the appellant were found bogus. I am not agree with the plea of learned DR that the documents presented were afterthought. If the said documents were afterthought, so why the adjudication officer has issued show-cause notice and why he called upon as to penal action should not be taken against the appellant and why the seized said goods should not be confiscated. The purpose of issuance of show-cause notice is that the accused should know about the allegation leveled against him and he prepared his defense. This is the right of appellant to defend himself and produce the evidence of legal import and lawful possession of the goods. There is no provision in the Customs Act, 1969 and the other laws of land that the accused cannot produce the documentary evidence in support of his version at any stage.

3. That the black tea, black pepper, green cardamom, cassia, cloves, cumin seed, Dry Copra, Dry Kajoor, Ispaghol Husk, Dal-e-Mong, Dal-e-Masoor, Stationery paper and tissue paper entered into the country by Karachi Sea Port either by the Pakistani Importers or by the Afghan Importers for Afghanistan. The goods which are imported for Afghanistan must carries the words "via Karachi in transit to Afghanistan" under the Afghan Transit Trade Treaty already executed between Pakistan and Afghanistan in 1965. It is in the notice of Customs authorities that the goods which didn't carry the words "via Karachi in transit to Afghanistan" and those are going to Afghanistan. The customs authorities have the power to seized the same. Because it is the violation of Afghan Transit Treaty 1965. The perusal of record shows that the seized said goods in question didn't carry the words "via Karachi in transit to Afghanistan". And admittedly those goods were not seized on border belt but were seized on settled area i.e. Hawalian. This fact had also been admitted by the Departmental Representative. Then how the customs authorities declared them smuggled one. Moreover, August Supreme Court of Pakistan in its judgment reported in 1995 SCMR 387 held that "If the items alleged to be smuggled by the prosecution were freely available in the open market and import of such goods were not banned in the country presumption could arise that the goods in question were lawfully brought in the country unless the contrary was shown".

4. Moreover once the goods imported into the country for home consumption and issue a sales tax invoice under section 23 of Sales Tax Act, 1990 in respect of the import goods. The provision of Customs Act, 1969 are not applicable because after a process of assembling, mixing, cutting, or preparation of goods in any other manner the same is re-packed in other bags from the original packing.

The learned DR contended that the sales tax invoice Nos. 1 to 8 dated 05.1.2014 neither mentioned the NTN Number or CNIC Number of purchaser issued by Messrs Khyber Tea and Food Company Peshawar nor his NTN, CNIC Number or his name mentioned in the monthly sales tax return Annex-C (Summary of Sales Invoices) for the month of January, 2014 which is against the SRO 821(I)/2011 dated 06.9.2011 issued by Government of Pakistan Federal Board of Revenue Islamabad which made it mandatory that in case of registered manufacturer, importers, exporters, making taxable or dutiable supplies to unregistered person, shall issue an invoice containing "computerized National Identity Card Number or National Tax Number" of such unregistered person. Thought the FBR has issued the above mentioned SRO but the Government of Pakistan Ministry of Finance, Economic Affairs, Statistics and Revenue Islamabad rescinded the said SRO vide notification S.R.O. 880(I)/2012 dated 17.7.2012, therefore the said plea of DR is turned down.

1. The learned Departmental Representative contended that the features and contents of recovered seized goods don't tally with the bill of entry. The record has been examined which revealed that the seized goods were imported by Messrs Khyber Tea and Food Company Peshawar vide GD No. KCSI-HC-109106 dated 12.2.2013, KCSI-HC-87679 dated 2.1.2013, KCSI-HC-85500 dated 28.12.2012 and KCSI-HC-83464 dated 24.12.2012. According to available record the condition of the seized goods at import stage and after manufacturing is tabulated as under:--

| | | | | --- | --- | --- | | S. No. | Condition at Import Stage in GD | Condition at Seized time | | 1 | Black tea Kenya Origin (100x68)=6800 KG | Blended black tea (100x20)=1200 KG | | 2 | Black pepper whole (50x25)=2500 KG | Black Pepper powder (50x12)= 600KG | | 3 | Green Cardamom (100 x30)=3000 KG | Grinded Green Cardamom Powder (100 x12)=1200 KG | | 4 | Cloves whole (100 x30)=3000 KG | Grinded Cloves powder (100 x20)=2000 KG | | 5 | Cumin Seed (20 x20)=400 KG | Cumin powder (20 x15 )=300 KG | | 6 | Dry Copra (50x50)=2500 KG | Dry Copra Powder (50 x30)=1500 KG | | 7 | Ispaghol Husk (10 x20)=200 KG | Ispaghol Powder (10 x10)=100 KG | | 8 | Dal-e-Mong (50 x50)=2500 KG | Grinded Dal-e-Mong (50 x 60)=3000 KG | | 19 | Dal-e-Mattar (100 x50)=5000 KG | Basin Powder (100 x30)=3000 KG | | 10 | Dal-e-Masoor whole (100 x 60)=6000 KG | Without whole Dal-e-Masoor (100 x40)=4000 KG | | 9 | Cassia whole (100 x30)=3000 KG | Cassia Powder (100 x 20)=2000 KG | | 10 | Ziffle and Jalwatry (100 x40)=4000 KG | Ziffle and Jalwatry Powder (100 x12)=1200 KG | | 11 | Black Cardamom (100 x40)=4000 KG | Black Cardamom powder (100 x12)=1200 KG | | 12 | Milk powder (100 x25)=2500 KG | Mix Milk Powder (Glucose) (100 x12)=1200 KG | | 13 | Nut Meg, Almond, Ground Nut and Peanut, Kajoor (100 x30)=3000 KG | Powder for kheer (50 x 12)=600 KG | | 14 | Red Chilli whole (50 x30)=1500 KG | Grinded Red Chilli Powder (50 x 12)=600 KG | | 15 | Green Tea (30 x 42)=1260 KG | Green tea mixed with green cardamom (30 x 12)=360 KG |

1. The learned Departmental Representative pointed out that the appellant didn't pay 3% value addition tax which is chargeable on the goods mentioned in the GDs produced by the appellant and placed reliance on S.R.O. 480(I)/2007 dated 09.6.2007. According to the available record appellant is importer manufacturer and 3% of value addition tax is not applicable to the present appellant because provisio to section 58 B exempted the importer manufactures from 3% value addition tax therefore the question raised by the learned DR has no force and has been turned down.

2. The learned DR also raised a question that the appellant has made supplies of black tea, dry copra, ground nuts, peanuts, tamarind seeds, cumin seeds, cassia whole, cardamom and black pepper to unregistered person without charging/paying further tax @ 1% on the value of supplies leviable in terms of section 3(1A) of the Sales Tax Act, 1990. Therefore the appellant has violated the provisions of section 3(1A) of the Sales Tax Act, 1990. In rebuttal the AR produced S.R.O. 648(I)/2013 dated 9.7.2013 which is reproduced as under;

In exercise of the powers conferred by the proviso to subsection (1A) of section 3 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that further tax @ 1% shall not be charged, levied or paid on the taxable supplies mentioned in column (2) of the Table below namely;

Serial No. 6 of the table provides that items failing in the third schedule to the Sales Tax Act, 1990 while at serial No. 14 of the third schedule tea is mentioned whereas at serial No. 18 of the said schedule spices sold in retail packing bearing brand names and trade marks is mentioned. The crux of the above mentioned is that further tax at the rate of 1% shall not be charged, levied or paid on the tea and spices etc.

1. The learned DR contended that the appellant has sold the tea and spices in huge quantity and the learned DR has also admitted that the seized goods are in retail packing of 1000 Grams and 500 Grams packets which also carries the monogram of the appellant's company, retail price and sales tax also mentioned on the packets. I have examined the S.R.O. 648(I)/2013 dated 09.7.2013 along with the 3rd schedule. It is no where mentioned in the schedule that the manufacturer will not sale the tea and spices in huge quantity. Under 3rd schedule the manufacturer is bound to sale the goods in retail packing with retail price including GST as well either in huge or less quantity. Therefore, this plea of DR has no force hence turned down.

14(sic) The learned Departmental Representative raised a question that the repacking was made un-necessarily is also a frivolous while the M/s. Khyber Tea and Food Co. Peshawar is a registered manufacturer with FBR. M/s. Khyber Tea and Food Co. Peshawar being manufacturer mixed/ blended the tea in question at Peshawar and repacked the same in bags.

The learned DR produced FBR Income Tax Circular No. 03 of 2009 dated 17.6.2009 Para No. 34 where it has clearly been defined

"Person engaged in packing and repacking have been excluded from the definition of manufacturer"

For the purpose of section 153 of Income Tax Ordinance, 2001 and as per Finance Act, 2009 the packing and repacking activities have been excluded from the definition of manufacturer. It is correct that the Finance Act and the above noted circular excluded the packing and repacking activities from the definition of manufacturer. But the provision of Finance Act, 2009 and the above mentioned circular did not exclude the activities of mixing and blending from the definition of manufacturer. The business activities of Messrs Khyber Tea and Food Company Peshawar is of mixing and blending of various tea with each other in order to create taste and flavor of tea. Thus the business activities of Messrs Khyber Tea and Food Company Peshawar falls within the scope and definition of manufacturer under section 2(16) and (17) of the Sales Tax Act, 1990 as well as under section 153(7)(iv)(b) of Income Tax Ordinance, 2001 and also section 2 (25) of Federal Excise Act, 2005. Section 153(7)(iv)(b) of Income Tax Ordinance, 2001 reproduced as under;

Section 153 (7) (iv) (b) of Income Tax Ordinance, 2001:-

"Manufacturer" for the purpose of the section means, a person who is engaged in production or manufacturer of goods, which includes:-

(a) any process in which an article singly or in combination with other articles, material, components, is either converted into other distinct article or produce is so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or

(b) a process of assembling, mixing, cutting or preparation of goods in any other manner.

In the light of above provisions of law the status of Messrs Khyber Tea and Food Company is manufacturer. It is understood fact that being manufacturer M/s. Khyber Tea and Food Company Peshawar would change the original packing after mixing and blending of tea. It is the right of manufacturer to change the original import packing after mixing, blending and processing.

The grinding process of spices and their mixing, grinding of leaves of green tea, grinding of green cardamom, mixing and grinding of dry fruits i.e. almonds, peanuts, nutmeg, dry coconut etc for keer, grinding of food grains i.e. Dal-e-Channa, Dal-e-Mattar, Mung etc., cutting of paper roll and use for different purposes and the act of cutting the tin plates to size are the examples of manufacturing.

There is no prohibition on mixing, blending, cutting and preparation under any law of land. So the seizing and confiscation of the tea, spices and dry fruits in question was unlawful. Hence reliance takes placed on 2004 PTD 791 Karachi High Court, 2012 PTD 1343, 2012 PTD 1632, 2002 MLD 700; 2001 SCMR 1376 = 2001 PTD 2097; 2001 PTD 2982; 2004 PTD 788; 2013 PTD (Trib.) 600 and 2016 PTD 80.

1. That the recovered black tea, food grains, spices items, mixed dry fruits was in plastic bags bearing the monogram/ trade mark of Messrs Khyber Tea and Food Company Peshawar along with address which means that the said seized goods in question were locally manufactured. According to the Sales Tax Registration produced by the appellant shows that the appellant is a registered manufacturer. The locally manufactured goods were illegally detained, seized and confiscated. The law of land doesn't permit to detain, seize and confiscate locally manufactured/packed goods. The goods were loaded on a truck were seized within the country as such this goods could not be treated as smuggled goods. Locally manufactured goods and imported goods purchased from the local markets are not liable to confiscation. "Moreover once the goods imported into the country for home consumption and issue a sales tax invoice in respect of imported goods the provisions of Customs Act, 1969 are not applicable because after process of assembling, cutting, mixing and preparation the same is repacked".

The Messrs Khyber Tea and Food Company Peshawar is registered with Sales Tax and Income Tax Department as manufacturer; therefore the Company is bound under the law that it cannot sale out its goods in the original import shape/packing, mark, and number. The company must sale out the same after manufacturing, processing, mixing cutting and then repacked it in other bags. So the seizing and confiscation of the goods in question was unlawful.

1. The learned Department Representative raised a point that the tea doesn't fall within the ambit of manufacturing. The learned counsel for appellant produced a judgment dated 06.1.2017 passed by the Commissioner Income Tax Appeals-II Karachi wherein the Commissioner Appeal held that "apex courts have already settled the issue in case of M.M Ispahani Tea (Pvt.) Ltd., Messrs SPATCO Karachi, Kohistan Tea Company Karachi, Decent Enterprises Karachi, Muqeet Brothers Karachi and holding that the business of blending, mixing and packaging of tea is a manufacturing process". Therefore, I also hold that the appellant is a manufacturer. The Taxation Officer is directed to accept the claim of the appellant as manufacturer and issue the refund of the excess deduction of the years 2013, 2014 and 2015 under appeals".

The appellant also produced exemption/ reduced rate certificates issued by Commissioner Income Tax Peshawar from time to time and this facility is only available to manufacturer.

In other similar cases of tea the Commissioners of Income Tax of various zone including Karachi have also issued exemption certificates to the tea manufacturer.

In this connection Chief Commissioner RTO Peshawar issued a clarification to appellant regarding manufacturing order under section 122B of the Income Tax Ordinance, 2001 vide order No. CCIR.RTO (HQ)/2013/35 dated 07.8.2013 which are as under;

To 07.8.2013

Messrs Khyber Tea and Food Company

Ashraf Road, Peshawar

Subject: CLARIFICATION REGARDING "MANUFACTURER" -ORDER UNDER SECTION 122-B OF THE INCOME TAX ORDINANCE, 2001.

Please refer to your application dated 17.7.2013 filed under section 221/122B, wherein you have sought clarification "regarding treatment as "Manufacturer" in the order already passed under section 122B vide No. 463 dated 07.5.2013.

It is clarified that the undersigned agrees with the fact that keeping in view the nature of your business activities and processes, you are covered under the provision of section 153(7)(iv)(b) of the Income Tax Ordinance, 2001.

Sd/-

YUSUF GHAFFAR KHAN

Chief Commissioner

The appellant also produced order under section 122(1) read with section 122(5) of the Income Tax Ordinance, 2001 dated 6.8.2012 passed by officer of Inland Revenue RTO Karachi in favour of Messrs SPATCO'S Karachi through which the officer IR RTO Karachi issued Income Tax Refund of Rs.81258461/- for the tax year 2012 dated 06.8.2012. The said order shows that Messrs SPATCO's engaged in running the business of tea blending and mixing of black tea and green tea as well as leaf tone and spices etc.

1. It is evident from the Bill of Entries produced by the appellant that the goods in question were imported by the appellant. Furthermore all the relevant documents were produced and according to section 187 of the Customs Act, 1969 as held in 2012 PTD 428 Karachi HC, 2012 PTD 28 QHC the onus of proof lies on the shoulder of the prosecution to proof its case. For convenience of perusal, section 187 of the Customs Act, 1969 is reproduced:-

"187. Burden of proof as to lawful authority etc:- When any person is alleged to have committed an offence under this Act and any question arises whether he did any act or was in possession of anything with lawful authority or under a permit, licence or other document prescribed by or under any law for the time being in force, the burden of proving that he had such authority, permit, license or other document shall lie on him."

1. In view of the above discussions I came to the conclusion that the respondent could not prove its case against the appellants regarding violation of Sections 2(s), 16 and 157 of the Customs Act, 1969 read with section 3(3) of the Imports and Exports (Control) Act, 1950 punishable under section 156(1)(8)(89) of the Customs Act, 1969. Seized goods are notified items but don't fall in the Appendix-A and are not bended items. It is freely importable under the import policy, any presumption of its being smuggled requires direct evidence which is absent in the present case. Consequently, this appeal is allowed and the Respondents are directed to immediately work out the entire sales proceeds that are payable to the Appellant accordingly and release the vehicle unconditionally, the redemption fine imposed on the vehicle is also remitted.

HBT/53/Tax(Trib.) Appeal allowed.

2018 P T D (Trib.) 756

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Judicial Member and Imran Tariq, Technical Member

MUHAMMAD RAFIQUE

Versus

SUPERINTENDENT INTELLIGENCE AND INVESTIGATION-FBR, LAHORE and 2 others

C.A. No.279/LB of 2015, decided on 19th May, 2016.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 157 & 168---Seizure and confiscation of vehicle allegedly used in smuggling---Validity---Confiscation, was generally used as a means of depriving certain criminals of the fruit of their crimes---Under Customs Act, 1969, confiscation of transport vehicles seized, while transporting smuggled goods, fell within the ambit of criminal law---Purpose of S.157 of the Customs Act, 1969, was to penalize and discourage clandestine involvement of owners of conveyance used in assistance of commission of an offence under the Customs Act, 1969---Object of confiscation under the Customs Act, 1969, was mainly to penalize perpetrators of the offence of smuggling; impliedly it was not the purpose of legislators to penalize the owner of vehicle, unless any connivance was proved---Transportation of freely traded items like Ceramic Floor Tiles, could not mechanically be construed as assistance to violation of the provisions of customs law---Case of the department was not that truck in question was apprehended while pilfering goods from a customs area or that truck was detained while removing goods from a customs bonded warehouse or a private bond or; that impugned merchandise was found hidden inside the truck, or that the impugned cargo vehicle was apprehended while hauling the contraband goods across the Frontier of Pakistan---Fact of the matter was that the cargo carrier was apprehended while transporting freely tradable Floor Tiles, under normal course of intercity haulage---Adjudicating Officer was let loose, the power of the executive to penalize an innocent person's property, would create travesty of justice impinging upon Fundamental Rights, guaranteed and enshrined under the Constitution---Customs authorities, did not possess unbridled powers to confiscate property of subjects---Confiscating property as a sanction to some breach of law without there being a relationship between the behaviour of the owner or the person responsible for the goods and the breach of law was definitely illegal and void and should be discouraged---Vehicle could not be penalized unless adequate proof of involvement of the owner of the vehicle was proved---No prima facie direct/adequate evidence was available to prove that the owner of the vehicle was involved in the impugned offence---Impugned order was modified to the extent that truck in question, was ordered to be unconditionally released to its lawful owner.

PLD 1974 SC 5 ref.

Ahsan Baqer Ali for Appellant.

Ms. Anila Jamil for Respondents.

Date of hearing: 28th April, 2016.

JUDGMENT

OMAR ARSHAD HAKEEM, MEMBER (JUDICIAL).---This judgment shall dispose of an appeal filed against Order-in-Appeal No.85/2015 dated 29.04.2015 passed by the learned Collector of Customs, (Appeals) Lahore.

1. Precise facts of the core controversy involved in the instant appeal are that the staff of Customs Intelligence and Investigation-FBR, Range Office, Lahore intercepted a Mazda Mini Truck bearing registration No. LES-11-1187 loaded with Iranian origin tiles. On query driver of the truck introduced himself as Muhammad Rafique son of Riaz Ahmad and produced bilty No. 336 dated 11.11.2014, but failed to produce any document regarding legal import or lawful possession of the impugned goods. The impugned goods were therefore seized under section 168(1) of the Customs Act. 1969 for confiscation under section 156(1)9 and 90 and section 157 ibid.

2. During the course of investigation, statement of driver Muhammad Rafique was recorded. He stated that the seized Iranian origin tiles were loaded in the truck from Messrs Azad Frontier Punjab Goods Transport Company, Gujranwala against bilty No. 336 dated 11.11.2014 which were booked by one Zikria. He further stated that the seized filed were to be off loaded at Al-Makka Tiles, Township Lahore. The owner of the goods did not provide any document regarding legal import or lawful possession to him.

3. Accordingly a show-cause notice was issued to the appellant for contravention of the provisions of law. The adjudicating proceedings culminated into passing of an order-in-original, which reads as under:--

"In view of the confession made by the respondents, the charge to the extent that the goods have been brought into the country without payment of duties and taxes stands established. Therefore the seized goods mentioned in para-1 of this order are confiscated under clause (90) of section 156(1) of the Customs Act, 1969. However, an option under section 181 of the Customs Act, 1969 is allowed and confiscated goods are redeemed to its lawful owners on payment of redemption fine equal to 20% (twenty percent) of the assessed value of the same in addition to payment of duty/taxes leviable thereon. The seized Mazda Mini Truck bearing registration No. LES-11-1187 used for transportation of impugned goods is confiscated under section 157 of the Customs Act, 1969. However, an option under section 181 of the Customs Act, 1969 is allowed and confiscated Mazda Mini Truck bearing registration No. LES -11-1187 provisionally released earlier against bank guarantee Rs.40,000/- (pak rupees forty thousand only) issued vide order C. No. V-Cus/DC/ADJ/ 274/2014/483 dated 24.11.2014 is redeemed to its lawful owner on payment of redemption fine of Rs.40,000/- (pak rupees forty thousand only)."

1. Being aggrieved from the aforesaid order of the Deputy Collector of Customs (Adjudication), Lahore the appellant filed an appeal (to the extent of Mazda Mini Truck) before the learned Collector of Customs (Appeals), Lahore who vide impugned order-in-appeal rejected the same and passed the following order:--

"I have examined the case record, considered the grounds of appeal, verbal arguments advanced by the learned counsel of the appellant as well as departmental representative during hearing proceedings and found that the appellant has failed to put forward any further evidence to defend his case. The Deputy Collector (Adjudication) has rightly passed the order-in-original in which all the aspects of the case have been thrashed out in detail. I find no reason to interfere with the order. The Order-in-Original No. 62/2015 dated 09.03.2015 is upheld and the instant appeal being devoid of merit is dismissed."

1. Being further aggrieved from the aforesaid order of the learned Collector of Customs (Appeals), Lahore the appellant has filed the instant appeal (to the extent of Mazda Mini Truck) before the Tribunal on the following grounds:--

a) That the impugned order-in-appeal to the extent of the appellant has been passed in a mechanical fashion and without proper appreciation of law points involved in the case. As such the same is liable to be set aside on this score alone.

b) That the confiscation and imposition of redemption fine on the vehicle in question is illegal because the appellant loaded tiles from the registered Goods Transport Company name Messrs Azad Frontier Punjab Goods Transport Company, Gujranwala against bilty No. 336 dated 11.11.2014. It is pertinent to mention here that the owner of the tiles claimed the ownership before the respondents.

c) That while deciding the case the respondents Nos. 2 and 3 misconceived the legal provisions of Customs Act, 1969 because the confiscation of the truck and imposition of redemption fine is unwarranted specially in the circumstances when there is no knowledge and criminal involvement of the owner of the vehicle as well as vehicle was found and established therefore the impugned order-in-appeal to the extent of the appellant is liable to be declared illegal.

d) That the appellant loaded the tiles from the truck adda and owner of the tiles is also available therefore the appellant cannot be held responsible for the production of import documents and lawful possession of the goods in question.

e) That the appellant did not violate any provisions of the Customs. Act, 1969.

f) That the impugned order in appeal has been passed in clear violation of the provisions of Customs Act, 1969. It is submitted that there is no evidence on record which shows any mala fide on the part of the appellant therefore the allegation is based on presumption. Hence the impugned order-in-appeal is illegal.

1. Heard. Record examined.

2. Suffice to say that under the criminal law confiscation is generally used as a means of depriving certain criminals of the fruits of their crimes. That under the Customs Act, 1969 confiscation of transport vehicles seized, while transporting smuggled goods falls within ambit of criminal law and the evident purpose of section 157 of the Customs Act, 1969 is to penalize and discourage clandestine involvement of owners of conveyance used in assistance of commission of an offense under the Act.

3. We further note that the object of confiscation under the Customs Act, 1969 is mainly to penalize perpetrators of the offence of smuggling impliedly it is not the purpose of legislators to penalize the owner of vehicle unless any connivance is proved. Conclusively speaking, transportation of freely traded items like Ceramic Floor Tiles cannot mechanically be construed as assistance in violation of the provisions of Customs Law. It is not the case of the respondent department that the Mazda Truck bearing registration No.LES-11-1187 was apprehended while pilfering goods from a customs area or that the conveyance was detained while clandestinely removing goods from a customs bonded ware house or a private bond or that the impugned merchandise was found surreptitiously hidden inside the Truck or that the impugned cargo vehicle was apprehended while hauling the contraband goods across the Frontier of Pakistan, fact of the matter is that the cargo carrier was apprehended while transporting freely tradable Floor Tiles under normal course of intercity haulage.

4. In order to arrive at a correct interpretation of section 157 of Customs Act, 1969, we have referred to a judgment of Hon'ble Supreme Court of Pakistan in case reported as PLD 1974 SC 5 wherein effect of Section 168 of the erstwhile Sea Customs Act, 1898 was duly considered and discussed, it would be pertinent to mention here that section 157 of Customs Act, 1969 and Section 168 of Sea Customs Act, 1898, with regard to confiscation of conveyance are in pari materia with each other. A comparison is therefore outlined below for ease of orientation;

Section 168 Sea Customs Act, 1898 thus reads;

Packages and contents included in confiscation of goods.---The confiscation of any goods under this act includes any package in which they are found, and all the other contents thereof.

Also conveyances and animals used in removal.---Every vessel, cart or other means of conveyance, and every horse or other animal used in the removal of any goods liable to confiscation under this act shall in the like manner be liable to confiscation.

Tackle etc included in confiscation of any vessel under this act includes her tackle, apparel and furniture.

That section 157 of Customs Act, 1969 reads thus;

1. Extent of confiscation.---(1) Confiscation of any goods under this Act includes any package in which they are found, and all other contents thereof

(2) Every conveyance of whatever kind used in the removal of any goods liable to confiscation under this Act shall also be liable to confiscation:

Provided that, where a conveyance liable to confiscation has been seized by an officer of customs, the 67 [appropriate officer] may, in such circumstances as may be prescribed by rules, order its release, pending the adjudication of the case involving its confiscation if the owner of the conveyance furnishes him with a sufficient guarantee from a scheduled bank for the due production of the conveyance at any time and place it is required by the 67 [appropriate officer] to be produced.

3) Confiscation of any vessel under this Act includes her tackle, apparel and furniture

1. A comparison of section 168 of Sea Customs Act, 1898 and section 157 of Customs Act, 1969 reveals that so far as confiscation of conveyances used in carriage of goods liable to confiscation are concerned both the provisions have the same effect i.e.;

Every vessel used in the removal of any goods liable to confiscation under this Act shall in the like manner be liable to confiscation.

1. Faced with a similar situation as has arisen in the instant case Hon'ble Apex Court in judgment reported as PLD 1974 SC 5 laid down the following dictum;

"If the words "liable to confiscation" give a discretion to the confiscating authority to deprive a person of his property then it follows that this discretion must be exercised upon the principles of natural justice; that is to say, the persons sought to be deprived of the property must be given notice to show cause, they must be given adequate opportunity of putting forward their point of view and the same must receive due consideration. Furthermore, according to the principles now well accepted, no person should be deprived of his property by way of penalty unless it is clear that he is in some measure responsible for assisting or furthering the commission of the offence committed.

No innocent person should be unjustly punished or deprived of his property. This was the cardinal principle which was followed by the learned Judge of Calcutta High Court in the last mentioned case. We too think this was correct principle upon which the authorities should proceed"

1. A perusal of the charge of offences raised in the impugned show-cause notice reveals that the owner of the impugned Truck has not been charged with assistance or connivance in the impugned offence. The adjudicating officer in absence of any incriminating charge or evidence has mechanically penalised the impugned vehicle as a consequence of transportation of smuggled goods. If the inter-pretation of law constructed by the learned adjudicating officer is let lose, the power of the executive to penalize an innocent person's property would create travesty of justice impinging upon fundamental rights guaranteed and enshrined under the Constitution of Islamic Republic of Pakistan.

2. A question then arises whether the customs Authorities possess unbridled powers to confiscate a subject's property? We do not hesitate to answer that question in negative. There is no room for margin appreciation here. Confiscating a property as a sanction to some breach of law without there being a relationship between the behaviour of the owner or the person responsible for the goods and breach of law is definitely illegal and void and should be discouraged.

3. In view of what has been stated, we are convinced that section 157 of the Act of 1969 cannot be applied in strict and absolute terms. The vehicle cannot be penalized unless adequate proof of involvement of owner of the vehicle is proved. It is evident from record that no prima facie direct/adequate evidence is available to prove that the owner of the vehicle was involved in the impugned offense; In these circumstances, the impugned order is modified to the extent that the Mazda Truck bearing registration No.LES-11- 1187 is ordered to be unconditionally released to its lawful owner.

4. Parties be informed through registered post A.D. or by UMS.

5. File be consigned to record after completion.

HBT/143/Tax(Trib.) Order accordingly.

2018 P T D (Trib.) 792

[Customs Appellate Tribunal]

Before Ch. Muhammad Shabbir Gujjar, Member (Judicial)

LAIQ

Versus

ADDITIONAL COLLECTOR CUSTOMS (ADJUDICATION), PESHAWAR and another

Customs Appeal No.170/PB of 2016, decided on 10th January, 2017.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 17, 156(1)(8)(89), 168 & 194-A---"Smuggling"---Detaining and seizing vehicle brought into the country through unauthorized route without payment of duty and taxes---Non duty paid car without registration number, was intercepted by Customs Staff---Driver of said car failed to furnish any import document/proof of lawful possession of car---Car was detained under S.17 of the Customs Act, 1969---Car in question was established to have been brought into the country through unauthorized route without payment of duty/taxes and thus was "smuggled" one---Said car was seized under Ss.168 of the Customs Act, 1969 for violation of Ss.2(s) & 16 of the Customs Act, 1969 punishable under S.156(1)(8)(89) of the Customs Act, 1969---Additional Collector of Customs (Adjudication) had ordered the outright confiscation of the car---Validity---Appellant contended that car had been purchased by him in open auction from the Ordnance Depot---Record had revealed that car was purchased by the appellant in open auction conducted by the Ordnance Depot being a successful bidder against the payment of Rs.6,49,000 inclusive of 18% General Sales Tax and 10% income tax; but no customs duty/taxes were charged by the Seller Depot---Release of the car against payment of customs duty and taxes would be more beneficial to the Government Exchequer---Car in question was ordered to be released with the direction to the buyer to deposit the customs duty/taxes leviable on the car---Impugned order-in-original passed by adjudicating authority, was set aside.

Wahid Ali Khan for Appellant.

Naseer Khan, Superintendent and Muhammad Azeem, D.S. Customs for Respondents.

Date of hearing: 10th January, 2017.

JUDGMENT

CH. MUHAMMAD SHAHBBIR GUJJAR, MEMBER (JUDICIAL).---This appeal filed by Laiq son of Musa Khan etc. (Appellants herein) is against the Order-in-Original No.532/2016 dated 24.05.2016 passed by the Additional Collector (Adjudications) Customs, MCC, Peshawar.

1. Brief facts of the case are that the Customs Mobile Squad Nowshera, in pursuance of an information provided by the Assistant Collector Customs Anti-Smuggling Division Peshawar to the effect that a non duty paid Toyota Estate Car bearing registration No. Nil Model 1992 is plying at Hakeem Abad Nowshera. A reading party to intercept the same consisting of the staff was constituted which kept surveillance near Hakeem Abad Nowshera. On 02.10.2015, the said car coming from Rawalpindi side was stopped. Driver of the vehicle namely Liaq son of Musa Khan R/o Manki Shareef Nowshera, on demand, failed to furnish any import document/proof of lawful possession of the vehicle. Therefore, the vehicle was detained under section 17 of the Customs Act, 1969 on 02.10.2015.

2. The vehicle was referred to FSL Peshawar for chemical examination of its chassis number vide letter C.No.22260 dated 04.11.2015 who reported vide lab No. S.V.34-1551-0-15 dated 28.10.2015 that "No other number has been deciphered on its chassis number". A request was made to PRAL (Dryport) Peshawar who vide his C.No.PDRY/Comp/2015 dated 17.11.2015 intimated that the vehicle pertaining to Chassis No. CPB14-12538 could not be traced out in one customs date base. A letter was also issued to Ordinance Depot Nowshera Cantt vide C.N. 363 dated 19.10.2015 for supply of import documents/ bill of entry on the basis of which the vehicle was auctioned. In response, the Commandant, Ordnance Depot, Nowshera Cantt. vide his letter C.No. 1809/A/S&D dated 20th October, 2015 reported that the particulars of the said vehicle vide above mentioned voucher is hereby is hereby confirmed/ verified.

3. In view of the above, it was prima facie established that Toyota Estate Car having. Chassis No. CE106-0113849, Engine No. 2C-2993420 Model 1992 (as per seat belt 1997), has been brought into the country through unauthorized route without payment of duty/ taxes and in smuggled one, therefore, the same was seized under Section 168 of the Customs Act, 1969 for violation of sections 2(s) and 16 of the Customs Act, 1969 read with Section 3(1) of the Imports and Exports (Control) Act, 1950 punishable under sections 156(1)(8) and (89) of the Customs Act ibid and Section 3(3) of the Imports and Exports (Control) Act, 1950.

4. Subsequently, after completion of the requisite formalities, the matter was placed before Additional Collector (Adjudication) Custom House, Peshawar, who vide Order-in-Original No.532 of 2016 dated 24.05.2016 ordered to outright confiscation of the said vehicle Hence, the instant appeal on the following grounds:-

5. That the order of the lower forum is against Law Facts and circumstances. Of the case.

6. That the seizure of the said vehicle is illegal and not maintainable in the eyes of law.

7. That the seizure of the vehicle does not come under section 2(s) of the Customs Act, 1969.

8. That the vehicle has been purchased in open Auction from the Ordnance Depot Nowshera Cantt on huge amount and after payments of all taxes and fulfillment of all the legal requirements the vehicle was delivered to the successful bidder.

9. That the documents of the auction from the above mentioned department has been properly verified by the seizing agency.

10. That the vehicle is the one and same which has been purchased in open Auction from the responsible department.

11. That the appellants may kindly be permitted to be allowed any other Arguments/Documents at the date/time of hearing.

12. During the course of arguments learned counsel for the appellant, while reiterating the above grounds of appeal, contended that the vehicle in question has been purchased in open Auction from the Ordinance Depot Nowshera Cantt., against the payment of handsome amount and after payments of all taxes and fulfillment of all the legal requirements the vehicle was delivered to the successful bidder. He further contended that the documents of the auction have duly been verified from the above mentioned department by the seizing agency.

13. On the other hand representative of the respondent-department opposed the contention of the learned counsel for the appellant and stated that although the vehicle in question has been auctioned by the Ordnance Depot, Nowshera but the customs authorities were not informed by the said Depot for assessment of the customs duty and taxes, therefore, without payment of the customs duty/taxes, the vehicle cannot be said to be legitimized. He prayed for dismissal of the appeal.

14. Both the parties heard. Perusal of the record would reveal that the vehicle in question was purchased by the appellant in open auction conducted by the Ordnance Depot, Nowshera being a successful bidder against the payment of Rs.6,49,000/- inclusive of 18% General Sales Tax and 10% Income Tax, however, no customs duty/taxes were charged by the said department. As such, keeping in view circumstances of the case and to avoid opening a venue of further proposed litigation also the fact that in case of release of the vehicle against payment of customs duty and taxes will be more beneficial to the Government Exchequer, therefore, for early resolution of the controversy raised before this Tribunal the vehicle in question is hereby released with the direction to the appellant to deposit the customs duty/taxes leviable on the vehicle. The impugned Order-in-Original No.532/2016 dated 24.05.2016 is set aside and the instant appeal stands disposed of accordingly.

HBT/5/Tax(Trib.) Order accordingly.

2018 P T D (Trib.) 882

[Customs Appellate Tribunal]

Before Tahir Zia, Member Judicial-II and Muhammad Nazim Saleem, Member Technical-II

COLLECTOR OF CUSTOMS, KARACHI

Versus

Messrs SHUJABAD AGRO INDUSTRIES (PVT.) LIMITED, KARACHI and another

Customs Appeal No.K-2177 of 2016, decided on 5th June, 2017.

Customs Act (IV of 1969)---

----Ss. 29, 80, 81, 88(5), 193 & 195---Re-assessment of goods---No provisional assessment or final assessment was made in terms of S.81 of the Customs Act, 1969---Goods against all declarations, were assessed to duty and taxes under S.80 of the Customs Act, 1969; once the goods were assessed under the said provision of law same could not be re-assessed---Remedy available was that of appeal under S.193 of the Act against the assessment order or invocation of provision of S.195 of the Act---Department had failed to legally prove its case---Order-in-appeal being lawful order appeal of department was dismissed being without merit.

Sajjad Rizvi, A.C. for Appellant Department.

M.H. Awan for Respondents.

2018 P T D (Trib.) 924

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Mohammad Yahya, Member (Technical-I)

Messrs ROHAIL ENTERPRISES, KARACHI

Versus

ADDITIONAL COLLECTOR OF CUSTOMS ADJUDICATION-II, KARACHI and another

Customs Appeal No. K-786 of 2014, decided on 30th January, 2015.

Customs Act (IV of 1969)---

----Ss. 25, 32, 79, 80 & 194-A---Import of 'Calcium Premium Batteries'--- Misdeclaration--- Determination of customs value---Appellants/importers, had imported goods by declaring item 'Calcium Premium Batteries'---Scrutiny of Goods Declaration, had revealed that importer had mis-declared the PCT heading '8507.2090', C.D. 20%, whereas the examination staff, had confirmed that subject goods were 'automotive batteries', which were correctly classifiable under PCT heading 8507.1020 (C.D. 35% add C.D. 15%)---Importer was alleged to have mis-declared the PCT heading of goods to avoid correct levy of customs duty, additional customs duty and taxes---Goods, were examined twice by the customs examination staff; in both the examination reports, customs staff had confirmed the declared description as "Calcium Premium Batteries"---Customs Authorities, had not given any basis to ignore the description declared by the importers and twice confirmed by the customs examination staff---Customs Authorities had not given the basis/document that the impugned batteries contained lead, calcium electrodes, which fell under Sub-heading 8507.1020---Order-in-original did not show that the batteries were meant for vehicles, mentioned against Sub-heading 8507.1020, and not meant for the vehicles mentioned against Sub-heading 8507.1010---Held, that goods in question were classifiable under heading 8507.8000 at 10% duty---Appeal was allowed and the order-in-original was set aside, in circumstances.

Ghulam Nabi for Appellant.

Abdul Ghani, E.O. Present for Respondents.

2018 P T D (Trib.) 954

[Customs Appellate Tribunal]

Before Tahir Zia, Judicial Member-II and Muhammad Nazim Saleem, Member Technical-II

Messrs CLOVER PAKISTAN LIMITED, KARACHI

Versus

COLLECTOR OF CUSTOMS, KARACHI

Customs Appeal No. K-1222 of 2016 (Old No. K-525 of 2009), decided on 17th June, 2016.

Customs Act (IV of 1969)---

----Ss. 19, 19-A, 20, 79 & 80---S.R.O. No. 567(I)/2006, dated 5.6.2006, (as amended through S.R.O. No. 787(I)/2008, dated 26.7.2008)---Exemption of customs duty---Claim of refund---Appellant imported extra fine crystal sugar, and filed goods declaration under self-assessment and after release of consignment on payment of customs duty and taxes, filed claim for refund of customs duty amounting to Rs.17.01 million---Scrutiny audit revealed that at the time of import, the importer had not claimed exemption of Customs duty in terms of item serial No.2A of S.R.O. No. 567(I)/2006, dated 5.6.2006 (as amended through S.R.O. No. 787(I)/2008, dated 26-7-2008) and the goods were released on payment of customs duty and taxes; that the refund claims were not admissible because under S.R.O. No. 787(I)/2008, dated 26.7.2008 the exemption could be claimed only at the time of import; that the importer had failed to prove that the incidence of duty and taxes in terms of S.19-A of the Customs Act, 1969 had not been passed on the consumers; that the importer did not provide the details of amount/audit accounts at the time of filing of refund claims---Validity---Refund was claimed by the importer on the ground that the import of sugar was exempted from customs duty vide S.R.O. No. 567(I)/2006, dated 5.6.2006 (as amended vide S.R.O. 787(I)/2008, dated 26-7-2008)---Importer had failed to avail exemption on his consignments due to the reason that he was not aware of the same---Adjudicating authority had acknowledged that importer was entitled for such exemption had he claimed so at the time of filing of goods declarations---Said authority had also appreciated/ acknowledged that importer was not aware of the amending notification---Said authority, however, had rejected the refund claim of the importer on the ground that he had failed to address the core issue of passing of incidence of duty to the consumer---Authority was to dilate upon said core issue seriously and cite relevant documents/ information which should have unambiguously reflected and convinced that the incidence of duty had been passed on to the consumer and not absorbed by the company---Findings of the adjudicating authority, were arbitrary, whimsical and baseless---Importer had rightly contended that in view of the fact that the landed cost of sugar had substantially increased, which called for increase in his finished product---Appellate Tribunal observed that it would be unfair and irrelevant to conclude that incidence of customs duty had been passed on the consumer as the price of product was not decreased---Importer did not increase price of its end-product, despite substantial increase in landed cost of sugar due to serge of price in international market and was still to get benefit of exemption of customs duty in the form of refund---Importer was entitled to refund of Rs.17.01 million as the incidence of customs duty had not been passed on to the consumer and the case of the importer did not fall in the category of undue enrichment---Importer had lodged lawful claim for the refund---Impugned orders passed by the adjudicating authority and appellate authority below, were set aside---Department was directed to sanction the refund to the importer without any delay.

Tata Engineering and Locomotive Company Ltd. v. Union of India 1994 (69) E.L.T. 460 (Bom.); Pfizer Laboratories v. Federation of Pakistan PLD 1998 SC 64; Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072; Messrs Fecto Belarus Tractor Ltd. v. Government of Pakistan PLD 2005 SC 605 and Messrs Gatron (Industries) Limited v. Government of Pakistan and others 1999 SCMR 1072 ref.

Abdul Qudus Moughal for Appellant.

Syed Masoom Raza, Appraising Officer for Respondent.

2018 P T D (Trib.) 982

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial)

Messrs STATE CORPORATION CUSTOMS CLEARING AGENTS, LAHORE

Versus

SUPERINTENDENT OF CUSTOMS DFGS, LAHORE and another

C. As. Nos.135/LB and 136/LB of 2014, decided on 25th April, 2015.

Customs Act (IV of 1969)---

----Ss. 18, 25, 32(1)(2) & 156(1)(14)(77)---S.R.O. No. 499(I)/2009, dated 13-6-2009---Misdeclaration---Imposition of penalty on clearing agent---Clearing Agent and the importer were alleged in the show-cause notice that they had knowingly and deliberately contravened the provisions of Ss.18 & 32(1)(2) of the Customs Act, 1969 punishable under cls.14 & 77 of S.156(1) of the Act---Adjudicating Officer ordered for recovery of alleged amount of duties and taxes from the importer and imposed penalty on importer and Clearing Agent---Validity---In order to bring actions against Clearing Agent within folds of penalty consequences, presence of requirement of S.32 of the Customs Act, 1969, had to be considered before proceeding any further---When the legislature had introduced the knowledge or intention actuating the commission of the offence as essential element, it was imperative that before the penal consequence of criminal provisions could be set into motion it was to be confronted, if the act in question (actus reus) was laced with presence of criminal intent (mens rea)---Penal consequences under S.32 of the Customs Act, 1969, could not be set into motion against the Clearing Agent in presence of clear findings of Collector (Appeals), wherein he had exonerated the Clearing Agent of committing any actus reus culminating in mens rea---Penalty imposed on the Clearing Agent, stood remitted.

PLD 1967 SC 1 ref.

M. Akram Nizami for Appellants.

2018 P T D (Trib.) 1013

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs NOOR BROTHERS, LAHORE

Versus

ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION-I), KARACHI and another

Customs Appeal No.K-651 of 2014, decided on 25th June, 2016

Customs Act (IV of 1969)---

----Ss. 32, 79, 80, 156(1)(14) & 194-A---S.R.O. No. 659(I)/2007, dated 30-6-2007---S.R.O. No. 499(I)/2009, dated 13-6-2009---Mis-declaration---Confiscation of goods---Importer declared description of goods and sought clearance under S.79(1) of the Customs Act, 1969 by filing Goods Declaration---Scrutiny in terms of S.80 of the Customs Act, 1979 was conducted and container was examined and examination report as well as the documents scanned by importer had revealed that there was a gross mis-declaration in net weight, PCT Heading of lower duty slabs and inadmissible facility of F.T.A.---Said act of misdeclaration was alleged to have proved that the importer had deliberately concealed the actual quantity and attempt to hoodwink the national exchequer by declaring incorrect, false and forged Goods Declaration---After issuing show-cause notice, matter was adjudicated by Additional Collector of Customs (Adjudicating Authority) and goods imported by the importer were confiscated---Validity---Importer, before clearance of goods had voluntarily requested to confirm description and quantity of imported goods through examination---After importer's honest disclosure, he could not be held guilty of misdeclaration---Importer had acted bonafidely and in accordance with law as he was not aware to the actual PCT heading and the actual quantity/weight of the imported goods imported by him, he applied to the authorities in a bonafidely manner---Show-cause notice issued to the importer, was defective it pertained to the total value of the goods and not the offending value---In absence of mens rea on the part of the importer, no charge of mis-declaration or untrue statement in the terms of S.32(1) and collusion in terms of S.32(2) of the Customs Act, 1969, could be made---Impugned order was declared to be illegal, void ab initio and was set aside---Redemption fine @ 20% imposed in terms of S.R.O. No. 499(I)/2009, dated 13-6-2009 and penalty imposed on the importer were remitted---Collector of Customs, was directed to immediately discharge/release the security furnished by the importer---Appeal was accepted accordingly.

M/s. Novo Nordisk Pharma (Pvt.) v. Additional Collector--If, PACCS, Karachi 2013 PTD 2186; Weave and Knit (Pvt.) Limited v. Additional Collector 2004 PTD 2981; Mubashir Ahmed Magoon, Karachi v. Collector of Customs (Appeals-I) and other 2014 PTD (Trib.) 830; Metro Tyres Limited v. Collector 1994 (74) ELT 964; Ibrahim Textile Mills Limited v. F.O.P. PLD 1989 Lah. 47 and Cargill Pakistan Seeds (Pvt.) Limited v. Tribunal 2004 PTD 26 ref.

Imran Iqbal Khan for Appellant.

Asfandyar A.C. and Ghulam Mustafa, A.O. present for the Respondents.

2018 P T D (Trib.) 1032

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member Judicial-I and Muhammad Nazim Saleem, Member Technical-II

Messrs KOKOZ INTERNATIONAL CORP. through Office bearing No.707 and others

Versus

The DIRECTOR GENERAL, KARACHI and 2 others

Customs Appeals Nos. K-2062, K-2076, K-2102, K-2103, K-2130, K-2131, K-2132, K-2064, K-2065, K-2066 and K-2067 of 2016, decided on 29th November, 2016.

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 25-D & 194-A---Determination of customs value of goods---Revision of the value---Appeal against order-in-revision---Director General of Customs Valuation, vide order-in-revision determined customs value of goods---Appellant contended that Director General had passed the impugned order without any lawful authority and had acted in excess of jurisdiction and powers conferred upon him by unlawfully fixing value---Director General, had the power or jurisdiction only in case of any conflict in customs value determined under subsections (1) & (3) of S.25-A of the Customs Act, 1969 and could determine the "applicable" customs value---In the present case, revision was filed before the Director General under S.25-D of the Customs Act, 1969; no application or reference in particular was pending before the Director General at the time of passing the order-in-revision---Said order was devoid of principle of statutory obligation---Valuation Ruling should contain sufficient details to show that S.25-D of the Customs At, 1969, had been properly applied and also make it necessary that the Valuating Ruling should be a speaking order---Purpose of administration of justice, was to hold and not to thwart appellants' rights---Department was directed, not to issue any fresh valuation ruling during---Order-in-revision having not adhered to the statutory requirements and being derogatory to the specific provisions of S.25-D of the Customs Act, 1969 was set aside.

Khyber Tractors (Pvt.) Ltd. v. Government of Pakistan PLD 2005 SC 482 ref.

Rana Zahid Hussain and Khalid Rajpar for Appellants.

Mehmood Rehman Khattak - D.C., Safdar Abbas - P.A., Hafiz Muhammad Jokhio - A.O., Ehtsham Paracha - A.O., present for Respondents.

2018 P T D (Trib.) 1056

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial) and Imran Tariq, Member (Technical)

MUHAMMAD YOUNAS

Versus

SUPERINTENDENT, CUSTOMS INTELLIGENT AND INVESTIGATION, FAISALABAD and others

Customs Appeal No.10/LB of 2016, decided on 12th April, 2016.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 18, 156(1)(89), 157, 168 & 178---S.R.O. No.499(I)/ 2009, dated 13-7-2009---Smuggling---Seizure and confiscation of truck loaded with container of smuggled goods---Truck was intercepted and on checking, foreign origin cloth was found loaded in the container---Driver of the truck could not produce documentary evidence showing legal import or lawful possession/purchase of the cloth---Recovered cloth was seized under S.168 of the Customs Act, 1969---Truck along with container allegedly used for transportation of smuggled cloth, was also seized under S.157 of the Customs Act, 1969---Adjudicating proceedings culminated into passing of impugned order-in-original, whereby cloth along with truck was seized and confiscated outrightly---Validity---Under the criminal law, confiscation was generally used as a means of depriving certain criminals of the fruits of their crimes---Under Customs Act, 1969 confiscation of transport vehicles seized, while transporting smuggled goods fell within the ambit of criminal law---Purpose of S.157 of the Customs Act, 1969 was to penalize and discourage clandestine involvement of owners of conveyance used in assistance of commission of an offence under Customs Act, 1969---Object of confiscation, was mainly to penalize perpetrators of the offence of smuggling impliedly, it was not the purpose of legislature to penalize the owner of vehicle unless any connivance was proved---Case of the department was not that truck in question was apprehended while trying to smuggle goods into Pakistan or caught in the act while pilfering goods from a customs area; or that same was detained while removing goods from a customs bonded wherehouse; or a private bond; or that the impugned merchandise was found surreptitiously hidden inside the truck---Fact was that cargo carrier was apprehended while transporting freely tradable cloth under normal course of intercity haulage---Owner of truck in question had not been charged with assistance or connivance in the impugned offence---Adjudicating Officer, in absence of any incriminating charge or evidence, had mechanically confiscated impugned vehicle as a consequence of transportation of smuggled goods---Customs Authorities, did not posses unbridled powers to confiscate a property---Section 157 of the Customs Act, 1969 could not be applied in strict and absolute terms as a consequence of smuggled goods---Owner of the truck could not be penalized unless adequate proof of his involvement was proved---No prima facie direct/adequate evidence was available to prove that the owner of the truck was involved in the heinous offence of smuggling---Impugned order was modified to the extent that truck in question was ordered to be unconditionally released to its lawful owner.

Malik Shakeel for Appellant.

2018 P T D (Trib.) 1170

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs EASTERN CONSTRUCTION COMPANY

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, MCC OF APPRAISEMENT-WEST, CUSTOM HOUSE, KARACHI

Customs Appeals Nos.S-436 of 2016, decided on 18th April, 2017.

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

----Ss. 2(a), 4, 16, 32, 79, 80 & 179---Notification SRO No.886(I)/2012, dated 18-7-2012---Notification SRO No.371(I)/2002, dated 15-6-2002---Mis-declaration of description and classification of goods---Issuance of show-cause notice and confiscation of goods---Appellant company imported consignment said to be containing "used Truck Mounted Crane" and determined its liability of payment of customs duty and other taxes and filed goods declaration---Examination Staff, on physical examination of the goods, reported that goods in question were "old and used trucks"---Additional Collector of Customs (Appraisement) on allegation of misdeclaration of the description of goods and classification, thereof issued show-cause notice to the appellant and ordered confiscation of goods and imposed penalty---Validity---Government had withdrawn the powers vested to Customs Officers of Executive Collectorate under S.179 of the Customs Act, 1969 through Notification S.R.O. No.886(I)/2012, dated 18-7-2012, in the cases where, charge of misdeclaration under S.32 of the Customs Act, 1969 had been invoked---Appropriate authority of adjudication of such cases rested with "Collectorate of Customs, Adjudication"---By laying hands on the case of appellant, Executive Collectorate had encroached the jurisdiction of officers of Collectorate of Customs, Adjudication, which was not permitted under law rendering the show-cause notice and the superstructure built there upon without jurisdiction---Cases of such nature were to be dealt by the competent authority defined in S.2(a) of the Customs Act, 1969, at the time of passing assessment order, which was Principal Appraiser; whereas in the present case show-cause notice had been issued by the Executive Directorate, who was a non-entity---Entire case against the appellant, in circumstances, revolved around assumption/presumption, which was nullity---Nothing was to be presumed or assumed or added or subtracted in a taxing statute---Order of the Exceptive Directorate being based upon proceedings which were infested with patent illegality, were declared to be null and void and set aside.

[Case-law referred].

(b) Interpretation of statutes---

----Fiscal statute---Nothing had to be presumed or assumed or added or subtracted in a taxing statute; while interpreting such statute, department must look to the words of the statute and interpret the same in the light of what was clearly expressed---Nothing could be implied which was not expressed---Department could not import provision in the statute so as to support assumed deficiency---No room exited for intendment; no equity about taxation no presumption as to tax and nothing was to read in---One could only look fairly at the language used, nothing else to be done.

Asim Munir Bajwa for Appellant.

Azfar Noor, Appraiser, for Respondent.

2018 P T D (Trib.) 1225

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs SIKANDAR AND CO., KARACHI and 2 others

Versus

COLLECTOR OF CUSTOMS, COLLECTORATE OF CUSTOMS and another

Customs Appeal No.K-131 of 2016, decided on 3rd July, 2017.

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

----Ss. 3-DD, 26-A, 32, 79, 80 & 83---S.R.O. No.500(I)/2009, dated 13-6-2009---Mis-declaration---Fourteen consignments were imported documents corresponding to said imports were delivered to Clearing Agent for transmitting goods declaration with the Collector of Customs (Appraisement)---Clearing Agent on the strength of description available on the import documents, transmitted goods declarations accordingly---Out of said 14 goods declaration, 6 were released by the System itself upon that the declarations were correct and true---Rest of the declarations were either selected for examination by the System or appeared on the desktop of the Monitor of the Appraiser---Goods in question, after examination were found in accordance with the declarations and the reports so prepared were posted in the reservoir of the goods declaration for perusal of the Assessing Officer, who passed the assessment order---Clearing Agent, thereafter obtained delivery orders from the shipping company and after paying the dues of the terminals obtained the deliveries of the goods and transmitted those to the warehouse of the importer---After post clearance purportedly an information was received by the office of Collector of Customs, MCC of Appraisement that certain unscrupulous importers were obtaining clearance of goods classifiable under PCT Heading No.8407.9090 on which the leviable amount of duty and taxes, were 20% customs duty---Collectorate MCC of Appraisement on the basis of said information opined that, the present importer, in connivance and collusion of his Clearing Agent, mis-declared the description of the goods in question and caused loss to exchequer in the shape of short payment of duty and taxes, which act fell within the ambit of violation of Ss.32(1)(2), 32-A, 79 & 80 of the Customs Act, 1969 punishable under S.156(1)(14)(14-A) of said Act and framed contravention report; Collectorate issued show-cause notice to the importer---Collector of Customs, thereafter passed order-in-original through which he held the charges levelled in the show-cause notice as established against the importer and ordered the importer to deposit amount of duty and taxes along with penalty---Validity---Upon passing of assessment order under S.80 of the Customs Act, 1969 by competent Authority, same could not be disturbed by any Authority for preparing contraventions report overlapping assessment orders for initiation of adjudication proceedings; on the basis of which Collector of Customs issued show-cause notice and passed order-in-original---Only course available under law for Collectorate of MCC of Appraisement was to challenge the assessment orders before the Collector of Customs (Appeals) under S.193 of the Customs Act, 1969 in exercise of the powers delegated upon him---Instead of adhering to the prescribed procedure available in the Act, authorities reopened the assessment/clearance order under S.195 of the Customs Act, 1969, under which no powers were vested either of the authorities---When the right of appeal had been accorded by the legislature under the provisions of S.193 of the Customs Act, 1969, the provisions of S.195 thereof was un-operational and could not be exercised---Collecotrate of Appraisement implicated and the collector customs charged the importers for mis-declaration under the provisions of S.32 of the Customs Act, 1969, merely on the basis of assumption/ presumption, that the importers had transmitted goods declaration on the basis of erroneous description and PCT heading in order to hoodwink the customs and to evade the amount of duty and taxes---Importer had no part to play while conduction of examination---Case against the importer, was based on presumptions, assumptions, conjectures and rowing and fishing inquiry which failed the test of judicial scrutiny---Appellate Tribunal, allowing appeal, vacated the show-cause notice and set aside the order-in-original.

[Case-law referred].

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

----Ss. 207, 208 & 209---Liability of Clearing Agent during the course of clearance of consignment---Scope---Such liability was to be evaluated under the provisions of Ss.207, 208, 209 of the Customs Act, 1969, which indicated that an Agent would represent his principal and until and unless any direct evidence was attributed against him, or when department was not able to prove any criminal intent on his part, he could not be penalized under the general provisions of the Customs Act, 1969, unless he would violate the governing conditions of his license.

Sardar Muhammad Ishaque for Appellants.

Saeed Soomro, PA/D/R for Respondents.

2018 P T D (Trib.) 1260

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Judicial Member and Khawaja Umar Mehdi, Technical Member

AMIN INTERNATIONAL TRADING COMPANY, PESHAWAR and others

Versus

SUPERINTENDENT, INTELLIGENCE AND INVESTIGATION-FBR, LAHORE and others

C.A. No.61/LB of 2014, heard on 20th October, 2015.

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

----Ss. 2(b), (KK), (O), 3, 17, 32, 80, 83, 156(1)(14)(90), 157, 180, 181, 194-A & 195---S.R.O. No.499(I)/2009, dated 19-6-2009---S.R.O. No.581(I)/2013, dated 18-6-2013---Import of goods---Assessment of duty payable---Misdeclaration---Seizure and confiscation of imported goods---Redemption of goods on payment of redemption fee---Staff of Collectorate of Customs physically examined the imported goods, checked the declaration and assessed the duty payable in respect of said goods---Assessment of duty was countersigned by the Principal Appraiser of Customs, Dry Port at "P" and entire customs duty was deposited by the importer with the State Exchequer---Importer, thereafter booked the said goods by road to another city "L" and container stuffed with said imported goods was detained by the department of Intelligence and Investigation, under Ss.2(KK) & 17 of Customs Act, 1969---Importer was refused delivery of goods even after production of requisite Goods Declaration and goods were seized on the premise that said goods had been under assessed by the appropriate Officers of Collectorate of Customs of Dry Port at "P" ---Additional Collector of Customs (Adjudication), at "L" issued show-cause notice under S.180 of the Customs Act, 1969, charging that the reassessment of impugned goods by the Staff of Collectorate of Customs, at "L", had revealed that the importer had committed an offence of mis-declaration and that goods were liable to confiscation under S.156(1)(14)(90) of the Customs Act, 1969---Said Adjudicating Authority, ordered seizure of the goods---Option under S.181 of the Customs Act, 1969, read with S.R.O. No.499(I)/2009, dated 19-6-2009 was allowed and confiscated goods were redeemed to the importer on payment of redemption fine, in addition to payment of duty/taxes leviable thereon---Truck/Trailer was also confiscated---Validity---Provisions of Ss.2(b)(i) & 3 of the Customs Act, 1969, had revealed that only such officers were assigned explicit functions with relation to an area in terms of S.3 of the Customs Act, 1969 would be "appropriate officer" or "officers of customs" for that area under the operative and functional sections of the Customs Act, 1969---Specific entrustment of jurisdiction by the Federal Board of Revenue, was the governing test to determine; whether an "officer of customs" or the "appropriate officer" had been authorized to exercise powers within a certain area---Under S.R.O. No. 581(I)/2013, dated 18-6-2013 the jurisdiction of officers of Collectorate of Customs, at "P" was well defined and distinct from that of Officers of Model Collectorate Customs (Appraisement), at "L"---Only such Customs Officers, who under S.3 of the Customs Act, 1969 had been assigned through notification by the FBR specific functions of assessment of duty in the jurisdictional area, where the import concerned had been effective, were the officers who were competent to assess the same---Officers of Model Collectorate of Customs, at "P", who wield the powers of assessment in the present case, which included re-assessment under S.80 of the Customs Act, 1969 or review under S.195 of the Customs Act, 1969---Officers working under the Model Customs Collectorate, at "P", within whose jurisdiction, the Goods Declaration had been filed and the consignment had been cleared for home consumption under S.83 of the Customs Act, 1969, would have the jurisdiction to re-assess the goods---Resultant adjudication proceedings were to be initiated by the relevant Collectorate of Customs Adjudication at Federal Capital area---Re-assessment of impugned goods by the Officers of Collectorate of Customs, at "L", was without jurisdiction and ultra vires to the powers conferred upon them under the Customs Act, 1969---Impugned show-cause notice as well as the impugned order-in-original, stood annulled, in circumstances. [

Messrs Yousaf Re-rolling Mills v. Collector of Customs (Appraisement), Karachi and others 1986 CLC 77; Messrs Zeb Traders through Proprietor v. Federation of Pakistan through Secretary, Ministry of Finance, Government of Pakistan, Islamabad and 3 others 2004 PTD 369 and Messrs Safe Way through Proprietor v. Deputy Collector, Customs (Appraisement Group-1), Lahore and others 2009 PTD 201 ref.

(b) Interpretation of statutes---

----Act was required to be read as a whole and while applying its various provisions, the doctrine of harmonious construction was required to be borne in mind.

Malik Muhammad Arshad for Appellant.

2018 P T D (Trib.) 1273

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs FUSION GLOBAL SOURCING (PVT.) LTD., FAISALABAD

Versus

ASSISTANT DIRECTOR, POST CLEARANCE and 3 others

Customs Appeal No.K-26 of 2017, decided on 18th July, 2017.

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

----Ss. 26-A, 32, 79, 80 & 83--- S.R.O. No. 500(I)/2009, dated 13-6-2009---Allegation of mis-declaration---Declaration was transmitted under PCT Heading 3105.9000---Importer deposited upfront and taxes as pre-requisite---Prior to completion of assessment, goods declaration was referred for examination, and declaration was confirmed on the strength of posted examination report---Competent authority passed assessment order and changed the PCT Heading as 2503.0000 and transmitted view message for payment of additional amount of duty and taxes; which the importer paid and Authority passed clearance order and the importer obtained the delivery of the goods---Subsequently, Assistant Director of Directorate of Post Clearance Audit purportedly conducted audit of the goods declaration of the importer in terms of S.26-A of the Customs Act, 1969, wherein it was observed that the goods imported by the importer fell under PCT Heading 3824.9090 attracting 10% customs duty---Assistant Director framed contravention report and Deputy Collector of Customs, Adjudication, issued show-cause notice, with the allegation that the importer obtained the clearance of the goods under erroneous PCT Heading as against actual applicable PCT Heading 3824.9090 on which customs duty was leviable at 10%---Said act of the importer was alleged to fall within the ambit of S.32 of Customs Act, 1969 punishable under S.156(1)(14) of the said Act---Validity---Under provisions of S.26-A of the Customs Act, 1969, appropriate officer of customs conducting any audit, would proceed in the manner as the Federal Board of Revenue could by rules prescribe---No rules were framed/issued by the Board despite insertion in S.26-A of the Customs Act, 1969 through Finance Act, 2006---Assistant Director, Post Clearance Audit, was not at all appointed/designated as officer of Inland Revenue, hence he was not empowered to exercise the powers of an officer of Inland Revenue for conducting the audit---Entire act of audit, being without power/jurisdiction was coram non judice---Exercise of jurisdiction by Deputy Collector of Customs, Adjudication, was also without lawful authority and jurisdiction---Issuance of show-cause notice and passing of order-in-original, were held to be ab initio void and as such coram non judice---Assessment order under S.80 of the Customs Act, 1969 and passing of clearance order under S.83 of said Act, could not be disturbed by any Authority for the purpose of preparing contravention report and adjudicating proceedings---Only course left for Assistant Director of Post Clearance Audit was to challenge the said order before the Collector of Customs (Appeals) under S.193 of the Customs Act, 1969, in exercise of the powers delegated upon him through S.R.O. No.500(I)/2009, dated 13-6-2009---In the presence of an appealable order, fresh order could not be passed, even through issuance of show-cause notice---Transaction, which stood as passed and closed transaction and attained finality, could not be disturbed---Assistant Director implicated and Deputy Director of Customs charged importer for mis-declaration under provisions of S.32 of the Customs Act, 1969, merely on the basis of assumption/presumption---Show-cause notice providing the basis for impugned orders by the forum below were vacated/set aside by the Tribunal, in circumstances.

[Case-law referred].

(b) Administration of justice---

----Thing had to be done as it had been prescribed to be done; in case of doing the same in any other manner that would render it illegal and as such void ab initio.

[Case-law referred].

Nadeem Ahmed Mirza, (Consultants) present for Appellant.

Azhar Abbas, D/R for Respondent No.1.

Ashfaq Ahmed D/R for Respondents Nos. 2 to 4.

2018 P T D (Trib.) 1300

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial) and Khawaja Umar Mehdi, Member (Technical)

Messrs SPACE WORLD TRADERS, LAHORE

Versus

COLLECTOR OF CUSTOMS (APPEALS), CUSTOMS HOUSE NABHA ROAD, LAHORE and 3 others

C.A. No.162/LB of 2015, decided on 23rd March, 2016.

(a) Interpretation of statutes---

----Statute was best interpreted when, it was known as to why it was enacted---Statute must be read, first as a whole and then section-by-section, clause-by-clause, phrase-by-phrase and word-by-word---If context of a statute was examined, keeping in mind the legislative intent, its scheme, the sections, clauses, phrases and words take colour and appear in clarity---No part of a statute, and no word of a statute could be rendered redundant and statute had to be construed so that every word had a place and everything was in its place.

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

----Ss. 25 & 25-A---Power to determine customs value of goods---Concept of 'transaction value'---Adaptability of---'Transaction value', envisaged under S.25, Customs Act, 1969 was adapted as a primary method for valuation during 1999 as part of Pakistan's commitment with the International Polity of Nations under the General Agreements on Tariffs and Trade (GATT)---Old system devised under S.25 of the Customs Act, 1969, stipulated mechanism prone to maintaining a uniform, fixed notional value for calculation of duties and taxes all over Pakistan---Subsequent to adaption of "transaction value", method under Article 'vii' of "GATT" the mechanism of valuation devised under S.25 of the Customs Act, 1969 was revamped/redrafted; which pivoted on the notion of determination of value of imported goods for customs purposes; based on the actual value of the imported merchandise; put simply the price actually paid or payable for the imported goods---System intended to provide a fair, uniform and neutral basis for the valuation of imported goods, as a part thereof, the Customs Department was bound to accept the value stated by the importer through the invoice, unless the department had additional information to substantiate under invoicing---Most of the importers while taking advantage of that legal situation, either undervalued their imports with false invoices or effectuated fraudulent re-invoicing in third countries, or double invoicing was done with the connivance of the foreign suppliers, or at some instances on basis of false invoices with assistance of customs staff---Said rampant fraudulent activity not only caused huge revenue losses to the State Exchequer, but also made related local industry unviable---Such an anomalous situation prompted "raison d'etre" for creation of a mechanism of oversight over the evidential data streams created under S.25 of the Customs Act, 1969 and consequently during the year 2007 S.25-A was included in the Customs Act, 1969.

PTCL 2014 CL 537 and 2012 PTD 1 distinguished.

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

----Ss. 25 & 25-A(4)---Customs Valuation Rules, 2001, R.107(a)---Power to determine the customs value---Section 25-A of the Customs Act, 1969 commenced with a non obstante clause embracing over S.25 of the Customs Act, 1969---When provision of any enactment was made 'notwithstanding' to some other provision, it would convey the idea that such clause was being used as a legislative device to give overriding effect to certain provisions over some contrary provisions; that could be found, either in the same enactment or some other enhancement, to avoid the operation and effect of all contrary provisions to which such non obstante provision had been given overriding effect---Harmonious reading of S.25-A of the Customs Act, 1969 and subsection (4) thereof, S.25-A and Customs Valuation Rules, 2001, enacted thereunder, revealed that the stipulation contained under S.25-A(4) of the Customs Act, 1969, was contrary to what had been envisaged under the Customs Valuation Rules, 2001---Subsection (4) of S.25 of the Customs Act, 1969, would prevail and operation period of 90 days, contained in R.107(a) of Customs Valuation Rules, 2001, would stand inapplicable to a value determined under S.25-A of the Customs Act, 1969---Any other reading of said law would render subsection (4) of S.25-A, redundant---Customs value of imported goods, determined under S.25-A of the Customs Act, 1969, would remain valid, unless revised or rescinded by the competent authority.

Maqbool Ahmad for Appellant.

2018 P T D (Trib.) 1318

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)

Messrs RIGHTWAY TRADING COMPANY, KARACHI

Versus

The DEPUTY COLLECTOR OF CUSTOMS and 3 others

Customs Appeal No.K-1343 of 2015, decided on 23rd July, 2016.

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

----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Renewable energy equipment---Question before the Tribunal was whether exemption of customs duty, sales tax and income tax was admissible on import of renewable energy equipment for installation of solar system in conformity with provisions of serial No.24 of the Second Schedule to the Customs Act, 1969"---Held, Collectorate had no reason to deny the exemption with no conditions attached for allowing exemption except certificate from Chief Executive Officer, Alternate Energy Development Board regarding the commensuration of the quantities imported---Question was answered in the affirmative.

[Case-law referred].

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

----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Commensuration letter against importer by Alternate Energy Development Board---Scope---Question before the Tribunal was "whether the commensuration letter against the importers' application confirming that goods imported against the bill of lading were exempted from payment of customs duty and sales tax in its entirety was factually issued by the office of the Chief Executive Officer Alternate Energy Development Board"---Held, scrutiny of the letter issued by the office of Chief Executive Officer, along with the connected record of the case indicated that said letter could not have been prepared and scanned by the importer/Clearing Agent since they did not have access to the office of the Chief Executive Officer---Said fact could not be proved either by Chief Executive Officer as well as the two inquiry reports---Various documentary evidence on record indicated that said letter was factually issued from the office of Chief Executive Officer and the importer/Clearing Agent had no role, either in its preparation, posting or scanning---Question was answered in the affirmative.

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

----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Issuance of Second Commensuration letter against importer by Alternate Energy Development Board---Scope---Question before the Tribunal was "whether second commensuration letter against the importer's application issued by the same Assistant Director of Chief Executive Officer's office with lesser quantities of renewable energy equipment already earlier notified by the first letter, could be termed a legally admissible document"---Held, second commensuration letter against Importer's application was issued by the said office---Letter was also issued by the Office of Chief Executive Officer without withdrawing the first letter, which was already issued by the Office of Chief Executive Officer and was in field for all legal practical purposes---Said letter was branded fake and forged and the importer was blacklisted for all their incoming and future consignments to cover the irregularities committed by personnel working at the office of Chief Executive Officer---Vested rights so created and acquired by the importer could not be disturbed or taken away by issuance of letter withdrawing the first letter---Question was answered in the negative.

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

----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Appointment of Adjudication officer as an officer of Inland Revenue---Requirement---Scope---Question before the Tribunal was "whether, Adjudicating Officer had been appointed as an Officer of Inland Revenue under S.30 of the Sales Tax Act, 1990 and S.207 of the Income Tax Ordinance, 2001, and could exercise powers under the provisions of Ss.11 & 162(1) of the Income Tax Ordinance, 2001"---Held, adjudicating authority had invoked Ss.3, 6, 11(c) & 37 of Sales Tax Act, 1990 and S.148 of the Income Tax Ordinance, 2001---Counsel for the importer, had contended that Adjudicating Officer had not been appointed as Officer of Inland Revenue under S.30 of the Sales Tax Act, 1990 and S.207 of the Income Tax Ordinance, 2001, therefore had no powers to proceed in the matter of sales tax and income tax under the sections invoked in the show-cause notice for short paid taxes---Clearance Collectorate, did have the authority to collect sales tax and income tax at import stage in the capacity of collecting agent and could recover escaped/short payment of customs duty and regulatory duty levied on the imported goods under S.18 of the Customs Act, 1969, however, under S.202 of the Customs Act, 1969 after due process of law, collectorate had no power to adjudicate the case of short recovery of sales tax and income tax under S.11 of the Sales Tax Act, 1990 & S.148 of Income Tax Ordinance, 2001---None of the said authorities had the powers to recover the arrears of said taxes on their own, unless they were in receipt of notice from the Officer of Inland Revenue and Commissioner of Income Tax under S. 48 of Sales Tax Act, 1990, S.148, Income Tax Ordinance, 2001--Resultant adjudication proceedings under S.11 of the Sales Tax Act, 1990 and S.148 of the Income Tax Ordinance, 2001, were not legal, justifiable and tenable in the eyes of law---Exercise of jurisdiction by adjudicating authorities, were without lawful authority and jurisdiction---Issuance of show-cause notice and passing of order-in-original was ab initio void and coram non judice---Question was answered in the negative.

[Case-law referred].

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

----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Issuance of fabricated/forged commensuration letter by officer of Alternate Energy Development Board---Inquiry conducted by officers of the Board---Scope---Question before the Tribunal was "whether both the inquiries conducted by Officers regarding issuance of fabricated/forged commensuration letter, were fair and impartial and within the parameters generally observed by Inquiry Officers---Held, two inquiry reports on record had shown that inspite of irregularities committed in the office of Chief Executive Officer by various personnel, no responsibility had been fixed on any particular officer or official regarding issuance of first commensuration letter---All the officers and involved lower staff, inspite their participation in preparation of the said letter, had not been held responsible and recommended for any penal action---Responsibility of forgery was cast upon the importer/Clearing Agent solely because it appeared to be the sole beneficiaries---Inquiry report recommended blacklisting of the importer---Said recommendation itself was indicative of the fact that something went wrong in the office of Chief Executive Officer in preparation of the earlier commensuration letter, its scanning and dispatch to the representative of importer---Inquiries did not seem to be impartial and conclusive and put out the complete responsibility on the shoulders of the Clearing Agent and the importer, who had been unnecessarily victimized---Question was answered in the negative.

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

----Ss. 18, 19, 20, 25, 32 & 80----Exemption from payment of customs duty and taxes---Issuance of commensuration letter to importer and Clear Agent---Effect---Question before the Tribunal was "whether the issuance of commensuration letter made the importer and his Clearing Agent liable for any penal action within the ambit of mischief of S.32 of the Customs Act, 1969, and tantamount to misdeclaration---Held, commensuration letter, was issued by the office of Chief Executive Officer and the importer and his Clearing Agent had no part whatsoever in its preparation and scanning from the office of Chief Executive Officer---Clearing agent, uploaded the letter into WBOC System for claming exemptions of customs duty and taxes while filing Goods Declaration on receipt of the same from the importer's representative---No act of misdeclaration was committed by the importer or his Clearing Agent---Question was answered in the negative---Appellate Tribunal, however, observed that courts, being custodians of law, were required to maintain the norms of justice and equity---Litigants were to be respected not on account of court's power to legalize injustice on technical grounds, but to remove injustice---Orders passed during the hierarchy of customs, based on apparent breach of natural justice and law suffered from grave legal infirmities; were declared illegal, ab initio void and of no legal effect on various---Appeal was allowed---Authorities were directed to issue delay detention certificate in duplicate for shipping terminal, order accordingly counts.

[Case-law referred].

Muhammad Anan Moton for Appellant.

Faraz Qazi and Masood Ahmed A.O. for Respondents.

2018 P T D (Trib.) 1467

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial) and Khawaja Umar Mehdi, Member (Technical)

MUHAMMAD AKRAM

Versus

SUPERINTENDENT, CUSTOMS ANTI-SMUGGLING ORGANIZATION, JHANG and others

Custom Appeal No.05/LB of 2015, decided on 20th November, 2015.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 18, 156(1)(89)(i), 168, 180 & 181---S.R.O. No.566(I)/ 2005, dated 6-6-2005 and SRO No.499(I)/2009, dated 13-6-2009---Smuggling---Seizure and confiscation of goods---Customs Anti-Smuggling staff intercepted container, loaded with foreign origin cloth, used machinery as well as local products---Driver of the trailer failed to produce any documentary evidence showing legal import or lawful possession of the goods---Due to non-production of valid evidence of its legal import or lawful possession said goods were seized under S.168 of the Customs Act, 1969 for violation of S.2(s) read with SRO No.566(I)/2005, dated 6-6-2005 and Ss.16 & 17 of the Customs Act, 1969, punishable under S.156(1)(89)(i) of said Act, read with SRO No.499(I)/2009, dated 13-6-2009---Photocopies of Goods Declaration produced by owner of truck, were not found relevant/tallied with the subject goods---Additional Collector of Customs (Adjudication) ordered confiscation of seized goods in favour of Federal Government under S.156(1)(89) of the Customs Act, 1969---Validity---Law required test of proportionality as touchstone of construction and interpretation of onus clause and accused could not be expected to discharge an unduly high standard of proof---Section 187 of the Customs Act, 1969, cast an evidentiary burden subject to creation of a prima facie case by accused and the legal or persuasive burden always rested on the prosecution/department---Legal position was that when an accused had to rebut the presumption under S.156(2) or 187 of the Customs Act, 1969 standard proof for doing so was that of preponderance of probabilities---If accused was able to raise a probable defence, which created doubt about the existence of a legally enforceable debt or liability, prosecution could fail---Twenty eight items of multifarious nomenclature were seized and consequently confiscated vide impugned order-in-original---Appellant/accused claimed lawful validity of confiscated merchandise to the extent of four items, depicted within Serial Nos.13, 15, 17 & 18 of impugned examination/seizure report and showed his acquiescence to payment of statutory duties and taxes on the remaining goods---Appellant, succeeded in not only making out a prima facie case, but also raised a probable defence creating doubt concerning the existence or factum of smuggled nature of impugned merchandise---Burden of proof under Ss.187 & 156(2) of the Customs Act, 1969 stood sufficiently discharged and shifted to the prosecution to establish the case---Department had not only failed to rebut the veracity of documentary evidence produced by the appellant/accused, but also could not forward any cogent reasons which could dislodge substantiated goods from the goods declarations or invoices---Benefit of doubt was extended in appellant's favour---Impugned order-in-original was modified to the extent that the merchandise would be unconditionally redeemed/released to its lawful owners.

Kamran Industries v. Collector of Customs (Exports) PLD 1996 Kar. 68; Barkat Ali v. State PLD 1973 Kar. 659; PLD 1980 Lah. 145; 1983 CLC 414, 1984 CLC 325 and PLD 1975 Kar. 458 ref.

Raza Ahmad for Appellant.

2018 P T D (Trib.) 1565

[Customs Appellate Tribunal]

Before Muhammad Nazim Saleem, Member (Technical-II)

DIRECTOR OF POST CLEARANCE AUDIT through Deputy Director (Customs), Karachi

Versus

Messrs AL-FATEH ENTERPRISES, BAHAWALPUR and others

Customs Appeals Nos. K-401 of 2017 and K-2069 of 2016, decided on 31st October, 2017.

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 32 & 79---Valuation Ruling---Assessment of imported goods---Directorate of Post Clearance Audit, during the scrutiny audit of import data found that the importer had declared the goods as 'TYRES and TUBES, with or without Flaps of Different Brands" of Indian origin under different sub heads of PCT heading---Transaction value was the value, which had actually been paid or payable in terms of S.25 of the Customs Act, 1969, required for computation of customs duty and other taxes---Transaction value of the subject imports, in circumstances, was the value declared to Indian Customs at the time of exports of subject consignments in view of such position, it revealed that under-invoicing had been done and correct information regarding transactional value had been suppressed by filing goods declaration at lower value than the actual transactional value paid by the importers in Pakistan to the exporter in India, therefore amount was short paid/evaded by the importer---Adjudicating Officer vide order-in-original, found that the charges against the importer, were established ordered recovery of legitimate amount of duty and taxes with penalty---Appellate Authority, on appeal set aside order-in-original---Importer had self-assessed the goods under S.79 of the Customs Act, 1969 and calculated the duty and taxes in view of prevailing Valuation Ruling---Clearance Collectorate, rightly, made "no objection/observation" and goods were accordingly released after payment of due amount of duty and taxes---Indian Official Website had no legal sanctity---Importer had assessed and paid the duty and taxes in the light of Valuation Ruling---Section 25-A of the Customs Act, 1969, whereby the said Valuation Ruling had been issued, opened with non-obstante clause, meaning thereby that it had over-rides S.25 of the Customs Act, 1969---If the department was so convinced about the legality and validity of process/values, as given on Indian Website, it would have told the Directorate General of Customs Valuation to re-visit said Valuation Ruling with a view to enhance values of goods in question---Both show-cause notice and impugned order-in-original were defective---Impugned order-in-original, was upheld to be lawful order and appeal of the department was dismissed having no merit; appeal of the importer was allowed on merit.

Azhar Abbas, Appraising Officer for Appellant.

Qamaruddin Samejo, P.A: for Appellant/Respondent.

Abdul Latif Chandio for Appellant/Respondent Party.

2018 P T D (Trib.) 1587

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I)

Messrs ALPHA DAIRIES (PVT.) LTD., LAHORE

Versus

COLLECTOR OF CUSTOMS, MCC, (ADJUDICATION-I), KARACHI

Customs Appeal No. K-1757 of 2014, decided on 18th May, 2016.

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

----Ss. 25, 25-A, 32, 79 & 80---Misdeclaration---Appellant/importer, was alleged to be involved in import and clearance of consignment of imported goods on under-assessed value in violation of relevant Valuation Ruling---Appellant was also alleged, to have resorted to file into-bond Goods Declaration for warehousing of commodity avoiding application of relevant Valuation Ruling and managed to get the goods subsequently ex-bonded on the same lower values causing a colossal loss to Public Exchequer---Previously another Valuation Ruling was issued by the Valuation Directorate, wherein value of the commodity was determined at US dollar 1.44/Kg, which subsequently was set aside and fresh revised Valuation Ruling was issued wherein customs value of commodity was determined at US Doller 2.60/Kg---Collector of Customs (Adjudication) vide order-in-original found appellant guilty of mis-declaration including non-application of relevant valuation ruling---Validity---Appellant's subject consignment was accordingly processed under the prescribed Rules and statutory obligations after complying the previous Valuation Ruling and the consignment was allowed into-bond---Later on, the subject goods were ex-bonded in accordance with proper procedure of law and clearance made by the clearance Collectorate---Show-cause notice was issued against the appellant; after the lapse of near about 6 months, wherein the allegations were attributed against the appellant that he, with the active connivance and collusion with the Clearing Agent and Assessing Staff, by clearing consignment at under-assessed value through non-applicable Valuation Ruling avoided thereby the Government legitimate revenue---When the allegation of mis-declaration had been attributed against the appellant/ importer, responsibility of the department was to comply with the proper provisions of law and invoke the same with its true letter and spirit---Before invoking the provisions of S.32 of the Customs Act, 1969, prima facie, element of mens rea did not exist---Re-assessment under S.80(3) of the Customs Act, 1969 after release of the goods was permitted only after calling for the documents as expressed in subsection (2) of S.80 of the Customs Act, 1969---Upon receipt of documents or the information so transmitted/submitted, or the statement given by the importer to the Customs authority, if were found to be incorrect in respect of earlier assessment, the re-assessment could be made---In the present case, no such notice under S.26 of the Customs Act, 1969 had been issued to the appellant/importer---In principle, if it was considered for the sake of arguments that the Customs Authority was empowered to re-assess a Goods Declaration after clearance of the goods under S.80(3) of the Customs Act, 1969 without adhering the procedure laid down in S.80(2), there was no need for the legislature to frame subsection (2) of S.80 of the Customs Act, 1969---No re-assessment was permitted under S.80(3) of the Customs Act, 1969 once the goods were cleared---Re-assessment was permitted prior to passing of order of clearance under S.83 of Customs Act, 1969---Valuation Ruling though was applicable under S.25-A(2) of the Customs Act, 1969 in the present case, but the department failed to apply subject Valuation Ruling in the Customs Clearance system---Said defect, could not be cured at the stage of the case when the goods, which were cleared after due process of law were disposed of in the market by the importer---Proceedings initiated by the department, were in "unlawful manner" in negation of Art.4 of the Constitution and the judicial principles---Proceedings, actions and orders passed by the hierarchy of the Customs, suffered from grave legal infirmities which were declared to be illegal, ab initio and of no legal effect---Appeal was accordingly allowed, in circumstances.

2016 PTD 35; DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; Collector of Customs, Model Customs Collectorate v. M/s. Kapron Overseas Supplies Co. (Pvt.) Ltd. 2010 PTD 465; PLD 1964 SC 536; 2001 SCMR 838 and 2003 SCMR 1505 ref.

(b) Constitution of Pakistan---

----Art. 4---Protection of law---Under Art.4 of the Constitution, every citizen enjoy the protection of law and to be treated in accordance with law, was inalienable right of every citizen; wherever he could be and every other person for the time being within Pakistan---Clause (a) of sub-Article (2) of Art.4 expressed that no action detrimental to the life, liberty, body, reputation or property of any person, would be taken, except in accordance with law.

Muhammad Adeel Awan for Appellant.

S.M. Wasi, A.O. for Respondents.

2018 P T D (Trib.) 1607

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Zulfiqar A. Kazmi, Member (Technical-I)

Messrs JAMIL BROTHERS, MULTAN

Versus

COLLECTOR OF CUSTOMS, MCC - ADJUDICATION-I, KARACHI and another

Customs Appeal No. K-1456 of 2015, decided on 12th July, 2017.

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

----Ss. 32, 79, 156(1), (14), (74) & 181---SRO No.499(I)/2009, dated 13-6-2009---Mis-declaration---Confiscation of offending goods and imposition of fine---Importer had filed home consumption goods declaration---Imported goods were examined under first examination system for verification of description/PCT/quantity/weight under "RED" category---On physical examination, the Shed Staff reported that it was a case of misdeclaration of description; that importer had deliberately, knowingly and willingly mis-declared the description of goods, PCT heading; which act of the importer constituted an offence within the meaning of S.32(1)(2) of the Customs Act, 1969 punishable under S.156(1)(14)(74) of the Customs Act, 1969---Collector of Customs (Adjudication-I)/Adjudicating authority, held that charge of misdeclaration, stood established against the importer---Adjudicating Authority ordered confiscation of offending goods, with option under S.181 of the Customs Act, 1969 to redeem confiscated goods on payment of 35% redemption fine and penalty of Rs.800,000 was also imposed on the importer---Importer, on the basis of the customs documents i.e. Commercial Invoice, Bill of Lading, had filed the goods declarations before the Customs Authorities---Information declared by the importer was in total conformity with the documents provided to him by the overseas supplier and the shipping company---Adjudicating Authority had based his reasoning on assumption and presumption only, which led to believe that Authority had failed to establish any mens rea on the part of the importer; as there was no evidence on record to substantiate that the importer had misdeclared the description, in collusion with the overseas supplier and the shipping company---Show-cause notice, did not show element of "mens rea" and existence of knowledge "or" reason to believe as well as any collusion with Customs officials and in support thereof no evidence substantiated the alleged offence---Provisions of S.32 of the Customs Act, 1969, could not be invoked in the case of the importer, in circumstances---Subject show-cause notice, wherein specific particulars were not stated, would be vague and would not be in consonance with the requirements of subsection (2) of S.32 of the Customs Act, 1969---In order to bring an act, or action within the framework of the word "false" as used in S.32 of the Customs Act, 1969, the act should either be a conscious wrong or culpable negligence and should be untrue, either knowingly or negligently---Mala fide and mens rea, were necessary ingredients for committing any offence, including that of "smuggling"---If element of mens rea, was not visible, and guilty intention was not proved, provisions of S.32 of the Customs Act, 1969, could not be invoked---Adjudicating Authority, had passed the impugned order with least application of judicious mind; pitch of fine and penalty, did not correspond with the gravity of offence---Fine and penalty imposed on the goods and the importer, were ordered to be remitted---Impugned order-in-original was modified accordingly.

2011 PTD (Trib.) 79; Omalsons Corporation v. The Deputy Collector of Customs (Adjudication) Karachi 2002 PTD (Trib.) 3053; Moon International v. Collector of Customs (Appraisement) Lahore PTCL 2001 CL 133; Union Sport Playing Cards Co. v. Collector 2002 YLR 2651; Al-Hamd Edible Oil Limited v. Collector 2003 PTD 552; A.R. Hosiery Works v. Collector of Customs (Export) 2004 PTD 2977; Ibrahim Textile Mills Limited 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. No.43 of 1999 and Cargill Pakistan Seeds (Pvt.) v. Tribunal 2004 PTD 26 ref.

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

----Ss. 15, 16 & 181---SRO No.499(I)/2009, dated 13-6-2009---Option to pay fine in lieu of confiscated goods---Option in S.181 of the Customs Act, 1969, did not specify the amount or value on the basis of which the owner of the goods, could be given the option to pay in lieu of the confiscation of goods such fine as the officer would think fit---First Proviso to S.181 of the Customs Act, 1969 provided that Federal Board of Revenue through an order, could specify the goods or class of goods, where such option would not be given; whereas second Proviso thereof, referred to the amount of fine which the Board could fix through issuance of an order and could be imposed on any goods or class of goods imported in violation of the provisions of S.15 or a notification issued under S.16 of the Customs Act, 1969, or any other law for the time being in force---First Proviso limited the powers of the Adjudicating Authority in regard to certain goods or class of goods; whereas, no option for redemption of the goods was given, instead was to be outrightly confiscated---Legislature, intentionally left the imposition of fine on the discretion of the Adjudicating Authority, who had to use that sparingly and in the benefit of the taxpayer, rendering the fixation of redemption fine on the goods or class of goods other than of Ss.15 & 16 through SRO No.499(I)/2009, dated 13-6-2009, as ultra vires to the provisions of S.181 of the Customs Act, 1969 and as such without lawful authority.

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; Saleem Raza v. FOP and others 2012 PTD 302; Messrs Weave and Knit (Pvt.) Ltd. v. Additional Collector of Customs, (Adjudication) Karachi and others 2004 PTD 2981 ref.

M. Adeel Awan for Appellant.

Faiz Mudassar, A.O. present for Respondent.

2018 P T D (Trib.) 1648

[Customs Appellate Tribunal]

Before Muhammad Nazim Saleem, Member (Technical-II)

Messrs FRIENDS, LAHORE

Versus

DEPUTY COLLECTOR OF CUSTOMS (GROUP-VI), MCC OF APPRAISEMENT-EAST, KARACHI and another

Customs Appeal No. K-1786 of 2015, decided on 9th November, 2017.

Customs Act (IV of 1969)---

----Ss. 25, 26-A, 79, 80 & 83---Re-assessment of imported goods---Declaration indicating the unit value of imported goods as US$ 0.90 K.G, whereas according to the Assessing Authority same was assessable at the unit value of US $ 1.20 K.G---Appeal against such determination was rejected by Collector of Customs (Appeals)---Concerned Customs Officers, had endorsed the declaration as given by the importer who had deposited amount as assessed and customs had allowed the consignment "Gate out" on the same day passing clearance order and importer had obtained the delivery from the Terminal---Department, after lapse of ten days, forwarded a view message, whereby the department re-assessed the imported goods and sent notice to the importer to deposit the amount according to re-assessment---Validity---When the consignment was allowed "Gate out" by the customs and same had left the port premises, customs had no authority to re-assess the imported goods and send the view message, as the consignment was no more under the customs control---For re-assessment under S.83(3) of the Customs Act, 1969, it was mandatory that the Customs Officer had detected some mis-declaration, misstatement in the goods declaration on the part of the importer---No such mis-declaration or misstatement was detected in the present case; after the consignment was allowed "Gate out" and also "cleared from Gate out", only option left with the department was to file appeal against the assessment order before the Collector of Customs (Appeals) under S.193 of the Customs Act, 1969; or the Collector of Customs could have re-opened/called for the relevant record under S.195 of Customs Act, 1969 to see propriety of the assessment order passed by the Deputy Collector---Demand/recovery of excess amount from the importer, by the department was illegal as same was raised without meeting the mandatory conditions of S.83(3) of the Customs Act, 1969---View message and impugned order-in-original, were set aside being void ab initio.

Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala 2008 PTD 60; Messrs Hanif Strawboard Factory v. Additional Collector (Adjudication) Customs, Sales Tax and Central Excise Gujranwala 2008 PTD 578; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others 2009 PTD 762; Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore and 2 others 2009 PTD (Trib.) 1263; Leo Enterprises v. President of Pakistan and others 2009 PTD 1978; 2011 PTD (Trib.) 79; 2011 PTD (Trib.) 987; 2011 PTD (Trib.) 1010; 2004 PTD (Trib.) 1324; Lt.-General (Retd.) Shah Rafi Alam v. Lahore Race Club 2004 CLD 373; Khalid Qureshi v. UBL 2001 SCMR 103; East West Steamship v. Queen Land Insurance PLD 1963 SC 663; Sahibzada Sharfuddin v. Town Committee 1984 CLC 1517; Abida Rashid v. Secretary, Government of Sindh PLD 1995 Kar. 587; Assistant Director v. B.R. Herman Mohata Ltd. PLD 1992 SC 485; Central Insurance v. CBR 1993 SCMR 1232; Messrs Muller and Phipps Pakistan (Pvt.) Ltd. v. The Collector of Sales Tax Enforcement LTU, Karachi (S.T. Appeal No. 176/2007); Collector of Customs, Peshawar v. Collector of Customs (Appeals) Peshawar 2011 PTD (Trib.) 2114; Messrs Wawa Garments Industries (Pvt.) Ltd v. The Additional Collector of Customs, Export, Karachi 2011 PTD (Trib.) 2557; 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, Noshehra and others v. Sarfraz Khan and others PLD 2001 SC 514; Pak Suzuki Motors Company Ltd, Karachi v. Collector of Customs, Karachi 2006 PTD 2237; 2009 PTD (Trib.) 1996; 2010 PTD(Trib.) 832; Messrs Smith Kline French v. Pakistan 2004 PTD 3020; Messrs Paramount International (Pvt.) Ltd. v. FOP and another 2014 PTD 1256; Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310; Glaxo Smith Kline Pakistan Ltd. Karachi v. Collector of Customs, Sales Tax Central Excise, Karachi 2004 PTD 3020; Messrs Sikander Enterprises v. Central Excise and Sales Tax Tribunal Karachi 2008 PTD 1968; 2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; PLD 1996 Kar. 68; 2006 PTD 978; PLD 1971 SC 184 and 2017 PTD 1608 ref.

Abeer Mirza for Appellant.

Azam Shah, Appraising Officer for Respondents.

2018 P T D (Trib.) 1669

[Customs Appellate Tribunal]

Before Muhammad Nazim Saleem, Member (Technical-II)

Messrs AG INTERNATIONAL, KARACHI

Versus

DEPUTY COLLECTOR OF CUSTOMS (R&D), MODEL CUSTOMS COLLECTORATE OF APPRAISEMENT (EAST), KARACHI and 2 others

Customs Appeal No. K-1702 of 2016, decided on 7th November, 2017.

Customs Act (IV of 1969)---

----Ss. 32, 79 & 80---Mis-declaration of origin of goods---Declaration of goods classifying under H.S. Code 5407.6100---Importer determined liability of duty/taxes accordingly and paid the same at the time of filing of declaration---Declaration was selected for scrutiny and was sent for physical examination---Examination of goods (conducted twice), transpired that the importer had mis-declared the origin of the imported goods and that said goods were banned for import as per the Import Policy---Adjudicating Officer vide order-in-original, found that charges against the importer were established---Examination conducted by department confirmed the declared description and weight of the consignment, however, it was observed that on some bales were found with a label indicating that the consignment was of "Indian" origin---Department, had attended the case in an extremely non-professional manner---First Examination Report clearly showed "Origin Not Shown"---Said report, no doubt, mentioned about a label pasted on some bales showing the origin of the consignment as Indian, but, it pertained to some other container, which did not relate to the importer---Second examination report, also mentioned about the labels, but that time reference to container number was deliberately avoided, which reflected intellectual dishonesty on the part of the department---All the relevant facts as given in both the examination reports, were tallying with those given in the goods declaration by the importer---Adjudicating Authority, had not been able to look into detailed distortion of the facts by the department, by passing a cursory judgment comprising six lines in sheer violation of S.24-A of the General Clauses Act, 1897---Show-cause notice issued to the importer, as well as the impugned order-in-original, being void ab initio, were set aside, in circumstances.

Nadeem Ahmed Mirza, Consultant for Appellant.

Nisar Ahmed, Appraising Officer for Respondent.

Date of hearing: 20th August, 2017.

JUDGEMENT

MUHAMMAD NAZIM SALEEM, MEMBER (TECHNICAL-II), KARACHI.---This Judgment disposes of Customs Appeal No.K-1702/ 2016 filed by the Appellant against Order-in-Original No.560069-09082016, passed by the Additional Collector of Customs Adjudication), Custom House, Karachi.

1. Brief facts of the case as reported in the impugned Order-in-Original are that the Appellant imported a consignment declared to contain 'unfinished grey fabric' weighing 16,800 kgs, from China and filed electronic Goods Declaration bearing Machine Number KAPE-HC-115178-22-02-2016 under section 79(1) of the Customs Act, 1969. They classified, the imported consignment under HS Code 5407.5100 and declared invoice value as US$ 1,680/-. The Appellant determined his liability of duty/ taxes accordingly as Rs.36,647/- and paid the same at the time of filing of Goods Declaration.

3 The concerned Assessment Group, in order to verify the Appellant's declaration and to ascertain the amount of duty/ taxes payable thereon, selected the under-reference Goods Declaration for scrutiny under section 80 of the Customs Act, 1969 and sent the same for physical examination. Examination Report revealed that the Appellant's goods declared to be of Chinese origin and shipped from UAE, were actually of Indian Origin. The Examination Report is reproduced hereunder;

"Container No: GATU8497628, GD No: KAPE-HC-115178-22-02-2016 Documents not found. Examined the goods with GD retrieved from the system. Description. Polyester grey undyed/ unfinished fabric for ladies shirting in bales. Net wt approx 16900kgs. Origin not shown. It is pointed out that on some bales a label showing container No. BMOU6036471, quantity 234 ctns and on one bale a cargo stack card pasted which shows the following details: DBC Port Logistics Ltd. CFSJNP Sonari Village, Taluka, Uran, Navi Mumbai - 400 707 India. Export Division Cargo Card, Agency Name: SHREE SAMARTH, Shipping Bill No. 4051497 09/11/15, CHA Name: Motherland Shipping. Export Shed No 03, Cargo Description: Fabric. The quality of all the fabric is same which reflect that whole consignment is of India origin. Group is requested to check all aspects keeping in view the ER to ascertain the origin of the goods. Rep sample drawn and forwarded to CH lab for confirmation of actual desp, HS code and all other aspects. Rep sample also forwarded to group for inspection and further confirmation thereof. 100% wt checked vide PICT wt slip No. 426548 dated 23.02.2016 and found 17190kgs. Wt slip scanned images attached."

1. Being dissatisfied with the above Examination Report, the Appellant approached for second examination which was conducted in joint collaboration of R&D Section of the Collectorate, which confirmed the first Examination Report, in the following terms:

"Container No. GATU8497628, GD No. KAPE-HC-115178-22-02-2016 inspected and examined jointly with (R&D) staff. Description of goods: polyester ladies chiffon undyed fabric packed in bales, net wt: 16900 Kgs approx, it is pointed out that during the course of physical examination of container indicated above, found some label pasted on bales showing address as "dbc port logistics ltd, cfsjnp shonary village, taluka uran, navi mumbai-400 707 India, export division cargo stack card, agency name: shree samarth, shipping bill No. 4051497 09.11.2015, cha name: motherland shipping, export shed No. 03, cargo description: fabric." it is pertinent to mention here that all quality of goods are same as mentioned above, which reflects that this consignment has been shipped from India. Moreover, representative samples of this consignment have already been forwarded to custom house laboratory for test, however, group may check the aspect of importability besides, actual description of the goods (whether dyed or undyed), in the light of test report, check weight 100% vide PICT order vide weight slip No. 426548 dated 23.02.2016 and found weight 17190 kgs. Image."

1. Evidently, Examination (conducted twice) transpired that the Appellant misdeclared the origin of the imported goods, the goods (weighing 16,900 KG) being banned for import under S. No. 363 of Appendix-G of the Import Policy Order, 2013, read with Para-5(B)(iii) ibid. Value of the offending goods is worked out to be Rs.6,682,619/-. The Appellant were called upon to Show-Cause as to why the goods imported through under reference Goods Declaration may not be confiscated, being in violation of the provisions of law and as to why further fine/penalty may not be imposed upon them under the relevant provisions of law.

2. The adjudicating officer vide Order-in-Original No.560069 dated 9.8.2016 held that the charges against the Appellant are established. The operative part of the impugned order reads as under:--

"I have gone through the record of the case and seen the images of the impugned goods and submissions made on behalf of the respondents in writing as well as verbally. The arguments of the representative of the department were also heard. I conclude that the charges levelled in show cause notice stand established and the impugned goods are ordered to be confiscated outrightly without extending any option for redemption of good. Further, a penalty of Rs.100,000/- is imposed on the importer under Clause 9 of section 156 of the Customs Act, 1969."

1. Feeling aggrieved and dissatisfied with the above Order-in-Original, the Appellant filed an Appeal before this Tribunal on the following main grounds:-

(i) The respondent No. 1 and his subordinate are indeed vested with the powers to detain the goods under Section 186 of the Customs Act, 1969 for better appreciation verbatim of the same is reproduced here-in-below:

186: Detention of Goods pending payment of fine or penalty;--(1) When any goods or fine or penalty has been imposed, or while imposition of any fine or penalty is under consideration, or pending any inquiry or investigation, in respect of any goods such goods shall not be removed by the owner until such fine or penalty has been paid or such inquiry and investigation has been completed.

(2) When any fine or penalty has been imposed in respect of any goods, the appropriate officer may detain any goods belonging to the same owner pending of such fine or penalty.

Upon conscientious analysis of section 186, it is abundantly clear that the said section comes into play during the course of imports, meaning thereby if any case has been adjudicated by the competent authority against an importer and through which the authority held the charges established as levelled in the show-cause notice and impose fine and penalty, and the importer has not paid the leviable duty, taxes, fine and penalty. The appropriate officer is empowered to detain the forthcoming goods of the same owner till the time the adjudged amount of duty, taxes, fine and penalty are not paid. The case of appellant is that his goods were lawfully clear by the competent authority and against him no case is pending wherein fine or penalty has been imposed, therefore his consignment could not be detained on any pretext under the provision of section 186 of the Customs Act, 1969 and this stood validated from reported judgment (2015 PTD 560), O.S. Corporation v. FOP and others in which it has been held in categorical terms that "where no fine or penalty has been imposed or is even under consideration the provision of Section 186 are not relevant" and "the authorities acting on a hunch have detained goods at the exit gates even though taxes and duties have been paid and the goods have been released, detaining goods at the exit gate after having releases them is totally contrary to the provision of the Act, 1969."

(ii) That the respondent No. 1 put on hold/detained the consignment of the appellant on 29.02.2016 014 Such hold tantamount to notional seizure as held by High Court of Sindh in reported judgment (2003 PTD 2821) Syed Muhammad Razi v. Collector of Customs (Appraisement), Karachi and 2 others in the following words:

"A careful consideration of section 168(1) and section 2(rr) leads to the conclusion that the word "possession" is not confined to the physical possession and is inclusive of constructive possession as well. We are further of the considered opinion that the seizure of goods cannot be confined to the cases where an order in writing in this behalf is made but is inclusive of notional seizure as well, meaning thereby, that if the customs officials has not passed any specific order in writing about the seizure of goods but has verbally given instructions or by his conduct has made the release for removal of goods under restraint thereby depriving to the owner of the goods of exercising all the incidents of the right had title and interest in the goods, it would also amount to seizure of goods within contemplation of section 168(2) of the Customs Act.

(iii) That by virtue of notional seizure the provision contained in sections 171 and 168 of the Customs Act, came into operation. Meaning thereby in the case of seizure of goods under section 168 the reason are to be recorded under section 171 and communicated to the person from whose possession the things are seized and the notice under section 180 of the Customs Act, 1969 by the authorities vested with the powers under section 179 ibid is also required to be issued within 2 months of the seizure of the goods subject to extension for further two months based on exceptional circumstances by the Collector of Customs after giving notice to the respective person as per law laid down by the Supreme Court of Pakistan in reported judgment 1999 SCMR 1881 Khalid Mahmood v. Collector of Customs, Custom House, Lahore. In the instant case the initial period of two months stood lapsed on 29.04.2016, no extension either was asked for or accorded by the Collector of Customs, prior to expiry of initial period and this stood validated from the order-in-original itself, which is silent in this regards. Since, no show-cause notice has been issued on or before 29.04.2016 in this case instead on 10.05.2016 rendering it barred by time by 12 days , hence it is without power/jurisdiction, therefore, void and ab initio as held by Superior Court in umpteenth judgment e.g. 1998 MLD 650, 2005 PTD 23, 2003 PTD 2821 and 2007 PTD 2092.

(iv) That in the show-cause notice the respondent No. 3 have invoked the provision of sections 32(1), (2) and 32A of the Customs Act, 1969, which speaks about mis-declaration. The authority to adjudicate cases relating to these sections rest with Collectorate of Customs, Adjudication in terms of SRO 886(I)/2012 dated 18.07.2012. To the contrary, the respondent No. 3 laid hands on the Sovereign Territory of Collectorate of Customs, Adjudication. The said act is transgression of powers and renders the show-cause notice and order-in-original without jurisdiction, void and ab-intio as held in reported judgment PLD 1975 SC 331, S.T. Appeal No. 984/98, S.T. Appeal 72/04, S.T. Appeal 54/09, S.T. Appeal No. 2352/99, S.T. Appeal No.106/03, 2002 CLC 705, 2004 PTD 624, 2004 PTD 3020, 2007 PTD 1895, 2009 PTD (Trib.) 1925, 2005 PTD (Trib.) 135, 2010 PTD (Trib.) 759,2010 PTD (Trib.) 1283, Customs Appeal No.K-44/ 2010 and Customs Appeals Nos. K-435/08 to 455/08, 2010 PTD (Trib) 2523 and K- 638/2010-727/2010.

(v) The expression of section 179 of the Customs Act, 1969 is very clear in regards to determination of the powers of the Adjudicating Authority on the basis of "amount of duty and taxes involved excluding the conveyance." Not "amount of evaded duty and taxes". In this case the amount involved is Rs.36,647.00. The competent authority to adjudicate the case of said amount under clause (vi) of section 179 (1) is Principal Appraiser. To the contrary, respondent No. 3 has issued the show-cause notice and passed order-in-original while usurping the powers of his subordinate. This is not permitted under law, hence, the show-cause notice suffer from lack of powers. Therefore, ab-initio void and so the superstructure built thereupon in the shape of subsequent order as held in Sales Tax Appeal No. 444/03, S.T.A. 465/07 and judgments reported at PLD 1971 SC 184, PLD 1976 Supreme Court 514 , 1992 ALD 449, 2004 PTD 624, PLD 2004 Supreme Court 600, PLD 2005 Supreme Court 842, 2009 PTD 1112, 2010 PTD 465 and 2010 PTD (Trib.) 1636.

(vi) That it is also imperative for the appellant to add further that neither respondent No. 3 nor any other authority is empowered to issue show-cause notice in the case, where there exist no revenue loss because the leviable duty and taxes after resolution of the dispute, upon receipt of view message an importer invariably pays and obtained delivery. The aspect of determination of importability rest upon the Principal Appraiser, which he determines at the time of passing assessment order under section 80 of the Customs Act, 1969 and Rule 438 of Sub-Chapter III of Chapter XXI of the Customs Rules, 2001, in exercise of the powers vested upon him under the said section through Notification No. 371(I)/2002 dated 15.06.2002. (Exhibit "O"). Meaning thereby that he is the only authority to proceed in the matter instead of respondent No.3. It is settled elementary principle of law that action of executive functionaries are to be restricted to specific sphere permitted by the statute. In Serial No. 80 of SRO 371(I)/2002 dated 15.06.2002, rendering the show-cause notice as well as the anticipated to he passed order-in-original without power/jurisdiction, hence null void and ab-initio and this have been held in countless reported judgements by the Superior Judicial Fora, refer to Lt. General (Retd.) Shah Rafi Alam v. Lahore Race Club, 2004 CLD 373 Khalid Qureshi v. UBL 2001 SCMR 103, East West Steamship v. Queen Land Insurance PLD 1963 SC 663, Sahibzada Sharfuddin v. Town Committee 1984 CLC 1517, Abida Rashid v. Secretary, Government of Sindh PLD 1995 Kar. 587, Assistant Director v. B.R. Herman Mohata Ltd. PLD 1992 SC 485, Central Insurance v. CBR 1993 SCMR 1232, S.T. Appeal No. 176/2007 M/s. Muller and Phipps Pakistan (Pvt.) Ltd. v. The Collector of Sales Tax Enforcement LTU, Karachi and 2011 PTD (Trib.) 2114 Collector of Customs, Peshawar v. Collector of Customs (Appeals) Peshawar and 2011 PTD (Trib.) 2557 M/s. Wawa Garments Industries (Pvt.) Ltd. v. The Additional Collector of Customs, Export, Karachi and Order in Custom Appeal No. H-510/2008 Dewan Farooque Motors Ltd v. Collector of Customs(Appeal) and 2014 PTD 199 Collector of Customs, Lahore v. South East Trading.

(vii) Notwithstanding, to the referred in above grave illegality, it is worth stating that the respondent No. 3 is not familiar with the Sales Tax Act, 1990 and Income Tax Ordinance, 2001 and this stood validated from the fact that he has invoked Section 11C of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001, without realizing that these are not penal clauses instead charging and machinery Section respectively, charge under section 11(c) can be made by the authority referred therein and section 148 contains the procedure for collection of Income Tax at import stage by the authorities referred therein. Meaning thereby that the said sections are independent under which no charge can be invoked. The authority to take cognizance of the charging section rest with the Officer of Inland Revenue. No show-cause notice can be issued under these sections. Issuance of show-cause notice on the basis of irrelevant sections renders the show-cause notice void and ab-initio and of no legal effect as held in reported judgment judgments 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, Rose Color v. Chairman, CBR and 2013 PTD 813 Sarwar International v. Addl. Collector of Customs.

(viii) That even otherwise respondent No.3 is not appointed as Officer of Inland Revenue under section 30 of the Sales Tax Act, 1990 and section 207 of the Income Tax Ordinance, 2001 and as such is not empowered to issue show-cause notice and pass order-in-original relating to matters of Sales Tax and Income Tax under section 11 of the Sales Tax Act, 1990 and section 162(1) of the Income Tax Ordinance, 2001. Hence, by issuing show-cause notice with the inclusion of amount of Sales Tax and Income Tax, respondent No. 3 usurped the power of Officer of Inland Revenue to which he is not vested, Rendering the show-cause notice as well as order-in-original being in flagrant violation of law and as such coram non-judice as held in Order in Sales Tax Appeal No. 444/03, S.T.A. 465/07 and judgments reported at PLD 1971 SC 184, PLD 1976 Supreme Court 514,1992 ALD 449, 2004 PTD 624, PLD 2004 Supreme Court 600, PLD 2005 Supreme Court 842, 2009 PTD 1112, 2010 PTD 465 and 2010 PTD (Trib.) 1636, 2011 PTD 1Trib.) 110, 2010 PTD (Trib.) 2086, Customs Reference No. 01/2010, 2014 PTD (Trib.) 299, 2004 PTD 801, C.P. No. D-216/2013, 2014 PTD 1963, 2015 PTD 702, 2016 PTD (Trib.) 925, 2016 PTD (Trib.) 969, 2016 PTD (Trib.) 843, 2016 PTD (Trib.) 1008.

(ix) That no mis-declaration in material particular has been made by the Appellant in any aspect and this stood validated from the Invoice, B/L Certificate of Origin, veracity of which has not been disputed by the respondent and declaration to the extent of description, weight and PCT stood validated from transmitted examination report and test reports. No finding of falsity is visible in this entire act of appellant and. Resultant invoking of sections 32(1), (2) and 32A is misplaced. This lapse renders the show-cause notice and order-in-original suffer from legal infirmity and as such of no legal authority, hence, ab-initio and void.

(x) That there exists no illegality in importing goods of China origin from the company of UAE, it is International Trade practice, majority of the buying and selling houses have their offices either in Hong Kong, Singapore or UAE, from where they book orders for their principle for shipment of their product or procure different goods from different countries and supply to their buyers. Since, appellant was not knowing any company in China, beside he was not assure that the goods desired by him shall be of those specification, resultant, he felt appropriate to place order with the company of UAE, which took guarantee of supply of the goods as per specification and within time and on credit basis.

(xi) That appellant has no concern as to whether the seller-ship the goods directly from the Port of China or from UAE after importing in transit in UAE for shipment to Pakistan. The goods imported by the appellant are from UAE and are of China origin and this stood validated from the certificate of origin No. 16C 3307Y0746/0087 dated 24.02.2016, issued by the China Council for Promotion of International Trade and of Dubai Chamber of Commerce bearing No. 15810757 dated 22.02.2015 which the seller mailed him after the respondent without any lawful authority raised the issue of origin and this was due to the % that it was verified by the respondent No. 1 online from the Internet Authentication Centre of China Council of Promotion of International Trade.

(xii) That by submitting the documents of export and their verification, the appellant discharged the initial burden laid upon him and the onus of burden to prove the allegation stood shifted on the shoulders of the respondent Nos. 1 and 3 under Articles 117 and 121 of Qanun-e-Shahadat (10 of 1984) as per laid down law by the Superior Courts of Pakistan namely S.M. Anwar Sethi v South British Insurance Company Ltd. PLD 1975 Kar. 458; Barkat Ali v. The State PLD 1973 Kar. 659; Cross on evidence 1967, 3rd Edn., London Butterworth; A Practical Approach to Evidence by Peter Murphy 1988 3rd Edn. London, Black Stone Press Ltd; The Modern Law of evidence by Adrian Kean 1985, 1st Den. Oxford , Professional Books Ltd; Mst. Safia Begum v. Mst Malkani and another PLD 1965 Lah. 576; Akber Ali v. Ehsan Ellahi PLD 1980 Laho. 145; Government of Pakistan v. Moulvi Ahmed Saeed 1983 CLC 414; Muhammad Sarwar v. Fazal Rehman 1982 CLC 1286 Sardar Ghulam Nabi Khan v. Azad Government of State of Jammu and Kashmir 1984 CLC 325; Eastern Rice Syndicates v. C.B.R. PLD 1959 SC (Pak) 364; The Collector Central Excise and Land Customs v. Imdad Ali 1969 SCMR 708 and M/s. Latif Brothers v. Deputy Collector of Customs, Lahore 1992 SCMR 1083, which the respondents Nos. 1 and 3 miserably failed to discharge.

(xiii) That the said proposition of law was explained with clarity by their Lordship of High Court of Sindh in reported judgment PLD 1996 Karachi 68 Kamran Industries v. Collector of Customs (Exports) and Order of the Custom Tribunal in Customs Appeal No. K-391/04 Mr. Muhammad Mir v. Collector of Customs (Adjudication), Karachi and 2016 PTD 582.

(xiv) That irrespective of the above submission, through which the appellant aptly proved that the goods of his consignment are of China origin and he does not feel obliged to controvert the opinion of the examiner and the respondents in regards to said to be impugned label pasted on one of the bale, existence of which is denied by the appellant in totality. Nevertheless for the sake of argument without conceding, if it is presumed that the labels does exist, even then it has no nexus with the appellant goods and this stood validated from the varied facts, it refers to container No. BMOU-6036471, 180 bales and 13289.85 kgs. Whereas, the appellant container No. is JATU8497628 stuffed with 224 bales of 16800 kgs. Likewise reference to the GD number 4051497 dated 09.11.2015 is also out of context because it pertains to fabric falling under HS Code 5215.015104 of Indian Customs Tariff as against the claimed/assessed HS Code of the appellant 5407.5100, which is in accordance with the HS Code available on the verification of the certificate of origin of China by the Internet Authentication Centre of China Council for Promotion of International Trade. Connecting the goods of appellant with the goods shipped from Nava Shiva, India against the aforesaid GD is manifestly erroneous instead absurd , stood validated from the fact that right from the number of bales to container No. differs from the appellant. Drawing of inference for holding the clearance of the appellant goods is without any cause and lawful authority and speaks volume about high handedness and abuse of powers.

It is therefore prayed that the Appellate Tribunal may please order that the show-cause notice dated 10.05.2016 and order-in-original dated 09.08.2016 issued/ passed are unmindful, whimsical without power/jurisdiction and based on inapt interpretation of the provision of the Acts/ Rules and Ordinance and as such of no legal effect therefore, vacated/set aside.

1. The Respondent Department has filed their counter-objections/ para-wise comments on the Memo. of Appeal filed by the Appellant in terms of section 194-A(4) of the Customs Act, 1969, which are reproduced as under:-

(i) That the contents of para (i) of ground of appeal are misleading incorrect hence denied. It is submitted that the competent Adjudicating Officer after considering written as well as verbal arguments put forth from both sides and all aspects of the case passed the order-in-original by upholding the charges levelled in the Show-Cause Notice whereby the appellant failed to rebut such charges on any plausible grounds. It was proved beyond any doubt that the appellant tried to clear the goods which were other not importable considering the provisions of being banned for import under S.No. 363 of Appendix-G of the import Policy Order, 2013, the Adjudicating officer very rightly passed the order section 186 has no relevance with this case as the goods were out rightly confiscated being not importable. The cited case law has no relevance with this case.

(ii) That the contents of para (ii) of ground of appeal are misleading

incorrect hence denied. The contention of the Appellant is based on misinterpretation of law. Goods were never seized during proceeding of the case therefore the concept of notional seizer is quite misleading. Considering the facts and circumstances of this case the cited case law has no relevance.

(iii) That the contents of para (iii) of ground of appeal are misleading incorrect hence denied. It is submitted that the goods were never seized therefor provisions of sections 171 and 168 are irrelevant Considering the facts and circumstances of this case the cited case law has no relevance.

(iv) That in the light of submissions made above, the contents of para (iv) of ground of appeal are misleading incorrect hence denied. It is submitted that as the importer knowingly and with mala fide attention misdeclared the origin therefore section 32 is very much attracted in the instant case, it is respectfully submitted that under electronics clearance promulgated vide Chapter-XVI A of the Customs Act, 1969, an importer is not only responsible to make declaration of true and correct particulars of the imported goods including origin but also he is responsible to assess and pay his liabilities of duty.taxes as per law and thereafter file his "Goods Declaration (G.D.)" electronically in terms of section 79(1) of the Customs Act, 1969. Most of the consignments are allowed release as per importer's self-assessment and declaration, without manual check, however, under selectivity criteria few consignments ai$ ought to be checked to verify whether or not correct particulars of the imported goods have been declared and leviable amount of revenue has been paid. In the instant case, it is proved that the Respondent importer had made an attempt to clear the banned goods by deliberately mis-declaring the origin of the imported goods, i.e. declared origin China instead of actual origin India knowingly through self-assessment made under section 79(1) of the Customs Act, 1969. It is also submitted that the provision of section 155-A and Chapter-XVIA of the Act is special enactment. As such, considering the provisions of subsection (1) of section 79 of the Act, particularly in a case of electronic clearance under the Pakistan Customs Computerized System an importer is required to assess/ determine his liabilities of duties and taxes and after payment, file his Goods Declaration (G.D.) with true and accurate declaration of all particulars of the imported goods as essential for correct assessment. It was also submitted that the present amended provision of section 79 of the Customs Act, 1969, is actually a "Self-Assessment" system, and in terms of Section 80 of the Customs Act, 1969, the appellants will only check correctness and legality of such payments, and declaration, under selectivity criteria on random basis. In section 79(1) the words "true declaration", "complete and correct particulars" and "assessing and paying his liability" have a great significance in processing and clearance of imported cargo through electronic clearance system. Thus, according to the definition given in subsection (1) of section 32 of the Customs Act, 1969, read with the amended provision of section 79(1) of the Customs Act, 1969, wrong and lower assessment and deliberate incorrect declaration of any particular of the imported goods, with an intent to evade and pay lesser amount of duties and taxes also constitutes a mis-statement in a matter of customs.

(v) That in the light of submissions made above, the contents of para (v) of ground of appeal are misleading incorrect hence denied. It is submitted that considering the provisions of section 179 of Customs Act, 1969, the adjudicating officer very rightly adjudicate the subject case. Considering the facts and circumstances of this case the cited case law has no relevance.

(vi) That in the light of submissions made above, the contents of para (vi) of ground of appeal are misleading incorrect hence denied. It is submitted that considering the provisions of section 179 of the Customs Act, 1969, the adjudicating officer very rightly issued the Show-Cause Notice and after due hearing adjudicate the subject case. Considering the facts and circumstances of this case the cited case law has no relevance.

(vii) That, the contents of para (vii) of ground of appeal are misleading incorrect hence denied. The provisions of section 3 of the Federal Excise Act, 2005, Section 148 of the Income Tax Ordinance, 2001, Section 6 of the Sales Tax Act, 1990 and Section 32 of the Customs Act, 1969, the customs officers are empowered to recover any tax or duty, which has been short levied at import / clearance stage, within five years. In terms of Section 6, the answering respondents are / were empowered to collect and recover the Sales Tax. The learned counsel of the appellant has deliberately ignored the words "or charge" appeared after customs duty in Section 32 of the Customs Act, 1969. Considering the facts and circumstances of this case the cited case law has no relevance.

(viii) That in the light of submissions made above, the contents of para (viii) of ground of appeal are misleading incorrect hence denied.

(ix) That in the light of submissions made above, the contents of para (ix) of ground of appeal are misleading incorrect hence denied. It is pointed out that examination (conducted twice) transpired that M/s. AG International Karachi misdeclared the origin of the imported good being banned for import under S.No. 363 of Appendix-G of the Import Policy Order, 2013, read with para 5(B)(iii) ibid.

(x) That in the light of submissions made above, the contents of para (x) of ground of appeal are actually admission of the Appellant. The fact is that Appellant was very well aware to the fact the subject imported item is not importable from India there to avoid this confiscation he indirectly shipped the goods from UAE.

(xi) That in the light of submissions made above, the contents of para (xi) of ground of appeal are misleading incorrect hence denied.

(xii) That in the light of submission made above the contents of Para (xii) of grounds of appeal are incorrect hence denied. It is submitted that the subject case has no relevance with Qanun-e-Shahadat, whereas according to the IPO S.No. 363 of Appendix-G of the Import Policy Order, 2013, read with para 5(B)(iii) ibid. Importer goods are not importable from India. Considering the facts and circumstances of this case the cited case law has no relevance.

(xiii) That considering the facts and circumstances of this case the cited case law has no relevance. With this case hence denied.

(xiv) That in the light of submissions made above, the contents of para (xiv) of ground of appeal are misleading incorrect hence denied.

In the light of submissions made above, it is respectfully prayed to kindly dismiss the subject appeal.

1. I have heard arguments of the learned Consultant of the Appellant as well as the learned Representative for the Respondent Department besides examining the relevant record. The case of the Appellant is that they imported a consignment of "Unfinished Polyester Grey Fabric" of Chinese origin, from M/s. London Silk General Trading, LLC, Dubai, U.A.E weighing 1680 K.gs. The consignment was stuffed and despatched in container No.GATU 8497628 against the Invoice No.5080 dated 20.02.2016 with Certificate of Origin No.16C3307Y074600087 dated 24.02.2016. The Examination Report conducted by the staff of the Respondent Department confirmed the declared description and weight of the consignment, however, observed that on some bales showing container number BMOU6036471, a label was pasted indicating that the consignment was of Indian origin. The Respondent Department's plea is exactly the same as aforestated. On the request of the Appellant, the consignment was re-examined in the presence of Examination staff and R&D staff of the Collectorate. The joint Examination Report also observed that a label was pasted on some of the bales showing goods of Indian origin. The Appellant straightaway deny that the above container relates to his consignment. During the course of hearing, the learned Counsel laid tremendous emphasis on this point stating that their consignment was brought in container under GATU8497628 and not in container number BMOU6036471.

2. In my assessment, the Respondent Department has attended this case in an extremely non-professional manner. The first Examination Report clearly shows "Origin Not Shown". No doubt, the said Report mentions about a label pasted on some bales showing the origin of the consignment as India nevertheless it pertains to some other container bearing No.BMOU6036471. More interesting part is that this container shows quantity as 234 cartons whereas the container No.GATU8497628 pertaining to the Appellant's consignment mentions about 'Bales'. For convenience, the first Examination Report is reproduced below:-

"Container No: GATU8497628, GD No: KAPE-HC-115178-22-02-2016 Documents not found. Examined the goods with GD retrieved from the system. Description. Polyester grey undyed/ unfinished fabric for ladies shirting in bales. Net wt approx 16900kgs. Origin not shown. It is pointed out that on some bales a label showing container No. BMOU6036471, quantity 234 ctns and on one bale a cargo stack card pasted which shows the following details: DBC Port Logistics Ltd. CFSJNP Sonari Village, Taluka, Uran, Navi Mumbai - 400 707 India. Export Division Cargo Card, Agency Name: SHREE SAMARTH, Shipping Bill No. 4051497 09/11/15, CHA Name: Motherland Shipping. Export Shed No 03, Cargo Description: Fabric. The quality of all the fabric is same which reflect that whole consignment is of India origin. Group is requested to check all aspects keeping in view the ER to ascertain the origin of the goods. Rep sample drawn and forwarded to CH lab for confirmation of actual desp, HS code and all other aspects. Rep sample also forwarded to group for inspection and further confirmation thereof. 100% wt checked vide PICT wt slip No.426548 dated 23.02.2016 and found 17190kgs. Wt slip scanned images attached."

2018 P T D (Trib.) 1685

[Customs Appellate Tribunal]

Before Tahir Zia, Member Judicial-II and Muhammad Nazim Saleem, Member Technical-II

Messrs SHAHEEN AERO TRADERS AVIONIC ENGINEERING, RAWALPINDI and another

Versus

DEPUTY COLLECTOR OF CUSTOMS, GROUP-III, MCC OF APPRAISEMENT WEST, KARACHI and another

Customs Appeals Nos. K-2204 and K-2217 of 2016, decided on 13th July, 2017.

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

----Ss. 25, 25-A, 32 & 79---SRO No.499(I)/2009, dated 13-6-2009---Mis-declaration---Importer, submitted goods declaration---Said declaration was confirmed in all aspects---Assessing Officer passed the assessment order on declared value against quantity of each item---Principal Appraiser framed contravention report in respect of one of the imported items, with the allegation that the importer in connivance with the other importer had committed an act of mis-declaration of weight which was found excess and tried to evade the duty and contravene the provisions of Ss.32 & 79 of the Customs Act, 1969, S.33 of the Sales Tax Act, 1990 and S.148 of Income Tax Ordinance, 2001, punishable under S.156(1)(14) of the Customs Act, 1969---Collector of Customs, ordered confiscation of goods, subject to redemption of 20% fine by invoking S.33 of the Sales Tax Act, 1990 and S.148 of the Income Tax Ordinance, 2001---Section 33 of the Sales Tax Act, 1990 was a penal section and contained penal clauses, which were to be invoked on the contravention of charging/respective sections of the Sales Tax Act, 1990---Said section was synonymous with S.156(1) of the Customs Act, 1969---Section 33 of the Sales Tax Act, 1990 could not be invoked unless charging/relevant sections were invoked by the authority empowered under the respective provisions of Sales Tax Act, 1990---Section 148 of the Income Tax Ordinance, 2001, contained procedure for collection of income tax at import stage by the authorities referred therein---Said sections were independent under which no charge could be invoked---No show-cause notice could be issued under said sections---Issuance of show-cause notice on the basis of irrelevant sections, rendered show-cause notice and order-in-original void ab initio and of no legal effect---Collectorate of Customs was not empowered to lay hands on the matter falling within ambit of S.11 of the Sales Tax Act, 1990 and S.162 of Income Tax Ordinance, 2001---Said sections empowered the Officers of Inland Revenue/Commissioner of Income Tax to initiate adjudication/recovery proceedings for the short collected/paid sales tax and income tax---Clearance Collectorates, did have the authority to collect sales tax and income tax at import stage in the capacity of collecting agent and could recover escaped/short payment paid customs duty and regulatory duty levied on imported goods, after process of law, but had no powers to adjudicate the cases of short recovery/evaded amount of sales tax and income tax---Exercise of jurisdiction on that point by Collector of Customs Adjudication, was without lawful authority---Issuance of show-cause notice and passing of order-in-original were held to be ab initio void, coram non judice on that point.

[Case-law referred]

(b) Words and phrases---

----Declaration---Meanings.

[Case-law referred]

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

----S. 32---False statement or misdeclaration---Declaration of importer, could only be termed as 'misdeclared', if during the course of examination, his given description, quality, quantity or weight was found contrary or any document delivered to Customs Officer was found to be false, forged or tampered; or a statement given in answer to any question put to him, was found to be false---Prior to leveling allegation under S.32 of the Customs Act, 1969, Authority had to determine that whether the importer had given declaration or submitted document/statement knowingly or having reason to believe that such documents and statement was false in material particular---Importers had been dragged needlessly, in the litigation in the absence of any wrong-doing or misdeclaration within the meanings of S.32 of the Customs Act, 1969---Show-cause notice was vacated and impugned order-in-original, was set aside, in circumstances.

[Case-law referred]

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

----Ss. 25, 25-A, 32 & 156---Charging of duty and taxes on the imported goods---Duty and taxes, to be charged on goods, actually imported for use/consumption of the general public---No provision of Customs Act, 1969 had empowered the officer of Customs to add the weight of essential/non-essential packing---Vital element was its cost not weight and that was validated from the provisions of S.25 of the Customs Act, 1969 which provided about "goods" and "class of goods".

[Case-law referred]

Nadeem Ahmed Mirza (Consultant) present for Appellant.

Adnan Rafiq, Deputy Collector and Asad Masood Principal Appraiser present for Respondents.

2018 P T D (Trib.) 1702

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Member (Judicial)

SHAKIR JAN

Versus

COLLECTOR OF CUSTOMS, PESHAWAR

Customs Appeal No.980/PB of 2014, decided on 17th January, 2018.

Customs Act (IV of 1969)---

----Ss. 2(s), 16 & 17---SRO No.499(I)/2009, dated 13-6-2009---Smuggling---Car in question parked at road side, was checked by Anti-Smuggling authorities for its import status---Person sitting in the car produced Registration Book, but failed to provide any proof regarding legal import of said car and same was detained under S.17 of the Customs Act, 1969---Motor Registration Authority provided documents of the Customs Collectorate on which car was registered and said documents were sent to Superintendent (I&P) Model Customs Collectorate concerned for verifications who vide letter replied that verification did not tally with the record and found the documents bogus---Detention of car was converted into seizure in violation of Ss.2(s) & 16 of the Customs Act, 1969---Additional Collector of Customs (Adjudication), vide order-in-original, confiscated the car---Car, in question having been proved to be smuggled one and brought into the country through unauthorized routes without payment of leviable duty and taxes and was registered with connivance of staff of Customs Collectorate and Motor Registration Authority, appeal against impugned order-in-original, was dismissed, in circumstances.

Ajoon Khan for Appellant.

Muhammad Azeem, Supdt/DR for Respondent.

2018 P T D (Trib.) 1705

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs CHIEF AUTO CENTRE (PVT.) LTD., LAHORE and another

Versus

COLLECTORATE OF CUSTOMS, ADJUDICATION-I, KARACHI and another

Customs Appeals Nos. K-1224, K-1223, K-1226 and K-1225 of 2016, decided on 9th June, 2017.

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

----Ss.194-A & 195-B---Appeal to Appellate Tribunal---Maintainability---Appeal was objected to, contending that same could not be heard for decision, unless the imposed fine and penalty was paid by the appellant as expressed in S.195-B of the Customs Act, 1969---Validity---Section 195-B of the Customs Act, 1969, being directory and permissive in nature, appeal could not be dismissed on the basis of non-deposit of imposed fine/penalty---Section 195-B of the Customs Act, 1969, while directing the deposit of amount of duty in respect of goods, which were not under the control of Customs Authority or any penalty levied under that Act, though had used expression "shall", but no consequences followed in the expression for non-compliance---Section 195-B of the Customs Act, 1969 was deemed to be directory and not mandatory.

S.M. Naqi son of Syed Muhammad Hussain, Karachi v. Collector of Customs (Adj-I) and others (Customs Reference No.157 of 2008); PLD 1972 SC 326; Niaz Muhammad Khan v. Mian Fazal Rakib PLD 1974 SC 134; 1993 MLD 1645, 1993 CLC 1405 and 2005 PTD (Trib.) 731 ref.

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

----S. 181---SRO No.499(I)/2009 dated 13.6.2009---Imposition of redemption fine---Adjudicating authority, for the purpose of imposition of redemption fine, had resorted to application of SRO No.499(I)/2009, dated 13.6.2009 despite there being no allegation as to the import being violative of S.15 or a notification issued under S.16 of the Customs Act, 1969, or any other law for the time being in force, which requirements clearly had the mandate of the provisos to S.181 of the Customs Act, 1969---Such recourse had been adopted by the adjudicating authority, without there being any allegation in such regard, either narrated in the show-cause notice or in the order-in-original---Adjudicating authority had also unlawfully fixed the amount of the redemption fine to the extent of 35% of the value of the offending goods, inspite of the fact that customs value, was to be worked out with reference to the amount of duty/taxes attempted to be evaded and not the value of the offending goods---Manner in which the redemption fine had been imposed, simply militated against the settled principles of law and was neither warranted nor sustainable under the law.

Weave & Knit (Pvt.) Limited's case 2004 PTD 2981 and Novo Nordisk Pharma's case 2013 PTD (Trib.) 2186 ref.

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

----Ss.32, 80, 83, 168 & 186---SRO No. 371(I)/2002, dated 15-6-2002---SRO No. 486(I)/2007, dated 9-6-2007---Mis-declaration---Evasion of duty and taxes---Seizure or detention of goods---After examination of goods, authorities, in exercise of powers vested upon them, through SRO No.371(I)/2002, dated 15-6-2002 passed valid assessment/ clearance orders, meaning thereby, the goods were out of charge of the customs---Said goods could not be detained or seized by either Director General of Intelligence and Investigation, or for the purpose of examination and assessment or even classification; as nothing of that sort was permissible, as after the goods were out of charge of Customs Officials they would become functus officio---Even otherwise, powers of valuation, classification and assessment, were not available to the said Directorate under SRO No.486(I)/2007, dated 9-6-2007---In case of apprehension of evasion of duty and taxes, the appropriate course available with Directorate was to file appeal under S.193 of the Customs Act, 1969 against the assessment orders passed under S.80 of the Customs Act, 1969, incorporating the apprehension and facts of the case and the controverting provisions of the Act/Rules---Directorate had also charged the appellants/importers for mis-declaration under the provision of S. 32(2) of the Customs Act, 1969, in absence of availability of collusion, without any basis---Appeal was allowed, holding that the subject goods, in terms of description, were to be assessed as per importers' declaration---Impugned order-in-original and the show-cause notice, were set aside.

2002 SCMR 312; 2009 PTD 1507 and 2005 SCMR 492 ref.

Asim Munir Bajwa for Appellants.

Muhammad Sadiq, I.O. and Saud-ul-Hassan, Investigating Officer present for Respondents.

2018 P T D (Trib.) 1774

[Customs Appellate Tribunal]

Before Tahir Zia (Member Judicial-II) and Muhammad Nazim Saleem (Member-Technical-II)

The COLLECTOR OF CUSTOMS, through Deputy Collector (Group-VI), MCC of Appraisement (East) Customs House, Karachi

Versus

The RANGEELA INTERNATIONAL 43-G, GULBERG II, LAHORE and another

Customs Appeal No.K-2135/2016, decided on 4th February, 2017.

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

----Ss. 32, 79 & 156(1)---Mis-declaration---Consignment comprised of 5110 Kgs of "L.C.D. Computer Monitors" and clearing agent transmitted the Goods Declaration with M.C.C. of Appraisement (M.C.C.E.)---Assessing Officer framed contravention report stating that imported goods were 'T.V.' and not Computer Monitors; that importer had deliberately concealed/declared the description of the imported goods and attempted for getting the imported goods at lower tariff rate for evading legitimate amount of taxes wilfully and with mala fide intention; that said act of the importer attracted the provisions of Ss.32(1)(2) & 79(1) of the Customs Act, 1969, punishable under S.156(1) of the Customs Act, 1969---Collector of Customs Adjudication passed order-in-original, wherein, he on the basis of the report of Expert Company, held that subordinates of Collector of Customs, were unable to establish the charges levelled in show-cause notice against the importer---Collector of Customs, had challenged the vires of said order of Collector of Customs Adjudication in appeal before the Appellate Tribunal---Validity--Claim of Collector of Customs that monitors imported in fact, were T.Vs., had not been validated by the team of technical exparts ---Said experts in their report presented after examination of the sample, had confirmed that the goods imported by the importer, were Monitors and not T.Vs.---Appeal against impugned order-in-original, being without merit and substance, was not maintainable---Collector was directed to issue a delay and detention certificate for submission to respective shipping company and P.I.C.T. for waiver of accumulated container detention/rental and terminal demurrage/storage charges due to needless adjudication---Order accordingly.

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

----Ss. 194-A & 179---Appeal to Appellate Tribunal---Limitation---Section 194-A of Customs Act, 1969, had prescribed the time limit of 60 days from the date on which the decision or order sought to be appeal against was communicated to the Collector---Appeal filed after lapse of 60 days from the date of which the order under S. 179 of the Customs Act, 1969 was served on the Collector, would be barred by time---Appeal would be deemed to have been properly filed when annexed with challan of one thousand rupees, which was not done in the present appeal---Appeal, not validly and legally filed, was not maintainable---When the law had prescribed method for doing a thing in a particular manner, such provision of law was to be followed in letter and spirit---Attaining the objective of performing or doing of a thing in a manner other than provided by law, would not be permitted.

Amjad Iqbal, A.O. for Appellant.

Nadeem Ahmed Mirza Consultant and Mirza Abeer for Respondents.

2018 P T D (Trib.) 1846

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)

Messrs WASEEM BROTHERS, KARACHI

Versus

COLLECTOR OF CUSTOMS, KARACHI and another

Customs Appeal No. K-2297 of 2016, decided on 30th November, 2017.

Customs Act (IV of 1969)---

----Ss. 32, 32-A & 156(1)(9)(14)--- SRO No. 1125(I)/2011, dated 31-12-2011 (as amended by SRO No.504(I)/2013, dated 12-6-2013)---Mis-declaration and fiscal fraud---Five consignments were imported and accordingly goods declarations were filed---Department alleged that importers claimed and availed undue benefit of reduced rates of sales tax and income tax under SRO No.1125(I)/2011, dated 31-12-2011---Contention of importers was that they were entitled for claiming the said benefits in respect of first three goods declarations as they had fulfilled all the conditions as laid down in the SRO 1125(I)/2011, dated 31-12-2011---Importers conceded that short payment was made by them in one declaration by paying sales tax at 2% instead of 17% in the light of SRO No.504(I)/2013, dated 12-6-2013---Importers, at the same time claimed that they had paid excess amount in the case of one declaration---Importers suggested that short paid amount as per said goods declaration, could be adjusted by the department against excess amount paid against one declaration---Department, was in complete agreement with the position taken by the importers---Department was directed by the Tribunal to refund the excess amount deposited by importers against the goods declaration make adjustment accordingly---Impugned order-in-original passed by the Additional Collector of Customs (Adjudication) was not accordingly to the statutory requirements, besides being derogatory to specific provisions of law which was set aside being without lawful authority, void ab initio, in circumstances.

Muhabbat Hussain Awan and Ms. Suraiya Sarwar for Appellant.

Azhar Abbas, Appraising Officer for Respondent.

MCC of Appraisement East, Karachi: Called absent.

2018 P T D (Trib.) 1860

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)

Messrs IMK TRADERS and 9 others

Versus

The DIRECTOR GENERAL, DIRECTORATE GENERAL OF CUSTOMS VALUATION, CUSTOMS HOUSE, KARACHI and another

Customs Appeal No.K-226 to K-232, K-319, K-138 and K-174 of 2017, decided on 28th March, 2017.

Customs Act (IV of 1969)---

----Ss.25 & 25-A---Determination of customs value of imported goods---Issuance of fresh valuation ruling---Goods in question were imported when Valuation Ruling No.665/2014, dated 31-3-2014, was in field and according to that ruling goods were being assessed and cleared by the customs---When the goods were on way, the Director Valuation, by issuing a new Valuation Ruling enhanced the value of the goods more than 300%---Said fresh valuation ruling was challenged by the importer by filing review application before the Director General of Valuation, which application was rejected---Validity---Customs Officers were limited or restricted only to the methods set forth in S.25 of the Customs Act, 1969, not to act otherwise---If, some method other than the one specified in S.25 of the Customs Act, 1969 was followed that would clearly be ultra vires the powers conferred under S.25-A of the Customs Act, 1969---Department had no justification about such increase which clearly reflected against the statutory obligations, prescribed under Ss.25 & 25-A of the Customs Act, 1969---In the present case, Director General, Customs Valuation acted in contradiction to the provisions of S.25-A of the Customs Act, 1969---Being custodian of law, purpose of administration of justice, was to hold and not to thwart importer's right---Authorities, were directed not to issue any fresh Valuation Ruling against the procedure laid down under S.25 of the Customs Act, 1969---Impugned Valuation Ruling lacked the warrant of law, and its issuance had no adherence to the statutory requirement as laid down in S.25 of the Customs Act, 1969---Said Valuation Ruling was declared as void, illegal and without lawful authority, and was set aside---Impugned order-in-review was illegal and was declared to be void and without lawful authority and set aside.

S.M. Naqi son of Syed Muhammad Hussain, Karachi v. Collector of Customs (Adjudication-I), Karachi and others Customs Reference No.157/2008 ref.

Ghulam Yasin, Consultant and Muhammad Siddiq Zia, Consultant for Appellant.

M. Aslam, Principal Appraiser for Respondents.

2018 P T D (Trib.) 1903

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)

Messrs CAREWELL TRADERS, KARACHI and 14 others

Versus

DIRECTOR GENERAL, DIRECTORATE GENERAL OF CUSTOMS VALUATION, CUSTOMS HOUSE, KARACHI and another

Customs Appeals Nos.K-2162, K-2166 to K-2176, K-2186, K-2260 and K-2286 of 2016, decided on 13th February, 2017.

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 25-D & 81---Customs Rules, 2001, R.107(a)---Import of goods---Determination of customs value of goods---Provisional assessment of duty---Goods in question, were imported depending on the category/quality of the goods---Local manufacturers of the said goods, approached the Officers of Directorate General Customs Valuation for enhancement of import value of said goods to protect their industry---Director General Valuation, with the active collaboration of local manufacturer; issued a Valuation Ruling and revised/enhanced the values with the pretext that the international prevailing prices of goods in question were on higher side---Directorate again re-determined the value of goods without proper consultation with the importers under another Ruling and enhanced the same accordingly---Said determination being not acceptable to the importers they filed revision petition before the Director General Valuation for consideration of their request and to allow clearance under S.81 of the Customs Act, 1969 till the order-in-revision---Director General Valuation, allowed the request of the importers for provisional release of goods, but re-determined the goods enhancing the value of goods---Director General Valuation under S.25-D of the Customs Act, 1969, could only deliberate with the value earlier determined in a Ruling issued by the Director Valuation under S.25-A of the Customs Act, 1969---Director General Valuation had no inherent power or jurisdiction to travel beyond his authority---Director General Valuation, was not authorized to re-determine or adjudicate the issue, which was never been assailed before him against any valuation ruling---Department was alleged to show some material to justify the observations caused and imposed by the Director General of Valuation in the impugned order-in-revision---Legal lacunae of such type and such disclosures, would discredit the impugned action---Impugned order-in-revision, ruling and its perfunctory and sketchy revision by the Director General, were devoid of the attributes which were declared without lawful authority, void and illegal and were set aside to the extent of importers/appellants, only---Department was further directed to re-asses the impugned goods of the importers in accordance with the value as declared in terms of S.25(1)(5)(d) of Customs Act, 1969, read with R.107(a) of Customs Rules, 2001---Appeals were allowed in such terms, in circumstances.

S.M. Naqvi son of Syed Muhammad Hussain, Karachi v. Collector of Customs (Adjudication-I) Karachi and others, Customs Reference No.157/2008; Sadia Jabbar v. Federation of Pakistan and others C.P. No. D-2673/2009; 2008 PTD 1494; Sadia Traders v. Federation of Pakistan 2007 PTD 2623 and 2006 PTD 909 ref.

Muhabbat Hussain Awan for Appellants along with Ms. Suraiya Sarwar present (in C.As. Nos.K-2162/2016, K-2166 to K-2176/2016, K-2186/2016, K-2260/2016 and K-2286 of 2016).

Ghulamullah for Appellant (in C. A. No. K-2171/ 2016), Allison Stephen, P.A. and Nadeem Anwar, V. O., for Respondents.

2018 P T D (Trib.) 1916

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial)

DEPUTY COLLECTOR OF CUSTOMS (IMPORTS), MODEL CUSTOMS COLLECTORATE, FAISALABAD

Versus

Messrs E.R. BROTHERS, FAISALABAD and another

C.A. No.94/LB of 2017, decided on 24th May, 2017.

Customs Act (IV of 1969)---

----Ss. 15, 16 & 17---Import Policy Order, 2016 Appendix-C---Confiscation of goods being not importable---Declaration for old/used machinery and some new items---Examination process revealed that the old and used goods were not importable in such condition under the provisions of Appendix-I of the Import Policy Order, so were detained---Adjudicating Officer ordered outright confiscation of the goods being not importable in such condition---Collector of Customs (Appeals), modified, the impugned order, holding that goods were correctly classified under PCT Heading 8504.4090, which were importable in such condition under the Import Policy, 2016---Goods were ordered to be released against duty and taxes leviable thereon---Validity---Goods imported would only be classifiable in their respective PCT Heading if those were imported separately; however, in event of those being imported along with a another system, notwithstanding the fact that those had been individually packed or that those fell under PCT Headings, same merited classification under PCT Heading 8504.4090 being integral components of a composite system---Imported goods in old and used condition, was not hit by Appendix-C of Import Policy Order, 2016 being part of a composite system classified under PCT Heading 8504.4090---Appellate order was upheld, by the Tribunal accordingly.

Muhammad Awais Kamboh for Appellant.

2018 P T D (Trib.) 1925

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial) and Imran Tariq, Member (Technical)

The COLLECTOR OF CUSTOMS, MCC (APPRAISEMENT), LAHORE and another

Versus

Messrs ADVANCE ENERGIES, GULBERG, LAHORE

C.A. No.02/LB of 2016, decided on 22nd May, 2017.

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

----Ss. 19 & 20, Vth Schedule, Item No.24---SRO No.568(I)/2014, dated 26-6-2014---Exemption of customs duty---Consignment comprised of "Complete SMD/LED Lights in Parts" at the transactional value at US$ 1,746.92 and importer sought clearance under PCT Heading 9405.1090 vide goods declaration---Importer claimed exemption of customs duty vide Sr. No.24 of the Vth schedule of the Customs Act, 1969 and under SRO No.568(I)/2014, dated 26-6-2014---Goods were found in accordance with description, quantity, weight and import origin as declared in the invoice, packing list enclosed with the goods declaration---Appraising Officer assessed the impugned 'LED Lights' under HS Code extending exemption under provisions of Vth Schedule of Customs Act, 1969 and VIth Schedule of Sales Tax Act, 1990 and SRO No.568(I)/2014, dated 26-6-2014---Adjudicating Officer assessed the imported goods in accordance with law and the benefit of SRO No.568(I)/2014, dated 26-6-2014 and Vth Schedule of Customs Act, 1969 had been refuted---Collector of Customs (Appeals)/Appellate Authority, on appeal set aside order of Adjudicating Officer holding that impugned items were entitled for exemption as per Sr. No.24 of the Vth Schedule of the Customs Act, 1969---Validity---Purpose for which Item No.24 of Vth Schedule of the Customs Act, 1969 had been embodied, was that of promotion of 'renewable emergency technologies' as used in Item No.24 of the Schedule, had much wider connotation than what had been projected by Departmental Representative---Departmental interpretation of restricting tariff concession under the Schedule solely to the extent of electric current extracted through use of solar energy, was based upon a misconception of fact and law and mere a conjecture---Type of output electrical current, could not be equated with ascertainment of the type of source energy used to run the electrical power generating system---Departmental stance of associating renewable energy technologies with direct current being cryptic in nature, could not sustain the test of judicial scrutiny---Serial No.24 of Vth Schedule, revealed that the impugned tariff entry was bereft of any precondition with regard to restricting the scope of concession to the extent of type of source energy or the current used in illuminating the specified 'LED Lights'---Pivotal legislative intent behind Item No.24 of the Schedule was that of inclusion of articles carrying the most energy efficient technologies---In absence of any wording in the statute supporting restriction on the scope of concession granted thereunder to the extent of 'LEDs' based unilaterally on direct current, the interpretation rendered by Federal Board of Revenue tantamounted to subversion or recasting of legislation through manufactured interpretation, which could not be sustained---Impugned 'LED Lights' merited exemption of customs duty, sales tax and regulatory duty under Sr. No.24 of the Vth Schedule of the Customs Act, 1969---Appeal of the department being devoid of merits, was dismissed in circumstances.

(b) Words and phrases---

----'Renewable energy'---Meaning explained.

According to encylopedia Britannica ref.

Moazzam Sultan Appraiser for Appellant.

2018 P T D (Trib.) 1938

[Customs Appellate Tribunal]

Before Justice (Retd.) Malik Manzoor Hussain, Chairman/Member Judicial and Zulfiqar A. Kazmi, Member (Technical)

DIRECTOR, DIRECTORATE OF INTELLIGENCE AND INVESTIGATION FBR, LAHORE and another

Versus

GUL ALAM and others

Customs Appeals Nos.271/LB/2015 and 359/LB/2015, decided on 16th May, 2017.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 156(1)(89), 157, 168 & 181---SRO No.499(I)/2009, dated 13-6-2009---Smuggling---Seizure and confiscation of vehicle loaded with smuggled goods---Huge quantity of goods of foreign origin were found in the Vehicle (Bus) in question---Adjudication Collectorate after hearing the parties passed order, released the goods on payment of duty/taxes leviable thereon along with redemption fine equal to 20% of the assessed value---Vehicle in question was released on payment of redemption fine of Rs.100,000---Validity---Plea of the department was that under special circumstances of the case, the only order would have been that of confiscation, and option of redemption fine under S.181 of the Customs Act, 1969 was not available to the claimants of seized goods under SRO No.499(I)/2009, dated 13-6-2009---Claimants of seized goods, had admitted the fact that the goods seized were smuggled items---Goods seized were restricted/prohibited goods, thus were "smuggled" goods as defined in S.2(s)(ii) of the Customs Act, 1969, and provisions of cl.89 of S.156 of the Customs Act, 1969 was applicable thereto---Once it was established that the goods confiscated were notified one, it would squarely fell within purview of S.2(s) of the Customs Act, 1969---Federal Board of Revenue, as per SRO No.499(I)/2009, dated 13-6-2009 had notified that no option would be given to pay fine in lieu of confiscation in respect of smuggled goods---In the said SRO, the vehicle found carrying smuggled goods and being used repeatedly for transportation of offending goods, could not be released on payment of redemption fine---Vehicle in question was previously involved in smuggling and was released on payment of redemption fine and warning---Appeal filed by the department, was allowed and orders passed by the fora below, set aside and appeal filed by claimants of the seized goods, was dismissed, in circumstances.

Collector of Customs, Peshawar v. Wali Khan and others Civil Appeal No.1050 of 2009 and Collector of Customs, Multan v. Mohammad Saleem PTCL 2002 CL 80 rel.

Nadeem Mehmood Mian for Appellant.

2018 P T D (Trib.) 1947

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)

Messrs NICE TRADERS, GUJRANWALA

Versus

The DIRECTOR GENERAL, DIRECTORATE GENERAL OF VALUATION, CUSTOMS HOUSE, KARACHI

Customs Appeal No.K-25 of 2017, decided on 21st August, 2017.

Customs Act (IV of 1969)---

----Ss. 25, 25-A & 25-D---Import of goods---Customs value of goods---Determination---Declared value of imported goods was accepted by the Clearance Collectorate---Directorate General of Valuation, issued Valuation Ruling through which value of imported goods was determined under heading of "other origin", and no notice of hearing was served upon the importer---Importer filed revision under provisions of S.25-D of the Customs Act, 1969, which was rejected---Vires of said rejection order was challenged before the Customs Appellate Tribunal which declared the impugned Ruling and revision order as of no legal effect to the extent of the importer; with direction to accept the declared value of the importer being fair---Said order was served on the authorities, but on the very date when the order was served, authorities with mala fide intention and to thwart the compliance of the order of the Tribunal, issued fresh ruling, through which value of goods of foreign origin was again determined at US $ 1.35/Kg, without any basis or evidence in support of the same---Importer again filed revision application before Director General Valuation, who rejected the same---Validity---Director, General of Valuation was only empowered to determine value for the levy of customs duty under the provisions of S.25-A of the Customs Act, 1969 but valuation ruling was issued through which value for levy of sales and income tax at import stage was also determined in the absence of any lawful authority---Competent authority empowered to determine the value for levy of sales tax on imported goods was "Officer of Inland Revenue" under the respective provisions of Sales Tax Act, 1990 and Income Tax Ordinance, 2001---While issuing Valuation ruling, it was mandated upon the Director General of valuation to state prominently in the ruling that value so fixed was only for the levy of customs duty not for sales tax and income tax at import stage---By laying hand on the domain of the officer of 'Inland Revenue' the Director General of Valuation had usurped the power not vested to it, rendering the determination of value through the impugned valuation ruling without power/jurisdiction---Director General valuation was not empowered to fix/determine the value of imported goods through valuation ruling in exercise of power vested under S.25-A of the Customs Act, 1969; Federal Board of Revenue was to issue notification in that respect---Assumption of jurisdiction, was of great importance and power had to be exercised within allotted sphere; acting contrary to the said principle was incurable, rather fatal for the case---Director General Valuation had erred in law and impugned order-in-revision did not appropriately reflected on the submissions and argument of the importer, nor did it illuminate as to why the significant case-law presented by the importer were considered irrelevant---Valuation Ruling issued under S.25-A of the Customs Act, 1969 only would apply for a certain period---If some method other than specified in S.25 of the Customs Act, 1969, was complied, that would be ultra vires the powers conferred under S.25-A of the Customs Act, 1969---Order-in-revision was set aside and Valuation Ruling by the Director General and Director Valuation, did not have any adherence with the statutory requirements---Valuation Ruling was declared to be without lawful authority, void and infested with patent illegally and was set aside.

[Case law referred].

Nadeem Mirza for Appellant.

Safdar, P.A. for Respondents.

2018 P T D (Trib.) 1991

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs TRACKING WORLD (PVT.) LTD., LAHORE

Versus

COLLECTORATE OF CUSTOMS, MCC OF APPRAISEMENT-WEST, KARACHI and 2 others

Customs Appeal No.K-1238 of 2016, decided on 24th May, 2017.

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

----S. 186---SRO No.371(I)/2002, dated 15-6-2002---Detention of the consignment---Consignment could only be detained under S.186 of the Customs Act, 1969, after payment of leviable duty and taxes and order of clearance by the authority defined under S. 186 or SRO No.371(I)/2002, dated 15-6-2002, if any adjudication order against the importer was in field and wherein fine/penalty had been imposed and which was not paid; or in the case wherein contravention report had been framed in an under-clearance consignment; for adjudication by the competent authority as defined in S.179 of the Customs Act, 1969 for imposition of fine or penalty---In the absence of the said conditions in the provisions, consignment, could not be detained under S.186 of the Customs Act, 1969---In the present case, no such order was available; wherein adjudicating authority had imposed any fine or penalty on the importer, nor any contravention report was prepared for the purpose of adjudication, prior to passing of assessment/clearance order under the respective provisions of the Act/Rules---Consignment, in the present case, had been detained by subordinates of the Director of Intelligence and Investigation, after passing of valid assessment/ clearance order by the adjudicating authority in exercise of the powers conferred upon him by S.R.O. No.371(I)/2002, dated 15-6-2002 on the premises that the goods so imported were under assessed on the basis of declared erroneous description, PCT and appreciation of incorrect value---Detention under such pretext was not permissible under the provisions of S.186 of the Customs Act, 1969---Officials of Director of Intelligence and Investigation or any other authority being not competent to detain the consignment on said pretext was in derogation of the express provision of S.186 of the Customs Act, 1969.

[Case law referred].

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

----S.168---S.R.O. No.486(I)/2007, dated 9-6-2007---Seizure of goods---Director of Intelligence and Investigations, and the officials derived powers for functioning by S.R.O. No.486(I)/2007, dated 9-6-2007 for thwarting the act of smuggling---Such authority would not mean that they had unfettered powers to intercept and detain the goods cleared by the officials of Clearance Collectorate after completion of codal formalities and realization of the leviable duty and taxes, for delivery to the importer through his representative; either in the terminal or their office---Jurisdiction of the said authorities, in fact, was only restricted to the areas falling outside the purview of Ss. 9 & 10 as expressed in S. 177 of the Customs Act, 1969 and S.R.O. No.188(I)/83, dated 12-12-1983---Without any allegation of smuggling, in the contravention report and invoking of the said jurisdiction in the show-cause notice, Collectorate of Customs, could not assume powers of seizing the goods under S.168(1) of the Customs Act, 1969---Directorate of Intelligence and Investigation was not empowered to exercise powers under the provisions of S.168(1) of the Customs Act, 1969, which could only be exercised by invoking the provisions of S.2(s) of the Customs Act, 1969---Goods, in question could not even be seized by said directorate---Unlawful act of the directorate of Intelligence and Investigation was an act of high handedness, abuse of powers being in violation of the law, void ab initio and coram non judice.

[Case law referred].

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

----Ss. 32, 79, 80 & 195---S.R.O. No.371(I)/2002, dated 15-6-2002---Untrue statement, error etc.---Assessment of duty---Powers of the Federal Board of Revenue or Collector of customs to pass certain orders---Federal Board of Revenue had not delegated powers to the Director of Intelligence and Investigation under the provision of Ss.32 & 79 of the Customs Act, 1969 which were incorporated in the contravention report and were invoked in the show-cause notice by Additional Collectorate of Customs; because S.32 provided about false statement, error etc. and S.79 (Declaration and Assessment of Home Consumption Warehousing) was a machinery section and defined the procedure for filing of goods declaration by the importer---For re-opening of the appealable order, powers under S.195 of the Customs Act, 1969 had been conferred either on the Collector of Customs or Federal Board of Revenue---Despite the fact that no powers under said sections were available with the Directorate of Intelligence and Investigation reopened the assessment order passed by the competent authority under the provisions of S.80 of the Customs Act, 1969---Mode and manner in which the said Directorate operated, was nothing more than creating a situation of anarchy---Detention/seizure and subsequently preparation of contravention report by the Directorate of Intelligence and Investigation and issuance of show-cause notice/ passing of order-in-original by collectorate of customs and putting thereupon order-in-appeal, were without powers/jurisdiction and lawful authority, as such, null, void ab initio and coram non-judice.

[Case law referred].

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

----Ss. 80, 179, 180 & 193---S.R.O. No.371(I)/2001, dated 15-6-2001---Assessment order---Assessment order by adjudicating authority under S.R.O. No.371(I)/2001, dated 15-6-2001, could not be disturbed by any authority for preparing contravention report, overlapping assessment order; for initiation of adjudication proceedings---Additional Collector of Customs, in the present case, issued show-cause notice and passed order-in-original---Only course available under the law for Collectorate of Customs and Directorate of Intelligence and Investigation was to challenge the assessment order before the Collector of Customs (Appeals) under S.193 of the Customs Act, 1969 in exercise of the powers delegated upon them---In the presence of an appealable order, fresh order could not be passed even in the shape of assessment order or through issuance of show-cause notice under S.180 while exercising powers either under provisions of S.80(3) or S.179 of the Customs Act, 1969---Detention/seizure notice and contravention report, was annulled, show-cause notice was vacated and orders passed by forums below, were set aside being illegal, void ab initio.

[Case law referred].

Javaid Anjum, G.M. for Appellant.

Saeed Ahmed Soomro P.A. for Respondent No.1.

Saud ul Hassan I.O. for Respondent No.2.

2018 P T D (Trib.) 2013

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II) and Muhammad Nazim Saleem, Member (Technical-II)

Messrs GMSA INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

DEPUTY COLLECTOR OF CUSTOMS (R&D) and 3 others

Cus. Appeal No.K-1005 of 2016, decided on 18th July, 2017.

Customs Act (IV of 1969)---

----Ss. 26-A, 32, 79, 80 & 83---SRO No.371(I)/2002, dated 15-6-2002---Mis-declaration---Reassessment---Goods declaration was filed and deposited up front duty and taxes against each goods declaration---Physical verification, revealed that goods were found the same as declared---Inbuilt authority passed clearance orders and clearing agent of the importer, thereafter obtained the deliveries of the consignments from terminal---Later on, competitor of appellant forwarded complaint in regard to under assessment and on the strength of which Deputy Collector of Customs (R&D) opened file and forwarded his opinion to the superior authorities, who ordered reassessment of all the goods declaration---Deputy Collector of Customs (R&D) directed the Deputy Collector of Customs, (Group-II) to reassess as ordered---In compliance to that, Deputy Collector of Customs (Group-II) passed reassessment order---Being aggrieved from said reassessment order, importer filed appeal before Collector of Customs (Appeals), who declared all the reassessment orders passed by Deputy Collector of Customs (Group-II) beyond jurisdiction observing that he was not within his right to create recovery through view message in absence of compliance of the mandated requirement of issuance of show-cause notice---Deputy Collector of Customs (R&D), thereafter framed contravention report against the goods declaration with the allegation that importer obtained the clearance of goods on lower value, which was instrumental in causing loss to the Exchequer---Validity---Proper course of action available with Deputy Collector of Customs (R&D) was to file appeals against the order of Collector of Customs (Appeals) before the Customs Appellate Tribunal, but same was not done and the orders of the Collector of Customs (appeal) attained finality---Deputy Collector of Customs (R&D) after lapse of the stipulated period, woke up and in order to cover up his negligence/carelessness and after lapse of the period of 60 days, flogged the dead horse by preparing contravention report, based on the same facts and grounds on which reassessment orders were passed; which were declared without lawful authority/jurisdiction and arbitrary by Deputy Collector of Customs (R&D)---In presence of order of Collector of Customs (appeal) no occasion was available with Deputy Collector of Customs (R&D) to frame contravention report and Collector of Customs Adjudication to issue show-cause notice and pass order-in-original---Only one order at a time had to remain in the field, no second order was permitted to file upon the existing order which had attained finality---In terms of Rule of Business, officer of same grade, was not empowered to pass an adverse order in the presence of order of officer of same grade; wherein relief had been granted to a person after allowing the appeal after setting aside the order passed by subordinate authority---Collector of Customs (Appeal) and Collector of Customs Adjudication were of the same grade Collector of the Customs Adjudication was not empowered for nullifying the order passed by Collector of Customs (Appeals), which had attained finality---Despite issuance of order by Collector of Customs Adjudication the order passed by the Collector of Customs (Appeals), would remain intact being valid and lawful and the order passed by Collector of Customs Adjudication would bear no consequences---Preparation report of Deputy Collector of Customs (R&D) and issuance of show-cause notice and passing of order-in-original by Deputy Collector of Customs (Group II)), were ab initio illegal and void and of no legal effect which were set aside.

Messrs Smith Kline French v. Pakistan 2004 PTD 3020; Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310; Messrs Paramount International (Pvt.) Ltd. v. FOP and another 2014 PTD 1256; 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, Noshehra and others v. Sarfraz Khan and others PLD 2001 SC 514; Pak Suzuki Motors Company Ltd., Karachi v. Collector of Customs, Karachi 2006 PTD 2237; 2009 PTD (Trib.) 1996; 2010 PTD (Trib.) 832; All Pakistan Newspaper Society v. F.O.P. PLD 2004 SC 600; Khyber Tractors (Pvt.) Ltd. v. FOP PLD 2005 SC 842; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax, Gujranwala 2008 PTD 60; Messrs Hanif Strawboard Factory v. Additional Collector (Adjudication) Customs, Sales Tax and Central Excise Gujranwala 2008 PTD 578; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and 4 others 2009 PTD 762; Messrs Syed Bhai Lighting Limited, Lahore v. Collector of Sales Tax and Federal Excise, Lahore and 2 others 2009 PTD (Trib.) 1263; Leo Enterprises v. President of Pakistan and others 2009 PTD 1978; Innovative Impex, v. Collector of Customs, Sales Tax and Federal Excise (Appeal) 2010 PTD (Trib.) 1010; Fazal Ellahi v. Additional Collector of Customs, MCC of PaCCS 2011 PTD (Trib.) 79; Unique Wire Industries v. Additional Collector of Customs, MCC of PaCCS 2011 PTD (Trib) 987; Kaka Traders v. Additional Collector of Post Clearance Audit 2011 PTD (Trib.)1146 and Pak Electron Ltd. v. Collector of Customs, Lahore and others 2012 PTD (Trib.) 1650 ref.

Nadeem Ahmed Mirza for Appellant.

Syed Azam Shah (Appraiser) for Respondents Nos. 1, 2 and 4.

2018 P T D (Trib.) 2066

[Customs Appellate Tribunal]

Before Ch. Muhammad Shabbir Gujjar, Member (Judicial)

Messrs KHYBER TEA AND FOOD COMPANY, KATCHERY GATE, PESHAWAR

Versus

DIRECTOR CUSTOMS INTELLIGENCE AND INVESTIGATION, PESHAWAR and 4 others

Customs Appeal No.241/PB of 2012, decided on 21st April, 2017.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 157, 168 & 156---SRO No. 913(I)/2005, dated 30-7-2005---Seizure and confiscation of alleged smuggled goods---Customs Staff seized the alleged foreign origin smuggled goods along with vehicle---Deputy Collector Adjudication, vide order-in-original ordered outright confiscation of the seized goods and released the vehicle against 20% redemption fine---Driver of the vehicle showed the legal import documents along with sales tax invoices to the Customs Official, who denied to accept the said documents---Initially said goods were intercepted by the local Police and thereafter Police handed over the said goods with vehicle to the Customs Officials---Prosecution while not submitting counter affidavit, had admitted the bids narrated by the appellant in his affidavit---SRO No.913(I)/2005, dated 30-7-2005, provided that the Federal Government had withdrawn the powers of Customs Officers entrusted to the Police; in the light of said notification, the Police had no power to detain or stop the goods having documents of lawful possession and legal import---Officers, notified under S.6 of the Customs Act, 1969, could only seize the goods and give it to the custody and care of Customs authorities; whereas, the Police Officers were neither notified nor authorized officers of customs to detect or detain the goods and hand over the same to the Customs authorities---Any such action taken by the Police Officials within the provisions of the Customs Act, 1969 was illegal---Detention of goods by un-notified and unauthorized officers had been termed as "an illegal detention"---Order-in-original, did not show that the documents produced by the appellant were found bogus---Purpose of issuance of show-cause notice was that accused should know about the allegations levelled against him and prepare his defence---Appellant/accused had a right to defend himself and produce the evidence of legal import and lawful possession of the goods---No provision existed in the Customs Act, 1969 and the other laws of the land that accused could not produce the documentary evidence in support of his version at any stage---Seizing Officer by himself had determined the approximate value of the seized goods, however, the determination of the value of the seized goods was the jurisdiction and duty of the Appraiser and not the Inspector of Intelligence and Investigation Wing of the Customs---Duty and jurisdiction of the Inspector Intelligence and Investigation, was to prevent the smuggling, not to determine C.I.F. value of the seized goods---If the law required a thing to be done in a particular manner; it would be legal and valid only if it was done in that manner and not otherwise---In the present case, the determination of C.I.F. value was carried out without lawful authority and jurisdiction and was void ab initio---Appeal, was allowed and authorities were directed to immediately work out the entire sales proceeds that were payable to the appellant accordingly and release the vehicle unconditionally; the redemption fine imposed on the vehicle, was ordered to be remitted.

2007 PTD 157; PLD 1968 Kar 599; PLD 1969 SC 53; PLD 1977 Lah. 1318; PLD 1975 Kar. 482; 2015 PTD 462; PLD 1971 SC 124; PLD 2002 SC 630; 1999 PTD 4126; 2006 SCMR 1713; 1995 SCMR 387; Messrs Hero Tea Company Peshawar v. Collector Customs Appeals Peshawar Appeal No. CUS-1364/PB/2010; 2004 PTD 791; 2012 PTD 1343; 2012 PTD 1632; 2002 PTD 470; 2001 PTD 2097 = 2001 SCMR 1376; 2001 PTD 2982; 2004 PTD 788; 2013 PTD (Trib.) 600; 2016 PTD 80; 2015 PTD 990; 2013 PTD 327 + 600; 2015 PTD 2480; 2007 SCMR 1095; 2008 PTD 60; PLD 2005 Pesh. 214; 2007 SCMR 1256; 2010 SCMR 1408; 2006 PTD 340; PTCL 2005 CL 841; 2012 PTD 428 and 2012 PTD 28 ref.

Syed Pir Alam Shah, Legal Consultant and Fakhr-e-Alam Paracha Managing Director for Appellants.

Naseer Khan Afridi, Superintendent Customs for Respondents.

2018 P T D (Trib.) 2132

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

Messrs TARIQ AUTO TRADERS, KARACHI

Versus

ASSISTANT DIRECTOR DIRECTORATE GENERAL OF PCA and 2 others

Custom Appeal No.K-24 of 2017, decided on 15th July, 2017.

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

----Ss. 25, 25-A, 26-A, 80 & 83---SRO 659(I)/2007, dated 3-6-2007---Mis-declaration---Prior to completion of assessment, goods declarations were referred for examination and were confirmed by Customs Officials by examination report---Competent authority passed assessment orders under provisions of S.80 of the Customs Act, 1969---Directorate General of Valuation, transmitted view messages to the importer for payment of additional amount of duty and taxes for obtaining clearance---Importer paid those and the inbuilt mechanism of 'WeBoc' passed clearance order; consequent to which the delivery of the consignments were obtained by Clearing Agent---Subsequently, Assistant Director, Directorate General of PCA, purportedly conducted audit of the goods declaration in terms of S.26-A of the Customs Act, 1969; wherein it was observed that the goods in fact fell under PCT 3208.2090 and the benefit of Free Trade Agreement with China under SRO No.659(I)/2007, dated 3-6-2007, was not admissible and the goods so cleared should have been after payment of 20% customs duty---Directorate General of PCA framed contravention report and show-cause notice was issued to the importer with the allegation that he obtained the clearance of the goods under erroneous PCT---Said act of the importer was held to be falling within the ambit of S.32, punishable under S.156(1)(14) of the Customs Act, 1969---Provisions of S.26-A of the Customs Act, 1969, clearly showed that the appropriate designated officer of customs, empowered by the Federal Board of Revenue for conducting audit of the record of the importer in the manner prescribed by the Board in rules, but no rules were framed/issued by the Board despite insertion of S.26-A through Finance Act, 2006; resultantly, the audit of importer's account/record maintained by him under provision of S.211 of the Customs Act, 1969, had to be conducted by the Officials of Directorate of Post Clearance Audit or Directorate General of PCA as per the mechanism provided in the section itself---Prior to proceedings with the said exercise appropriate officer appointed for said purpose, had to either summon or give a notice and reasonable time to an importer for the conduction of audit; but Directorate had not issued to importer any notice or served summons for the purported exercise of audit despite mandated under the law---Said lapse had rendered the order so conducted, which was the root cause of the impugned show-cause notice, as of no legal effect---Thing had to be done as it had been prescribed to be done, in case of doing the same in any other manner, would render it illegal and void ab initio---Assumption of power on the strength of Board's letter, was also erroneous as it lent no help to the Additional Collector of Customs as Board had no mandate to interpret the provisions of Act or amend the provision; it could only give opinion and it was for the judicial fora to interpret the provisions of statute---Upon passing of assessment order under S.80 of the Customs Act, 1969, and thereafter passing of clearance order under S.83 of the said Act by competent authority, it could not be disturbed by any authority for the purpose of preparing contravention report and adjudicate proceedings---Only course left for the respondent No.1, was to challenge the said order before the Collector of Customs (Appeals) under S.193 of the Customs Act, 1969, in exercise of the powers delegated upon him through Notification 500(I)/2009, dated 13-6-2009---In the presence of an appealable order, fresh order could not be passed even through issuance of show-cause notice under S.180 of the Customs Act, 1969 while exercising powers under the provisions of S.179 of said Act---Directorate implicated and the Additional Director of Customs charged the importer, for mis-declaration under the provisions of S.32 of the Customs Act, 1969, merely on the basis of assumption/presumption that importers transmitted goods declaration on the basis of erroneous description and PCT, in order to hoodwink the customs and to evade the amount of duty and taxes---Importers, in conduction of examination had no part to play, which was to be carried out by the subordinate of Deputy Collector of Customs with the assistance of officials of Terminal Operation, independently and without any influence---Allegations levelled by Additional Collector of Customs in the show-cause notice, were of general nature and for that reason in support of said notice no intangible incriminating evidence, such as posted examination reports, copies of images, which was vital in such type of cases, were annexed with the show-cause notice or even placed on the record of the Tribunal on the date of hearing---Appellate Tribunal, allowed appeal, show-cause notice providing the basis thereof for impugned order, was vacated/set aside, in circumstances.

[Case-law referred].

(b) Jurisdiction---

----Exercise of---Exercise of jurisdiction by an authority, was mandatory requirement and its non fulfillment would entail the entire proceeding to be coram non judice.

[Case-law referred].

Nadeem Ahmed Mirza for Appellant.

Azhar Abbas, A/O/ D/R for Respondents.

2018 P T D (Trib.) 2162

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial) and Imran Tariq Member (Technical).

Messrs ALBA INTERNATIONAL, LAHORE

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), DRY PORT MUGHALPURA, LAHORE and 2 others

C.A. No.110/LB/2016, decided on 6th September, 2016.

Customs Act (IV of 1969)---

----Ss. 32, 33 & 156(1)(14)---Mis-declaration---Refund, claim of---Importer filed goods declaration, of the goods as "Paper Board" classified under PCT Heading 4802.1000 declaring the value US$ 11780---Representative samples were drawn and sent to laboratory for test---On chemical examination, the sample was actually found metal foil backed paper, which appropriately fell under Heading 7607.2000 of PCT---Said variation in nomenclature of merchandise, not only instigated change in PCT from 4802.1000 to 7607.2000, but also was consequential in increase of assessable value from US$ 11780 to US$ 57350---Appellant was changed with the offence of mis-declaration under S.32(1)(2) of the Customs Act, 1969 punishable under S.156(1)(14) of said Act---Goods in question were put to auction by the customs authorities---Importer filed constitutional petition before High Court, with the request to restrain the customs authorities from auction---High Court directed the customs authorities not to deliver the impugned auctioned goods to the bidder, but despite the court's specific order the goods were delivered to the bidder/purchaser---Importer filed claim of admissible refund of sale proceed---Said claim was rejected being barred by time---Validity---Section 33 of Customs Act, 1969, had created an exception with regard to customs duties or charges inadvertently paid or over paid while keeping a statutory silence over the other species of refunds---When legislature explicitly had enumerated certain exceptions, additional exceptions, were not to be implied, in the absence of a contrary legislative intent---Refund of sale proceeds pertaining to residual value left after deduction of charges mentioned under S.201(2) of the Customs Act, 1969 being neither customs duty nor a charge, the time limitation envisaged under Customs Act, 1969 for the purposes of refund, was not applicable thereon---Importer's substantive right to refund of the illegally recovered retained money by the State, would flow automatically as an absolute right from the mandates of the philosophy and the core values of the Constitution---Importer right to refund, could not be diluted or affected by any plea, such as the application of objects of limitation envisaged under S.33 of the Customs Act, 1969---Appeal was accepted, impugned order was quashed and Collectorate of Customs was directed to process appellant's refund claim and remit the sale proceed of impugned auctioned merchandise to the importer in accordance with Auction Rules.

Sakhi Muhammad for Appellant.

2018 P T D (Trib.) 2191

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member Judicial-I

COLLECTOR OF CUSTOMS

Versus

Messrs TABANI TRADERS and others

Customs Appeals Nos. K-676 to K-696 of 2015, decided on 24th March, 2017.

Customs Act (IV of 1969)---

----Ss. 32(3), 79, 80, 83, 179, 193 & 195---Finalization of assessment after filing goods declaration---Re-opening of the case and making fresh assessment---Importers had filed goods declaration under S.79 of the Customs Act, 1969 and the Customs Department assessed the same under S.80 of the Act during processing of the goods declaration---Once the assessment was finalized and the goods declaration was cleared under S.83 of the Act, it could only be reopened under S.195 by the Federal Board of Revenue or the Collector within two years or an appeal must be filed under S.183 of the Act within 30 days before the Collector Appeals or a show-cause notice be issued under S.32(3) of the Act---Collector in order-in-appeal, had rightly observed that after clearance of the goods, re-assessment of the same was against the spirit of Ss.193 & 195 of the Customs Act, 1969; even otherwise, recovery created to view message of clearance of goods, was not warranted under the law---Department was not empowered under S.83(3) of the Customs Act, 1969 to reopen 'an out of charge' goods declaration---Impugned order was neither fanciful nor colorful, but was passed after detailed scrutiny of the case, fell well under the warrant of law and needed no interference---All the appeals being without merits, were dismissed, in circumstances.

Sajjad Rizvi, A.C. and Syed Hamid AO for Appellants.

Sardar Muhammad Ishaque for Respondents.

2018 P T D (Trib.) 2195

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)

FAIR MARKETING PAKISTAN and others

Versus

DIRECTOR GENERAL, DIRECTORATE GENERAL OF CUSTOMS VALUATION and another

Customs Appeals Nos.K-1919, K-1991 to K-1996 of 2016, decided on 8th February, 2017.

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 25-D, 32 & 194-A---Customs value of goods---Determination---Enhancement of value---Interpretation scope and application of S.25-A, Customs Act, 1969---Importer was an association of person, which was engaged in import of confectionary items and selling further on wholesale basis to its customers throughout the country---Appeal against order-in-revision passed under S.25-D of the Customs Act, 1969 against Valuation Ruling---Director Valuation, after thorough discussion with the stakeholders, issued valuation ruling and determined value of the confectionary items---Importer was satisfied with the value determined by Director Valuation and did not challenge the same Director General, enhanced value of all the items, with the exception of certain items---Value was enhanced about 110% from the value determined by Director Valuation---Importer, being aggrieved and dissatisfied with the order-in-revision, filed appeal before the Tribunal---Validity---Appellant/importer had not been called before the disturbance of the determined value, but had been condemned unheard in violation of settled and universally recommended and accepted principle of justice "audi alteram partem" (no one should be condemned unheard)---Impugned order-in-revision, was bad example of colourful exercise of powers, while using the same as a tool of harassment---Valuation ruling issued under S.25-A of the Customs Act, 1969, which would apply only for a certain period, must ordinarily be regarded valid for a period of 90 days from the date of its issue---Principal method of determining customs value was, and must remain with S.25 of the Customs Act, 1969---Section 25-A of the Act was not intended to be a substitute for S.25, nor could it be resorted to, in such a manner and with such a frequency that, it marginalized the latter provision---Section 25-A was merely an adjunct of S.25, to be resorted to in particular circumstances and for an appropriate period---Legislatures, in enacting S.25-A, did not intend to create a statutory bye-pass to the valuation agreement---While issuance of valuation ruling under S.25-A, could not be regarded as limited only to those cases, where the department concluded that there was group under invoicing; said section also could not be issued for the wholesale determination of customs values---Section 25-A of the Customs Act, 1969 being not a simple thing, it was appropriate that the ruling should contain sufficient details to show that the provisions of S.25 had been properly applied while invoking S.25-A---Valuation ruling was to be a speaking order---In the present case, Authority/Director General, Customs Valuation ignored the direction of superior courts and made observation in contradiction of provisions of S.25-A of the Customs Act, 1969---Such ignorance was violative of law---Being custodian of law, purpose of administration of justice was to hold and not to thwart appellant's rights---Department was directed not to issue any fresh valuation ruling during the course of present judgment, wrongfully---Order-in-revision passed by Director General, Customs Valuation, which did not have any adherence to the statutory requirements, besides being derogatory to specific provisions of Ss.25, 25-A, 25-D of the Customs Act, 1969, was set aside by the Appellate Tribunal being without lawful authority and jurisdiction, ab initio void.

Najeeb ur Rehman Abbasi and Rafi Kamboh for Appellants.

Safdar Abbas, Principal Appraiser for Respondents.

2018 P T D (Trib.) 2220

[Customs Appellate Tribunal]

Before Syed Tanvir Ahmad, Member (Technical-III)

Messrs SHAHBAZ ENTERPRISES

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, COLLECTORATE and another

Customs Appeal No.K-864 of 2017, decided on 10th August, 2017.

Customs Act (IV of 1969)---

----Ss. 16, 79 & 80---SRO No.499(I)/2009, dated 13-6-2009---Public Notice No.08/2017, dated 12-3-2017---Letter No.SI/Misc/260/2015 dated 12-9-2015---Prohibition of import of fabric falling in the negative list for import from India---Declaration in respect of consignment shipped from Hong Kong, declaring to contain Polyester grey fabric of Chinese origin---Importer determined liability of payment of applicable duties and taxes---In terms of Public Notice No.08/2017, dated 12-3-2017, import of fabric falling in the negative list for import from India as per prevailing Policy Order would be viewed to be banned, if imported from any free port---Contention of the department was that the consignment of un-finished fabric was imported from China, but the importer had not produced manufacturer's certificate rather submitted wrong certificate---Certificate of origin was, however verified from the official internet website of China---Main contention of the department was that since certificate of origin had shown the name of the importer separately, hence the consignment was of Indian origin---Consignments imported from Dubai, were normally suspected and commercially viable to bring Indian origin goods from Dubai, but it seemed odd and illogical that consignment was taken from India to Hong Kong then shipped to Pakistan from Hong Kong---Freight element would make such consignment invioable and much expensive---Had the importer intended to bring Indian origin consignment, he would have done it through Dubai or Colombo etc., i.e. some nearby port---Department had made out case on frivolous grounds---Imported fabric was normal fabric from China and manufactured in China and it was freely imported item---Department was not justified to conclude that fabric in question was Indian origin---Additional Collector of Customs (Adjudication), ordered for outright confiscation of the consignment in terms of Ss.16 & 79(1) of the Customs Act, 1969 holding that the imported goods had been brought in violation of Import Policy and Public Notice No.08/ 2007, dated 12-3-2007---Said order, was set aside, in circumstances.

Muhabbat Hussain Awan for Appellant.

None for Respondents.

2018 P T D (Trib.) 2274

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I)

Messrs REHMAN TRADERS, HYDERABAD

Versus

The AUDIT OFFICER (FAT-VK) and 3 others

Customs Appeal No. H-325 of 2017, decided on 23rd December, 2017.

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 29, 79, 80 & 83---Customs Rules, 2001, Rr.107(a), 110, 438 & 442---Making of assessment of goods---If assessment of the goods at the time of passing assessment order under S.80 of the Customs Act, 1969 and R.438 of the Customs Rules, 2001, had not been made with the correct application of the value available in data reservoir maintained by the "Pakistan Revenue Automation Ltd." under R.110 of the period given in R.107(a) of Customs Rules, 2001 or with the application of in-field Valuation Ruling; it could not be applied for the purpose of assessment after out of charge i.e. passing of clearance order under S.83 of the Customs Act, 1969 and R.442 of the Customs Rules, 2001, by virtue of bar laid down in S.29 of the Customs Act, 1969 and of the fact of becoming of Officer of Customs as "functus officio"---Customs Appellate Tribunal, could not allow the authorities to avoid a clear requirement of law---State and the citizens must be treated alike---Appellant/importer, could not be foisted with liability arising from gross inefficiency of Public Officials---Order passed during hierarchy of the Customs along with the show-cause notice was based on adequate breach of principles of natural justice and law, suffered from grave legal infirmities which was declared illegal ab initio and of no legal effect and set aside.

Messrs S.T. Enterprises v. Federation of Pakistan and 4 others 2009 PTD 467; Sikander Enterprises v. Customs Excise and Sales Tax Tribunal Karachi and 3 others 2008 PTD 1968; Asst. Collector v. Khyber Election 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; Rose Color v. Chairman, CBR 2013 PTD 813; 1994 CLC 1612; 1990 PTD 29; 2005 PTD 23; Collector of Sales Tax and Federal Excise v. Messrs Qasim International Container Terminal Pakistan Ltd. 2007 PTD 250; Xen Shahpur Division v. Collector of Sales Tax 2008 PTD 1973 and DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 ref.

Nadeem Ahmed Mirza for Appellant.

Abdul Hafeez Khatri, D.S, along with Abdul Latif Sher, Inspector for Respondents.

2018 P T D (Trib.) 2282

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi Member (Judicial-I) and Zulfiqar A. Kazmi, Member (Technical-I)

Messrs JAMIL BROTHERS

Versus

The COLLECTOR OF CUSTOMS

Customs Appeal No.K-927 of 2014, decided on 12th July, 2017.

Customs Act (IV of 1969)---

----Ss. 80, 83, 179, 193 & 195---SRO No.565(I)/2006, dated 5-6-2006---Assessment of duty---Re-opening of past and closed assessments---Goods in question were assessed under mandate of S.80 of the Customs Act, 1969 and were cleared under S.83 of the Act and different orders were passed at the relevant time---All said assessment orders attained finality; which were neither re-opened by the Collectorate of Customs, nor were challenged by the authorities before the appropriate forum of law---Collectorate of customs, had attempted re-opening of said past and closed assessment orders with mala fides and misusing the jurisdiction under S.179 of the Customs Act, 1969---Assessment orders passed by Collectorate at the relevant period of clearance had attained finality, and imported goods had been consumed by the importer in manufacturing process---Importer contended that proceedings initiated through issuance of show-cause notice and impugned order-in-original, amounted 'double jeopardy' and attracted the principle of res judicata---Impugned order-in-original being not sustainable under the law, was set aside and case was remanded to the authorities along with the directions to re-adjudicate the matter on account of paid amount of customs duty through extra paid bill.

Muhammad Adeel Awan for Appellant.

Arif Maqbool, Senior Auditor for Respondents.

2018 P T D (Trib.) 2305

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Zulfiqar A. Kazmi, Member (Technical-I)

Messrs SANGERWAL COSMETICS

Versus

The COLLECTOR (ADJUDICATION-I) MCC -ADJUDICATION-I and another

Customs Appeal No.K-179 of 2017, decided on 25th March, 2017.

Customs Act (IV of 1969)---

----Ss. 25, 25-A, 32, 79-A & 194-A---Determination of customs value of goods---Mis-declaration---Department had blocked the consignment, after assessment on the basis of on-line-data obtained from exporting country's website showing excess value of goods as against the declared and assessed value---Department had claimed that value of goods was based on the value of same goods which were shipped to the exporter to another country---Importer contended that no value other than the one notified in Value Ruling No.866/2016 could apply to the consignment and department had no locus standi to impose any value which could not be directly ascertained as the transactional value---No evidence was available to show that goods were exchanged for the amount alleged and adjudicated as the value based on the department's information---Show-cause notice, had also been issued to the importer after the statutory limit of time under the Customs Act, 1969---No reason existed to uphold the impugned order, which was based on an unqualified premise, having no coverage or support of the relevant specific provision governing valuation of the imported goods.

Adeel Awan for Appellant.

Javed Hasan, P.A. and Muhammad Rahim, A.O. for Respondents.

2018 P T D (Trib.) 2324

[Customs Appellate Tribunal]

Before Ghulam Mustafa Memon, Member (Judicial-III)

MUHAMMAD ASLAM

Versus

SPS, ASO, NMB WHARF, KARACHI and another

Customs Appeal No. K-432 of 2017, decided on 22nd September, 2017.

Customs Act (IV of 1969)---

----Ss.2(s), 16, 17, 156 & 157---SRO No.499(I)/2009, dated 13-6-2009---Smuggling---Confiscation of seized goods along with the vehicle---Customs Anti-Smuggling Organization team, chased and intercepted vehicle containing foreign origin 'Gutka', which was a restricted/ prohibited item---Vehicle was confiscated and no option was given to pay fine in lieu of confiscated vehicle to appellant who claimed to be owner of the vehicle---Driver of the vehicle disclosed that he ran the vehicle on hire basis and that recovered 'Gutka' belonged to a lady, who hired the services of vehicle for its transportation---No document of whatsoever nature in respect of legal import or purchase of subject consignment was produced by the driver---Appellant/owner of the vehicle asserted that he had no concern with the subject "Gutka"; whereas no one came forward to claim ownership of the seized "Gutka"; which manifested that foreign origin "Gutka" was smuggled/ non-duty paid---Additional Collector of Customs (Adjudication) vide order-in-original, held that charge of smuggling was established and directed outright confiscation of the seized goods along with vehicle---At the time of the seizure of offending goods from the vehicle, present at the time of seizure of goods and vehicle---Appellant/owner of the vehicle was not---No inquiry/investigation was made to ascertain clue of the alleged lady being owner of the offending goods---Appellant/owner of the vehicle and driver thereof, in no way could be held responsible without establishing guilty knowledge of the offence---For proving knowledge of owner not present in the vehicle would require inquiry, which was totally lacking in the case; even Investigating Officer could not register crime against the driver of the vehicle---Involvement of appellant in the act was not proved by the department---No indication existed that appellant was involved in smuggling of offending goods which were lying in the vehicle openly and were neither hidden in any false or secret cavity nor false cavity was noticed in the vehicle---Department, admitted that vehicle in question was never used before for transportation of smuggled goods---Vehicle was registered in the name of appellant and was being used on hiring basis for transportation of passengers and goods---Adjudicating authority, had passed impugned order merely on presumption without any cogent reasons; whereas the circumstances of the case were of the nature which could only lead a prudent mind to conclusion that the appellant/the owner of the vehicle had no connivance with the owner of offending goods or for that matter guilty knowledge of the fact---Impugned order-in-original was modified to the extent of outright confiscation of vehicle, having no history of previous use in smuggling of goods, with direction to release the same to its lawful owner (appellant) on payment of 20% redemption fine of customs value of the subject vehicle---Order-in-original in respect of confiscation of foreign "Gutka", was maintained as same did not suffer from any illegality or irregularity.

PLD 1988 Lah. 177; Messrs Shew Pujan Rai Indrasen Rai Ltd. v. Collector of Customs AIR 1962 Cal. 789; 1952 Cr.LJ 1951; Hafeez Rehman v. State PLD 1970 SC 82; 1971 SCMR 404 and Haji Abdul Razzaq v. Pakistan through Secretary, Ministry of Finance, Islamabad and others PLD 1974 SC 5 ref.

Barkat Ali Awan for Appellant.

Malik Safdar, I.O. for Respondent.

2018 P T D (Trib.) 2335

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Zulfiqar A. Kazmi, Member (Technical-I)

COLLECTOR OF CUSTOMS through Collector of Customs and 2 others

Versus

Messrs BYCO PETROLEUM PAKISTAN LTD. and another

Customs Appeals Nos. G-2127, G-2149 and G-2150 of 2016, decided on 1st March, 2017.

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

----S. 32(2)(3)---SRO No.886(I)/2012, dated 18-7-2012---SRO No.371(I)/2002, dated 15-6-2002---Misdeclaration---Powers and functions relating to cases under S.32(3), Customs Act, 1969 had been conferred on Superintendent Customs or Principal Appraiser vide SRO No.371(I)/2002, dated 15-6-2002 and not to the Collector Adjudication---Act of issuance of show-cause notice by the Collector Adjudication was ab intio wrong.

S.M. Naqi son of Syed Muhammad Hussain Karachi v. Collector of Customs (Adj-I) and others Customs Reference No.157 of 2008; PLD 1999 SC 1072; Khyber Electric Lamp's case 2001 SCMR 838; Chitranjan Cotton Mills's case PLD 1970 SC (sic); PLD 1986 Lah. 237; PLD 1969 SC 407 and 1992 SCMR 1652 ref.

(b) Administration of justice---

----Order in field, could not be substituted with another order---Once an order was passed, which attained finality, same could not be subjected to show-cause notice again.

Messrs Smith Kline French v. Pakistan 2004 PTD 3020 ref.

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

----Ss. 32 & 195---Misdeclaration---Revisional power of Federal Board of Revenue or Collector---Order or decision passed or taken by the subordinate officer, could only be corrected in revisional power and not under S.32 of the Customs Act, 1969---Collector or Federal Board of Revenue, would exercise their revisional powers or correctional jurisdiction in terms of S.195 of the Customs Act, 1969---For adjudication of a case through issuance of show-cause notice, the proof of mis-declaration had to be prima facie present at the first instance; if allegation of mis-declaration was to be believed against taxpayer in terms of S.32 of Customs Act, 1969 through issuance of show-cause notice by the officer of original jurisdiction---Where the consignments were released on the basis of commercial documents and physical examination by the Examining and Assessing Officer and the charges subsequently leveled under S.32(3) of the Customs Act, 1969 were unsubstantiated, whole proceedings, were infested with inherent legal infirmities and substantive illegalities tantamounting to patent violation of mandatory statutory provisions and in utter disregard of the provisions of Act---If the law had prescribed method for doing of a thing in a particular manner, such provision of law was 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.

S.M. Naqi son of Syed Muhammad Hussain Karachi v. Collector of Customs (Adj-I) and others Customs Reference No.157 of 2008; PLD 1999 SC 1072; Khyber Electric Lamp's case 2001 SCMR 838; Chitranjan Cotton Mills's case PLD 1970 SC (sic); PLD 1986 Lah. 237; PLD 1969 SC 407; 1992 SCMR 1652; Messrs Smith Kline French v. Pakistan 2004 PTD 3020; 2008 PTD 1968; 2010 SCMR 1425; 2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236, PLD 1964 SC 536 and 2003 SCMR 1505 ref.

(d) Administration of justice---

----Assuming of jurisdiction was of great importance and power had to be exercised within the allotted sphere---Acting contrary to said powers was incurable, rather fatal to the case---Order which was coram non judice would have no legal sanction ---Question of jurisdiction of a forum, was always considered to be very important and any order passed by a court or a forum having no jurisdiction, even if it was found to be correct on merit, was not sustainable---Jurisdiction of a court would lay down a foundation stone for a judicial or a quasi judicial functionary to exercise its power/authority and no sooner the question of jurisdiction was determined in the negative, the whole edifice built on such defective proceedings, was bound to crumble down.

PLD 1996 Kar. 68; 2006 PTD 978; PLD 1971 SC 184; Ali Muhammad v. Chief Settlement Commissioner 2001 SCMR 1822 and All Pakistan Newspaper Society and others v. FOP and others PLD 2004 SC 600 ref.

(e) Interpretation of statutes---

----Fiscal statute---Instrument was to be taken as a whole and not in isolation.

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

----S. 19---SRO No.678(I)/2004, dated 7-8-2004---Exemption from customs duty---Equipments and materials imported by the importer stood covered within the framework of SRO No.678(I)/2004, for the release of goods free from duty and taxes on import-cum-export basis---Proceedings initiated by the Collector of Customs against the importer to deny the exemption, were closed door proceedings, and the importer was never given a chance to explain the correct legal position---Such proceedings in circumstances, were in violation of the principles of natural justice to the extent that the person whose rights were being affected, had not been given an opportunity to explain his point of view---Mandatory and established principle of law was that the right to claim exemption under notification issued under S.19 of the Customs Act, 1969 remained available to a party as well as the exemption notification would hold the field---Vested rights could not be taken away, save by express words and necessary intendment.

Messrs Gatron Industries v. Government of Pakistan and others 1999 SCMR 1072 and Messrs MY Electronic (Pvt.) Ltd. v. Government of Pakistan 1998 SCMR 1404 ref.

(g) Administration of justice---

----Duty of court was to follow the legal obligations made by the legislature---Observations of the higher courts and the intention of the legislature and interpretation which would lead to manifest the absurdity were to be avoided---Court was under statutory obligation to supply the omission with a view to prevent the defeating of a very object of legislation, where the plain instructions would lead to absurd results.

(h) Interpretation of statute---

----Interpretation which was more in consonance with the avowed policy decipherable from title and preamble, of legislation was to be preferred to an interpretation which abridged, abrogated or infringed the rights which had accrued in favour of the parties.

Faisal Khan, D.C. for Appellants.

Zafar Iqbal and Sajjad Haider Janjua for Respondents.

2018 P T D (Trib.) 2353

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial)

ASSISTANT COLLECTOR OF CUSTOMS, AFU, AIRPORT, LAHORE

Versus

The COLLECTOR OF CUSTOMS (APPEALS), LAHORE and another

C.A. No.6/LB of 2017, decided on 22nd May, 2017.

Customs Act (IV of 1969)---

----S. 19---Exemption---Importer imported an Endosurgery and Endoscopy equipment and claimed the clearance thereof under PCT Heading 9939 vide goods declaration---Consignment was physically examined and documents/particulars were 100% confirmed, but the items did not fall in the list of items admissible for benefit under PCT Heading 9938---Such benefit was denied to the importer and the review filed by the importer was also rejected---Appeal filed by the importer was dismissed by Collector of Customs (Appeals)---Validity---Collector of Customs (Appeals) had extended a blanket exemption to "other equipments" relatable to fields of Neurovascular, Endosurgery, Endoscopy, Oncology, Urology and Gynecology under the garb of rescuing those components of PCT Heading 9938 from redundancy---PCT Heading 9938 (Entries A to K) related solely to disposables and equipments relating to cardiology/cardiac surgery, but it was deemed necessary that PCT Heading 9938 (Entry "L") thereof relating to "Peripheral Interventions Equipments" be further probed juxtaposed with preface of impugned Tariff Heading so that a correct conclusion could be reached---General overview of schematics of PCT Heading 9938 would reveal that the equipment and disposables mentioned thereunder, were used or deployed in the most advanced field of surgery known as minimally invasive surgery---Entry of "L" to PCT Heading 9938 clearly covered the disposables and equipments used in various peripheral interventions procedures in all the field of medical sciences mentioned in Preamble of PCT Heading 9938---Interpretation of the departmental officers, restricting items mentioned under entries "A" to "L" of PCT 9938 to the fields of cardiology and cardiac surgery and resultantly declaring other specified fields of medical science superfluous, was ill-conceived, which could not be sustained---One therefore, could not advent to the reasoning that the term "other equipment" was to be read in isolation---Finding of the forum below that same was disjunctive in nature to rest of the Tariff Heading 9938, could not be subscribed---Forum below had erred in interpreting that the narration "and other equipment" carried the impute of providing a blanket exemption to sundry "disposables and equipment", meant for cardiology/cardiac surgery, neurovascular, Electrophysiology, Endoscopy, Endosurgery, Oncology, Urology and Gynecology---Only those disposable and equipment would merit extension of exemption under the PCT Heading 9938 which qualified the specifics mentioned in item "A" to "L" thereunder---Impugned "cervical cup", not only failed the test of contemporaneousness with items specifically listed under PCT Heading 9938, but also did not fall within the precincts of peripheral interventions equipment used in conjunction with the various branches of medical science mentioned in the impugned Tariff Heading---Impugned instrument did not qualify for exemption of customs duty and taxes under PCT Heading 9938, benefit thereof, was correctly denied by the Deputy Collector, Model Customs Collectorate---Grossly errant impugned order was set aside and appeal was accepted, in circumstances.

G.N. Zafar for Appellant.

2018 P T D (Trib.) 2372

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Zulfiqar A. Kazmi, Member (Technical-I)

BBJ PIPE INDUSTRIES LTD.

Versus

COLLECTOR OF CUSTOMS (ADJUDICATION-II) and another

Customs Appeal No.K-11 of 2017, decided on 20th March, 2017.

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

----Ss. 32, 79, 80, 162, 163, 168 & 171---SRO No.565(I)/2006, dated 5-6-2006 (as amended by SRO No.474(I)/2016, dated 24-6-2016)---Misdeclaration and misstatement---Consignment was declared to contain prime quality Hot Rolled Steel Coils at self assessed value depending upon sizes of coils attracting 11% customs duty and sought clearance thereof against 5% concessionary rate of customs duty as per serial No.5 of amending S.R.O. No.474(I)/2016, dated 24-6-2016 of S.R.O. No.565(I)/2006, dated 5-6-2006---Goods declaration was completed under S.80 of the Customs Act, 1969 without physical examination of goods, as per declared description in the light of import documents and goods were allowed release against payment of duty/taxes leviable therein---Meanwhile R & D Section of the Model Customs Collectorate of Appraisement received an information that importers were attempting to clear the Hot Rolled Steel Sheets in Coils of Secondary Quality under the guise of Prime Quality and evading the duty/taxes by claiming inadmissible benefit of SRO by paying 5% customs duty---Goods were examined by R & D Section and consignment thereof was seized under S.168 read with S.171 of the Customs Act, 1969---In the present case, the chemical composition of each coil was different from the other, meaning thereby that the consignment did not comprise coils of single batch/lot having similar composition---By virtue of chemical composition also the quality of goods was found to be secondary quality---When importer was confronted with the documentary proof of mis-declaration, he voluntarily opted for payment of duty and taxes vide additional duty payment challan---Value of offending goods was assessed as Rs.83,668,115 by the Model Customs Collectorate of Appraisement and said act of importer was considered to be an offence of mis-declaration/mis-statement within the meaning of Ss.32(1), 79 & 192 of the Customs Act, 1969---Adjudication authority, imposed penalty of Rs.200,000 upon the Clearing Agent---Being aggrieved and dissatisfied with the impugned order-in-original, importer filed appeal before Appellate Tribunal---Impugned show-cause notice was issued to the importer on the basis of information received by R & D Section of Model Customs Collectorate of Appraisement; wherein they apprehended that the importer attempted to clear the Hot Rolled Steel Sheets in Coils of secondary quality under the guise of prime quality and evading the duty/taxes by claiming inadmissible benefit of SRO---After detailed deliberation in association of all stakeholders, it was observed that goods were incorrectly declared as "prime quality", whereas same were correctly classified as "secondary quality"---Subject imported goods were released, but subsequently were detained and seized---Authority made the seizure without complying proper procedure of law as envisaged and required under Ss.162 & 163 of the Customs Act, 1969---Such transgressional and derogatory act of the Authority, did not have any support or warrant of law to be treated admissible as their rightful act as same was a clear violation of the applied law caused and created by the authorities and their affiliates---Issuance of show-cause notice to the importer by the Customs Officer for the short recovery of tax was against the very spirit of law and the Maxim 'ubi jus ibi remedium' (where there was a right, there was a remedy)---Impugned show-cause notice was vacated and order passed thereon was set aside---Authorities were directed to release the subject goods forthwith; appeal was accordingly allowed.

Akhtar Hussain v. Collector of Customs (Appraisement) and 3 others 2003 PTD 2090; PLD 1996 Kar. 68; 2006 PTD 978; PLD 1971 SC 184 and 2001 SCMR 1822 ref.

(b) Interpretation of statutes---

----Court being custodian of law, was bound to follow the legal obligations laid by the higher courts as well as the legislature---Observations of the superior courts and the intention of the legislature and interpretation which would lead to manifest the absurdity, should, if possible be avoided---Courts were under statutory obligation to supply the omission with a view to prevent the defeat of the very object, rules and could fill in the gap in a piece of legislation, where the plain instructions would lead to absurd results---Interpretation, which was more in consonance with the avowed policy that decipherable from its Title and Preamble and avoid to abridge, abrogate or infringe those rights which had occurred in favour of the parties by any means.

Ahmed Ali Hussain for Appellant.

Abdul Qadeer A.O. for Respondent.

2018 P T D (Trib.) 2400

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member (Judicial) and Imran Tariq, Member (Technical)

COLLECTOR OF CUSTOMS, MODEL CUSTOMS, COLLECTORATE, FAISALABAD

Versus

ADDITIONAL COLLECTOR (ADJUDICATION), FAISALABAD and 3 others

C.A. No.232/LB of 2016, decided on 4th April, 2017.

Customs Act (IV of 1969)---

----Ss. 2(kk), 2(s), 16, 18, 168 & 187---SRO No. 566(I)/2005, dated 6-6-2005---"Smuggling"---Proof---Truck was intercepted by Staff of Customs and on demand, the driver of the truck failed to produce any document regarding lawful import/possession of said truck, except Registration Book---Chassis number of said truck was found to be suspicious---Truck was detained and sent to Forensic Science Laboratory for chemical examination of the chassis number plate---Seizure agency alleged that the owner of the truck manually punched the vehicle's chassis of smuggled vehicle according to Registration Book---Detention of truck was converted into seizure under S.168 of the Customs Act, 1969 for violation of Ss.2(s), 16 & 18 of the Customs Act, 1969 and SRO No.566(I)/2005, dated 6-6-2005---Adjudicating proceedings culminated into passing of an order in original, to the effect that no mens rea having been established on part of the owner of truck there remained no force in the charges levelled against the owner of the truck in the show-cause notice---Vehicle was released unconditionally to its lawful owner---Validity---Section 187 of the Customs Act, 1969, only cast an evidentiary burden, subject to creation of prima facie case and the legal or persuasive burden, always rested on the prosecution/department---If accused was able to raise a probable defence, which would create doubt about existence of a legally enforceable liability the prosecution, could fail---Prima facie, the owner was in possession of the vehicle under a valid Registration Book issued by the concerned Motor Registration Authority---Tribunal directed the department to produce cogent evidence to thwart the veracity of Form "F" or sales certificates of impugned vehicle and ascertain the manual punching of chassis numbers of truck---Department failed to produce evidence to consolidate its assertions---In absence of any finding in the laboratory report with regard to tampering of chassis number, department's contention that impugned digits of the chassis number had been punched by the owner, itself was doubtful and it also could not be ruled out that during period in question, manufacturer of truck itself was engraving chassis number manually on its locally manufactured vehicles---Owner, was successful in carving out a prima facie case---Preponderance of probabilities, also ran in his favour---Existence of factum of smuggled nature of impugned vehicle, was doubtful, in circumstances; conversely department, could not forward any cogent arguments or evidence to disconnect impugned vehicle from the evidential documents or to thwart the veracity thereof to prove that impugned truck was of foreign origin---Impugned order was upheld in toto, and departmental appeal being devoid of merits, was dismissed.

Kamran Industries v. Collector of Customs (Exports) PLD 1996 Kar. 68; PLD 1980 Lah. 145; 1983 CLC 414; 1984 CLC 325; PLD 1973 Kar. 659 and PLD 1975 Kar. 458 ref.

Tariq Mehmood for Appellant.

2018 P T D (Trib.) 2418

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)

DEENS SONS

Versus

The DIRECTOR, DIRECTORATE GENERAL OF VALUATION, CUSTOMS HOUSE, KARACHI and another

Customs Appeal No.K-1449 of 2017, decided on 1st April, 2018.

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

----Ss. 25, 25-A, 25-D & 80---Customs Rules, 2001, Rr.107(a), 110, 113, 117, 118 & 438---Valuation Ruling---Determination of customs value of goods---Director, Directorate General of Valuation, was not empowered to fix the value of imported goods through Valuation Ruling under S.25-A(1) of the Customs Act, 1969 as value of the imported goods had to be determined by Customs Authorities under S.25 of the said Act and it was the Federal Board of Revenue to issue a notification in that regard---No deviation from the notified jurisdiction could be made---If an action had been taken or order had been passed without having competency under the respective provisions of law, same was to be declared illegal and without jurisdiction---Deputy Director, Directorate of Valuation, had been appointed under provisions of S-3(d) of the Customs Act, 1969 and had been delegated powers through notification for assisting the Director in determination of value of goods under the provisions of S.25-A of the Customs Act, 1969---Director had issued Valuation Ruling in substitution of VDB letter which itself was without lawful authority and was void ab initio---If the initial order/letter was ab intio void, the superstructure built thereupon, no matter how strong it might be had to crumble down---Director, Directorate of Valuation in the solitary meeting, which was attended by only one person, determined the value of the imported goods, which exercise was not valid---Director had no mandate to associate importer of his choice or manufacturer for determination of value of the imported goods---Any Ruling, issued with the association of specific person or importer/manufacturer, was void ab initio and could not be termed or treated as valid document within the meaning of S.25 of Customs Act, 1969---Director, Directorate of Valuation had not followed the provisions of S.25 of the Customs Act, 1969, in letter and spirit while determining the value of imported goods---Department had desired that the importer should pay excessive duty and taxes as against his competitor of Chinese origin goods---Said attitude negated the fair competition, and created monopoly which was an infringement of fundamental rights, not permissible under any circumstances---Order passed by Director General of Valuation was sketchy and bald, containing no rebuttal of grounds of importer's revision application; instead was based on personal observations of no substance and in derogation of provisions of Ss.25, 25-A of the Customs Act, 1969 and Customs Rules, 2001---Impugned order was not a proper order lacking application of judicial mind and Valuation Ruling being ab initio void, were set aside.

Mansab Ali's case PLD 1971 SC 124; Chittaranjan Cotton Mills Ltd. v. Staff Union PLD 1971 SC 197; Chief Kwame Asante, Treahon v. Chief Kwame Tawia Raunaq Ali's PLD 1973 SC 236; Messrs Shahid Impex v. Director General of Valuation 2014 PTD (Trib.) 674; Messrs AFU International v. Director General of Valuation 2016 PTD (Trib.) 1305; Ch. Muhammad Hussain and others v. Commissioner of Income Tax 2005 PTD 152; Messrs Toyo International Motorcycle v. Federation of Pakistan and 3 others 2008 PTD 1494; Goodwill Traders, Karachi v. FOP and others 2014 PTD 176; AIR 1954 SC 747; AIR 1963 SC 1811; AIR 1970 SC 1453; AIR 1971 SC 1017; PLD 2005 SC 193; 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 272; PLD 1970 SC 158; PLD 1970 SC 173; 1984 SCMR 1014 and 2012 PTD (Trib.) 619 ref.

(b) Administration of justice---

----Every judicial or quasi judicial findings were to be based on reasons, containing the justification for the findings in the order itself---If the initial order was ab initio void, the superstructure built thereupon, no matter how strong, it might be had to crumple.

PLD 1996 Kar. 68; 2006 PTD 978 and PLD 1971 SC 184 ref.

Nadeem Ahmed Mirza for Appellant.

Muhammad Aslam, P.A. for Respondent.

2018 P T D (Trib.) 2437

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)

M.I. TRADERS, LAHORE

Versus

DIRECTOR, DIRECTORATE GENERAL OF VALUATION, CUSTOMS HOUSE, KARACHI and another

Customs Appeal No.K-1644 of 2016, decided on 3rd April, 2018.

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

----Ss. 25, 25-A, 25-D, 194-A & 195---Customs Rules, 2001, Rr.107, 110, 117, 118 & 433---Determination of customs value of goods---Assessment, was made by the official of Clearance Collectorate on the basis of identical/similar transaction value as enunciated in S.25(5)(6) of the Customs Act, 1969 and Rr.117 & 118 of Customs Rules, 2001---Director, Directorate General of Valuation, determined customs value for levy of duty and taxes on import of different kind/brands of the item---Being aggrieved by said Ruling, importer filed revision application under provision of S.25-D of the Customs Act, 1969 before Director General, Directorate General of Valuation, who determined the value of the item and ignored the fact that the Director, Directorate General of Valuation, determined no value---Validity---No cross-objection under subsection (4) of S.194-A of the Customs Act, 1969 had been filed by the department within the stipulated period of 30 days---Director General, Directorate General of Valuation, was only empowered to re-examine the Ruling for correcting the same or improving it, if the Director had failed to adhere to the determination of value under the provisions of S.25 of the Customs Act, 1969---Director General was empowered to correct the value and in case the value determined was on the higher side, he could revise the same---Director General had to confine himself within the ambit of the valuation ruling and not empowered to add a new item in the revision order, value of which had not been determined by the Director---Director General, in revision, could only, either accept the revision application, or reject the same or modify, which meant "to change some parts thereof while not changing the other parts"---Action to the contrary by the Director General was detrimental for the importer---By including the item in the revisional order, Director General travelled beyond his mandated sphere and committed a grave illegality, which was not curable hence void ab initio---Any order passed beyond the scope of law, would be deemed to be illegal---Impugned order-in-revision and Valuation Ruling by the Director General did not have any adherence with the statutory requirements, also derogatory to the specific provision of law---Same was declared without lawful authority and jurisdiction, void being infested with the patent illegalities and was set aside---Appeal was allowed.

Collector Excise and Land Customs and others v. Rehm Din 1987 SCMR 1840; Adam v. Collector of Customs, Karachi PLD 1969 SC 446; Muhammad Sadqain v. Collector of Customs (Appraisement) 2006 PTD 2742; Messrs Exide Pakistan Ltd. v. Deputy Collect of Customs (Adjudication-III) , Karachi 2004 PTD 1449; Saadia Jabbar's case PTCL 2014 CL 537; 1992 PTD 593; 2003 PTD (Trib.) 928; 2010 PTD 1515 and 2009 PTD (Trib.) 2025 ref.

(b) Words and phrases---

----'Revision'---Literal meaning, explained.

Balcks Law Dictionary; Lexicon Webster Dictionary and Oxford Advance Learner Dictionary ref.

Nadeem Ahmed Mirza for Appellant.

Umer Baloch, P.A. for Respondents.

2018 P T D (Trib.) 2452

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Member (Judicial)

GUL MUHAMMAD KHAN and another

Versus

ADDITIONAL COLLECTOR CUSTOMS and another

Cus. Appeal No. 181/PB of 2017, decided on 7th February, 2018.

Customs Act (IV of 1969)---

----Ss. 2(s), 16 & 178---SRO No.499(I)/2009, dated 3-6-2009---Smuggling of goods---Seizure and confiscation of goods along with vehicle---Truck found loaded with foreign goods was intercepted---Driver of the truck, having failed to produce legal documents, goods along with the truck were seized and Additional Collector of Customs (Adjudication) vide order-in-original, outrightly confiscated the seized goods along with the truck---Confiscated goods, consisted of two kinds; firstly, used auto parts and secondly half cut engines of foreign origin vehicles---Half cut engines of foreign origin vehicles, were not importable; whereas used auto parts, were redeemable under Cl.(e) of Part 2 of the Table mentioned in SRO No.499(I)/2009, dated 13-6-2009---Used auto parts, were ordered to be redeemed to its lawful owner on payment of redemption fine equal to 20% of assessed value, in addition to payment of duty and taxes leviable under the law---Truck carrying goods falling under Cl.(s) of S.2 of the Customs Act, 1969, was also ordered to be released on payment of redemption fine equal to 20% of assessed value of the same---Half cut engine of foreign origin vehicle, which was not importable, was rightly confiscated.

2016 PTD (Trib.) 22 and 2005 SCMR 492 ref.

Ajoon Khan for Appellant.

Mir Sahib Khattak, I.O./D.R. for Respondents.

2018 P T D (Trib.) 2461

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Zulfiqar A. Kazmi, Member (Technical-I)

Messr DOGAR TRADERS through Proprietor

Versus

The ADDITIONAL COLLECTOR OF CUSTOMS and another

Customs Appeal No.K-1495 of 2016, decided on 22nd March, 2017.

Customs Act (IV of 1969)---

----Ss.32, 79, 156(1)(14) & 181---SRO No.499(I)/2009, dated 13-6-2009--Misdeclaration---Confiscation of goods---Option to importer to redeem the confiscated goods on payment of redemption fine---Importer had filed goods declaration, declaring the goods as "submersible pumps" under P.C.T. Heading 8413.7010, chargeable to customs duty at 5% and sought clearance under S.79(1) of the Customs Act, 1969---Goods declaration was selected for examination to confirm the declaration made by the importer---Examination report revealed that the goods were found to be "light vertical multistage centrifugal pump with motor", classifiable under PCT Heading 8413.7090, chargeable to customs duty at 20%---Importer, in view of said report, was found to have wilfully and deliberately misdeclared the description and PCT Heading of the goods to avail undue benefit of duty and taxes---Adjudicating Authority, ordered confiscation of the goods with option under S.181 of the Customs Act, 1969 to redeem the confiscated goods on payment of 35% redemption fine---Penalty of Rs.25,000 was also imposed on the importer---Validity---Question for determination, in the present case, was as to whether the imported goods fell under the category of "Submersible Pumps PCT Heading 8413.7010" or under "Centrifugal Pumps PCT Heading 8413.7090"---First examination report showed that the subject goods were found under the description of 'submersible pumps with motor'; another report extended the different description of consignment as "light vertical multistage centrifugal pump with motor"---Importer claimed the PCT Heading 8413.7010, but on the contrary, PCT Heading 8413.7090 was insisted by the department, without support of any evidence---Element of mens rea, had not been proved against the importer---Charge of misdeclaration under S.32 of the Customs Act, 1969, was unwarranted and penalty imposed on importer under cl.(14) of S.156(1) of Customs Act, 1969, was patently unlawful---Option provided in S.181 of the Customs Act, 1969, did not specify amount or value on the basis of which the owner of the goods could opt to pay in lieu of the confiscation of the goods---Adjudicating Officer passed impugned order with least application of judicious mind; pitch of fine and penalty, did not correspond with the gravity of offence---Fine and penalty imposed on the importer, were ordered to remitted by the Tribunal---Impugned order-in-original was modified accordingly---Department was also directed to issue delay detention certification in accordance with law.

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

Raja Babar for Appellant.

Khalid Pervaiz A.O. and Faiz Mudassir, A.O. for Respondents.

Date of hearing: 24th October, 2016.

JUDGEMENT

MUHAMMAD NADEEM QURESHI, MEMBER (JUDICIAL-I).---This appeal has been directed under Section 194-A of the Customs Act, 1969, against Order-in-Original No. 522116-18052016, passed by the Additional Collector of Adjudication, Custom House, Karachi.

1. Brief facts of the case as per impugned Order are that, it was reported by MCC-Port Muhammad Bin Qasim Karachi that Messrs Dogar Traders imported a consignment vide IGM No.164-11/04/ 2016, Index No. 78 and filed Goods Declaration No. KPP1-HC-58069-13-04-2016, declaring the goods as 'submersible pumps', under PCT heading 8413.7010, chargeable to Customs Duty @ 5%, Sales Tax @ 0%, and Income Tax @ 0%, by availing the benefit of SRO 947(I)/2008 and 6th Schedule (serial No.113) of Income Tax Ordinance, 2001, respectively. The said importer determined his liability for payment of duty and taxes on self-basis and sought clearance under section 79(1) of the Customs Act, 1969. The GD was selected for examination to confirm the declarations made by the importer. As per the examination report endorsed by the shed staff, the impugned goods have been found to be 'Light Vertical Multi-Stage Centrifugal Pump with Motor' correctly classifiable under PCT heading 8413.7090, chargeable to Customs Duty @ 20%, Sales Tax @ 17% Additional Sales Tax @ 3%, Income Tax @, 9% and Additional Custom Duty @ 1%. In view of the above it is evident that the importer has willfully and deliberately mis-declared the description and PCT heading of the impugned goods to avail the undue benefit of duty and taxes under claimed SRO and 6th Schedule. Had this willful and deliberate offence gone undetected, the government exchequer would have suffered a loss of revenue to the tune of Rs.2,210,235/-. The act of importer constitutes an offence within the meanings of Sections 32(1)(2) and 79(1) of the Customs Act, 1969, Sections 3 and 6 of Sales Tax Act, 1990, Section 148 of the Income Tax Ordinance, 2001 and Rule 101 of the Customs Rules, 2001 notified vide S.R.O. 450(I)/2001 dated 18-06-2001. The offence is punishable under Clause (14) of Section 156(1) of the Customs Act, 1969, Sections 33 and 34 of the Sales Tax Act, 1990 and Section 148 of the Income Tax Ordinance, 2001 read with S.R.O. 499(I)/2009 dated 13-06-2009. According a show-cause notice was issued to the appellant and the matter was adjudicated by the adjudicating officer who concluded his. observations as follows:--

"I have gone through the case record and considered written/ verbal arguments of both sides. The respondent declared the under reference goods as 'Submersible Pumps' against PCT heading 8413.7010 (chargeable to CD @ 5%, Sales Tax @ 0%, and Income Tax @ 0%, under S.R.O. 947(I)/2008 and 6th Schedule. Serial No. 113, of Income Tax Ordinance, 2001, respectively). However, physical examination by Customs revealed that the impugned goods were not `Submersible Pumps' but "Centrifugal Pumps" in view of the physical attributes of the goods such as the absence of mandatory insulation of the motor inside the housing of the pump to qualify the said goods as Submersible Pumps. Moreover, the manufacturer's original literature retrieved from inside the consignment also confirms the impugned goods as "Light Vertical Multi-stage Central Pumps with Motor" along with the installation instructions emphasizing that the pumps are not to be submerged in water. The goods so recovered are appropriately classifiable under PCT heading 8413.7090, chargeable to CD @ 20%, Sales Tax 17%, Additional Sales Tax 3%, Income Tax 9% and Additional Customs Duty 1 %, instead of the declared PCT heading 8413.7010 where only the bare CD is chargeable @ 5%. As per the scheme of Tariff the "Centrifugal Pumps" are bifurcated into two local/ national headings, i.e. 8413.7010 for "Submersible Pumps" and 8413.7090 for "Other." Based on this, the arguments put forth by the respondent that the instant goods are "Submersible Pumps falling under PCT Heading 8413.7010 and chargeable @ CD 5% is not tenable as Submersible Pumps are those Centrifugal Pumps which have electric motor in the same housing as the pump and is designed as such to operate while being submerged below surface/under water. Since the physical attributes and catalogue found along with the consignment confirm the usage and application of goods as other than "Submersible Pumps" therefore, the department has correctly classified the goods under PCT heading 8413.7090, chargeable to CD @ 20% and other taxes. From the above discussion, it is clear that the importer misdeclared the description and PCT heading of the impugned goods under self-assessment system to evade payment of legitimate government revenue. During the hearing, the respondent also raised the issue of value of impugned goods ascertained by the department. The DR, however, vide written reply mentioned above has stated that value determined by the department is as per the evidential data available with the Collectorate. In view of the above, the charges of levelled in the Show-Cause Notice stand established. I, therefore, order for confiscation of the goods under section 156 (1) clause 14, read with sections 32(1)(2) and 79(1) of the Customs Act, 1969. However, option under Section 181 of the Customs Act, 1969 is given to the importer to redeem the confiscated goods on payment of 35% Redemption Fine, i.e. Rs.1,388,018/ -(Rupees one million three hundred eighty-eight thousand and eighteen), equivalent to the value of offending goods (as determined by the department), in terms of S.R.O. 499(I)/2009 dated 13.06.2009, in addition to payment of duty and taxes chargeable thereon. I impose a penalty of Rs.25,000/ - (Rupees twenty five thousand) on the importer for violation of above-mentioned provisions of law."

1. Being aggrieved and dissatisfied with the impugned Order-in-Original, the Appellant filed the appeal before this Tribunal on the facts and grounds incorporated in the memo. of appeal.

2. On the date of hearing Mr. Raja Babar, Advocate appeared on behalf of the Appellant, reiterated the contents of the facts and grounds of the Memo. of Appeal and contended that, the first examination conducted by the shed staff confirmed declaration made by the importer as categorically defined the consignment/item is 'Submersible Pump with Motor' and not raised any objection or controversial report regarding imported consignment as such same was cleared. He further contended that, joint second examination in presence of CIU staff was conducted and prepared its report through which it was again confirmed that, earlier examination report is correct as mentioned in second examination report. No any controversial report given by the examination officials. Due to misreading of Pakistan Custom Tariff Chapter 84 in which the HS Codes of centrifugal pumps are mentioned, however, submersible pumps by name mentioned with PCT Code 8413.7010 under the heading of other centrifugal pumps and below that column other pumps relates to centrifugal pumps are mentioned with PCT Code 8413.7090. He also contended that, submersible pumps are one of centrifugal pumps as other centrifugal pumps which installed outside the fluid and submersible pump which merge in the fluid are differentiated by the Pakistan Customs Tariff under Chapter 84 as mentioned in the two different columns, despite that respondent No.2 issued the show-cause notice without any mis-declaration on the ground that the submersible pump and other centrifugal pump are same which is against codified law and amounted to harassment with mala fide intention. The imported goods item are submersible stainless steel vertical multi stage centrifugal pump and also submitted fact that `Light Vertical Multi Stage Centrifugal Pump with Motor is the function of Submersible Pump. He further contended that, all those pumps which works against the gravity, definitely vertical in direction are called Centrifugal Pumps. The respondent passed impugned Order-in-Original which is illegal and unlawful as contents of its are shocking as self made not mentioned in examination reports, such as it is mentioned on page No.7 of the Impugned Order-in-Original in para No.9 that, 'Physical examination by Customs reveal that the impugned goods were not submersible pumps but centrifugal pumps'. Although, it is false observation taken by the respondent No.1 who is also failed to appreciate that submersible pumps are light vertical multi stage centrifugal pumps which merge in the water not on the surface. It is also does not correspond, as to if the survey report was furnished by the committee or people or person carrying out the survey, the impugned order to this effect is silent. He prayed to set aside the impugned Order-in-Original and release the consignment in the interest of justice.

3. No cross objections under subsection (4) of Section 194-A of the Customs Act, 1969 have been submitted by the Respondents. However, the respondent filed para-wise comments. The representative of the respondent argued the matter and opposed the grounds of appeal and contended that appellant not imported submersible pump. As per examination report and catalogue found packed with each package the goods are 'Multi Stage Centrifugal Pumps' not having the characteristics of a submersible pump. On the basis of images in the first examination report it transpired that the goods are not submersible pumps as declared by the appellant. Hence the goods were re-examined for the confirmation of the declaration. It is denied that the second examination report confirmed the earlier examination report as correct. The second examination report states that 'the goods are examined in presence of C.I.U. staff. Found description of consignment is light vertical multistage centrifugal pump with motor of assorted models, brand and quality reported in the earlier examination report are correct. However description to the extent of submersible may be read as light vertical multistage centrifugal pump with motor. Group is requested to check all aspects in the light of catalogue being forwarded for ready reference.' The show-cause notice was issued correctly. Since the goods imported by the appellant are not `submersible pumps' therefore cannot be classified under PCT heading 8413.7010. On the basis of examination report, images and found catalogue the classification of the goods is under the heading 8413.7090, chargeable to customs duty @ 20%. It is denied that the submersible pump and centrifugal pump are same. The mandatory condition to qualify for a pump to be a submersible pump is insulation of the motor inside the housing of the pump, which is not present in the goods/pumps imported by the appellant. Moreover, the manufacturer's original literature retrieved from inside the consignment also confirms the goods are 'Light Vertical Multi-stage Centrifugal pump with motor' along with the installation instruction emphasizing that the pumps are not to be submerged in water and prayed that the order passed by the respondent No.1 may be upheld and the instant appeal be dismissed.

4. Arguments heard and concluded. Record of the case perused. After perusal of the record as well as arguments extended by both the parties, it has been noticed and observed that the only controversy in the subject case revolves around the issue whether the imported goods falls under the category of "submersible pumps (PCT heading 8413.7010) or under "centrifugal pumps (PCT heading 8413.7090). According to the 1st examination report, the subject goods are found under the description of submersible pumps with motors, having different brands and HP (Horse Power) marked with the brand JDYDEE, report is available on Page-17 as Annexure, another report is available at Page-18 about the same container which extended the different description, the report says that goods are examined in presence of CIU staff, the fund description of consignment is "light vertical Multi stage centrifugal pump with motor of assorted model, Brand and quantity, reported in the earlier examination report are correct, however, description to the extent of submersible may be read as light vertical multi stage centrifugal pump with motor". These examination reports causes the basic confusion in the description of goods specifically on the ground of additional presumptive observations that "the mandatory condition to clarify for a pump to be a submersible pump is installation of the motor inside the housing of the pump, which is not present in the goods / pumps imported by the appellant" because the said observation is neither part of the 1st Examination Report nor it has been reflected from second Examination Report which in fact originally causes the difference of opinion and show-cause notice was accordingly issued. The claim of the respondents based on the ground that original literature retrieved inside the consignment confirms the impugned goods as "light vertical Multi stage centrifugal pump with motor" and as such classifiable under PCT heading 8413.7090, chargeable to Customs Duty @ 20%, Sales Tax @ 17% Additional Sales Tax @ 3%, Income Tax @ 9% and Additional Custom Duty @ 1% instead of declared PCT heading 8413.7010 where the chargeable customs duty @ 5%. During hierarchy of the customs appellant established their ground through the evidence provided in form of literature / catalogue and tried to distinguish that, the submersible pump is one of centrifugal pump as other centrifugal pumps are installed outside the fluid and submersible pump which merge in the fluid are differentiated by the Pakistan Customs Tariff Chapter 84 under aforesaid two different PCT headings. It is evident from the record of the case that the appellant in support of their claim and to distinguish the "submersible pump" and "centrifugal pump" submitted the catalogue as Annexure available at Page 8 of the appeal. According to the catalogue the impugned product, name as "submersible centrifugal pump" supported with photographs of the original product. The main difference which they had elaborated apart from others, clearly differentiable from the photographs, category one of the pumps called horizontal centrifugal pumps and the others are been called submersible centrifugual vertical pumps. Although, these are for the different purposes and use over the water and under the water. For elebrating the characteristics and working of submersible pumps and centrifugal pumps. First of all, we prefer to place here the definition of word "Centrifugal" which means moving or tending to move away from a centre practically there should be some of the force, that force appears to cause an object travelling around a centre to fly away from the centre and off its circular path. The machine (For Liquid) having such function is called centrifugal pumps. If it is being used over the water or on the earth, it would be called centrifugal pump. When it has been used under the water it would be called submersible centrifugal pump. According to the subsequent distinctive characteristics of pumps, same falls under sub-heading 8413 of Chapter 84 of Pakistan Customs Tariff.

5. Now for clearity and description, we prefer to refer third (single dash) heading which is the basis of main conflict between the appellant and respondents, submersible pumps are specifically defined under three dash sub-heading of 8413.7010 other than submersible pumps (other dash) heading falls under sub-heading 8413.7090. It is the fundamental principle of rules of interpretation of statutes that taxing statute must be interpreted strictly. Bare reading of third (single dash) heading of sub-heading 8413.7010 reveals that machine/pump performs specific function for use under water would be classified under this category of heading only. On the contrary respondents/department failed to provide any evidence neither in the 1st examination report nor in the subsequent second examination report, about the purpose of use, specifically to verify the characteristic of impugned goods. It is clear from the second report that the distinction placed to the extent of word "submersible", may be read as light verticle multi stage centrifugal pump with motor, by doing so, word "submersible" has been alternatively added as read along with light vertical multi stage centrifugal pump and only by that reason, respondent/department assessed the impugned goods under sub-heading 8413.7090 (--- others) instead of sub-heading 8413.7010 (--- submercible pumps).

6. In our view the appellants contention carries weight on the ground that redendency cannot be attributed to the legislature and each and every word inserted in the statute has its own significance. The explanatory notes does not provide any assistance for distinguishing classification of three (--- dash) sub-headings 8413.7010 and 8413.7090. These sub-headings are distinguishable by application of General Interpretation Rules 1 to 6 of the Pakistan Customs Tariff, according to which classification is to be made according to term of heading and relevant Chapter and Section Notes. The appellants claimed the PCT heading 8413.7010, but on the contrary PCT heading 8413.7090 insisted by the department without the support of any iota of evidence provides the sufficient proof about the bona fide of the appellant. The element of mens rea has not been proved against the appellant, thus the charge of mis-declaration under Section 32 is therefore unwarranted and penalty imposed under Clause (14) of Section 156 (1) of the Customs Act, 1969 is patently unlawful.

7. Now, it is important to point out that in the subject Show-Cause Notice the element of "mens rea" and "existence of knowledge" or "reason to believe" as well as any collusion with customs officials and in support thereof no evidence substantiated the said alleged offence brought on record by the respondent. The subject impugned goods were examined under the First Appraisement System, in compliance of Section 79(1) of the Customs Act, 1969, where the said option was given, the provisions of Section 32 cannot be invoked the language of Section 32 can only be applied on the basis of documents delivered or furnished by the importer or the statement given by him before the Customs authorities, in this particular case while making the declaration the same was in support of the import documents and the description given on said documents the declaration made thereon are of same details. The language of that Section gives a very clear impression that the person who in action with any matter of customs makes or signs or causes to be made sign, or deliver causes to be delivered to an officer of customs any declaration, notice, certificate or other documents in any form or gives statement in reply to a question before the customs authorities knowingly and intentionally, having the reasons to believe that such documents and statements are falls under any material particular and he shall be guilty by an offence under this Section the question to giving the reply to an officer in this particular case in presence of the compliance of Section 79 (1) of the Customs Act, 1969 does not arise and element of "mens rea" having "fraudulent intention", "knowledge" and "reason to believe" about the declaration in a material particular has no legal warrant of charge, in absence of the subsequent and specific evidence, which constitutes a sufficient cause in favour of the appellant. It is also a settled law that if such specific particulars are not stated in the Show-Cause Notice, the notice would be vague and would not be in consonance with the requirement of subsection (2) of Section 32 of the Customs Act, 1969.

2018 P T D (Trib.) 2471

[Customs Appellate Tribunal]

Before Tahir Zia, Member (Judicial-II)

COLLECTOR OF CUSTOMS

Versus

Messrs SPORTS ONE INTERNATIONAL TRADING COMPANY and another

Customs Appeal No.K-105 of 2017, decided on 21st July, 2017.

Customs Act (IV of 1969)---

----Ss. 25 & 81---Customs value of goods---Determination---Importer imported declaration, showing rate of unit value US $ 1.00/Kg.; whereas assessment was made at the rate of US $ 6.00/Kg. by adjudicating authority---Being aggrieved and dissatisfied with the order-in-original by adjudication authority, importer filed appeal before Collector of Customs (Appeal), who set aside the order-in-original, holding that requisite order under S.81(5) of the Customs Act, 1969, having been passed after a lapse of one year and seven months, provisional determination had become final---Order-in-appeal by Collector of Customs (Appellate Authority) had rightly and justifiably been passed---Present appeal, did not contain substantial grounds for its consideration---In absence of any reason to interfere with order passed vide impugned order-in-appeal, same was dismissed being devoid of any merit and substance.

Abdul Rasheed, P.A. for Appellant.

M.H. Awan and Suraiya Sarwar for Respondents.

2018 P T D (Trib.) 2475

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)

Messrs SPATCO'S, KARACHI

Versus

DEPUTY COLLECTOR OF CUSTOMS (R&D) and 2 others

Customs Appeal No.K-1072 of 2016, decided on 14th April, 2018.

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

----S. 32(2)--- Mis-declaration--- Show-cause notice mentioning irrelevant sections of law---Effect---Show-cause notice being a basic document, was to be prepared with utmost care after going through the provisions of Customs Act, 1969---Cosmetic show-cause notice was not a legal document---Show-cause notice issuing authority was supposed to carefully go through the facts of the case and applicable provisions of Customs Act, 1969, alleged by contravened and the penal clauses so attracted for penalizing after establishing the charges---Decision on any fresh ground which was not spelled out in the show-cause notice, was not permitted---Any provisions of law which were not applicable and were invoked or irrelevant sections were invoked, same would render the show-cause notice palpably illegal---Collector of Customs, transmitted the show-cause notice to importer without going through its contents containing penal clauses of the Sales Tax Act, 1990 and Income Tax Ordinance, 2001---Issuance of such show-cause notice on the basis of irrelevant sections had rendered the show-cause notice void ab initio and of no legal effect.

Sadia Jabbar v. Director, Directorate General of Valuation 2012 SCMR 617 = 2012 PTD 898; Danish Jehangir and others v. The FOP and others 2016 PTD 702; Messrs Zeb Traders v. Federation of Pakistan 2004 PTD 369; Assistant Collector v. Khyber Elec. Lamps 2003 PTD 1275; D.G. Khan Cement v. Collector of Customs 2005 PTD 480; Caltex v. Collector (2003) 88 Taxation 128 (Lah.); 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 Rose Color v. Chairman, CBR 2013 PTD 813 ref.

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

----S. 32---Mis-declaration of description of goods---Importer could not be charged for mis-declaration under S.32 of the Customs Act, 1969 (i) where an importer made correct declaration on bill of entry or opted for first appraisement for determination of correct description, PCT heading of quantity of goods; (ii) when a consignment was found to contain goods of description other than the one declared falling under separate PCT heading, but chargeable to same rate of duty and (iii) where the description of goods was as per declaration, but incorrect PCT heading had been mentioned in the bill of entry, no case of mis-declaration under S.32 of the Customs Act, 1969 was made out, provided there was no change in the rate of customs duty as a result of ascertained PCT heading---Test report of Customs Laboratory, was conclusive in regard to the actual description of the goods, which could have been determined to the extent of zero error after obtaining instrumental analysis from any renowned Food Laboratory or from Pakistan Standard and Quality Control Authority, which was not obtained---Contravention was framed for issuance of show-cause notice for mis-declaration of description under the provisions of S.32 of the Customs Act, 1969 by Deputy Collector of Customs (R & D) and while doing so vital fact was ignored in the present case---Nothing categorical in regard to imported goods was available for discarding the declaration of the importer; in such like situation, neither framing of contravention was warranted nor issuance of show-cause notice and passing of order-in-original by Deputy Collector of Customs (R & D) or Deputy Collector of Customs---Framing of contravention report and subsequent proceedings in the case being void ab initio were not sustainable under the law.

Syed Muhammad Razi v. Collector of Customs, (Appraisement), Karachi and 2 others 2003 PTD 2821 and Muhammad Waheed v. Customs Appellate Tribunal 2016 PTD 35 ref.

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

----Ss. 25-A & 32---Customs Rules, 2001, Rr.107(a) & 110---Mis-declaration---Overruling of Valuation Ruling---Issue for determination was as to whether charge of mis-declaration of value could be invoked on the basis of Valuation Ruling issued by the Director, Directorate General of Valuation---Application of Valuation Ruling could only be overruled when evidence of higher value was available; because proving of charge of mis-declaration of value needed high standard of proof, a direct evidence not the Valuation Ruling or the value of identical/similar goods available in the data reservoir maintained by PRAL under R.110 of the period given in R.107(a) of Customs Rules, 2001---In absence of direct evidence of higher value levelling charge of mis-declaration on the basis of Valuation ruling was without substance and in contravention of the provisions of Customs Act, 1969 and Customs Rules, 2001 and Regulations framed thereunder---Issue was answered in the negative.

Sadia Jabbar v. FOP PTCL 2014 CL 537 and Danish Jehangir v. FOP and 2 others 2016 PTD 702 ref.

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

----Ss. 25 & 25-A---Customs Rules, 2001, R.107(a)---Assessment on the basis of Valuation Ruling---Limitation---Issue the determination was, whether assessment could be made on the basis of Valuation Ruling after lapse of 90 days---Validity of any Valuation Ruling issued by the Director, Directorate General of Valuation under provisions of S.25-A of the Customs Act, 1969 was to the extent of 90 days i.e. the period expressed in R.107(a) of Customs Rules, 2001---Any assessment made for the levy of duty and taxes of either a consignment of any importer beyond said period with the application of a Valuation Ruling would lose its enforcement being in derogation of R.107(a) of Customs Rules, 2001---Proceedings in the case were declared to be infested with inherent legal infirmities and substantive illegalities, tantamounting to patent violations of prescribed law and in utter disregard of principles of natural justice---Impugned orders were set aside.

Nadeem Ahmed Mirza for Appellant.

Raja Shakeel Ahmed, A.O. for Respondents.

2018 P T D (Trib.) 2485

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Member (Judicial)

USMAN

Versus

The ADDITIONAL COLLECTOR CUSTOMS (ADJUDICATION), PESHAWAR and others

Cus. Appeal No. 1074/PB of 2015, decided on 4th January, 2018.

Customs Act (IV of 1969)---

----Ss. 2(s), 16, 156 & 157---SRO No.1090(I)/2010, dated 1-12-2010---Smuggling of vehicle---Confiscation of vehicle---Appellant, having failed to produce valid registration and other legal documents in respect of vehicle in question, Additional Collector Customs confiscated vehicle, seized by F.C. troops---Appellant raised objection to the effect that seizure was conducted by "Subedar" of the FC under S.157 of the Customs Act, 1969, who was not authorized to seize the vehicle under said section in the light of S.R.O. No.1090(I)/2010, dated 1-12-2010---Objection of the appellant was not sustainable as the show-cause notice was issued to the appellant for violation of Ss.2(s) & 16 of the Customs Act, 1969 and the appellant had not raised any objection at the time of show-cause notice---'Subedar' of FC Force was competent to seize the vehicle---Impugned order of confiscation passed by Additional Collector Customs (Adjudication), was upheld, in circumstances.

Ajoon Khan for Appellant.

Muhammad Azeem Superintendent, Customs Peshawar for Respondents.

2018 P T D (Trib.) 2488

[Customs Appellate Tribunal]

Before Ghulam Mustafa Memon, Member Judicial-III

Messrs AARIJ STEEL CORPORATION, KARACHI

Versus

The COLLECTOR OF CUSTOMS (APPEALS), KARACHI and another

Customs Appeal No. K-469 of 2016, decided on 28th December, 2017.

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

----Ss. 16, 27-A, 32 & 79---SRO No.450(I)/2001, dated 18-6-2001---Mis-declaration of description of imported goods---Import of a consignment of re-meltable scrap, classifiable under PCT Heading 7204.4920 by declaring its value under S.79 of the Customs Act, 1969 was cleared---Said consignment was intercepted by Directorate General of Customs Intelligence and Investigation-FBR on the basis of a credible information---Authorities, on physical examination, noticed 49 old and used motor cycles/scooty in addition to re-meltable scrap, which did not appear to be bona fide scrap and were not importable---Show-cause notice was issued to the importer on the basis of contravention report---Adjudicating authority, could not concur with the defence plea of the importer and recorded order-in-original---Order-in-original was maintained by the appellate authority below---Validity---Objectionable parts of the consignment i.e. motor cycles/scooty, due to non-availability of rims/tyres alleged to be incomplete, yet had essential character of the complete finished article---Out of 49 old and used motor cycles/scooty, 48 motor cycles were usable after fixing rims and tyres, whereas remaining one scooty after replacement of broken body; could easily be used for original purpose---Said motor cycles/scooty, were serviceable in original form---Importer, in circumstances, could not plead that objectionable part of the consignment was bona fide scrap---Request of the importer for release of the subject part of the consignment after de-shaping/mutilation/ scraping on the cost of the importer, was declined on the score that once goods were confiscated, same became the property of Federal Government in accordance to S.182 of the Customs Act, 1969---Importer being no more owner of the subject property, was not entitled to the subject relief---Provisions of S.27-A of the Customs Act, 1969, was to be read and interpreted as expressed/phrased, which permitted mutilation or scraping of imported goods on the request of the importer, without any condition; whereas R.593 of the Customs Rules, 2001, changed the prime scope of S.27-A of the Customs Act, 1969 with the condition i.e. request was to be made before filing of goods declaration---Rules were subordinate to the statute and those were made for promotion of the Act---Said Rules could not to be employed to harass the taxpayer on the basis of technicalities instead of advancing the purpose for which those were framed---Provisions of S.27-A of the Customs Act, 1969 and R.593, to be adhered in letter and spirit and for the benefit of the taxpayer, by virtue of fact that those were directory in nature---Appellate Tribunal observed that request of the importer for mutilation/de-shaping of objectionable items, was to be allowed after filing of goods declaration by Adjudicating Collectorate or by Collector of Customs (Appeals)---Similar type of request was allowed at the level of adjudication and appeal---Facility allowed to someone and denied to other, was discrimination---Request of the importer was vouchsafed for release of the said confiscated goods after de-shaping/mutilation to the extent of small pieces useable as re-meltable scrap only in consonance of S. 27-A of the Customs Act, 1969 at the expenses of the importer and on payment of penalty of Rs. 50,000 in addition to payment of leviable duty and taxes---Order-in-original and order-in-appeal, were set aside, in circumstances.

Messrs Atta Muhammad Qureshi v. Settlement Commissioner, Lahore and others PLD 1971 SC 61 ref.

(b) Interpretation of statutes---

----Rules under a statute---Scope---Rules, which were merely sub-ordinate legislation could not override or provail upon the parent statute---When there was inconsistency between the rule and statute, the statute must prevail.

Messrs Nishat Mills v. Superintendent of Central Excise Circle 2 PLD 1989 SC 222 ref.

(c) Constitution of Pakistan---

----Art. 25---Equality, doctrine of ---Doctrine of equality, as contained in Art.25 of the Constitution enshrined the golden rules of Islam, which stated that every citizen, no matter, how high-so-ever, must be accorded equal treatment with similarly situated persons---State could classify persons and object for the purpose of legislation and make laws applicable only to persons or objects within a class---Almost all legislation involved some kind of classification, whereby same people acquire rights or suffer disabilities; whereas other do not---What was prohibited under that principle, was legislation favouring some within a class and unduly burdening others---Basic rule for the exercise of such discretion and reasonable classification, was that all persons placed in similar circumstances must be treated alike and 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.

Aqeel Ahmed for Appellant.

Jehanzeb, I.O. and Khurrum Shahzad, I.O. for Respondents.

2018 P T D (Trib.) 2500

[Customs Appellate Tribunal]

Before Muhammad Nadeem Qureshi, Member (Judicial-I) and Muhammad Nazim Saleem, Member (Technical-II)

Messrs NICE TRADERS, GUJRANWALA

Versus

The DIRECTOR, DIRECTORATE GENERAL OF VALUATION, CUSTOMS HOUSE, KARACHI and 2 others

Customs Appeal No. K-1430 of 2017, decided on 12th April, 2018.

Customs Act (IV of 1969)---

----Ss.25, 25-A, 25-D, 80, 81 & 194-A---Customs Rules, 2001, R.438---Determination of customs value of goods---Declared value of imported goods was accepted by the Clearance Collectorate---Director, Directorate General of valuation issued Valuation Ruing against which revision application was filed before Director General, Directorate General of Valuation, who, remanded the matter to director for conducting fresh exercise for issuance of ruling; while doing so Director General failed to set aside the ruling in question issued by Director and same remained in field for the purpose of assessment---Importer's Clearing Agent approached Chief Collector for clearance of consignment under S.81 of the Customs Act, 1969 which he refused on the basis of Chief Collector's Circular dated 22-11-2017---No cross-objections, under subsection (4) of S.194-A of the Customs Act, 1969 were filed within the stipulated period of 30 days, by the department but were filed on the date of hearing---Departmental Representative stated that order passed by Director General of Valuation was correct in fact and law---Under the provisions of S.25-D of the Customs Act, 1969, the Director General Valuation had no power to re-determine the value of the imported goods under scrutiny before him---Concept of remand was not available under the provisions of S.25-D of the Customs Act, 1969---Director General of valuation was not empowered to remand a ruling without setting aside the same---Order of remand in violation of the provision of law could not be passed without setting aside the Valuation Ruling---When a ruling was remanded, same was deemed to be set aside and as such non-existent for any purpose, including passing the assessment order under provisions of S.80 of the Customs Act, 1969 and R.438 of Customs Rules, 2001---Director General of Valuation by doing so, in fact rendered the Valuation Ruling ab initio void, being in derogation of S.25 of the Customs Act, 1969---Impugned Valuation Ruling, was not in existence and could not be applied on the consignment of the importer from the date of its issuance---Director General of valuation, in revision had not disputed the veracity of the import value of the goods nor the annexed documents were found false, but in fact had accepted the value of importer's goods as fair, falling within the ambit of S.25(1) of the Customs Act, 1969---Order-in-Revision Valuation Ruling and Circular dated 22.11.2017 by the Director General of Valuation had no adherence with statutory requirements, and derogatory to the specific provisions of Ss.25, 25-A, 25-D & 81 of the Customs Act, 1969 which were declared without lawful authority, void and infested with patent illegalities and were set aside to the extent of the importer.

Sadia Jabbar v. FOP 2018 PTD 1746; Messrs Danish Jehangir v. FOP and 2 others 2016 PTD 702; SCRA No.744 of 2016; Central Insurance Co. v. Central Board of Revenue 1993 SCMR 1232 Messrs Lever Brother Pakistan Ltd. v. Customs Sales Tax and Central Excise Appellate Tribunal, Karachi 2005 PTD 2462; Superior Textile Mills Ltd. v. FOP 2000 PTD 399 and Messrs Arjun Salt Chemical v. UC Gharo 1982 SCMR 522 ref.

Nadeem Mirza, Consultant for Appellant.

Umer Baloch, V.O. for Respondent No. 2.

Ashfaq Ahmed, P.A. for Respondent No.3.

2018 P T D (Trib.) 2508

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Member (Judicial)

Messrs MOEED'S INDUSTRIES, PESHAWAR

Versus

The DEPUTY DIRECTOR CUSTOMS, LAHORE and 2 others

Cus. Appeal No.10/PB of 2016, decided on 15th March, 2018.

Customs Act (IV of 1969)---

----Ss. 32 & 33---Mis-declaration---Deputy Director (Post Clearance Audit), during scrutiny, observed in valuation that the importer had declared the value at US $ 1.4/Kg, instead of US $ 2.23 Kg and evaded duty/taxes violating the provisions of S.32 of the Customs Act, 1969---Show-cause notice was issued to the importer and Additional Collector-II, vide Order-in-Original decided that as the case was kept pending for want of clarification from Deputy Director Valuation, due to non receipt of desired report, the order was passed in the light of Valuation Ruling relevant to the impugned consignment according to which the value of the imported consignment was US $ 2.23 Kg.---Declaration of lesser value, resulted into short payment of duty/taxes, was recoverable from the importer---Being aggrieved, the importer filed an appeal against said order to the Collector (Appeals)---Nothing had been explained by the Collector of Customs in his Order of Remand in respect of the directions issued by the Order-in-appeal of the Collector of Customs (Appeals) as nothing was dilated upon the letter which was the main issue for resolving the matter---Collector of Customs (Appeals), had decided the case without adverting to the factual as well legal points---Order-in-remand of the Additional Collector (Adjudication), was set aside, in circumstances.

Danish Ali Qazi for Appellant.

Mussa Khan, Superintendent/D.R. for Respondents.

2018 P T D 943

[Federal Tax Ombudsman]

Before Abdul Rauf Chaudhry, Federal Tax Ombudsman

Messrs SEVEN ELEVEN CNG STATION, BAHAWALNAGAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.FTO-ONL/0000051 of 2017, decided on 31st July, 2017

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

----Ss. 2(3)(i)(a)(ii), 9(2)(b) & 10(1)(4)---Income Tax Ordinance (XLIX of 2001), Ss.234-A & 235---Federal Board of Revenue---Clarification No.4(19).T.Budget/2017-23670-R, dated 23-2-2017---Non-issuance of refund amount---Complainant filed return of income at Rs.10.288 million, tax payable at Rs.0.411 million and refund amounting to Rs.0.227 million of the tax deducted under S.235 of the Income Tax Ordinance, 2001---Complainant, submitted application for refund along with original bills and statement of tax deduction under S.234-A of the Income Tax Ordinance, 2001, but said application was not disposed of, which according to the complainant tantamounted to maladministration under S.2(3)(i)(a)(ii) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Department raised preliminary objection of jurisdiction under S.9(2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, on the ground that the matter pertained to the assessment and determination of tax in respect of which remedy was available by way of appeal to Appellate Fora---Validity---Objection of the department was misconceived, as refund claim was not an issue pertaining to assessment of income or determination of tax liability---Federal Board of Revenue had issued clarification vide letter No.4(19)T-Budget/2017-23670-R, dated 23-2-2017; whereby, it had been clarified that in the light of provisions of subsection (4) of S.234-A of the Income Tax Ordinance, 2001, CNG Station was not entitled to claim adjustment of withholding tax collected or deducted under any other head/provision of said Ordinance; even in instances where tax collected/deducted under any other head, was in excess of final tax liability discharged by the taxpayer under S.234-A of the Income Tax Ordinance, 2001---Ombudsman observed that Department should dispose of refund application in accordance with said clarification after providing opportunity of hearing to the complainant, expeditiously.

Messrs Khalid Modern Industries (Pvt.) Ltd.'s case C.No. 564/ LHR/ST(157)/999/13 and Messrs Libra International, Karachi's case No.154/KHI/ST-(66)/527/2015 ref.

Abdur Rehman Dogar, Advisor, Dealing Officer.

Riaz Ahmad Raja, ITP, Authorized Representative.

2018 P T D 1961

[Gilgit-Baltistan Chief Court]

Before Malik Haq Nawaz and Ali Baig, JJ

QAISER

Versus

The STATE

Cr.App. No.14 of 2016, decided on 11th June, 2018.

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

----S. 156(1)(8)(89)---Foreign Exchange Regulation Act (VII of 1947), S.8(2)---Criminal Procedure Code (V of 1898), S.154---Smuggling---Restriction to take or send Currency out of Pakistan---Delay in lodging of FIR---Effect---Record transpired there was four days unexplained delay in lodging of FIR---Circumstances suggested that FIR had been lodged after due deliberation and consultation, which created serious doubt regarding involvement of the accused in the alleged crime.

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

----S. 156(1)(8)(89)---Foreign Exchange Regulation Act (VII of 1947), S.8(2)---Smuggling--- Restriction to take or send currency out of Pakistan---Prosecution case was that accused, who was driving the truck, was stopped, near the Boarder of China, checked and a carton lying near driver seat was found containing Pakistan currency amounting to Rs. 8899500/----Accused, on inquiry stated, that he was taking the money to give to co-accused which was sent by someone through him---Prosecution case was that someone had handed over the disputed currency to the accused for onward transmission to the co-accused, but the prosecution had failed to produce witness to prove its version---Prosecution had not produced and examined the person who allegedly sent the currency for co-accused---Prosecution had cited six witnesses in calendar of witnesses of challan but had abandoned three material witnesses including FIR lodger, who had submitted challan in the court---Prosecution had produced and examined complainant and two other customs officials as witnesses in the Trial Court---No independent/impartial witness was either cited in the calendar of witness of challan---Conviction could not be ordered on the basis of statement of complainant and his colleague customs officials---Record showed that neither case property/currency notes were produced in the court at the time of recording evidence, which was mandatory, nor FIR had been exhibited while recording statement of the complainant---Currency was allegedly recovered from possession of the accused within territory of Pakistan and there were check posts at the border to check smuggling---Prosecution had failed to produce any documentary and oral evidence in the Trial Court to substantiate its version---Circumstances established that prosecution case was full of doubts, benefit of which would resolve in favour of accused---Appeal was allowed and accused was acquitted in circumstances by setting aside conviction and sentence recorded by the Trial Court.

Amjad Hussain for Appellant.

Syed Riaz Kazimi, Special Prosecutor for Respondent.

2018 P T D 1574

[High Court (AJ&K)]

Before M. Tabbasum Aftab Alvi, C.J. and Muhammad Sheraz Kayani, J

Kh. ZAFAR IQBAL, DISTRIBUTOR LEVER BROTHERS PAKISTAN LIMITED RAWALAKOT (A.K.) and others

Versus

DEPUTY COLLECTOR CENTRAL EXCISE AND SALES TAX, RAWALAKOT and others

Appeals Nos.26, 37, 28, 39, 29, 34, 30, 33, 31, 36, 32, 38, 35 of 2001 and 27 of 2002, decided on 22nd May, 2018.

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

----Ss. 33 & 34---Offences and penalties under the Sales Tax Act, 1990---Default surcharge/additional tax---Imposition of penalty---Exercise of discretion under Ss.33 & 34 of the Sales Tax Act, 1990---Scope---Before imposition of penalty under Ss.33 & 34 of the Sales Tax Act, 1990; the Department must be satisfied that defaulting party/ taxpayer acted deliberately in defiance of the law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of its obligations---Penalty should not be merely imposed because the officer was competent to impost the same and discretion of concerned officer of Department should be exercised judicially and after consideration of all relevant circumstances.

Hindustan Steel Ltd. v. State of Orissa, decided on August 4 of 1969 Supreme Court of India; Mamy Beverage v. Naseem 1995 PTD 91 and The Collector of Sales Tax, Gujranwala and others v. Messrs Super Asia Mohammad Din and sons and others 2017 SCMR 1427 rel.

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

----S. 11---Assessment of Tax and Recovery of Tax not levied or short levied or erroneously refunded---Mandatory nature of Departmental obligations under S.11 of the Sales Tax Act, 1990---Scope---Section 11 of the Sales Tax Act, 1990 was mandatory in nature and any order passed in non-compliance of the same, particularly an order passed beyond the time period stipulated in the said section, would be invalid.

The Collector of Sales Tax, Gujranwala and others v. Messrs Super Asia Mohammad Din and Sons and others 2017 SCMR 1427 rel.

(c) Discretion---

----Public functionary---Exercise of discretion---Scope---Law did not permit an authority to exercise its discretion in an arbitrary or capricious manner.

Haji Muhammad Afzal for Appellants (in all the Appeals).

2018 P T D (Trib.) 4

[Inland Revenue Appellate Tribunal]

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

Messrs SUKKUR ELECTRIC SUPPLY COMPANY LTD., SUKKUR

Versus

C.I.R., R.T.O., SUKKUR

S.T.A. No.261/KB of 2016, decided on 5th October, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 11, 25, 33, 34 & 46---Short payment of sales tax---Company, was engaged in the supply of electrical energy to the registered and unregistered persons---Audited accounts of the company revealed that company had an outstanding liability of sales tax to the tune of Rs.17,158,836,157---Said amount was reflected in the audited accounts for the tax period from July 2013 to June 2014---Amount of sales tax was liable to be recovered under S.11(2) of the Sales Tax Act, 1990 along with default surcharge, besides the imposition of penalty---Adjudicating Authority, charged said amount vide, order-in-original---Company being aggrieved with order of the Adjudicating Authority filed appeal before Commissioner (Appeals) who dismissed the appeal---Validity---Order-in-original had been passed for the period from January 2012 to June 2014 (30 Months); whereas sum treated as unpaid sales tax liability was upto 30-6-2014, which included unpaid liability of another Electricity Supply Company prior to January 2012---Period of order-in-original covered the amount unpaid sales tax as Rs.5,020,946,775 and balance amount fell outside the periodical scope of impugned order-in-original---Balance amount of Rs.7,223,172,649, was not covered by order-in-original as the same related to the period up to December, 2011---Two Officers of the department having relied on accounts and subsequently failed to dislodge the explanation of taxpayer, impugned order was set aside, with the directions to the Adjudicating Authority to re-examine the impugned claim of payment of sales tax strictly in accordance with law on merits to the extent of examination and verification of evidence of payment made by the company to the Government treasury during the relevant tax period involved in the order-in-original---Tribunal observed that it would be a better course to select the case for audit for any period in terms of S.25 of the Sales Tax Act, 1990 and thoroughly examine the pattern of accounting disclosure, matching same with monthly sales tax returns and reason for absolute adjustment of input against output with no value addition despite substantial activities of the entity---Besides that, the Adjudicating Authority, could also obtain audit reports under S.25 of the Sales Tax Act, 1990.

[Case-law referred].

Hussain Ahmed Shirazi for Appellant.

Farhan Badar Solangi, D.R. for Respondent.

2018 P T D (Trib.) 69

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Raana Ahmed, Accountant Member

Messrs DECENT TEXTILES, FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, RTO, FAISLABAD

S.T.A. No.1309/LB of 2016, decided on 7th December, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 11(3), 33 & 34---Refund of input tax---Second show-cause notice---Registered person was alleged to have had claimed/received refund of input tax during relevant period on the strength of invoices issued by blacklisted unit---Registered person was served with a show-cause notice, as to why refunded amount of sales tax could not be recovered along with default surcharge and penalty---Adjudicating Authority passed order-in-original against the registered person---Appellate authority below upheld order-in-original---Validity---Impugned show-cause notice, was not only duplicate, but also equivalent to impede the registered person with double taxation and double jeopardy as the matter in question had been concluded in the favour of registered person in the first round of litigation---Issuance of multiple show-cause notices, was depreciated---Repeated issuance of show-cause notices on the same issue, would constitute fishing enquiries not permitted under the fiscal laws---Re-agitating of the same issue by the tax functionaries, was against all the principles of administration of justice and fair play---Issuance of second show-cause notice was patently illegal and unlawful, particularly when departmental appeal was currently pending before the Appellate Tribunal---Issuance of multiple show-cause notices on the same cause of action, involving same amount, for the same tax-periods, to the same person, would not only defeat rationality and logic, but also "due process of law"---Any past liability of input tax, could not be created against a taxpayer upon subsequent inclusion of his supplier in the list of black-listed persons---Impugned notice being illegal, immaterial in its substance and presumptive in its nature had no legal effect at all---All the controversies of legal significance, had been resolved in favour of registered person by setting aside the impugned second show-cause notice, as well as consequent orders of both the authorities below.

Messrs Ahsan Enterprises, Faisalabd v. The CIR(A), Faisalabad and others 2015 PTD (Trib.) 1839; 2016 PTD 483; 2011 PTD (Trib.) 2619; 2000 PTD 399; PLD 2001 SC 600 = 2001 PTD 1486; The Commissioner Inland Revenue, Faisalabad v. Messrs Amtex Limited, Faisalabad 2016 PTD 1695; Messrs K.B. Enterprises, Faisalabad v. Federation of Pakistan and others 2016 PTD 483 ref.

Khubaib Ahmad for Appellant.

Mrs. Amina Kamal, D.R. for Respondent.

2018 P T D (Trib.) 85

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Muhammad Waseem Ch., Judicial Members and Mohammad Raza Baqir, Accountant Member

Messrs PARACHA CHEMICAL INDUSTRIES, FAISALABAD

Versus

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

S.T.A. No.1492/LB of 2014, decided on 7th March, 2016.

Per Ch. Shahid Iqbal Dhillon, Judicial Member, Muhmmad Waseem Chaudhry, Judicial Member agreeing [Majority view]

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

----Ss. 8-B(1), 11(3), 33(5) & 46-S.R.O. No. 647(I)/2007, dated 27-6-2007---Adjustment of excess input tax---Imposition of penalty and default surcharges---Assessee was alleged to have adjusted input tax in excess to ninety percent of output tax---Adjudicating officer imposed penalty and default surcharge based on said omission/irregularities of registered person---Order of Adjudicating Officer, was challenged before appellate authority below, who vacated whole principal amount of sales tax, and upheld liability on account of penalty and default surcharges---Impugned order of appellate authority upholding penalty and default surcharges was illegal and unjustified as the appellate authority itself had held that there was no dispute regarding the genuineness of input tax and vacated the demand of principal amount of sales tax and adjudged recovery of penalty of five percent of the amount of tax involved under S.33(5) of Sales Tax Act, 1990---Assessee would become liable to pay penalty under S.33(5) of the Sales Tax Act, 1990, when he would fail to deposit the amount of due tax or any part thereof, but in the present case appellate authority below had vacated whole amount of sales tax and nothing left payable by the assessee---Imposition of penalty was utter violation of provisions of S.33(5) of the Sales Tax Act, 1990---Where the assessee did not act mala fidely with the intention to evade the tax, the imposition of penalty and default surcharge was not justified---In the present case neither any charge of wilful default, nor to defraud the Government had been levelled against the assessee---No justification existed for levy of default surcharge and imposition of penalty, impugned order was declared to be illegal, ab initio void and was set aside, in circumstances.

Collector of Customs, Sales Tax and Central Excise Appeal, Karachi v. Messrs Nizam Impex (Pvt.) Ltd. Karachi 2014 PTD 498 ref.

Per Muhammad Raza Baqir, Accountant Member disagreeing with Ch. Shahid Iqbal Dhillon, Judicial Member. [Minority view]

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

----Ss. 8-B(1), 11(3), 33(5) & 46---S.R.O. No. 647(I)/2007, dated 27-6-2007---Adjustment of excess input tax---Imposition of penalty and default surcharges---Registered person had defaulted the provisions contained in S.8-B of the Sales Tax Act, 1990---Claim of 100%, input tax adjustment instead of 90% of output tax being a procedural lapse, recovery of principal amount from the registered person, was not justified---Such registered persons were liable to penalty/additional tax as they defaulted the provisions of S.8-B of the Sales Tax Act, 1990 by claiming 100% input tax instead of 90%---Legislature did not bring any provision in the statute book without any purpose---Appellate authority below had rightly ordered recovery of penalty/additional tax from the registered person, as he had defaulted the provisions of S.8-B of the Sales Tax Act, 1990. [Minority view]

Per Muhammad Waseem Chaudhary, Judicial Member on difference of opinion between Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Raza Baqir, Accountant Member, agreeing with Ch. Shahid Iqbal Dhillon, Judicial Member [Majority view]

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

----Ss. 8-B, 11(3), 33(5) & 46---S.R.O. No. 647(I)/2007, dated 27-6-2007---Adjustment of excess input tax---Imposition of penalty and default surcharge---Registered person, in the present case, was neither a defaulter, nor any mala fide intention had been disclosed by the revenue---Provision of S.8-B of Sales Tax Act, 1990, was not applicable in the case of registered person---Default surcharge and penalty in such situation was to be deleted---Appellate Tribunal, being a judicial forum, having power to interpret the law, if found any discrimination in respect of Fundamental Rights of a registered person, could render the findings according to the judgments of superior judiciary.

Messrs N.H. Packages, Faisalabad's case S.T.A. No.902/LB/2014 dated 10.09.2014; Messrs Nestle Milk Pak Ltd.'s case 2002 PTD (Trib.) 300; Messrs Nizam Impex (Pvt.) Ltd.'s case 2014 PTD 498; Messrs D.G. Khan Cement Factory Ltd.'s case 2004 SCMR 456 = 2004 PTD 1179; Messrs Pakistan Refinery Limited's case GST 2006 CL 63; Messrs Bilal Textiles (Pvt.) Ltd. Faisalabad's case 2010 PTD 957; Messrs Azhar Corporation (Pvt.) Ltd. Faisalabad's case S.T.A. No.1136/LB/2014 dated 17.09.2014 and Messrs Zahidjee Textile Mills Ltd. Faisalabad's case 2012 PTD (Trib.) 1123 ref.

Khubaib Ahmad for Appellant.

Shafiq-ur-Rehman Siddiqui, D.R. for Respondent.

2018 P T D (Trib.) 250

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch. Judicial Member and Muhammad Ahmad, Accountant Member

Messrs AIMEN TRADERS, MULTAN

Versus

The C.I.R., R.T.O., MULTAN

M.As. (AG) Nos.15/LB, 16/LB of 2017, S.T.As. Nos.672/LB and 673/LB of 2016, decided on 3rd October, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 11(2) & 11(3)---Constitution of Pakistan, Art.13---Appellate Tribunal Inland Revenue Rules, 2010, R.14---Assessment of tax---Assumption of jurisdiction by Inland Revenue Audit Officer (IRAO) and Deputy Commissioner Inland Revenue (DCIR)---Taxpayer contended that assumption of jurisdiction by IRAO and DCIR, was illegal in the absence of legally passed jurisdiction order---Wisdom of higher forum in interpretation of law was to dominate---Subordinate forum, was not supposed to make any interpretation in contrary to that of the upper forum---Appellate Tribunal had a constitutional duty to uphold the protections guaranteed in the Constitution---In the present case, relevant provisions of law and the case-law had either not been appreciated in its true perspective, or had been inadvertently ignored---Impugned orders of the appellate authority below were vacated by the Tribunal and assessment orders were annulled.

Zaver Petroleum Corporation Limited v. Federal Board of Revenue 2016 PTD 2332 and Zain Ali v. Additional Collector of Customs, Quetta 2014 PTD (Trib.) 1389 ref.

Mian Ahmad Saeed, ITP for Applicant.

Faisal Asghar, D.R., (RTO) for Respondent.

2018 P T D (Trib.) 314

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch. Judicial Member and Masood Akhtar Shaheedi, Accountant Member

Messrs SAEED BROTHERS STEEL RE-ROLLING MILLS, LAHORE

Versus

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

I.T.As. Nos.2244/LB, 2243/LB, 2242/LB of 2016 and M.As. (cond.) Nos.56/LB to 58/LB of 2017, decided on 31st October, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss.111(1)(d)(i) & 122(5-A)---SRO No. 345(I)/2010, dated 24-5-2010---Amendment of assessment---Assessing Officer noticed certain discrepancies which warranted action and considered the deemed assessment erroneous in so far as prejudicial to the interest of revenue within the meaning of S. 122(5-A) of the Income Tax Ordinance, 2001---Assessing Officer, initiated the proceedings and issued show-cause notice confronting the taxpayer with alleged discrepancies and sought its explanation in that regard---Reply tendered by the taxpayer, being not satisfactory for the Assessing Officer, deemed assessment was amended---Appellate authority below upheld the order of the Assessing Officer---Taxpayer had declared rate of sale of re-rolled items, which was even lesser than the rate of ingots/billets which was raw material of re-rolled items---Assessing Officer had concluded that the taxpayer had suppressed/concealed sales which attracted the provisions of S.111(1)(d)(i) of Income Tax Ordinance, 2001 and said amount was added to the total income of taxpayer---Held, that orders passed by the authorities below on the issues of suppressing of sales were not in accordance with law and the order was vacated---Action initiated by Assessing authority in exercise of its powers under S.122(5-A) of the Income Tax Ordinance, 2001 and confirmed by appellate authority were not maintainable in the eyes of law.

1984 PTD (Trib.) 143; S.H. Mahmood and Company v. CIT, Karachi 1960 PTD 1347; Laser Parix Deplix Clinic v. ATIR 2002 PTD 549; Commissioner of Income Tax v. Sakhi Contractors and Engineers, Multan, 1987 PTD 210; 2007 PTD (Trib.) 1253; CIR, Legal Division, Hyderabad v. Messrs Shad & Co. Carriage Contractor Head Office, Hyderabad), 2011 PTD (Trib.) 2380; Defence Housing Authority Islamabad v. CIR, LTU, Islamabad 2013 PTD (Trib.) 1749; Haji Meher Din v. Commissioner of Income Tax 2002 PTD 541; Kamalia Steel Furnace v. CIR, RTO, Lahore I.T.A. 858/LB/2015 and I.T.A. 859/LB/2015 ref.

Mian Ahmad Saeed, ITP for Appellant.

Ms. Amina Kamal, DR (RTO) for Respondent.

2018 P T D (Trib.) 359

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Farzana Jabeen, Accountant Member

Messrs J & P COATS PAKISTAN (PVT.) LTD., KARACHI and another

Versus

C.I.R., ZONE-I, LTU, KARACHI and another

F.E.As. Nos.39/KB and 37/KB of 2013, decided on 17th June, 2014.

(a) Federal Excise Act (VII of 2005)---

----S. 33(2)---Appeal against order of Deputy Commissioner Inland Revenue/adjudicating authority---Scope---Commissioner Inland Revenue/appellate authority decided appeal without issuing notice to the department and no opportunity of hearing was provided to the department---Principles of natural justice, violation of---Taxpayer being aggrieved and dissatisfied with the order of the Deputy Commissioner Inland Revenue/adjudicating authority, filed appeal before the Commissioner Inland Revenue (Appeals)/appellate authority, who vide impugned order, partly confirmed the treatment of the matter by the Authority below---Validity---Department had agitated the appeal on the ground of non-providing opportunity of hearing or without taking into account the view point of the department at the time of hearing of appeal---Department, though had no inherent or statutory right to file appeal before appellate authority, but before deciding appeal filed by the taxpayer, appellate authority below, must give an opportunity of hearing to the department, or at least obtain its comments on the arguments of the taxpayer---Appellate authority had rendered an ex parte decision without giving any chance of hearing for rebuttal---Appellate authority being an executive/quasi judicial, was required to dilate upon all the questions of fact and law---If appellate authority, would fail to pass proper speaking, judicial and judicious order by considering all the facts and points of law, same would amount to negation of justice---Appellate authority below had violated provisions S.33(2) of Federal Excise Act, 2005, which was to be followed in letter and spirit---No party could be condemned on basis of evidence or information adduced behind its back and without notice---Rule of justice demanded that before any adverse order, penalty or liability was passed or imposed upon a party, it should be afforded full opportunity to meet the case and rebut the evidence used against it---Appellate authority below, had not served the notice on the department and departmental Representative appeared before the Tribunal without any record of the assessment and appellate proceedings---Appellate authority after reproducing the written arguments, simply gave its findings in a short paragraph, in violation of S.24-A of General Clauses Act and Arts.4 & 10-A of the Constitution---Provisions of S.33(2) of Federal Excise Act, 2005 were mandatory and not directory or regulatory---Impugned order, passed by the appellate authority, in circumstances, was against the doctrine of hearing and the principles of natural justice---Order of the appellate authority below, in circumstances was vacated and appeal was remanded to appellate authority, with the direction to rehear the appeal de novo after giving reasonable opportunity of being heard to both the parties and decide all the issues of facts and law raised by the parties, by an elaborate and speaking order, supported by reasons and after application of judicious, judicial and conscious mind for and against.

Adamjee Jute Mills Ltd. v. The Province of East Pakistan and others PLD 1959 SC (Pak.) 272; Gouranga Mohan Sikdar v. The Controller Import and Export and 2 others PLD 1970 SC 158; Mollah Ejahar Ali v. Government of East Pakistan and others PLD 1970 SC 173; Muhammad Ibrahim Khan v. Secretary, Ministry of Labour and others 1984 SCMR 1014; Airport Support Services v. Airport Manager PIA 1998 SCMR 2268; 2012 PTD 144; I.T.A. No.CE No.1/KB of 2010 and F.E. Nos.30 and 31/KB of 2010 ref.

(b) Maxim---

----Audi alteram partem---Applicability---Scope---When a statute was silent regarding observance of principles of natural justice, said rule would be read into the statute as inbuilt provision---Rule must be held to be a necessary postulate in all cases, where a decision was to be taken affecting a person's rights or interest, unless such rule was specifically excluded by the relevant statute---Failure to observe principles of natural justice, could not be justified, merely because the Authority vested with the power to decide, was of the opinion that to grant such opportunity would be an exercise in futility---Non-observance of principles of natural justice, was itself a prejudice---No person, including Revenue Department, would be saddled with a prejudicial order without being heard---Doctrine of natural justice was to be extended when any prejudicial action was taken without being heard---Principles of natural justice did not supplant the law, but merely supplement the law or even harmonise it---If a statutory provision could be read consistent with the principles of natural justice, the court could do so, for the Legislature was presumed to intend to act according to the principles of natural justice.

Wiseman v. Borneman (1969) 3 All ER 275, 278; 1971 SCMR 681; Mrs. Anisa Rehman v. P.I.A.C. and others 1994 SCMR 2232; Government of Balochistan through Additional Chief Secretary v. Azizullah Memon and 16 others PLD 1993 SC 341 and Founder of Pakistan Quadi Azam Muhammad Ali Jinnah ref.

Asif Haroon, ACA for Appellants (in F.E.A. No.39/KB of 2013).

Dr. Ghulam Murtaza, D.R. for Respondents (in F.E.A. No.39/KB of 2013).

Dr. Ghulam Murtaza, D.R. for Appellants (in F.E.A. No.37/KB of 2013).

Asif Haroon, ACA for Respondents (in F.E.A. No.37/KB of 2013).

2018 P T D (Trib.) 388

[Inland Revenue Appellate Tribunal]

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

Messrs THATTA CEMENT COMPANY LTD., KARACHI

Versus

COMMISSIONER INLAND REVENUE, (APPEALS-II), INLAND REVENUE, KARACHI and another

S.T.A. No.249/KB of 2015, decided on 2nd January, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 3 & 11(2)---Federal Excise Act (VII of 2005), Ss.3, 7 & 14(2), First Schedule, Serial No.13---PCT Heading 25.23---Scope of sales tax---Raising demand of sales tax and Federal excise duty---Assessing Officer had issued show-cause notice to taxpayer who was registered for sales tax and federal excise purposes as manufacturer of cement---Assessing Officer while passing the order-in-original, had raised sales tax and federal excise duty against the taxpayer---Appellate authority below had dismissed appeal of taxpayer---Validity---Assessing Officer had raised a demand of Federal excise duty under the Federal Excise Act, 2005 on an item of a non-charging of Federal Excise Duty---Cement was liable to Federal Excise Duty under Federal Excise Act, 2005 through Serial No.13 of the First Schedule of said Act---"Cement" was wide in term and there were various types of cement, which could be determined on the basis of their use, power of bond goods or elements etc---All such cements were recognized on the basis of the ingredients used for production of each cement---All sorts of cements were not excisable under Federal Excise Act, 2005 but only types of cements that were covered under Serial No.13 of First Schedule of said Act were excisable---Under Serial No.13 only 'Portland Cement', aluminous cement, slag cement, super sulphate cement and similar hydraulic cement, were exciseable and remaining type of cements that were not covered under said types of cement, was not subject to Federal Excise Duty---Product of taxpayer 'Ground Granulated Blast Furnance Slag', if to be considered as a type of cement, such description of type of cement was not mentioned in Serial No.13---Contention of the taxpayer was that his product was not a cement falling under Tariff Heading 25.23 and instead of that his product viz. 'Ground Granulated Blast Furnace Slag', fell under separate Heading 26.18, which was not chargeable to Federal Excise Duty---Impugned order was not sustainable on that factual plane---Assessing Officer had committed fatal infirmities which were incurable and rendered the entire proceedings without any legal force---Suppressed value of production determined on the basis of mere assumption and presumption of the Taxation Officer, were not approved, when the very basis of determining value of suppressed production was dubious/suspicious the whole structure built upon such basis was bound to collapse---Assessing Officer had failed to establish, whether the quantum of suppressed production was sold to illegitimate buyers without applying sale tax; or the said quantum of production was illegally removed by the taxpayer to avoid sales tax levy---Ultimate destiny of suppressed production having been determined by the officer who was unknown, sales tax could not be levied/charged on such production; worked out on the basis of unknown source and unknown experts---No charge of short payment or non-payment of sales tax had been made out in the impugned order-in-original or appellate order by the Assessing Officer or Commissioner (Appeals)---Assessing Officer was not empowered to issue combined show-cause notice, initiate proceedings, passing combined single impugned assessment order---Impugned assessment order and appellate order, were void, illegal and without jurisdiction---Appeal of taxpayer was allowed, in circumstances.

[Case-law referred].

Adnan Mufti, FCA for Appellant.

Zafar Rafiq, D.R. for Respondents.

2018 P T D (Trib.) 447

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Raana Ahmed, Accountant Member

RAHMAN RASHID

Versus

COMMISSIONER INLAND REVENUE (APPEALS), RTO, FAISALABAD

S.T.A. No.678/LB of 2016, decided on 27th October, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 3, 7-A, 11(2)(3), 46 & 71---S.R.O. No.645(I)/2007, dated 27-6-2007---Assessment of tax---Levy and collection of tax on specified goods on value addition---Special procedure---Registered person who was engaged in the business of sales of imported goods and fell under F.T.R. vide SRO No.645(I)/2007 dated 27-6-2007; in compliance of letter had explained in detail before the adjudicating authority, that as Government had collected at import stage tax at the rate of two percent of the value of goods imported by commercial importer; in addition to the tax chargeable under S.3(1)(2) of the Sales Tax, no sales tax would be charged from the said importers on subsequent supply of goods imported by them---Adjudicating Officer, while passing the order-in-original, had not considered the submission made by the registered person---Charge levelled in the show-cause notice, was held to be established and recoverable under S.11(2)(3) of the Sales Tax Act, 1990---Said order-in-original, had been upheld by the Commissioner Inland Revenue (Appeals)/Appellate Authority below---Validity---Under relevant provisions of Ss.7-A & 71 of Sales Tax Act, 1990 and SRO No. 645(I)/2007, dated 22-6-2007, importer was entitled to deduct input tax paid during a tax period for the purposes of taxable supplies made, from the output and the value addition tax paid at the import stage would form part of the input tax---Conditions stipulated in S.11 of the Sales Tax Act, 1990, did not exist in the case, impugned order under S.11(2)(3) of the Sales Tax Act, 1990, was misconceived---Adjudicating authority was required to apply its mind cautiously and indicate the registered person as to under what reason assessment of tax was sought---Notice issued to the registered person was defective and the error was not curable; as it did not indicate the reason to reassess the already assessed tax---Impugned show-cause notice being illegal ab intio, proceedings initiated on the basis of the said notice, were set aside---Impugned orders of both the authorities, being illegal and void ab initio were cancelled by the Appellate Tribunal.

2016 PTD 346; 2016 PTD 152 and Assistant Collector Customs, Dry Port, Peshawar and others v. Messrs Khyber Electric Lamps MFG Co. Ltd., Peshawar 2001 SCMR 838 rel.

Muhammad Imran Rasheed for Appellant.

Adnan Ahmad Khan, D.R. for Respondent.

2018 P T D (Trib.) 479

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Dr. Manzoor Ahmed, Accountant Member

Messrs SHAHEEN AIR INTERNATIONAL, KARACHI

Versus

COMMISSIONER INLAND REVENUE, ZONE-V, LTU, KARACHI

M.A. (Stay) Nos.1634/KB to 1636/KB of 2017, decided on 6th October, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 146-A, 161 & 162---Stay against recovery of tax demand---Taxpayer had applied for stay against recovery of tax demand before Appellate Tribunal---High Court had already stayed recovery proceedings whereby department was ordered not to enforce coercive action/recovery of impugned demand---Said order of High Court, would hold field even after next date of hearing---Interim order granted earlier would remain in force and operate till such interim order was either expressly cancelled, vacated or recalled through an order or case was finally disposed of---Tribunal, being a subordinate special court, was bound to follow the order of High Court---Tax payer, in the event of recalling/expiry/cancelling/vacating of the stay by the High Court would be at liberty to file application for stay before the Tribunal against the coercive measures to be adopted by the department---Stay application being infructuous, stood dismissed in circumstances.

2016 PTD 2695 and Raja Talat Mehmood v. Ismat Ehtisham-ul-Haq 2000 MLD 1755 ref.

Raja Talat Mehmood v. Ismat Ehtisham-ul-Haq 1999 SCMR 2215 rel.

Asif Haroon (FCA) for Applicant.

Javed Iqbal Tarar, D.R. for Respondent.

2018 P T D (Trib.) 487

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Abdul Nasir Butt, Accountant Member

Messrs ORIENT ELECTRONICS (PVT.) LTD., LAHORE

Versus

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

S.T.A. No.313/LB and F.E.A. No.11/LB of 2017, decided on 26th May, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 2(46), 7, 11, 36 & 46---Under-declaration of value of supply of products---Manufacturer was found involved, in tax evasion by way of under declaration of value of supply of his products/goods and additional amount (actual receipt-declared receipt) of consideration received against actual value of supply depositing in an other Bank account---Sales prices declared by manufacturer were disregarded on the basis of those charges and case was made out on the basis of price lists allegedly belonging to the manufacturers company, obtained from some retailers dealing in its products---Declared value of per unit price of each and every product was compared with the price list for the relevant period and it was observed that for the relevant period, the actual value of supply came to Rs.58,398 million vis-à-vis declared value of Rs.355,715 million---Said value of supply had been worked out on the basis of 'whole-sale/sale price' per unit mentioned in price lists---Assessing authority ordered recovery of amount, along with default surcharges and penalty---Appeal against Assessing Authority was dismissed---Validity---Dispute being that of valuation of the products manufactured and sold by the manufacturer, the only recourse available to the department was, if it had sufficient reasons to believe that the value of the supply had not been correctly declared in the invoice, was to approach the Valuation Committee comprising representatives of the Trade and Officers of Inland Revenue under S.2(46)(e) of the Sales Tax Act, 1990 and S.2(46)(a) & (b), no longer remained applicable to such dispute---No Valuation Committee, having been constituted, case was not only based on presumption and suppositions, but without any support of law so far as valuation was concerned---Entire valuation exercise carried out by the Directorate General of Intelligence and Investigation (Inland Revenue) was coram non-judice, illegal and without lawful authority and jurisdiction and could not be sustained---Orders of authorities below were set aside with the directions that Commissioner Inland Revenue, would constitute a Valuation Committee, under S.2(46)(e) of the Sales Tax Act, 1990, comprising representatives of the Trade and Inland Revenue, which would consider all relevant facts and data to arrive at assessable value/open market prices of the products manufactured and supplied by appellant company and that after the Valuation Committee had determined the value differential, if any, show-cause notice would be issued accordingly for recovery of short paid duties and taxes.

Akhtar Ali along with Iqtidar Alam, ITP for Appellants.

2018 P T D (Trib.) 500

[Inland Revenue Appellate Tribunal]

Before Qamar-ul-Haq Bhatti, Judicial Member and Masood Akhtar Shaheedi, Accountant Member

Messrs MIAN NAWAZ STEEL FURNACE, NAROWAL

Versus

COMMISSIONER INLAND REVENUE, SIALKOT

I.T.As. Nos.2000/LB and 2001/LB of 2013, decided on 15th February, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 129(1)(a), 161, 162 & 205---Decision in appeal---Commissioner Inland Revenue (Appeals), set aside impugned order under Ss.161/205 of Income Tax Ordinance, 2001 and remanded case to the Assessing Officer for passing speaking order after ensuring proper service of the notice---Inland Revenue Officer, without establishing proper service of notice upon the taxpayer raised a demand of Rs.39,859,962 ex-parte---When an ex parte action was taken without establishing proper service of the last notice upon the taxpayer, Assessing Officer could not initiate proceedings afresh---Legislature had done away with the relief of "setting aside" under S. 129(1)(a) of the Income Tax Ordinance, 2001---Order passed by the Assessing Officer, in circumstances suffered with glaring legal flaws, which snatched legality and propriety from the impugned orders and rendered them untenable in law, and were annulled---Section 161 of Income Tax Ordinance 2001, was applicable only within the income tax year during which the payment for goods and services were made---Commissioner Inland Revenue (Appeals) had grossly erred in law in setting aside the impugned orders under Ss.161/205 of the Income Tax Ordinance, 2001 in respect of tax years 2010 and 2011 for de novo action, which ought to have been annulled---Impugned orders under Ss.161/205 of the Income Tax Ordinance, 2001, were annulled by the Appellate Tribunal.

2015 PTD (Trib.) 1572; 2012 PTD (Trib.) 122; 2015 PTD (Trib.) 654; PLD 1987 Lah. 471; 1983 CLC 1492 and 1989 CLC 1495 rel.

Sayyid Ali Imran Rizvi for Appellant.

Imran Altaf, I.T.P.

Ali Adnan Khan, D.R. for Respondent.

2018 P T D (Trib.) 527

[Inland Revenue Appellate Tribunal]

Before Justice (R) Nadeem Azhar Siddiqi, Chairman

Messrs APM TERMINALS PAKISTAN (PVT.) LTD., KARACHI

Versus

ASSISTANT COMMISSIONER-SRB-VI, SINDH REVENUE BOARD, KARACHI

Appeal No.17 of 2013, decided on 28th September, 2015.

(a) Sindh Sales Tax on Services Act (XII of 2011)---

----Ss. 3, 24, 24-B & Second Schedule---Compulsorily registration of company under Tariff Heading 9809.0000---Scope---Company, carrying on the business of providing services falling under SRB Tariff Heading 9819.9090, as given in the Second Schedule to the Sindh Sales Tax on Services Act, 2011---Said services were taxable at 16%, but the company was neither registered in SRB, nor was paying any sales tax---Adjudicating Officer issued notices to appellant company asking it to get registered/enrolled with Sindh Revenue Board---Company contested his registration under the proposed Tariff Heading 9819.9090---Adjudicating Officer after considering company plea, found that company was liable to be registered under Heading 9809.0000 and not 9819.9090---Adjudicating Officer disposed of the case in terms of the order-in-original, directing that company be registered compulsorily in terms of S.24-B of the Sindh Sales Tax on Services Act, 2011---Appeal against order-in-original was dismissed by Commissioner (Appeals)---Validity---Unless the proper nature, scope and classification of services provided or rendered by the company was determined, the question of levy of tax, could not be decided---None of the forum below had decided/determined the nature, scope and classification of services provided or rendered by the company---Tariff Heading 9809.0000 which was a general heading to cover contractual execution of work or furnishing supplies, not falling in the other tariff heading, had two components i.e. providing or rendering execution of work or furnishing supplies---For attracting said Tariff Heading, it was necessary that both the components were available in the contract or agreement---Both the forums below, while deciding that even if a service had no constituent of goods, it could be classified under Tariff Heading 9809.0000 and could be taxed but had avoided to consider whether furnishing supplies alone, without constituent of service of execution of work could still be taxed under Tariff Heading 9809.0000, if it was provided or rendered under a contractual execution of furnishing supplies---Essentially under Sindh Sales Tax on Services Act, 2011, only services mentioned in the Second Schedule could be taxed and the supplies alone could not be taxed; in circumstances, it was necessary that 'Composite Services' i.e. those including elements of both providing or rendering execution of work and furnishing supplies, should be present---Appeal was allowed and both order-in-original and order-in-appeal were set aside---Case was remanded to the Assistant Commissioner concerned to determine the nature of services provided and rendered by the company and to determine the proper Tariff Heading under which the services provided by the company fell, after providing due opportunity of hearing to the appellant.

Messrs G.M. PFAAA A.G. v. Sartaj Engineering Co. Ltd. and 3 others PLD 1971 SC 564; Muhammad Younus v. Central Board of Revenue PLD 1964 SC 113 and Syed Nasir Ali and 33 others v. Pakistan through Secretary Ministry of Law 2010 PTD 1924 ref.

(b) Words and phrases---

----"Supplies"---Meaning, explained.

Black's Law Dictionary 10th Edition p.1968 ref.

(c) Words and phrases---

----"Or" Connotation of.

Muhammad Waseem, FCA and Muhammad Aleem for Appellant.

2018 P T D (Trib.) 536

[Inland Revenue Appellate Tribunal]

Before Qamar-ul-Haq Bhatti, Judicial Member and Masood Akhtar Shaheedi, Accountant Member

The C.I.R. (LEGAL), R.T.O., FAISALABAD

Versus

Messrs SETH MUHAMMAD TUFAIL & SONS, FAISALABAD

S.T.As. Nos.711/LB and 712/LB of 2016, decided on 17th February, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 2(25), 3, 11(3), 14, 23, 25, 46 and Sixth Schedule, Table 2, Entry No.3---Sales Tax Rules, 2006, R.6---Registration with the Sales Tax Department---Exemption from registration---Taxpayer, who was liable to be registered on the basis of turnover as declared in the income tax returns, having failed to get itself registered with the Sales Tax Department, was called upon to show-cause as to why sales tax could not be recovered from it under S.11(3) of the Sales Tax Act, 1990---Explanation tendered by the taxpayer, being not satisfactory, adjudicating proceedings were initiated and orders were passed which were challenged before appellate authority which up held the same---Taxpayer opposed departmental appeal before the Tribunal mainly on the ground that a person, who was liable to be registered, but not actually registered, could neither issue sales tax invoice under S.23 of the Sales Tax Act, 1990, nor could he charged and sales tax recovered under S.3 of the Sales Tax Act, 1990---Sales tax invoice, could be issued under S.23 of the Sales Tax Act, 1990 by the specified persons only and its subsection (2) in unequivocal terms had mandated that no person, other than a registered person or a person paying retail tax, would issue an invoice---Person not registered under Sales Tax Act, 1990 could not issue a sales tax invoice under S.23 of the said Act---If, a person was not registered, but was required or liable to be registered, R.6(3) of the Sales Tax Rules, 2006, would come into operation and concerned authority could compulsorily register such person after following the procedure prescribed thereunder---Without sales tax registration number, a person liable to be registered, could not file sales tax return, pay tax or be subject to audit under S.25 of the Sales Tax Act, 2001---Imposing sales tax by the department, without assigning compulsory sales tax registration number, would not find any support from R.6 of Sales Tax Rules, 2006, which explained and laid down the procedure for carrying out the spirit of the statute---If a person, could not register himself voluntarily, thereafter, it was duty of the Sales Tax Department to register the defaulting person compulsorily as per the provisions of R.6 of the Sales Tax Rules, 2006 at the material time---Liability of sales tax created against the person for the tax period prior to sales tax registration was illegal and unlawful---Orders of the appellate authority below did not suffer from any gross irregularity, illegality and infirmity, which did not warrant any interference by the Tribunal---Departmental appeal, was dismissed in circumstances.

Ali Adnan Khan, D.R. for Appellants.

Khubaib Ahmad for Respondent.

2018 P T D (Trib.) 552

[Inland Revenue Appellate Tribunal]

Before Qamar-ul-Haq Bhatti, Judicial Member and Masood Akhtar Shaheedi, Accountant Member

Messrs TOWN CRIER (PVT.) LIMITED, FAISALABAD

Versus

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

I.T.As. Nos.1581/LB, 2463/LB of 2015, 607/LB of 2016, 618/LB and 619/LB of 2017, decided on 10th May, 2017.

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

----S. 122(5-A)---Amendment of assessment---Mandatory requirements were that there should be some illegality in the existing order, and apparent loss of revenue must exist to proceed under S.122(5-A) of Income Tax Ordinance, 2001---Enquiry had to be in accordance with two requirements and sense of enquiry would not be in respect of calling of information---First show-cause notice was defective having no definite material to establish the co-existence of erroneousness and prejudice---Assessing authority, had asked for documents/record and showed its intention or the estimation of bifurcating or apportioning the "Normal Tax Regime" or "Final Tax Regime" expenditures, disallowing the expenses on his volition---Said action was based on assumption, which was not allowable in proceedings under S.122(5-A) of Income Tax Ordinance, 2001---Such action of Assessing Officer was ab initio illegal as there was no proper basis for invoking provisions of S.122(5-A) of Income Tax Ordinance, 2001---Amended assessment order as well as the order of appellate authority below, was cancelled, in circumstances.

(2016) 113 Tax 53 (Trib.) and 2014 PTD (Trib.) 1101 rel.

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

----S. 32---Method of accounting "Double-entry accounting System"---Scope---Taxpayer used "double-entry accounting system", which was based on the accounting equation and required that every business transaction be recorded in at least two accounts; in addition, it required that the total debts recorded for each transaction equal the total credits recorded---Double-entry accounting system also had specific rules of debt and credit for recording transactions in the accounts---Foreign trade debts, were advance receipts of the future revenues and were receivable in the financial year---Receivables were usually a significant portion of the total current assets---Receivable was recorded as a debt to accounts receivable---All receivables that were expected to be realized in cash within a year or more, were reported in the current assets section of the balance sheet---Current assets were normally reported in the order of their liquidity beginning with cash and cash equivalents---Taxing the assets side of the financial, when the taxpayer had already explained the liability side, was against the norms of justice---Samples of goods sent through post were legal export of the taxpayer and duly offered for determination of customs duties and realized amount of said exported received through Banking channel---Entries in the book of accounts were not conclusive about determination of the income and if a liability had been incurred but not entered in the books of accounts, same had to be allowed where the assessee was following mercantile system of accounting---Recording transactions must follow some rules e.g., increase in assets was recorded on the debt (left side) of account---Decrease assets were recorded on the credit (right side) of account---Excess of the debits of an asset account over its credits, was the balance of the account---Balance in the present case, being zero, addition made by the Amending Authority was illegal and not maintainable in the eye of law and facts---Orders of the authorities below, were vacated by the Tribunal, in circumstances.

(c) Administration of justice---

----Technical subtleties could not be allowed to strangulate justice.

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

----Ss. 111(1)(a)(b)---Unexplained income or assets---Taxpayer company had been maintaining proper books of accounts and said entries were depicted from the financial e-filed by the taxpayer---Addition of unexplained income or assets, if any, would fall within the purview of S.111(1)(a) and not under S.111(1)(b) of the Income Tax Ordinance, 2001.

2007 PTD (Trib.) 2319 rel.

(e) Interpretation of statutes---

----Fiscal statute---Words used in a statute---Scope---Court, was not confined to literal meaning of the words used in the statute or notification, but it had to adopt rational attitude by attempting to align its vision to the draftsman of the statute in question---Where law had provided a thing to be done in a particular manner, then it ought to be done in that manner and all other modes of doing it would stand excluded---Words should be given sensible meanings so as to make them effective---Provisions in a taxing statute or notification dealing with machinery for assessment had to be construed according to the ordinary rules of construction i.e. in accordance with the clear intention of the legislature, which was to make a charge levied effectively.

(f) Interpretation of statutes---

----Where the language of any statute or legal document was clear, it had to be acted upon accordingly.

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

----S. 29---Bad debt---Scope---Law required that a bad debt should be written-off in the accounts, where the amount available was not sufficient to recover debts of secured creditors with company as irrecoverable in the accounts of the taxpayer---In the present case, the shipment exported by the taxpayer was rejected by the buyer for lack of quality and the taxpayer again sent another shipment of the same cost to the buyer, buyer being good client of the taxpayer---Rejected shipment being not irrecoverable, the taxpayer rightly claimed the value of shipment as bad debt---Second shipment made by the taxpayer was enable to enable itself to continue to have a licence without which the business could not be carried out---Said expenses connoted a punishment incidental to the trade and a payment without which the taxpayer was unable to continue the business with his foreign buyers and the nature of said expenses being purely that on business consideration for the sole object of maintaining business and profit earning apparatus, addition of said expenses was deleted by the Tribunal.

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

----S. 21---Allowable expenses---Taxpayer filed copy of the ledger showing monthly expenses, which included rent, electricity expenses, salary of sweeper and miscellaneous expenses sent to three stations where taxpayer maintained its office---Such expenses were incurred in connection with carrying on the business which were allowable expenses---Addition of such expenses was deleted, by the Appellate Tribunal.

2009 PTD (Trib.) 869; 2010 PTD (Trib.) 25; 2012 PTD (Trib.) 1385; 2012 PTD (Trib.) 1268; 2014 PTD (Trib.) 935; 2015 PTD (Trib.) 2241; 1997 PTD 1555 and 2010 SCMR 1236 rel.

Muhammad Imran Rashid for Appellant (in I.T.As. Nos. 1581/LB of 2015, 618/LB and 619/LB of 2017).

Naeem Babar, D.R. for Respondent (in I.T.As. Nos. 1581/LB of 2015, 618/LB and 619/LB of 2017).

Naeem Babar, D.R. for Appellant (in I.T.As. Nos. 2463/LB of 2015 and 607/LB of 2016).

Muhammad Imran Rashid for Respondent (in I.T.As. Nos. 2463/LB of 2015 and 607/LB of 2016).

2018 P T D (Trib.) 573

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Raana Ahmed, Accountant Member

Messrs OILCO TRADING COMPANY, FAISALABAD

Versus

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

I.T.A. No.1524/LB of 2016, decided on 6th March, 2017.

(a) Interpretation of statutes---

----Beneficial legislation---Retrospectivity---Scope---Beneficial legislation, would not automatically apply retrospectively, unless it was consciously so sanctioned in explicit and unequivocal language.

Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73; Government of Pakistan v. Village Devt. Organization 2005 SCMR 492; Commissioner of Income Tax/Wealth Tax v. Messrs Ellcot Spinning Mills Ltd. 2008 PTD 1401; Anoud Power Generation v. Federation PLD 2001 SC 340; Messrs Army Welfare Sugar Mills Ltd. v. Federation 1992 SCMR 1652/1673; Messrs Taj Mahal Hotel Limited v. Karachi Water and Sewerage Board 1997 SCMR 503; Messrs Hashwani Hotels Limited v. Federation of Pakistan and others PLD 1997 SC 315; Messrs Ellahi Cotton Mills Limited and others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 6 others PLD 1997 SC 582 and Federation of Pakistan v. Shaukat Ali Mian and others PLD 1999 SC 1026 ref.

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

----S. 183---Failure to discharge a patent tax liability---Taxpayer had generally disputed imposition of default surcharge as illegal, without specifically pointing out the illegality---Taxpayer having deliberately failed to discharge a patent tax liability, default surcharge had rightly been levied.

Shahbaz Butt, A.R. for Appellant.

Mrs. Amina Komal, D.R. for Respondent.

2018 P T D (Trib.) 591

[Inland Revenue Appellate Tribunal]

Before Adnan Ahmed, Member (Judicial-II)

Messrs ZAIN ENTERPRISES, KARACHI and another

Versus

DIRECTOR, DIRECTORATE GENERAL OF VALUATION and 2 others

Customs Appeals Nos. K-1603 and K-1604 of 2014, decided on 20th January, 2015.

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

----S.223---General Clauses Act (X of 1897), S.24A---Officers of Customs to follow Board's orders---Speaking order---Scope---Direction of Board and mandated requirements of General Clauses Act, 1897 had to be adhered in terms of S.223 of Customs Act, 1969 and principles of natural justice, fair play and ratio decidendi---Import of goods---Department intentionally and purposely had not rebutted a single ground of appeal filed before it by importer and nor on rebuttal/additional arguments were filed by consultant---Department had passed a very sketchy, vague, cursory and non-speaking order confirming that it had been passed not on objective consideration rather on personal whims and wishes and inapt interpretation of provisions of Customs Act, 1969 and definition of phenomenon, "passed and closed transaction"---Such type of order was termed as illegal, void, arbitrary and a result of misuse of authority vested with authority---No room was available with Department to pass such illegal, void and arbitrary order---If any Authority, Court or Tribunal gave finding of fact which was not based on material available on record, findings so given were illegal, arbitrary and perverse---Perverse finding of fact was violative of established principles of appreciation of evidence of record and as such not sustainable in law---Every judicial/quasi judicial order should be based on a reasoning containing justification for findings given in order because in absence of the same, order so issued was in derogation of principles of dispensation of justice---Order in appeal, in present shape, was too vague and defective as it contained no valid reasoning for rejecting appeal and it was in derogation of direction of Federal Board of Revenue and mandatory requirement of S.24A of General clauses Act, 1897, therefore, it was not only illegal and void but also failed the test of judicial scrutiny and as such not sustainable in the eyes of law.

[Case-law referred].

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

----S.193A(3)---Order in appeal---Delay of 361 days---Effect---Appeal was filed on 16-05-2013---Order under S.193A(3) of Customs Act, 1969 should have been passed within 120 days from date of filing of appeal i.e. on or before 13-09-2013 or within a further extended period of 60 days during initial period of 120 days with reason to be recorded for extension in writing after serving notice to person---No extension was granted by department within initial period of 120 days as evident from order which was completely silent in that regard---Department passed order on 09-09-2014 rendering the same barred by 361 days, hence, without powers/jurisdiction and could not be enforced under law.

[Case-law referred].

(c) Words and phrases---

----"Ab initio" "void" and "set aside"---Meaning---Expressions meant: "From the beginning"; "of no legal effect", "absolute nullity" and to "annul or vacate a judgment, order etc.". respectively.

[Case-law referred].

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

----S.80(3)---Assessment order or valuation ruling---Scope---Past and closed transaction---Scope---Assessment order was not final, as Department could pass a reassessment order under S.80(3) of Customs Act, 1969 before Collector of Customs and likewise by Customs Appellate Tribunal---Unless assessment order crossed all forums set up under the law in which it could be challenged, order of last forum set up under law would become final---Transaction stood past and closed when the same attained finality---Neither valuation ruling nor assessment order attained finality by virtue of the fact that each order stood reopened immediately upon filing of review/appeal---Appeal was allowed, accordingly.

[Case-law referred].

Nadeem Ahmed Mirza, Obaydullah Mirza and Mirza Muhammad Abeer Nadeem for Appellants.

Shamim Iqbal P.A. for Respondent No.1.

Aamir Hussain Examiner for Respondent No.2.

2018 P T D (Trib.) 602

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Nadeem Dar, Accountant Member

Messrs BESTWAY CEMENT (PVT.) LTD, ISLAMABAD

Versus

C.I.R., L.T.U., ISLAMABAD

I.T.A. No.211/IB of 2013, decided on 4th October, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 161, 174(3) & 205---Failure to pay tax collected or deducted---Declaring an assessee in default---Limitation---Department took action against appellant taxpayer under Ss.161/205 of the Income Tax Ordinance, 2001 for his failure to pay tax collected or deducted---Taxpayer challenged such action relying upon the time limitation given in S.174(3) of the Income Tax Ordinance, 2001---Validity---Sections 161/205 of the Income Tax Ordinance, 2001, did not contain any limitation of time, legislature had chosen not to provide any period of limitation for passing an order for declaring a person assessee in default---Department and Commissioner Inland Revenue (Appeals) were correct in their action in holding that no time limitation violation was involved in the case.

HBL v. Federation of Pakistan 108 Tax 294; MCB, Lahore v. CIR, Zone-I, LTU, Lahore 375/LB/13; 2012 PTD 25; Shahnawaz (Pvt.) Ltd. v. Pak Ministry of Finance 2011 PTD 1558; 1999 PTD 3357; 2003 PTD 1965; CIT v. Hassan Kasam Dada 4 Tax 96; CIT v. Kamran Model Factory 2002 PTD 14; 2003 PTD (Trib.) 405; 2004 PTD (Trib.) 1096 and 2000 PTD 2664 ref.

Faisal Banday, F.C.A. for Applicant.

Muhammad Jawad, D.R. for Respondent.

2018 P T D (Trib.) 616

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Chairman, Muhammad Waseem Ch., Judicial Member and Mian Saeed Iqbal, Accountant Member

Messrs GHULAM HABIB AND CO., PESHAWAR and others

Versus

C.I.R., R.T.O., PESHAWAR and others

I.T.As. Nos. 68/PB, 02/PB, 17/PB, 13/PB of 2017 and 511/PB, 509/PB, 619/PB and 147/PB of 2016, decided on 3rd May, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114, 115(4), 153(1)(c), 159, 169(b) & 170---Filing of income tax returns---Tax collected or deducted as final tax---Refund claim---Taxpayers, who were contractors falling under the purview of "Final Tax Regime (FTR)" by virtue of Ss.153(1)(c) & 169(b) of the Income Tax Ordinance, 2001 were required to file statement under S.115(4) of the Income Tax Ordinance, 2001; which they did so, but later on they also filed normal return of income under S.114 of the Income Tax Ordinance, 2001 for the purpose of claiming refund---Validity---Returns filed under normal law i.e. under S.114 of the Income Tax Ordinance, 2001, were altogether illegal and against the scheme of law---Taxpayers being contractors falling under the category of 'FTR' were only required to file statements under S.115(4) of the Income Tax Ordinance, 2001, without claiming any deduction---Appeals of the taxpayers were rejected and that of the department, were accepted.

2006 PTD 734 ref.

Muhammad Shafi Jan for Appellant (in I.T.A. No.68/PB of 2017).

Shaukat Hayat, D.R. for Respondent (in I.T.A. No.68/PB of 2017).

Rahim Khan for Appellant (in I.T.A. No.02/PB of 2017).

Shaukat Hayat, D.R. for Respondent (in I.T.A. No.02/PB of 2017).

Rahim Khan for Appellant (in I.T.A. No.511/PB of 2016).

Shaukat Hayat, D.R. for Respondent (in I.T.A. No.511/PB of 2016).

Rahim Khan for Appellant (in I.T.A. No.509/PB of 2016).

Shaukat Hayat, D.R. for Respondent (in I.T.A. No.509/PB of 2016).

None for Appellant (in I.T.A. No.17/PB of 2017).

Shaukat Hayat, D.R. for Respondent (in I.T.A. No.17/PB of 2017).

Muhammad Suleman, I.T.P for Appellant (in I.T.A. No.13/PB of 2017).

Shaukat Hayat, D.R. for Respondent (in I.T.A. No.13/PB of 2017).

Faisal Rasheed, I.T.P. for Appellant (in I.T.A. No.619/PB of 2016).

Shaukat Hayat, D.R. for Respondent (in I.T.A. No.619/PB of 2016).

Shaukat Hayat, D.R. for Appellant (in I.T.A. No.147/PB of 2016).

None for Respondent (in I.T.A. No.147/PB of 2016).

Date of hearing: 10th April, 2017.

ORDER

NAZIR AHMAD, (CHAIRMAN).---This Full Bench has been constituted in the titled appeals to decide the issue that as to whether the contractors falling under the category of Final Tax Regime (FTR) are entitled to exemption under Clause 126F of the Income Tax Ordinance, 2001 (hereinafter called 'the Ordinance') or not. Since, common question of law is involved in all the titled appeals, therefore, this single order shall disposed of the same.

1. The facts in brief leading to the instant appeals are that the appellants are the contractors falling under the preview of FTR by virtue section 153(1)(c) read with section 169(b) of the Ordinance. They were required to file statement under section 115(4) of the Ordinance and they did so but later on they also filed normal returns under section 114 of the Ordinance and claimed refund, which was paid. Subsequently, the cases were treated to be erroneous in so far as prejudicial to the interest of revenue by virtue of exemption from levy of income tax under clause 126F was not available with the taxpayer under FTR as income of such cases did not fall under the definition of profit and gains and resultantly were amended accordingly. Feeling aggrieved, the taxpayers preferred appeal before CIR (Appeals), which was accepted only in the case of Messrs Karcon (Pvt.) Limited by way of annulment of amended assessment order whereas in respect of the other above titled cases, the appeals were rejected. Against the relief allowed by the first appellate authority in the case of Messrs Karcon (Pvt.) Limited, the department has come up in further appeal before this Tribunal whereas against rejection of first appeals, the taxpayers have preferred appeals before this Tribunal.

2. Mr. Faisal Rasheed, learned AR while arguing his case submitted that the taxpayer had filed statement under section 115(4) of the Ordinance and the statements falling under the said section cannot be subjected to action under section 122(5A) of the Ordinance. He also placed reliance on the judgment of Honourable Sindh High Court in this respect reported as 2000 PTD 734. However, in reply to question by the court, he admitted that the taxpayer has subsequently filed normal return under section 114 of the Ordinance to claim the refund. Concluding his arguments, he submitted that FTR cases are entitled to exemption under clause 126-F.

3. Mr. Muhammad Shafi Jan, Advocate took the plea that the proceedings initiated by the department under section 122(5A) of the Ordinance tantamount to change of opinion. While elaborating his view point he submitted that refund was issued by the department with the approval of the Additional Commissioner and therefore, the Additional Commissioner while proceedings under section 122(5A) of the Ordinance has changed his opinion, which is illegal in the light of judgment of this Tribunal dated 05.12.1994 recorded in I.T.A. No.4(PB) of 1993-94, wherein it was held as under:--

"that when the IAC was all along associated with the reassessment, subsequently he was estopped to change the view ……………………………………………………… the IAC could not exercise his powers under section 66-A by revising the order."

1. Mr. Raheem Khan, Advocate appearing in the case of M/s. Sarwar Construction Company has adopted the same line of arguments, which was adopted by him before the first appellate authority and has been carefully perused by us.

2. On the other hand, the learned DR appearing on behalf of the department has apprised the court that all the appellants filed statements under section 115(4) of the Ordinance but subsequently they also filed returns under section 114 of the Ordinance claiming refund, which, was inadvertently issued to them by the Revenue Authorities despite the fact that being contractors and falling under the category of FTR, they were not entitled to file return under section 114 or to claim exemption under clause 126F of the Ordinance. He has emphasized that issuance of the refund to the appellants is contrary to the ratio settled by the Honourable Lahore High Court in PTR No.71 of 2014 in the case, titled as Messrs Sarwar Construction Co. (Pvt.) Ltd. v. The ATIR etc. wherein the FTR cases have been held not entitled to exemption under clause 126F of the Ordinance. This view point of the Honourable Lahore High Court was subsequently endorsed by the August Supreme Court of Pakistan vide its judgment date 26.01.2017 recorded in C.Ps. Nos.3147-L to 3149-L of 2016 in the case titled as Messrs Sarwar and Company (Pvt.) Ltd., Lahore v. The ATIR etc. On the strength of these assertions, he seeks rejection of instant taxpayers' appeals.

3. Arguments heard and record perused.

4. As far as, the contention of Mr. Muhammad Shafi Jan learned counsel regarding change of opinion while taking action under section 122(5A) of the Ordinance is concerned, we have gone through the orders relied on by him and observed that in this case the order under section 62 of the repealed Income Tax Ordinance, 1979 (hereinafter called 'the repealed Ordinance`), was passed by the taxation officer with the approval of Inspecting Additional Commissioner (IAC). Subsequently, the order was subjected to proceedings under section 66A of the repealed Ordinance by the IAC. In that appeal, the Tribunal declared the action of IAC as change of opinion as he was also associated in earlier approval proceedings to the tax authority. The AR argues that while taking action under section 66A of the repealed Ordinance, which is equivalent to section 122(5A) of the prevailing Ordinance, he had changed his opinion. However, we find that in the instant case the situation is quite different as returns were filed by the contractors under sections 114 and 115 of the Ordinance, which were deemed to be assessment orders in terms of section 120(1) of the Ordinance subject to subsection (3) where defects are pointed out after receiving the return and in case of non-compliance the return is treated as defective. Under section 122(5A) of the Ordinance, the proceedings are to be initiated by the Commissioner where he finds that the assessment order is erroneous in so far it is prejudicial to the interest of revenue. The stance of the learned counsel that the Additional Commissioner was involved in issuance of refund to the taxpayer is not acceptable because approval of refund is an administrative function and not a judicial one whereas the action taken by the Additional Commissioner under section 122(5A) of the Ordinance is a statutory power and the Additional Commissioner under delegation of power in terms of sections 210 and 211 of the Ordinance has passed the order. Therefore, the case Law relied on by the learned counsel is distinguishable with the instant case. In the referred judgment the IAC was involved in assessment proceedings as he was consulted for obtaining approval whereas in the case in hand no such involvement exists. Therefore, action of the Additional Commissioner for invoking provisions of section 122(5A) of the Ordinance cannot be termed as change of opinion.

5. Admittedly, the appellants of the instant case being contractors and falling under FTR by virtue of section 153(1)(c) read with section 169(b) of the Ordinance, were required to only file statements under section 115(4) of the Ordinance, which were duly filed by them but subsequently they also filed normal returns under section 114 of the Ordinance purely for the purpose of claiming refund by following the procedure of Normal Tax Regime (NTR). In our considered opinion, the returns filed under normal law i.e. under section 114 of the Ordinance in these cases were altogether illegal and against the scheme of Law. Being contractor and falling under the category of FTR they were only required to file statements under section 115(4) of the Ordinance without claiming any deductions in the light of latest judgment of Honourable Lahore High Court recorded in PTR No.71 of 2014 in the case titled as Messrs Sarwar Construction Co. (Pvt.) Ltd. v. The Appellate Tribunal Inland Revenue etc. wherein it has been held in unequivocal manner that the FTR cases are not entitled to exemption under Clause 126F, as per findings given below:--

"22. To crystallize the opinion arrived at, supra, we intend to resettle the question of law, before answering the proposition of law, in following words:--

Whether under the facts and circumstances of the case, taxpayers falling under Presumptive Tax Regime are entitled to exemption under section 126F?

Our answer to the resettled question is in Negative. The petitions filed by the department are decided in its favour, whereas petitions filed by the taxpayers are decided against them."

1. The view taken by the Honourable Lahore High Court was subsequently endorsed by the Honourable Supreme Court of Pakistan vide its judgment dated 26.01.2017 recorded in C.Ps. Nos.3147-L to 3149-L of 2016 in the case titled Messrs Sarwar and Company (Pvt.) Ltd., Lahore v. The Appellate Tribunal Inland Revenue etc. by holding as under:--

"We, therefore, conclude that the tax exemption granted in the year 2010 under Clause 126F from its tenor could only have been intended for the taxpayers falling under the domain of 'normal tax regime' whose profitability while doing business in the affected areas had diminished in the past on account of an external factor i.e. political strife that affected the profitability of doing business there. The exemption was never meant for the taxpayers like the petitioners whose businesses fall within the domain of 'final tax regime' for whom the question of experiencing loss of business opportunity on account of internal strife does not arise. They made their presence in the affected area only when they had in their hands a business opportunity to make profits and gains in the form of contracts to be executed there. The income tax department shall accordingly proceed to recover the income tax that has been wrongly refunded to any of the petitioners."

1. In the presence of above mentioned landmark judgments given by the Honourable Lahore High Court as well as August Supreme Court of Pakistan having binding effect on this Tribunal in terms of Article 201 of the Constitution of Islamic Republic of Pakistan, 1973, we find no justification for further discussion at our end. Therefore, by respectfully following the said judgments, we reject the appeals of the taxpayers and accept the appeals of the department. We order accordingly.

HBT/80/Tax(Trib.) Order accordingly.

2018 P T D (Trib.) 691

[Inland Revenue Appellate Tribunal]

Before Aaliya Latif Unar, Judicial Member and Abdul Nasir Butt, Accountant Member

Messrs BP PAKISTAN EXPLORATION AND PRODUCTION INC, KARACHI

Versus

COMMISSIONER INLAND REVENUE ZONE-III, LTU, KARACHI

I.T.A. No.879-KB of 2012, decided on 28th March, 2016.

Income Tax Ordinance (XLIX of 2001)---

----S. 131---Delay in filing appeal---Condonation---Delay of 72 days in filing appeal had been sought to be condoned contending that said delay was neither deliberate not intentional, but due to transfer of record and employees, the papers were inadvertently missed and did not reach the principal officer of the taxpayer for signing---Explanation offered by the taxpayer was not plausible---Law would support vigilant and not indolent---Any delay in filing appeal was to be considered negligence on the part of the party---Appellate Tribunal declined to allow condonation of delay---Appeal was dismissed being time barred, in circumstances.

Qadeer Ahmed, FCA for Applicant/Appellant.

Ejaz Ahmed, DR for Respondent.

Muhammad Taseer Khan for the State.

Date of hearing: 22nd February, 2016.

ORDER

Through this miscellaneous application, the taxpayer has requested court for condonation of delay in filing of appeal before the Tribunal in I.T.A. No.879/KB/2012 dated 08.11.2012. The contents of the Application are reproduced hereunder:--

1) Through this application , the above named applicant seeks condonation for delay in filing of the subject appeal filed under the cover of our letter DT1572 dated November 8, 2012.

2) This appeal has been preferred against order dated June 27, 2012 framed under section 129 of the Ordinance, which was served on the AR of the appellant on June 28, 2012.

3) It is respectfully brought into your knowledge that the appellant had assigned its entire working interest to another petroleum Exploration and production company effective January 1, 2011. The transaction was completed upon completion of all necessary formalities and approvals of the Government of Pakistan on September 15, 2011.

4) As and from the effective date, the employees of the appellant were hired and employed by the aforementioned assignee Petroleum Exploration and production company i.e. to whom the working interest of the appellant had been assigned.

5) The appeal papers were sent to the applicant for signing and for filing of appeal with the Honourable Tribunal however, due to the transfer of records and employed as said above, the appeal paper were inadvertently missed out and did not reach the principal officer of the appellant for singing. Therefore, the appeal was not filed in time.

6) On facts of the circumstances of the case discussed above, it is, therefore respectfully prayed to kindly condone the delay of 2 days in filing the impugned support of this application is also enclosed."

1. Mr. Qadeer Ahmed, FC appeared on behalf of the Taxpayer/ Applicant and submitted that the delay in filing of appeal was neither deliberate nor intentional but due to transfer of records and employees, the appeals papers, were inadvertently missed out and did not reach the principle officer of the taxpayer for signing, hence delay of 72 days was caused which may be condoned.

2. It was pointed out by the learned D.R. that appeal filed by the Taxpayer/Appellant is barred by 72 days and no plausible explanation was offered by the Appellant, therefore, the appeal is liable to be dismissed.

3. We have heard the leaned representatives from both the parties and have also gone through the contents of the miscellaneous application as well as the record of the case. After thoughtful consideration of the case records, we are of the opinion that it has been constant view of the superior court that for administration of justice principle has to be followed "law would support vigilant and not indolent", therefore, any delay in filing appeal is to be considered negligent on the part of that party, thus, the other party should not be penalized for such negligence. We, therefore, decline to accept the application filed for condonation of delay as prayed for by the taxpayer and dismiss the main appeal being hopelessly time barred.

HBT/122/Tax(Trib.) Appeal dismissed.

2018 P T D (Trib.) 717

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Muhammad Ahmad, Accountant Member

Messrs SHAH SONS PAKISTAN (PVT.) LTD., MULTAN

Versus

C.I.R., R.T.O., MULTAN

S.T.A. No.656/LB of 2016, decided on 22nd August, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 7, 8(1)(a) & 73---Adjustment of input tax---Recovery of adjusted input tax---Taxpayer allegedly adjusted input tax on the goods which were not used for taxable supply, thus violating provisions of Ss.7, 8(1)(a) & 73 of the Sales Tax Act, 1990---Taxpayer on the basis of said allegation was called upon to show-cause as to why the evaded sales tax could not be recovered from him along with default surcharge and penalty---Reply furnished by the taxpayer having been considered unsatisfactory, order-in-original was passed against the taxpayer---Appellate authority below, remanded case to the Assessing Officer for de novo proceedings by a non-speaking order---Taxpayer having failed to prove his claim of input tax through any documentary evidence before the Assessing Officer along with the documents which were placed on record before the appellate authority below, no other option lay except to remand the case so that the documents so submitted by the taxpayer, could be thoroughly examined by the Assessing Officer---Impugned order was annulled and case was remanded to the Assessing Officer with the direction to pass fresh order after allowing adequate opportunity of hearing to the taxpayer.

Riaz Ahmad Raja, ITP for Appellant.

Faisal Asghar, D.R. for Respondent.

Date of hearing: 22nd August, 2017.

ORDER

MUHAMMAD AHMAD (ACCOUNTANT MEMBER).---The titled appeal preferred at the instance of the registered person is directed against the order dated 12.05.2016 passed by the learned CIR(A), Multan.

1. Facts of the case, in brief, are that during scrutiny of sales tax profile it transpired that for the tax periods July, 2011 to June, 2012 the appellant had adjusted input tax amounting to Rs.34,683,751/- on the goods which were not used for taxable supply, therefore, violated sections 7, 8(1)(a) and 73 of the Sales Tax Act, 1990. On the basis of this allegation the appellant was called upon to show cause as to why the evaded sales tax may not be recovered from him along with default surcharge and penalty. The reply furnished was considered unsatisfactory, therefore, Order-in-Original No. 210/2015-16 dated 13.04.2016 was passed.

2. Being aggrieved the appellant preferred appeal before the CIR(A) contending that no audit/contravention report was issued, therefore, issuance of show-cause notice was defective and the resultant Order-in-Original is not sustainable. However, the CIR(A) after considering the contention remanded the case to the assessing officer for de novo proceedings with the following observations:--

"I have considered the grounds of appeal and the arguments and the impugned order-in-original is hereby remanded back for de novo proceedings with the directions to pass a speaking order on merits after providing an adequate opportunity of being heard to the appellant and to reliance is placed on the judgment of the learned ATIR reported as 2013 PTD 2219.

1. The learned AR contended that under subsection (3) of section 45B of the Sales Tax Act, 1990 the CIR(A) was not empowered to remand the case, hence, his order is not sustainable. In support of his contention reliance is placed on the judgment of Hon'ble Lahore High Court S.T.R. No.26 of 2016 dated 01.02.2017 and an order of the Tribunal bearing S.T.A. No.1592/LB/2015 and S.T.A. No.338/LB/2016 dated 12.04.2016 re: Messrs Servo Motor Oil (Pvt.) Ltd., Multan. Moreover, it was also pleaded that claim of input tax was rejected on the basis of presumptions without appreciating facts of the case. The learned DR, on the other hand, pointed out that since the CIR(A) has already remanded the case to the assessing officer for de novo proceedings the appellant has an ample opportunity to prove his stance.

2. After having heard the rival arguments and going through the impugned order we have observed that the CIR(A) has disposed off the appeal in non-speaking manner. So far as the contention that CIR(A) is not empowered to remand the case, we agree with this assertion, however, since the taxpayer could not prove his claim of input tax through any documentary evidence before the assessing officer along with the documents which were placed on record before the CIR(A). Hence, there is no other option except to remand the case so that the documents so submitted by the AR could be thoroughly examined by the assessing officer. The impugned order is therefore, annulled and the case is remanded to the assessing officer with the direction to pass fresh order after allowing adequate opportunity of hearing to the appellant.

3. The appeal is disposed off in the manner indicated above.

HBT/93/Tax(Trib.) Case remanded.

2018 P T D (Trib.) 739

[Inland Revenue Appellate Tribunal]

Before Ch. Anwaar-ul-Haq, Judicial Member, Nazir Ahmad, Judicial Member and Muhammad Raza Baqir, Accountant Member

Messrs AZGARD NINE LTD., LAHORE

Versus

C.I.R., LTU, LAHORE

M.A. (Stay) No.687/LB and I.T.A. No.895/LB of 2015, decided on 21st April, 2014.

Per Muhammad Raza Baqir, Accountant Member, Ch. Anwaar-ul-Haq and Nazir Ahmad, Judicial Members, disagreeing [Minority view]

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

----S. 131(5), first proviso---Appeal with application before Appellate Tribunal, seeking grant of stay against recovery of tax demand---Commissioner Inland Revenue (Appeals), pending appeal, had denied stay against recovery of tax---Validity---Appellate Tribunal, in terms of first proviso to subsection (5) of S.131 of the Income Tax Ordinance, 2001 was empowered to stay the recovery for a period not exceeding 180 days in the cases where the tax levied had been upheld by the Commissioner (Appeals)---In the present case, the levy of tax having not been upheld by the Commissioner (Appeals), who also denied grant of stay to the taxpayer on the ground that taxpayer could not make out a prima facie arguable case---Representative of the taxpayer had failed to point out any mistake, or legal flaw in the order of Commissioner (Appeals)---In the absence of any such illegality and the limitations of the Tribunal in view of S.131(5), proviso of the Ordinance regarding the grant of stay, no interference was warranted---Appeal and applica-tion for stay was dismissed. [Minority View]

Per Ch. Anwaarul Haq, Judicial Member; Nazir Ahmad, Judicial Member, agreeing

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

----Ss. 131(5) & 132(6)---Appeal with application to Appellate Tribunal seeking grant of stay against recovery of tax demand---Commissioner Inland Revenue (Appeals), pending appeal, had denied stay against recovery of tax---Validity---Subsection (1) of S.131 of the Income Tax Ordinance, 2001, provided that any party objecting to an order of the Commissioner (Appeals) could file an appeal before the Tribunal---Forum which could allow final relief, was competent to grant interim relief---Present appeal/application being against the "decision" of the Commissioner (Appeals) and not against an assessment "order", powers vested in the Appellate Tribunal under subsection (6) of S.132 of the Income Tax Ordinance, 2001 would apply---Appellate Tribunal, in circumstances, annulled the decision of the Commissioner (Appeals), granted stay against the disputed tax demand; with direction to the Commissioner to dispose of the main appeal of the taxpayer within reasonable time, and till the release of the order of Commissioner, the department was directed to restrain from taking any coercive measures against the taxpayer.

Mehram Ali and others v. Federation of Pakistan and others PLD 1998 SC 1445; Messrs Pak Saudi Fertilizer Ltd. v. Federation of Pakistan 2002 PTD 679; 2009 PTD 1220 and Messrs Saigol Qingqi Motors Ltd. v. Federation of Pakistan 2011 PTD 1290 ref.

Per Nazir Ahmad, Judicial Member agreeing with Ch. Anwaar-ul-Haq, Judicial Member

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

----Ss. 131(5) & 132(3)(6)---Grant of stay against recovery of tax demand by Appellate Tribunal---Scope---Section 132 of the Income Tax Ordinance, 2001, provided that there were two types of appeals; one which related to the assessment order and the other related to decisions other than assessment---According to subsection (6) of S.132 of the Income Tax Ordinance, 2001, if appeal related to a decision other than the assessment order, Appellate Tribunal had the power to affirm, vary or annul the decision and issue such directions which the case could require---Appeal to Appellate Tribunal against the order of Commissioner (Appeals), rejecting the stay application, was competent under subsection (6) of S.132 of the Income Tax Ordinance, 2001---Appellate Tribunal annulled the decision of the Commissioner (Appeals), regarding refusal of stay against the disputed tax demand, with the direction for disposal of main appeal within 30 days restraining the department from taking any coercive measures for recovery of disputed tax demand.

(d) Interpretation of statutes---

----Every provision of law had to be interpreted so as to make the law workable and no redundancy could be attached or attributed to the provision or the legislative intention.

Shehbaz Butt for Applicant.

Asim Aleem, D.R. for Respondent.

Date of hearing: 21st April, 2014.

ORDER

MUHAMMAD RAZA BAQIR, ACCOUNTANT MEMBER.---The above titled miscellaneous application seeking grant of stay against recovery of tax demand as well as appeal against the order of CIR (Appeals), Zone-I, Lahore dated 04-03-2015, agitating refusal of stay, have been filed at the instance of the applicant/taxpayer. Mr. Shehbaz Butt, learned counsel is present for the taxpayer whereas Mr. Asim Aleem, learned DR has tendered appearance on behalf of the department/respondent.

1. The learned counsel only reiterated the grounds as contained in the grounds of appeal and the application for stay. He stated that the learned CIR(Appeals) has failed to pass a speaking order. Further submitted that the appellant has a prima facie arguable case with every likelihood of success and balance of convenience also lies in its favour and if the department is not restrained from recovery of the impugned tax demand, it will cause irreparable loss.

4(sic) On the other hand, learned DR has fully opposed the arguments of learned counsel and submits that the applicant has failed to point out any legal infirmity or lacuna in the order passed by the learned appellate authority. He added that the Commissioner (Appeal) has passed a speaking order and has refused the grant of stay mainly on the ground that the appellant could not make out a prima facie arguable case.

1. We have gone through the facts of the case and carefully considered the contentions of both the parties at the bar. In terms of first proviso to subsection (5) of Section 131 of the Income Tax Ordinance, 2001, this Tribunal is empowered to stay the recovery for a period not exceeding 180 days only in those cases where the tax levied has been upheld by the Commissioner (Appeals). In this case the levy of tax has not yet been upheld by the Commissioner, who after careful consideration of facts and affording opportunity of hearing has regretted grant of stay to the taxpayer on the ground that the appellate could not make out a prima facie arguable case. Learned AR has failed to point out any mistake, or legal flaw in the order of the first appellate authority. In the absence of any such illegality and the limitation of this Tribunal as contained in the afore-referred legal provisions regarding the grant of stay, we are not inclined to interfere in the matter. Accordingly, the appeal filed by the taxpayer is dismissed along with the application for grant of stay.

Sd/-

Muhammad Raza Baqir, Accountant Member

6.CH. ANWAAR UL HAQ (JUDICIAL MEMBER).---I have gone through the proposed draft order written by my learned brother Mr. Muhammad Raza Baqir, Accountant Member, whereby he has dismissed the application of applicant/taxpayer for grant of stay by holding that in terms of first proviso to subsection (5) of Section 131 of the Income Tax Ordinance, 2001 this Tribunal is empowered to stay the recovery for a period not exceeding 180 days only in those case where the tax levied has been upheld by the Commissioner (Appeals). I respectfully disagree with his findings on the following facts, provisions of law and decision of the superior courts.

1. The Hon'ble Supreme Court of Pakistan in the case of Mehram Ali and others v. Federation of Pakistan and others (PLD 1998 SC 1445), has laid down that access to justice is fundamental right of a petitioner and essential feature of this right is determination of any grievance or dispute by an independent Tribunal.

2. In the case of Messrs Pak Saudi Fertilizer Ltd., v. Federation of Pakistan cited as (2002 PTD 679), it has been held by the Division of the Hon'ble Karachi High Court that "While a dispute in the shape of appeal are pending, no coercive actions are to be taken." Their lordship declared recovery proceedings initiated by assessing officer to be without lawful authority in view of the pendency of appeal/disputes and unconditionally stayed the coercive measures towards recovery till disposal of appeal by the departmental hierarchies.

3. It is also held by the Superior Courts in a number of cases that the recovery of demand should not be initiated till at least one forum of appeal is availed by the appellant and appeal is decided by that forum as held in 2009 PTD 1220 LHC and 2011 PTD 1290 (LHC), Messrs Saigol Qingqi Motors Ltd., v. Federation of Pakistan, page 1292, Para 5. The aforesaid Para is reproduced as under:--

"Admittedly, the appeal of the petitioner is pending adjudication before the Customs Appellate Tribunal since 21-9-2010 and the same has not been decided so far, obviously, in the event of the recovery of outstanding demand, the petitioner's appeal would become in fructuous. In the case of Sunrise Bottling Company (Pvt.) Ltd. v. Federation of Pakistan (2006 PTD 535), it has been held as under:--

Learned counsel for the petitioner has referred to the judgment of this Court in the case of Z.N. Exports (Pvt.) Ltd. v. Collector Sales Tax 2003 PTD 1746. In that case it has been held by this court that an assessee is entitled to adjudication in respect of this disputed tax liability by at least on independent forum outside the hierarchy of the respondent-department. Admittedly in this case the impugned liability has been determined by the officers of the respondent-department and remedy of the petitioner before the learned Appellate Tribunal provides the independent adjudication of his challenge to the impugned tax liability.

The Honourable Supreme Court has laid down that access to justice is a fundamental right. In the case of Mehram Ali and others v. Federation of Pakistan and others (PLD 1998 SC 1445), it has been held that an essential feature of such right is the determination of any grievance or dispute by an independent Tribunal."

1. In terms of subsection (1) of Section 131 of the Ordinance any aggrieved party objecting to an order of the Commissioner (Appeals) may file an appeal before this Tribunal. Now, it is well settled principle of law that a forum which can allow final relief, is competent to grant interim relief.

2. The present appeal/application is against the "decision" of the CIR (A) and not against an assessment "order". Therefore, the powers vested under subsection (6) of section 132 of the Income Tax Ordinance, 2001 would apply in the instant case. For sake of convenience the relevant provision is reproduced herein below:--

(6) Where the appeal relates to a decision other than in respect of an assessment, the Appellate Tribunal may make an order to affirm, vary or annul the decision and issue such consequential direction as the case may be required (emphasis added)

11(sic). Accordingly, following the judgments of the Superior Courts quoted above and by exercising powers conferred upon this Tribunal as above, I annul the decision of the learned CIR (A) grant stay against the disputed tax demand with direction to CIR (A) to dispose the main appeal of the taxpayer within reasonable time of 30-days is and till the release of the order of learned CIR (A), the department is directed to restrain from taking any coercive measures against the appellant.

Sd/-

Ch. ANWAAR UL HAQ

Judicial Member

1. Since, difference of opinion has arisen between the Members of this Bench, we, accordingly, refer the matter to the Hon'ble Chairperson for appointment of any Member(s) of this Tribunal as umpire to resolve the following proposed questions of law on the subject:--

(i) Whether on the facts and circumstances of the case, this Tribunal is bound to follow the above quoted decision of Honourable Supreme Court of Pakistan and High Court in terms of Article 189 and 201 of the Constitution of Islamic Republic of Pakistan, 1973 whereby said Superior Courts has decided the question of law and enunciated a principle of law?

(ii) If the answer of proposed question No. (i) is affirmative, whether the taxpayer is entitled for stay of demand or the tax department can initiate coercive measures, until taxpayer's appeal came before this Tribunal i.e. first forum outside the departmental hierarchy?

Sd/- Sd/-

MOHAMMAD RAZA BAQIR Ch. ANWAAR UL HAQ

(Accountant Member) Judicial Member

MOHAMMAD RAZA BAQIR (ACCOUNTANT MEMBER).---I have gone through noting at para-6 to 12/ante. The undersigned begs to differ with the questions proposed in the preceding paras. The issue involved in this case is not the compliance or otherwise of the orders passed by the superior courts. There is no denying the facts that all the orders passed by the higher fora are bound to be implemented in letter and spirit without any reservation or questions by all authorities. The judgments quoted in the preceding paras are distinguishable as they do not dilate upon the powers of the Tribunal to grant stay in those cases pending before the Commissioner (Appeals) and where stay has been regretted by the first appellate authority or where the case is still pending before Commissioner (Appeals). The question involved in this case is whether or not this Tribunal can grant stay where the demand has not yet been upheld by the Commissioner (Appeals). Attention is again invited to the first proviso to subsection (5) of section 131 of the Income Tax Ordinance, 2001 which specifically provides that this Tribunal can grant stay only against the recovery of tax, for a period not exceeding 180 days only in those cases where the tax levied has been upheld by the Commissioner (Appeals). Since the condition of upholding the demand has not been met in the instant case, the request for stay was regretted vide para 5/N.

Keeping in view the fact that the learned Judicial Member does not agree with the afore referred legal provisions, it is proposed that the matter may be referred to the Honourable Chairperson for appointment of an umpire member to resolve the following proposed questions of law:

1. Whether this Tribunal can disregard the legal condition of upholding of demand by Commissioner (Appeals) as laid down in the first proviso to subsection (5) of section 131 of the Income Tax Ordinance, 2001?

2. Whether all tax demands get stayed automatically till the decision of the appeal by the Appellate Tribunal irrespective of the conditions of upholding of demand by Commissioner (Appeals) and the limitation of 180 days?

Sd/-

Muhammad Raza Baqir, Accountant Member

CH. ANWAAR UL HAQ (Judicial Member):---Let the matter be put up before Hon'ble Chairperson for resolution of both set of questions framed by the Members of the Bench by a referee Member(s) of the Tribunal.

Sd/-

Ch. Anwaar ul Haq

Judicial Member

Shahbaz Butt for Appellant.

Qaisar Mahmood, D.R. for Respondent.

NAZIR AHMAD, (JUDICIAL MEMBER).---The titled appeal has been entrusted to me by the Honourable Chairperson, to decide the questions referred by Division Bench as a result of difference of opinion. The case was fixed for hearing and the representatives of both the parties were heard at length.

Briefly stated facts of the case are that during the pendency of first appeal before CIR (Appeals), the applicant filed stay application, which was refused vide order dated 04.03.2015. Against this treatment, the applicant came up in appeal challenging the impugned order through appeal along with stay application. The case was heard on 21.04.2014 by the Division Bench of this Tribunal wherein the learned Accountant Member refused to grant stay on the ground enumerated in para 5 of above order. However, the learned Judicial Member by not agreeing with the proposed draft order disapproved by giving a dissenting note wherein he accepted the appeal as well as stay application by directing the learned CIR (Appeals) to decide the appeal within 30 days and till that time the department was restrained to recover the disputed tax demand. The following questions have been proposed:--

i) Whether on the facts and circumstances of the case, this Tribunal is bound to follow the above quoted decision of Honourable Supreme Court of Pakistan and High Court in terms of Articles 189 and 201 of the Constitution of Islamic Republic of Pakistan, 1973 whereby said Superior Courts has decide the question of law and enunciated a principle of law.

ii) If the answer of proposed question No.(i) is affirmative, whether the taxpayer is entitled for stay of demand or the tax department can initiate coercive measures, until taxpayer's appeal came before this Tribunal i.e. first forum outside the department hierarchy?

iii) Whether this Tribunal can disregard the legal condition of upholding of demand by Commissioner (Appeals) as laid down in the first proviso to subsection (5) of Section 131 of the Income Tax Ordinance, 2001?

iv) Whether all tax demands get stayed automatically till the decision of the appeal by the Appellate Tribunal irrespective of the conditions of upholding of demand by Commissioner (Appeals) and the limitation of 180 days?

The above questions are decided in perspective of arguments advanced by the representatives of both the parties as well as findings of both the learned Members. The sole issue, precisely, is that in the light of proviso to subsection (5) of section 131 whether the Tribunal is empowered to stay the recovery proceedings in case appeal is pending before the first appellate authority. The relevant section, which deals with the powers of Tribunal to decide the appeals etc. are 131 and 132 of the Ordinance. In section 131 of the Ordinance the procedure to file appeal against the order of Commissioner (Appeals) is given whereas section 132 of the Ordinance deals with the disposal of appeal. Subsection (5) of section 131 of the Ordinance deals with the powers of Tribunal to grant stay and proviso's to this subsection were added through Finance Act, 2008 and 2012 respectively. However, section 132 of the Ordinance, which deals with the disposal of appeal gives the procedure and frame work under which this Tribunal will function and also stipulates powers of this Tribunal. According to this section, there are two types of appeals one which relates to the assessment order and other relates to decisions other than assessment. The relevant provisions of sections 131 and 132 are reproduced below for the sake of convenience:--

1. Appeal to the Appellate Tribunal.---(1) Where the [taxpayer] or Commissioner objects to an order passed by the Commissioner (Appeals), the [taxpayer] or Commissioner may appeal to the Appellate Tribunal against such order.

(5) Notwithstanding that an appeal has been filed under this section, tax shall, unless recovery thereof has been stayed by the Appellate Tribunal, be payable in accordance with the assessment made in the case:

[Provided that if on filing of application in a particular case, the Appellate Tribunal is of the opinion that the recovery of tax levied under this Ordinance and upheld by the Commissioner (Appeals), shall cause undue hardship to the taxpayer, the Tribunal, after affording opportunity of being heard to the Commissioner, may stay the recovery of such tax for a period not exceeding one hundred and eighty days in aggregate:

Provided further that in computing the aforesaid period of one hundred and eighty days, the period, if any, for which the recovery of tax was stayed by a High Court shall be excluded.]

[Provided further that the Appellate Tribunal may stay the recovery of the tax on filing the appeal which order will remain operative for thirty days and during which period a notice shall be issued to the respondent and after hearing the parties, order may be confirmed or varied as the Tribunal deems fit but stay order shall in no case remain operative for more than one hundred and eighty days.]

1. Disposal of appeals by the Appellate Tribunal.---(1) The Appellate Tribunal may, before disposing of an appeal, call for such particulars as it may require in respect of the matters arising on the appeal or cause further enquiry to be made by the Commissioner.

(3) Where the appeal relates to an assessment order, the Appellate Tribunal may [, without prejudice to the powers specified in subsection (2),] make an order to -

(a) affirm, modify or annul the assessment order; or

[(c) remand the case to the Commissioner or the Commissioner (Appeals) for making such enquiry or taking such action as the Tribunal may direct.]

(6) Where the appeal relates to a decision other than in respect of an assessment, the Appellate Tribunal may make an order to affirm, vary or annul the decision, and issue such consequential directions as the case may require.

A careful perusal of above quoted legal provisions in juxta position clearly follows that as per subsection (1) of 131 taxpayer as well as the department/revenue can file appeal against the orders passed by the CIR (Appeals), meaning thereby, then all the order passed by the CIR (Appeals) are appealable whereas subsection (3) of section 132 indicates power of the Tribunal only in those orders of CIR (Appeals), which were passed against an assessment order, the Tribunal has power to affirm, modify or annul such assessment or remand the case to the Commissioner or Commissioner (Appeals) with certain directions. Whereas, according to subsection (6) if the appeal relates to a decision other than the assessment order, the Tribunal has the power to affirm, vary or annul the decision and issue such directions, which the case in hand may require.

The above discussion also leads to an understanding that there may be orders or decision, which relate to assessment and there may be decisions which do not relate to assessment and both the orders/decisions of the first appellate authority are appealable before the Tribunal and the Tribunal can pass adequate order after hearing the parties in accordance with law. An order of refusal of stay is not the order of CIR (Appeals) against an assessment order and it is order or decision, which is appealable as per section 1 of section 131 of the Ordinance, which envisages that every order of the Commissioner (Appeals) is apealable before the Tribunal. So if we restrict the Tribunal that only those appeals in the stay matter will be filed before the Tribunal in which the tax demand has been upheld by the Commissioner (Appeals) then subsection (6) of the section 132 becomes redundant, which is not the intention of legislature. It is also well settled legal proposition that every provision of law has to be interpreted so as to make the law workable and no redundary can be attached or attributed to the provision of law or the legislative intention.

So keeping in view the above discussion, I fully concur with the findings of learned Judicial Member that under subsection (6) of the 132 appeal against the order of CIR(Appeals) rejecting the stay application is fully competent.

As far as the referred questions are concerned, Questions Nos. (i) and (ii) are answered in affirmative. Question No.(iii) is replied in negative for the reason that the provision of section 132(3) of the Ordinance relates to an assessment order while provision of subsection (6) of section 132 of the Ordinance relates to decision. Question No.4 has two limbs, first that whether all the tax demands gets stayed on filing of appeal and secondly irrespective of the condition of upholding the demand by CIR (Appeals) and the limitation of 180 days. In my view since any order passed by the CIR (Appeals) is appealable in terms of section 131(1) of the Ordinance, the subsequent consequence shall follow on filing of appeal against order/decision of first appellate authority.

Therefore, no automatic stay shall operative unless the order/decision is not impugned before us. Therefore, the necessary corollary shall be filing of an appeal against the order passed by the first appellate authority. So far as, the other limbs is concerned, as it has earlier been explained in pre-paras of the order the upholding of demand by CIR (Appeals) as envisaged in section 131(5) of the Ordinance and proviso thereof relates to an assessment order and in case an assessment order has been passed and demand therein has been modified or confirmed, the provisions of section 131(5) of the Ordinance shall apply. However, decision regarding to grant stay shall squarely fall and covered by subsection (6) of 132 of the Ordinance. Therefore, at this stage I may point out that the Tribunal can pass an order in the circumstances affirming, verifying or annulling the decision in as much as issue such consequential direction as the case may require. Therefore, the answer to the other limb shall be in negative.

Therefore, by concurring the finding of learned Judicial Member, I hereby declare that annulment of the decision of the learned CIR (Appeals) regarding grant of stay against the disputed tax demand with the direction for disposal of main appeal of the taxpayer within 30 days and restraining the department from taking any coercive measures for recovery of disputed tax demand is quite justified.

HBT/101/Tax(Trib.) Order accordingly.

2018 P T D (Trib.) 787

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Ahmad, Accountant Member

Messrs AYAN BATTERY TRADERS, FAISALABAD

Versus

C.I.R. (CHENAB ZONE), R.T.O., FAISALABAD

M.A. Stay No.3438/LB and S.T.A. No.1407/LB of 2017, decided on 7th December, 2017.

Sales Tax Act (VII of 1990)---

----S.21(2)---Sales Tax Rules, 2006, R.12---S.R.O. No.494(I)/2015, dated 30-6-2015---Suspension of registration and blacklisting of registered person---Appellant/taxpayer, was alleged to be having no genuine business activities was involved in tax evasion and paper transaction with bogus units to avoid payment of sales tax---Commissioner Inland Revenue, suspended registration of appellant and blacklisted him---Whole exercise carried out by the Commissioner for suspension of registration and blacklisting the appellant was illegal and unlawful as jurisdiction over the case of appellant vested with the Commissioner of another Zone---Power vested in any Authority, could only be exercised by that Authority and in default thereof the entire action would be without jurisdiction, void ab intio and of no legal effect---Impugned order passed by the Commissioner Inland Revenue being without jurisdiction, was annulled, in circumstances.

PLD 2005 SC 482 rel.

Khubaib Ahmad for Appellant.

Kashif Azhar D.R. for Respondent.

Date of hearing: 7th December, 2017.

ORDER

CH. SHAHID IQBAL DHILLON, (JUDICIAL MEMBER).---The instant appeal has been filed on behalf of appellant against an order C.No. CIR/RTO/FSD/1185 dated 19-06-2017 passed by the learned CIR (Chenab Zone) RTO, Faisalabad whereby the appellant was blacklisted under section 21(2) of the Sales Tax Act, 1990.

1. Succinctly stated, the facts of the case are that the appellant is registered under the Sales Tax Act, 1990 running its business as an authorized distributor of Messrs Century Engineering Industries (Pvt.) Ltd. (formerly Phoenix Batteries) and Messrs Exide Pakistan Ltd dealing with storage batteries, etc. It was alleged that appellant having no genuine business activities is involved in tax evasion and paper transactions with bogus units to avoid payment of sales tax. Resultantly, the learned CIR (Chenab Zone) through his order C. No. 891 dated 16-03-2017 while exercising powers conferred upon him under section 21(2) of the Act read with Rule 12 of the Sales Tax Rules, 2006 as amended vide S.R.O. 494(I)/2015 dated 30-06-2015, suspended registration of the appellant and subsequently, a show-cause notice C. No. 847 dated 21-03-2017 was issued, asking the appellant as to why he may not be blacklisted. Whereupon, an order C.No. 1185 dated 19-06-2017 for blacklisting the appellant was issued under section 21(2) of the Act read with Rule 12 of the Sales Tax Rules, 2006 as amended vide S.R.O. 494(I)/2015 dated 30-06-2015. Learned counsel appearing on behalf of appellant has termed the suspension/blacklisting proceedings concluded by the learned CIR (Chenab Zone) to be illegal, without jurisdiction, arbitrary and contrary to the facts of the case. Initiating the arguments, learned counsel has vehemently contested that whole exercise of suspension/blacklisting carried out by the learned CIR (Chenab Zone), RTO, Faisalabad is illegal and without lawful jurisdiction as jurisdiction over the case of the appellant vests with the CIR (Lyallpur Zone), RTO, Faisalabad as per Order No. 05 dated 06-09-2016. Learned counsel vociferously contented that the appellant is an authorized distributor of Messrs Century Engineering Industries (Pvt.) Ltd. and Messrs Exide Pakistan Ltd. and sales tax at the rate of 17% along with 2% extra sales tax is paid at the time of purchases and its subsequent supplies are exempt from payment of sales tax under sub-rule (5) of Rule 58T of the Chapter-XIII (Special Procedure for Payment of Extra Sales Tax on Specified Good) and the principal companies have also verified all the purchases through certificates dated 01-08-2016 and 08-09-2017 therefore, charge of tax fraud, tax evasion and paper transactions is illegal and unfounded when due amount of sales tax along with extra sales tax have already been deposited in the national exchequer by the respective suppliers. Conversely, when the learned DR was confronted with the situation cited supra, in counter arguments, he has assailed the case on similar grounds and charges as leveled earlier in the impugned orders and has failed to put forth any explanation to justify any deviation from the arguments advanced by the learned AR and has fully supported the suspension and blacklisting orders of the learned CIR, simply re-endorsing the basis evolved therein and nothing newel is put forth except to reiterated earlier set of contentions.

2. After having heard both the rival parties and carefully examining the relevant record and relevant provisions of law as well as the case law cited at the bar, we find that whole exercise carried out by the learned CIR (Chenab Zone), RTO, Faisalabad for suspension of registration and blacklisting the appellant is illegal and without lawful jurisdiction as jurisdiction over the case of the appellant vests with the learned CIR (Lyallpur Zone), RTO, Faisalabad as per Order No. 05 dated 06-09-2016 assigning jurisdiction for suspension and blacklisting of a registered person under section 21(2) of the Act falling under respective territorial and legal jurisdiction. The jurisdictional order clearly reveals that all cases or classes of cases, persons or classes of persons of non-corporate whose place of business is situated within the limit of "Maher Sadiq Market" shall be the jurisdiction of Lyallpur Zone. Learned counsel for the appellant has invited our attention towards online application for change in the business address of the appellant duly accepted/approved by the FBR on 08-12-2015, showing new business address of appellant "Shop No. 6, Khan Plaza, Maher Sadiq Market, Railway Road, Lyallpur Town, Faisalabad" and resultantly, this new business address was also updated by the FBR on 'Taxpayer Online Verification'. Learned counsel, in support of his stance, has placed on record, the copies of jurisdictional order dated 06-09-2016, application for change in particulars of registration along with online approval of FBR as well as latest computer profile of the appellant showing current business address of the appellant. While confronted with such factual and legal position, learned DR has candidly conceded to the legal position as stated hereinabove. We are of the considered view that it is the CIR (Lyallpur Zone) who was legally empowered to proceed under section 21(2) of the Act for suspension of registration and blacklisting of the appellant therefore, whole proceedings of suspension and blacklisting being illegal and without jurisdiction are infested with inherent legal infirmities and substantive illegalities. It is a well-settled principle of law that power vested in any authority can only be exercised by that authority, in default whereof, the entire action would be without jurisdiction, void ab initio and of no legal effect. In this regard, reliance is placed on the judgment of Apex Court of Pakistan reported as (PLD 2005 SC 482) while observing the issue of jurisdiction, it was observed that the question of jurisdiction in forum is always considered to be very important and any order passed by a Court or a forum having no jurisdiction, even if it is found to be correct on merits, is not sustainable under law.

3. We also derive strength from the ratio settled by the Hon'ble Supreme Court of Pakistan in case of "Izhar Alam Farooqi v. Sheikh Abdul Sattar" reported as (2008 SCMR 240). The relevant excerpt of the said judgment is reproduced as under:--

"If a mandatory condition for the exercise of a jurisdiction before Court, Tribunal or Authority is not fulfilled, then the entire proceedings which follow become illegal and suffer from want of jurisdiction. Any order passed in continuation of these proceedings in appeal or revision equally suffers from illegality and is without jurisdiction."

1. In view of the foregoing facts and law, we have no hesitation to hold that suspension and consequent blacklisting of the appellant has been passed by the CIR (Chenab Zone) without lawful jurisdiction as its jurisdiction vests with CIR (Lyallpur Zone), hence, the impugned orders are annulled. Since the appeal is accepted on point of jurisdiction other grounds need not to be dilated upon.

2. Since, the main appeal of the appellant/registered person has been decided in his favour therefore, stay application has become infructuous.

HBT/117/Tax(Trib.) Appeal accepted.

2018 P T D (Trib.) 803

[Inland Revenue Appellate Tribunal]

Before Shahid Pervez Memon, Judicial Member and Sikandar Aslam, Accountant Member

ADDITIONAL, CIR, (LEGAL) ZONE-II, RTO, HYDERABAD

Versus

Messrs WALLS PACKAGES, KOTRI

S.T.A. No.14/KB of 2013, decided on 22nd December, 2015.

Sales Tax Act (VII of 1990)---

----Ss. 7, 8, 11(2), 21(3), 33(ii), 36(1) & 46---Input tax adjustment---Claim for---Deputy Commissioner, Inland Revenue/Adjudicating Authority, vide order-in-original rejected claim of the taxpayer with regard to adjustment of input tax---Appellate authority, declared order-in-original as bad in law and without merits dismissed said order---Adjudicating authority had rejected claim of taxpayer in respect of adjustment of input tax on the ground that the taxpayer had made purchase from a blacklisted unit---Validity---Unit in question was blacklisted in the year 2012, whereas adjustment of input tax was made in year 2008-2009, when said unit was active---Adjustment of input tax having been made prior to blacklisting of said unit, taxpayer could not be penalized---Purchases were made prior to date of order of blacklisting of the unit---Taxpayer had right to claim input adjustment in circumstances---Appellate authority had discussed the matter with solid reason on each and every issue involved---In absence of any illegality or irregularity in the order passed by appellate authority below, departmental appeal against said order was dismissed by the Tribunal in circumstances.

Habib Akhtar, D.R. for Appellant.

Muhammad Afzal Awan for Respondent.

Date of hearing: 15th December, 2015.

ORDER

SHAHID PERVEZ MEMON, JUDICIAL MEMBER.---The instant appeal has been filed by the Department against the CIR(A)'s order 22.10.2012 with the following ground:--

i. That, the Deputy Commissioner, Inland Revenue, Audit Unit-X Regional Tax Officer, Hyderabad has passed the Order-in-Original No.02 of 2012 dated 31.07.2012 after applying his mind judicially and rejected that claim of the Respondent No.02 which was legally not covered in terms of section 8(1) (ca) (d) of the Sales Tax Act, 1990 because the registered person had made purchase from a "Non-Active and Blacklisted" unit Messrs Prizma Enterprises, Karachi having STRN. 1700999801473 and adjusted input tax amounting to Rs.413,238/-.

ii. That, the Order-in-Appeal No.438/2012 dated 22.10.2012 (herein after referred to as the impugned order) passed by the Commissioner Inland Revenue, (Appeals-III), Karachi, is bad in law without merits and ignores the fact that in terms of Rule 12(5) of Sales Tax Rules, 2006, dated 5th June 2006, invoices issued by blacklisted units irrespective of being issued prior or after such blacklisting are not to be entertained for the purpose of refund or input tax adjustment. Thus, the Deputy Commissioner, Inland Revenue, Audit unit-X, Regional Tax Office. Hyderabad was correct to disallow input tax adjustment against the said invoices.

1. Brief facts of the case are that the exercise regarding admissibility of input tax adjustment was carried out of the registered persons, which revealed that Messrs Walls Packages, C-3, SITE, Kotri, had made the illegal/unlawful input tax adjustment of Rs.413,287/- during the period 2008-09 on fake/flying invoices issued by Messrs Prisma Enterprises, 1971, Pak Avenue Building, Block-06, PECHS, Shahrah-e-Faisal, Karachi, (STRN 17-009998-014-73). The said supplier was blacklisted since registration vide order No.4766 dated 04.05.2012 issued by the Commissioner Inland Revenue (Zone-IV), RTO, Karachi. The Registered person had adjusted input tax during the aforesaid period which was inadmissible in terms of sections 7 and 8 of the Sales Tax Act, 1990 read with sub-rule (5) of Rule 12 of the Sales Tax Rules, 2006, on account of the purchases made on fake/ flying invoices from a blacklisted unit. Messrs Walls Packages, C-3, SITE, Kotri, were called upon to show cause under sections 11(2) and 36(1) of the Sales Tax Act, 1990, that why principal amount of input tax Rs.413,287/- along with default surcharge (to be calculated at the time of payment) under section 34 of Sales Tax Act, 1990 should not be recovered under sections 11(2) and 36(1) ibid and why penal action prescribed under section 33(11) of the Sales Tax Act, 1990 should not be taken for violation of provisions of sections referred above of the Sales Tax Act, 1990.

2. During the course of hearing, the learned DR argued that the Deputy Commissioner, Inland Revenue, Audit Unit-X, Regional Tax Officer, Hyderabad has passed the Order-in-Original No.02 of 2012 dated 31.07.2012 after applying his mind judicially and rejected that claim of the Respondent No.02 which was legally not covered in terms of section 8 (1) (ca)(d) of the Sales Tax Act, 1990 because the registered person had made purchase from a "Non-Active and Blacklisted" unit Messrs Prizma Enterprises, Karachi having STRN No.1700999801473 and adjusted input tax amounting to Rs.413,238/-. He further argued that the Order-in-Appeal No.438/2012 dated 22.10.2012 (herein after referred to as the impugned order) passed by the Commissioner Inland Revenue, (Appeals-III) Karachi, is bad in law without merits and ignores the fact that in terms of Rule 12(5) of Sales Tax Rules 2006, dated 5th June 2006, invoices issued by blacklisted units irrespective of being issued prior or after such blacklisting are not to be entertained for the purpose of refund or input tax adjustment. Thus, the Deputy Commissioner, Inland Revenue, Audit unit-X, Regional Tax Office. Hyderabad was correct to disallow input tax adjustment against the said invoices.

3. On the other hand, Mr. Muhammad Afzal Awan, Advocate representing the Respondent/taxpayer vehemently opposed the contention made by the learned DR. He argued that the order passed by the learned CIR (A) is well within the framework of law and there is no illegality, irregularity and infirmity in the same.

4. After hearing, we have perused the material placed before us which reveals that the learned DCIR passed the order against the respondent No.2 in respect of adjustment of input tax against purchases made from a black listed unit viz. Messrs Prizma Enterprises. The said order was declared Null and void by the learned CIR(A) in his order dated 22.10.2012 passed in Appeal No.438/2012/223. With regard to black listing Section 21(3) of Sales Tax Act, 1990 is very much clear. The order of the learned DCIR is self explanatory that the said supplier viz M/s. Prizma Enterprises was black listed since registration vide order No.4766 dated 04.05.2012 whereas the record shows that the period of adjustment of input tax is 2008-09 and according to dictum laid down by the superior court, the executive order or notification, which adversely invade upon vested right cannot be applied with retrospective effect. In the present case, the order in original shows that on 04.05.2012 Messrs Prizma Enterprises was declared black listed, meaning thereby in year 2008-09 M/s. Prizma Enterprises was active on the e-portal of the FBR, therefore, the taxpayer cannot be panelized. Since the purchases made prior to date of order of black listing, therefore, the taxpayer is ever right to claim input adjustment. The order passed by the learned CIR (A) is well discussed with solid reasons on each and every issue involved in the matter. No illegality or irregularity has been found in the order.

5. The Departmental appeal stands dismissed.

HBT/32/Tax(Trib.) Appeal dismissed.

2018 P T D (Trib.) 850

[Inland Revenue Appellate Tribunal]

Before Qamar-ul-Haq Bhatti, Judicial Member and Masood Akhtar Shaheedi, Accountant Member

Messrs SHAHZAIB BROTHERS PAPER CONE (PVT.) LTD., FAISALABAD

Versus

C.I.R. (APPEALS), RTO, FAISALABAD and others

S.T.A. No.330/LB of 2017, decided on 10th July, 2017.

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

----Ss. 11, 33 & 34---S.R.O. No. 98(I)/2013, dated 14-2-2013---Failure to withhold sales tax---Taxpayer, who was legally required to withhold 1/5th of his total input tax with regard to local purchases, did not withhold amount of withholding sales tax---Taxpayer was called upon to show as to why withholding sales tax, could not be recovered under S.11(2) of the Sales Tax Act, 1990, along with default surcharge and penalty under Ss.33(9) & 34 of the Sales Tax Act, 1990---Adjudication proceedings culminated in passing of impugned order; which was challenged before appellate authority below, who also rejected the appeal---Validity---Inland Revenue Audit Officer had wrongly assumed jurisdiction under S.11(2) of the Sales Tax Act, 1990, upon a case of failure to withhold sales tax---Provisions of S.11(2) only cater 'non-payment' and 'short-payment' of the tax due on supplies made by a person---Case of taxpayer was misinterpreted and misconstructed by revenue department because deposit of sales tax was independent to that payment of withholding tax---No revenue loss was involved in the case of non-withholding sales tax particularly when the suppliers of the taxpayer had already discharged sales tax liabilities in their sales tax returns by depositing the same into the exchequer---Demanding the amount of sales tax from the buyer, despite its having been deposited by the suppliers in the exchequer, would definitely tantamount to double taxation not permissible under law---Impugned show-cause notice and consequent orders passed during hierarchy of Inland Revenue, suffered from grave infirmities and substantive illegalities which, were declared to be illegal, without jurisdiction and set aside.

(b) Interpretation of statutes---

----Retrospectivity---Retrospectivity, even in a procedural law was to be avoided, if it would affect an existing right or otherwise caused inconvenience or injustice to anybody---In absence of clear intention of the legislature to apply a provision of statute with retrospective effect, would always be deemed to be applicable prospectively.

Khubaib Ahmad for Appellant.

Ms. Ghazalla Hameed, D.R. for Respondents

2018 P T D (Trib.) 854

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Raza Baqir, Accountant Member

Messrs K. B. ENTERPRISES, FAISALABAD

Versus

COMMISSIONER OF INLAND REVENUE, R.T.O., FAISALABAD

S.T.A. No.754/LB of 2015, decided on 26th November, 2015

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

----Ss. 7, 8, 10, 11, 25, 36 & 46---Refund of input tax---Recovery of already refunded amount of sales tax---Taxpayer had received refund of input tax on the strength of invoices issued by an Undertaking whose registration was suspended---Based on said omission/irregularities, adjudication proceedings were initiated by Taxation Officer by way of issuance of a show-cause notice dated 25-9-2014 for recovery of already refunded amount of sales tax asking to pay back the amount of tax under S.11(3) of the Sales Tax Act, 1990---Explanation tendered by taxpayer having been treated unsatisfactory, proceedings culminated into passing of an order dated 26-11-2014 which order was upheld by appellate authority---Validity---Recovery of refunded amount of sales tax had been adjudged under S.11(3) of the Sales Tax Act, 1990 which came into being w.e.f. 1st July, 2012 by virtue of the Finance Act, 2012 and its provisions had not been made applicable retrospectively by the legislation consciously as the provisions of S.36(1) of the Sales Tax Act, 1990, providing limitation of five years and S.36(2) providing limitation of three years respectively for issuance of show-cause notice in different tax situations had been kept intact for all recovery cases for the period prior to 1st July, 2012---In absence of clear intention of the legislature to apply a provision of statute with retrospective effect, it would always be deemed that it would be applicable prospectively---Provisions of S.11(3) of the Sales Tax Act, 1990, were not deemed to be curative, remedial and beneficial in nature as it curtailed right of a registered person not to be called upon to show-cause notice after expiry of time limitation under S.36(2) of the Sales Tax Act, 1990 by impending him with tax liabilities beyond three years in case of inadvertence, error and misconstruction as well---Same could not be made applicable retrospectively on the said general principle of law---Adjudicating authority in circumstances had erred in invoking provisions of S.11(3) of the Sales Tax Act, 1990 for recovery of sales tax for the periods prior to its insertion in all cases squarely falling under S.36(1) of the Sales Tax Act, 1990 or as the case could be under S.36(2) of said Act---Past and closed transactions could not be reopened, especially when a beneficiary had no role in the irregularity committed by the other party.

Messrs Asghar Surgical Works, Daska v. The C.I.R. (ZONE-I), R.T.O, Sialkot 2015 PTD (Trib.) 416; M/s. Ahsan Enterprises, Faisalabad v. The CIR(A), Faisalabad and others 2015 PTD (Trib.) 1839; 2004 PTD 3626; 2011 PTD (Trib.) 2619; 2000 PTD 399; PLD 2001 SC 600 = 2001 PTD 1486; The Federation of Pakistan and others v. Haji Muhammad Sadiq and others 2007 PTD 67; Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652; Government of Pakistan v. Messrs Village Development Organization 2005 SCMR 492 and Messrs Galaxo Smith Kline Pakistan Ltd, Karachi v. The Collector of Customs, Sales Tax and Central Excise (Adjudication), Karachi 2004 PTD 3020 rel.

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

----S. 36---Constitution of Pakistan, Art.13---Issuance of second show-cause notice regarding the same tax periods, would amount to imposition of double taxation and double jeopardy which could not be given legal credence, but also would offend and defy the Fundamental Rights set out in Art.13 of Constitution, which provided that no person would be prosecuted or punished for the same offence more than once---Issues once settled and accepted by the department would not be allowed to be deviated, because it would create uncertainty which had always been deprecated---Any subsequent proceedings initiated with issuance of second show-cause notice and adjudication and appellate orders thereon, were patently illegal null and void ab initio having no legal effect at all.

M/s. Ahsan Enterprises, Faisalabad v. The CIR(A), Faisalabad and others 2015 PTD (Trib.) 1839 rel.

Khubaib Ahmad for Appellant.

2018 P T D (Trib.) 892

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Nazir Ahmad, Judicial Members and Muhammad Asif, Accountant Member

Messrs MADINA WEAVING, FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, ZONE-II, R.T.O., FAISALABAD

S.T.A. No.545/LB of 2014, decided on 2nd June, 2015.

Per Muhammad Asif, Accountant Member

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

----Ss. 3, 11, 45-B & 46---SRO No.283(I)/2011, dated 1-4-2011---S.R.O. No.1058(I)/2011, dated 23-11-2011---SRO No.1125(I)/2011, dated 31-12-2011---Taxpayer, did not charge/pay tax on supply made to unregistered persons in accordance with SRO No.283(I)/2011, dated 1-4-2011---Concerned Officer, noted that such facility of zero rating was available, if the unregistered persons had paid tax at 6% of the value of supply from Spinning Mills; but in the present case no evidence to that effect was available on record---Order passed by the Officer was confirmed by appellate authority---Validity---Taxpayer had submitted that SRO No.283(I)/2011, dated 1-4-2011, was superseded by S.R.O. No. 1058(I)/2011, dated 23-11-2011 and S.R.O. No. 1125(I)/ 2011, dated 31-12-2011 and maintained that he did not charge tax in view of cl.(v) of S.R.O. No.283(I)/2011 as tax @ 6% was already charged from his customers/unregistered persons by the textile units---Department had submitted that no evidence to that effect was produced by the taxpayer---Representative of taxpayer, conceded that he did not have any evidence of payment of said tax---Appellate Tribunal declined to intervene in favour of the taxpayer---Reliance of taxpayer's Representative on subsequent two SROs, was misplaced, because said notifications had no retrospective effect.

Per Ch. Shahid Iqbal Dhillon, Judicial Member disagreeing with Muhammad Asif, Accountant Member [Minority view]

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

----Ss. 3, 11, 45-B & 46---SRO No. 283(I)/2011, dated 1-4-2011---S.R.O. No. 1058(I)/2011, dated 23-11-2011---SRO No. 1125(I)/2011, dated 31-11-2011---SRO No. 1012(I)/2011, dated 4-11-2011---Failure to charge/pay tax on supply by taxpayer (a Weaving Mill) to unregistered persons---Taxpayer had failed to deduct/deposit sales tax against the supplies made to unregistered persons (during the tax period 7/2011 to 12/2011) in accordance with S.3 of the Sales Tax Act, 1990, read with SRO No. 283(I)/2011, dated 1-4-2011---Contention of the taxpayer (a Weaving Mill) was that it was engaged in providing service and as per cl.(v) of SRO No. 283(I)/2011 no further amount of sales tax would be demanded or charged as the yarn had been purchased by unregistered persons on the payment of sales tax at 6%---Validity---Principally, both the authorities below had accepted the proposition that no further sales tax could be demanded or charged, if the yarn had been purchased after payment of sales tax at 6%---Taxpayer had been burdened with sales tax only for the reason that he had to furnish the proof of payment made by the unregistered persons at the time of purchase of yarn---Said treatment was harsh and unfair---Taxpayer could not provide proof of payment made by other parties---Neither the law had imposed such condition, nor did the taxpayer had any authority to call for such proof of payment---By furnishing complete particulars of such parties, taxpayer was absolved of his duty---Onus was on the Adjudicating Officer to demand such proof from the parties, on behalf of which weaving had been done, instead of directly burdening the taxpayer with sales tax particularly when textile goods fell under zero-rated category---Such steps having not been taken, action of the Adjudicating Officer, was not sustainable and appellate authority had erred in law to maintain his order---Impugned orders were not sustainable and same were set aside, in circumstances. [Minority view].

Per Nazir Ahmad, Judicial Member, agreeing with Muhammad Asif, Accountant Member, with observations that appeal be dismissed but for different reasons [Majority View]

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

----Ss. 3, 11, 45-B & 46---S.R.O. No. 283(I)/2011, dated 1-4-2011---Failure to charge/pay tax on supply by taxpayer to unregistered persons---Tax period involved in the present case, pertained to July 2011 to October 2011, which fell under the ambit of SRO No. 283(I)/2011, dted 1-4-2011---Clause 'V' of said SRO related to those unregistered persons, who could be trading or involved in activities like sizing, warping, weaving, intermediary and other ancillary process etc.---Since the taxpayer was a registered person, it was out of the ambit of cl.'V' of said SRO---Legal position was that the taxpayer, did fall under cl.VI of SRO No.283(I)/2011, dated 1-4-2011 and not under the cl.'V' of said SRO---Both authorities below had rightly placed the taxpayer under cl.VI of said SRO and charged sales tax at 4%---Appeal was dismissed, but not for the reasons as recorded by Accountant Member---Order accordingly.

M. Tahir, ITP for Appellant.

Hussnain Ahmad Hali, D.R. for Respondent.

2018 P T D (Trib.) 905

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Ahmad, Accountant Member

Messrs SAJID BASHIR WEAVING FACTORY, GOJRA

Versus

C.I.R. (APPEALS), R.T.O., FAISALABAD

S.T.A. No.329/LB of 2017, decided on 18th October, 2017.

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

----Ss. 7, 11, 33, 34 & 73---Adjustment of input tax---Certain discrepancies allegedly were found in the sales tax record of the taxpayer---Adjudication proceedings culminated on ex parte basis and taxpayer was proceeded in absentia without affording any opportunity of hearing, which was challenged before appellate authority and was partially vacated---Validity---Taxpayer did hold valid sales tax invoices duly incorporated in supplier's sales tax returns and summary statement for relevant tax period, and taxpayer had transacted all payments to his supplier through Banking Channel by complying with the mandatory provisions of S.73 of the Sales Tax Act, 1990---Taxpayer, could not be deprived of legitimate right of input tax adjustment, as no violation in that regard was found to have been committed by him---Alleged late filing of sales tax returns for the tax periods in question was not intentional and wilful, but was due to certain financial problems which were beyond human control---Taxpayer, being under liquidity hardships, could not file sales tax returns within time which could not be termed as "deliberate and intentional failure"---No mala fide and wilful default was attributed to the taxpayer---Delay in filing of sales tax returns, would not attract imposition of penalty without establishing mala fide and wilful default on the part of taxpayer---Imposition of penalty for late filing of sales tax returns under S.33(1) of the Sales Tax Act, 1990 was not only illegal, but also unjustified---Taxpayer was alleged of suppression of sales, presumptively and arbitrarily, on the basis of consumption of electricity units---Consumption of electricity units might have any nexus with that of production of goods and any correlation in between could have been made out, but no direct relationship could be established in electricity with that of sales and supply of taxable goods---Demand of sales tax created on the basis of electricity bills, was illegal and without lawful authority, as neither the Sales Tax Act, 1990, nor Rules made thereunder, prescribed any procedure or formulae to calculate liability of sales tax merely on consumption of electricity units---Impugned show-cause notice as well as consequent orders of the authorities below, were declared to be illegal, ab initio void and were set aside---Appeal filed by taxpayer was accepted in circumstances.

Messrs Bhola Weaving Factory v. Customs, Excise and Sales Tax Appellate Tribunal and another 2004 PTD 1048; Messrs D. G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others 2004 SCMR 456 and Messrs Mashallah Paper Board Mills, Faisalabad v. The CIR, R.T.O., Faisalabad 2017 PTD 880 ref.

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

----Preamble---Failure to submit documentary evidence at the initial stages of adjudication---Neither the Sales Tax Act, 1990, contains any express provision debarring a taxpayer from submitting any documentary evidence at a subsequent stage nor there is any provision in the Sales Tax Act, 1990, placing restrictions on the power of appellate authority and Appellate Tribunal to entertain the same, that right of a taxpayer, could not be curtailed---Taxpayer could not be compulsarily deprived of his alienable right to be dealt with in accordance with law and to be equally treated under the law, and if one was allowed to put material documentary evidence on the basis of which he was accordingly exonerated and the other one was denied to produce the same in his favour during course of appeal at belated stage and that right had very much been appraised by Qanun-e-Shahadat, 1984---Any documentary material evidence and record relating to the facts of the case, even if was not produced at initial stage of adjudication before the lower forum, could be allowed to be produced and submitted at subsequent stage before the appellate forum---Factual issues, neither agitated at the original stage of adjudication nor at First appeal, could be considered in the second appeal---Points of facts could be raised at any stage of proceedings including appeal.

Khubaib Ahmad for Appellant.

Ms. Fouzia Addl. D.R. for Respondent.

2018 P T D (Trib.) 915

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Raana Ahmed, Accountant Member

Messrs AL-REHMAN PACKAGES, FAISALABAD

Versus

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

S.T.A. No.1368/LB of 2015, decided on 17th April, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 11(3) & 73---Adjustment of input tax---Recovery of already adjusted amount of sales tax---Scrutiny of sales tax returns, revealed that taxpayer had purportedly adjusted input tax for relevant period on the strength of invoices issued by the supplier, whose registration was allegedly suspended subsequently---Adjudication proceedings were initiated by the Taxation Officer by way of issuance of show-cause notice to taxpayer for recovery of already adjusted amount of sales tax directing him to pay back the amount of tax under S.11(3) of the Sales Tax Act, 1990---Explanation tendered by the taxpayer was treated unsatisfactory---Adjudication proceedings culminated in passing of order which was challenged before Commissioner Inland Revenue (Appeals), who also upheld the liability against the taxpayer---Validity---Taxpayer had duly produced all the relevant record, including purchase invoices, onward gate passes, sales tax returns and summary statements of the supplier, showing genuineness of the alleged transactions, but same were not considered by both the authorities below---All the transactions made with the alleged supplier being below fifty thousand rupees, provisions of S.73 of the Sales Tax Act, 1990, could not be applied in the case and the taxpayer could not be charged for any violation in that regard---Suspension order of supplier not converted into blacklisting order within 90 days, had become illegal and ab initio void due to afflux of time---Recovery of sales tax against the said invoices being illegal and unlawful therefore, all the subsequent proceedings carried out on its basis, were also void ab initio---Impugned show-cause notice as well as consequent orders of both the authorities below were set aside.

Khubaib Ahmad for Appellant.

Javed Anwar, D.R. for Respondent.

2018 P T D (Trib.) 991

[Inland Revenue Appellate Tribunal]

Before Mrs. Ambreen Aslam, Judicial Member and Faheemul Haq Khan, Accountant Member

COMMISSIONER INLAND REVENUE, R.T.O., SUKKUR

Versus

Messrs NABI BUX GOLD SMITH, UBARO

I.T.A. No.942/KB of 2012, decided on 30th October, 2015.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(3)(5-A) & 177---Amendment of assessment---Taxpayer, a goldsmith, filed return of income for tax year 2006 which was revised as a result of proceedings conducted under S.177 of the Income Tax Ordinance, 2001---Additional Commissioner Inland Revenue/ Adjudicating Authority amended the assessment enhancing the amount of income on the ground that taxpayer had ventured in the business of "land development/real estate business" along with business of goldsmith and said source of income was not determined---Validity---No plausible material was available on record which could reveal the source of information of the adjudicating authority from where the said authority confirmed regarding carrying on estate business by the taxpayer---Fishing enquiries, were not permissible to invoke provisions of S.122(5-A) of the Income Tax Ordinance, 2001---Amendment of assessment , otherwise was made after prescribed time of limitation enumerated under S. 122(4)(a) of the Income Tax Ordinance, 2001---Order passed by appellate authority, did not require interference and same was upheld, in circumstances.

Muhammad Azim v. CIT, East Zone Karachi 1991 PTD 658 and 1999 PTD 524 ref.

None for Appellant.

Udha Ram for Respondent.

2018 P T D (Trib.) 1027

[Inland Revenue Appellate Tribunal]

Before Shahid Pervez Memon, Judicial Member and Dr. Manzoor Ahmed, Accountant Member

Messrs THAHEEM RICE MILLS, SHIKARPUR

Versus

The COMMISSIONER INLAND REVENUE, AUDIT ZONE-II, R.T.O., SUKKUR

I.T.A. No.126/KB of 2016, decided on 29th April, 2016.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(2)(5-A)---Proceedings under S.122(5-A), Income Tax Ordinance, 2001---Nature and Scope---Amendment of assessment order---Limitation---Assessment order, could be amended within five years after its issuance, as provided under S.122(2) of the Income Tax Ordinance, 2001---Assessment order, in the present case, was amended after four months and twenty one days of its issuance---Impugned assessment order which was barred by prescribed time limitation; same being not tenable in the eyes of law, was annulled, in circumstances---Very nature of the proceedings under S.122(5-A) of the Income Tax Ordinance, 2001, were aimed towards enhancement of tax liability of the assessee; or to create additional burden of tax upon the assessee, such amendment of assessment could not be termed as a "procedural amendment"---Provisions of S.122(5-A) of the Income Tax Ordinance, 2001 being substantive in nature, unless, it had been specifically defined by the Legislature to apply the same retrospectively, said amendment was to be applied prospectively for the tax year in which it had been introduced through Finance Act.

2014 PTD (Trib.) 1241; 2015 PTD (Trib.) 2241 and 2016 PTD (Trib.) 189 ref.

Udha Ram for Appellant.

Fayyaz Hussain Abro, D.R. for Respondent.

2018 P T D (Trib.) 1054

[Inland Revenue Appellate Tribunal]

Before Nadeem Dar, Accountant Member

C.I.R., R.T.O., ABBOTABAD

Versus

SHAHID MEHMOOD

I.T.A. No.412/IB of 2013, decided on 28th December, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 177 & 214-C---Selection of case for audit---Powers of Commissioner Inland Revenue and Federal Board of Revenue---Scope---Case of taxpayer was selected for audit by Commissioner Inland Revenue, and for non-compliance of notices by the taxpayer, ex parte order was passed---Commissioner Inland Revenue (Appeals), annulled assessment on the ground that Commissioner Inland Revenue was not empowered to select cases for audit---Validity---Powers of Ss.177 & 214-C of the Income Tax Ordinance, 2001 with the Federal Board of Revenue and Commissioner Inland Revenue, to select cases for audit were not mutually exclusive, but were concurrent, and both could select cases for audit---Order passed by Commissioner Inland Revenue (Appeals) was cancelled and that of the department restored.

None for Appellant.

Usman Shaukat for Respondent.

2018 P T D (Trib.) 1062

[Inland Revenue Appellate Tribunal]

Before Nadeem Dar, Accountant Member

Messrs SUNNY JEWELERS, RAWALPINDI

Versus

C.I.R., R.T.O., RAWALPINDI

I.T.A. No.1138/IB of 2013, decided on 16th March, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 113 B, 114, 120, 122(1)(5-A) & 177---Taxation of income of retailers---Selection of case for audit---Amendment of assessment---Case of taxpayer was selected for audit under S.177 of Income Tax Ordinance, 2001---Taxpayer contended that his return of income filed under S.113B of Income Tax Ordinance, 2001 could not be amended under S.122 of said Ordinance---Taxation Officer made amendment in income tax return in terms of deemed assessment under S.120 of Income Tax Ordinance, 2001---Appeal against order of Taxation Officer was dismissed by appellate authority---Validity---Section 113B of the Income Tax Ordinance, 2001 was not a provision related to filing of return, as return was filed under S.114, while S.113B identified the rates of tax to be paid in certain specified situations---Taxpayer had paid tax in terms of S.113B, however it was incorrect to claim that his return was filed under S.113B---Return for relevant year filed by the taxpayer, was actually filed under S.114 of the Income Tax Ordinance, 2001 and tax thereon was paid claiming rates as given in S.113B of the Income Tax Ordinance, 2001---Return filed under S.114 of the Income Tax Ordinance, 2001, was a deemed assessment in terms of S.120(1) of the Income Tax Ordinance, 2001---Selection of taxpayer for audit and passing an amended assessment under S.122(1) of the Income Tax Ordinance, 2001, suffered from no legal infirmities---Appeal filed by the taxpayer, was rejected, in circumstances.

2010 PTD (Trib.) 1709; 2010 PTD (Trib.) 1700 and 2012 PTD 1184 ref.

Hafiz Muhammad Idress, A.R. for Appellant.

Miss Nazia Zaib, D.R. for Respondent.

2018 P T D (Trib.) 1068

[Inland Revenue Appellate Tribunal]

Before Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik, Technical Member

ASSISTANT COMMISSIONER, SRB

Versus

Messrs ELIXIR SECURITIES PAKISTAN (PVT.) LIMITED

Appeal No. AT-202 of 2015, decided on 30th January, 2017.

(a) Sindh Sales Tax Ordinance (VIII of 2000)---

----Ss. 23, 43 & 76(1)---Correction of clerical and arithmetical errors---Registered person, was as a stock broker rendering, management services and advisory consultancy services---Receipts from various services declared in the final statement, on the basis of which Assistant Commissioner, issued a show-cause notice, confronting the registered person as to why value of tax six different services rendered by him should not be taxed at the rate of 16%---Assistant Commissioner, on the basis of said show-cause notice, passed order-in-original---Assistant Commissioner, subsequently discovered that while calculating the sales tax in the final sum-up of the order some part was omitted to be typed in the calculation table---Assistant Commissioner issued notice under S.76(1) and on receiving its reply, rectified his order-in-original vide order under S.76 of Sindh Sales Tax Ordinance, 2000---Commissioner (Appeals), on appeal, set aside said order as according to him, the Assistant Commissioner had travelled beyond the domain of S.76, which allowed him to correct only clerical, arithmetical errors---Assistant Commissioner in his order under S.76 of the Sindh Sales Tax Ordinance, 2000 had informed the registered person that due to some clerical, arithmetical error a "row" in respect of advisory and consultancy services had inadvertently escaped from the table of the order-in-original---Assistant Commissioner, subsequently added value of advisory and consultancy services---Said service and amount of value was available in the statement of accounts from day one---Same was mere omission, which was not deliberate, but inadvertent---Provision of S.76 "Correction of clerical and arithmetical errors", catered for any such omission---"Errors and omission" in accounting parlance was a common phrase and correction thereof was generally accepted in bona fide cases---In the present case, no mal-intention or deliberate act appeared behind that omission, which was a bona fide mistake---Appellate Tribunal, disagreed with the Commissioner (Appeals), that in such situation, Assistant Commissioner should have resorted to relevant provisions to amend or revise the order---Assistant Commissioner in fact, had not amended, what he intended to tax through original show-cause notice and discussed throughout his assessment proceedings---Impugned order of Commissioner (Appeals) was set aside and appeal was allowed.

(b) Words and phrases---

----'Clerical error'---Dictionary meaning.

Black's Law Dictionary Clerical Error ref.

Tariq Ali, A.C. SRB for Appellant.

2018 P T D (Trib.) 1082

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Ahmad, Accountant Member

Messrs ABDULLAH ENTERPRISES, FAISALABAD

Versus

The C.I.R. (A), R.T.O., FAISALABAD

S.T.A. No.111/LB of 2017, decided on 22nd September, 2017.

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

----Ss. 11(2)(3), 33(a), 34 & 46---Recovery of adjusted amount of input tax and imposition of penalty---Issuance of show-cause notice---Necessity---Sections 11(2) & 11(3) of Sales Tax Act, 1990---Distinction---Application of S.11(2), Sales Tax Act, 1990---Scope---Taxpayer had adjusted input tax during relevant financial year---Based on said omission and irregularity, adjudicating proceedings initiated by issuance of show-cause notice under S.11(2) of the Sales Tax Act, 1990 for recovery of adjusted amount of input tax, besides penalty on account of non-production of record and late filing of sales tax returns---Adjudication proceedings culminated on the ex parte basis in passing an order which was challenged before the appellate authority, which instead o f discussing the legal side of the case and replying the query raised before him, upheld the findings of the adjudicating authority, which had been agitated before the Appellate Tribunal---Case being neither a case of assessment of tax on the basis of any short-payment nor non-payment nor of inadmissible input tax credit or refund claim, consumption of jurisdiction under S.11(2) of the Sales Tax Act, 1990 for recovery of adjusted amount of input tax without issuing show-cause notice under S.11(3) of the Sales Tax Act, 1990 was illegal and without jurisdiction---If the statute enacted that certain action would be taken in a certain manner and no other manner, such requirement was absolute and negate to attend or non-compliance of such mandate, would invalidate the whole proceedings---Sections 11(2) & 11(3) of the Sales Tax Act, 1990 were distinct in nature and issuance of separate show-cause notice under said sections were condition precedent for assumption of jurisdiction---Section 11(2) of the Sales Tax Act, 1990 would apply where any person had paid the tax short or had not paid tax due, on supplies made by him or had claimed input tax credit and refund which was not admissible under law; whereas S.11(3) of the Sales Tax Act, 1990, could be invoked in case of taxpayer's 'collusion' with the tax officials or on account of 'deliberate act'---Show-cause notice having been issued in the case for recovery of adjusted amount of input tax was completely silent with regard to 'collusion' or 'deliberate act' on the point of the taxpayer, the very acquiring of jurisdiction, in circumstances, was illegal and ab initio void---In the present case, amount of input tax having already been adjusted by the taxpayer, recovery of the same was to be made under S.11(3) of the Sales Tax Act, 1990 and not under S.11(2)---Any order passed under S.11(2) of the Sales Tax Act, 1990, could be equated with an assessment order determining the amount of tax actually payable by taxpayer, and in no way, could be purported to be a judgment for adjudicating any recovery of tax or charge, non-levied or made or had been short levied or had been erroneously refunded or adjusted in its legal semantics and jurisdiction---Show-cause notice issued to the taxpayer had failed to reflect; whether alleged act of adjustment of input tax was the result of collusion or same was a deliberate step to defraud the Government---Onus to prove the allegation of collusion or of a deliberate act, lay on the department---Requisite show-cause notice as required by law had not been served upon the taxpayer, no straight notice for recovery of alleged tax, therefore, could be issued---Impugned show-cause notice had also revealed that same was vague, defective, flawed and legally invalid as it did not contain necessary particulars of the suppliers and detail of invoices etc. nor was the detail of the transactions confronted and failed to meet the foundational legal requirements---Show-cause notice issued without fulfilling mandatory requirements of law, was illegal and without jurisdiction---Consequent orders, were also declared to be illegal, ab initio void and nullity in the eyes of law which were set aside and appeal was accepted.

Messrs Ahsan Enterprises, Faisalabad v. The CIR(A), Faisalabad and others 2015 PTD (Trib.) 1839 rel.

Messrs Inam Packages, Lahore v. Appellate Tribunal Customs, Central Excise and Sales Tax, Lahore 2007 PTD 2265 ref.

(b) Interpretation of statutes---

----Fiscal statute---All charges upon the subject were to be imposed by clear and unambiguous words---No room for any intendment nor there was any equity or presumption as to a tax.

Assistant Director Intelligence and Investigation, Karachi v. Messrs B.R. Herman and others PLD 1992 SC 485 ref.

Khubaib Ahmad for Appellant.

Ms. Rabia Shah, D.R. for Respondent.

2018 P T D (Trib.) 1115

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Nazir Ahmad, Judicial Members and Muhammad Raza Baqir, Accountant Member

SHAUKAT ALI, Prop. Shaukat Oil Traders, Faisalabad

Versus

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

I.T.A. No.936/LB of 2015, decided on 18th June, 2015.

Per Muhammad Raza Baqir, Accountant Member; Shahid Iqbal Dhillon Judicial Member dissenting; Nazir Ahmad, Judicial Member, agreeing [Majority View]

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

----Ss. 113, 122(5-A), 153(1)(b) & 221, Second Sched., Part III, Cl.(8)---SRO No.57(I)/2012, dated 24-11-2012---Minimum/turnover tax, charge of---Amendment of assessment---Deduction of withholding tax---Taxpayer, a dealer of petroleum products, contended that his product fell within the category of "Fast Moving Consumers Goods", whereupon minimum tax under S.113 of the Income Tax Ordinance, 2001 as per Cl.(8) Part III, Second Sched. to the Ordinance, was 0.20%---Contention of the taxpayer was accepted and deemed assessment was rectified charging minimum tax at 0.20%---Succeeding Additional Commissioner, on scrutiny of the record observed that the petroleum products did not fall under "Fast Moving Consumers Goods" thus not covered under Cl.(8), Part III, Second Sched., to the Ordinance and minimum tax was charged at 1%---Appeal against order of Additional Commissioner by the taxpayer was dismissed by appellate Authority---Case of the taxpayer pertained to year 2011, whereas Notification No. S.R.O. No.57(I)/2012, dated 24-1-2012, whereby minimum tax under S.113 of the Income Tax Ordinance, 2001 was to be charged at 0.20% was issued in the year 2012---Contention of the taxpayer was that said notification had retrospective application---Validity---Said notification did not mention its retrospective effect---General principle of law was that all notifications, would take effect from the date of its issuance, unless specified otherwise---Said notification was applicable only from the date of its issuance and it could not be applied retrospectively---Appellate Authority, in circumstances, had rightly upheld the order of Additional Commissioner---Taxpayer had failed to point out any legal or factual infirmity in the appellate order and had not put forth any evidence to rebut the observation and findings of the Appellate Authority below---No infirmity having been found in the order of appellate Authority same was maintained and upheld---[Majority view] [Per Ch. Shahid Iqbal Dhillon, Judicial Member dissenting [Minority View]---Executive order or notification, which confirmed right and was beneficial would be given retrospective effect and those adversely affect or invade upon vested right, could not be applied retrospectively and taxpayer was entitled to the benefit of 80% rebate in the minimum tax as provided in Cl.(8), Part III, Second Schedule to the Income Tax Ordinance, 2001].

2005 SCMR 492 ref.

Per Muhammad Raza Baqir, Accountant Member; Nazir Ahmad, Judicial Member, agreeing [Majority View]

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

----S. 53(2)---General Clauses Act (X of 1897), S.5---Notification or enactment involving public money---Prospective or retrospective operation of---Scope---Such notification or enactment could not be extended retrospectively, even if those were beneficial to the taxpayer---Such retrospective application was fraught with risk to the Revenue and could play havoc with public money---Principles.

Per Nazir Ahmad, Judicial Member agreeing with Muhammad Raza Baqir, Accountant Member [Majority View]

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

----Ss. 113, 122(5-A), 153(I)(b) & 221, Second Sched., Part III, Cl.(8)---S.R.O. No.57(I)/2012, dated 24-11-2012---Minimum/turnover tax, charge of---Amendment of assessment---Deduction of withholding tax---Question in the present case, revolved around the claim of the taxpayer, which was two fold, firstly, being a dealer of petroleum products he was entitled to claim 80% relief by treating the petroleum product as "Fast Moving Consumers Goods (FMCG) as per Cl.(8) of Part III of the Second Schedule to the Income Tax Ordinance, 2001, and secondly the amendment brought in the said clause through SRO No.57(I)/2012, dated 24-1-2012; vide which the petroleum agents and distributors, were entitled to claim 80% rebate on turnover tax and being remedial and curative in nature, was retrospective in its applicability for the tax year 2011---Held, concession of 80% on turnover was applicable to the distributors, dealing in FMCG, whereas in the present case, it was not established on record that taxpayer/appellant was a distributor of petroleum product; rather he was a dealer of petroleum product---Effect of any amendment brought by the Federal Government from time to time in Second Schedule, would be effective for a tax year in the beginning or after the commencement of the financial year in which said notification was issued by the Government---S.R.O. No.57(I)/2012, dated 24-1-2012 was not retrospective in effect---Notification containing administrative instructions was procedural, whereas the notification beneficial to the general public could be applied retrospectively, but notification involving public money, could not be given retrospective effect even if the same was beneficial to the taxpayer.

2005 SCMR 492 ref.

M. Tahir, ITP for Appellant.

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

2018 P T D (Trib.) 1131

[Inland Revenue Appellate Tribunal]

Before Mrs. Seema Imran, Judicial Member and Ahmed Saeed, Accountant Member

Messrs MAYFAIR IMPEX, KARACHI

Versus

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

M.A. (Rect) No.43/KB of 2014 in New S.T.A. No.678/KB of 2009 in Old S.T.A. No.359/K of 2007, decided on 23rd November, 2016.

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

----Ss. 57 & 46---Rectification of error or mistake---Jurisdiction of Appellate Tribunal---Scope---Appellate Tribunal had inherent jurisdiction to rectify the error/mistake---Error/mistake floating on the surface of order, was not at all restricted to clerical error or arthimetical mistake, instead all types of errors; whether factual/legal or substantive or procedural, fell within the ambit of "apparent mistake floating on the surface of an order" and could be rectified within one year from the date of order by the Tribunal being final fact finding forum.

[Case-law referred].

(b) Sales Tax Refund Rules, 2000---

----Rr. 7, 8 & 9---Refund claim not found genuine and thus inadmissible---Scope---Issuance of notice---Limitation---If any refund claim or part thereof was found non-genuine and not admissible under the law, a notice would be served on the claimant requiring him to show cause in writing within fourteen days; as to why his claim or part thereof should not be rejected and claimant proceeded against under the relevant provisions of law---Appellant, in the present case, submitted Sales Tax Refund challan in the Bank on 15-3-2002; supportive documents as defined in R.9 of the Sales Tax Refund Rules, 2000 were submitted on 18-9-2002 with the Collectorate of Sales Tax---If the Assistant/Deputy Collector of Sales Tax, were of the view or opinion that the claim of appellant seemed to be non-genuine or not admissible under S.10 of Sales Tax Act, 1990 and R.7 of Sales Tax Refund Rules, 2000, it was mandatory upon them to issue show-cause notice on or before 2-10-2002, without any exception, but show-cause notice, in the present case, was issued on 3-7-2006 i.e. after expiry of four years and eight months from the date of submission of supportive documents---Said action of Officer would render the show-cause notice barred by time and no proceedings culminating to the said notice, could be undertaken.

[Case-law referred].

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

----S. 45---Power of adjudication---Issue, in the present case, was whether Deputy Collector and Assistant Collector, could issue show-cause notice/pass order-in-original in excess of their monetory limit expressed in S.45 of the Sales Tax Act, 1990---Amount of refund involved in the case being Rs.4,952,683,00, power to adjudicate the case would rest with the Additional Collector in terms of cl.(i) of S.45 of the Sales Tax Act, 1990---Deputy Collector had issued show-cause notice by assuming the powers of Additional Collector, rendering same to be void ab initio and as such coram non judice---Order-in-original had been passed by Assistant Collector, again by usurping the powers of Additional Collector---Officers could not act in derogation of the provisions of S.45 of the Sales Tax Act, 1990, when it was precondition for him to look into the provisions of S.45, prior to issuing show-cause notice/passing of order-in-original---Both the officers had usurped the powers of their superior Officers---Determination of jurisdiction by the court/Authority seized with the matter was one of the important elements in administration of justice---Assuming of powers by the Deputy/Assistant Collector of the Sales Tax in the case of appellant, being coram non judice, was ab initio null and void and of no legal effect---Officer having crossed his limit which was not allowable, action of the Officer was without jurisdiction.

[Case-law referred].

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

----Ss. 11(2)(4) & 45-B(2)---Failure to pay tax due---Making assessment of sales tax actually payable---Issuance of show-cause notice---Limitation---Show-cause notice by the Deputy Collector of Sales Tax was issued on 3-7-2006 under subsection (2) of S.11 of the Sales Tax Act, 1990 and order under subsection (4) of S.11 had to be passed within 90 days or further extended period of 90 days prior to expiry of the initial period of 90 days i.e. 1-10-2006 by the Collector after serving notice to the person concerned---Recording the exceptional circumstances for extension of further period was necessary---In the present case, the order-in-original had been passed on 2-12-2006 without any extension rendering the order-in-original barred by time by 62 days---Appeal was also filed before the Collector on 23-12-2006 and an order by him under the proviso of subsection (2) of S.45-B of Sales Tax Act, 1990 had to be passed within 90 days i.e. on or before 12-3-2007---Collector instead passed the order on 12-6-2007 and extended the period for further 90 days on 12-3-2007 while ignoring the fact that the time had to be extended prior to expiry of initial period of 90 days i.e. on or before 12-3-2007---Collector observed that the time had been extended due to "unavoidable circumstances and administrative changes"---Time extension given in such cases was akin to giving a new lease of life into dead entity---Action of the two officers was hit by limitation, hence not sustainable.

[Case-law referred.]

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

----Ss. 3(3)(a), 4, 26 & 73---Scope of sales tax---Zero rating---Liability to pay tax---Scope---Liability to pay tax of the person making supply would be in the case of supply of goods in Pakistan---Tax collected from the buyer by the seller in the capacity of agent of FBR, had to be deposited in the exchequer by him along with monthly sales tax return cum-payment challan submitted with the designated bank, as per enunciation made in S.26 of the Sales Tax Act, 1990---In the present case, the appellant paid the amount of goods inclusive of tax through pay orders in terms of S.73 of the Sales Tax Act, 1990---Emphasis laid by the Deputy/Assistant Collector was that the supplier had not deposited the collected tax in the exchequer---Assistant/Deputy Collector failed in pointing out the enabling provisions of the Act wherein it was mandated upon the buyer that he had to ensure that the tax paid by him to the supplier, had to be paid to the exchequer---Such a view was completely based on misconception---Exporter was entitled for refund of the sales tax, which he paid along with the cost of goods to the supplier upon exporting the goods, as the goods exported out of Pakistan, were zero rated in terms of S.4 of Sales Tax Act, 1990---Where sales tax had been paid to the units registered by the Sales Tax Department and was authorized to collect sales tax on its behalf, the responsibility to deposit the same would lie with the suppliers and not on the buyer---Action of the department was not sustainable in circumstances.

[Case-law referred].

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

----Ss. 10, 22, 23, 26 & 73---Sales Tax Refund Rules, 2000, R.9---Claimed refund---Duty of exporter to submit supportive documents with Collector---For refund under S.10 of the Sales Tax Act, 1990, exporter had to submit with Collectorate, supportive documents prescribed in R.9 of Sales Tax Refund Rules, 2000---In the present case, appellant was holding taxable invoices issued by the suppliers as per S.23 of Sales Tax Act, 1990 and had filed monthly sales tax return cum-payment challan under S.26 of the Sales Tax Act, 1990 within the prescribed period and had submitted all the documents prescribed in R.9 of Sales Tax Refund Rules, 2000 with the Collectorate---Payment of the suppliers had been made through pay order in terms of S.73 of the Sales Tax Act, 1990, under any provision of the Act or Rules---In absence of enabling provision of the Act and Rules, no liability lay on the exporter (appellant)---If the sales tax return-cum-payment challan were actually not filed, or were found false, in that case action was warranted under the provisions of law against the suppliers and not against the purchaser as the falsity had to be construed against the maker of the documents---Allegation of tax fraud as defined in S.2(37) of the Sales Tax Act, 1990, could not be levelled against any person, unless initial burden of proof lay on the department, was not discharged---Appellant had acted strictly within the provision of law and the Rules and Regulations framed thereunder and the action of the department was violation of law and procedure prescribed.

[Case-law referred].

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

----S. 67---Constitution of Pakistan, Arts.4 & 25---Payment of refund---Descrimination---Department in the cases similar to the appellant had paid refund inclusive of additional amount under S.67 of the Sales Tax Act, 1990, in spite of the fact that their suppliers were suspected/blacklisted by the Collector Headquarter, and charge of tax fraud under S.2(37) of the Sales Tax Act, 1990---Appellant's, refund had been rejected in derogation of the provisions of Act and Rules and the Regulations framed thereunder---Appellant, inspite of standing on the same pedestal had been given a different treatment, which tantamounted to discrimination not permitted under Arts.4 & 25 of the Constitution---Discrimination and different treatment given to the appellant, was not in accordance with the settled principles of law---Action of the department was not sustainable---Orders passed by the forums which appeared to be contrary to the law/Rules being erroneous and not in accordance with law, equity and natural justice, thus were not sustainable---Application of rectification showed legal and procedural mistakes in the original order passed by the Appellate Tribunal---Many legal and procedural contentions raised had escaped the attention of the Tribunal---Appeal was allowed with direction to the department to pay the refund claim.

[Case-law referred].

(h) Words and phrases---

----"Amend"---Meaning.

Black's Law Dictionary ref.

Nadeem Ahmed Mirza for Appellant.

Riaz Ali Shah, Additional Commissioner Inland Revenue/DR for Respondent.

2018 P T D (Trib.) 1158

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Chairman, Shahid Masood Manzar, Muhammad Waseem Ch., Judicial Members, Mian Saeed Iqbal and Nadeem Dar, Accountant Member

Messrs KHAN AND COMPANY, SWAT

Versus

C.I.R., R.T.O., PESHAWAR

S. T. As. Nos. 27/PB to 30/PB of 2015, decided on 29th June, 2017.

(a) Sales Tax Rules, 2006---

----R. 4---Registration of taxpayer---Discrepancies of non-payment of sales tax for the relevant years on supply of coal having been observed, appellants were confronted through show-cause notice; against which explanation tendered by the appellants was treated as unsatisfactory---Assessing Officer established the sales tax demand along with default surcharge as well as penalty through impugned assessment order---Said order having been upheld upto the Appellate Tribunal, appellant had challenged said order in reference before the High Court which remanded the case to the Appellate Tribunal on the point of fact as to "whether appellants fell within the category of person liable to registration under R.4 of the Sales Tax Rules, 2006"---Appellant who had been supplying coal in bulk, fell under the category (d) of R.4 of Sales Tax Rules, 2006 being wholesaler and being a wholesaler, appellant itself was required to be registered---Taxpayer, in circumstances, was rightly declared as liable to be registered for the purpose of sales tax levy.

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

----S. 65---Exemption of sales tax not levied or short levied---Exemption of sales tax under S.65 of the Sales Tax Act, 1990, would be available to taxpayer subject to fulfilment of three conditions mentioned as (a)(b)(c); and all such conditions were to apply collectively---Appellant had obtained coal mines on lease in tribal area and after excavation, appellant supplied coal to a customer located in settled area, which was a registered person---Tax laws were not applicable activities in tribal area, but the supply was made to a customer in settled area, which was taxable---Contention that sales tax was not applicable to a person belonging to Tribal area was not tenable and overruled---Supply having been made to a registered person in settled area, who admittedly had withheld income tax also, appellant could not be exempted from paying of sales tax on such supply---Claim of charging/paying sales tax, remained unsubstantiated and needed verification, case was remanded on that issue to the taxation authority having jurisdiction of the case to verify as to whether the claim of charging sales tax was correct or not.

Caltex Oil Ltd. v. Collector 2005 PTD 480 and 2011 PTC 1844 rel.

Shahid Qayyum Khatak for Appellant (in S.T.As. Nos.27/PB to 30/PB of 2015).

Shaukat Hayat, D.R. for Respondent (in S.T.As. Nos.27/PB to 30/PB of 2015).

2018 P T D (Trib.) 1188

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmed Chairman and Ahmed Saeed, Accountant Member

COMMISSIONER INLAND REVENUE, ZONE-IV

Versus

Messrs HAZARA EFFICIENT GAS, KARACHI

I.T.A. No.487/KB of 2017, decided on 13th December, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 2(29-C) & 153(7)(iv)(a)(b)---Status of industrial undertaking---Determination---Respondent/company claimed to be 'industrial undertaking', but Additional Commissioner Inland Revenue, treated the company as not being an 'industrial undertaking' vide order-in-original---Commissioner Inland Revenue (Appeals) passed detailed order holding that company was an industrial undertaking meeting all requirements of S.2(29-C) of the Income Tax Ordinance, 2001 and that company carried out manufacturing process---Validity---Company had claimed that it was licensed by Oil and Gas Regulatory Authority to import bulk LPG; blend and filter the same, add odor regularizers and bottle it into small cylinders according to the requirement of industrial and domestic user; which clearly was manufacturing process as the result product was different from the raw material imported/used and the end product was usable for domestic consumption---Company had employed more than ten employees and the salary bill for the year was Rs.65,7400---Company used electric energy and in that way fulfilled the conditions of industrial undertaking--- Commissioner Inland Revenue (Appeals), after examining the manufacturing process of company held that it was an industrial undertaking---Case was not that of a commercial importer as claimed by the department---Representative of company also submitted copies of facilities where processing was being carried out which showed, pipelines, motors, pumps, various gauges and other equipments and machinery; which was used for mixing of two types of gasses, filling, bottling according to various process of safety---Company, therefore was an industrial undertaking as per Ss.2(29-C) & 153(7)(iv)(a)(b) of Income Tax Ordinance, 2001---Departmental representative, had not been able to rebut the finding of Commissioner (Appeals)---Appeal by the department was dismissed and the order of Commissioner (Appeals), was confirmed and same required no interference.

2017 PTD 1181; 2000 PTD 874; 1982 SCMR 523; PLD 1959 Lah. 955; Goel Industries v. CST (1971) 28 STC 729; Industrial Oxygen v. CCE 2000 (120) ELT 188 (CEGAT); Puttar Petro Products (Pvt.) ltd. v. Asstt. Commissioner (2014) 361 ITR 290; Vadilal Chemicals Ltd. v. State of Andhra Pardesh (2005) 6 SCC 192; CIT v. Vinbros and Co., (2012) 349 ITR 697; Pyramid Gas (Pvt.) case's I.T.R. No.1130/LB of 2016 and 2007 PTD 2088 (Trib.) ref.

Zia Agro, D.R. for Appellant.

Abid H. Shaban for Respondent.

2018 P T D (Trib.) 1199

[Inland Revenue Appellate Tribunal]

Before Mrs. Ambreen Aslam, Judicial Member and Sikandar Aslam, Accountant Member

COMMISSIONER INLAND REVENUE, ZONE-IV

Versus

OCCIDENTAL OIL AND GAS PAKISTAN LTD., KARACHI

I.T.A. No.514/KB of 2012, decided on 26th September, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 60-A, 114 & 122(1)---Worker's Welfare Fund Ordinance (XXXVI of 1971), Ss.2 & 4---Workers welfare fund---Taxation Officer charged workers welfare fund on the amended income instead of declared income; whereas subsection (1) of S.2 of Workers Welfare Fund Ordinance, 1971, as amended in 2006, emphasized that workers welfare fund was chargeable on declared income as per return---Commissioner Inland Revenue (Appeals) had rightly passed the impugned order which did not require interference and was upheld---Departmental appeal was dismissed.

Zafar Rafique, DR, LTU for Appellant.

Qadeer Ahmed FCA for Respondent.

2018 P T D (Trib.) 1244

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member

COMMISSIONER INLAND REVENUE, (ZONE-III), LTU, ISLAMABAD

Versus

Messrs PRINTING CORPORATION OF PAKISTAN (PVT.) LTD., ISLAMABAD

S.T.A. No.47/IB of 2013, decided on 26th October, 2016.

Sales Tax Act (VII of 1990)---

----Ss. 3, 6, 7, 8, 26 & 45-B(3)---Sales tax and federal excise duty---Claim for input tax adjustment---Remand of case---Registered person claimed input tax adjustment on the basis of supplies, which had not been reconciled with the sales tax returns filed by the suppliers---Adjudicating authority passed order-in-original for recovery of sales tax along with default surcharge and penalty---Registered person, being aggrieved and dissatisfied with the treatment of Adjudicating authority, filed appeal before CIR(A), who vide his impugned order remanded the case---Validity---In view of S.45-B(3) of the Sales Tax Act, 1990, Commissioner Inland Revenue had no jurisdiction to remand the case for de novo consideration---Main object of S.45-B(3) of the Sales Tax Act, 1990, was that the taxpayer, ought not to be tormented twice on the same subject matter, firstly in the hands of Adjudicating authority and secondly in the hands of appellate authority---Appellate authority, was directed by the Tribunal to preferably decide the appeal himself, instead of remanding case for vexing taxpayer twice for the same cause---No justification existed to prolong, protract litigation at the cost and inconvenience of the taxpayer and Revenue/Adjudicating Officer; particularly when the statutory provision S.45-B(3) of the Sales Tax Act, 1990, had expressly prohibited such remand---Appellate authority, had acted illegally in remanding the case---Appellate authority had failed to consider the arguments submitted by the representative of the registered person---Taking a lenient view and in the interest of justice Tribunal deemed it appropriate to vacate the impugned order-in-appeal passed by the appellate authority and remand the case to the appellate authority to pass speaking, elaborate and well reasoned order conducting necessary verification/enquiry and affording full and fair opportunity of hearing to both the parties.

The Commissioner Inland Revenue v. Messrs Supreme Tech. International S.R.T. No.12 of 2012 and Messrs Nigar Enterprises, Chaman Chambers v. CIR Zone-VI, RTO Lahore 2015 PTD (Trib.) 931 ref.

Imran Shah, D.R. for Appellant.

Mehmood Ahmed for Respondent.

2018 P T D (Trib.) 1256

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Chairman and Masood Akhtar Shaheedi, Accountant Member

Messrs MALIK TRADERS, FAISALABAD

Versus

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

S.T.A. No.307/LB of 2016, decided on 12th October, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 10, 11, 33, 34 & 66---SRO No.555(I)/2006, dated 5-6-2006---Refund claims of sales tax---Appellant/registered person, being wholesaler, filed refund claims of sales tax for relevant periods; against which certain objections were raised by the Computerized Risk Based Data---Adjudication proceedings, culminated into sales tax order-in-original, whereby amount was adjudged to be recoverable in terms of S.11(3) of the Sales Tax Act, 1990, along with penalty and default surcharge---Said order was upheld by appellate authority below---Validity---Provisions of S.10(1) of the Sales Tax Act, 1990, entitled a registered person to get refund of excess input tax paid against purchases by interaction with the out put tax charged at the zero percent against local supplies or exports made during such tax period---Said provision did not discriminate among various categories in which registered person could be made---Main enactment did not place any specific bar on the appellant/registered person being wholesaler, not to claim refund of the excess amount of input tax paid on goods which were later on sold out by charging tax at the zero rate---Contention of registered person, that if the main enactment granted a right to the registered person and no procedure for granting that right was provided by the sub-ordinate legislation, it would not mean that no such right existed, carried substantial weight---No express bar existed on claim of refund for a wholesaler making zero rated supplies---Appellant being a wholesaler was entitled to refund of input tax paid at purchase stage, which was later on supplied at the zero rated---Impugned orders being not sustainable in the eyes of law, were vacated, in circumstances.

2001 PTD 2383; PLD 2007 Lah. 170; PLD 2005 Pesh. 25; 2000 PCr.LJ 1995; 2000 PLD 1214; 1987 PLC 354; PLD 1965 Lah. 77 and 2008 YLR 1341 ref.

Khurram Shahbaz Butt for Appellant.

Ms. Shazia Gull, D.R. for Respondent.

2018 P T D (Trib.) 1289

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Ahmad, Accountant Member

ZEESHAN MAJEED

Versus

COMMISSIONER INLAND REVENUE (APPEALS), RTO, FAISALABAD

S.T.A. No.1342/LB of 2017, decided on 11th December, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 3, 7, 8 & 11---SRO No.480(I)/2007, dated 9-6-2007---Assessment of tax---Issuance of show-cause notice---Conditions/ situations mentioned in show-cause notice under S.11 of the Sales Tax Act, 1990; that the registered person had failed to file the returns; that the registered person had not paid the tax due on supplies or made short payment or had claimed input tax credit or refund which was inadmissible---If assessment was made in absence of any detail or proper allegation regarding said situations, same would be misconceived---Appellate Tribunal observed that Adjudicating Authority was required to apply its mind cautiously to indicate under S.11(2) of the Sales Tax Act, 1990 as to under what situation assessment was sought---Assessment to some extent being a penal action; registered person had to be prepared to meet the consequences of an assessment of tax---In the present case, no revenue loss was involved, particularly, when the supplier had already collected and deposited the output tax---Registered persons having not violated any provisions of S.11(2) of the Sales Tax Act, 1990, order-in-original was not sustainable and appellate authority had erred in law to uphold the same---Impugned orders of both the authorities below, being illegal and void ab initio on facts as well as on legal issues, were set aside by the Tribunal, in circumstances.

2002 PTD 942; PTCL 2002 CL 115; 2000 PTD 254; 2016 PTD 648; PTCL 2017 CL 178; Messrs Zia Brothers v. Federation of Pakistan and others 2015 PTD 175; 2017 PTD (Trib.) 846; 2016 PTD (Trib.) 445 and 2013 PTD (Trib.) 2344 ref.

Muhammad Imran Rasheed for Appellant.

Kashif Azhar, D.R. for Respondent.

2018 P T D (Trib.) 1315

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Chairman and Masood Akhtar Shaheedi, Accountant Member

Messrs USMAN ENGINEERING SERVICES

Versus

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

S.T.A. No.1551/LB of 2015, decided on 3rd October, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 21 & 26---Failure to file monthly sales tax returns---De-registration, suspension and blacklisting of registered person---Appellant/registered person, along with 1197 other registered persons who were non-filers of sales tax returns, were required to file returns on monthly basis under S.26(1) of the Sales Tax Act, 1990 which they failed ---Sales tax registration of all registered persons were suspended and finally they were blacklisted---Validity---Non-filing of monthly sales tax returns would not result into suspension and blacklisting, which was illegal being beyond the scope of S.21 of the Sales Tax Act, 1990---Impugned orders being illegal, non-maintainable, suffering from incurable defects, were cancelled by the Tribunal with the direction that appellant be treated as registered persons after examining the available incontrovertible evidence in support of contentions---Non-taking judicial notice of such evidence would be against the law and judicial norms which was not permissible.

Zahid Atteeq Chaudhry for Appellant.

Ms. Shazia Gull, D.R. for Respondent.

2018 P T D (Trib.) 1344

[Inland Revenue Appellate Tribunal]

Before Javed Iqbal, Chairman, Shahid Masood Manzar, Judicial Member and Muhammad Riaz Khan, Accountant Member

Messrs MOL PAKISTAN OIL AND GAS CO. B.V.

Versus

C.I.R., L.T.U., ISLAMABAD

I.T.As. Nos. 263(IB), 264(IB), 265(IB), 266(IB) and 267(IB) of 2015, decided on 8th May, 2015.

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

----Ss. 100, 122(5-A) & 129, Fifth Schedule, Part 1, Rr.1 & 2---Business of production and exploration of petroleum---Claim of expenses of one Petroleum Concession Agreement (P.C.A.) against the income from the other---Concept of 'ring fencing' and 'one basket'---Amendment of assessment---Taxpayers, who were engaged in business of production and exploration of Petroleum, had challenged orders, whereby their assessment was amended---Authorities below put wrong construction on the interpretation of Rr.1, 2 of the Fifth Schedule to Income Tax Ordinance, 2001; and in that manner taxpayers had been deprived of their legal rights---Business of exploration and production of petroleum, was to be treated as a separate business encompassing all Petroleum Agreement (PCA) for exploration of petroleum deposits---No bar existed on the taxpayers to claim expenses of one 'PCA' against the income from the other---Concept of 'ring-fencing' had no place in the law---Law provided that all 'PCAs' had to be aggregated; and the expenses therefrom had to be deducted in case the company had been notified with commercially---All the receipts as well as expenses, would be put in one basket---Consolidated amount of receipts and expenses had to be treated as a "single business"---Concept of 'one basket' assessment was applicable in the assessment of petroleum companies---Income from exploration and production of petroleum from oil 'PCAs' was assessable as "one business"---Profits and gains of such business, would be assessable separately from the income and profits of any other business---All the receipts and expenses of all the 'PCAs' had to be lumped; and tax liability had to be worked out accordingly, on the basis of resultant income---Assessment of such income, was regulated by special provisions contained in Regulation of Mines and Oil-fields; and Mineral Development (Government Control) Act, 1998.

[Case-law referred].

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

----S. 32(2)---Method of accounting--- Two principal methods of keeping track of a business's income and expenses were "cash method" and "accrual method"---Said methods differ only in the timing---Income Tax Ordinance, 2001, had provided that income of a person chargeable to tax was computed in accordance with the method of accounting employed by the taxpayer---Section 32(2) of Income Tax Ordinance, 2001 in case of a company had provided that income chargeable to tax under the head 'income from business', would be computed on an accrual basis; while other person, could account for such income and cash on accrual basis---Under cash-basis accounting, a taxpayer would derive income, where it was received and incurred expenditure, when it was paid---While under accrual basis accounting, the taxpayer would derive income, when it was due or receivable and would incur expenditure, when it was payable.

[Case-law referred].

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

----Ss. 6 & 152---Payments to non-residents---Deduction of tax---Additions---Company (tax-payer) was not provided with the adequate opportunity to provide the required details---Tax-payer company had provided all required data, showing that the company had released all the payments of Technical Assistance Fee after the proper deduction of taxes under S.152 of the Income Tax Ordinance, 2001---Additions by the Assessing Officer under said head, was not justified---Matter was remanded by Tribunal to the Assessing Officer, with the direction that issue should be examined afresh.

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

----Fifth Schedule, Part-I, R.3---Expenditure incurred on account of royalty---Deduction---Addition---Assessing Officer made addition in tax on account of "depletion allowance"---While making the impugned addition, the Assessing Officer observed that for the purpose of computing depletion allowance under R.3 of Part I of Fifth Schedule to the Income Tax Ordinance, 2001, the expenditures incurred on account of royalty, was to be deducted from "Gross receipts"---Such treatment was confirmed, in first appeal---Validity---Held, that depletion allowance had to be worked out after deduction of royalty from the well head value of the product---Departmental action was confirmed and taxpayer's appeals were rejected.

[Case-law referred].

Ch. Naeem-ul-Haq Istataat Ali, Muhammad Khurram Shahzad and Naveed Iqbal for Appellants.

Mohi-ud-Din Ismail for Respondent.

2018 P T D (Trib.) 1391

[Inland Revenue Appellate Tribunal]

Before Mrs. Ambreen Aslam, Judicial Member and Faheemul Haque Khan, Accountant Member

COMMISSIONER INLAND REVENUE, ZONE-II, KARACHI

Versus

Messrs SECURITY LEASING CORPORATION LIMITED, KARACHI

F.E. Appeals Nos. 43/KB and 44/KB of 2013, decided on 30th March, 2016.

Federal Excise Act (VII of 2005)---

----S. 14(1)---Federal Excise Rules, 2005, Rr.40-A(4) & 45---S.R.O. No.475(I)/2009, dated 13-6-2009---Leasing activities---Levy of federal excise duty---Appellant/taxpayer was engaged in the business of leasing---Tax Officer, held appellant liable to federal excise duty under Third Sched., Table II, Item 8 of Federal Excise Act, 2005 for the period 2007 to 2011 and levied federal excise duty vide order-in-original---Said order was challenged in appeal before the Commissioner Inland Revenue (Appeals) who held the period of 2007-2008 to be barred by time under S.14(1) of the Federal Excise Act, 2005; however, maintained the levy of Federal Excise duty for the remaining period---Validity---Taxpayer, in the present case, earned interest income and recovered principal amount while receiving the instalment of lease---Business of leasing was inherently funded, capital oriented and investment based yield was in the form of interest, whatever other name given to it---Leasing company, could not operate without the support of adequate capital---Revenue recognition of income leasing company was based on interest earned on the principal amount of loan---Banking companies also undertake the business of leasing, interest income of lease such would not be considered service income distinguishable from interest income on loans---S.R.O. No. 475(I)/2009, dated 13-6-2009, provided that markup or interest earned by Non Banking Finance Companies (NBFC) in apparent form of "lease" could not be subject to federal excise duty and would be dealt as per substance of the transaction---Fundamental difference between funded and non-funded service was that when a Bank or NBFC provided credit facility with funds (real cash), it was called funded, while unfunded were like guarantees and documentary credits where Bank/NBFC did not give cash, but take risk and consequently charges commission/service income---Funded facilities, in banking terminology, were over drafts, loans, while non-funded were Letter of Credit, tender bonds---Taxpayer, did not derive income from any sort of consultancy, financial services or other services---Taxpayer had been deriving "lease income" by appropriating his capital---Any service which was not capital oriented, would be considered as service for the purpose of federal excise duty---Orders of two authorities below, were vacated in circumstances.

PTR No.20 of 2001; 1999 PTD 14; 2002 PTD 2210; 1995 PTD 401; 2003 PTD 1135; 2002 PTD 2210; 2015 PTD 424 and 2015 PTD 772 ref.

Zulfiqar Ali Memon, D.R. for Appellant (in F.E. Appeals Nos.43/KB of 2013).

Nadeem Ahmed Farooqui for Appellant (in F.E. Appeal No.44/KB of 2013).

Nadeem Ahmed Farooqui for Respondent (in F.E. Appeal No.43/KB of 2013).

Zulfiqar Ali Memon, D.R. for Respondent (in F.E. Appeals Nos. 44/KB of 2013).

2018 P T D (Trib.) 1406

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Ahmad, Accountant Member

Messrs AL-RAHEEM TEXTILE PROCESSING, FAISALABAD

Versus

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

I.T.A. No.599/LB of 2018, decided on 23rd April, 2018.

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

----S.122(5-A)---Amendment of assessment---Re-assessment proceedings taken place on presumption basis confronting wrong facts to re-open the assessment tantamount to fishing enquiry---First show-cause notice issued to the taxpayer was defective as neither the assessment was erroneous nor prejudicial to the interest of Revenue---Action of amending authority was ab initio illegal as there was no proper basis for invoking provisions of S.122(5-A) of the Income Tax Ordinance, 2001---Amended assessment order as well as the order of Commissioner (Appeals) were vacated.

2017 PTD (Trib.) 1911 ref.

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

----S. 111(1)(b)---Investment Tax Scheme, 2008---C.B.R. Circular No.3 of 2008 dated 1-7-2008---Investment in business---Declaration of business assets---Appellant/taxpayer, was an "Association of Persons" (AoP)---Both members of 'AoP' made investment in business and declared their business assets in wealth statements and explained the origin of sources of cash investment made in the firm---Both members had explained that they had sufficient funds which they obtained by availing Investment Tax Scheme, 2008; they had also made cash declaration, but explanation offered by both members of 'AoP', was rejected by authorities without giving any cogent reason---Authorities made huge addition of amount under S.111(1)(b) of the Income Tax Ordinance, 2001, on the ground that the assets declared by the members of AoP in the Investment Tax Scheme, 2008 were not available, to them---Validity---Both the authorities below had inadvertently mis-read the Investment Tax Scheme, 2008---Judgment which did not disclose the reasons, would be of little assistance to the appellate authority or the court---Court and appellate authority, would have to wed through the entire record for such reasons to decide, whether the decision of lower authorities was right or wrong---Impugned order was struck down by the Tribunal because no reason had been given---Orders of both the authorities below were vacated and impugned addition was deleted.

2004 PTD (Trib.) 880; 2003 PTD 1040 and PLD 2018 SC 28 ref.

M. Imran Rasheed for Appellant.

Neme for Respondent.

2018 P T D (Trib.) 1436

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Muhammad Ahmad, Accountant Member

Messrs AL-RAHEEM TEXTILE PROCESSING, FAISALABAD

Versus

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

S.T.A. No.96/LB of 2018, decided on 23rd April, 2018.

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

----Ss. 3(3)(a), 8(1)(a), 25 & 73---Input tax credit---Claim for---Case of appellant/registered person was selected for audit proceedings, which were accordingly completed vide order-in-original by Deputy Commissioner (DCIR)---Appellant being aggrieved, assailed assessment made by DCIR before the Commissioner (Appeals) (CIR(A))---Validity---Appellant contended that sales tax was premised on a self-assessment paradigm, where the tax due was self-assessed by the taxpayer and deposited along with monthly sales tax return---All the necessary evidence regarding payment was provided at assessment stage as well as before Commissioner Inland Revenue (Appeals)---No Revenue loss was involved, particularly when the supplier had already paid output tax---Demanding refunded amount of input tax back from the buyer, despite having same been deposited by the supplier in national exchequer, would amount to double taxation---Input tax credit, disallowed, under the garb of S.73 of the Sales Tax Act, 1990, was allowed by the Tribunal in circumstances---Impugned orders passed by authorities below without application of judicial mind, were liable to be cancelled---Assessment framed by DCIR, which was illegal on factual and legal premises was cancelled and order of CIR(A), was accordingly vacated.

(b) Words and phrases---

----'Sale' meaning and connotation---Element of "sale" in its simple parlance means the transfer of a property from one individual to another on payment of and passing of a consideration.

M. Imran Rasheed for Appellant.

Neme for Respondent.

2018 P T D (Trib.) 1458

[Inland Revenue Appellate Tribunal]

Before Nazir Ahmad, Chairman, Ch. Shahid Iqbal Dhillon, Muhammad Waseem Ch., Judicial Members, Masood Akhtar Shaheedi and Muhammad Ahmad, Accountant Members

Messrs FARAZ FOOD (PVT.) LTD., GUJRANWALA

Versus

C.I.R., R.T.O., GUJRANWALA

S.T.A. No.1535/LB of 2014, decided on 20th March, 2018.

Sales Tax Act (VII of 1990)---

----Ss. 8-B, 11(2), 33, 34 & 46---Adjustment of input tax---Procedural lapse---Imposition of penalty---Appellant/registered person, who was required to claim input tax adjustment at ninety percent of output tax, had adjusted hundred percent input tax---Registered person under subsection (2) of S.8-B of the Sales Tax Act, 1990, was allowed to adjust or claim refund of remaining ten percent subject to some conditions---Said 10 percent tax, which was the property of the registered person, would ultimately be adjusted after the end of the financial year---Registered person, though had not fulfilled the requirement of adjustment of input tax as provided under subsection (1) of S.8-B, but that was a procedural lapse on part of the registered person---No loss having been caused to the Revenue for excess adjustment of input tax, department could not demand default surcharge from registered person under S.34 of the Sales Tax Act, 1990 and the registered person was not liable to pay additional tax---Default, committed by the registered person did not fall within the definition of 'evasion', as there was no mala fide intention of the registered person to defraud the department and only allegation being procedural lapse same could be condoned---Demand of default surcharge after the stipulated time, was patently illegal and unjustified---Registered person, however, was liable to penal action as it had not fulfilled the procedure as laid down in subsection (1) of S.8-B of the Sales Tax Act, 1990---If the registered person, would not be penalized for said procedural lapse, the provision as contained in S.8-B of the Sales Tax Act, 1990, would become redundant---Appellate authority below had rightly ordered imposition of penalty as provided under subsection (5) of S.33 of the Sales Tax Act, 1990---Said order was maintained, in circumstances.

2015 PTD (Trib.) 990; S.T.A. No.1108/LB of 2014; S.T.A. No.1492/LB of 2014; S.T.A. No.892/LB of 2016 and S.T.A. No.519/LB of 2015 ref.

Tipu Sultan, ITP for Appellant.

Said Munaf, D.R. for Respondent.

2018 P T D (Trib.) 1480

[Inland Revenue Appellate Tribunal]

Before Mrs. Ambreen Aslam, Judicial Member and Syed Tahir Raza Zaidi, Accountant Member

Messrs SALEEM FLOUR MILLS, USTA MUHAMMAD, BALOCHISTAN

Versus

C.I.R. (WHT), R.T.O., QUETTA

I.T.As. Nos. 729/KB and 730/KB of 2017, decided on 23rd February, 2018.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 137(2), 140, 153, 161, 205 & 221---Failure to make deduction of withholding tax---Appellant/taxpayer, who was an Association of Persons (AOP), was required to deduct tax under S.153(1) of the Income Tax Ordinance, 2001, in respect of payment made on account of purchases made, services acquired and contract executed, but taxpayer had not made deduction of withholding tax---Assistant Commissioner Inland Revenue (ACIR) levied tax on taxpayer and appellate authority below had confirmed such order of ACIR---Validity---Taxpayer's case was selected for monitoring of withholding tax for the relevant year, and as a result of such monitoring orders were issued under Ss.161 & 205 of the Income Tax Ordinance, 2001, creating tax liability---Said order did not contain any bar-code and was without DCR number, which was integral part to prove the authenticity of any order/notice---Non-compliance of the taxpayer, resulted in recovery proceedings, whereby taxpayer's account was attached---Taxpayer, had contended that assessment of withholding liability had already been done and that initiation of fresh proceedings on the same issue would amount double jeopardy, which was against the principles of law and violation of constitutional protection---Fresh proceedings initiated by the department, were not of rectificatory nature under S.221 of the Income Tax Ordinance, 2001 but were re-assessment of tax, which was against the principle of 'res-judicata'---Orders passed by two authorities below in respect of fresh proceedings were of no legal consequences and appeal of taxpayer was allowed.

Udha Ram Rajput for Appellant.

Sardar Abdul Rab, D.R. for Respondent.

2018 P T D (Trib.) 1522

[Inland Revenue Appellate Tribunal]

Before Ambreen Aslam, Judicial Member and Ahmed Saeed, Accountant Member

Messrs SUI SOUTHERN GAS COMPANY LTD., KARACHI

Versus

COMMISSIONER INLAND REVENUE, ZONE-III, KARACHI

S.T.As. Nos. 34/KB and 66/KB of 2013, decided on 8th December, 2016.

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

----Ss. 3, 7, 11 & 36---Fixed assets---Non-payment of sales tax on disposal of fixed assets---Appellant company, contended that the department's assertion regarding non-charging of sales tax on disposal of fixed assets was contrary to the facts, and the company had properly charged and deposited the sales tax---Appellant company, in support of said contention, produced copies of some sales tax invoices---Plea of Departmental Representative was that appellant could not produce any convincing evidence in support of its contention---Issue involved in the case was of factual nature, which could be resolved after reconciliation of facts and examining the documents submitted by the appellant---Matter was remanded to the department for detailed verification of sales tax as claimed to have been paid by the appellant.

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

----Ss. 4 & 36---S.R.O. No.1164(I)/2007, dated 30-11-2007---Non-charging of sales tax on transportation charges---Sales tax was chargeable on value of supply and not on the value of services, which was a domain of the Provinces---If the transportation charges were added as a value of supply in the value of condensate, which was chargeable at the rate of zero percent, resultant sales tax would remain zero---Demand created by the department as upheld by appellate authority below, were ordered to be deleted by the Tribunal.

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

----Ss. 3, 7, 11, 13 & 36---Charge of sales tax on service connection of gas---Scope---Activity of "providing gas connection" and "supplying of gas" were separate processes "Service charges" was a medium for supply of gas and it could not be termed as value of supply of gas---Said service charges represented activity for establishing the connection like fixation of pipeline etc., prior to actual supply of gas---Main revenue was generated from sales, which represented supply of gas to consumer---Sales tax was leviable on amount of sale---Appellant had rightly submitted that services, were not taxable---Demand raised by department was ordered to be deleted by the Tribunal.

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

----Ss. 3, 7 & 11---Non-admissibility of Input Sales Tax against Unaccounted For Gas (UFG) line losses---Appellant/taxpayer company incurred line losses/UFG to the extent of 7.9% for the year under reference and Gas Regulatory Authority allowed UFG to the company at 7%---Taxing Department raised objection regarding claim of input tax on UFG by the company and had disallowed input tax on entire UFS/line losses suffered by the appellant company---Order of the department was challenged before the Commissioner (Appeals), who allowed input tax on UFG---Validity---Input tax claimed by the appellant in excess to the limit determined by the authority was not permissible---Decision of the Commissioner (Appeals), was upheld---Appellant, had been allowed input tax on UFG to the extent of limit determined by the Authority.

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

----Ss. 3, 7 & 11---Excess input sales tax claimed on internally manufactured Gas Meters---Appellate Tribunal while remanding the case to the department observed that matter, in question needed to be properly thrashed out by the department and it was required to ascertain as to whether the appellant company had paid output taxes twice i.e. both on the internal transfer of meters and on the meter rent charged from the customers and after examining that aspect, the appropriate order be passed.

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

----Ss. 33, 34 & 34-A---Default surcharge and penalty---Commissioner (Appeals), deleted the penalty levied by the Tax Officer holding that no mens rea and wilful default could be established by the department; while the action of levying default surcharge, was upheld on the ground that default surcharge was a mark-up/interest which was charged on the time value of money---No mala fide, was found leading to non-payment of tax on the part of the appellant---Levy of default surcharge imposed by Tax Officer, was ordered by the Tribunal to be deleted.

Arshad Mehmood, F.C.A. for Appellant (in S.T.A. No.34/KB of 2013).

Pervez Ahmad, D.R. for Respondent (in S.T.A. No.34/KB of 2013).

Pervez Ahmad, D.R. for Appellant (in S.T.A. No.66/KB of 2013).

Arshad Mehmood, F.C.A. for Respondent (in S.T.A. No.66/KB of 2013).

2018 P T D (Trib.) 1533

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Mrs. Seema Imran, Judicial Members and Faheemul Haq Khan, Accountant Member

COMMISSIONER INLAND REVENUE, ZONE-I, REGIONAL TAX OFFICE, HYDERABAD

Versus

Messrs MEDIMAKERS PHARMACEUTICAL (AOP), HYDERABAD

I.T.A. No.1128/KB of 2011, decided on 3rd April, 2017.

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

----Ss. 4, 114, 120, 122, 137, 138, 161 & 205---Failure to pay tax collected or deducted---Liability to pay additional tax---Assistant Commissioner Inland Revenue (ACIR), after examination of return of income filed by the taxpayer, observed that taxpayer had made purchases for relevant period at Rs.114,968,668 and taxpayer who was liable to deduct tax on such purchases had failed to deduct the same; show-cause notice was issued to the taxpayer---On reply to the show-cause notice, taxpayer took legal objection to the effect that law did not permit such action after filing of income tax return and he contended that proceedings initiated be dropped---Such objection having been rejected by ACIR, taxpayer preferred appeal against order of ACIR, which appeal was decided in favour of the taxpayer---Validity---Three distinct types of provisions existed generally in every fiscal enactment; namely; charging provisions; assessment provisions; and collection provisions---Charging provisions, related to the levy or charge of tax, which usually stated that tax was to be on what matter, or goods or income and in which manner and at what rate and matters relevant thereto---Assessment provisions, deal with the assessment, calculation or quantification of the tax for the purposes of determining the amount of tax due and payable, or which had escaped collection, or had been under assessed or assessed at a lower rate, or on which excessive relief or refund had been allowed---Element of addition of liability was woven in such provisions and these were impregnated with the potential of adding to the liability of the taxpayer---Same were not mere matter of procedure, but had substantive provisions as well---Collection provisions related to the mode and manner of recovery of collection/recovery of the tax---Provisions of Ss.4, 5, 6, 7 & 113 of the Income Tax Ordinance, 2001 were charging sections---Provisions of Ss.120, 121, 122, 123, 124 125 & 221 of Income Tax Ordinance, 2001 were in nature of assessments---Sections 137, 138, 138-A to 145 & 161, were provisions of collection or recovery in nature---Provisions of Ss.120, 122, relating to assessment, were distinct and separate from the recovery provisions of Ss.161 & 162 respectively---Section 161(1) of the Income Tax Ordinance, 2001, could only be invoked when a failure to collect or deduct tax, was established---Responsibility to collect or deduct tax, being in respect of a transaction of payment, each transactional failure, had to be determined, which was a condition precedent for initiation and conclusion of the proceedings under S.161 of the Income Tax Ordinance, 2001---Any order, which would lack determination of transactional failure of collection or deduction of tax as required by law, would not be sustainable in law---In order to invoke the provisions of S.161 of the Income Tax Ordinance, 2001, it was mandatory to establish, through material and substantial transactional failure of non-withholding of tax as mentioned in S.161, which provision was for recovery in nature---Nature of transaction, could not be determined unless nature of such transaction had already been determined in an assessment order under the provisions of law---ACIR, in the present case, had not highlighted each transactional failure from the evidence produced by the taxpayer---Appellate Tribunal observed that ends of justice would be met, if matter be remanded with the direction to the extent of the factual enquiry for identifying the failure envisaged in provisions of S.161 of the Income Tax Ordinance, 2001, providing adequate opportunity of being heard---Objection of the taxpayer that an order under S.161 of the Income Tax Ordinance, 2001 could not be made in presence of order under Ss.120, 121 & 122, was rejected.

2008 PTD (Trib.) 1683; Friends Sons v. Deputy Collector Central Excise and Sales Tax, Lahore PLD 1989 Lah. 337; Noon Sugar Mills Ltd. v. Commissioner of Income Tax, Rawalpindi PLD 1990 SC 1156 = 1990 PTD 768 = 1990 MLD 1977; (1956) 30 ITR 57; (1961) 41 ITR 76 SC India; PLD 1991 SC 308; 2003 PTD (Trib.) 1167; 2005 PTD 1303; Habib Bank Limited v. Federation of Pakistan 2013 PTD 1659; Lt. Col. Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty, Government of Pakistan, Karachi and another PLD 1962 SC 335; Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279; (1961) 41 ITR 76; Messrs R.C.D. Bowl Barring Ltd. v. Sindh Employees Social Security Institution, Karachi PLD 1991 SC 308; 1982 PLC 1062; 1999 PTD 4028 and 2006 PTD 1888 ref.

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

----S.161---"Liable", as used in S.161, Income Tax Ordinance, 2001---Connotation---Expression "liable" connotes subject to an obligation, answerable legally.

Noon Sugar Mills Ltd. v. Commissioner of Income Tax, Rawalpindi PLD 1990 SC 1156 = 1990 PTD 768 = 1990 MLD 1977 ref.

Ashok Kumar, D.R. for Appellant.

A.R. Lakhani and Vishwa Mittar for Respondent.

Arshad Siraj, Amicus Curie.

2018 P T D (Trib.) 1723

[Inland Revenue Appellate Tribunal]

Before Shahid Pervez Memon, Judicial Member and Dr. Manzoor Ahmed, Accountant Member

Messrs NIT INCOME FUND, KARACHI

Versus

COMMISSIONER INLAND REVENUE, ZONE-I, RTO, KARACHI

I.T.A. No. 799/KB of 2016, decided on 17th November, 2016.

(a) Words and phrases---

----'Super Tax'---Meaning explained.

Chambers Dictionary and Black's Law Dictionary ref.

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

----Ss.2(63)(64), 4-B, 9, 53-A, Sched. II, Part-I, Cl.(99)---Super Tax---Exemption from---Taxation Officer vide ex parte order, charged Super Tax on income of taxpayer, which was a Public Limited Mutual Fund (Collective Investment Schemes)---Such order of Taxation Officer having been confirmed by Commissioner (Appeals); taxpayer challenged said order before Appellate Tribunal, claiming that taxpayer was exempted from Super Tax---Income or class of income, or person or class of persons specified in Schedule-II of Income Tax Ordinance, 2001, would be exempted from tax under S.53-A of Income Tax Ordinance, 2001, subject to conditions and to the extent specified therein---Section 4-B of Income Tax Ordinance, 2001, was a charging provision which was sought to levy Super Tax on income of individuals, associations of persons and companies---Exemption from Super Tax was available to the taxpayer under Cl.99, Part-I of the Second Schedule of Income Tax Ordinance, 2001---Impugned orders passed by both the authorities below, being not in accordance with law, were vacated and demand created was deleted.

Syed Shabbar Zaidi, FCA and Amin A. Malik, FCA for Appellants.

Sanaullah Nawazani, DR for Respondent.

2018 P T D (Trib.) 1817

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon Judicial Member and Muhammad Raza Baqir Accountant Member

Messrs Z & J HYGIENIC PRODUCTS (PVT.) LTD., KAMOOKI

Versus

THE CIR, RTO GUJRANWALA

I.T.A. No.379/LB of 2015, decided on 2nd December, 2015.

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

----Ss. 53, 153, 161, 205 & Second Schedule, Part-IV, Cl.45-A---Constitution of Pakistan, Arts.4 & 25---Deduction of short paid income tax---Failure to pay tax collected or deducted---Department, had itself rendered in order-in-original, that the taxpayer being a manufacturer was subjected to zero rating of sales tax through various notifications---Taxpayer, in circumstances, had correctly deducted withholding tax on reduced rates applicable on zero rating supplies after due compliance of the prevalent conditions prescribed by zero rating; in the light of applicable law on the issue---None of the conditions in said notifications, having been violated, zero rating benefits, could not be denied to the taxpayer---Benefit allowed by the department in sales tax; and denied in income tax, was by all means a discrimination, hit by Art.25 of the Constitution---Person equally placed, must be treated alike in the matter of privileges and liabilities under the rule of equal protection of law---Person placed at the same pedestal, could not be treated differently; as it would constitute a negation of Arts.4 & 25 of the Constitution---Income Tax deducted by the taxpayer by applying reduced rate of 1%, considering the zero rated sales tax regime, was absolutely correct, and in accordance with law---Case of the taxpayer had not been considered judiciously by the Commissioner (Appeals)---Since the claim of the taxpayer, had not been rebutted in clear, unambiguous words, case was remanded to Commissioner (Appeals), to examine the record, provide reasonable opportunity of being heard to the taxpayer; and pass a speaking order on the issue, preferably within sixty days of the receipt of the present order---Taxpayer was also directed to associate himself with De Novo proceedings of the matter before the Commissioner (Appeals).

2005 SCMR 492 and 2010 SCMR 431 ref.

(b) Income tax---

----Exercising statutory powers of adjudication/assessment by authority---Authority, exercising statutory powers of adjudication/assessment, or appeal, affecting valuable rights of the parties, should act as Quasi Judicial authority; and while exercising those powers, must pass a speaking order, duly supported by reasoning, showing due application of mind to the facts; as well as applicable law---Any order lacking such criteria, would be illegal, having no legal effect---In order to maintain the sanctity of both Quasi Judicial and administrative proceedings, it was necessary to maintain oversight on the performance of Adjudicating Authorities, whose orders, should not be entirely dependant upon the opinions and comments of the Assessing Officer---Non-speaking and sketchy order, could not be said to meet the requirements of the judicial order; which must contain the contentions raised before the authority by the rival parties and its reasoning based on evidential substance for passing reasoned order in accordance with the relevant applicable law read with S.24-A of the General Clauses Act, 1897.

Waheed Shahzad Butt for Appellant.

Salman Ahmad Khan, D.R. for Respondent.

2018 P T D (Trib.) 1913

[Inland Revenue Appellate Tribunal]

Before Mrs. Ambreen Aslam and Faheemul Haq Khan, Members

BP PAKISTAN AND PRODUCTION INC. KARACHI

Versus

The CIR, ZONE-III, LTU, KARACHI

I.T.A. No.1077-KB of 2013, decided on 18th April, 2016.

Income Tax Ordinance (XLIX of 2001)---

----Ss.60-A, 120, 122(1) & 221---Amendment of assessment---Rectification of mistake---Contention of taxpayer was that Commissioner Inland Revenue (Appeals) had erred in maintaining the action of Additional Commissioner Inland Revenue in calculating "depletion allowance"---Taxpayer also sought consequential relief in the liability of Workers Welfare Fund---Validity---Calculation of "depletion allowance" was justified and contention of taxpayer was repelled---Commissioner Inland Revenue (Appeals) had clearly issued directions to the Adjudicating Officer for allowing the relief in liability of Workers Welfare Fund after verification---Taxpayer, in circumstances, had already been granted required consequential relief in shape of the directions---Order accordingly.

Qadeer Ahmed, FCA for Appellant.

Abdul Salam Khan, DR for Respondent.

Muhammad Taseer Khan Advocate.

2018 P T D (Trib.) 2096

[Inland Revenue Appellate Tribunal]

Before Javed Iqbal, Chairman, Nazir Ahmad, Judicial Member and Abdul Nasir Butt, Accountant Member

Messrs UNITED FINISHING MILL, NANKANA SAHIB

Versus

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

I.T.A. No.321/LB of 2015, decided on 3rd September, 2015.

Per Nazir Ahmad, Judicial Member; Javed Iqbal, Chairman, agreeing; Abdul Nasir Butt, Accountant Member, disagreeing on the issue of "selection of cases for Audit under S.177, Income Tax Ordinance, 2001" [Majority View]

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

----Ss.177, 120 & 122(1)(5)---Assessment---Amendment of assessment---Selection of case for audit---Taxpayer filed return of income for the year under consideration declaring loss, which was taken as an assessment order in terms of S. 120(1) of Income Tax Ordinance, 2001---Case was selected for audit under S.177 of the Income Tax Ordinance, 2001; on the basis of audit report, show-cause notice was issued to the taxpayer and proceedings culminated in passing of amended assessment---Appellate Authority dismissed appeal of taxpayer---Taxpayer had opted to assail orders passed by both the Authorities below on legal plane of selection of the case for audit---Taxpayer contended that selection of the case for audit under S.177 of the Income Tax Ordinance, 2001 was illegal as the case could be selected for audit by the Commissioner from 13-9-2001 till 27-10-2009; that till 27-10-2009 case in question was never selected by the Commissioner; however after that date the case could be selected for audit by the Federal Board of Revenue only and not by the Commissioner---Taxpayer, in circumstances, had sought vacation of the orders passed by both the Authorities below---Validity---Selection of case, for audit by the Commissioner, in the present case, was contrary to the settled law---Appeal of taxpayer was accepted by the Appellate Tribunal on legal plane of jurisdiction and there was no need to adjudicate upon rest of the grounds taken as per memo. of appeal---Order accordingly. [Per Abdul Nasir Butt, Accountant Member (Contra) (Minority View): Commissioner had the jurisdiction to issue notice in exercise of his power under S.177 of the Income Tax Ordinance, 2001, without selection of a person for audit by the Federal Board of Revenue under S. 214-C of the Income Tax Ordinance, 2001---Case, in the present matter, was lawfully selected for audit under S.177 of the Income Tax Ordinance, 2001 for the year 2009---Order passed by appellate Authority below was maintained and appeal of the taxpayer, stood dismissed].

Messrs Chenone Stores Ltd. v. F.B.R. 2012 PTD 1815 and Messrs Kohinoor Sugar Mills's case Writ Petition No. 4691 of 2010 rel.

Per Nazir Ahmad, Judicial Member; Javed Iqbal, Chairman agreeing; Abdul Nasir Butt, Accountant Member, dissenting [Majority View]

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

----Ss. 111, 120, 122(5) & 128(5) & 177---Unexplained income or assets---Addition made on account of short term loan obtained from Bank---Amendment of assessment---Selection of case for audit---Appellate Tribunal vacated orders passed by the Authorities below and accepted appeal of the taxpayer on legal plane of jurisdiction---Sole factual ground, which needed adjudication was regarding addition made under S.111(1)(b) of the Income Tax Ordinance, 2001 on account of short term loan obtained by the taxpayer from the Bank, not in the relevant tax year---Amount could only be added in the person's income chargeable to tax in the year to which such amount related---Amount which was invested, obtained or owned by a person, would only be added in the year of investment and not in the subsequent or prior year---Amount in the present case, appeared to be under the head "current liabilities" (short term Bank borrowing) in the tax year 2008 and same also appeared in the tax year 2009; which clearly indicated that said amount was obtained by the taxpayer from Bank in the year 2008---Addition of said amount in the year 2009 was contrary to provisions of S.111(2) of the Income Tax Ordinance, 2001---Addition made in the wrong tax year 2009, was deleted---[Per Abdul Nasir Butt, Accountant Member disagreeing, [Minority View]: Taxpayer, had opted to assail the orders of the authorities below on the legal plane of selection of the case for audit, giving findings on other grounds of appeals and laying hands on the same, which were not stressed by the taxpayer, were unwarranted and legally unsustainable---Appellate Authority below had dismissed the appeal only on legal ground and no findings had been given by him in respect of merit of the case---Findings of the Appellate Authority below had further shown that during the appellate proceedings certain documents were produced before him, which had not been earlier produced before the adjudicating authority---Appellate Authority had no power to take evidence, details and documents which were not produced earlier---Taxpayer had not proved sufficient cause which prevented him to furnish the relevant documents, details before the adjudicating authority---Submission of fresh evidence/documents which were not produced earlier, had ousted the jurisdiction of the appellate Authority---Accountant Member observed that instead of upholding the order of appellate Authority, it was appropriate to remand the case to adjudicating Authority for de novo proceedings with directions to the taxpayer to furnish all the available relevant documents, details and evidence which he produced before the appellate Authority and were not entertained by appellate Authority due to embargo placed on him under S.128(5) of the Income Tax Ordinance, 2001---Adjudicating Authority, was also to be directed to give reasonable opportunity of being heard to the taxpayer to present his view point as well as the documents].

Per Javed Iqbal, Chairman, agreeing with Nazir Ahmed, Judicial Member [Majority View]

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

----S. 111---Addition made on account of short term loan obtained from Bank---Question for determination: When appeal had earlier been decided by the Tribunal only on the legal plane, Tribunal could not again lay its hands to other grounds of appeal which were not opted to be assailed by the taxpayer---Tribunal could entertain evidence which was not furnished before the lower authorities, if the said evidence would go to the roots of the case---In the present case, short term loan was advanced by the Bank in the year 2008, whereas same had been added in the tax year 2009, which was contrary to the provisions of S.111(2) of the Income Tax Ordinance, 2001---Addition made was liable to be deleted---Remand of the case for de novo consideration, was not needed in the case, because the evidence, was very much clear.

Abuzar Hussain for Appellant.

Abu Bakar Siddique, D.R. for Respondent.

2018 P T D (Trib.) 2114

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Muhammad Riaz, Accountant Member

Messrs R.I. STEEL HATTAR

Versus

C.I.R., R.T.O., ABBOTABAD

I.T.A. No.1166/IB of 2017, decided on 12th April, 2017.

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

----S. 131---Appeal to Appellate Tribunal---Procedure---Law laid down by Division Bench (D.B.) of the Tribunal---Binding force---Scope---Law laid down by Division Bench of Appellate Tribunal on a given issue, was binding on Division Bench of the Tribunal---If Division Bench of the Appellate Tribunal was not agreeable to an earlier pronouncement of law by a Bench of equal strength, it could refer the matter to the Chairman of the Appellate Tribunal stating the reason of dissent to form a Larger Bench for resolving the controversy through speaking order.

PLD 1995 SC 423; PLD 2015 SC 166; I.T.As. Nos. 1866 and 1867/LB/2014, dated 06.01.2015 ref.

(b) Words and phrases---

----"Distributor"---Meaning.

Black's Law Dictionary ref.

(c) Words and phrases---

----"Expression fast moving consumer goods"---Meaning.

Dictionary of Commerce and Product Management in India by Ramanuj Majumdar (ISBN 978-81-203-1252-4) ref.

Muhammad Aamir Qadeer for Applicant.

Nemo for Respondent.

2018 P T D 2170

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Syed Ayaz Mehmood, Accountant Member

OFFICE WORLD

Versus

The COMMISSIONER INLAND REVENUE, ZONE-III, R.T.O.-II, KARACHI

M.A. (Stay) No.212/KB and S.T.A. No.160/KB of 2018, decided on 10th April, 2018.

Sales Tax Act (VII of 1990)---

----S. 48---Recovery of disputed tax---Taxpayer was granted conditional stay by Commissioner Inland Revenue (Appeals) (CIR(A)) subject to payment of 10% outstanding demand---Validity---Commissioner Inland Revenue (A) was included as the "Income Tax Authority" under S.207 of the Income Tax Ordinance, 2001, working under the hierarchy of Federal Board of Revenue---Order of CIR(A), forcing the taxpayer to deposit 10% of outstanding demand, was unjustified and unlawful for the reason that CIR(A) had not been given powers to either collect or recover the tax---Direction of CIR(A) to deposit 10% of outstanding demand was outside the domain of powers of CIR(A)---Separate Authority had been created for enforcement, recovery and collection of taxes---Commissioner Inland Revenue (A) had heard the appeal but not "decided" the same yet---Commissioner Inland Revenue (A) could grant the stay beyond 30 days or 60 days or till the decision of pending appeal before him---Commissioner had inherent, ancillary and implied powers to grant the stay till the decision or disposal of appeal but said power had not been exercised by him and instead he directed the taxpayer to deposit 10% of the outstanding amount using stereo typed stock phrases and in slipshod manner without recording any appropriate figure and findings, which could not be expected from an Officer, who was enjoying quasi judicial powers---Commissioner Inland Revenue (A) was directed by the Tribunal, either to release/issue and serve appellate order within 30 days from the receipt of present order, or grant unconditional stay till the disposal of decision of main appeal and pass speaking order after application of conscious mind; till then, as a protective measure, department was directed not to adopt any coercive measure for the recovery of the disputed demand and de-attach Bank accounts.

2010 PTD (Trib.) 557 and 1996 PTD (Trib.) 388 ref.

Abdul Khaliq, ITP for Applicant.

Imran Qadeer, D.R. RTO for Respondent.

2018 P T D (Trib.) 2235

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Syed Ayaz Mehmood, Accountant Member

The COMMISSIONER INLAND REVENUE, ZONE-I, R.T.O., HYDERABAD

Versus

Messrs D.S. MOTORS, HYDERABAD

I.T.A. No.1000/KB of 2014, decided on 1st June, 2018.

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

----Ss.120 & 122(2)(5-A)---Amendment of assessment---Limitation---When the income tax return was filed for the tax year 2008, the provisions of S.122(2) of Income Tax Act, 2001, before amendment through Finance Act, 2009, were applicable---Maximum time mandated under S.122(2), as it stood at the time of filing of return, was five years from the date of the order sought to be revised---Order under S.120 of the Income Tax Ordinance, 2001, was treated to have been passed on the date of filing the return viz. 30-10-2008---If the limitation period was computed as per the provisions of S.122(2), as the same stood at the time of filing the return, the same would be considered to have been expired on 29-1-2013---Question to be resolved was "whether assessment order issued in the year in appeal dated 19-6-2014, was time barred under S.122(2) (as amended by Finance Act, 2009)"---Held, that provisions providing limitation were mandatory and could not be waived---Period of limitation, would start when the returns was filed and a deemed assessment order was issued on 30-10-2008 consequent to the amendment in S.122(2), through Finance Act, 2009 the increased time limitation for passing orders continued therein could be held as applicable retrospectively---Amendment in S.122(2), enlarging limitation period effected in the pre-amended S.122(2), could not be construed to be designed to dismantle and throw apart the edifice of the past actions attaining finality thereunder---Transactions which became past and closed, could not be reversed or revived by dent or under the garb of subsequent amendment enhancing the period of limitation in the statute---When a law was treated as dead, transaction which was past and closed, could not be revived and actions which were either commenced, prosecuted, concluded or became barred by limitation, whilst the law was operative, could not be reopened or revived on the basis of subsequent amendment after the lapse of time of existed provisions at relevant period; which had become as dead transactions and past and dead matter---Amended law could not affect any past and closed transactions---Amendment in S.122(2), was not remedial, curative in nature, benevolent or beneficial in the interest of taxpayer nor it was clarificatory, declaratory or rectificatory in nature---Law of limitation in so far as it regulated the period in which one party could avail remedy against another was not to be lightly disturbed as the certainty created by limitation was necessary for the success of trade and business, the more so when that limitation would govern tax matters---On filing the return of income on 30-10-2008, the taxpayer had obtained a vested right in the time limitation contained in S.122(2), as it stood at the time i.e. an order under S.122(5-A) of Income Tax Ordinance, 2001, could not be issued after expiry of five years from the date of the order sought to be revised---Once the limitation period had already started from a particular date i.e. the date of filing of return, same could not be assumed to have been extended by subsequent amendment, which did not alter the period of limitation, rather amended the starting date of limitation period---Taxpayer was entitled to grant relief as department had failed to establish its claim---Findings of CIR(A), were upheld and order of Additional Commissioner Inland Revenue under S.122(5-A) for the tax year 2008, was barred by limitation.

[Case-law referred].

(b) Administration of justice---

----Primary duty of courts and other adjudicating forums to decide matters lay before them in accordance with law---Judge must wear all the laws of the country on the sleeves of his rob and failure of the counsel to properly give assistance, was not a complete excuse in the matter.

[Case-law referred].

(c) Maxim---

----Expressio unius est exclusio alterius'---If a statute provides for a thing to be done in a particular manner then it had to be done in that manner and in no other manner and following other course was not permissible.

(d) Interpretation of statutes---

----Retrospective or retroactive law---Scope and extent---Retrospective or retroactive law is a law that, in respect of past transaction or consideration, it takes away or impairs vested rights acquired under existing laws; creates a new obligation and imposes a new duty/limitation; enhancement/extension of existing obligations, or duties/liability and attaches a new disability---Retrospective means, looking backward; having reference to a state of things existing before the Act in question---Retrospective statute contemplates the past and gives to a previous transactions a legal effect from that what it had under the law when it occurred or transpired---Retrospective law is a law which looks backward or on things that were past; retroactive law is one which acts on things that were past---In common use, as applied to statutes the two words were synonymous and in that connection may be defined as having reference to a state of things existing before the acts in question---Statute which operates upon acts and transactions which have not occurred when the statute takes effect, that is, which regulates the future, prospective statute---On the other hand, a retrospective or retroactive law is one which takes away or impairs vested rights acquired under existing laws or creates new obligations and imposes new duties; or attaches new disabilities in respect of past transactions---Courts regard as retrospective any statute, which operates on cases or facts coming to existence before commencement of statute---Where the legislature expressly takes away vested rights from some and correspondingly bestows privileges on others by legislation, the latter was always retrospective---If a matter in question was a matter of procedure only, the provisions would be retrospective---However, if it touches a right in existence at the passing of the Act then legislation would not operate retrospectively unless the legislature had either by express enactment or by necessary intendment given to the legislation retrospective effect---Law could not be said to be retrospective unless it would take away or impairs a vested right acquired under existing law or creates some obligation or disability with regard to close and past transaction---Retrospective operation of statute can not divert rights already vested, in absence of clear provisions to that effect---When a statute affects existing rights, its provisions are not to be held as retrospective in operation, unless a clear intention to the contrary manifests---All statutes, other than those, which were merely declaratory or which relate only to matters of procedure or of evidence, are prima facie prospective and retrospective effect is not to be given to them unless it appears that it was the intention of the legislature---Court could construe a provision as conferring power to act retrospectively only when clear words were used---Retrospective operation of an enactment may mean one thing and its affecting the rights of parties another---Enactment normally is prospective in nature and does not affect that which has gone, or completed and closed up already.

[Case-law referred].

(e) Vested rights---

----Meaning and scope---Rights which were completed and consummated so that nothing remained to be done to fix the right of the citizen to enjoy them, were vested rights---Vested right could be defined as 'some right' or interest in the property that had become fixed and established and was no longer open to doubt or controversy---Vested right was free from contingencies but not in the sense that it was exercisable anywhere and at any moment---Hardly there was any right, which could be so exercised; there must always be occasions at which and circumstances did not constitute contingencies, but were the peculiar characteristics of those rights---Rule that statutes should not be given a construction which would give them retrospective effect was, especially applicable to statutes, where such a construction would either destroy or impair vested rights---Such statutes should be construed, if possible, as applying only to future cases; that was as having no retrospective operation.

(f) Interpretation of statutes---

----Tax law---Curative and remedial tax legislation---Applicability---Scope---Curative and remedial legislation would apply retrospectively to pending cases only---Pending cases under the tax laws, would mean and include any stage of the proceedings starting from assessing officer to the apex court which would mean that curative and remedial legislation would not have retrospective application in cases, where concerned persons have not challenged the action of Revenue Authorities before the higher forum and same was not pending adjudication.

Iqbal Ahmed Sheikh, D.R. for Appellant.

A.S. Jaffri and Kamran Rizvi for Respondent.

2018 P T D (Trib.) 2287

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Muhammad Riaz, Accountant Member

AIRBLUE LIMITED

Versus

COMMISSIONER INLAND REVENUE, ZONE-I, ISLAMABAD

Sales Tax Appeal No.190/IB of 2016, decided on 1st March, 2017.

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

----Ss. 2(35), 3, 4(b), 7, 11, 33 & 34---Federal Excise Act (VII of 2005), Ss.14 & 42-B---SRO No.490(I)/2004, dated 12-6-2004---SRO No.478(I)/ 2009, dated 13-6-2009---SRO No.550(I)/2006, dated 5-6-2006---Taxable activity---Scope of tax---Determination of tax liability---Assessment of tax---Appellant, an Airline, was subject to Federal Excise Duty---Appellant filed monthly sales tax returns for relevant tax period---Case of appellant was selected for audit under S.42-B of the Federal Excise Act, 2005 and Assessing Officer, proceeded to pass the assessment order along with default surcharge and penalty against the appellant---Appeal filed by the appellant, was partially rejected by the Appellate Authority---Validity---Main issue involved in the appeal was; whether the appellant was liable to adjust input tax on food, beverages and other services in terms of S.7 of the Sales Tax Act, 1990, or it would hit by Notification No. SRO 490(I)/2004, dated 12-6-2004---Appellant, being an Airline, under Sales Tax Act, 1990, was entitled for the adjustments of input tax in terms of S.7 of the Act and Notification S.R.O. No.550(I)/2006, dated 5-6-2006 on food, beverages and other services---Provisions of Sales Tax Act, 1990, were applicable on the services rendered in respect of travel by air of passengers within the territorial jurisdiction of Pakistan---Collection of Federal Excise Duty on services rendered by Airline within territorial jurisdiction of Pakistan, was deemed to be like the output tax payable on supplies (Supply of Services) under Sales Tax Act, 1990---Passengers were offered meals/eatables and drinks etc. during the flight; which had direct nexus and was integral part of travel service to passengers---Flight crew/staff, between the period of returning from one flight to another flight, was entitled to stay in designated hotels arranged by the Airline---Any input tax incurred with reference to crew, was directly attributed to the taxable activity of the Airline---Any sales tax paid/incurred on the crew/staff of the Airline and the input tax paid on the refreshment of passengers, was having direct attribution on the furtherance of taxable activity---Any input tax paid on said activity, was admissible in terms of S.7 of the Sales Tax Act, 1990---Input tax suffered on account of receiving services from different vendors/suppliers was admissible---Assessing Officer, had failed to point out a single instance of misuse of personal usage on part of the management of Airline in respect of input tax incurred---Notification SRO No.490(I)/2004, dated 12-6-2004, provided exception to items on which the input tax was not admissible---Exemption was for the 'goods', otherwise than 'stock in trade'---Input tax claimed by the Airline, was allowed and demand raised in that respect, was deleted and appeal was accepted accordingly.

[Case law referred].

(b) Limitation---

----Provision of Limitation in a statute---Object---Object of providing limitation in any statute was to finalize the transaction within the period specified therein; so that there could not be any adverse financial implication after the expiry of the period mentioned therein---Object of provision for limitation was to regulate the course and manner for providing relief or remedy; where substantive rights were pressed in the limitation---Policy behind the provisions for limitation was to encourage promptitude in the remedies---Doctrine of limitation, was based on legal maxim that "delay defects equity, time and tide wait for none and law helps the vigilant and not the indolent"---Bar of limitation created valuable rights in favour of parties.

(c) Words and phrases---

----"Stock-in-trade"---Meanings explained.

[Case law referred].

Tahir Razzaque Khan, FCA, Authorised Representative and Shaheer Bin Tahir for Appellants.

Imran Shah, FCMA, Departmental Representative for Respondent.

2018 P T D (Trib.) 2310

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Syed Ayaz Mahmood, Accountant Member

Messrs SHAHEEN AIR INTERNATIONAL, KARACHI

Versus

The COMMISSIONER INLAND REVENUE, ZONE-V, LTU, KARACHI

M.A. (Stay) No.904/KB of 2018, in I.T.A. No.708/KB of 2018, decided on 15th May, 2018.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 131(5) & 132---Tax-payer, pending his appeal before the Appellate Tribunal, had sought grant of stay against recovery of impugned tax demand as well as stay against the remand-back proceedings---Validity---Appellate Tribunal under S.132 of Income Tax Ordinance, 2001, in exercise of appellate jurisdiction, could affirm, modify or annul an assessment, or an order appealed against; in addition to remanding the case to Appellate Commissioner---For exercising said jurisdiction effectively, power to suspend the impugned order or to restrain Taxation Officer from passing assessment order, pursuant to the order impugned before it, fell within the incidental and ancillary jurisdiction of the Tribunal; particularly when no restriction or limitation, on exercise of such ancillary or incidental power, was available in subsection (5) of S.131 of the Income Tax Ordinance, 2001---Allowing the Taxation Officer to complete re-assessment would not only lead to multiplicity of litigation but would frustrate the right of appeal before Appellate Tribunal---Power to grant interim relief by suspending wholly or partially the operation of order appealed against was reasonably incidental or ancillary to the main appellate jurisdiction of the Tribunal---Even in the absence of an express provision for the grant of interim relief, Appellate Tribunal, having power to grant the main relief, could also grant the interim relief by suspending wholly or partially the operation of the order under appeal before it---Remand proceedings were stayed till the decision of main appeal by the Appellate Tribunal---Appeal of the taxpayer assailing the treatment meted out by the Revenue Authorities with regard to stay of recovery of impugned demand was pending decision before the Tribunal---Unless the appeal was decided coercive measures for recovery of the impugned amount could not be made---Recovery proceedings by the Revenue Authorities was not justified---When matter was sub-judice before the higher hierarchy (the Tribunal) the lower Officer would become functus officio---Stay was granted accordingly.

2012 PTD 1572; Sunrise Bottling Company (Pvt.) Ltd. v. Federation of Pakistan 2006 PTD 535; Dawood Textile Printing Industries (Pvt.) Ltd. v. Federation of Pakistan 2009 PTD 1220; Magna Processing Industries (Pvt.) Ltd. v. Federation of Pakistan 2014 PTD 841; Z.N. Exports (Pvt.) Ltd. v. Collector Sales Tax 2003 PTD 1746; Mehram Ali and others v. Federation of Pakistan and others PLD 1998 SC 1445; 2012 PTD 1572; Shahnawaz v. ATIR 2017 PTD 1134; Imran Raza Zaidi v. Commissioner Punjab 1996 SCMR 645; F.A. Khan v. The Government of Pakistan PLD 1964 SC 520; PLD 1964 Kar. 587; PLD 1957 SC(sic) 448; 1992 PTD 1581; 1985 PTD 375; Commissioner Income Bombay Presidency and Aden v. Khemchand Remdas (1938) 61 ITR 414; 1989 PTD 367; Pak-Saudi Fertilizers Ltd., v. Federation of Pakistan 2002 PTD 679 and Messrs Magna Processing Inds. (Pvt.) Ltd. v. Federation of Pakistan 2014 PTD 841 ref.

Abid Shaban for Applicant.

Imran Ali Shaikh, D.R. for Respondent.

2018 P T D (Trib.) 2385

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Syed Ayaz Mehmood, Accountant Member

Messrs SAINDAK METALS LTD., QUETTA

Versus

COMMISSIONER INLAND REVENUE, ZONE-I, RTO, QUETTA

I.T.As. Nos.261/KB to 265/KB and 171/KB of 2017, decided on 21st March, 2018.

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

----Ss. 39 & 40---Depreciation allowance/expenditure---Concept---Claim for depreciation allowance and deduction of depreciation on Building, Plant and Machinery---Concept of depreciation allowance/expenditure was of wider import---Depreciation referred to the fall in quality or value of the asset, which decrease in value after wear and tear, decay, decline in price---All assets used were subject to depreciation---Assets, at some time, would become useless and require replacement---Tribunal observed that it was essential that out of the profit of the business or income from other sources, each year a certain sum be earmarked to take care of the fall in the value of assets so that when the assets needed replacement, there was no undue strain on the resources of the organization in that year---Depreciation being a genuine and accepted expense of each business organization, it was permitted to be deducted for income tax purposes---Tax need be paid only on the profit that remained after depreciation had been provided for---Depreciation allowance that was permitted for income tax purposes was at the rates specified in Third Schedule to the Income Tax Ordinance, 2001; or even if that rate differed from the rate at which the organization claimed depreciation on its assets in its books of account---When, the assessee computed its income for tax purposes, it was first required to add back to the profit for the year the depreciation claimed as per the books of account and then deduct the depreciation permissible under the Income Tax Law/Rules---Like other objects, business premises building, plant and machinery employed by a taxpayer in the course of his business or source of income had a limited life---Vigour, strength, capability etc. of each object gradually exhausted by the facts of use and time---Depreciation allowance under S.40 read with S.22 of Income Tax Ordinance, 2001 was a mandatory allowance, not confined expressly to diminution in value of the asset by reason of wear and tear, and could not be restricted on the basis of quantum of earned income/profit or under any imagination whatsoever---Taxpayer enjoying income from leasing out building with plant and machinery would be allowed deduction on plant and machinery---Mandatory requirement was for allowing statutory depreciation allowance as deduction of depreciation on Building, plant and machinery---Taxpayer was, in the present case was legally entitled to claim full depreciation allowance as claimed---Department/concerned Officer/CIR were directed by the Tribunal to allow full claim of depreciation as claimed by the taxpayer for all the years and to allow adjustment of loss as per law against any other income when depreciation allowance resulted in loss of income falling under S.39(1)(F) of the Income Tax Ordinance, 2001.

2017 PTD (Trib.) 1044; 1992 PTD 1681; 1993 SCMR 39 = 1992 PTD 1681; 2015 PTD 550; (1906) 6 Tax Cas. 501; (1915) AC 433; 1996 PTD 627; 1996 PTD (Trib.) 388; 2010 PTD (Trib.) 557 and 1996 PTD (Trib.) 388 ref.

(b) Words and phrases---

----Depreciation---Connotation.

Webster's New World Dictionary ref.

(c) Administration of justice---

----Law is legislated by the legislature and not framed by the court, but court interprets law for advancement of justice---Law can not be allowed to operate to defeat the ends of justice---Court and qausi judicial officer, are required not only to do meaningful speedy justice, but also must perform their duties in such a manner that justice was seen to have been done---Quasi judicial officer, while discharging judicial duties was not to take any such step which could create apprehension in the mind of appellant, that justice was not being done.

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

----Ss. 2(13-A) & 135---Powers of Appellate Tribunal---Commissioner Inland Revenue (A) being subordinate authority was bound to follow and obey the judgment/order of Appellate Tribunal Inland Revenue---Commissioner Inland Revenue (A) was not open to ignore decision of the Tribunal---Powers of the Tribunal were very wide as the civil court enjoyed under O.XLI, R.33, C.P.C.

Zubair Abdul Sattar, FCA for Appellant.

Rehmatullah Durrani, D.R. for Respondent.

2018 P T D (Trib.) 2408

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Mian Saeed Iqbal, Accountant Member

Messrs INTERACTIVE COMMUNICATIONS

Versus

The COLLECTOR (APPEALS), SALES TAX AND FEDERAL EXCISE, ISLAMABAD

M.A.(A.G.) S.T.A. No.16/IB of 2017 and S.T.A. No.7/IB of 2009, decided on 12th September, 2017.

(a) Administration of justice---

----Legal contentions/submissions/grounds, could be raised at any stage of proceedings before any forum/court, including the Supreme Court.

2006 SCMR 1519; PLD 1965 SC 690;1997 PTD 1555; 1999 PTD (Trib.) 401; 1976 PTD 56; 1999 PTD (Trib.) 705 and 2009 PTD (Trib.) 1136 ref.

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

----S. 36(1)(2)---Recovery of tax not levied or short-levied or erroneously refunded---Allegation of collusion or deliberate act---Issuance of show-cause notice---Limitation---Provisions of subsection (1) of S.36 of the Sales Tax Act, 1990, had specifically mandated that a show-cause notice was mandatorily to specify the reasons of "some collusion or a deliberate act" for the alleged non-levy, short levy or erroneous refund of sales tax or to charge; whereas in the present case impugned show-cause notice was silent to the effect that registered person/taxpayer had made a collusion with the departmental officials, or the act of non-payment of sales tax was deliberate---Prior to issuance of show-cause notice, it was mandatory on the part of the Additional Collector to establish mens rea against the registered person in the show-cause notice---Department had assumed jurisdiction under S.36(1) of Sales Tax Act, 1990, without establishing specific charge, which was fundamental requirement of law---Issuance of show-cause notice was not maintainable as---Impugned show-cause notice, did not circumscribe the facts and circumstances of the case---Taxpayer's case, in circumstances fell under S.36(2) of Sales Tax Act, 1990, as the condition precedent therein existed in the present case---Notice under S.36(2) of the Sales Tax Act, 1990 could only be issued within a period of 3 years of the relevant date, show-cause notice having been issued beyond the period specified in S. 36(1) of the Sales Tax Act, 1990 was barred by time---Order-in-original passed on the basis of said show-cause notice was declared to be without lawful authority.

2010 PTD (Trib.) 1759; 1992 SCMR 1898; 2001 SCMR 838; 2012 PTD (Trib.) 1040; 2013 PTD (Trib.) 2130; 2007 PTD 2265; 2013 PTD (Trib.) 420; 2011 PTD (Trib.) 677; 2011 PTD (Trib.) 866; 2008 PTD 1973; 2009 PTD (Trib.) 1263; 2010 PTD (Trib.) 1759; 2012 PTD (Trib.) 350; 2008 PTD 1032; 2014 PTD (Trib.) 375; 2016 PTD (Trib.) 485; 2017 PTD (Trib.) 70 and 2013 PTD 1536 ref.

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

----S. 36(1)---Federal Excise Act (VII of 2005), S.14(1)---Recovery of tax not levied, short levied or erroneously refunded---Issuance of combined show-cause notice---Limitation---Additional Collector had issued a combined show-cause notice under distinct and different statutes; one under the Sales Tax Act, 1990, and the other under Federal Excise Act, 2005, both being barred by time---Initially, S.14(1) of Federal Excise Act, 2005 had provided three years of period for issuance of show-cause notice from the relevant date which period was substituted by Finance Act, 2011, with a period of five years---In the present case date of payment was 10-1-2003 and show-cause notice under S. 14(1) of the Federal Excise Act, 2005, was to be issued by 10-1-2006, instead same was issued on 18-7-2008, which was beyond the relevant date---Issuance of combined notice S.36(1) of the Sales Tax Act, 1990 and S.14(1) of the Federal Excise Act, 2005, was beyond the prescribed period of limitation---Impugned orders, passed by Additional Collector and Collector, stood vacated and cancelled.

Umar Rasheed and Shoaib Ahmed Sheikh for Appellants.

Muhammad Altaf Khan, D.R. for Respondent.

2018 P T D (Trib.) 2428

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Nadeem Dar, Accountant Member

Messrs PAKISTAN TELECOM EMPLOYEES TRUST, ISLAMABAD

Versus

C.I.R., R.T.O., ISLAMABAD

I.T.As. Nos.815/IB to 817/IB and 822/IB to 824/IB 2016, decided on 27th February, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 2(4), 120, 122(5-A)(6)(9), 53 & 239(10), Second Sched., Part-I, Cl.(57)(3)(ii), Sixth Sched., Part-II---Pakistan Telecommunication (Re-organization) Act (XVII of 1996), Ss.2(t), 36(3), 52 & 53---Amendment of assessment---Exemption---Taxpayer, an employees Trust, had been filing its Tax returns since its inception, claimed exemption being an 'Approved Pension Fund' under Sixth Schedule to Income Tax Ordinance, 2001---Commissioner Inland Revenue, rejected said request of taxpayer by holding that, taxpayer was a separate entity from the "Pension Fund"---Taxpayer contested amended assessments before the Commissioner (Appeals) which were dismissed---Validity---In terms of S.2(4) of the Income Tax Ordinance, 2001, an approved 'Superannuation Funds' would mean a fund or part thereof which had been approved by Commissioner Inland Revenue, under Part-II of Second Schedule to Income Tax Ordinance, 2001; whereas in terms of S.239(10) of the said Ordinance, the approval granted by the Commissioner Inland Revenue to the Employees Trust, was to continue unless revoked, cancelled or repealed by Income Tax Ordinance, 2001---Commissioner Inland Revenue for over 14 years consistently granted exemption certificates and department continued to treat the income exempt under Cl.(57)(3)(ii) of Second Schedule applicable to Approved Pension Fund---Appeals were allowed holding that appellant trust was exempt from tax under Cl.(57)(3)(ii) of Part-I of Second Schedule to Income Tax Ordinance, 2001 on income of assets vested therein and contributions received from Employer Company for the Trust.

1987 SCMR 1197; 2003 PTD (Trib.) 2625 and 1987 SCMR 1197 ref.

Aazar A. Hameed, FCA, Rashid Ibrahim, FCA and Muhammad Younas for Appellant.

Faisal Mushtaq Dar, D.R. for Respondent.

2018 P T D (Trib.) 2445

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Judicial Member and Muhammad Riaz, Accountant Member

AIRBLUE LTD.

Versus

COMMISSIONER INLAND REVENUE, ZONE-I

Sales Tax Appeal No.164/IB of 2016, decided on 9th March, 2017.

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

----Ss. 2(14), 2(35), 3, 4, 7, 8, 11, 33 & 34---SRO No.550(I)/2006, dated 5-6-2006 and S.R.O. No.490(I)/2004, dated 12-6-2004---Adjustment of inadmissible input tax credits---Assessing Officer examined monthly sales tax returns filed by appellant company and observed that appellant had adjusted inadmissible input tax credits on the invoices of food, beverages and services during relevant period---Assessing Officer being not satisfied with the reply submitted by the appellant in response to show-cause notice proceeded to pass order-in-original under S.11(2) of Sales Tax Act, 1990 along with default surcharge and penalty---On filing appeal against order-in-original, appellate authority below remanded the matter for de novo considerations---Appellant had filed appeal before Tribunal against remand order---Appellant, engaged in the services of air travelling of passengers within territorial jurisdiction, which were subject to Federal Excise Duty, was entitled for the adjustments of input tax in terms of S.7 of Sales Tax Act, 1990 read with SRO 550(I)/2006, dated 5-6-2006 on food, beverages and other services---Collection of Federal Excise Duty on services rendered by airline within territorial jurisdiction of Pakistan was deemed as the output tax payable on supplies (Supply of Services) under Sales Tax Act, 1990---Since the input tax attributed was having direct nexus with the taxable activity, the S.R.O. No. 490(I)/2004, dated 12-6-2004, could not be invoked---Input tax suffered in rendering of services was admissible---Assessing Officer, had failed to point out a single instance of misuse or personal usage on the part of Management of appellant in respect of input tax incurred---S.R.O. No.490(I)/2004, dated 12-4-2004 provided exception to the items on which the input tax was not admissible---Said exception was "goods" otherwise than 'stock in trade'---Input tax paid on the goods and services, was admissible as used within flights and allied flight operation within the territorial jurisdiction of Pakistan because its use was in the taxable activity and furtherance of business.

2001 PTD 2097; 2014 PTD 1285; 2001 PTD 2097 and 2014 PTD 1285 ref.

(b) Words and phrases---

----'Stock-in-trade'---Meaning explained.

Attock Cement Pakistan Ltd. v. Collector of Customs and Central Excise 2005 PTD 779; Black's Law Dictionary; Shorter Oxford English Dictionary; Chambers English Dictionary; Concise Oxford Dictionary of Current English and Webster's Third New International Dictionary ref.

Tahir Razzaque Khan, FCA, Authorised Representative and Shaheer Bin Tahir for Appellants.

Imran Shah, FCMA, Departmental Representative for Respondent.

2018 P T D (Trib.) 2455

[Inland Revenue Appellate Tribunal]

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

Haji ABDULLAH AND SONS

Versus

COMMISSIONER INLAND REVENUE, ZONE-I, RTO, HYDERABAD

I.T.A. No.1337/KB of 2016, decided on 7th April, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 127 & 131---Limitation Act (IX of 1908), S.3---Appeal against order of Assistant Commissioner Inland Revenue---Dismissal of appeal being barred by time---Validity---Provision of S.3, Limitation Act, 1908, was mandatory in nature in that every appeal/suit instituted after the period of limitation, would, subject to the provisions of Ss.4 to 25 of said Act, be dismissed, although limitation had not been set up as a defence---If from the memo of appeal, it would appear to be barred by limitation, the appeal would have to be rejected---Limitation being a matter of statute and the provision being mandatory, it could not be waived---Valuable right would accrue to other side by lapse of time---Each day's delay was to be satisfactorily explained as of necessity---Law would support vigilant and not indolent---Any delay in filing appeal was to be considered negligence on the part of the party, thus, the other party should not be penalized for such negligence---Appeal filed by the taxpayer before CIR(A), being barred by limitation, was rightly dismissed in limine---Order of CIR(A), did not require inter-ference by the Tribunal.

Market Committee v. Cantonment Board, Shorkot 2001 SCMR 639 ref.

A.S. Jaffry for Appellant.

Ahmed Nadeem, D.R. for Respondent.

2018 P T D 654

[Islamabad High Court]

Before Miangul Hassan Aurangzeb, J

WI-TRIBE PAKISTAN LTD.

Versus

DEPUTY COMMISSIONER INLAND REVENUE and others

W.P. No.930 of 2016, decided on 30th January, 2018.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170 & 127---Constitutional petition before the High Court against rejection of application for issuance of refunds---Maintainability---Alternate remedy available in the statute---Impugned order rejecting application of petitioner-company for issuance of refunds was passed under S. 170 of the Income Tax Ordinance, 2001---Section 127 of the Ordinance provided that any person dissatisfied with any order passed by the Commissioner or an officer of Inland Revenue under S. 170 may prefer an appeal to the Commissioner (Appeals) against the order ---Alternative remedy of filing appeal being available to the petitioner-company against the impugned order, Constitutional petition was not maintainable.

Sayyid Murtaza Ali Pirzada for Petitioner.

Babar Bilal for Respondents Nos.1 to 3.

S. Farooq for Respondent No.1/FBR.

ORDER

MIANGUL HASSAN AURANGZEB, J.---Through the instant writ petition, the petitioner, Wi-tribe Pakistan Limited, impugns the order dated 03.02.2016, passed by respondent No.1 (The Deputy Commissioner, Inland Revenue, Islamabad), whereby the petitioner's application for the issuance of refunds under section 170 of the Income Tax Ordinance, 2001 ("the 2001 Ordinance") for the tax years 2011 and 2013, was rejected.

1. Learned counsel for the petitioner submitted that the petitioner is providing long distance international and wireless local loop internet services in Pakistan, and has been issued a license by the Pakistan Telecommunication Authority; that the petitioner has regularly been filing income tax returns; that the petitioner had claimed refund of various amounts for the tax years 2011 to 2013, and in this regard, on 06.07.2015, applications were submitted under section 170 of the 2001 Ordinance; that instead of processing the petitioner's refund applications, the respondents department started verification of the tax deductions; that even after the verification was completed, a refund order was not passed within a period of sixty days; that respondent No.3 started proceedings for the amendment of the assessment against the petitioner just to deprive him of the benefit of the refunds; that the refunds claimed by the petitioner were wiped out due to the tax demands created against the petitioner; that the appeals filed by the petitioner against the amendment orders are pending before the Commissioner (Appeals); that tax credits were allowed to the petitioner after rectification applications were filed; that after adjusting the demand created against the petitioner, the refund amount for the tax years 2011 and 2013 was determined; that since the refund was not genuinely determined, the petitioner filed Writ Petition No.231/2015; that during the pendency of the said writ petition, the petitioner's refund applications were turned down, vide impugned order dated 03.02.2016; that thereafter, respondent No.1 called upon the petitioner, vide notice dated 24.02.2016, to pay the arrears of tax by 01.03.2016; and that the said impugned order dated 03.02.2016 is wholly unlawful, and liable to be struck down under the constitutional jurisdiction of this Court.

2. On the other hand, learned counsel for respondents Nos.1 to 3 raised a preliminary objection to the maintainability of this petition. Learned counsel for the said respondents submitted that the impugned order dated 03.02.2016 was passed under section 170(4) of the 2001 Ordinance; that against the rejection of the application for refund, an alternative remedy of an appeal is provided under section 127(1) of the 2001 Ordinance; that in view of the said alternative remedy, the instant petition is not maintainable; and that the petitioner has raised disputes which required a factual inquiry. Learned counsel for respondents Nos.1 to 3 prayed for the writ petition to be dismissed.

3. I have heard the contentions of the learned counsel for the contesting parties.

4. I propose first to decide the objection to the maintainability of this petition raised by the learned counsel for respondents Nos. 1 to 3.

5. Perusal of the impugned order dated 03.02.2016 shows that the same has been passed under section 170 of the 2001 Ordinance. Vide the said order, the petitioner's applications for refunds for the tax years 2011 and 2013 have been rejected. Section 127 of the 2001 Ordinance provides that any person dissatisfied with any order passed by the Commissioner or an officer of Inland Revenue under section 170 may prefer an appeal to the Commissioner (Appeals) against the order. Since the alternative remedy of filing an appeal was available to the petitioner against the impugned order dated 03.02.2016, I find the instant petition not to be maintainable.

6. The petitioner's entire case is that after determining the refund amount of Rs.6,874,109/- for the tax year 2011 and Rs.24,859,966/- for the tax year 2013, the petitioner's applications for refund could not have been rejected on the basis of recommendations made by the Federal Tax Ombudsman. I am of the view that this is a matter that the petitioner could have agitated before the appellate forum. This is not a case of absence or excessive jurisdiction so as to warrant the filing of a writ petition.

7. In view of the above, this petition is dismissed as not maintainable.

MWA/28/Isl Petition dismissed.

2018 P T D 719

[Islamabad High Court]

Before Aamer Farooq, J

FAUJI FERTILIZER COMPANY LTD.

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 3 others

W.P. No.3333 of 2017, decided on 23rd October, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 147 & 205---Advance tax paid in quarterly installments---Tax Officer, powers of---Scope---Notices issued to petitioner-company seeking proof of basis for estimation of advance tax paid in installments---Legality---Perusal of S.147 of the Income Tax Ordinance, 2001 led to the conclusion that once estimate (of advance tax) was filed by the tax payer whether right or wrong, there was no provision which provided any authority to the Taxation Officer to discard such estimate and ask the taxpayer to continue paying the tax in accordance with the provision of subsection (1) of S. 147 read with subsection (4) ---No provision in the Income Tax Ordinance, 2001 empowered the tax authorities to question the correctness of the estimates filed by the tax payer- and only recourse was when the tax returns were filed and in the same it was found that the estimate was incorrect then additional surcharge under S.205 of the Ordinance could be imposed by the tax department ---Constitutional petition was allowed accordingly and impugned notices issued to the petitioner-company were set-aside.

Messrs Pak Telecom Employees Trust (PTET) v. Federation of Pakistan and others W.P. No.2447 of 2016; Karachi Port Trust Karachi v. Commissioner Inland Revenue, Karachi 2011 PTD 1996 and Commissioner of Income Tax and another v. Dawood Hercules Chemicals Ltd. 2007 SCMR 227 = 2006 PTD 2498 ref.

Sirdar Ahmed Jamal Sukhera for Petitioner.

Babar Bilal for Respondents.

Date of decision: 23rd October, 2017.

JUDGMENT

AAMER FAROOQ, J.---This judgment shall decide the instant petition as well as Writ Petition No. 4803/2016 as common questions of law and facts are involved.

1. The petitioners are taxpayers who under section 147 of the Income Tax Ordinance, 2001, (the Ordinance) are liable to pay advance tax. The petitioners are aggrieved of notices issued by the respondent department for providing proof of payment of the installments and basis for assessment of tax liability.

2. Learned counsel for the petitioner, inter alia, contended that the issue raised in the instant petition is the same as was in Writ Petition No. 2447/2016, titled "Messrs Pak Telecom Employees Trust (PTET) v. Federation of Pakistan and others". In light of the referred judgment, it was requested that the instant petition be allowed.

3. Learned counsel for the respondent department, inter alia, contended that there is no justification or basis for filing estimation for the tax year 2017. It was further contended that through the notice the respondent department is seeking proof of payment of the installments for the advance tax with respect to the relevant quarters.

4. The facts leading to filing of the instant petition have been mentioned with brevity hereinabove, therefore, need not be recapitulated. The petitioners are aggrieved of notices dated 27.12.2016 and 27.09.2017, whereby proof for payment of advance tax for quarter ending December, 2016 and September, 2017 as well as justification and basis for estimation has been sought. Under the law i.e. section 147(1) of the Ordnance, a taxpayer is liable to pay advance tax for the year in accordance with the section. In this behalf, tax is to be paid in four quarterly installments. In case of company or association of persons, advance tax is to be paid with respect to September quarter, on or before the 25th day of September and in case of December quarter, on or before the 25th day of December. The petitioners in both the petitions categorically submitted that the referred installments have been paid and in this behalf along with petition has appended the proof thereof. The question regarding justification or basis for filing of the estimation by the petitioners cannot be sought by the respondent department at this stage. The matter regarding estimation of payment and installments was dealt in detail by this Court after discussing relevant case-law and provisions in case titled "Messrs Pak Telecom Employees Trust (PTET) v. Federation of Pakistan and others" (W.P. No. 2447/2016) vide judgment dated 18.07.2016. This Court in the referred judgment held as follows:--

"However, under subsection (6) of section 147 ibid, if any Tax Payer who is required to make payment of advance tax under Subsection (1) submit an estimate before the last installment is due that its tax liability for the relevant tax year is less than the amount it is required to pay under Subsection (1). The purpose and scope of advance tax was lucidly explained by the Hon'ble Lahore High Court in case titled "Lone Cold Storage, Lahore v. Revenue Officers, Lahore Electric Power Co. and others" (2010 PTD 2502). The Hon'ble Lahore High Court after discussing various judgments on the subject held as follows:--

1. Advance Tax is, therefore, an estimated amount of proposed income tax to be paid by the taxpayer at the close of the Tax Year. After the said estimation the law requires the taxpayer to pay the said estimated amount during the currency of the Tax Year in four quarters. The estimate is to be made by the taxpayer and is not for the tax authorities to question or object till the close of the Tax Year when the law authorizes the tax authorities to verify the advance tax paid and impose additional tax if the advance tax paid has been less than 90% of the total income tax liability of the taxpayer (section 205 of the Ordinance), The obligation of the Tax Payer and filing of the estimation and its consequences was discussed in detail by the Hon'ble Division Bench of Sindh High Court in case titled "Commissioner (Legal) Inland Revenue v. E.N.I. Pakistan (M) Ltd., Karachi" (2011 PTD 476) and held as follows:

2. A perusal of subsection (1) of section 147 reveals that it provides that every taxpayer subject to the provisions of subsection (2) which provides that those individuals whose latest taxable income excluding the heads of income mentioned in the exclusions (a) to (d) provided in subsection (1) is Rs.500,000 or more, shall be liable to pay advance tax. Subsection (4) provides how the advance tax payable by a company or an association of persons shall be computed, Subsection (4A) provides that the companies and association of persons shall estimate their tax payable for the relevant tax year at any time before the last installment is due and in case they find that the tax payable is likely to be more than the amount they are required to pay under the formula provided in subsection (4) then they shall furnish an estimate of the amount of the tax payable by them and thereafter pay such amount after adjustment for the amount if any already paid in terms of subsection (4), whereas subsection (6) provides that if any taxpayer who was required to make payment of advance tax estimates before the last installment is due, that the tax payable by him for the relevant tax year is likely to be less than the amount required to be paid under subsection (1), he may furnish to the Commissioner an estimate of the amount of the tax payable by him and thereafter pay such estimated amount. A comprehensive reading of subsection (6) also leads to the conclusion that all taxpayers who are liable to pay advance tax under subsection (1), are entitled to the benefit provided in this section and companies and association of persons have not been excluded from the benefit given to the taxpayers under this subsection. What the Assessing Officer has done is that he wants to get the benefit of the subsection (4-A) if taxpayer estimates that his tax is likely to be more than the tax payable under subsection (4) but does not want to give benefit to the corporate taxpayer if he estimates that the tax payable by him for the relevant tax year is estimated to be less than the tax payable by him. We may also refer to subsection (7) of section 147 and section 205 of this Ordinance which provide deterrents to the taxpayers for filing a wrong estimate under subsection (6) as subsection (7) of section 147 provides that if there is any shortfall the same may be recovered from the taxpayer as if it was a tax due under an assessment order and subsection (1B) of section 205 provides if the taxpayer fails to pay advance tax under subsection (4A) or subsection (6) of section 147 or the tax paid is less than ninety percent of the tax chargeable for the relevant tax year, he shall be liable to pay default surcharge at the rate of KIBOR plus three percent per quarter.

Similarly, in case titled "Karachi Port Trust, Karachi v. Commissioner Inland Revenue, Karachi" (2011 PTD 1996) the Hon'ble Division Bench of Sindh High held as follows:--

1. A bare reading of subsection (6) of section 147 leads to the conclusion that a taxpayer who is required to make payment of advance tax under subsection (1), if he estimates that the tax due for the relevant tax year is likely to be less than the amount he is required to pay under subsection (1), he may file an estimate of the amount of tax payable by him and thereafter pay such estimated amount. From a perusal of this subsection it is clear that this subsection is only applicable to a person who is required to pay tax under subsection (1) and the applicant before us fulfills that condition. We have been unable to understand the logic of the argument of the learned counsel for the respondent that subsection (6) has to be read with subsection (1) and since subsection (1) does not apply to the applicant's case, therefore, subsection (6) will not apply and he cannot file an estimate. We are clear in our minds that the only condition to file an estimate under subsection (6) is that subsection (1) should apply and the taxpayer estimates that the tax Payable by him is likely to be less than the amount payable by him under subsection (1), and once these two conditions are fulfilled then estimate can be filed and they apply in the applicant's case, so the estimate has been rightly filed.

2. Now we come to the contention of the learned counsel for the respondent and the decision given by the Tribunal that the NIL estimate cannot be filed under subsection (6). From a perusal of the order of the Tribunal it is seen that the reasons given by the Tribunal are that subsection (6) of section 147 does not envisage filing of a NIL estimate because it clearly provides that the taxpayer may furnish to the Commissioner an estimate of the amount of the tax payable by him and thereafter pay such estimated amount, as reduced by the amount, if any, already paid under subsection (1), in equal installments, therefore, estimate has to be in respect of reduced amount of tax payable by the taxpayer and not NIL amount of tax because according to the learned Tribunal this section does not envisage a situation where a taxpayer estimates that no advance tax is likely to be payable; therefore, according to the Tribunal, the estimate of NIL advance tax payment filed by the applicant was not in consonance with the provision of subsection (6) of section 147 and hence cannot be termed as a valid estimate within the meaning of section 147(6). We fail to see any logic in this contention because what subsection (6) requires is that the tax will become payable on the basis of the estimate filed and if no tax is payable then it will not mean that such estimate cannot be filed as there is no provision in subsection (6) prohibiting that an estimate cannot be filed under which no tax is payable. We will substantiate this point by drawing an analogy that if it was not the first installment due but the third installment and the tax had already been paid under the first and second installment which was enough to cater to the entire four tax installments in accordance with the estimate the taxpayer would not be required to pay any further tax but that does not mean that he cannot file such estimate. This contention of the learned counsel and the Tribunal is not backed by any statutory provision and is hereby rejected, Our view is also supported by the judgment of Delhi High Court in the case of J.K. Synthetics Ltd., quoted supra.

3. Now we will examine if a wrong estimate is filed then what are the options available to the Taxation Authorities to take action for filing such wrong estimate. A perusal of section 147 leads to the conclusion than once such estimate is filed whether right or wrong, there is no provision which provides any authority to the Taxation Officer to discard this estimate and ask the taxpayer to continue paying the tax in accordance with the provision of subsection (1) of section 147 read with subsection (4) of section 147. The learned counsel for the respondent has also not been able to point out any provision of law which provides such authority and therefore we are of the considered opinion that once an estimate is filed the only option available to the Taxation Authority is to levy default surcharge under subsection (1B) of section 205 after completing the assessment, if such default surcharge is leviable on the basis of the assessment. The language of subsection (7) of section 147 is also clear which provides an authority to the Taxation Authorities to recover advance tax not paid as if it was a tax due under an assessment order so that provisions of section 137(2) are not violated. However, we are inclined to agree with the learned counsel for the applicant that it does not provide them an authority and jurisdiction to pass any order for the recovery of such tax and therefore we are of the considered opinion that the order passed by the Taxation Officer is without proper jurisdiction and authority and cannot be sustained.

The Hon'ble Supreme Court of Pakistan in case titled "Commissioner of Income Tax and another v. Dawood Hercules Chemicals Ltd." (2007 SCMR 227 = 2006 PTD 2498) held that where estimation was filed after due date on which the last installment was to be paid the same was not valid.

It was further observed by this Court as follows:--

"There is no provision in law which empowers the Tax Authorities to question the correctness of the estimates filed by the Tax Payer and only recourse is when the tax returns are filed and in the same it is found that the estimate is incorrect then additional surcharge under section 205 of the Ordinance can be imposed by the Department.

Since in the instant petition as well as Writ Petitions Nos.2538/ 2016 and 2447/2016 estimate was filed before the payment of last installment due, therefore, the same are in accordance with law. There is no prescribed way of filing estimates in the Ordinance. As stated above, there is no provision in the Ordinance for the tax department to question veracity of the estimate, therefore, petitioners in the said petitions are to pay 4th installment in accordance with the estimate and in case they have worked out that nothing is outstanding then not to pay any amount. However, as mentioned above, in case when the tax returns are filed by the petitioners in the referred petitions and the estimate turns out to be incorrect the respondent department shall be entitled to impose additional surcharge as provided in section 205 of the Ordinance. The recovery notices and demand for payment of the 4th quarterly, installment of advance tax in the referred petitions are not sustainable".

1. In view of the above decision of this court, if the estimation filed by the petitioner is incorrect, the respondent department may proceed against the petitioner under section 205 of the Ordinance when the tax returns are filed by it. However, at this stage, if the estimation has been filed within the prescribed time period and installments are being paid, no action can be initiated by the department against the petitioners with respect to the referred issue.

2. For the foregoing reasons, the instant petition as well as W.P. No. 4803 of 2016 is allowed; consequently, notices dated 27.12.2016 and 27.09.2017, are set aside being illegal and without lawful authority.

MWA/27/Isl. Petitions allowed.

2018 P T D 767

[Islamabad High Court]

Before Athar Minallah and Miangul Hassan Aurangzeb, JJ

Messrs SHV ENERGY PAKISTAN (PVT.) LTD.

Versus

APPELLATE TRIBUNAL INLAND REVENUE and 3 others

Sales Tax Reference No. 264 of 2011, decided on 7th February, 2018.

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

----Ss.2(39), 3 & 13---Levy and recovery of sales tax---Scope---Supply---Scope---In order to attract levy and charge of sales tax under Sales Tax Act, 1990, transfer of right to dispose of goods as an owner was essential to constitute ‘taxable supply’ in the context of S.3 of Sales Tax Act, 1990---Question of entitlement in respect of adjustment of input tax would be relevant only if it was established that disposition or transaction fell within the ambit of ‘supply’.

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

----Ss.2(39), 3, 13 & 47---Taxable supply---Adjustment of input tax from output tax---Scope---Applicant companies were engaged in purchase of Liquefied Petroleum Gas (LPG) from oil exploration and production companies and then sell the Gas in cylinders of various capacities to distributors---Cylinders were supplied to distributors against refundable security deposit---Assessing officer issued notice claiming input tax relating to purchase of cylinders for depositing sales tax in exchequer---Validity---Cylinders used for transportation of supply of LPG were returned by distributors to applicant companies---No transfer in any mode whatsoever of any right to dispose of the cylinders as owner existed nor consideration was involved for such purpose---‘Refundable security deposit’ did not fall within the express ‘consideration’---Use of cylinders was not a disposition for consideration, nor it involved transfer of a right to dispose of as owner---LPG supplied by applicant companies attracted levy and charge of sales tax under S.3 of Sales Tax Act, 1990, while transaction relating to cylinders was of a nature which was excluded from the scope thereof---Applicant companies were not entitled to claim, adjust or deduct input tax from output tax in the relevant tax period---Use of cylinders for supply of LPG by applicant companies did not attract levy of charge of sales tax under Sales Tax Act, 1990 and were not entitled to claim and adjust input tax from output tax in respect of cylinders---Such inadmissible input tax was recoverable along with default surcharge in accordance with S.34 of Sales Tax Act, 1990---Reference was disposed of accordingly.

Ali Sibtain Fazli, ASC, Malik Sardar Khan Awan, AHC, Hasham Ahmed Khan, AHC and Abad Ur Rahman, AHC for Applicants.

Mst. Dr. Farhat Zafar, ASC, Sh. Anwar Ul Haq, ASC and Hafiz Munawar Iqbal, AHC for Respondents.

Date of hearing: 26th October, 2017.

ORDER

ATHAR MINALLAH, J.---Through this consolidated judgment we shall decide the instant Sales Tax Reference, along with S.T.R. No.13/2012 titled 'Commissioner Inland Revenue (Zone-I) v. Messrs SHV Energy Pakistan (Pvt.) Ltd. and S.T.R. No.07/2013 titled 'Messrs Capgas (Pvt.) v. Appellate Tribunal Inland Revenue, etc., since common questions of law have been proposed for our consideration.

1. Sales Tax Reference No.264/2011 and Sales Tax Reference No.07/2013 have been filed by the taxpayers, namely, Messrs SHV Energy Pakistan (Pvt.) Ltd. and Messrs Capgas (Pvt.) Ltd. respectively (hereinafter referred to as the 'applicant Companies') while through Sales Tax Reference No.13/2012 the Department, through the Commissioner Inland Revenue (Zone-I), has proposed questions of law for our consideration. The questions of law in all the three References are common.

2. The facts in brief are that the applicant Companies are registered under the Sales Tax Act, 1990 (hereinafter referred to as the 'Act of 1990'). They are, inter alia, engaged in the purchase and sale of Liquefied Petroleum Gas (hereinafter referred to as the 'LPG'). Both the applicant cpmpanies have been granted respective licences by the competent authority under Rule 7 of the Liquefied Petroleum Gas (Production and Distribution) Rules, 2001. The said rules have been made by the Federal Government in exercise of powers conferred under section 2 of the Regulation of Mines and Oilfields and Mineral Development (Government Control) Act, 1948. The applicant Companies purchase LPG from the oil exploration and production companies or refineries. The LPG is stored in the facilities and tanks established by the applicant Companies before its onward sale to the Distributors. The LPG is sold and delivered to the Distributors through the mode of 'decanting'. The LPG is decanted into cylinders of various capacities. The LPG is then supplied to the distributors in cylinders and the latter is required to deposit with the applicant Companies an amount as refundable security for the return of the said cylinders. The said 'refundable security deposit' is released to the distributors after the return of the cylinders. The refundable security deposits are shown in the annual balance sheets of the applicant Companies as a 'liability'. The cylinders, in which LPG is supplied to the Distributors, are owned by the applicant Companies and at no stage is their ownership intended to be transferred. The applicant Companies were issued respective show-cause notices. Messrs Capgas (Pvt.) Ltd. was issued a show-cause notice, dated 12-03-2012, wherein it was alleged that the latter had claimed input tax amounting to Rs.5.644 million relating to the purchase of cylinders during the period from July-2007 to July-2011. The said show-cause notice was adjudicated by the Deputy Commissioner Audit-III, Zone-I vide Order-in-Original No.13/2012, dated 25-06-2012. An appeal was preferred and the same was disposed of by the learned Commissioner Inland Revenue (Appeals), Islamabad (hereinafter referred to 'CIR(A)') vide Sales Tax Order-in-Appeal No.28/2012, dated 10-09-2012. The applicant Companies preferred appeals before the learned Appellate Tribunal Inland Revenue, Islamabad (hereinafter referred to as the 'Tribunal') which were dismissed vide judgment dated 10-09-2005. In the case of Sales Tax Reference No.264/2011 and Sales Tax Reference No.13/2012, show-cause notice dated 02-03-2010 was issued by the Additional Collector Sales Tax, alleging that the Applicant Companies had supplied cylinders to its Distributors and that the leviable sales tax was not deposited in the exchequer. The said show-cause notice was adjudicated by the Additional Commissioner (Audit-III) vide Order-in-Original No. 6/2010, dated 29-06-2010. The appeal preferred by the applicant Company was disposed-of vide Sales Tax Order-in-Appeal, dated 04-12-2010. The applicant Company preferred an appeal before the learned Tribunal and the same was disposed-of vide judgment dated 30-04-2011. The learned Tribunal has held that the supply of LPG in cylinders to the Distributors attracts levy and charge of sales tax while the cylinders itself are excluded from its scope. Nevertheless, it has been further held that since sales tax is not levied or charged to the extent of the cylinders, therefore, the applicant Companies were not entitled to claim any input tax in relation thereto. The applicant Companies as well as the Department have raised questions of law for our consideration, arising out of the judgments rendered by the learned Tribunal.

3. The learned counsel appearing on behalf of the applicant Companies have argued that; the cylinders are used for the purpose of supplying LPG to the Distributors and, therefore, the learned Tribunal has rightly concluded that, to the extent of such cylinders, sales tax is not attracted; the learned Tribunal, however, has erred in holding that the applicant Companies are not entitled to claim input tax; the learned Tribunal has travelled beyond the show-cause notice by directing that inadmissible input tax be recovered from the applicant Companies; the adjustment of input tax, if any, has attained finality and, therefore, the same cannot be recovered.

4. The learned counsels appearing on behalf of the Department, on the other hand, have contended that; the LPG is supplied in the containers and, therefore, the amounts deposited as security form part of the value for the purposes of charge and levy of sales tax; the learned Tribunal has erred in interpreting the provisions of the Act of 1990; the definition of the expression 'supply' includes the delivery of cylinders to the distributors in the instant case; cylinder falls within the definition of 'goods' and its disposition would therefore attract the definition of 'supply' thus attracting the charge of sales tax under section 3 of the Act of 1990.

5. The learned counsel have been heard and the record perused with their able assistance.

6. It is an admitted position that the applicant Companies purchase and sell LPG. The sale and supply of LPG is made through the Distributors. For the purpose of supply of LPG to the Distributors, it is decanted from the storage tanks to cylinders having various capacities. The cylinders are returned by the Distributors to the applicant Companies. At the time of taking delivery the Distributors deposit an amount as security which is referred to as 'refundable security deposit'. This refundable security deposit is returned by the applicant Companies upon receiving the cylinders from the Distributors. The cylinders are, therefore, exclusively used as containers for the supply of LPG. The Department is of the view that the disposition of the cylinders attracts the levy and charge of sales tax under section 3 of the Act of 1990 while the learned Tribunal has held otherwise. On the other hand, it is the case of the applicant Companies that though the learned Tribunal has rightly concluded that the disposition of cylinders is not liable to payment of sales tax but it has erred by holding that the input tax relating thereto was not admissible. In order to answer the questions raised for our consideration it would be advantageous to survey the relevant provisions of the Act of 1990.

7. The Act of 1990 was enacted so as to consolidate and amend the law relating to the levy of tax on the sale, importation, exportation, production, manufacture or consumption of goods. Section 2 defines various expressions. Subsection (12) of section 2 defines 'goods' as including every kind of movable property other than actionable claims, money, stocks, shares and securities. 'Input tax' is defined in section 2(14) as, inter alia, meaning tax levied under the Act of 1990 on supply of goods to a person or on the import of goods. The expression 'sales tax' is defined in sub section (29A) of section 2 and 'tax' in subsection (34) ibid. The expression 'supply' is defined in subsection (33) of section 2. The definition of supply, as it exists today, was amended through the Finance Act, 2008, which was assented on 26-06-2008. Before the amendment, subsection (33) of section 2 was as follows:--

"(33) "supply" includes sale, lease or other disposition of goods carried out for consideration and also includes-

(a) putting to private, business or non-business use of goods acquired, produced or manufactured in the course of business;

(b) auction or disposal of goods to satisfy a debt owed by a person [and]

(c) possession of taxable goods held immediately before a person ceases to be a registered person

(d) \\

[Provided that the Federal Government, may by notification in the official Gazette, specify such other transactions which shall or shall not constitute supply]"

The definition inserted through the Finance Act, 2008 is as follows:--

"(33) "supply" means a sale or other transfer of the right to dispose of goods as owner, including such sale or transfer under a hire purchase agreement, and also includes -

(a) putting to private, business or non-business use of goods produced or manufactured in the course of taxable activity for purposes other than those of making a taxable supply;

(b) auction or disposal of goods to satisfy a debt owed by a person;

(c) possession of taxable goods held immediately before a person ceases to be a registered person [; and]

[(d) in case of manufacture of goods belonging to another person, the transfer or delivery of such goods to the owner or to a person nominated by him:

Provided that the Federal Government may, by notification in the official Gazette, specify such other transactions which shall or shall not constitute supply;]"

1. The expressions 'taxable activity', 'taxable goods', 'taxable supply', 'time of supply', 'value of supply' have been defined in subsections (35), (39), (41) and (44) of section 2 respectively. The charging section is section 3 and subsection (1) thereof provides that subject to the provisions of the Act of 1990, there shall be charged, levied and paid a tax known as 'sales tax' at the rate of 17% of the value of, (a) taxable supply made by a registered person in the course or furtherance of any taxable activity carried out by the latter and, (b) goods imported into Pakistan. Section 4 describes such goods which are charged tax at the rate of zero percent. Section 6 prescribes the time and manner of payment of sales tax. Section 7 describes the manner for determining the tax liability of a registered person and it provides that, for the purpose of such determination, a registered person shall be entitled to deduct input tax paid or payable during the tax period for the purposes of taxable supplies made or to be made by the latter from the output tax. The expression 'output tax' is defined in subsection (20) of section 2 as, inter alia, tax levied under the Ordinance of 2002 on the supply of goods made by a registered person. The determination of tax liability under section 7 is subject to sections 8 and 8B ibid. Section 8B specifies the eventualities in respect of the scope of adjustment of input tax. Section 10 provides for the mechanism and conditions relating to the refund of input tax.

2. A plain reading of the above provisions clearly shows that the sales tax is levied and charged under section 3 of the Act of 1990. Section 3 is the charging section and specifies the scope of tax known as 'sales tax'. The charge, levy and payment of sales tax is attracted when a registered person makes taxable supplies in the course or furtherance of any taxable activity carried out by such registered person. It is noted that for the purposes of levy, charge and payment of sales tax, the value of supply is also required to be ascertained since it forms the basis for the calculation of the tax. In the context of the levy, charge and /payment of sales tax under section 3 there are, inter alia, three fundamental factors which attract the levy and charge, i.e. firstly, there must be a taxable supply, secondly, the value of taxable supply must be determined and, thirdly, that the taxable supply must have been made in the course or furtherance of any taxable activity by a registered person. As noted above, the expressions 'taxable supply', 'value of supply' and 'taxable activity' have been explicitly defined under the Act of 1990. 'Taxable supply' has been defined as meaning supply of taxable goods made under section 13...". Section 2(39) defines 'taxable goods' as meaning all goods other than goods which have been exempt under section 13. The definition of the expression 'supply', before and after its amendment through the Finance Act, 2008, has been reproduced above. The definition prior to the amendment, made through the Finance Act, 2008, included within its ambit the sale, lease or other disposition of goods carried out for consideration or putting to private, business or non-business use of goods acquired, produced, manufactured in the course of business. The definition after the amendment is exclusive i.e. meaning a sale or other transfer of the right of disposal of goods as owner, including sale or transfer under purchase agreement or putting to private, business or non-business use of goods produced and manufactured in the course of taxable activity for the purpose of other than those making a taxable supply. The argument raised by the learned counsel for the Department to the effect that mere 'disposition' is sufficient to constitute 'supply' of taxable goods would tantamount to giving a wrong interpretation of the definition of 'supply' under the Act of 1990, whether before or after the amendment through the Finance Act, 2008. The definition prior to the amendment did not envisage mere disposition of goods but it had to be for 'consideration'. The amendment made through the Finance Act, 2008 removed even the slightest ambiguity by explicitly restricting the definition to sale or other transfer of the right to dispose of goods as an owner including such sale or transfer under hire purchase agreement. The expressions 'disposition' and 'consideration' are not defined in the Act of 1990. The said two expressions are defined in the Black's Law Dictionary Eighth Edition as follows.

"Disposition (dis-pa-zish-an), n. 1. The act of transferring something to another's care or possession, esp. by deed or will; the relinquishing of property, a testamentary disposition of all the assets."

"Consideration, n. 1. Something (such as an act, an forbearance, or a return promise) bargained for and received by a promisor from a promise; that which motivates a person to do something, esp. to engage in a legal act. Consideration, or a substitute such as promissory estoppels, is necessary for an agreement to be enforceable."

1. It is obvious from the above meaning of the two expressions that the definition of 'supply' even before the amendment made through the Finance Act, 2008 definitely had a nexus with the sale or other transfer of the right to dispose of goods as an owner. The essential factor was transfer of the right of disposal of goods as an owner and not merely giving temporary possession for a limited purpose. A combined reading of the above highlighted provisions, therefore, unambiguously shows that in order to attract the levy and charge of sales tax under the Act of 1990, transfer of the right to dispose of goods as an owner is essential to constitute 'taxable supply' in the context of section 3 ibid. Moreover, the question of entitlement in respect of adjustment of input tax would be relevant only if it is established that the disposition or transaction falls within the ambit of 'supply'. A registered person is entitled to deduct input tax paid or payable during the relevant tax period in respect of taxable supplies made or to be made by the latter from the output tax. As a corollary, if the nature of disposition of goods does not fall within the definition of 'supply' or 'taxable supply' then neither will the levy or charge of sales tax under section 3 of the Act of 1990 be attracted nor in such an eventuality would the registered person be entitled to deduct input tax from the output tax.

2. In the instant case it is an admitted position that the cylinders used for transportation of supply of LPG are returned by the Distributors to the applicant Companies. There is no transfer in any mode whatsoever of any right to dispose of the cylinders as owner nor consideration is involved for such a purpose. The 'refundable security deposit' by no stretch of the imagination falls within the expression 'consideration'. The use of cylinders, therefore, is not a disposition for consideration, nor does it involve transfer of a right to dispose of as owner. The LPG supplied by the applicant Companies indeed attracts the levy and charge of sales tax under section 3 of the Act of 1990, while the transaction relating to the cylinders is of a nature which is excluded from the scope thereof. Consequently the applicant Companies are not entitled to claim, adjust or deduct input tax from the output tax in the relevant tax period. The scheme of the Act of 1990 is based on the concept of self assessment. The registered person is under a statutory obligation to file a tax return and determine the sales tax liability without supervision or interference by the sales tax officials. Any determination of liability on the basis of erroneous or wrongful adjustment of input tax is loss to the revenue and thus recoverable. In the instant case the input claimed by the applicant Companies in relation to the cylinders was definitely inadmissible and, therefore, the learned Tribunal has rightly held that the same is recoverable under the Act of 1990. There is no force in the argument raised by the learned counsel who have appeared on behalf of the applicant Companies that the learned Tribunal was not competent to direct the recovery of input tax which was wrongly claimed and adjusted by the applicant Companies in respect of the cylinders.

3. The questions of law proposed for our consideration are answered in the light of the above discussion. In a nutshell, we hold and declare that the use of cylinders for the supply of LPG by the applicant Companies did not attract the levy and charge of sales tax under the Act of 1990 and consequently they were not entitled to claim and adjust input tax from the output tax in respect of the cylinders. Such inadmissible input tax is, therefore, recoverable along with Default Surcharge in accordance with section 34 of the Act of 1990.

4. A copy of this judgment shall be sent to the learned Tribunal under the seal of this Court.

MH/26/Isl Order accordingly.

2018 P T D 795

[Islamabad High Court]

Before Athar Minallah, J

Messrs HASHTNAGAR ARMS AND AMMUNITION DEALERS through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Commerce, Pak Secretariat, Islamabad and 3 others

W.P. No.3526 of 2017, heard on 11th January, 2018.

Customs Act (IV of 1969)---

----Ss. 79, 80, 81, 83 & 179---Notification S.R.O. No.1112(I)/2014 dated 16-12-2014---Confiscation of goods---Procedure, non-compliance of---Petitioners were arms importers and their grievance was that imported consignment of arms and ammunition was confiscated on directions of Federal Ministry of Commerce---Validity---Neither Ministry of Commerce nor Federal Government was vested with power and jurisdiction to dictate adjudicating authorities specified under Customs Act, 1969 to decide a matter in a particular manner---Confiscation of goods or imposition of penalty could only be adjudicated in the manner and that too by the authorities explicitly contemplated under Customs Act, 1969---Letter in question whereby Federal Ministry of Commerce had advised or directed confiscation of 55 consignments was issued in violation of provisions of Customs Act, 1969---High Court set aside letter in question as it was illegal, issued without lawful authority and jurisdiction---Constitutional petition was allowed in circumstances.

Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232 and M.A. Rahman v. Federation of Pakistan and others 1988 SCMR 691 ref.

Najeeb ur Rehman Abbasi for Petitioners.

Adnan Haider Randhawa for Respondent No.4.

Dr. Ms. Farhat Zafar for Collector Customs, Peshawar for Respondent.

Israr ul Haq, Assistant Attorney General.

Samroon Georage, S.O. (IMP-1) and Ata M.I. Ansari, S.O. (Litigation) M/O Commerce.

Date of hearing: 11th January, 2018.

JUDGMENT

ATHAR MINALLAH, J.---Through this consolidated judgment I intend to decide the instant petition along with following petitions:--

i. W.P. No.3650 of 2017, re: "Messrs Diamond Star Arms and Ammunition v. Federation of Pakistan, etc."

ii. W.P. No. 3651 of 2017, re: "Messrs Muhammad Nasim and Brothers Arms and Ammunition Dealers v. Federation of Pakistan etc".

iii. W.P. No. 3652 of 2017, re: "M/s Hashtnagar Arms and Ammunition Dealers v. Federation of Pakistan, etc".

iv. W.P. No. 4087 of 2017, re: "M/s Ahmad and Company Arms and Ammunition Dealers v. Federation of Pakistan, etc".

v. W.P. No. 4088 of 2017, re: "M/s Biland Khan & Co. v. Federation of Pakistan, etc".

vi. W.P. No. 4089 of 2017, re: "M/s Mian Anwar-ud-Din, Arms and Ammunition Dealers v. Federation of Pakistan, etc".

vii. W.P. No. 4090 of 2017, re: "M/s Khizar Hayat & Co. v. Federation of Pakistan, etc".

viii. W.P. No. 4091 of 2017, re: "M/s Hidayat Ullah and Brothers, Arms and Ammunition Dealers v. Federation of Pakistan, etc".

ix. W.P. No. 4092 of 2017, re: "M/s Augusta Traders, Arms and Ammunition v. Federation of Pakistan, etc".

x. W.P. No. 4281 of 2017, re: "M/s Kaka Khel Arms and Ammunition Dealers v. Federation of Pakistan, etc".

xi. W.P. No. 4279 of 2017, re: "M/s Nasir Arms and Ammunition Dealers v. Federation of Pakistan, etc".

xii. W.P. No. 4280 of 2017, re: "M/s Kohinoor Arms Co. Arms and Ammunition Dealers v. Federation of Pakistan, etc".

xiii. W.P. No. 4282 of 2017, re: "M/s Khitab Gul and Sons Arms and Ammunition Dealers v. Federation of Pakistan, etc".

xiv. W.P. No. 85 of 2018, re: "M/s National Arms Company, Arms and Ammunition Dealers v. Federation of Pakistan, etc".

1. The facts, in brief, are that the petitioners are, inter-alia, engaged in the business of import and sale of arms and ammunition. The petitioners imported consignments of arms and ammunition and filed respective Goods Declarations under section 79 of the Customs Act, 1969 (hereinafter referred to as the "Act of 1969"). The concerned officers of customs instead of processing the respective Goods Declara-tions sought advice from the Federal Board of Revenue. It appears from the record that the latter in return sought clarification from the Ministry of Commerce. The latter vide letter dated 14-09-2017 advised the relevant authorities of customs to confiscate the 55 consignments. The relevant portion of the impugned letter, dated 14-09-2017 is as follows:--

"It is to inform that after detailed deliberations on the matter, Ministry of Commerce has decided that the said 55 consignments of arms and ammunition imported by the commercial importers, held up by the Customs Authorities after 20th October, 2015, may be confiscated, being in violation of S.R.O. 1112(I)/2014, dated 16-12-2014."

The petitioners are aggrieved on account of the direction given by the Ministry of Commerce regarding confiscation of the imported consignments.

1. The learned counsel for the petitioners has contended that; imported goods can only be confiscated in the manner prescribed under the Act of 1969; the Ministry of Commerce is not empowered to dictate to an officer exercising quasi judicial functions to decide a matter in a particular manner: the Goods Declarations filed by the petitioners are required to be processed in accordance with law and. therefore, the direction to confiscate the consignment is without lawful authority and jurisdiction; proceedings under sections 79, 80 and 81 are of quasi judicial nature and, therefore, interference by the Ministry of Commerce is unwarranted; the impugned letter, dated 14-09-2017 is without lawful authority and jurisdiction.

2. The learned Assistant Attorney General has appeared along with Mr. Samroon George, S.O. (Imp-1) Ministry of Commerce. The latter was asked whether the Ministry of Commerce is competent and empowered to direct the officials exercising quasi judicial functions under the Act of 1969 to take decisions in a particular manner. He has explained in detail the restrictions imposed on the import of arms and ammunition from time to time. He has emphasized that the imports of arms and ammunition are regulated under the policy notified vide S.R.O. 1112(I)/2014. The officer was asked whether before issuing letter, dated 14-09-2017, the petitioners were afforded an opportunity of hearing or that each case was examined on the basis of the facts involved therein. He has answered in the negative.

3. The learned counsel and the representative of the respondents have been heard and the record perused with their able assistance.

4. Admittedly, the petitioners have imported arms and ammunition and for the purposes of clearance thereof respective Goods Declarations were filed in each case under section 79 of the Act of 1969. The authorities instead of processing the Goods Declarations sought clarification from the Federal Board of Revenue. The Ministry of Commerce vide letter, dated 14-09-2017 advised the authorities of customs to confiscate the 55 consignments of arms and ammunition which had been imported by commercial importers. The sole question which requires consideration by this Court is regarding the jurisdiction, powers and functions of the Ministry of Commerce in the context of the provisions of the Act of 1969. The precise question which is required to be answered is whether the Ministry of Commerce is vested with jurisdiction under the Act of 1969 to direct or advise the concerned officials exercising powers under the Act of 1969 to confiscate imported goods. In order to answer this question it would be advantageous to survey the relevant provisions of the Act of 1969.

5. The Act of 1969 is a self contained, comprehensive special statute. The object and purpose of enactment of the Act of 1969 is described in its preamble as to consolidate and amend the law relating to levy and collection of customs-duties and to provide for other allied matters. "Adjudicating authority" is defined in clause (a) of section 2 as meaning any authority competent to pass any order or decision under the Act of 1969. The definition excludes the Federal Board of Revenue, the Collector (Appeals) or the Appellate Tribunal. "Appropriate officer" is defined as the officer of customs to whom such functions have been assigned by or under the Act of 1969 or the rules made thereunder. Clause (bb) of section 2 provides that "assessment" includes provisional assessment re-assessment and any order or assessment in which the duty assessed is nil. "Officer of customs" is defined in clause (o) as meaning an officer appointed under section 3. Section 4 provides that an officer of customs appointed under section 3 shall exercise such powers and discharge such duties as are conferred or imposed on him by or under the Act of 1969 or the rules made thereunder. Section 5 empowers the Federal Board of Revenue by notification in the official gazette and subject to such limitations or conditions as may be specified therein to delegate powers by name or designation as described under clauses (a) to (d). Section 6 further empowers the Federal Board of Revenue to entrust either conditionally or unconditionally any functions of customs under the Act of 1969 to any officer of the Federal Government, Provincial Government, State Bank of Pakistan and Scheduled Banks. Subsection (2) of section 6 is couched in negative language and provides that no officer entrusted with any functions of an officer of customs under sub-section (1) shall interfere in any manner in the performance or discharge of any duty by an officer of customs in places notified under section 9. Section 16 vests the power in the Federal Government to prohibit or restrict the bringing into or taking out of Pakistan of any goods of specified description by air sea or land. Section 79 makes it mandatory for the owner of any imported goods to make entry of such goods for home consumption or warehousing or for any other approved purposes within fifteen days of the arrival of the goods by filing a true declaration thereof. The petitioners have filed respective Goods Declarations pursuant to the mandate under section 79. Sections 80 and 81 prescribes the procedure and vests the power in the concerned appropriate officers to assess the imported goods and allow them out of customs charges after duty and taxes have been assessed and paid by the importers. Subsection (1) of section 83 explicitly provides that when the owner of any goods entered for home-consumption and assessed under section 80 or 81 has paid the import duty and other charges, if any, in respect of the same the appropriate officer, if he is satisfied that the import of the goods is not prohibited or in breach of any restrictions or conditions relating to the import of such goods may make an order for clearance thereof. It is implicit in the language used in section 83 that in case the appropriate customs officer is satisfied that the goods are prohibited or have been imported in breach of restrictions then the clearance thereof may be withheld and refused. In such an eventuality section 156 specifies various punishments and offences. The penalties described under column 3 of the table given in section 156, inter-alia, includes confiscation of goods. Section 168 empowers an appropriate officer to seize goods which are liable to confiscation under the Act of 1969. Subsection (2) further provides that where any goods are seized under subsection (1) and no show-cause notice in respect thereof is given under section 180 within two months of the seizure of the goods, the same shall be returned to the person from whose possession they were seized.

6. Section 179 describes the power vested in various officers of customs in the context of adjudication. Section 180 prescribes the procedure for the purposes of confiscation of goods or imposition of penalties. The said section is also douched in negative language and expressly provides that no order under the Act of 1969 shall be passed for the confiscation of any goods or for imposition of any penalty on any person unless the owner of the goods has been informed in writing of the grounds on which it is proposed to confiscate the goods or to impose the penalty. It is further a mandatory requirement to give an opportunity of making a representation in writing to the person against whom the show-cause notice has been issued. Section 181 empowers the adjudicating authority to give an option to pay fine in lieu of confiscation of goods.

7. A combined reading of the Act of 1969, particularly the provisions highlighted above, clearly shows that the legislature has prescribed the procedure for the purposes of confiscation of goods. It is, therefore, obvious that imported goods can only be confiscated in the manner and by the authorities explicitly empowered in this regard under the Act of 1969. The Federal Board of Revenue is vested with power and jurisdiction to appoint officers of customs or to delegate and entrust powers and functions to them as provided under sections 4, 5 and 6 of the Act of 1969. Neither the Ministry of Commerce nor the Federal Government has the power to assess the imported goods under sections 80 and 83 nor to adjudicate and, inter-alia, order confiscation thereof under sections 179 and 180. The power to adjudicate and confiscate the goods exclusively vests in the authorities who have been expressly mentioned under the aforementioned provisions of the Act of 1969. Moreover, the proceedings leading to confiscation of goods inevitably have to be in accordance with the manner prescribed under the Act of 1969. Confiscation of goods on account of violation of prohibition or restriction imposed by the Federal Government pursuant to powers conferred under the Imports and Exports (Control) Act, 1950 (hereinafter referred to as the "Act of 1950") expressly vests in the adjudicating authorities vested with jurisdiction under the Act of 1969. The powers and functions exercised by the adjudicating authorities are quasi judicial in nature. The legislature in its wisdom has expressly barred interference with the discretion of an appropriate officer of customs who is exercising quasi judicial functions as is expressly mandated in the proviso of section 223 of the Act of 1969. The Federal Board of Revenue, therefore, is not vested with power or jurisdiction to interfere with the quasi judicial functions or powers vested in an adjudicating authority under the Act of 1969. The august Supreme Court in the case titled "Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others" [1993 SCMR 1232] in the context of the Income Tax Ordinance, 2001 has observed and held that the Federal Board of Revenue though has administrative control over the functionaries discharging functions under the statute but it does not figure anywhere in the forums provided for adjudication of an assessee's liability relating to tax. The august Supreme Court, therefore, has held that instructions and directions of the Federal Board of Revenue are binding on the functionaries discharging their functions so long as they are confined to the administrative matters while interpretation of any provision of the statute could only be rendered by the hierarchy of the forums provided under the provisions of the statute. As a corollary the adjudicating authorities vested with jurisdiction inevitably have to adjudicate in the manner prescribed under a taxing statute.

8. In the context of the instant petition it would be beneficial to refer to two passages from the celebrated treaties by De Smith, as quoted with approval by the august Supreme Court of Pakistan in the case of M.A. Rahman v. Federation of Pakistan and others [1988 SCMR 691]. The said two passages are as follows:--

"The relevant principles formulated by the Courts may be broadly summarized as follows. The authority in which a discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, a discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it: it must not act under the dictation of another body or disable itself from exercising a discretion in each individual case. In the purported exercise of its discretion it must not do what it has been forbidden to do, nor must it do what it has not been authorized to do. It must act in good faith, must have regard to all relevant considerations and must not be swayed by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously."

And:--

"An authority entrusted with a discretion must not, in the purported exercise of its discretion, act under the dictation of another body or person. In at least two modern Commonwealth cases licensing bodies were found to have taken decisions on the instructions of the heads of Government who were prompted by extraneous motives. But, as less colourful cases illustrate, it is enough to show that a decision which ought to have been based on the exercise of independent judgment was dictated by those not entrusted with the power to decide, although it remains a question of fact whether the repository of discretion abdicated it in the face of external pressure. An it is immaterial that the external authority has not sought to impose its policy."

1. The august Supreme Court observed and held in the case of M.A Rehman supra that a discretion must be exercised only by the authority to which it is committed, and that in exercising the same the authority must genuinely address itself to the matter before it and must act in good faith, and have regard to all relevant considerations. It was further held that in exercising discretion, the authority must not be swayed by irrelevant considerations, nor must it seek to promote purposes alien to the letter and/or spirit of the legislation that gives it the power to act and, therefore, must not act arbitrarily or capriciously. It is, therefore, obvious that the officers who are vested with the power and jurisdiction to adjudicate under the Act of 1969 have a statutory duty to proceed and act independently, having regard to all relevant considerations and pursuant to the purpose and object of the statute. Any interference or dictation by authorities who are not vested with jurisdiction under the Act of 1969 will vitiate the proceedings.

2. In the light of the above principles and law laid down by the august Supreme Court and the survey of the provisions of the Act of 1969 as highlighted above neither the Ministry of Commerce nor the Federal Government is vested with power and jurisdiction to dictate to the adjudicating authorities specified under the Act of 1969 to decide a matter in a particular manner. Confiscation of goods or imposition of penalty can only be adjudicated in the manner and that too by the authorities explicitly contemplated under the Act of 1969. The impugned letter, dated 14-09-2017, whereby the Ministry of Commerce has advised or directed confiscation of 55 consignments has been issued in violation of the provisions of the Act of 1969. The said letter is, therefore, declared as illegal, having issued without lawful authority and jurisdiction. The letter, dated 14-09-2017 is, therefore, set aside.

3. This Court has been informed that the assessment relating to the goods imported by the petitioners has not been completed as yet. The concerned appropriate officers are, therefore, directed to complete the assessment, inter-alia, under sections 80, 81 and 83 of the Act of 1969. In case the appropriate officer is satisfied that the goods imported by the petitioners are hit by any prohibition or restriction and thus liable to confiscation, then he or she shall proceed in the manner prescribed under the Act of 1969, inter-alia, having regard to section 179 read with sections 180 and 181 of the Act of 1969. If the matter is referred to the competent adjudicating officer then the latter is expected to proceed and adjudicate independently without being influenced by any extraneous authority not envisaged under the Act of 1969.

12(sic) All these petitions are, therefore, allowed and disposed of in the above terms.

MH/11/Isl Petitions allowed.

2018 P T D 946

[Islamabad High Court]

Before Athar Minallah, J

PAKISTAN TELECOMMUNICATION COMPANY LIMITED through General Manager

Versus

DIRECTORATE OF INTELLIGENCE AND INVESTIGATION-FBR RAWALPINDI through Assistant Director and another

Writ Petition No.1026 of 2017, decided on 15th December, 2017.

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

----S.80---Goods declaration---Classification of imported goods---Resolving of dispute---Scope---Question of classification is a mixed question of law and fact---Federal Board of Revenue is empowered to constitute a Committee or nominate an officer for the purposes of resolving disputes relating to classification of imported goods.

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

----Ss. 2(rr), 32, 79, 80 & 168 (1)---Constitution of Pakistan, Art.199---Constitutional petition---Seizure of goods---Classification of goods, dispute of---Petitioner company was aggrieved of seizure of its imported goods by authorities on the plea of using wrong PTC Heading in "Goods Declaration"---Validity---Description of imported goods was not disputed but officials who seized the goods were of the opinion that those were parts and were to be classified under a different heading---No document was available on record to even remotely suggest that essential ingredients of offence under S.32 of Customs Act, 1969, were fulfilled, so as to justify seizing imported goods instead of accepting security and then referring the matter to competent authority for resolution---Such was the case of inadvertence or misconstruction---High Court declared seizure of goods imported by petitioner company and ordered clearance pursuant to filing "Goods Declaration" was illegal on account of grave abuse of discretion and use of excessive powers---Petition was allowed in circumstances.

Independent Newspapers Corporation (Pvt.) Ltd. and another v. Chairman, Fourth Wage Board and Implementation Tribunal for Newspaper Corporation (Pvt.) Ltd. and another 1993 SCMR 1533 ref.

Malik Qammar Afzal and Saad Khan Mayar for Petitioner.

Riffat Hussain Malik for Respondent No.1.

Zahoor Ahmed Mughal, Supt. I & I, FBR, Abdul Munir, I.O./I&I, FBR for Respondents.

2018 P T D 977

[Islamabad High Court]

Before Aamer Farooq, J

Messrs BESTWAY CEMENT LIMITED through Senior Deputy Financial Controller

Versus

ADDITIONAL COMMISSIONER INLAND REVENUE, ISLAMABAD and 3 others

Writ Petition No.67 of 2016, decided on 26th December, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5-A) & 122(9)---Amendment in procedure---Retrospective effect---Scope---Petitioner company was taxpayer and aggrieved of notices issued by authorities seeking information and record with regard to assessment orders passed in previous years---Validity---Any amendment even though procedural in nature which could affect vested rights of any person was to operate prospectively and not retrospectively---Amendment made in S.122(5-A) of Income Tax Ordinance, 2001 provided power to Commissioner to make inquiries as he deemed fit---Consequence of such inquiries was that assessment order could be revised/modified which was a substantive right of an assessee---Prior to amendment in year 2012, assessment could only be revised if same appeared to be erroneous or prejudicial to revenue and no information could be sought to determine the same---New procedure which had allowed Commissioner to make inquiries directly, affected existing rights of an assessee regarding modification of revision in assessment and it would operate prospectively---High Court directed the authorities that they could proceed against petitioners under S.122(5-A) of Income Tax Ordinance, 2001 in accordance with procedure as it existed prior to amendment in year 2012 and notices in question were set aside---Constitutional petition was allowed in circumstances.

[Case-law referred].

Hafiz Muhammad Idrees, Muhammad Mohsin Nazir, Mian Tauqeer Aslam, Usman Shoukat, Ch. Naeemul Haq and Mazhar ul Haq Hashmi in their respective petitions for Petitioners.

Hafiz Munawar Iqbal, Babar Bilal and Riaz Hussain Azam Bopara for Respondents.

2018 P T D 996

[Islamabad High Court]

Before Athar Minallah and Miangul Hassan Aurangzeb, JJ

OCEAN PAKISTAN LIMITED through Chief Executive Officer, Islamabad

Versus

ADDITIONAL COMMISSIONER INLAND REVENUE, (AUDIT-I), ISLAMABAD and 2 others

I.T.R. 1 of 2013, decided on 15th January, 2018.

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

----Ss. 11(1)(c)(d), 53, 54, 122 & 133---Regulation of Mines and Oilfields and Mineral Development (Government Control) Act (XXIV of 1948), Ss.2 & 3-B---Reference---Working Interest, sale of---Taxable income---Scope---Applicant was a foreign company engaged in petroleum exploration in Pakistan, who sold its entire share of Working Interest to another company---Authorities issued notice of recovery tax on consideration amount received by applicant in such transaction---Plea raised by applicant was that it sold its interest in an immovable property which was leased out to it---Validity---Gain accrued to applicant company from consideration received for sale or assignment of its share of Working Interest was definitely taxable income---Such was not sale of an asset or leasehold rights in respect of an immovable property---Nature of transaction did not attract provisions of Income Tax Ordinance, 2001, relating to immovable property; it was an income which fell under S.11(c) and (d) of Income Tax Ordinance, 2001---Income derived from sale, dispossession or assignment of a Working Interest and falling under the heads of 'income from business' or 'income from other sources' was not exempted under Ss.53 & 54 of Income Tax Ordinance, 2001---Language of S.54 of Income Tax Ordinance, 2001, was unambiguous and free from any doubt---Income arising from sale or assignment of share in Working Interest attracted levy and charge of income tax and the sale consideration had to be offered for tax in the relevant tax year---Reference was dismissed accordingly.

[Case law-referred].

(b) Interpretation of statutes---

----Enactment or repeal of law---Authority---Legislature has the exclusive domain to make laws or to repeal, amend and revise existing statutory enactments---Repeal of an existing law may be amended through express intendment or it may be implied from statute enacted later in time and which contain provisions that are contrary to the provisions of an earlier Act of Parliament.

[Case law-referred].

(c) Interpretation of statutes---

----Fiscal statute---Connotation---Court looks at what is clearly said and there is no room for any intendment, nor is there any equity about a tax---No presumption as to tax---Nothing has to be read or implied and to look fairly at the language used.

[Case law-referred].

Mansoor Usman Awan for Applicant.

M. Bilal, Babar Bilal and Hafiz Munawar Iqbal for Respondents.

2018 P T D 1089

[Islamabad High Court]

Before Miangul Hassan Aurangzeb and Athar Minallah, JJ

COMMISSIONER OF INCOME TAX (LEGAL), ISLAMABAD

Versus

Messrs ASKARI COMMERCIAL BANK LIMITED, RAWALPINDI

I.T.R.A. No. 71 of 2008, decided on 13th March, 2018.

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

----S. 17(1)(a)---Expression 'Receivable'---Connotation---Expression 'receivable' cannot be construed as involving actual receipt of income---Under international accounting standards 'receivable' is distinct from actual receipt of income.

(b) Interpretation of statutes---

----Taxing/fiscal statute---Intendment---Court, in case of taxing statute has to look to clear words since there is no question of any intendment---No presumption or equity about tax---Nothing can be read or implied in taxing statute---Statute has to be read as a whole in order to discover legislative intent---Provisions of a fiscal statute are required to be interpreted literally and equity or presumption are alien thereto---If a provision of a taxing statute can have two reasonable explanations, then one which is favourable to taxpayer has to be accepted---Any ambiguity is required to be resolved in favour of taxpayer---Redundancy cannot be attributed to lawmaker---Every word and part of statute has to be given meaning and effect---Presumption is that legislature has used every word in a context and for a purpose---Statute has to be read as a whole and intention of legislature has to be discovered by paying attention to what has been said.

(c) Words and phrases---

----"Entitled"---Defined.

Burton's Legal Thesaurus, Fifth Edition; Cambridge Dictionary Tenth Edition; Black's Law Dictionary Ninth Edition; Concise Oxford English Dictionary Twelfth Edition and Words and Phrases Paramount Edition Volume 14B rel.

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

----Ss. 2(12), 33, 34, & 80(1)(b)---Banking company---Status---Accounting on cash/accrual basis---Scope---Each individual Bank is a company within meaning of expression 'company' under S.2(12) read with S.80(1)(b) of Income Tax Ordinance, 2001---Mandatory for Banks to account for chargeability to tax under head 'income from business' on accrual basis---Distinction between "accounting on cash basis" or "accrual basis" is explained under Ss. 33 & 34 of Income Tax Ordinance, 2001 respectively which is in consonance with methods of accounting which are recognized under international accounting standards.

(e) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 17(1), 23(1)(x), 24(i) & 32---Income Tax Ordinance (XLIX of 2001), Ss. 18(2), 32, 33, 34 & 100-A---Public Debt Act (??? of 1944), S. 28---Interest on securities---Charging of tax---Principle---Dispute was with regard to charging of tax from Banking companies on securities offered by Federal Government under Public Debt Act, 1944---Validity---Income tax was chargeable to tax under Income Tax Ordinance, 2001 during tax year when income derived from interest on government securities was recorded in accounts as receivable or earned and not when it was actually received in installments or upon maturity, as the case was; it would have been otherwise if Banks were regularly employing method of accounting on cash basis because thereunder a person was not required to declare or record income unless actually received---Question of law formulated for consideration of High Court involved factual controversy---Banks advanced loans to their employees on concessional rates of interest---Respective assessing officers made additions on basis of difference between concessional rates of interest charged to an employee and prevalent market rate having regard to S.24(1) of Income Tax Ordinance, 1979---Such addition was detected by Income Tax Appellate Tribunal on sole ground and after making determination on factual side, that no actual expenditure was incurred so as to attract S.24(1) of Income Tax Ordinance, 1979---Actual expenditure in relation of concessional loans advanced to directors and employees was required to be established by department---Nothing was on record to show that conclusion drawn by Income Tax Appellate Tribunal was based on misreading ort non-reading---High Court declined to interfere in reasoning recorded by Income Tax Appellate Tribunal as same did not suffer from any legal infirmity---Reference was disposed of accordingly.

Commissioner of Income Tax v. Habib Bank Limited and ANZ Grindlays Bank PLC 2014 SCMR 1557; 'Messrs MCB Bank Ltd. v. Commissioner Inland Revenue 2014 PTD 1874 and Black's Law Dictionary Eighth Edition ref.

Hafiz Munawar Iqbal, Advocate Supreme Court and Sayyid Murtaza Ali Pirzada, Advocate Supreme Court for Applicants.

Dr. Ikram ul Haq, Mansoor Beg, Dr. Farhat Zafar, Sh. Anwar ul Haq, Syyed Murtaza Ali Pirzada, Advocate Supreme Court and Hafiz Munawar Iqbal, Advocate Supreme Court for Respondent.

2018 P T D 1413

[Islamabad High Court]

Before Aamer Farooq and Mohsin Akhtar Kayani, JJ

COMMISSIONER INLAND REVENUE (LEGAL), ISLAMABAD

Versus

Messrs WI-TRIBE, ISLAMABAD

F.E.R.As. Nos. 11 and 13 of 2015, decided on 21st May, 2018.

(a) Federal Excise Act (VIII of 2005)----

----Ss. 3, 16, 34A & Sched.----Levy, payment and collection of excise duty--- Exemption from payment of excise duty----Telecommunication services----Internet services---Scope--- Question before the High Court was whether an internet service provider was liable to pay federal excise duty which was imposed with regard to voice / telephonic content of internet applications and whether such voice content of internet applications would fall within purview of "telecommunication services" liable to federal excise under the Federal Excise Act, 2005----Held, that under the Schedule to the Federal Excise Act, 2005; services which were inter alia run through the internet were exempt from levy of federal excise duty---Liability to pay excise duty was dependent upon charges imposed by taxpayer and there existed no mechanism to decipher or segregate internet usage for voice content of applications run on the internet from other internet usage---High Court observed that mechanism devised by the Department by holding that 30% of of the taxpayer internet service provider's earnings were out of voice telecommunication services was arbitrary, whimsical and liable to the rejected----Reference was answered, accordingly.

Zilla Council Jehlum through District Coordination Officer v. Messrs Pakistan Tobacco Company Limited and others PLD 2016 SC 398; Messrs Mehran Associates Limited v. The Commissioner of Income Tax, Karachi 1993 SCMR 274; Government of Pakistan and others v. Messrs Hashwani Hotel Limited PLD 1990 SC 68 and Ihsan Yousaf Textiles (Pvt.) Ltd. v. Commissioner of Income Tax 2015 PTD 812 ref.

(b) Interpretation of statutes---

----Taxation / fiscal statutes----Where a tax statute provided certain concessions or exemptions and an ambiguity existed with respect thereto, the interpretation which was beneficial to the taxpayer was to be made----No room existed for any intendment nor there was any equity or presumption as to a tax and a fiscal provision was to be construed liberally in favour of the taxpayer, and in case of any substantial doubt, the same had to be resolved in favour of the citizen.

Zilla Council Jehlum through District Coordination Officer v. Messrs Pakistan Tobacco Company Limited and others PLD 2016 SC 398; Star Textile Limited and 5 others v. Government of Sindh through Secretary, Excise and Taxation Department, Sindh Secretariat Karachi and 3 others 2002 SCMR 356 and Messrs Mehran Associates Limited v. The Commissioner of Income Tax, Karachi 1993 SCMR 274 rel.

Adnan Haider Randhawa for Applicant.

Sayyid Murtaza Ali Prizada for Respondent.

2018 P T D 1966

[Islamabad High Court]

Before Aamer Farooq, J

Messrs AIMNAZ (PVT.) LIMITED

Versus

FEDERATION OF PAKISTAN, through the Secretary, Ministry of Law, Federal Secretariat, Islamabad and 2 others

Writ Petition No.2547 of 2017, decided on 24th July, 2018.

(a) Anti-Dumping Duties Act (XIV of 2015)---

----S. 3---Anti-Dumping duties, nature of---Scope---Anti-Dumping Duty was not a tax or a fee, but a regulatory measure or a remedial measure to protect the local industry from unfair competition where goods were being dumped into Pakistan---Anti-Dumping Duty may not be regarded as a penalty.

Messrs R.A.D. Enterprises and another v. Anti-Dumping Appellate Tribunal" C.P. No.2605 of 2017 ref.

(b) Interpretation of statutes---

----"Directory" and "mandatory" provision---Distinction---Where consequence was not provided regarding doing of something within the time prescribed, such provision was directory and not mandatory.

Ghulam Hassan v. Jamshaid Ali and others 2001 SCMR 1001 ref.

Munawar-us-Salam for Petitioner (in W.P. No.2547 of 2017).

Aziz-ul-Haq Nishtar for Petitioners (in W.Ps. Nos.2590 and 2653 of 2017).

Ali Nawaz Kharal and Malik Asif Raza for Petitioners (in W.Ps. Nos.2633, 2662 and 2855 of 2017).

Karim-ud-Din Khilji and Ms. Nazma Parveen for Petitioners (in W.P. No.2662 of 2017).

Zulfikar Khalid Maluka for Petitioner (in W.P. No.2849 of 2017).

Muhammad Wisal Khan, Barrister Qasim Wadud and Wasi UIIah Khan Surrani for Petitioners (in W.Ps. Nos.2852, 2853, 3076, 3077 of 2017).

Syed Riaz Hussain and Malik Asif Raza for Petitioners (in W.P. No.2855 of 2017).

Farhan Shahzad for Petitioners (in W.Ps. Nos.3250 and 3251 of 2017).

Riaz Hanif Rahi for Petitioner (in W.P. No.3252 of 2017).

Ch. Khurram Shahzad for Petitioner (in W.P. No.3260 of 2017).

Malik Jawad Khalid for Petitioner (in W.P. No.3407 of 2017).

Barrister Syed Masood Raza for Petitioner (in W.Ps. Nos.3579, 3580, 3581 of 2017, 128 and 129 of 2018).

Aasim Shafi and Sardar Najib R. Abbasi for Petitioners (in W.Ps. Nos.3700, 3701, 3708 and 4015 of 2017, 79 and 81 of 2018).

Muhammad Nazir Jawad for Petitioner (in W.P. No. 3868 of 2017).

Syed Pervaiz Zahoor Gillani for Petitioners (in W.Ps. Nos. 4033 to 4038 of 2017).

Muhammad Siddiq Mughal and Mazhar Marghoob, Petitioner in Person (in W.P. No. 4069 of 2017).

Muhammad Afzal Awan and Ms. Nazma Parveen for Petitioners (in W.Ps. Nos. 4410 of 2017, 564, 669 and 701 of 2018).

Tariq Manzoor Sial for Petitioners (in W.Ps. Nos. 194, 195 and 811 of 2018).

Khalil-ur-Rehman for Petitioners (in W.Ps. Nos. 694 and 1304 of 2018).

Monim Sultan for Petitioner (in W.P. No. 794 of 2018).

Shaukat Ali and Mr. Sohail Akhtar for Petitioners (in W.P. No. 1274 of 2018).

Sajid Abbas Khan, Ahmed Sheraz, Rashid Anwar, Ahmed Bashir, Salman Zaheer Khan, Musa Bashir Janjua, Jahanzab Awan, Muhammad Yousaf Nasim, Muhammad Adil Saeed, Sibah Farooq, Sajid Aurangzeb Khan and Irfan Ahmed for Respondents.

Raja Khalid Mehmood Khan Deputy Attorney-General.

2018 P T D 114

[Sindh]

Before Munib Akhtar and Zulfiqar Ahmad Khan, JJ

COMMISSIONER INLAND REVENUE, ZONE-III

Versus

Messrs IGI INSURANCE COMPANY LTD.

I.T.R.A. No.6 of 2013, decided on 18th April, 2017.

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

----Ss. 109, 99, Fourth Sched. Rr.5 & 6A---Scope and application of S.109 Income Tax Ordinance, 2001---Anti-tax avoidance---Recharacterisation of income and deductions---Section 109 of the Income Ordinance, 2001 as a General Anti-[tax]avoidance Provision ("GAAR")---Special provisions relating to insurance business---Exemption of Capital Gains from the sale of shares---Application of S. 109 of the Income Tax Ordinance, 2001 in cases where provisions of the Fourth Schedule to the Income Tax Ordinance, 2001 regarding Rules for The Computation of the Profits and Gains of Insurance Business and exemption from capital gains from sale and purchase of shares are invoked by the Department---Scope---Section 109 of the Income Tax Ordinance, 2001 could apply in suitable circumstances to a situation where one or more clauses of R.5 of the Fourth Schedule to the Income Tax Ordinance, 2001 were sought to be invoked as neither S. 99 nor the Fourth Schedule to the Income Tax Ordinance, 2001 contained a non-obstante clause; said section had no equivalent in earlier legislation and was a brand new concept as far as tax jurisprudence of Pakistan was concerned---Section 109 sought to apply, as expressly provided therein, to determination of all tax liability "under this Ordinance" and absent a non-obstante clause, it would certainly include (at the least) an application of the said section to the situation in which one of the Clauses of R.5 of the Fourth Schedule to the Income Tax Ordinance, were sought to be invoked.

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

----S. 109---Anti-tax avoidance---Recharacterisation of income and deductions---Section 109 of the Income Ordinance, 2001 as a General Anti-[tax]avoidance Provision ("GAAR")---Genesis and rationale for anti-tax avoidance measures---Concept of tax avoidance, tax evasion, tax planning, and tax mitigation---Acceptable and unacceptable tax planning---Invocation, application and limits of General Anti-tax avoidance provisions---Interpretation of GAAR provisions , generally and with specific reference to S. 109 of the Income Tax Ordinance, 2001---GAAR provisions to be interpreted purposively and not otherwise---Importance of alignment between purposive approach to interpretation of GAAR provisions in its interaction with the specific provision(s) of the Tax Code ---Application of S. 109 of the Income Tax Ordinance, 2001, construed purposively to a transaction viewed realistically---Comparable statutory provisions and judicially evolved rules from various jurisdictions, extensively examined and analyzed.

Case law referred.

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

----S. 109---Anti-tax avoidance---Recharacterisation of income and deductions---Section 109 of the Income Ordinance, 2001 as a General Anti-[tax]avoidance Provision ("GAAR")---Interpretation of S. 109 of the Income Tax Ordinance, 2001---Meaning and scope of the words "transaction", purpose" and tax avoidance scheme" used in S. 109 of the Income Tax Ordinance, 2001---Limits of the application of S. 109 of the Income Tax Ordinance, 2001 and recognition of the principle that the same was intended not to operate on all types of tax planning but only against certain types of transactions that amounted to tax avoidance---"Purpose and effect" in GAAR provisions---Effect of the qualification of the word "purpose" with the word "main" used in S. 109 of the Income Tax Ordinance, 2001---Concept, scope and meaning of the word transaction" , "purpose" and "tax avoidance scheme" in the context of S. 109 of the Income Tax Ordinance, 2001 examined with regard to judicially evolved principles and comparable statutory provisions from various jurisdictions.

Case-law referred.

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

----S. 109---Anti-tax avoidance---Recharacterisation of income and deductions---Section 109 of the Income Tax Ordinance, 2001 as a General Anti-[tax]avoidance Provision ("GAAR")---Interpretation of S.109 of the Income Tax Ordinance, 2001---Application of S.109 of the Income Tax Ordinance, 2001 to only certain kinds of transactions---Factors or characteristics that may indicate or establish tax avoidance within the Legislative intent behind S. 109 of the Income Tax Ordinance, listed.

Case-law referred.

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

----S. 109---Anti-tax avoidance---Recharacterisation of income and deductions---Section 109 of the Income Tax Ordinance, 2001 as a General Anti-[tax]avoidance Provision ("GAAR")---Interpretative approach for, and application of, S. 109 of the Income Tax Ordinance, 2001---Summary of the extended judicial analysis on GAAR provisions, generally and with specific regard to the scope and applicability of S. 109 of the Income Tax Ordinance, 2001.

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

----Ss.109, 99, 133 & Fourth Sched., Rr.5 & 6A ---Anti-tax avoidance---Recharacterisation of income and deductions---Section 109 of the Income Tax Ordinance, 2001 as a General Anti-[tax]avoidance Provision ("GAAR")---Application of S. 109 of the Income Tax Ordinance, 2001 where provisions of the Fourth Schedule to the Income Tax Ordinance, 2001 regarding Rules For The Computation of the Profits and Gains of Insurance Business are invoked by the Department to establish a tax avoidance scheme---Main and actuating purpose of a transaction---Exemption for Insurance Companies on Capital Gains from the sale of shares---Scope ---Question before High Court related to the applicability of S. 109 of the Income Tax Ordinance, 2001 to transactions made by the taxpayer, which was an Insurance Company---Contention of the Department, inter alia, was that the said transactions constituted a tax avoidance scheme under S. 109 read with R. 5(b) of the Fourth Schedule to the Income Tax Ordinance, 2001 since the same involved sale and purchase of shares by the associated undertaking of the taxpayer, involving an appreciation of investment which should be recharacterised as an appreciation of investment within the meaning of S.109 read with R. 5(b) of the Fourth Schedule to the Income Tax Ordinance, 2001---Held, that transactions in question had a non-tax avoidance purpose, which was its main purpose---Main purpose, for application of S. 109 of the Income Tax Ordinance, 2001 was tax avoidance if for the person in entering into a transaction, such avoidance was a significant or actuating purpose which had been or could have been pursued as a goal in itself---When the totality of facts and circumstances were considered from such perspective, it could not be concluded that tax avoidance was a significant or actuating purpose of the taxpayer in the present case---Taxpayer was primarily concerned with capturing the market value of the shares on its books, and the same was the main non-tax-avoidance purpose and by entering into the said transactions, the taxpayer was not actuated by the purpose of avoiding taking credit for the appreciation in investments nor could it be regarded as a significant purpose and the same was not a goal that the taxpayer would have pursued in and of itself---High Court observed that while S. 109 of the Income Tax Ordinance, 2001 was to be interpreted purposively, the specific provision with which the said section must interact was to be interpreted and applied in terms of orthodox and established tax jurisprudence---Rule 5(b) of the Fourth Schedule to the Income Tax Ordinance, 2001 was to be construed in a strict formalistic and literal approach and when the said approach was applied, the taxpayer had not taken credit in its accounts for any appreciation in the portfolio as a result of the transactions in question---High Court further observed that in a literal sense, it had only done what it claimed to have done, which was that it showed the value of the portfolio at all times at the acquisition cost and R.5(b) of the Fourth Schedule to the Income Tax Ordinance, 2001 could therefore not be applied to the facts and circumstances of the present case even when the said transactions were cast in terms of S. 109 of the Income Tax Ordinance, 2001---Reference was answered, accordingly.

Amjad Javed Hashmi for Applicant.

Arshad Siraj for Respondent.

2018 P T D 453

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

COMMISSIONER INLAND REVENUE, ZONE-I, RTO, HYDERABAD

Versus

Dr. NAZIR ASHRAF LAGHARI

Income Tax Reference Application No.82 of 2012, decided on 29th November, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5)(9) & 133(1)---Reference---Re-opening of case---Past and closed transactions---Authorities were aggrieved of the order passed by Appellate Tribunal Inland Revenue annulling order under S.122(1) of Income Tax Ordinance, 2001---Validity---Officer of Inland Revenue while reopening case of taxpayer for tax year 2009, did not give any reason, nor could point out any deficiency in accounts of taxpayer, for tax year 2009, which could possibly be considered as basis of reopening the case of taxpayer for the purposes of making assessment under S.122(5) & (9) of Income Tax Ordinance, 2001---Authorities had made reference to Audit proceedings for tax year 2005, which were already finalized with the approval of Additional Commissioner as explanation offered by taxpayer in respect of disputed credit entries and revised return submitted by taxpayer for tax year 2005 was accepted and proceedings were dropped---Proceedings which already stood finalized in respect of the same subject receipts, could not have been reopened by the same officer---High Court declined to interfere in concurrent findings of facts recorded by two forums below---Reference was dismissed in circumstances.

Rahim Lakho for Applicant.

Ms. Lubna Parvez for Respondent.

2018 P T D 621

[Sindh High Court]

Before Muhammad Ali Mazhar, J

Messrs INBOX BUSINESS TECHNOLOGIES LTD. through Chief Investment Officer

Versus

PAKISTAN through Secretary Revenue Division and 2 others

Suit No. 2275 and C.M.A. No.14960 of 2017, decided on 9th March, 2018.

(a) Constitution of Pakistan ---

----Art. 10A---Right to fair trial---Scope---Right to a fair hearing and or trial necessitated that no one should be penalized by the decision upsetting and afflicting his right or legitimate expectations unless he was given prior notice of the case, a fair chance to answer it and a fair opportunity to explicate/present the case.

Warid Telecom (Pvt.) Ltd. v. Pakistan Telecommunication Authority 2015 SCMR 338 ref.

(b) Sales Tax Rules, 2006 ---

----R. 12(a)(i)---Allegation of evasion of tax and tax fraud---Power of Commissioner to suspend registration 'without prior notice' after satisfaction that person had issued fake invoices, evaded tax or committed tax fraud [Rule 12(a)(i) of Sales Tax Rules, 2006]---Scope---Word 'without prior notice' had much significance that necessitated and commanded onerous responsibility on the Commissioner to accomplish his satisfaction prior to passing suspension order which could be issued without prior notice---Commissioner was obligated to make sure and double check that the registered person had committed tax fraud and the case was vivid, obvious and fit for issuing suspension order---Commissioner was also required to discuss the tangible evidence in the suspension order which he was issuing without any notice or providing any opportunity of hearing to the registered person---Such drastic action without prior notice could only be issued where the Commissioner had solid and tangible evidence and not on basis of mere sweeping allegations---Satisfaction of Commissioner required a strong mind for action than mere suspicion and the discretion conferred upon Commissioner to pass suspension order without prior notice ought to be exercised with rationality and due diligence which meant the existence of mental persuasion much higher than mere opinion; a mind not troubled by doubt; a mind having reached a clear conclusion---Suspension order could not be passed in a slip shod manner but it should reflect the independent application of mind with cogent and plausible reasons which one may consider to be fair and in accordance with law.

Dr. Farogh Naseem and Munawar Hussain for Plaintiff.

Muhammad Aqeel Qureshi for Defendants Nos. 2 and 3.

Abdul Qadir Leghari, Assistant Attorney General.

Rabnawaz Ahmad Matiana, Deputy Commissioner, Inland Revenue.

Dates of hearing: 6th December, 2017 and 19th January, 2018.

ORDER

MUHAMMAD ALI MAZHAR, J.---This suit for declaration and permanent injunction has been brought to challenge the show-cause notice and suspension order dated 17.10.2017. The transient facts of the case are as follows:--

The Government of Punjab took steps to import Laptops and in order to facilitate the import, they entered into a contract on 17.12.2011 with the plaintiff. The salient features of contract were that the Punjab HED shall obtain exemption from FBR with regard to GST and advance tax at import stage for laptops with a further condition that in case such exemption is not obtained, the tax shall be borne by the purchaser i.e. the Punjab HED. The goods on imports were to be received by Punjab HED and then handed over to the successful bidder i.e. the plaintiff, which was to take possession of the said goods only for the purpose of delivering them to the respective institutions. The Contract was for 100,000 laptops, subsequently through an Addendum dated 26.01.2012, 10,000 more laptops were imported by the Punjab HED and facilitated by the plaintiff. Even in terms of addendum, the Punjab Higher Education Department had to obtain exemption from the FBR and in case such exemption was not obtained, the Punjab Higher Education Department was liable to pay the amount of GST and advance tax pertaining to imports. As per contract and its Addendum, the Punjab Higher Education Department approached the FBR and vide letter dated 30.11.2011 FBR intimated to the Punjab Higher Education Department that the laptops in question imported by the Punjab Higher Education Department for public sector educational institutions are exempt from the payment of sales tax under Item 52 of Table 1 of the Sixth Schedule of the Sales Tax Act, 1990 and the said Punjab Higher Education Department was also exempt from the payment of advance income tax at import stage as per S.R.O. 947(I)/2008 dated 5.11.2008. The plaintiff was not importer which fact can be established by the letter of the Punjab Higher Education Department to the FBR dated 28.12.2011, letter by the Punjab Higher Education Department to the FBR dated 21.12.2011, letter by the FBR to the Punjab Higher Education Department dated 27.12.2011, letter by FBR to the Punjab Higher Education Department dated 29.12.2011, letter by Punjab Higher Education Department dated 9.2.2012 to the Deputy Collector of Customs, Allama Iqbal International Airport, wherein the last para of the said letter it has been requested that the Customs Department may facilitate the Punjab Higher Education Department in customs clearance and warehousing of the laptops. The defendant No.3 earlier issued a show-cause notice for the purposes of carrying out assessment, which was followed by another show-cause notice. These notices were challenged in constitution petition in which the plaintiff was directed to join the adjudication proceedings and the department should act strictly according to the law. The defendant No.2 without any show-cause notice or opportunity of hearing issued a suspension order under Section 21(1) of the 1990 Act read with Rule 21(a)(i) of the Sales Tax Rules, 2006. The effect of this suspension order is that the Sales Tax Registration of the plaintiff has been suspended w.e.f. 17.10.2017 and the plaintiff is being treated as non-active taxpayer. Simultaneously the defendant No.2 has also issued a show-cause notice under Section 21(2) of the 1990 Act read with Rule 12(a)(i) and Rule 12-A of the 2006 Rules as to why they should not be blacklisted.

1. The learned counsel for the plaintiff argued that the entire case of the department hinges upon that the plaintiff is the actual importer of the laptops but the tax department failed to consider that the actual implementation of the contract, the conduct of parties and the provisions and subsequent correspondences can only determine the exact covenant. In order to resolve any ambiguity in the contract and to ascertain the real intention of the parties, the court should have resort to the correspondences, the indenture of contract and the conduct of the parties including all attending circumstances. According to Section 79(1) of the Customs Act, 1969, it is the owner of the imported goods which has to file the goods declaration. The Airway bills and goods declarations categorically point out that it is the Punjab HED which is the actual owner, buyer and importer of the laptops.

2. He further contended that due to some misunderstanding in the original tax return, the plaintiff declared itself to be the importer, however vide letter dated 14.07.2017, the plaintiff moved for seeking permission to revise its tax returns. Though Section 114(6) of the 2001 Ordinance permits the revision of tax return, but unfortunately no order was passed by the learned Commissioner within 60 days of the application to file revise return dated 14.07.2017, therefore, the department cannot now rely upon the original return submitted under some misunderstanding.

3. The learned counsel further argued that the assumption of jurisdiction by the defendants in relation to the suspension of sales tax registration and blacklisting is mala fide. When FBR confirmed the tax exemption, the question of treating the plaintiff in default and lodging tax fraud proceedings including the extreme steps of suspension of sales tax registration is unwarranted. The statutory provision meant for ordering suspension under Section 21 of the Sales Tax Act does not exclude the principles of natural justice. If the statute itself does not exclude the principles of natural justice, the same cannot be excluded by delegated legislation.

4. It was further asserted that though Section 21(2) permits the Commissioner to blacklist or suspend the registration of a taxpayer if the said Commissioner is "satisfied" that the taxpayer/registered person has "issued fake invoice" or "has otherwise committed tax fraud". Admittedly, no fake invoice of sales tax has been issued by the plaintiff. The term "tax fraud" has been defined in Section 2(37) of the 1990 Act. In fact there is no determination by the department to the effect that the plaintiff had intended to commit tax fraud. The term "satisfied" employed in Section 21(2) means an application of mind requiring determination with reasons. The term "satisfaction? means satisfaction upon reasonable grounds and existence of a state of mental persuasion much higher than opinion and when used in the context of judicial proceedings the mental state has to be arrived at within the prescribed statutory provisions. The reasons given by the defendant No.2 in the impugned suspension order are vague and arbitrary. It was further contended that under Rule 12(a)(i) of the 2006 Rules, the criteria for suspension are provided but the case of plaintiff does not fall under the incidents pointed out in sub-rule (A) to (F). With regard to the residuary category i.e. sub-rule (G), the same does not give an open-ended discretion to the learned Commissioner. The tax fraud can only be established once adjudication proceedings are finalized and the taxpayer has exhausted all appeals. It was further averred that not only the plaintiff has a strong prima facie case but also irreparable loss is being caused and shall further be caused in case the injunction as prayed is not granted as the entire business of the plaintiff has been brought to a complete standstill. The impugned action is against Articles 18 and 23 of the Constitution, which deal with the fundamental rights to conduct business and hold property. The learned counsel for the plaintiff in support of his contention referred to the case of Malik Ghulam Jilani v. Government of West Pakistan, reported in PLD 1967 SC 373. The court while dilating the provisions of Defence of Pakistan Ordinance 1965, held that the word "satisfied" requires stronger ground for action than mere suspicion. In the case of Muhammad Hayat v. The Crown, reported in PLD 1951 FC 15, Per Abdul Rashid-J, while expounding the provisions of Punjab Public Safety' Act, held that words "if satisfied " are not preceded by any qualifying adverb, such as, "reasonably". In the case of Director Food, NWFP v. Messrs Madina Flour and General Mills (Pvt.) Ltd., reported in PLD 2001 SC 1. The court held that discretionary decision is to be made according to rational reasons. Actions which do not meet these threshold requirements are arbitrary and might be considered as a misuse of powers. Whereas in the case of Warid Telecom (Pvt.) Limited v. Pakistan Telecommunication Authority reported in 2015 SCMR 338. The court expounded and explicated the principle and concept of natural justice. In the last case referred to by the learned counsel for the plaintiff i.e. Sohail Butt v. Deputy Inspector General of Police (North) National Highway and Motorway Police, reported in 2011 SCMR 698, the court held that the word "satisfied" means existence of mental persuasion much higher than mere opinion; a mind not troubled by doubt; a mind which has reached on clear conclusion.

5. The learned counsel for the Tax Department argued that the contract in question clearly stipulates that duties and taxes as applicable at the time of supply will be paid by the bidder. The exemption was only for import of laptops and backpacks were not included. The FBR did not provide any exemption to the plaintiff for import of laptops, however the exemption for import of laptops was available to HED but the said import was not made by HED itself, and hence it is not applicable in the present case. He admitted that Import by Provincial Government is exempt from GST and Advance Income Tax but this exemption was not available to the plaintiff. The invoices were issued by Dell in the name of the plaintiff. Similarly the plaintiff made the payment for such laptops through LCs opened by them. The present proceedings only intended to charge tax on the declaration made by the plaintiff itself in the sales tax returns. The Sales Tax Act, 1990 distinguishes between imports and supply. The issue of imports is to be determined by the Customs authorities whereas the supply of the laptops is a transaction which the Inland Revenue has to tax, hence there is no bar on issuance of show-cause notice in respect of supply when proceedings are underway for its purchase/import as well. He further argued that the show-cause notices are well within the bounds of law as envisaged in the Sales Tax Act, 1990 and based on concrete evidence. As per subsection (2) of section 21 of the Sales Tax Act, when the Commissioner is satisfied that a registered person has committed tax fraud, he may blacklist such person or suspend his registration in accordance with such procedure as the Board may by notification in the official gazette prescribe. At the time of issuing order of suspension of registration of a person, the Commissioner institutes an inquiry and an opportunity of being heard is provided after suspension. The scheme of the Act does not envisage any opportunity of being heard before suspension of the person. If the plaintiff is cleared of the charge, the suspension order will be automatically withdrawn. The case of the plaintiff squarely falls under subsection (37) of Section 2 of the Sales Tax Act, 1990 which defines the Tax Fraud. The learned counsel in support of his contention referred to the case of Sh.Diwan Mohammad Mushtaq Ahmed v. Central Board of Revenue, reported in [1969] Vol.XIX Taxation 198 in which the court held that the rules of natural justice are to be read as part and parcel of every statute unless and until there is a specific provision in a particular statute to the contrary. In the case of Messrs Volkart Pakistan (Private) Limited v. Federation of Pakistan, reported in 2006 PTD 236, the court held that while examining a fiscal statute court should not be carried away with the fact that the same may be disadvantageous to some of the tax payers. If such a fiscal statute is beneficial to the country on the whole, the individual's interest should yield to the national' interest. Whereas the court in the case of Messrs Bilz (Pvt.) Ltd. v. Deputy Commissioner of Income-Tax, Multan, reported in 2002 PTD 1, held that fiscal statute has to be construed in its true perspective and in respect of payment of tax, if it is found due against a party, then such statute cannot be interpreted liberally in order to make out a case in favour of an assessee. In the case of Lucky Cement Ltd. v. Commissioner Income Tax, Zone Companies, Circle-5, Peshawar, reported in 2015 PTD 2210, it was held that a prohibitory clause, couched in the negative language should be construed and applied strictly. Court should assess and ascertain as to what was the real intent and object behind such a clause. And finally in the last case cited by the learned counsel for the tax department Messrs Pakistan Paper Products Ltd. v. Commissioner of Income Tax, reported in 2006 PTD 1027, the court held that function of court is not to render operation of a statute redundant or interpret it in a manner which may lead to evasion of tax.

6. Heard the arguments. In fact by means of this lawsuit for declaration and permanent injunction, the plaintiff has questioned the suspension order dated 17.10.2017 passed under Section 21(2) of the Sales Tax Act, 1990 read with Rule 12(a)(i) of the Sales Tax Rules, 2006. The gist and essence of suspension order communicates that the Deputy Commissioner, Inland Revenue, Enforcement and Collection Unit, Zone-III, Large Taxpayer's Unit, Karachi reported that the plaintiff filed monthly Sales Tax Returns for the tax periods March 2012 on 13.3.2015 and of May 2012 on 15.6.2015. The plaintiff declared taxable supply as exempt in sales tax returns whereby evaded sales tax amount of Rs.663,520,000/-. In the suspension order it was further alleged in paragraph 5 that the registered person knowingly, dishonestly or fraudulently declared sales of notebook computers and back packs as exempt in the sale tax returns, contravening the explicit duties/ obligation placed on them under Sales Tax Act, 1990. While referring to Section 21(2) of the Sales Tax Act, 1990 read with Rule 12(a)(i) of the Sales Tax Rules, 2006 it is avowed that where a Commissioner is satisfied that registered person has issued fake invoices, evaded tax or committed tax fraud, registration of such person may be suspended by the Commissioner through the system without prior notice and pending further inquiry. It is further made known in the suspension order that the taxpayer will be considered as "Non Active Taxpayers" as per provision of Rule 12A read with clause (1) of Section 2 of the Sales Tax Act, 1990.

7. On the same date a show-cause notice under Section 11(5) read with section 11(2), 33 and 34 of the Sales Tax Act, 1990 was also issued to the plaintiff. Whereas on 23.10.2017 one more show-cause notice was issued as to why action under Section 21(2) of the Sales Tax Act, 1990 read with Rule 12(a)(i) and Rule 12A of the Sales Tax Rules, 2006 should not be initiated to blacklist the plaintiff and exclude them from the list of "Active Taxpayer" on the ground of evasion of tax or committed tax fraud. When the matter was fixed for orders on 30.10.2017 on injunction application, the court ordered that the proceedings if any for deciding the issue of blacklisting may continue by the Department but no final order shall be passed till next date of hearing and so far as the suspension order is concerned, that has already been passed, therefore, the propriety and validity of suspension order shall be taken up after notice to the defendants.

8. One more facet is also reckonable that the plaintiff has filed another Suit No.2274/2017 in which they have impugned the show-cause notice dated 17.10.2017 whereby the plaintiff was called upon to show as to why the sales tax amount should not be recovered including the default surcharge and penalty. In this case also while issuing notice to the defendants as well as D.A.G. the court ordered that proceedings if any may continue but till next date of hearing no coercive action shall be taken against the plaintiff. During the course of arguments learned counsel for the plaintiff produced an Assessment Order No.03/2017-18, passed on 17.11.2017 which is almost after one month of suspension order dated 17.10.2017. A scant foretaste and preview of Assessment Order put on view that the matching invoices and figure of alleged evaded tax are mentioned as pointed out in the suspension order passed much earlier without notice and without subpoenaing any explanation.

9. Section 21 of the Sales Tax Act, 1990 accentuates and draw attention to the incidents when the extreme action of De-registration, blacklisting and suspension of registration can be taken. A mechanism has been set down by dint of which the Board or any officer, authorized in this behalf, may subject to the rules, de-register a registered person. However, subsection (2) expand on that in the cases where the Commissioner is satisfied that a registered person is found to have issued fake invoices or has otherwise committed tax fraud, he may blacklist such person or suspend his registration in accordance with such procedure as the Board may by notification in the official Gazette, prescribe. Contemporaneously Rule 12 of the Sales Tax Rules, 2006 is also germane to blacklisting and suspension of registration which propounds a modus operandi to be followed for suspension and blacklisting distinctly. However the precondition and qualification of Commissioner's satisfaction is communal in the rules as well. The foundation of structuring and reinforcing the case of suspension is provided under the head of Suspension from Clauses (A) to (G). No right of appeal against the suspension is provided except that on receipt of the reply to the show-cause notice after giving an opportunity of hearing to the registered person, if the Commissioner is satisfied, he may order for revoking of suspension of the registered person. Nevertheless, in the aftermath of blacklisting, a self-speaking order is required to be passed with the reasons for blacklisting which is made appealable. For the ease of reference Section 21 of the Sales Tax Act, 1990 and Rule 12 of Sales Tax Rules, 2006 concerning to the procedure of suspension and blacklisting are reproduced as under:--

Section 21 of the Sales Tax Act, 1990.

1. De-registration, blacklisting and suspension of registration:--

(1) The Board or any officer, authorized in this behalf, may subject to the rules, de-register a registered person or such class of registered persons not required to be registered under this Act.

(2) Notwithstanding anything contained in this Act, in cases where the [Commissioner] is satisfied that a registered person is found to have issued fake invoices [\ \ ] or has [otherwise] committed tax fraud, he may blacklist such person or suspend his registration in accordance with such procedure as the Board may, by notification in the official Gazette, prescribe.

(3) During the period of suspension of registration, the invoices issued by such person shall not be entertained for the purposes of sales Tax refund or input tax credit, and once such person is black listed, the refund or input tax credit claimed against the invoices issued by him, whether prior or after such black listing shall [\ \ ] be rejected through a self-speaking appealable order and after affording an opportunity of being heard to such person.

(4) Notwithstanding anything contained in this Act, where the Board, the concerned Commissioner or any officer authorized by the Board in this behalf has reasons to believe that a registered person is engaged in issuing fake or flying invoices, claiming fraudulent input tax or refunds, does not physically exist or conduct actual business, or is committing any other fraudulent activity, the Board, concerned Commissioner or such Officer may after recording reasons in writing, block the refunds or input tax adjustments of such person and direct the concerned Commissioner having jurisdiction for further investigation and appropriate legal action.

Rule 12 of the Sales Tax Rules, 2006

1. Blacklisting and suspension of registration. Where the Commissioner or Board has reasons to believe that the registered person is to be suspended or blacklisted, in order to ensure that the LTUs and RTOs follow a uniform policy for suspension and blacklisting of sales tax registered persons under section 21(2) of the Act and for subsequent proceedings in such cases, the following procedure shall be followed, namely:--

(a) SUSPENSION

(i) Where a Commissioner, having jurisdiction, is satisfied that a registered person has issued fake invoices, evaded tax or committed tax fraud, registration of such person may be suspended by the Commissioner through the system, without prior notice, pending further inquiry. The basis for such satisfaction may inter alia include the following, namely:-

(A) non-availability of the registered person at the given address;

(B) refusal to allow access to business premises or refusal to furnish records to an authorized Inland Revenue Officer;

(C) abnormal tax profile, such as taking excessive input tax adjustments, continuous carry-forwards, or sudden increase in turnover;

(D) making substantial purchases from or making supplies to other blacklisted or suspended person;

(E) non-filing of sales tax returns;

(F) on recommendation of a commissioner of any other jurisdiction;

(G) any other reason to be specified by the Commissioner;

(ii) the suspension of registration shall take place through a written order of the Commissioner concerned, giving reasons for suspension. This order shall be endorsed to the registered person concerned, all other LTUs/RTOs, the FBR's computer system, the STARR computer system and the Customs Wing computer system for information and necessary action as per law;

(iii) a registered person who does not file sales tax return for six consecutive months shall be caused to be suspended through the system without any notice;

(iv) in cases, where the buyers and suppliers of any such person, whose registration is being suspended, belongs to another LTU/RTO, and these buyers/ suppliers are also required to be suspended, the Commissioner shall intimate the Chief Commissioner of the concerned LTU/RTO in whose jurisdiction such buyers/ suppliers fall, in writing explaining the complete facts of the case and the reasons on the basis of which these buyers/suppliers are to be suspended, to initiate proceedings for suspension/blacklisting of the buyers/suppliers;

(v) no input tax adjustment/refund shall be admissible to the registered person during the currency of suspension. Similarly, no input tax adjustment/refund shall be allowed to any other registered persons on the strength of invoices issued by such suspended person (whether issued prior to or after such suspension), during the currency of suspension;

(vi) the Commissioner shall, within seven days of issuance of order of suspension, issue a show-cause notice (through registered post or courier service) to the registered person to afford an opportunity of hearing with fifteen days of the issuance of such notice clearly indicating that he will be blacklisted, in case-

(A) there is no response to the notice;

(B) he has not provided the required record;

(C) he has not allowed access to his business record or premises; and

(D) any other reason specified by the Commissioner;

(vii) in case show-cause notice is not issued within seven days of the order of suspension, the order of suspension shall become void abinitio;

(viii) in case of non-availability of the suspended person at the given address, the notice may be affixed on the main notice Board of the LTU/ RTO;

(ix) on receipt of the reply to the notice and after giving an opportunity of hearing to the registered person, if the Commissioner is satisfied, he may order for revoking of suspension of the registered person.

1. At this point of time the definition of tax fraud provided under subsection (37) of Section 2 of the Sales Tax Act, 1990 is somewhat significant which is reproduced as under:--

"(37) 'tax fraud' means knowingly, dishonestly or fraudulently and without any lawful excuse (burden of proof of which excuse shall be upon the accused)-

(i) doing of any act or causing to do any act; or

(ii) omitting to take any action or causing the omission to take any action, [including the making of taxable supplies without getting registration under this Act [or];

(iii) falsifying [or causing falsification] the sales tax invoices]

in contravention of duties or obligations imposed under this Act or rules or instructions issued thereunder with the intention of understating the tax liability [or underpaying the tax liability for two consecutive tax periods] or overstating the entitlement to tax credit or tax refund to cause loss of tax."

1. The plaintiff in the same suit has also sought the declaration that the Sales Tax Rules, 2006 prescribed through S.R.O. 555(I)/2006 dated 5.6.2006, so also amendments made thereunder, in particular Rules 12 and 12-A including subsection (37) of Section 2 and Section 21 of the Sales Tax Act, 1990 are unconstitutional especially the Rule permitting the suspension without prior notice and or without due process of law is violative of Article 10-A of the Constitution.

2. Due process is prerequisite that needs to be respected at all stratums. The conception and perception of due process was developed on or after Clause 39 of Magna Carta that "No free man is to be arrested, or imprisoned, or disseised, or outlawed, or exiled, or in any other way ruined, nor will we go against him or send against him, except by the lawful judgment of his peers or by the law of the land". In our Constitution, right to fair trial is a fundamental right. This constitutional reassurance envisaged and envisioned both procedural standards that courts must uphold in order to protect peoples" personal liberty and a range of liberty interests that statutes and regulations must not infringe. On insertion of this fundamental right in our Constitution, we ought to analyze and survey the laws and the rules/ regulations framed thereunder to comprehend whether this indispensable right is accessible or deprived of? In case of stringency and rigidity in affording this right, it is the function rather a responsibility of court to protect this right so that no injustice and unfairness should be done to anybody. The proactive role of the court must alone prove that this right is not confined only within the precincts of the Constitution but in actuality and for all practicality it exists to do good to the people. The right to a fair hearing and or trial necessitates that no one should be penalized by the decision upsetting and afflicting his right or legitimate expectations unless he is given prior notice of the case, a fair chance to answer it and a fair opportunity to explicate/present the case. The right to a fair trial means that general public and commonalities can be sure that process will be fair and certain which is the finest method of detaching and disengaging a guilty from an innocent thereby protecting against injustice. The right to fair trial is recognized worldwide as a fundamental human right by virtue of Article 10 of Universal Declaration of Human Rights which expounds that "Everyone is entitled in full equality to a fair and public hearing by an independent and impartial tribunal, in the determination of his rights and obligations and of any criminal charge against him". The honourable Supreme Court in the case of Warid Telecom (Pvt.) Limited v. Pakistan Telecommunication Authority, reported in 2015 SCMR 338 held as under:--

"Constitution of Pakistan, Article 10A. Fundamental Rights. Whenever adverse action was being contemplated against a person a notice and/or opportunity of hearing was to be given to such person. Said principle was a fundamental right under Article 10A in the Constitution. However, both the requirements of a notice and providing an opportunity of a hearing may also be dispensed with in certain type of cases e.g. where such requirement would cause "more injustice than justice" or it was not in the "public interest". The Indian Supreme Court in the case of Karnataka Public Service Commission v. B. M. Vijaya Shankar (AIR 1992 Supreme Court 952) stated that, when meeting the requirement of notice and providing an opportunity of hearing will cause "more injustice than justice" or it is not in the "public interest" the same may be withheld. It will be useful to reproduce the following portion from the said judgment:--

"(4) Was natural justice violated? Natural justice is a concept which has succeeded in keeping the arbitrary action within limits and preserving the rule of law. But with all the religious rigidity with which it should be observed; since it is ultimately weighed in balance of fairness, the courts have been circumspect in extending it to situations where it would cause more injustice than justice. Even though the procedure of affording hearing is as important as decision on merits yet urgency of the matter, or public interest at times require, flexibility in application of the rule as the circumstances of the case and the nature of the matter required to be dealt may serve interest of justice better by denying opportunity of hearing and permitting the person concerned to challenge the order itself on merits not for lack of hearing to establish bona fide or innocence but for being otherwise arbitrary or against rules. Present is a case which, in our opinion, can safely be placed in a category where natural justice before taking any action stood excluded as it did not involve any misconduct or punishment."

Another case from the India in a similar vein is the case of Union of India v. J. N. Sinha (AIR 1971 Supreme Court 40) where it was held, that:--

"As observed by this Court in Kraipak v. Union of India AIR 1970 SC 150, "the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words they do not supplant the law but supplement it." It is true that if a statutory provision can be read consistently with the principles of natural justice, the Courts should do so because it must be presumed that the legislatures and the statutory authorities intend to act in accordance with the principles of natural justice. But, if on the other hand, a statutory provision either specifically or by necessary implication excludes the application of any or all the rules of principles of natural justice then the Court cannot ignore the mandate of the legislature or the statutory authority and read into the concerned provision the principles of natural justice. Whether the exercise of a power conferred should be made in accordance with any of the principles of natural justice or not depends upon the express words of the provision conferring the power, the nature of the power conferred, the purpose for which it is conferred and the effect of the exercise of that power."

1. The connotation and import forming the constituents of the word "satisfied" has been used in various laws and interpreted and deciphered in a number of judgments of our own as well as foreign jurisdiction. On close appraisal and scrutiny of numerous judgments, the true meaning and import of this expression is deducible as under:--

2. Word "satisfied" in R. 32, requires "stronger" ground for action than mere suspicion. Existence of reasonable grounds essential under S. 3(2)(x)-Mere declaration of "satisfaction" not sufficient (Defence of Pakistan Ordinance, 1965).

3. The words "if satisfied " are not preceded by any qualifying adverb, such as, "reasonably". It is the satisfaction of the arresting officer that forms the basis of the arrest of the detenu. The legislature has omitted the word "reasonably" which would have enabled Courts of law to examine the sufficiency of the reasons for the satisfaction of the arresting authority. (Punjab Public Safety Act.)

4. Discretionary decision is to be made according to rational reasons which means that there be findings of primary facts based on good evidence and decisions. Actions which do not meet these threshold requirements are arbitrary and might be considered as a misuse of powers.

5. The word "satisfied" means existence of mental persuasion much higher than mere opinion; a mind not troubled by doubt; 'a mind which has reached on clear conclusion.

6. The word 'satisfied' is a term of considerable expansiveness.

7. The term 'satisfied' has been understood to mean, free from anxiety, doubt, perplexity, suspense or uncertainty.

8. In the context, it is synonymous with 'convince the understanding or convince beyond a reasonable doubt.'

9. The word 'satisfied' in section 23 of the Hindu Marriage Act 1955, must mean satisfied on preponderance of probabilities and not satisfaction beyond reasonable doubt.

10. The word 'satisfied' has been defined in Shorter Oxford English Dictionary, 3rd edn, p. 1792, as to furnish with sufficient proof of information, to set free from doubt or uncertainty, to convince

11. to answer sufficiently (an objection, question), to fulfill or comply with (a request), to solve (a doubt, difficulty):

12. to answer the requirements of (a statement of things, hypothesis, etc); to accord with (condition).

13. The word "satisfied" does not mean "satisfied beyond reasonable doubt".

14. The nature and gravity of an issue necessarily determines the manner of attaining reasonable satisfaction of the truth of the issue and because the presumption of innocence is to be taken into account.

15. The phrase "is satisfied" means, in my view, simply "makes up its mind"; the court on the evidence comes to a conclusion which, in conjunction with other conclusions, will lead to the judicial decision.

Ref: PLD 1967 SC 373 (Malik Ghulam Jilani v. Government of West Pakistan) PLD 1951 FC 15 (Muhammad Hayat v. Crown) PLD 2001 SC 1 (Director Food, N.W.F.P. v. Messrs Madina Flour and General Mills (Pvt.) Ltd.) 2011 SCMR 698 (Sohail Butt v. Deputy Inspector General of Police (North) National Highway and Motorway Police) AIR 1957 Punj 303 (Faquir Chand v. Bhana Ram) (1989) 1 Civ LJ 104, p 106 (Ker) (DB) (Somasekharan Nair v Thenkamma) (S R Bommai v. Union of India) AIR 1994 SC 1918, pp 1969-1970, AIR 1994 SCW 2946, (1994) 3 SCC 1, (1994) 2 JT (SC) 215]. [1966] 1 All E.R. 524 (Blyth v. Blyth). Judicial Dictionary by K J Aiyar, 15th Edition, Volume 2, 2011,]

1. Whether the plaintiff has committed the tax fraud and or evaded the tax liability and whether on establishing these charges the plaintiff is liable to be blacklisted or not? All these questions are to be decided by the hierarchy or chain of command provided under the Sales Tax Act, 1990. The point at issue for which the plaintiff has in essence approached this court is with regard to the suspension order. Under Section 21 of the Sales Tax Act, 1990 for the purpose of suspending the registration, the satisfaction of the Commissioner is de rigueur as an indispensable condition. If I look into Rule 12 of the Sales Tax Rules, 2006, the suspension and blacklisting both have been treated separately. In this rule too it is clearly provided that where the Commissioner is satisfied that the registered person has issued fake invoices, evaded tax or committed tax fraud, the registration may be suspended by the Commissioner without prior notice pending further inquiry. The definition of tax fraud is separately provided under subsection (37) of Section 2 of the Sales Tax Act, 1990. Though under Section 21 it is nothing provided that the suspension can be done without prior notice but the elementary component for exercising the right of suspension hang on the satisfaction of the Commissioner.

2. The word without prior notice has much significance that necessitates and commands onerous responsibility on the learned Commissioner to accomplish his satisfaction prior passing suspension order which under the rules can be issued without prior notice. In this explicit context the learned Commissioner is obligated under the letters of the law to make sure and double check that the registered person has committed tax fraud and the case is so vivid, obvious and fit for issuing suspension order. If so, he is also required to discuss the tangible evidence in the suspension order which he is issuing without any notice or providing any opportunity of hearing to the registered person. In my view, such type of drastic action without prior notice can be issued only where the Commissioner has the solid and tangible evidence and not on mere sweeping allegations. The assessment order No.3/2017-2018 was passed in the case of plaintiff on 17.11.2017 under Section 11(2) r/w Section 34 of the Sales Tax Act, 1990 for the period of March, 2012 and May, 2012. This is the same matter and period for which the suspension order has been issued at least one month's before the date of assessment order. The learned counsel for the tax department himself confessed that the exemption was only for import of laptops and backpacks were not included. He further admitted that Import by Provincial Government is exempt from GST and Advance Income Tax. He also made much emphasis that at the time of issuing order of suspension of registration of a person, the Commissioner institutes an inquiry. Despite numerous triable issues, no concrete evidence or material has been discussed which may reasonably demonstrate at this stage that the plaintiff has committed the tax fraud nor anything is discernible from the suspension order that any discrete inquiry was conducted.

3. The word satisfied requires stronger mind for action than mere suspicion and the discretion conferred upon Commissioner to pass suspension order even without prior notice ought to have been exercised with rationality and due diligence which means the existence of mental persuasion much higher than mere opinion; a mind not troubled by doubt; a mind must have reached on clear conclusion. Up till now the guilt of the plaintiff has not been proved through the findings of any independent forum even the assessment order passed has been assailed by the plaintiff in appeal. The basis for satisfaction are envisioning in Clauses A to G of Rule 12 of 2006 Rules but a simple glimpse and preview of the suspension order do not reflect any particular condition or basis relied on. The suspension order cannot pass in a slip shod manner but it should reflect the independent application of mind with cogent and plausible reasons to which one may consider it to be fair and in accordance with law. It is indeed specie and rudimentary trait of celebrated principle of due process of law and in case of its violation, the registered person can approach to the court for redress as admittedly, no right of appeal is provided against the suspension under the Sales Tax hierarchy.

4. The learned counsel for the defendants referred to the case of Sh. Diwan Mohammad Mushtaq Ahmed (supra). The principle of natural justice has already been discussed in detail while referring to the case of Warid Telecom. The case of Volkart Pakistan and Messrs Bilz (Pvt.) Ltd. (supra) are distinguishable in the present situation where only limited issue of suspension is involved. In the case of Lucky Cement Ltd (supra), the court held that prohibitory clause, couched in the negative language should be construed and applied strictly. This dictum is also distinguishable in the present circumstances. In the next case of Pakistan Paper Products Ltd (supra) it was held that function of court is not to render operation of a statute redundant or interpret it in a manner which may lead to evasion of tax. No interpretation is being made here for rendering operation of any statue redundant but the threshold of examining the attribute is whether the authority while issuing suspension order exactly proceeded within the tenor of law or overstepped and surpassed.

5. In the wake of above discussion, the suspension order dated 17.10.2017 passed by Commissioner Inland Revenue is set-aside. However, the proceedings if any commenced with regard to blacklisting may continue and after providing ample opportunity of hearing, the order may be passed by the competent authority. In case of any adverse order, the plaintiff may seek appropriate remedy provided under the provisions of Sales Tax Act, 1990. The application is disposed of accordingly.

MWA/I-16/Sindh Order accordingly.

2018 P T D 668

[Sindh High Court]

Before Muhammad Faisal Kamal Alam, J

DEWAN STEEL MILLS through Authorized Representative and others

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Commerce, Islamabad and others

Suit No. 1661 of 2015, decided on 2nd June, 2017.

Anti-Dumping Duties Act (XIV of 2015)---

----Ss. 31, 33 & 70---Specific Relief Act (I of 1877), Ss.42 & 54---Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2---Suit for declaration and injunction---Interim injunction, grant of---Limitation period, extension of---Preliminary determination---Plaintiffs were importers of 'hot rolled steel billets' and complaint was filed against them before National Tariff Commission alleging that plaintiffs were dumping the goods in question---Plaintiffs assailed process of investigation against them on the ground that copy of complaint was not provided to them---Validity---Special statutory remedy under S.70 of Anti-Dumping Duties Act, 2015 was provided---Subject was of technical nature and that was why, quorum/composition of National Tariff Commission and academic qualification of its members were also mentioned---Plaintiffs could avail remedy of appeal before Appellate forum as mentioned in S. 70 of Anti-Dumping Duties Act, 2015---Limitation period in terms of S.70(2) of Anti-Dumping Duties Act, 2015, was 30 days' time prescribed for preferring appeal against preliminary determination, which time had already ended---Plaintiffs came to know about preliminary determination when they filed second application for grant of injunction before High Court and no appeal was preferred till then---High Court enlarged time to plaintiffs who could file appeal against preliminary determination before Appellate Tribunal under S.70 of Anti-Dumping Duties Act, 2015---High Court directed the authorities to ensure that local industry was not destroyed and import from China should not result in threat of material injury or causing material retardation of establishment of a domestic industry as envisaged in definition of "injury" contained in Anti-Dumping Duty Act, 2015---High Court directed the Federal Government to ensure by improving capacity of National Tariff Commission to meet impending challenges---High Court further directed that much acclaimed business opportunities in China Pakistan Economic Corridor (CEPC) must focus on the fact that it should also result in enhancing / boosting exports of Pakistan resulting in reduction of trade deficit---Suit was dismissed in circumstances.

[Case law referred].

Haider Waheed and Basil Nabi Malik for Plaintiffs.

Ali Almani and Ahmed Shiraz for Defendants Nos. 1 and 2.

Khalid Jawed Khan for Defendant No.3.

Dates of hearing: 31st January, 8th February, 20th March and 18th April, 2017.

JUDGMENT

MUHAMMAD FAISAL KAMAL ALAM, J.---Plaintiffs have brought this action at law primarily against defendant No.2-Natonal Tariff Commission ("NTC") that while conducting an investigation in respect of product Continuous Casting Billets ("C.C. Billets") imported by the plaintiffs, the defendant No.2-NTC is not acting within parameters of law. Plaint contains the following prayer clause:--

"PRAYERS

The Plaintiffs herein above mentioned humbly pray for the following:--

1. The Honourable High Court may be pleased to declare that the investigation initiated by the Defendant No.2 is unlawful and illegal, and hence of no legal effect;

2. The Honourable High Court may be pleased to declare that the Defendant No.2 had acted unlawfully and illegally in depriving the Plaintiffs of the complete copy of the application, along with all annexures and evidence, on the basis of alleged confidentiality;

3. That the Honourable High Court may be pleased to restrain the Defendants from initiating, conducting or concluding the impugned investigation (as mentioned in Public Notice dated 05.08.2015) against the producers / importers of hot rolled steel billets;

4. That in the alternative, the Honourable High Court may be pleased to restrain the Defendants from conducting and / or concluding the investigation without affording the Plaintiffs a copy of the application submitted by the applicants to Defendant No.2, inclusive of all evidence attached therewith, an opportunity to be heard, as well as all other legal rights as available under the law;

5. That the Honourable High Court may be pleased to award the costs of the suit to the plaintiffs;

6. That the Honourable High Court may be pleased to award any other relief as it may deem appropriate in the facts and circumstances of the instant case."

7. On issuance of notice, defendant No.2-NTC has contentiously contested the case and claim of plaintiffs by filing their counter affidavits to different interlocutory applications filed by the plaintiff, to which the latter filed Affidavit-in-Rejoinder.

8. Since the controversy at hand does not involve such facts, which are triable issues, therefore, by consent of the parties, it was decided that this matter should be decided on the basis of legal issues, therefore, vide order dated 16.01.2017, following consent issues were settled:--

9. Whether the suit as framed and filed is maintainable in law?

10. Whether the requirement of Sections 31 and 33 of Anti-Dumping Duties Act, 2015, has been complied with or not?

11. While writing Judgment, it is deemed appropriate that though a formal but a necessary issue should also be framed to the effect that:

12. What should the decree be?

13. Succinctly, Plaintiffs are engaged in the business of importing "hot rolled steel billets" (raw material), for the purpose of manufacturing steel bars through a metal working process.

14. As per learned counsel, a Complaint has been lodged with the Defendant No.2 against the Plaintiffs that the latter have committed an act of dumping the above product in local market, that is, introduced into the Commerce of Pakistan. Subsequently, a Public Notice dated 05.10.2015 was published in the Daily Express "Tribune" by the Defendant No.2 under Anti-Dumping Duties Act, 2015, ("Governing Law"). The investigation is in respect of C.C. Billets exported by China into Pakistan. Hence, the above C.C. Billets are the investigated product in term of Section 2(k) of the Governing Law.

15. In the intervening period, defendant No.2-NTC has given its Preliminary Determination about the subject product. This report dated 22.04.2016, has been appended as Annexure "A" with C.M.A.No.15958 of 2016, preferred by the plaintiff and seeking a restraining order against defendant No.2-NTC from passing a final determination in the matter. In addition to this, another application being C.M.A.No.15780 of 2016 was filed for initiating contempt proceedings against officials of defendant No.2-NTC.

16. The grievance of the Plaintiffs is that the Defendant No.2 has not provided them a complete copy of the complaint lodged by (i) A mreli Steels Limited, Karachi (ii) Agha Steel Industries, Karachi, and (iii) ASG Metals Limited, Karachi, (Complainants/Interested Parties). Subsequently, Amreli Steels Limited was impleaded as defendant No.3, vide order dated 08.02.2017.

17. Mr. Haider Waheed, learned counsel vehemently argued that it is plaintiffs' statutory right in terms of Section 28 and Section 33 of the Governing Law to be provided the full text of written application along with record/material relied upon by the above Applicants / Complainants and the Plaintiffs have under the latter provision has a right to see the information relating to the subject Complaint. It was further argued that only fetter to the above provision is Section 31, which pertains to the confidentiality, but in Section 31 itself the confidentiality is qualified (conditional) and has been explained in detail; that includes business or trade secrets, production process and other operational and financial information, which are not publicly available. To justify his submissions, the plaintiffs' counsel has drawn the attention of the Court to certain portion of the Complaint in which normal export price and other components are missing, rather they are deleted through asterisk and at page 543 of the case file it has been alleged that the goods imported by plaintiffs have a dumping margin of 46.86% which plaintiffs' side seriously questions besides impugning the entire proceedings. It would be advantageous to reproduce Section 31 herein under:--

"31. Confidentiality.-(1) Subject to subsection (2), the Commission shall, during and after an investigation, keep confidential any information submitted to it and such information shall not be disclosed without specific permission of the party submitting it.

(2) Any information which is-

(a) by nature confidential, because its disclosure shall be of significant competitive advantage to a competitor, or because its disclosure would have a significantly adverse effect upon a person supplying the information, or upon a person from whom the information was acquired;

(b) determined by the Commissioner to be of a confidential nature for any other reason; or

(c) provided as confidential by parties to an investigation, shall, on good cause shown, be kept confidential by the Commission.

(3) The following types of information shall be deemed to be by nature confidential, unless the Commission determines that disclosure in a particular case would neither be of significant competitive advantage to a competitor nor have a significantly adverse effect upon a person supplying the information or upon a person from whom such information was acquired, namely: --

(a) business or trade secrets concerning the nature of a product, production processes, operations, production equipment, or machinery;

(b) information concerning financial condition of a company which is not publicly available; and

(c) information concerning costs, identification of customers, sales, inventories, shipments, or amount or source of any income, profit, loss or expenditure related to manufacture and sale of a product.

(4) Any party seeking any information to be kept confidential shall request for the same at the time the information is submitted, along with the reasons warranting confidentiality. The Commission shall consider such request expedite ously keeping the information confidential is not warranted.

(5) Any party submitting any information with the request to keep it confidential shall furnish non-confidential summary of all such information. Such summary may take the form of ranges or indexation of figures provided in the confidential version or marked deletions in text or in such other form as the Commission may require:

Provided that such non-confidential summary shall permit a reasonable understanding of the substance of the information submitted in confidence:

Provided further that any deletion in text shall, unless otherwise allowed by the Commission, only relate to names of the buyer or supplier.

(6) In exceptional circumstances, any party submitting confidential information may indicate that such information is not susceptible of summary, in which case a statement of the reasons why summarization is not possible shall be provided. If the Commissioner concludes that the non-confidential summary provided fails to satisfy the requirements of subsection (5), it may determine that the request for keeping the information confidential is not warranted.

(7) If the Commission finds that a request for keeping the information confidential is not warranted, and if the supplier of such information is unwilling to make it public or to authorize the disclosure in generalized or summary form, the Commission shall disregard such information and return the same to the party submitting it.

(8) Subject to subsection (9), notwithstanding anything contained in this Act or in any other law for the time being in force, any confidential information received or obtained, directly or indirectly, by the Commissioner pursuant to or in connection with an investigation shall not be subject to disclosure by the Commission Government or a Provincial Government without the prior permission of the party submitting such confidential information.

(9) The provisions of subsection (8) shall not preclude the supply of any information called for by the Appellate Tribunal pursuant to section 72:

Provided that the obligation to protect confidential information as provided for in this Chapter shall, mutatis mutandis, extend to the Appellate Tribunal."

1. It was further argued that the defendant No.2 in utter disregard of other statutory provision has accepted the subject Complaint for hearing. To explain this contention, the learned counsel has made a Reference to Sections 20, 21, 22 and Subsection 2 (b) of Section 20, inter alia, providing that the application / complaint should disclose the evidence of dumping and injury; similarly Section 21 enjoins that a notice to be given to the Government of each exporting country; in the present case China, whereas, Section 23 provides that defendant No.2/Commission should first examine the accuracy and adequacy of the evidence and where after, the application / complaint shall be set down for a proper investigation.

2. The Plaintiffs' side further contends that the Complainants in the present case do not even fulfill the criteria mentioned in Section 24 of the Governing Law, primarily relating to the production capacity. To further fortify this argument, plaintiffs' legal team has relied upon the language of subsection (2) of Section 24, which is in a negative command, which according to him, should be interpreted strictly being mandatory in nature. Further arguments from the plaintiffs' side were advanced to show that in view of the above provision, the defendant No.2 has to pass a preliminary order about the competency of the Applicants / Complaints before initiating the subject investigation against the plaintiffs. As per learned counsel for the Plaintiffs, the present Complainants /Applicants neither constitute 25% (twenty five percent) of the total production of market share nor fulfills the 50% threshold of collective output, hence their complaint before defendant No.2-NTC is liable to be dismissed. In this regard he has referred to public advertisement appended as Annexure "A" with the Plaintiffs' Rejoinder, in which it is mentioned that the total production capacity of Still Mills Manufactures in Pakistan is seven million Metric Ton and due to certain Government policies they were compelled to reduce their production to only fifty percent. As per learned counsel if the interview of CEO of one of the Complainants (interested party) Amreli Steels Limited (defendant No.3) is read, which he has annexed with his Affidavit-in-Rejoinder, if would be clear that total capacity of Amreli Steels Limited is two lac metric ton only and if the other Complainants, for the arguments sake are also joined with Amreli Steels Limited then the accumulative total production would be six lac metric ton. Plaintiffs' counsel has referred to its covering letter of 15.09.2015, under which they have filed their Reply / Comments before defendant No.2-NTC in response to the investigation under dispute bearing Case No.36 of 2015/NTC/CCB. This covering letter and Reply are appended with Affidavit-in-Rejoinder of plaintiffs, which they have filed as rebuttal to the counter affidavit of defendants to C.M.A.No.12609 of 2015, whereunder plaintiffs have sought an interim injunctive relief.

3. Primarily, the plaintiffs' side laid foundation of their arguments on section 31 of the Governing Law. The crux of the arguments is that unless defendant No.2-NTC meets the test of Section 31 (confidentiality) of the Governing Law, latter (defendant No.2-NTC) is under an obligation to provide the entire complaint along with annexures to the plaintiffs enabling them to file a comprehensive reply. The onus is on defendant No.2-NTC to show "good cause" for not disclosing the contents of entire complaint, which onus defendants have failed to discharge. It was further argued that the Questionnaire, which is annexed as Annexure 'F/1' at page-489, contains indexation and other asterisk and the actual figures as contained in the complaint of above named complainants including defendant No.3 has not been disclosed by defendant No.2-NTC to the plaintiffs and thus the latter deprived of their right to a fair trial as envisaged under Article 10A read with Article 19A, relating to freedom of information, of the Constitution of Pakistan.

4. In his rebuttal by filing a comprehensive synopsis, the plaintiffs' counsel has reiterated that even information within public domain has also been withheld in the questionnaire, which created impediment for the plaintiffs to submit their complete reply and that is why they have submitted their incomplete response as referred hereinabove.

As per plaintiffs, defendant No.2-NTC has given the details of Chinese Exporters and the quantity they have exported, but yet Commission did not have exporting price, which is not believable and can easily be obtained from the Chinese Market by defendant No.2-NTC as well as through other material available, for instance, London Metal Bulletin and the Chinese Metal Bulletin. Similarly, pivotal factor in determining the injury is the calculation of normal value of the investigated product. As per the plaintiffs' counsel, normal value indexed by defendant No.2-NTC in its questionnaire in Table-2 under clause 8.6, (available at page-539 of the case file), is completely erroneous and imaginary as normal value can be calculated or determined by applying standard methods including the one mentioned hereinabove. Consequently, the plaintiffs have challenged the dumping margin of 46.86% as mentioned under clause-9 of the questionnaire -Table-3. Plaintiffs' counsel has cited the Judgments mentioned in the title of this decision to fortify his submissions.

1. The above arguments were controverted by the legal team of defendants Nos.1 and 2; Mr. Ali Almani and Mr. Ahmed Shiraz (Legal Advisor of NTC). According to defendants' counsel, while conducting investigation against the plaintiffs, defendant No.2-NTC has complied with requisite statutory formalities and the entire investigation up to the stage of Preliminary Determination is carried out and completed through due process of law.

2. As per defendants' counsel, defendant No.2-NTC had first made efforts to obtain information and other data about the subject dispute from Chinese Exporters through Chinese Embassy at Islamabad, besides, sending a questionnaire to Pakistani importers including the plaintiffs. Unfortunately, no information was shared by Chinese Exporters and even conduct of Pakistani Importers is also not forthcoming, except those which are mentioned in paragraph-15-3 of the Preliminary Determination. It is further argued that the Governing Law itself is quite equitable in nature and unlike other statutes, in terms of Section 70 thereof, even an investigation of the nature is also appealable before the Appellate Tribunal, thus, the plaintiffs have every right to agitate their grievances before the Appellate Tribunal established under the Governing Law, which is a special statute, instead of pursuing the present lis, which otherwise tantamount to strangulating the statutory provisions of the Governing Law as this Court is a final Court of Appeal against the decisions of the Appellate Tribunal in terms of subsection (13) of Section 70 of the Governing Law.

It was further argued by defendants' legal team that investigation is only undertaken if it appears to defendant No.2-NTC that act of dumping is causing injury to the local industry. Mr. Ali Almani has referred to the Binder No.A and read the internationally accepted concept of dumping. He then referred to relevant Articles of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, besides citing case-law of foreign jurisdictions in support of his stance that confidentiality clause is not something unusual in the Governing Law, but similar clauses do exist in the laws of all those countries, where the Anti-Dumping Regime are functioning. It would be advantageous to reproduce the relevant concept on 'dumping' as under:--

"The term "Dumping" is recognized as a practice of selling a product in a foreign country for less than the prevailing price of the same product in the domestic country or the manufacturing cost of the product. Many countries have declared dumping as an illegal business practice to protect their domestic industries from such unfair competition. If a company situated in a country exports a product at an export price lower than the normal price it charges in its domestic market, it is said to be "dumping" the product into another Country. This form of price differentiation between markets is not a prohibited practice under international trade agreements.

The only unacceptable and harmful type of dumping is predatory dumping, which happens when a foreign firm, with the help of huge subsidies from its Government, sells goods at lower prices or below cost of manufacturing in the domestic market of the importing country in order to eliminate domestic producers and gain monopoly. It can harm the domestic industry by reducing its sales volume in market shares, as well as its sales prices, resulting in decline in profitability, job losses and, in the worst case, in the domestic industry going out of business and thus creating monopolistic situations. Such dumping, where the dumping firm rules the price on attaining monopoly is harmful to the entire society because it hurts not only the domestic producers but also consumers. Such business practice is clearly undesirable as viewed by a huge number of free trade opponents.

According to the World Trade Organization (WTO) Rules, a firm is said to dump if it sells its product in another country at a price less than the normal value. (Underlined for emphasis)

Remedial action in the form of Anti-Dumping measures generally involves charging extra import duty on that product from the exporting country to bring its closure to the normal value and thus remove the injury to the domestic industry in the importing country."

Similarly, Section 4 of the Governing Law provides_

1. Identification of dumping.---For the purposes of this Act an investigated product shall be considered to be dumped if it is introduced into the commerce of Pakistan at a price which is less than its normal value.

2. It is also necessary to reproduce the relevant Articles hereunder of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 to which Pakistan is one of the signatories and the reason for enacting the Governing Law:

"Members hereby agree as follows:

PART 1

Article 1

Principles

An anti-dumping measure shall be applied only under the circumstances provided for in Article VI of GATT, 1994 and pursuant to investigations initiated and conducted in accordance with the provisions of this Agreement. The following provisions govern the application of Article VI of GATT, 1994 in so far as action is taken under anti-dumping legislation or regulations.

2.1 For the purpose of this Agreement, a product is to be considered as being dumped, i.e. introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country.

6.5 Any information which is by nature confidential (for example, because its disclosure would be of significant competitive advantage to a competitor or because its disclosure would have a significantly adverse effect upon a person supplying the information or upon a person from whom that person acquired the information), or which is provided on a confidential basis by parties to an investigation shall, upon good cause shown, be treated as such by the authorities. Such information shall not be disclosed without specific permission of the party submitting it.

6.5.1 The authorities shall require interested parties providing confidential information to furnish non-confidential summaries thereof. These summaries shall be in sufficient detail to permit a reasonable understanding of the substance of the information submitted in confidence. In exceptional circumstances, such parties may indicate that such information is not susceptible of summary. In such exceptional circumstances, a statement of the reasons why summarization is not possible must be provided.

6.5.2 If the authorities find that a request for confidentiality is not warranted and if the supplier of the information is either unwilling to make the information public or to authorize its disclosure in generalized or summary form, the authorities may disregard such information unless it can be demonstrated to their satisfaction from appropriate sources that the information is correct."

[Underlined to add emphasis]

1. Defendants' counsel has also relied upon number of reported decisions (Supra) in support of his arguments that rule of adequate and efficacious alternate remedy in statutory hierarchy as is mentioned in the Governing Law, is not only applicable to the exercise of writ jurisdiction but also to the proceedings of the nature, though here it is termed as rule of implied ouster.

2. With regard to the arguments of the plaintiffs' side that the Complainants including defendant No.3 do not constitute 50% of market share, it was stated that this aspect was specifically dealt with while passing the Preliminary Determination by defendant No.2-NTC; Paragraphs Nos. 8 to 9.5 of Preliminary Determination were referred by defendants' side in relation to the market shares of the complainant, besides making a reference to page-517 of main file, which is one of the sections of the impugned Questionnaire dealing with the issue of market share under Section 24 (of the Governing Law).

3. Mr. Khalid Jawed Khan, learned counsel for defendant No.3 based his arguments on various statutory provisions of the Governing Law. He referred to Section 25 to advance his contention that defendant No.2-NTC can even Suo Moto take notice of dumping of goods in Pakistan, which is causing injury to local industry and, therefore, plea taken by the plaintiffs about inadequacy of requisite market shares of the Complainant is meritless. He further contended that Anti-Dumping Duty is only leviable when the act of Anti-Dumping is causing injury to the Complainants or local industry in terms of Section 3 of the Governing Law. It was further averred that the Governing Law itself provides checks and balances on defendant No.2-NTC and the onus is on latter to prove the material injury cause to the local industry. It was further argued that if every investigation, which otherwise is initiated after preliminary enquiry, is restrained, then defendant No.2-NTC would become dysfunctional. Learned counsel representing defendant No.3, while summing up his arguments has relied upon the judgment of SECP v. Mian Nisar Elahi (supra), that time can be enlarged by this Court, which will enable the plaintiffs to file their appeal before the Appellate Tribunal in terms of Section 70 of the Governing Law, if in the event, this Court comes to the conclusion that present suit is not maintainable.

4. With the able assistance of learned counsel representing respective parties, the record of the case is examined and their submissions are thoughtfully considered.

5. In compliance of the observations, Mr. Ahmed Shiraz (Legal Advisor) of defendant No.2-NTC has submitted an additional Information in the form of a Binder, in which record and proceedings of the impugned complaint, which is pending before the said defendant No.2-NTC, has been made available, besides, extract of relevant provisions/Articles of the GATT, 1994 and one of the precedents in which Egyptian Authority; viz. 'Anti-Dumping, Subsidy and Safeguard Department' sought information from Pakistan as an exporting country of the product Matches (in Boxes). The above questionnaire of Egyptian Jurisdiction is a non-confidential version in which crucial information has either been indexed or left blank.

6. Anti-Dumping Duties Rules, 2001, have been referred and particularly sub-rules d, e, f, g of Rule 3, to support their contention that defendant No.2-NTC sought all that information from the interested parties / complainants, which was required to evaluate the accuracy of complaint. It was further argued that at National Tariff Commission, transparency is maintained by maintaining a public file relating to each investigation containing information, but obviously not the confidential one covered under Section 31 of the Governing Law; in this regard Rules 3 and 7 of the Anti-Dumping Rules, 2001, are referred. It would be advantageous to reproduce the above discussed Rules:

"3. Disclosure in application.---An application shall, in addition to the information specified in section 20 of the Ordinance, contain such information as is reasonably available to an applicant on the following, namely:--

(a) name, address, telephone number, facsimile number and electronic mail address of the applicant;

(b) the identity of domestic industry by or on behalf of which the application is being made, including the names, addresses and telephone numbers, facsimile numbers and electronic mail addresses of all other known producers or, association of producers which is a trade organisation as defined in the Trade Organisations Ordinance, 1961 (XLV of 1961), and has been granted or deemed to have been granted a licence thereunder, in domestic industry;

(c) information relating to the degree of domestic industry support for the application, including--

(i) the total volume and value of domestic production of a domestic like product; and

(ii) the volume and value of a domestic like product produced by the applicant and by each domestic producer identified;

(d) a complete description of the allegedly dumped product, including the technical characteristics and uses of such product and its current customs tariff classification number as specified in the First Schedule to the Customs Act, 1969 (IV of 1969);

(e) the country in which the allegedly dumped product is manufactured or produced and, if it is imported from a country other than the country of manufacture or production, the intermediate country from which the product is imported;

(f) the name and address of each person the applicant believes sells the allegedly dumped product and the proportion of total exports to Pakistan that person accounted for daring the most recent twelve-month period;

(g) information on prices at which the product in question iv sold when destined for consumption in domestic market of the country of export or origin or, where appropriate, information on the prices at which the product is sold from the country of export or origin to a third country or on the constructed value of the allegedly dumped product, and information on export prices or, where appropriate, on the prices at which the allegedly dumped product is first resold to an independent buyer in Pakistan, and on any adjustments as provided for in section 11 of the Ordinance.

1. Public file to be maintained for interested party and access thereto.---(1) The Commission shall establish and maintain a public file relating to each investigation or review pursuant to the Ordinance and subject to the requirement to protect confidential information under section 31 of the Ordinance, the Commission shall place in such file-

(a) all public notices relating to an investigation or review;

(b) all materials, including questionnaires, responses to questionnaires, and written communications submitted to the Commission;

(c) all other information developed or obtained by the Commission; and

(d) any other documents the Commission deems appropriate for disclosure to an interested party.

(2) The public file to be maintained under sub-rule (I) shall be available to any interested party for review and copying at the offices of the Commission, during such time as the Commission may notify, throughout the course of an investigation or review and any appeal under section 64 of the Ordinance."

1. The preamble of the Governing Law itself conveys the object of its enactment, inter alia, in order to implement the international obligation of Pakistan being one of the signatories of General Agreement on Tariff and Trade, 1994 ("GATT"). To give effect to this multilateral treaty, a legislative instrument is required under Article 70, sub-article (2) read with item/paragraph No.3 of Fourth Schedule of Federal Legislative List of the Constitution of Pakistan.

2. It is also noteworthy that the Governing Law is quite flexible; Section 46 whereof provides a concept of price undertaking, that is, if the National Tariff Commission in its Preliminary Determination has come to a conclusion that the investigated product has in fact caused the injurious effect of dumping then on the undertaking of exporters that they will not export the product at the dumped price, the imposition of anti-dumping duty can either be suspended or terminated. This shows the inbuilt checks and balances in the Governing Law and apparently these options and discretions are provided to make this statute a practical and workable one as far as possible.

Issue No.2 should be decided first.

1. To answer this issue, the impugned Anti-Dumping Importer's Questionnaire with regard to the Product Under Investigation-POI (available at pages-489 to 649) has been perused together with the Report (of 22.04.2016) on Preliminary Determination, available in second part from pages-157 to 225, delivered by the Chairman and the Members of defendant No.2-NTC.

2. The questionnaire contain list of exporters but since they all are based in China and did not provide information, therefore, no data was prepared in this regard, but to determine the export price and normal value in terms of sections 5 and 6 of the Governing Law, which is a basic component for reaching the dumping figure causing injury, the defendant No.2-NTC has used indexation. This is a main bone of contention of plaintiff that the defendant No.2-NTC should have disclosed the actual figure provided by interest parties including defendant No.3 (Amreli Steel Limited). It is strenuously argued by legal team of the plaintiffs that the crucial paragraph of questionnaire, where information provided by interested parties / complainants, should have been disclosed, but defendant No.2-NTC has inserted asterisk, due to which the plaintiffs are unable to have a reasonable understanding of questionnaire and sent an abridged version of Reply as referred in the foregoing paragraphs.

3. On the other hand learned counsel representing defendant No.2-NTC and defendant No.3 have argued that above being a vital information is fully covered under section 31 of the Governing Law relating to the confidentiality. It was further argued that disclosure of all the information as provided by interested parties/complainants would totally expose complainants' confidential data to the plaintiffs, which admittedly are their competitors.

4. Interestingly, the above questionnaire has been sent under a correspondence dated 07.08.2015 by defendant No.2-NTC to one of the plaintiffs, [available at page-485 of the case file], in which the present plaintiffs have also been given an option to provide the answer to the questionnaire in confidential and non-confidential version in the light of Article 6.5.1 of the Agreement on Implementation of Article VI of GATT, 1994, (already reproduced hereinabove); it means that plaintiffs have also been given an equal opportunity for not disclosing that information which falls within section 31 of the Governing Law.

5. Arguments of plaintiffs' counsel that the indexation and asterisks used in the questionnaire is even contrary to the concept of indexation and ranges are wrongly applied merely to technically oust the plaintiffs from the contest and to deprive the plaintiffs from rebutting the evidence of interested parties/complainants, could not be accepted for the reason that Section 31 of the Governing Law itself gives protection to the confidential information which provision is in line with the Clauses / Articles of the afore referred Implementation Agreement. The other argument of Mr. Haider Waheed, that first the defendant No.2-NTC should make a determination and show a 'good cause' as mentioned in subsection 2(b) and (c) of Section 31 of the Governing Law and then can use indexation in the questionnaire, is also devoid of merits, as already in the Governing Law different stages of the proceeding have been mentioned and it is not necessary for defendant No.2-NTC to first pass an independent decision or determination, as argued by plaintiffs' side, before delivering its Preliminary Determination. At best, defendant No.2-NTC can forward its determination that was given to an interested party invoking the confidentiality under subsection (4) of Section 31 of the Governing Law, at the time of filing the complaint, also to Respondents, in the present case, the plaintiffs. This aspect of confidentiality has already been determined as pointed out by Mr. Ali Almani (counsel for defendants) in paragraph-18 of the Report on Preliminary Determination dated 22.04.2016 ("Preliminary Determination"), therefore, I answer the second issue in the terms that while sending the afore referred questionnaire to the plaintiffs, defendant No.2-NTC has complied with the requirement of Section 31 of the Governing Law, whereas the plaintiffs are entitled to see and obtain copies of that information submitted to defendant No.2-NTC by the complainants/interested parties, which is not confidential and is relevant to the presentation of the case of the plaintiffs as envisaged under section 33 of the Governing Law, which information is accessible by virtue of the aforereferred correspondence of defendant No.2-NTC dated 25.08.2015.

Plaintiffs' side has relied upon a decision of World Trade Organization (WTO) Appellate Body, on a complaint preferred by Japan, European Union and other countries against the measures adopted by Ministry of Commerce of the People's Republic of China (MOFCOM) imposing Anti-Dumping duties on the products exported from Japan and European Union, was set aside on various grounds including the one mentioned in paragraph-6.1 that China acted inconsistently with Article 6.5 of the Anti-Dumping Agreement and permitted the full text of the reports contained in appendix 5 and appendix 8 to the petition, as well as MOFCOM improperly relied on the Market share of dumped imports, and its flawed price report. This decision in my humble view does neither advance the case of plaintiffs nor answers the issues involved in the present proceeding.

Now adverting to Issue No.1.

1. The unreported decisions relied upon by the plaintiffs' side are taken into account. Two of these are relevant for discussion. The Judgment of learned Lahore High Court given in Writ Petition No.4735 of 2016, which is appended as annexure "W/2" with the Written Arguments of Plaintiffs and the other one is a Judgment of the Hon'ble Supreme Court (annexure "W/4") handed down in number of Civil Petitions Nos. 1654, 1686, 1607 and others of 2009 filed by Messrs Waheed Sons Lahore and others versus defendant No.2-NTC, in which amongst other, the initiation of investigation on the complaint by one of the local manufacturers, Master Tiles and Ceramic Limited, was challenged. The facts are that while the parties were entangled in litigation, the National Tariff Commission first passed the Preliminary Determination, which was followed by Final Determination. In that case also the product under investigation, viz. porcelain/ceramic tiles, was being imported from China. Though the Hon'ble Apex Court set aside the decision of National Tariff Commission on the ground that composition of National Tariff Commission (present defendant No.2), as mentioned in the relevant Statute-National Tariff Commission Act, 1990 was incomplete, but the cases were remanded to present defendant No.2-NTC for decision afresh in terms of Section 11 of the above Act, while holding that a fresh decision should be given by a duly constituted Commission (NTC). However, the merits of the case were not touched upon and it was left to the Commission to decide the matter on merits. The Lahore High Court's case is not different, in which though it was held that one of the members of the Commission was not qualified to hold the Office while highlighting the importance of the NTC as an institution, but despite this irregularity, the proceeding before the Commission was not quashed but it was held in abeyance with the directions that when the composition of NTC is complete, the proceeding should be resumed. In the operative part of the Order, the learned High Court has specifically clarified that notice of initiation of proceeding which at that time was already issued, will remain intact.

2. Mr. Haider Waheed, learned counsel for the plaintiffs has contended that the Preliminary Determination should be set at naught as it has been passed in violation of restraining order of this Court, which was merged in the order of 10.01.2017 and officials of defendant No.2-NTC has committed contempt of Court. Submission considered. The first ad-interim injunction granted on 22.09.2015 is somewhat conditional and subject to fulfillment of Section 33 of the Governing Law, whereas, on 22.12.2015, the restraining order was slightly modified and on 01.01.2016 the matter was adjourned with a clarification that the defendants while proceeding further in the subject investigation under dispute have to conduct themselves strictly in accordance with law. Regarding the order dated 22.12.2015, the plaintiffs filed a Review Application (C.M.A. No.18691 of 2015), contents whereof are self-explanatory. Finally, on 10.01.2017, the restraining order was lastly modified by directing the Defendants to adhere to the terms of earlier orders of 22.09.2015 and 01.01.2016.

3. The relevant provision of the Anti-Dumping Duties Act, 2015 (Governing Law), is also taken into account and in my considered view that under Section 68 thereof, inter alia, (relating to quorum of NTC) a Preliminary Determination of the nature can be decided by two members of defendant No.2-NTC. Admittedly, the subject Report on Preliminary Determination (as referred above) has been signed by the Chairman and one Member, therefore, the same at least on the touchstone of quorum cannot be set at naught. The concluding Paragraph of this Preliminary Determination has clearly stated that no provisional Anti-Dumping Duty has been imposed on plaintiffs in view of the fact that the restraining orders passed by the Court have restrained the defendant No.2-NTC from taking any coercive measure, thus the defendant No.2-NTC refrained itself from imposing any provisional Anti-Dumping Duties on imports of the investigated products. Defendant No.2-NTC informed the counsel for the plaintiffs about Preliminary Determination vide a correspondence dated 26.05.2016 (available at Page-263 of second part of the Court file), but till date, admittedly no appeal (even under protest and without prejudice to the stance in the instant suit) as provided in section 70 of the Governing Law, has been preferred by the plaintiffs to challenge the above Preliminary Determination. Plaintiffs again sought an injunctive relief by filing another Application being C.M.A. No. 15958 of 2016 (under Order XXXIX, Rules 1 and 2 of C.P.C.), inter alia, that defendant No.2-NTC should be restrained from passing a Final Determination, besides filing yet another application for initiating the contempt proceedings against the officials of defendant No.2-NTC.

4. Taking into the consideration, the above undisputed factual aspect of the case revolving around the subject Preliminary Determination and peculiar nature of the controversy as agitated in the present cause vis-à-vis the Governing Law, having intricate technical characteristics, I am of the considered view that neither defendant No.2-NTC nor its officials, who have been named in the Contempt of Court Application are guilty of disobeying the order of this Court in a contumacious manner, therefore, no proceeding under Contempt of Court Act are warranted against the officials of defendant No.2-NTC and consequently, the C.M.A. No.15780 of 2016 for initiating the contempt proceeding is hereby dismissed. Thus, the Preliminary Determination cannot be set aside at this stage.

5. The legal team of defendants has relied upon the number of precedents, which are already mentioned in the title of this decision to advance their arguments on the principle of implied ouster; simply put, what defendants have argued that when a statutory remedy is mentioned in the statute, particularly a special statute governing the subject, then the ordinary jurisdiction of Civil Court under Section 9 of the Civil Procedure Code, 1908, is also barred. On this point of law, the afore referred decision of Administrator, Thal Development (supra) handed down by the Hon'ble Supreme Court, has been rightly relied upon by the defendants, wherein it has been held that since remedy of appeal was provided under Section 161 of West Pakistan Land Revenue Act, 1967, therefore, mere concession of the parties could not have conferred jurisdiction on a Court which was otherwise expressly barred by a statute and for which a specific mechanism has been provided in the hierarchy of the authority functioning under a special statute. This principle has been expounded in detail in a full bench decision of Mian Sultan (supra) (PLD 1949 Lahore 301), relevant portion whereof is reproduced hereunder for a better appreciation of this rule:

". . . . . It is, not contended here that there is any express ouster of the Civil Court's jurisdiction because neither in the Constitution Act nor in the Orders in Council or the Electoral Rules is there any provision that Civil Courts will have no jurisdiction to entertain suits relating to an electoral right. The question falling for decision is whether on a true construction of the various provisions contained in the Orders in Council and the Electoral Rules it can be held that the jurisdiction of Civil Courts is impliedly barred. It is while determining this question that the distinction between a right which is purely the creation of a statutes and a right at common law becomes important because where a civil right did not exist before a statute was passed and was entirely created by that statute, it is reasonable to infer that the Legislature intended that right to be enforced only in the manner that the statute prescribes. In the present case the right was created by the Constitution Act and the Orders in Council issued thereunder, which, together with the Electoral Rules promulgated by the Governor in exercise of the authority conferred on him by the Act and the Orders, also contain a complete Code in regard to the manner in which a person may acquire and exercise that right and the remedies available to him in case of infringement of that right. The right, therefore, falls within that class of rights which being a creation of the statute can only be enforced in the manner prescribed by the statute creating them and are excluded from the cognizance of Civil Courts. It is this position which was intended to be expressed by the provisions of Part III of the Provincial Elections (Corrupt Practices and Election Petitions) Order to the effect that an election shall not be called in question except by an election petition, that all proceedings and applications in connection with such petition shall be dealt with by and carried on by or before the Commissioners and that the Governor's orders on the report of the Commissioners shall be final. The ouster of Civil Courts' jurisdiction in such cases rests on the construction of the statute creating the right and a special tribunal for its enforcement and if as a matter of construction of the relevant statute the Court arrives at the conclusion that the Legislature intended that the right created by the statute should only be exercised or enforced in the manner provided by that statute, then it is somewhat difficult to accept the Madras and Patna view which found favour with the Division Bench in Sat Narian Gurwala v. Hanuman Parshad (44) that if the special tribunal is not constituted or having been constituted it does not function, the Civil Courts' jurisdiction to adjudicate on that right is not affected. The new right depending for its creation on the will of the Legislature, the Legislature could well have refused to create it or having created it, could have subjected it to qualifications and restrictions or defined the conditions under which it could be exercised. The argument for ouster is based in such cases on the presumed intention of the Legislature that the right was intended to be exercised only in the manner prescribed by Act that created it, and if that presumption is correct, the Civil Courts never acquired any jurisdiction to adjudicate on it as the very Act that created it also declared that it should be excluded from the Civil Court's cognizance, and the creation and ouster being simultaneous, the Civil Courts never had any jurisdiction in respect of it."

1. Various provisions of the Governing Law have been thoughtfully considered and in my considered view, it is one of the unique statutes I have come across, which even provides a remedy of appeal against initiation of investigation, besides making the Preliminary Determination also challengeable in appeal in terms of Section 70. Therefore, I hold that since under the Governing Law a special statutory remedy is provided and this being the subject of technical nature and that is why, quorum/composition of defendant No.2-NTC and academic qualification of its members are also mentioned, therefore, the plaintiffs can avail remedy of appeal before the Appellate Forum as mentioned under section 70 of the Governing Law.

2. The above view is further endorsed by the Judgment of Securities and Exchange Commission of Pakistan v. Mian Nisarl Elahi and others (supra) cited by Mr. Khalid Jawed Khan. In the above case, the Hon'ble Supreme Court has deprecated the practice of challenging initial orders passed by Securities and Exchange Commission of Pakistan ("SECP") directly before the High Court in its writ jurisdiction, while making an observation that dispute is highly of technical nature and could have been resolved only through special expertise (available with SECP). While setting aside the Judgment of Lahore High Court, the Hon'ble Apex Court sent the cases back to SECP to be decided by its appellate authority while making an observation that a lenient view should be taken with regard to condonation of delay. However, in present case, the difficulty in availing such remedy would be the period of limitation as in terms of subsection (2) of Section 70, thirty (30) days' time is prescribed for preferring an appeal against the Preliminary Determination, which has already ended. Undisputedly, plaintiffs came to know about the Preliminary Determination when they filed second injunction application (C.M.A.No.15958 of 2016, as referred in preceding paragraphs), that is, on 14.11.2016, but as discussed earlier, no appeal has been preferred till date.

3. Another reported decision of Hon'ble Supreme Court handed down in Muhammad Mubeen-us-Salam's case (supra) provides an answer, inter alia, where the Court had enlarged the time of filing appeals before the Service Tribunal, as due to litigation the appeals sought to be filed had become time barred. Consequently, in instant case also time is enlarged and present plaintiffs of this Suit can file the Appeal(s) against the Preliminary Determination before the Appellate Tribunal under Section 70 of the Governing Law within fifteen (15) days from the date of this Judgment.

4. While hearing an appeal of Plaintiffs against Preliminary Determination, the Appellate Forum of defendant No.2-NTC shall take into account the observations made in the following paragraphs with regard to certain portions/paragraphs of their Preliminary Determination:--

i) The Appellate Forum of defendant No.2-NTC will reconsider its finding on the market share which has been mentioned in paragraph-9 with the caption "Standing of the Application" (of the Preliminary Determination) particularly after exclusion of three interested parties, as mentioned in paragraph 8.3. This market share is mentioned in the Table-I.

ii) The Appellate Forum should also reconsider certain aspects of confidentiality as mentioned in its Preliminary Determination, inter alia, as prices of the investigated products could have been obtained from the local market of exporting country, that is, China. Even this information is obtainable and ascertainable from special bulletins.

iii) Similarly, data obtained from Customs Valuation Department usually is in public domain and it cannot be treated as confidential. Even Customs Valuation Department is posting valuation table on its website. Unless otherwise barred by any statute or rules, the information and database about prices may not be treated as confidential, primarily on the touchstone of Article 19A of the Constitution of Pakistan and the Freedom of Information Ordinance, 2002.

iv) Defendant No.2-NTC is to ensure that the term used in the Governing Law about accuracy of the complaint impliedly includes that interested parties under the garb of such complaint should not oust their competitor(s) from business and decisions of defendant No.2-NTC should not be resulting in creating directly or indirectly any monopoly or cartel of few entities or businesses.

v) In terms of Sections 11 and 12 of the Governing Law, where amongst other, the terms physical characteristics is also mentioned, which, in my considered view, should also mean that quality of the product under investigation be also evaluated by the defendant No.2-NTC. To further clarify, for instance, if Pakistani importers are importing raw material product for making finished goods of superior quality than the one locally manufactured by their competitors, then a very cautious approach is required on the part of NTC while determining/ deciding a complaint, inter alia, as it is also a right of every local consumer/customer to choose a best available quality product.

1. It is also necessary to observe that the vast discretion available with defendant No.2-NTC is still a structured one, as judicially pronounced from time to time and particularly by the Hon'ble Supreme Court in its famous reported decisions, viz. Chairman, Regional Transport Authority, [PLD 1991 Supreme Court page-14] and PLD 2014 Supreme Court page-131 {both decisions are mentioned in the title}. It may be advantageous to reproduce a relevant paragraph from the above decision of Chairman, Regional Transport Authority:--

". . . . . . . Structuring discretion means regularizing it, organizing it, producing order in it, so that decisions will achieve a higher quality of justice …….. The seven instruments that are most useful in the structuring of discretionary power are open plans, open policy statements, open rules, open findings, open reasons, open precedents, and fair informal procedure ……...When legislative bodies delegate discretionary power without meaningful standards, administrators should develop standards at the earliest feasible time, and then, as circumstances permit, should further confine their own discretion through principles and rules. The movement from vague standards to definite standards to broad principles to rules may be accomplished by policy statements in any form, by adjudicatory opinions, or by exercise of the rule making power …….. When legislative bodies delegate discretionary power without meaningful standards, administrators should develop standards at the earliest feasible time, and then, as circumstances permit, should further confine their own discretion through principles and rules."

Secondly, the discretion conferred upon the defendant No.2-NTC is coupled with an implied obligation that defendant No.2-NTC has to discharge its function in a fair, just and reasonable manner as enjoined by Section 20A of the General Clauses Act, 1897; and

Thirdly, if any party is claiming confidentiality about any information then such a request for keeping the information confidential shall be considered on the touchstone of Article 19A of the Constitution of Pakistan, relating to the access to information, the pronouncement in Hamid Mir's case (ibis) as well as the Freedom of Information Ordinance, 2002.

1. From the perusal of unreported precedents relied upon by the learned counsel for the Plaintiffs, it appears that defendant No.2-NTC has certain administrative issues and its Senior Officials like Members and Chairman litigated in connection with their own employment issues, that resulted in impeding the function of defendant No.2-NTC. In my considered view, role of National Tariff Commission is not only a very significant but also an onerous one, in the wake of China Pakistan Economic Corridor ("CPEC"); although CPEC is considered to be an Economic programe for regional connectivity, but at the same time, Defendant No.2-NTC besides other government functionaries will have to ensure that local industry is not destroyed or in other words, the imports from China should not result in threat of material injury or causing material retardation of the establishment of a domestic industry as envisaged in the definition of injury contained in the Governing Law. Defendant No.1 (Federal Government) is directed to ensure, inter alia, by improving the capacity of defendant No.2-NTC to meet impending challenges. Concerned Ministry, its Secretary and the Minister are responsible for ensuring compliance of these observations. Much acclaimed business opportunities in CPEC must focus on the fact that it should also result in enhancing/boosting exports of Pakistan, resulting in reduction of trade deficit.

Issue No.3.

1. Since the reported decisions relied upon by Defendants; their ratio and dicta, both are applicable to the issues at hand, therefore, I hold that the present suit as framed is not maintainable and is accordingly dismissed.

2. The Appellate Tribunal while considering the observations mentioned in the preceding paragraphs, will decide the Appeal of present Plaintiffs, if preferred within the time prescribed herein above, in accordance with l aw.

3. Parties are left to bear their own costs. Suit stands disposed of.

MH/D-10/Sindh Suit dismissed.

2018 P T D 712

[Sindh High Court]

Before Muhammad Ali Mazhar and Abdul Maalik Gaddi, JJ

BOARD OF TRUSTEES through Chairman

Versus

MUHAMMAD IQBAL

High Court Appeal No.164 of 2010, decided on 15th June, 2017.

Sales Tax Act (VII of 1990)---

----S. 3---Suit for recovery of money---Refund of sales tax---Admission---Suit filed by plaintiff for recovery of money against Karachi Port Trust was decreed along with markup---Validity---Incident of taxation and liability/charging was provided in S.3 of Sales Tax Act, 1990---Liability was put under S.3(3) of Sales Tax Act, 1990 on person making supply---Rail tracks which were to be removed by plaintiff were being supplied by Karachi Port Trust---Burden to pay sales tax was upon Karachi Port Trust since it had been making supply of rail tracks to plaintiff---Karachi Port Trust had admitted refund therefore, findings of Judge in Chambers of High Court were not against facts, law and documents on record---Similar question had already been decided in a Constitutional petition---High Court declined to interfere in the judgment and decree passed by Judge in Chambers of High Court as there was no perversity, illegality and incorrectness in same---Appeal was dismissed in circumstances.

Karachi Gas Co. Ltd. v. Dawood Cotton Mills Ltd. PLD 1975 SC 193 and Messrs Superior Textile Mills Ltd. v. Federation of Pakistan and others 2000 PTD 399 ref.

Jawaid Farooqui for Appellant.

Ishtiaq A. Memon for Respondent.

Date of hearing: 16th March, 2017.

JUDGMENT

ABDUL MAALIK GADDI, J.---Being aggrieved and dissatisfied with the judgment dated 21.04.2010 and decree prepared on 17.05.2010 passed by the learned Single Judge of this court in Civil Suit No.1451 of 2001, whereby the suit filed by the respondent for recovery of Rs.49,24,029.16/- against the appellant has been decreed in the sum of Rs.4,062,322.05/- along with markup at the rate of 10% per annum. The appellant has preferred the instant High Court Appeal with the prayer to set-aside the impugned judgment and decree and allow the appeal with costs.

1. Briefly the facts of the instant case as stated in the appeal are that the respondent filed a Civil Suit bearing No.1451 of 2001 for recovery of Rs.49,24,029.16/- against the appellant. It is averred in the plaint that in lieu of Tender Notice dated 29.11.1999 issued by the appellant for removal of rail tracks from T.P.X., the respondent had submitted his bid on 22.12.1999 for subject matter, which was accepted by the appellant on 17.04.2000 and formal agreement was executed in between them on 03.05.2000. Thereafter, work order was issued to the respondent and subject work was commenced on 22.05.2000. It is also averred in the plaint that for the first time, the dispute with regard to deposit of sales and income tax was arose when letter dated 31.05.2000 issued by the appellant for payment of sales tax and the respondent replied the same vide letter dated 07.06.2000. The legal notice was also sent by the respondent to the appellant on 29.09.2000 by stating that under the law they were not under obligation to pay sales tax nor the terms of the contract provided for payment of sales tax and according to legal notice, the payment of sales tax was the duty of the appellant. However, it appears from the record that in order to avoid blacklisting, the required sales tax was deposited by the respondent under protest and on this background, the respondent filed aforesaid civil suit, which was decreed.

2. The appellant filed its written statement and specifically denied the case and claim of the respondent. It was alleged by the appellant in the written statement that liability to pay sales tax is always upon the purchaser and in this case the respondent is liable to pay the sales tax and under the contract, the respondent has undertaken to keep the appellant indemnified from all the liabilities. The respondent was well aware that the payment of sales tax is his liability. In this regard, the respondent himself had sent a letter to the sales tax department asking whether he was liable for payment of sales tax. The sale tax department informed him through letter dated 28.11.2000 that sales of dismantled track is a taxable supply and is chargeable to sales tax. Therefore, under this scenario of the case, the appellant has prayed in the written statement for dismissal of the suit filed by the respondent.

3. From the pleadings of the parties, the learned Single Judge has framed the following issues:--

i. Whether the suit is not maintainable?

ii. Was the plaintiff liable to pay income tax and/or sales tax under the agreement dated 03.05.2000?

iii. Is the plaintiff entitled to refund of income tax and/or sales tax with markup or otherwise? If yes, to what amount?

iv. Whether the plaintiff has not indemnified the defendant as per Condition No.21 of the Conditions of Contract between them against all penalties and liabilities of every kind for breach of any Statute, Law, Regulation or Bye-Law?

1. It reveals from the record that learned Single Judge vide his order dated 19.12.2002, by consent of the parties had treated the suit as short cause matter as the case and claim of the parties was based on documents exchanged between them and its admission and denial took place, therefore, parties have not led any evidence and directly argued the matter on the basis of the documents on record. However, the learned Single Judge after hearing them decreed the suit of the respondent, which is impugned before this court.

2. It is contended by learned counsel for the appellant that the impugned judgment and decree passed by the learned Single Judge of this Court is against law and facts. Per learned counsel, this High Court appeal has been filed by the appellant against the judgment and decree, wherein learned Single Judge held that the contract price was inclusive of the sales tax liability and the sales tax liability cannot be charged over and above the contract price and directed the present appellant to refund the amount of Rs.4,062,322.5/- back to the respondent/plaintiff to refund along with markup at the rate of 10% per annum to be calculated till the date the amount is recovered. The learned counsel further submits that the liability of sales tax, unless otherwise mentioned in the contract, has to be charged on all sales made to any party unless the same is entitled to zero rating or there is any other exemption and only if it is specifically mentioned in the contract that the liability of the sales tax shall be borne by the seller, then the sales tax could not be charged from the purchaser and in this case no such clause is available in the contract and the tender document and, therefore, the learned Single Judge erred in holding that the amount of sales tax charged has to be refunded. Per learned counsel, the learned Single Judge failed to consider clause 21 of general conditions of contract for which all the liabilities are to be borne by the respondent and under the Sales Tax Act, 1990, the respondent is liable for payment of tax purchased from the appellant. In the last, he has prayed that respondent has no case on merits, therefore, the impugned judgment and decree in the suit passed by the learned Single Judge is liable to be set-aside and allow the appeal filed by the appellant by dismissing the suit filed by the respondent.

3. Conversely, learned counsel for the respondent has supported the impugned judgment and decree by arguing that the impugned judgment and decree has been passed by the learned Single Judge after due appreciation of pleadings of the parties and documents on record. During the course of arguments, learned counsel for the respondent has placed his much emphasizes upon Instruction No.2 of Instructions for tender, which reads as follows:-

"2. The rates and price set down by the Tenderer against the items in the bill of quantities are to be the full inclusive value of the finished work described thereunder and shall cover profit and all obligations of every kind which under the contract are to be borne by the contractor."

Mr. Ishtiaq A. Memon, Advocate argued that in terms of the above quoted instructions, the contract price was inclusive of entire obligation which the respondent was required to pay for dismantled material and, therefore, nothing was to be demanded by the appellant from the respondent. The liability of sales tax was to be deducted by the appellant from the contract price already settled between the parties and deposited with the sales tax authorities. No additional amount was to be claimed from respondent. In support of his contention, he also relied upon section 3(3)(a) of the Sales Tax Act, 1990, which provides that "the liability to pay the tax shall be in the case of supply of goods of the person making the supply." Lastly, he has prayed for dismissal of instant appeal while relying upon the case of Karachi Gas Co. Ltd. v. Dawood Cotton Mills Ltd. reported as PLD 1975 SC 193, Messrs Superior Textile Mills Ltd. v. Federation of Pakistan and others reported as 2000 PTD 399 and Statement dated 05.11.2014.

1. We have given our anxious thoughts to the contentions raised at the bar and have gone through the pleadings of the parties and documents on record.

2. It appears from the record that instructions on tender in clause-2 had clearly instructed to write full inclusive value against the items. It also appears that the respondent acting upon such instructions, submitted the bid by including every rate/charges against the item. In this respect, instructions are available on pages 52 to 54 of the paper book. The respondent was specifically asked to put rate against the work description. Normally, if other party to contract intends to have the sales tax and income tax calculated separately, then a separate column is given for such calculation. In the instant case, clear instructions were given to right full inclusive, which was so done by the respondent. The value of bid against work description including all taxes or incidental rates. The respondent cannot be burdened to pay additional amount, against the clear instructions given in the tender document.

3. The incident of taxation and the liability/charging section of the Sales Tax Act, 1990 is provided in section 3. The subsection (3) clearly and unambiguously puts a liability on the person making the supply. In the instant case, the rail tracks which were to be removed by the respondent contractor, were being supplied by the appellant. On simple application of charging Section, the burden to pay sales tax is clearly upon the appellant since it is making supply of the rails tracks to the contractor. Moreover, the additional presence of subsection (3A) requires the presence of gazette notification in case the Federal Government intends to shift the liability to pay tax on the person receiving the supply. In the instant appeal, the appellant has failed to produce or point to any such notification which would shift the burden to pay sales tax on the person receiving the supply. We have gone through the case diary dated 07.08.2007 of suit file and statement dated 06.11.2014 along with annexures Q-1 and Q-2 available in the appeal file, wherein the admission of refund in paragraph No.16 of the letter dated 27.02.2004 and liability therein was conceded. During the course the arguments, we have specifically asked the question to the learned counsel for the appellant/KPT that in paragraph No.16 of the letter dated 27.02.2004, the admission of refund was admitted by the appellant, how the findings of learned Single Judge are against facts, law and documents on record, he did not reply satisfactory. When we confronted the order dated 21.10.2008 passed by this court in C.P. No.D-186 of 2007 in which almost identical question was raised and decided in terms of payment of sales tax liability, he has no answer with him.

4. In view of the above facts and circumstances of the case, no perversity, illegality and incorrectness have been found in the impugned order. Learned Single Judge while passing the impugned order has appreciated all the facts and documents involved in the case. No illegality has been pointed out. We, therefore, under the facts and circumstances of the case, could not find any merits in this appeal, which is dismissed with no order as to cost.

MH/B-1/Sindh Appeal dismissed.

2018 P T D 790

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain, JJ

MUHAMMAD ZESHAN

Versus

FEDERATION OF PAKISTAN and 4 others

C.P. No.D-3007 of 2014, and C.M.A. No.15013 of 2015, decided on 1st February, 2017.

Sales Tax Act (VII of 1990)---

----S. 3---Constitution of Pakistan, Art. 199---Constitutional petition---Opportunity of hearing---Disputed question of fact---Assessee was aggrieved of order passed by authorities on grounds that he was not provided opportunity of hearing---Validity---Disputed facts were agitated by petitioner and same could not be examined by High Court while exercising Constitutional jurisdiction under Art. 199 of the Constitution---High Court directed the authorities to provide complete opportunity of hearing to petitioner by issuing proper show-cause notice under provisions of Sales Tax Act, 1990 and same would be responded by the petitioner---Matter was remanded to consider that if it was found that petitioner had not applied for sales tax registration and he was not involved in any sales tax activity, appropriate orders could be passed and fresh sales tax registration was to be considered in accordance with law---Constitutional Petition was disposed of accordingly.

S. Noman Zahid for Petitioner.

Ms. Dil Khurram Shaheen for Respondents.

Mir Hussain, DAG for the State.

ORDER

AQEEL AHMED ABBASI, J.---Through instant petition the petitioner has expressed his grievance against respondent department who, according to the learned counsel, did not entertain the application of the petitioner for sales tax registration on the ground that the registration issued in favour of the petitioner in the name of Messrs Maheen Enterprises, has already been cancelled and the petitioner has been black-listed on the allegation of violation of the provisions of Sales Tax Act, 1990 and issuing bogus and fake invoices. Per learned counsel, petitioner never applied for sales tax registration as he was not engaged in any sales tax activities, whereas, his CNIC was used by some unscrupulous person for getting sales tax registration, which fact was intimated to the department, however, the department has not taken any action against such person.

Comments have been filed by the respondent in which allegations of the petitioner have been denied and it has been stated that since the petitioner was already granted sales tax registration on the basis of his CNIC and the particulars given in the application, which was subsequently suspended and then cancelled, therefore, no fresh sales tax registration can be granted to him. It has been further stated in the comments that since the petitioner was involved in fraudulent activities by issuing fake invoices for the purpose of claiming input tax adjust of sales tax, therefore, the Sales Tax Registration in the name of Maheen Enterprises has been cancelled and the proceedings thereafter have also been initiated in accordance with law.

We have heard the learned counsel for the parties and have perused the record.

It appears that disputed facts have been agitated through instant petition which could not be examined by this Court while exercising Constitutional jurisdiction under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973. However, since the petitioner has alleged that no opportunity of being heard was provided to him before taking the adverse action of suspension and cancellation of the sales tax registration, therefore, we would dispose of instant petition with the direction to the respondents to provide complete opportunity of being heard to the petitioner by issuing proper show-cause notice under the provisions of Sales Tax Act, 1990, which shall be responded by the petitioner and if it is found that the petitioner did not apply for sales tax registration and was not involved in any sales tax activity; appropriate order may be passed and the request of the petitioner for fresh sales tax registration may be considered in accordance with law. It is expected that such exercise will be undertaken within four weeks of the date of this order.

MH/M-13/Sindh Case remanded.

2018 P T D 861

[Sindh High Court]

Before Munib Akhtar and Omar Sial, JJ

PREMIER SYSTEMS (PVT.) LTD. and others

Versus

FEDERATION OF PAKISTAN and others

C.P. No.D-7159 of 2017 and connected petitions, decided on 7th February, 2018.

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

----S.18 (3) [as amended by Finance Act (XXVII of 2017)---Constitution of Pakistan, Art. 98---Notification S.R.O. No. 1035(I)/2017 dated 16-10-2017]---Vires of S.18(3), Customs Act, 1969 (as amended)---Subordinate authorities---Regulatory duty, imposition of---Phrase 'officers or authorities' subordinate to Federal Government---Scope---Dispute was with regard to amendment made in law with regard to authority imposing regulatory duty on goods imported and exported---Validity---Two different sets of 'officers or authorities' subordinate to Federal Government, one to which Art. 98 of the Constitution had applied and the other who came within the scope of original clause---If combination of Federal Board of Revenue with the approval of Minister-in-Charge would have come within the scope of the phrase, had the original clause remained in field, the same also came within the scope of Art. 98 of the Constitution---If at all the Federal Board of Revenue, with the approval of Minister-in-Charge, could have lawfully and validly exercised the powers conferred on them by S.18(3) of Customs Act, 1969, then the power had to be so exercised---Seeking approval of or acting on behest of anyone else including Federal Cabinet would be contrary to well-known and well established principles of administrative law---As such it did not matter that ECC was invariably chaired by the very Minister-in-Charge empowered by the statute i.e. the Finance Minister---Whole purpose of amendment was, as it were, to take Federal Government out of the loop---Federal Government itself recommended and Finance Act, 2017 was tabled as a Bill with its approval---If Parliament acceded to the request and changed the law, then the amendment (if of course, otherwise constitutionally valid) would have to be read literally and applied strictly and rigidly---For Federal Government/Cabinet to be brought back into the picture via the ECC was itself contrary to the law as amended---Notification S.R.O. No. 1035(I)/2017 dated 16-10-2017 could not therefore, be 'saved' on such basis---High Court declared provisions of S.18(3) of Customs Act, 1969, as and to the extent as amended by Finance Act, 2017, as ultra vires the Constitution and of no legal effect---High Court also declared Notification S.R.O. 1035(I)/2017 dated 16-10-2017, issued in terms of and in purported exercise of powers conferred by, amended S.18(3) of Customs Act, 1969, as ultra vires the Constitution and of no legal effect and the same was quashed---Constitutional petition was allowed accordingly.

Mustafa Impex and others v. Government of Pakistan and others PLD 2016 SC 808 = 2016 PTD 2269 rel.

Zaibtun Textile Mills Ltd. v. Central Board of Revenue and others PLD 1983 SC 358; Abdul Rahim, Allah Ditta v. Federation of Pakistan and others PLD 1988 SC 670; Black's Law Dictionary and King-Emperor v. Sibnath Banerji AIR 1945 PC 156 and Federation of Pakistan and others v. Digicom Trading and others 2017 PTD 1706 ref.

(b) Interpretation of statutes---

----Fiscal statute---Amendment---Parliamentary practice is that a fiscal statute (Customs Act, 1969 so qualifies) is amended by a Money Bill.

Khalid Jawed Khan, Ghulam Haider Shaikh, Asad Raza Khan, Sarmad Hani, Sattar Pirzada, Haroon Dugal, Rana Sakhawat Ali, Khalid Mehmood Siddiqui, Aqeel Ahmed Khan, Ms. Rashida Parveen, Ms. Dilkhurrum Shaheen, Ms. Sofia Saeed, Ejaz Ahmed, Imran Iqbal Khan, Ms. Saima Syed, Samiur Rehman, Ali Aziz, Hussain Ali Almani, Zain A. Jatoi, Kalesh Suthar, Ms. Ayesha Memon, Muhammad Rashid Arfi, Ziaul Hassan, Adnan Moton, Muhammad Rafi Kambho, Muhammad Khalid Hayat, Farhan Minhaj, Madan Lal, Hayat Muhammad, Darvesh Madhan and Kamal Azfar for Petitioners.

Salman Talibuddin, Additional Attorney General along with Ms. Alizay Bashir, Asim Mansoor Khan, DAG, Kafil Ahmed Abbasi, and Ms. Masooda Siraj for Respondents.

Mustafa Aftab A. Sherpao for Intervener.

2018 P T D 900

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

COMMISSIONER INLAND REVENUE, WHT, ZONE, RTO-II, KARACHI

Versus

Messrs TIANSHI INTERNATIONAL PAKISTAN CO. (PVT.) LTD., KARACHI

I.T.R.A. No. 80 of 2015, decided on 7th December, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 133, 161 & 205---Sales Tax Act (VII of 1990), S. 34---Reference---Default surcharge---Authorities were aggrieved of deleting default surcharge under Ss.161 & 205 of Income Tax Ordinance, 2001, by Appellate Tribunal Inland Revenue---Validity---Provisions of S.34 of Sales Tax Act,1990, were materially not different in scope from the provisions of Ss.161/205 Income Tax Ordinance, 2001, relating to term 'default' and 'wilful default'---High Court declined to interfere in the order passed by Appellate Tribunal Inland Revenue as the same did not suffer from any factual error or legal infirmity and had depicted correct legal position---Reference was dismissed in circumstances.

Deputy Collector, Central Excise and Sales Tax v. Messrs ICI Pakistan Limited 2006 SCMR 626 ref.

Muhammad Aqeel Qureshi along with Abdul Wahid Shar, Additional Commissioner IR, LTU-II, Karachi for Applicant.

Hazrat Wali Khattak and Habib Ahmed for Respondent.

2018 P T D 917

[Sindh High Court]

Before Munib Akhtar and Omar Sial, JJ

Messrs GAS AND OIL PAKISTAN (PVT.) LIMITED through General Manager Operations

Versus

The CUSTOMS APPELLATE TRIBUNAL, KARACHI and 2 others

Special Customs Reference Applications Nos. 471 of 2016, decided on 30th January, 2018.

Customs Act (IV of 1969)---

----Ss. 2(s), 156(2), 171, 178 & 196---Smuggling---Proof---Confiscation of oil tankers of diesel---Determination---Powers of customs authorities---Applicants were aggrieved of confiscation of oil tankers and diesel loaded therein on allegation of same being "smuggled" goods---Validity---No evidence was available before Appellate Tribunal to establish that tankers had replaced diesel filled in them at refinery and diesel was brought into or was being taken out of Pakistan---Evidence was on record that diesel was heading towards Punjab---Whether or not refinery was refining diesel at a flashpoint it was not authorized to, was beyond ambit of powers given to customs authorities---Even if refinery was refining oil at a flashpoint in violation of various laws, rules and regulations applicable to it even then it could not be concluded that applicants were involved in offence of smuggling as principals or agents of refinery---Negligence of refinery in submitting reports and presumption that 20 kilometer journey of tankers (from refinery to point where they were stopped) took much longer time than what it should have, was not enough to hold applicants guilty of an offence of smuggling---High Court directed authorities to return confiscated vehicles and diesel to applicants---Reference was answered accordingly.

Pervez Iqbal Kasi for Applicant.

Ghulam Hyder Shaikh for Respondent Nos.2 and 3.

2018 P T D 936

[Sindh High Court]

Before Aqeel Ahmad Abbasi and Arshad Hussain Khan, JJ

KARACHI INTERNATIONAL CONTAINER TERMINAL through duly authorized attorney

Versus

SINDH through Secretary, Ministry of Finance Government of Sindh, Karachi and 3 others

Constitutional Petition No.D-5066 of 2017, decided on 14th December, 2017.

Sindh Sales Tax on Services Act (XII of 2011)---

----Ss. 47-A & 52---Sales Tax Act (VII of 1990), S.11-A---Notice of recovery, setting aside of---Petitioner company was aggrieved of notice issued by authorities and attachment of its Bank accounts---Validity---Both provisions of S.11-A of Sales Tax Act, 1990 and S.47-A of Sindh Sales Tax on Services Act, 2011, were identical in nature and effect and tax authorities were given powers to recover amount of tax from person, less than the tax due as indicated in his return---Short paid amount of tax along with default surcharge through attachment of Bank accounts, without giving show cause notice---Tax authorities, under such provisions of law, were only authorized to make recovery of short paid amount to tax, which was due as indicated in his return and the same could not be invoked to make assessment, create liability of tax and to recover the same without issuing any show cause notice to taxpayer and that too in absence of any lawful assessment proceedings in accordance with law---High Court declared recovery notices under S.11-A of Sales Tax Act, 1990, as illegal and without lawful authority---Constitutional petition was allowed in circumstances.

Messrs Advance Telecom v. Federation of Pakistan and 3 others 2015 PTD 462 and Messrs Lahore Electric Supply Company Ltd through Director Legal v. Federal Board of Revenue through Chairman and 2 others 2015 PTD 1 ref.

Ali Almani for Petitioner.

Malik Naeem Iqbal along with Ghulam Murtaza Korai, Law Officer, Syed Zainul Abdin Shah, D.C. Ms. Anum Shaikh, A.C. and Saifullah, A.A.G. for Respondents.

2018 P T D 1419

[Sindh High Court]

Before Munib Akhtar and Omar Sial, JJ

Haji IHSAN ULLAH

Versus

FEDERATION OF PAKISTAN through Secretary and 4 others

C. Ps. Nos. D-3485, 3293 of 2013, 1126 and 1162 of 2016 decided on 6th February, 2018.

Customs Act (IV of 1969)---

----S. 25(6)---Import Policy Order, 2013, Para. 9(ii)(5)---Dump trucks, old and used---Value---Determination---Importers were aggrieved of delay in release of dump trucks imported by them---Validity---No bar exited on importability of vehicles under Para. 9(ii)(5) of Import Policy Order, 2013 and vehicles in question were importable---Finalized assessments purporting to have been made under S.25(6) of Customs Act, 1969 were contrary to law and same was set aside and declared value of vehicles was applicable---High Court restrained all authorities from raising any objection to importability of vehicles in question and/or from applying finalized assessments or any value other than declared values---High Court directed authorities to release vehicles, if not already released, within thirty days and security given by petitioners was released---High Court further directed, in case any security was enforced or encashed, there must be a complete refund within specified period to the taxpayer---Constitutional petition was allowed accordingly.

Baig Enterprises and Engineering v. Federation of Pakistan and others 2015 PTD 181; Collector of Customs v. Eastern Construction Company 2015 PTD 963; Collector of Customs and others v. Shafiq Traders and another 2011 PTD 1185; Sadia Jabbar's case PTCL 2014 CL 537; Alpha Chemicals (Pvt.) Ltd. v. Federation of Pakistan and others 2013 PTD 2064 and Sus Motors (Pvt.) Ltd. v. Federation of Pakistan 2011 PTD 235 ref.

Faisal Siddiqui and Muhammad Vawda for Petitioners (in C.Ps. Nos.D-3485 of 2103 , 1126 and 1162 of 2016).

Haji Abdul Razik, Petitioner in person (in C.P. No.D-3293 of 2013).

Salman Talibuddin, Additional Attorney General and Asim Mansoor Khan, D. A. G. along with Ms. Alizay Bashir for Respondents.

Kashif Nazeer and Syed Mohsin Imam for the Department along with Abdul Latif Shar Inspector/ALO MCC Dry Port, Hyderabad.

2018 P T D 1487

[Sindh High Court]

Before Munib Akhtar and Abdul Maalik Gaddi, JJ

ASSOCIATION OF BUILDERS AND DEVELOPERS OF PAKISTAN

Versus

PROVINCE OF SINDH and others

Constitutional Petition No.D-3723 of 2013, decided on 23rd January, 2018.

(a) Interpretation of statutes---

----Fiscal statute---Charging provision---Scope---Interpretation of a charging provision in a fiscal statute, favourable to taxpayer is to be adopted.

(b) Sindh Sales Tax on Services Act (XII of 2011)---

----Ss.2 (79)(96), 3(c)(d), Second Sched., Heading No. 9807.0000, 9814.3000 & 9824.0000---Transfer of Property Act (IV of 1882), S.54---Constitution of Pakistan, Art. 199---Constitutional petition---Tax on services---Construction industry---Petitioners were related to construction industry in one way or the other and they were aggrieved of notices issued by authorities for recovery of tax under Tariff Heading Nos. 9807.0000, 9814.3000 & 9824.0000 of Second Schedule, Sindh Sales Tax on Services Act, 2011, from them for providing their services---Validity---Any activity in which relationship between service provider and recipient was governed by a contract for sale in terms of S.54 of Transfer of Property Act, 1882, was not to constitute a service within the meaning and scope of the Tariff Heading---Tariff Heading was applicable to a situation where (i) the activity could be regarded as a service directly and materially related to the construction of immovable property as such, and (ii) the activity could not more naturally and properly be regarded as coming within the scope of some other Tariff Heading; condition (i) must be shown to exist, and condition (ii) must not be applicable---Tariff Heading No. 9824.0000 of Second Schedule, Sindh Sales Tax on Services Act, 2011, could raise complex issues and question and its application might not be a simple and straightforward as the bare language of the Entry might suggest at first sight---Application of Tariff Heading No. 9824.0000 of Second Schedule, Sindh Sales Tax on Services Act, 2011, was quite fact-sensitive and much more than the other two Headings---Sindh Revenue Board and departmental authorities had seriously and to an extent fundamentally misunderstood and misapplied Sindh Sales Tax on Services Act, 2011, and more specifically the three Tariff Headings in question---Notices issued to petitioners disclosed an approach that was rather simplistic and superficial and had run counter to the requirements of the statute---Serious errors of law were made at a fundamental level and no attempt was made to discover the facts applicable to each petitioner and to the extent that the facts were set out at all the same were not fully appreciated or explored---High Court quashed the notices and orders in question as the same were not sustainable---High Court restrained the authorities from taking or continuing with any action or proceedings in terms or in respect thereof---High Court clarified that the same would not prevent the authorities from initiating fresh proceedings or taken action anew in accordance with Sindh Sales Tax on Services Act, 2011 (if at all such proceedings and / or actions were lawfully sustainable) but at all times and in manner only that was consistent with the judgments of superior courts---Constitutional petition was allowed accordingly.

Federation of Pakistan and others v. Haji Muhammad Sadiq and others 2007 PTD 67 = 2007 CLD 1; Defence Authority Club and others v. Federation of Pakistan and others 2007 PTD 398; Pakistan International Freight Forwarders Association v. Province of Sindh and another 2017 PTD 1; State of Madras v. Gannon Dmkerley and Co. AIR 1958 SC 560; K. Raheja Development Corporation v. State of Karnataka AIR 2005 SC 2350, (2005) 5 SCC 162; Magus Construction (Pvt.) Ltd. and another v. Union of India and others (2009) 3 GLT 161; Larsen and Touhro Limited and another v. State of Karnataka and another (2014) 1 SCC 708; BSNL v. Union of India (2006) 3 SCC 1; Propulsion Technologies Inc. v. Aitwood Corporation 369 F.3d 896 (2004) and Bunebrake v. Cox 499 F.2d 951 (1974) ref.

Dr. Muhammad Farogh Naseem along with Pooja Kalpana, Munawwar Hussain, Nasir Latif Khan and Syed Ziauddin, Amjad Jawed Hashmi, Muhammad Ali Lakhuni, Umar Lakhuni, Taimur Ali Mirza, Khalid Jawed Khan along with Asad Raza Khan and Muhammad Aleem for Petitioners.

2018 P T D 1600

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain, JJ

Messrs AL-ZARINA GLASS INDUSTRIES

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division and Ex-Officio Chairman, Federal Board of Revenue, Islamabad and 3 others

C. Ps. Nos.D-940 along with D-941 to 945, 1712 to 1715, 2892 to 2894, 2897, 2899 to 2903, 5550, 6833 and 6834 of 2016, decided on 14th July, 2017.

Sales Tax Act (VII of 1990)---

----Ss.3 (1A), 13 & Sixth Sched., item 29C---Notification SRO No.509(I)/2013, dated 12-6-2013---Exemption from sales tax---Registration of sales tax---Petitioners were glass bangles manufacturers and they were aggrieved of recovery of extra 5% in electricity and gas bills on the ground that they had not obtained sales tax registration number---Validity---Levy of extra tax at the rate of 5% of total billed amount excluding amount of federal taxes in addition to tax payable under S.3(1) of Sales Tax Act, 1990, was imposed on supplies of electric power and natural gas to person having industrial or commercial connections and whose bill for any month exceeded Rs.15,000/- but who had either not obtained sales tax registration number or were not on active taxpayers list maintained by Federal Board of Revenue---Provisions of notification SRO No.509(I)/2013, dated 12.6.2013 were not applicable to petitioners who enjoyed exemption in terms of S.13 read with item 29C of Sixth Schedule to Sales Tax Act, 1990, from payment of sales tax, as they were not making any taxable supplies in terms of S.2(41) of Sales Tax Act, 1990---Constitutional petition was allowed in circumstances.

Messrs Zia Brothers v. Federation of Pakistan and others Writ Petition No. W.P. 27097 of 2013 and Digicom Trading (Pvt.) Limited v. Federation of Pakistan and others 2016 PTD 648 rel.

Faheem Bhayo for Petitioners.

Meer Hussain for Respondent No.1.

Haider Naqi for Respondent No.2.

Usman Tufail Shaikh for Respondent No.3.

Muhammad Aqeel Qureshi for Respondent 4.

2018 P T D 1746

[Sindh High Court]

Before Muhammad Athar Saeed and Munib Akhtar, JJ

SADIA JABBAR

Versus

FEDERATION OF PAKISTAN and others

Constitutional Petition No. 2673 of 2009 and connected petitions decided on 28th February, 2011.

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

----Ss. 25 & 30---Customs value of goods---Determination---World Trade Organization Agreement---Scope---Rate of import duty---Date of determination---Section 25 of the Customs Act, 1969---Scope---Section 25 of Customs Act, 1969, embodied World trade Organisation Agreement and was one of the most important provisions of the Act, which laid down the general manner in which the customs value of imported goods was to be determined---Proper determination of the customs value was absolutely essential---Section 25 had provided that the customs value of imported goods was to be the "normal price" of the goods---Normal price of goods could be higher or lower than the actual price---Normal price being a statutory construct, same was to be determined by the appropriate Officer of the Customs in the manner specified in S.25---Federal Board of Revenue, through various Customs General Orders and other instructions, had made the "actual price" relevant---Valuation Agreement had to be construed as a whole---Appreciation of the fundamental principles underpinning the Valuation Agreement was important---Three points could be noted, firstly, the primary method of determining the customs value was the transaction value i.e. the price actually paid or payable for the imported goods; secondly, if the transaction value could not be determined, then the subsequent methods were to be applied sequentially, in the order set forth in the Valuation Agreement and thirdly, that the exercise must stop at the first method which was found applicable, was neither permissible nor necessary to go on to, or to consider any of the succeeding methods---To resort to a particular subsection of S.25 was not permissible unless, it was first concluded that the previous subsection referred to, did not apply and it was not permissible to apply the latter unless it was first concluded that the subsection preceding it did not apply---All the elements of the principle of sequential application were clearly embedded in S.25 of the Customs Act, 1969.

Rehan Umar v. Collector of Customs and others 2006 PTD 909; Collector of Customs (Valuation) and another v. Karachi Bulk Storage Terminal Ltd. 2007 SCMR 1357 = 2007 PTD 1858 and Toyo International Motorcycle v. Federation of Pakistan and others 2008 PTD 1494 ref.

Industrial Relations Advisors' Association v. Federation of Pakistan and others PLD 2010 Kar. 328 and Collector of Customs v. Muzammil Ahmad 2009 PTD 266 ref.

(b) Interpretation of statutes---

----Statute or statutory provision which embodied World Trade Organization Agreement---If two interpretations of such a provision, were possible, the one consistent with International Law or Pakistan's treaty obligations, would be preferred---If meaning of the Municipal law was clear, then it must be given effect to, even though it could conflict with Pakistan's obligations under International Law.

Hanover Fire Insurance Company v. Muralidhar Banechand PLD 1958 SC 138, 142 and Marine Engineers Association of Pakistan v. Shipping Office, Government of Pakistan and another 1989 CLC 588 rel.

(c) Interpretation of statutes---

----Amendments in law embodying World Trade Organization Agreement---Amendments were usually intended to change the law---In special case, even if it was concluded that the amendment had changed the law, the amendment should, if at all possible, be interpreted and applied in a manner which would remain consistent; or minimize any difference or conflict with the World Trade Organisation Agreement---If the relevant statutory provisions, or any amendment thereto, was clear and admitted only one meaning then the court must give effect to that meaning, even if inconsistent with International Law or a treaty obligations of the State---Principles of statutory interpretation, were aids to discovering and giving effect to the legislative intent, and if that intent was clear, then it must be recognized and given effect to.

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

----S. 25-A---Determination of customs value---Scope---Interpretation of S.25-A, Customs Act, 1969---World Trade Organization Agreement---Scope---Section 25-A(1) appeared to simultaneously seek to prevail over S.25 of the Act, and at the same time, mandate application of the very section (S.25) which was being overridden---Primary method of determining value was the transaction value i.e. the price actually paid or payable for the goods in question---Such a price, could arise only in relation to goods actually imported---Section 25-A(1) of the Customs Act, 1969, spoke of goods imported into Pakistan---Section 25-A permitted a predetermination of the customs value of goods to be imported into Pakistan---Subsection (2) of S.25-A, specifically provided that the value determined in terms of subsection (1) of S.25-A, was to be the customs value of the relevant imported goods---Determination of customs value, was to start with the primary method, the transaction value i.e. the price actually paid or payable, which could only arise in the context of goods actually imported---If S.25-A was intended only to apply to goods actually imported into Pakistan, then there would essentially be no point to it, since the exercise therein contemplated would in any case be carried out under S.25 of the Customs Act, 1969---Section 25-A, had to apply to goods yet to be imported into Pakistan---By adding S.25-A, the Legislature clearly intended that it ought to be permissible for the Customs Authorities to predetermine the customs value of goods imported into Pakistan; since that predetermined value was to apply to the relevant imported goods, it constituted a departure from the valuation agreement by dis-applying the primary method, i.e. the transaction value---Language of said section was carefully crafted to keep the difference to a minimum, by making the remaining methods of the Valuation Agreement applicable in the same manner as provided therein---In relation to these methods the principle of sequential application, applied in full so that, in determining the customs value the concerned Officer had to apply methods sequentially and stop at the first method found applicable---Section 25-A, allowed for the determination of customs value of both "goods" and "category of goods"---Proper determination of what constituted a "category of goods" must relate to how goods were specified in the First Schedule to the Customs Act, 1969---Proper valuation ruling issued under S.25-A, must specify the PCT Heading to which it was applicable---Section 25-A, could not have retrospective effect i.e. a valuation ruling, could not be issued in relation to goods actually imported, nor could it be applied to imported goods, unless it was issued before such importation---If there was no valuation ruling when the goods were actually imported, it was only S.25, which was applicable---Valuation ruling issued under S.25-A could only apply for a certain period and no more---Valuation ruling, must ordinarily be regarded as valid for a period of ninety days from the date of issuance---Section 25-A, was only an enabling section and would permit, but would not mandatorily require predetermination of customs value---Legislature intent of S.25-A was not, nor could be, to create a statutory by-pass to the Valuation Agreement---Section 25-A, could not be used for the wholesale determination of customs value.

(e) Interpretation of statutes---

----Words or expressions used in the same statute in different sections, were to be given the same meaning, unless the context otherwise required.

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

----S. 25-A---Power to determine customs value---Valuation ruling issued in relation to imported goods (tyres and tubes) was clearly contrary to the provisions of S.25-A of the Customs Act, 1969, same having been issued, essentially on the basis of some understanding arrived at between the Customs Collectorate and the Importers and Dealers Association---Such was not a permissible method under S.25-A---Such a Valuation Ruling was ultra vires S.25-A of the Customs Act, 1969.

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

----Ss. 25 & 25-A---Determination of customs value of goods---Valuation Ruling---Effect---Valuation Ruling was retrospective, since it purported to apply to the relevant goods imported during the period November, December 2008 and January-February, 2009---Said Ruling purported to apply a method, which was not one of the methods provided under S.25---Said Ruling, did not give the PCT Heading of the goods to which it was to apply i.e. did not properly identify and specify the "category of goods" to which it was applicable---Section 25-A, contemplated and permitted predetermination of customs value; it was impermissible to apply the transaction value in terms of S.25-A; such value could only apply under S.25---Validity---Ruling was ultra vires S.25-A of the Customs Act, 1969.

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

----Ss. 25 & 25-A---Determination of customs value of goods---Valuation Ruling---Effect---Valuation Ruling purported to apply a method other than those permitted under S.25 of the Customs Act, 1969---No attempt was made to establish as to which were the applicable methods and which one of those methods was the method of S.25 at all---Said Ruling, did not give the PCT Headings of the goods to which it was to apply---Ruling in question was though issued by the Director Valuation, who had merely endorsed, without any proper or independent application of mind of his own---Same was a clear abdication of the statutory powers vested under S.25-A---Valuation Ruling in question purported to apply the "invoice value; if it was "higher" than the value determined in the Ruling---Valuation Ruling was ultra vires S.25-A of the Customs Act, 1969.

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

----S. 25-A---Determination of customs value of goods---Valuation Ruling appeared to come closest to correctly applying and following the provisions of S.25-A---Director Valuation had applied his mind to the various methods in the proper sequential order, though the reference to the transaction value was not relevant---Reasons of one sort or another, were given in respect of each method, as to why that method was inapplicable, and ultimately the fall-back method was purportedly applied---Ruling in question was ultra vires S.25-A of the Customs Act, 1969.

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

----Ss. 25 & 25-A---Determination of customs value of goods---Valuation Agreement of World Trade Organization---Scope---Valuation Ruling was issued in relation to goods (automotive safety glass) which referred to some of the methods of S.25 and purported to apply the computed value method; it was not evident as to how the computed value method was applied---Valuation Agreement and S.25, operated in the context of country of export and country of import---Vaulation Ruling was ultra vires S.25-A of Customs Act, 1969.

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

----Ss. 25 & 25-A---Determination of customs value of goods---Valuation Ruling was issued in relation to imported goods (drawer locks, door closures and door hinges)---Said Ruling though referred to some of the methods of S.25 and purported to apply the "deductive value method" which was non-compliant with the requirements of S.25-A---Selling price in the local market was irrelevant; as to how the deductive value method had been applied was not clear---Valuation Ruling was ultra vires S.25-A of the Customs Act, 1969.

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

----Ss. 25 & 25-A---Determination of customs value of goods---Valuation Ruling was issued in relation to imported goods (bicycle parts and components)---No attempt was made to establish as to which applicable methods related to the category of goods which were the subject matter of the Valuation Ruling---Valuation Ruling did not refer to any of the methods of S.25 at all and purported to apply the "invoice value" (i.e. the transaction value), if it was "higher" than the value determined in the ruling---Said Ruling was ultra vires S.25-A of the Customs Act, 1969---Valuation Ruling was quashed and set aside by the High Court with observation that concerned Officer, could, in each case, make a fresh determination of the customs value under S.25-A of the Act.

(m) Administration of justice---

----If the basic order was set aside or quashed, then the entire superstructure of orders resting thereon, automatically would fall.

Atta ur Rahman v. Sardar Umar Farooq and others PLD 2008 SC 663 and Yousuf Ali v. Muhammad Aslam Zia and others PLD 1958 SC 104 ref.

Amer Raza Naqvi, Shakeel Ahmed, Mrs. Ismat Mehdi, Aziz A. Shaikh and Zain A. Jatoi for Petitioners.

Khalid Jawaid Khan by Court permission.

2018 P T D 1787

[Sindh High Court]

Before Munib Akhtar and Agha Faisal, JJ

Messrs MAROSH and 24 others

Versus

FEDERATION OF PAKISTAN through secretary and 3 others

C.P. No.D-7357 of 2017, decided on 23rd April, 2018.

Customs Act (IV of 1969)---

----Ss. 18 & 19---General Clauses Act (X of 1897), S.6---Notification SRO No.497(I)/2009 dated 13-06-2009 and Notification SRO No.1035(I)/2017 dated 16-10-2017---Doctrine of implied repeal---Applicability---Petitioners were importers of tiles and sanitary fixtures and fittings from People's Republic of China with exemption from customs duty in excess of 37.5%---Authorities imposed duties upon various items including goods imported by petitioners through Notification SRO No.1035(I)/2017 dated 16-10-2017---Plea raised by petitioners was that Notification SRO No.497(I)/2009 dated 13-06-2009 was in field and same was not revoked/repealed by Notification SRO No. 1035(I) / 2017 dated 16-10-2017---Validity---Provisions of Notification SRO No.497(I)/2009 dated 13-06-2009 were not repugnant to Notification SRO No.1035(I)/2017 dated 16-10-2017 and both the Notifications (SROs) standing together did not lead to any absurd consequences and finally it was not the case of entire subject matter of Notification SRO No.497(I)/2009 dated 13-06-2009 being taken away by Notification SRO No.1035(I)/2017 dated 16-10-2017---Both Notifications (SROs) were not hit by any of the three settles tests---Provisions of Notification SRO No.497(I)/2009 dated 13-06-2009 were not impliedly repealed by Notification SRO No.1035(I)/2017 dated 16-10-2017---High Court declared that Notification SRO No.497(I)/2009 dated 13-06-2009 remained in field and items listed therein continued to be exempted by customs duties in terms stated therein---High Court further declared that in respect of items covered under Notification SRO No.497(I)/2009 dated 13-06-2009, duties imposed vide Notification SRO No.1035(I)/2017 dated 16-10-2017 were not recoverable---Any amounts recovered from petitioners, in excess of exemption provided for under Notification SRO No.497(I)/2009 dated 13-06-2009 was to be duly refunded---High Court directed that such refund could be made by way of direct repayment or adjustment (against any tax or duty) and in one lump-sum or in installment as Federal Board of Revenue could determine(but same policy must be adopted in all cases)---Any security provided by any of the petitioners in terms of interim orders made in petitions was to be released/discharged subject to proper verification and confirmation---Appeal was allowed accordingly.

Tanveer Hussain v. Divisional Superintendent Pakistan Railways and others PLD 2006 SC 249 and Muhammad Sheraz v. Chief Secretary Government of Khyber Pukhtunkhwa and others PLD 2014 Pesh. 170 rel.

Messrs Advance Telecom and others v. Federation of Pakistan and others 2018 SCMR 1 distinguished.

Assistant Collector, Customs, Central Excise and Sales Tax, Mardan Division and 2 others v. Messrs Gadoon Textile Mills Limited, 1994 SCMR 712; Collector of Customs and others v. Ravi Spinning Limited and others 1999 SCMR 412; Government of Pakistan and others v. Messrs Saif Textile Mills Limited and others 2003 PTD 335 and Ahmed Khan Niazi v. Town Municipal Administration Lahore and others PLD 2009 Lah. 657 ref.

Kashif Nazeer for Petitioners (In C.Ps. Nos.D-7357, 7418 and 7769 of 2017)

Imran Ali Mithani for Petitioners (In C.Ps. Nos.D-7918, 7991, 8025, 8135, 8167, 8245, 8373, 8516, 8617, 8705, 8882 of 2017 and 123, 301, 484, 646, 706, 911, 1140, 1216, 1365, 1700, 2451, 2848 and 3007 of 2018).

Aqeel Ahmed Khan for Petitioners (In C.Ps. Nos.D-8246, 8546 of 2017 and 9, 438, 566, 612, 759, 1355, 1433, 1703, 1863, 2357, 2644 and 3022 of 2018).

Ms. Dil Khurram Shaheen for Petitioners (In C.Ps. Nos.D-7803, 7816, 8468 of 2017 and 2180 of 2018).

Imran Iqbal Khan for Petitioners (In C.Ps. Nos.D-8432, 8619 of 2017 and 743 of 2018).

Ghulam Haider Shaikh for Petitioners (In C.Ps. Nos.D-7357, 7918, 7991, 8135, 8516, 8617 of 2017 and 2617 of 2018).

Salman Yousuf for Petitioners (In C.Ps. Nos.D-1509 of 2017 and 2255 of 2018).

Muhammad Afzal Awan for Petitioners (In C.Ps. Nos.D-676 and 1116 of 2018).

Adnan Moton for Petitioners (In C.P. No.D-8266 of 2017).

Ms. Rashida Perveen for Petitioners (In C.P. No.D-2357 of 2018).

Meer Hussain Abbasi, Assistant Attorney General for Respondents.

Kafeel Ahmed Abbasi for Respondent.

2018 P T D 1827

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Arshad Hussain Khan, JJ

SINDH REVENUE BOARD

Versus

Messrs MEESSAM CONSTRUCTION COMPANY

Special S.T.R.A No.424 of 2017, decided on 20th November, 2017.

Sindh Sales Tax on Services Act (XII of 2011)---

----S.61---Appeal---Limitation---Condonation of delay---Appeal by Sindh Revenue Board----Government departments / functionaries---Statutory periods for filing of appeals---Scope---Government departments could not be extended different treatment in respect of legal provisions---Procedure provided for assailing any order before a statutory forum of appeal while seeking condoning of delay in filing of such appeal, delay of each and every day was required to be explained reasonably---Vested right accrued in favour of succeeding party after expiry of period of limitation and defaulting party could not be rewarded for its default and omission to the disadvantage of the other party.

The Commissioner Inland Revenue v. Sony Traders Wine Shop S.T.R.A. No. 122 of 2015; Messrs Pakistan Soap Manufacturer v. Customs Appellate Tribunal and others Special Customs Reference Application No. 367 of 2016; The Commissioner Inland Revenue v. Maymar Housing Services (Pvt.) Ltd. Income Tax Reference Application No. 47 of 2017 and Collector of Customs v. Shandev Vankwani 2006 PTD 55 rel.

Shamshad Ahmed for Applicant.

2018 P T D 1869

[Sindh High Court]

Before Muhammad Iqbal Kalhoro and Mohammad Karim Khan Agha, JJ

Messrs INDEPENDENT MEDIA CORPORATION (PVT.) LTD., through Director Finance

Versus

PROVINCE OF SINDH through Chief Secretary Sindh and others

C.P. No. D-2798, Spl. S.T.R.As. Nos.195 and 196 of 2009, C.P. Nos.D-614 and D-783 of 2010, decided on 30th May, 2018.

(a) Taxation---

----Delegated legislation---Tax could not be levied automatically through a delegated legislation until and unless it was leviable under the charging provision of the fiscal statute.

(b) Sindh Sales Tax Ordinance (VIII of 2000) [since repealed]---

---- S.3 & Sched., Item No.2---Television channels---Sales tax on advertisements---Short payment of sales tax---Recovery of short paid amount along with default surcharge and penalty---Dispute between the petitioner (company owning certain television channels) and the tax department was over the issue of payment of sales tax on services of advertisements being telecast on the petitioner's television channels---Collector (Audit) found that the petitioner was involved in short filing of payment of sales tax in its monthly sales tax returns---Order-in-Original was passed against the petitioner by the Additional Collector (Adjudication) directing recovery of short paid amount from the petitioner along with default surcharge and a penalty equal to 100% of the tax---Contention of petitioner that it had no concern with actual broadcasting of advertisements and that for the said purpose it had purchased airtime for its two television channels from a foreign based company, which was actually telecasting programmes and advertisements from its own equipment, and that such an activity on its part not related to broadcasting of the advertisement was not liable to sales tax---Validity---[Per Muhammad Iqbal Kalhoro, J: Section 3 of the Sindh Sales Tax Ordinance, 2000 read with Item 2 of the Schedule expressly levied tax on services of advertisements on television and radio ---Advertiser would be imposed tax only when he was provided with services of broadcasting of his advertisements on television or radio---Only when an advertisement wasbroadcast, it would qualify as services being rendered to another person---Broadcasting of advertisements on television was merely a single link in the whole chain called taxable services in relation to advertisements on TV; every part/activity which lead to provision of such services would form its integral part and would be so considered in law ---Petitioner did not consist of a single company engaged only in booking of the advertisements, but was a part of a media conglomerate which owned several newspapers, magazines and satellite television channels and had landing rights licenses issued by Pakistan Electronic Regulatory Authority (PEMRA) for free to air satellite TV channels---Petitioner shared common ownership with the foreign based company, which allegedly was engaged in broadcasting of the advertisements booked and supplied by the petitioner, and which was named as the principal in the landing rights licenses held by the petitioner--- Origin of providing services of broadcasting of the advertisements to advertisers started from Pakistan---Advertisements of Pakistan-made items for the viewers in Pakistan were being broadcast / telecast on the two Pakistan-based satellite television channels of the petitioner---Petitioner was a registered person under the domestic law, and it was this reason it succeeded in booking advertisements of the advertisers who were Pakistan-based and whose primary target was viewers in Pakistan--- By all appearances, the activity of provision of such services which were taxable under the Sindh Sales Tax Ordinance, 2000 originated in Pakistan and due to such fact the petitioner was able to charge and collect the sales tax from its customers (advertisers)---Place or the equipment used for broadcasting advertisements would be irrelevant for such purposes---Amount of sales tax which the petitioner had collected in the capacity of a collecting agency on behalf of the government was to be transferred to it, but the petitioner did not do so and retained it unjustly---Such unjust enrichment resulted in double loss to the government, on the one hand the persons who paid sales tax to the petitioner claimed input tax adjustments on the basis of invoices issued to them for the amount of tax paid on account of release of advertisements on TV, and on the other the petitioner did not transfer the said amount of tax to the government---Petitioner had unjustly enriched itself to the detriment of the people's welfare upon which otherwise that amount of tax would have been spent by the Government---Petitioner had committed tax fraud and was liable to pay penalty and the additional tax/additional surcharge---High Court directed that the Federal Board of Revenue within two months of receipt of the sales tax amount, penalty and default surcharge from the petitioner shall transfer the same to the exchequer of the relevant Province; that the Federal Board of Revenue while calculating the liability of sales tax in all respects against the petitioner shall adjust in accordance with law all the undisputed payments made by the petitioner from time to time--- Constitutional petition was dismissed in circumstances]---[Per Mohammed Karim Khan Agha, J, agreeing: Petitioner company was under an obligation to collect sales tax on behalf of the Government which it duly did by issuing invoices to its customers showing an element in respect of sales tax which was duly paid by the customers to the petitioner---Instead of keeping such sales tax, which the petitioner had collected in trust for its onward transmission to the Government, it was used by the petitioner to run its business---Such practice on part of the petitioner was nothing but criminality and a case of breach of trust, tax evasion and tax fraud---His Lordship observed that decisions in cases involving revenue collection should be made expeditiously by the concerned tribunal and or court in accordance with the law and the Constitution; that it may in such respect be of assistance if the Chief Justice of the High Court were to put in place a mechanism to ensure that such cases (involving revenue collection) where stays were in operation be fixed for final decision on a priority basis in both the public interest and the interest of justice as envisaged by the Constitution].

(c) Interpretation of statutes---

----Words and expressions in a given law were to be assigned simple, plain and easily deductible meaning for the purpose of understanding their scope and object.

(d) Interpretation of statutes ---

----Fiscal statute---Rules made in furtherance of fiscal statute---Where the incidence of the tax was clear, the event attracting the levy was ascertainable and the person on whom the tax was imposed was indicated clearly, the machinery provisions (i.e. Rules) that were enacted to make realization of the tax possible would be liberally construed, and not interpreted in a way to prevent collection of due tax and thereby defeating intention of the fiscal statute.

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

----S. 3---Sales tax---Scope---Sales tax was an indirect tax, burden of which was to be borne by the end consumer---After such burden had been passed on to the end user and the amount was so collected, it became duty of the vendor to pass on the same to the government accordingly---Vendor had no legal authority to hold on to the amount of sales tax which he recovered from the purchaser as an agent of the government.

Dr. Farogh Naseem for Petitioner.

Ameer Bux Matelo for the FBR.

Salman Tailbuddin, Addl. Attorney General.

Syed Muhasan Imam for Respondent No.3./Additional Commissioner Inland Revenue (in Spl. S.T.R.As. Nos.195 and 196 of 2009).

Malik Altaf Javed, Advocate for Intervener (Sindh Revenue Board).

Malik Naeem Iqbal, Additional Advocate General and Jan Muhammad Khoro, Assistant Advocate General Sindh.

Ms. Sarwat Jawahri, State Counsel.

2018 P T D 2026

[Sindh High Court]

Before Munib Akhtar and Omar Sial, JJ

MUHAMMAD SALEEM BIKIYA through Attorney and 14 others

Versus

PAKISTAN through Secretary Ministry of Commerce and another

C.Ps. Nos. D-4780 to 4782 and 2605 of 2017, decided on 19th February, 2018.

(a) Anti-Dumping Duties Act (XIV of 2015)---

----Ss. 3, 4, 5 & 10---Anti-dumping---Injury to domestic industry---Levy of anti-dumping duty---Principle---If the export price of a product is less than its normal price then there is dumping and S.4 of Anti-Dumping Duties Act, 2015, seeks to present the same---If an exporter or producer is in violation of such provision, and there is injury to domestic industry within the meaning of Anti-Dumping Duties Act, 2015, then dumping margin is determined and based on that, anti-dumping duty is imposed---Both dumping margin and anti-dumping duty are to be determined on an individually particularized basis unless the matter comes within one of the permissible exceptions---Anti-dumping duty is the penalty imposed, if there is a violation of S.4 of Anti-Dumping Duties Act, 2015, and the violation causes injury to domestic industry---Purpose is to remove the injury by, in effect, aligning export price with normal price by imposition of penalty.

(b) National Tariff Commission Act (XII of 2015)---

----S.10(3)---Term 'parties'---Connotation---Use of 'parties instead of 'interested parties' in S.10(3) of National Tariff Commission Act, 2015, is designed to allow for broader category to be given access to 'information' in terms thereof---Term includes a person wishing to make a complaint under Anti-Dumping Duties Act, 2015.

(c) National Tariff Commission Rules, 1990---

----R.3---"Further information"---Scope---'Further information' that complainant has to provide in terms of R. 3 of National Tariff Commission Rules, 1990, is only such as is 'reasonably available' to it.

Sadia Jabbar v. Federation of Pakistan and others PTCL 2014 CL 537 rel.

(d) Anti-Dumping Duties Act (XIV of 2015)---

----Ss. 3, 4, 5, 10, 20, 25, 26 & 78---National Tariff Commission Act (XII of 2015), Ss.10 (1) & 30---National Tariff Commission Rules, 1990, R.3---Customs Act (IV of 1969), S.155H---Anti-dumping---Injury to domestic industry---Levy of anti-dumping duty---Principle---Confidentiality of information under S.155-H, Customs Act, 1969---Scope---Petitioners were aggrieved of proceedings / complaints initiated under Anti-Dumping Duties Act, 2015, where in certain cases final determination had been made and in other cases there was provisional determination---Validity---National Tariff Commission did not have jurisdiction to obtain import data and information from Customs Department in terms of S.10(1) of National Tariff Commission Act, 2015 and if there was anything in S.155H of Customs Act, 1969, that would stand in the way of National Tariff Commission doing so, then to that extent S.155 H of Customs Act, 1969, stood overridden by reason of both S.30 of National Tariff Commission Act, 2015 and S.78 of Anti-Dumping Duties Act, 2015---National Tariff Commission had jurisdiction and power to use such information and data under and in terms of Anti-Dumping Duties Act, 2015, either for purpose of any suo motu investigation under S.25 of Anti-Dumping Duties Act, 2015, or in relation to and for the purposes of complaints filed under S.20 or S.26 of Anti-Dumping Duties Act, 2015; in latter situation (and especially for purposes of a complaint under S.20 of Anti-Dumping Duties Act, 2015) National Tariff Commission was entitled and empowered to either provide information to a person wishing to make a complaint, or to itself use the information and data to inter alia see where there was 'sufficient evidence' of dumping and injury---National Tariff Commission could provide information and data to a person who wished to file a complaint under S.20 of Anti-Dumping Duties Act, 2015, or an actual complainant in terms of S.10(3) of National Tariff Commission Act, 2015, only if the requisite rules were in place---If the rules were not framed then National Tariff Commission had no power to provide the information and data to any person except to the extent otherwise expressly made permissible by or under Anti-Dumping Duties Act, 2015---Investigations were based in relevant and substantial part on the data and information obtained from and/or by National Tariff Commission, which was in any case usable by it---High Court declined to exercise its discretionary jurisdiction under Art. 199 of the Constitution and did not invalidate investigation or determination as challenged by petitioners---Constitutional petition was dismissed in circumstances.

Westbank First Nation v. British Columbia Hydro and Power Authority (1999) 3 SCR 134; 620 Connought Ltd. v. Canada (2008) 1 SCR 131 and 2008 SCC 7 dissented.

D.S. Textile Mills Ltd v. Federation of Pakistan PLD 2016 Lah. 355; Iqbal Zafar Jhagra v. Federation of Pakistan 2013 SCMR 1337; Sadia Jabbar v. Federation of Pakistan and others PTCL 2014 CL 537; Sohail Jute Mills Ltd. and others v. Federation of Pakistan and others PLD 1991 SC 329 and Ellecot Spinning Mils Ltd. v. Federation of Pakistan and others 2016 PTD 1334 ref.

Dr. Farogh Naseem and Altamash Arab, Asad Arain and Umar Zad Gul Kaka for Petitioners.

Shahzad A. Elahi, Salman Zaheer, Shahid Iqbal Rana and Muhammad Ali for the Complainant/Respondents.

Ahmed Sheraz for NTC.

Asim Mansoor Khan, DAG and Ghulam Shabbir Baloch, Assistant Attorney General for the State.

2018 P T D 2112

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Mrs. Ashraf Jehan, JJ

SHAMIMUDDIN AHMED and 2 others

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and 3 others

C.P. No. D-2585 of 2018 and C.M.As. Nos. 11160 of 2017, 16615, 16616 of 2018, decided on 10th May, 2018.

Sales Tax Act (VII of 1990)---

----Ss. 11(3), 11(2) & 3---Recovery of sales tax---Assessment of tax and recovery of tax not levied or short-levied or erroneously refunded---Taxpayer impugned issuance of show-cause notice under Ss. 11(2) & 11(3) of the Sales Tax Act, 1990 on the ground inter alia, that the proposed assessment by Department of the sales tax liability of taxpayer was based on considerations which were contrary to law---Validity---Impugned notice provided the taxpayer opportunity to explain the position and the Department had not suspended sales tax registration and no lawful cause of action appeared to have accrued to the tax payer---High Court disposed of the Constitutional petition with direction to the Department to examine the matter in the light of law and judgments of superior courts within a period of four weeks.

PTCL 2000 CL 50; 2004 PTD 868 and 2001 PTD 2097 = 2001 SCMR 1376 ref.

Zain A. Jatoi along with Ms. Ayesha Munawar and Kelashs for Petitioners.

Ameer Bux Metlo for Respondents.

2018 P T D 2208

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

SOPHIA COM B.V. through Duly Authorized Officer

Versus

PAKISTAN through Secretary Revenue and 2 others

Suit No.55 and C.M.A.No. 303 of 2018, decided on 6th August, 2018.

Income Tax Ordinance (XLIX of 2001)---

----Ss.177, 214C & 120---Audit---Nature---Selection for audit---Scope---Audit in itself was not an adverse action and / or order; particularly in a system where tax return was filed by taxpayer under self-assessment, which was to be treated as an assessment order of the Commissioner under S.120 of the Income Tax Ordinance, 2001---Conduct of audit was not even an inconvenience if taxpayer fulfilled its statutory duty by maintaining record under the Income Tax Ordinance, 2001.

Civil Appeal No.1171 of 2013; Messrs Pfizer Pakistan Ltd. Through Company Secretary and others v. Deputy Commissioner and others PLD 2016 PTD 1429 and Pakistan Telecommunication Company Ltd. v. Federation of Pakistan 2016 PTD 1484 rel.

Hyder Ali Khan , Samiur Rehman for Plaintiff.

Aamir Bukhsh Metlo for Defendant.

2018 P T D 1

[Lahore]

Before Shahid Karim, J

MUHAMMAD YASIN BUTT

Versus

FEDERATION OF PAKISTAN and others

W.P. No.27338 of 2014, decided on 7th November, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 37A, 33 & 37----Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) Ss. 32 & 14---Offences and penalties under the Sales Tax Act, 1990---Sales Tax fraud---Power to arrest and prosecute---Payment of tax and penalty/default surcharge---Recommendations of the Federal Tax Ombudsman---Representation to the President---Setting aside of order of the President under S. 32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Scope---Petitioner, under protest, deposited tax and penalty after order-in-original was passed in proceedings under Sales Tax Act, 1990 for sales tax fraud, which order was subsequently set aside by Commissioner Appeals---Contention of petitioner, inter alia, was that the Department had not returned the said amount to him---Validity---Recommendations of the Federal Tax Ombudsman in support of the petitioner, were made after due regard to the facts and circumstances of the case, which were set aside after representation filed by Department to the President was accepted---Department compelled the petitioner to deposit substantial amount by way of sales tax when there was no evidence or any document on record to show that subsequently petitioner was found involved in tax fraud and was liable for said amount---No reply was given to petitioner from Department when request for return of said amount was made by him---Order passed by the President was set aside and findings of the Federal Tax Ombudsman were revived---Constitutional petition was allowed, accordingly.

Waheed Shehzad Butt for Petitioner.

2018 P T D 75

[Lahore High Court]

Before Shahid Jamil Khan and Mudassir Khalid Abbasi, JJ

Messrs TANDLIANWALA SUGAR MILLS LTD.

Versus

PROVINCE OF PUNJAB through Excise and Taxation and 5 others

I.C.A. No.1219 of 2016 in Writ Petition No.18347 of 2012, heard on 10th October, 2017.

(a) Punjab Excise Act (I of 1914)---

----Ss. 13 & 15---Law Reforms Ordinance (XII of 1972), Ss. 3(2) & proviso---Intra-court appeal---Maintainability---Bar on filing of intra-court appeal in presence of remedy of appeal, revision or review---Word "proceedings" used in proviso to S. 3(2) of the Law Reforms Ordinance, 1972---Notifications/show-cause notices/demand notices under the Punjab Excise Act, 1914---Remedy of appeal and revision under the Punjab Excise Act, 1914---Scope---Question before the High Court was whether demand/show-cause notices under the Punjab Excise Act, 1914 fell within purview of the proceedings in which the law provided for an appeal, revision or review as envisaged in proviso to S.3(2) of the Law Reforms Ordinance, 1972---Held, that word "proceedings" would include every step taken towards further progress by which machinery of law was put into motion---Original order may be the order passed by the lowest officer or authority in the hierarchy; and test for S. 3(2) of the Law Reforms Ordinance, 1972 was whether original order passed in such proceedings was subject to appeal under the statute, irrespective of whether such appeal was availed or not---Original order was one under which statutory proceedings were commenced---Show-cause / demand notices under the Punjab Excise Act, 1914 were original orders and steps in proceedings, for which remedy under Ss. 14 & 15 of the Punjab Excise Act, 1914 were available, and therefore S. 3(2) of the Law Reforms Ordinance, 1972 would be attracted, and intra-court appeal would not be maintainable.

Deputy Commissioner/Administrator, District Council Attock and another v. Lawrencepur Woolen Textile Mills Ltd. 1999 SCMR 1357; Iqan Ahmed Khurram v. Government of Pakistan and others PLD 1980 SC 153; Mst. Karim Bibi and others v. Hussain Bakhsh and another PLD 1984 SC 344 and Muhammad Abdullah v. Deputy Settlement Commissioner, Centre-I, Lahore PLD 1985 SC 107 ref.

Pir Sabir Shah v. Shad Muhammad Khan, Member Provincial Assembly, NWFP and another PLD 1995 SC 66; Pakistan International Airlines Corporation through Chairman and others v. Samina Masood and others PLD 2005 SC 831; Town Committee, Kot Abdul Malik District Sheikhpura through Administrator v. Province of Punjab through the Secretary, Local Government and Rural Development Department Punjab Lahore and another 2001 YLR 1032; Pakistan Telecommuni-cation Company Ltd. v. Federation of Pakistan 2016 PTD 1484 and Pakistan Oilfields Limited, Rawalpindi v. Province of Punjab, through Secretary Finance Department, Lahore and others 2010 SCMR 328 distinguished.

Pakistan Oilfields Limited, Rawalpindi v. Province of Punjab, through Secretary Finance Department, Lahore and others 2010 SCMR 328 and Mst. Karim Bibi and others v. Hussain Bakhsh and another PLD 1984 SC 344 rel.

(b) Appeal---

----Appeal was creation of a statute which remedy could not be taken away or made available except in accordance with the law providing for the same.

Ali Sibtain Fazli for Appellant.

Shazib Masud, Umer Tariq Gill, Hasham Ahmad Khan and Abad-ur-Rehman for Appellants.

Mrs. Asma Hamid, Addl. A.G. Punjab for Respondents.

Imran Aziz Khan, Deputy Attorney General for Pakistan for Respondents.

Ch. Imtiaz Elahi, Assistant Attorney General for Pakistan for Respondents.

Mian Abid Zia, Law Officer, Excise and Taxation Department.

2018 P T D 93

[Lahore High Court]

Before Masud Abid Naqvi, J

Mst. KOUSAR KAMAL

Versus

CHAIRMAN, CUSTOMS, FBR and others

Writ Petition No.9264 of 2012, decided on 21st Mach, 2017.

Customs Recovery Rules, 1992---

----R.7---Constitution of Pakistan, Art.199---Constitutional petition---Recovery proceedings were initiated by Model Custom Collectorate, "Peshawar" with regard to property situated at "Lahore"---Petitioner assailed said notices at Lahore under Art.199 of the Constitution---Validity---Relief claimed by petitioner could be granted by High Court within whose jurisdiction persons were performing/discharging their duties---High Court (Lahore) declined in interfere in the matter---Constitutional petition was dismissed in circumstances.

D.G. Customs Valuation, Karachi and another v. Messrs Trade International Lahore and others 2014 SCMR 15 and Sandalbar Enterprises (Pvt.) Ltd. v. Central Board of Revenue and others PLD 1997 SC 334 ref.

Sandalbar Enterprises (Pvt.) Ltd. v. Central Board of Revenue and others PLD 1997 SC 334 fol.

Sikandar Javed for Petitioner.

2018 P T D 108

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs ALI HASSAN METAL WORKS

S.T.R. No.242 of 2015, decided on 1st November, 2017.

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

----Ss. 21, 7, 8 & 2(37)---De-registration, blacklisting and suspension

of registration---Input tax adjustment---Blacklisted suppliers---Blacklisting of suppliers subsequent to transaction(s)---Invoices issued before blacklisting of suppliers---Denial of claim of input tax adjustment by Department---Mandatory requirement of Department passing self-speaking order under S. 21(3) of Sales Tax Act, 1990---Sales Tax fraud---Scope---Section 21(3) of the Sales Tax Act, 1990 dealt mainly with invoices issued during period of suspension of sales tax registration and after consequent blacklisting, and invoices issued by such registered person "whether prior or after such blacklisting" shall be rejected "through a self speaking appealable order"---Section 21(3) of the Sales Tax Act, therefore authorized Department to go behind blacklisting to reject refund or credit against invoices issued by blacklisted suppliers, however, such power could not be construed to reject tax credit of all previously issued invoices for the reason that the supplier was blacklisted subsequently---Requirement of self-speaking appealable order, after affording opportunity of hearing, had to be satisfied---While applying the provisions of S. 21(3) of the Sales Tax Act, 1990; Department had to ascertain facts as to whether invoices were issued during suspension or blacklisted period and in case invoices were issued prior to blacklisting, cause or reason for blacklisting could have nexus with such invoices and burden was upon the Department to prove such facts, however, such burden could not be shifted upon the taxpayer claiming adjustment or refund of tax, in cases of tax fraud, in accordance with the provisions of S. 2(37) of the Sales Tax Act 1990.

Al-Hilal Motors Stores and another v. Collector, Sales Tax and Central Excise (East) and another 2004 PTD 868 rel.

(b) Constitution of Pakistan---

----Arts. 10A & 4---Right to fair trial---Due process of Law---Right to be dealt in accordance with law---Adjudication by quasi-judicial bodies---Authorities exercising quasi-judicial powers under a statute were bound to conduct fair adjudication as to be dealt in accordance with law, due process and fair trial were unalienable Fundamental Rights guaranteed under the Constitution.

The Province of East Pakistan v. MD. Medhi Ali Khan PLD 1959 SC 387 rel.

Mian Yusuf Umar for Applicant.

Nemo for Respondent.

2018 P T D 208

[Lahore High Court]

Before Shahid Jamil Khan and Masud Abid Naqvi, JJ

The FEDERAL BOARD OF REVENUE and others

Versus

Messrs CHENONE STORES LTD.

I.C.A. No. 855 of 2014, decided on 17th November, 2017.

(a) Constitution of Pakistan---

----Arts. 8 & 199---Laws inconsistent with or in derogation of Fundamental Rights---Judicial powers to declare laws as being ultra-vires the Constitution---Competence of the Legislature---Valid / invalid enactments---Validation of enactments declared invalid being ultra vires the Constitution---Scope---For validation of any law, competence of Legislature was a precondition and a law declared ultra vires for want of Legislative competence would have to be re-enacted even if competence for the same was supplied later---Article 8 of the Constitution provided that any law inconsistent with Fundamental Rights shall be void "to the extent of such inconsistency" and thus such a law remained a valid enactment, however, the same became ineffective or inoperative to the extent of such inconsistency with Fundamental Rights and as soon said inconsistency was removed, it became effective and operative without being re-enacted---For validation of a law, defect or cause of such invalidity, declared in a judgment, must be removed by the validating statue, before validation could said to have taken place effectively---Validation could take place if a provision declared as invalid was so fundamentally altered that the judicial invalidation decision could not have been given in such altered circumstances---Legislature could also give its own meaning and interpretation of a law declared as invalid and by such Legislative fiat, it could give new meaning of said law which would be binding upon Courts---Legislature may follow any one or all of said methods to neutralize the effect of an earlier decision of the Court, declaring a law as invalid, which became ineffective after change was brought through validating statute.

[Case-law referred]

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

----Ss. 214C & 177---Finance Act (XXII of 2013) Ss. 7(40) & 7(34)---Constitution of Pakistan, Arts.8 & 25---Selection of case for audit under S.177 of the Income Tax Ordinance, 2001---Interpretation of Ss. 177 & 214C of the Income Tax Ordinance, 2017---Binding effect of explanations to provisions supplied by Legislature---Nature of powers of Commissioner under S.177 of the Income Tax Ordinance, 2001---Scope---Question before the High Court was whether Explanations inserted in Ss. 177 & 214C of the Income Tax Ordinance, 2001 through Finance Act, 2013 had cured the defect or cause of S.177(1) of the Income Tax Ordinance, 2001 being declared as ultra vires and unconstitutional---Held, that by inserting Explanations to Ss. 177 & 214C of the Income Tax Ordinance, 2001 the Legislature had given its own meaning and interpretation to said law and declared that powers of Commissioner under S.177 of the Income Tax Ordinance, 2001 were independent of the Department's powers under S. 214C of the Income Tax Ordinance, 2001 and nothing contained in said section would restrict powers of Commissioner to call for record and to conduct audit under S.177 of the Income Tax Ordinance, 2001---Such explanations supplied by Legislature were binding upon courts and a provision of law being inconsistent with a Fundamental Right could be declared void but the same remained on the statute book and as soon the inconsistency with Fundamental Right(s) was cured, said provision of law became effective again---High Court observed that S.177(1) being interpreted , clarified and declared through the Explanations inserted via Finance Act, 2013 would apply from date of promulgation of Finance Act, 2013 and that the Explanations inserted effectively obliterated binding force of judgment in Messrs Chenone Stores Ltd. v. Federal Board of Revenue 2012 PTD 1815 which declared S.177(1) of the Income Tax Ordinance,2001 as ultra vires---Intra-court appeals were allowed, accordingly.

[Case-law referred]

Sarfraz Ahmad Cheema, Liaquat Ali Chaudhary, Raja Sikandar Khan, Muhammad Asif Hashmi, Kausar Parveen, Foziya Bukhsh, Muhammad Asif, Imran Rasool, Mian Yusuf Umar, M. Shahid Usman, Umair Awan, Irshad Ullah Chatha, Shahid Sarwar Chahil, Sohail Zahid Butt, Hafiz Shahzad Ahmad Cheema, Ch. Muhammad Yasin Zahid, Waqar A. Sheikh, Rana Muhammad Mehtab, Javed Akhtar, Amjad Hussain Malik, Sultan Mahmood, Malik Abdullah Raza, Muhammad Asif Butt, Shagufta Ijaz, Muhammad Akram Awan and Abdul Rehman Khalil for the appellant-department in connected appeals.

Barrister Imran Aziz Khan, Tahir Mahmood Khokhar and Mian Irfan Akram, Deputy Attorney Generals for Pakistan for Appellants.

Dr. Ishtiaq Ahmad Khan, Director (Law), FBR, Lahore.

Dr. Hamid Attiq Sarwar, Commissioner Inland Revenue, Lahore.

Shahbaz Butt, Mansoor Usman Awan, Naved A. Andrabi, Imtiaz Rashid Siddiqui, Barrister Shehryar Kasuri, Barrister Qadir Buksh, Ali Sibtain Fazli, Rana Muhammad Afzal, Muhammad Ajmal Khan, Khurram Shahbaz Butt, Muhammad Humzah, Raza Imtiaz, Jamshid Alam, Qadeer Kalyar, Muhammad Imran Rasheed, Salman Zaheer, Shahid Hussain Ch., Zafar Iqbal, Yawar Mehdi Naqvi, Mirza Mubashar Baig, Ch. Wasim Ahmad, Muhammad Mansha Sukhera, Muhammad Mohsin Virk, Muhammad Ahsan Virk, Abdul Qadoos, Ch. Imran Masood, Dr. Ilyas Zafar, Syed Nasir Ali Gillani, Waheed Shahzad Butt, Shehzeen Abdullah, Asghar Leghari, Hussain Ibrahim, Muhammad Younas Khalid, Muhammad Akram Saleh, Asghar Ahmad Kharal, Muhammad Shabbir Hussain, Muhammad Ijaz Ali Bhatti, Omar Tariq Shamim, Mudassar Shuja-ud-Din, Ali Hasnain, Tahir Naeem, Waseem Ahmad Malik, M. Iqbal Hashmi, M. M. Akram, Muhammad Tahir Amin, Nadeem Mehmood, Sheikh Aqeel Ahmad, Zargham, Muneeb Zafar, Salman Ahmad, Ehsan-ur-Rehman Sheikh, Monim Sultan, Nasir Khan, Barrister Pirzada Aurangzaib, Syed Ali Imran Rizvi, Rasheed Ahmad Sheikh, Shoaib Ahmad Sheikh, M. Waseem Chaudhry, Zeeshan Ali, Aurangzeb Tahir, Muhammad Naeem Munawar, Muqtedir Akhtar Shabir, Sh. Aqeel Ahmed, Muhammad Shahid Baig, Rana Hammad Aslam, Ch. Muhammad Ali, Salman Ahmad, Muhammad Masud Akhtar, Sohail Raza, Mian Haseeb-ul-Hassan, Irtaza Naqvi, Javed Iqbal Qazi, Usman Javed Qazi, Rana Munir Hussain, Sayyid Ali Imran Rizvi, Abdul Waheed Habib, Zaeem-ul-Farooq Malik, Salman Hasan, Ahmad Farooq, Saleem Iqbal Rathore, Munawar-us-Salam, Agha Sarfraz Ahmad, Muhammad Aleem Irshad, H.M. Majid Siddiqi, Sajid Ijaz Hotiana, Iftikhar Ahmad Khan, M. Shahid Mukhtar Chandia, Mirza Anwar Baig, Jan Muhammad Chaudhry, Shahzad Mahmood Butt, Muhammad Saqib Sheikh, Zurgham Lukhesar, Syed Murtaza Ali Zaidi, Mian Abdul Ghaffar, Muhammad Amir Malik and Rana Muhammad Aslam for the Respondents taxpayers in connected appeals.

2018 P T D 253

[Lahore High Court]

Before Shahid Karim and Tariq Saleem Sheikh, JJ

WAK LIMITED, LAHORE

Versus

CUSTOMS, CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL and 2 others

S.T.R. No.33 of 2005, decided on 24th August, 2017.

(a) Show-cause notice---

----Object and Scope---Show-cause notice is a serious business and is not a casual correspondence---Purpose of show-cause notice is to put person on notice about allegations for which authorities intend to proceed against him and to give him an opportunity to explain his position.

[Case-law referred].

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

----S. 36---Show-cause notice---Necessary ingredients---Show-cause notice is required to state necessary particulars so that addressee is fully informed as to which provision has been invoked against him.

[Case-law referred].

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

----Ss. 2(33)(a), 2(35), 2(41), 2(46), 3 & 47---Reference---LPG cylinders---Taxable supply---Value of supply---Market value, determination of---Dispute was with regard to recovery of sales tax from taxpayer on supply of LPG cylinders to its customers using LPG---Taxpayer denied manufacturing of cylinders and for determination of value relied upon the provisions of S.2(46)(c) of Sales Tax Act, 1990---Validity---LPG cylinder delivered by taxpayer to its distributors and / or consumers was a taxable supply made in the course and in furtherance of taxable activity subject to levy of sales tax---Value of supply was essentially the consideration supplier received from recipient for that supply (including all federal and provincial taxes but excluding sales tax)---Taxpayer altogether denied manufacturing and supply of cylinders therefore, provisions of S.2(46)(a) of Sales Tax Act, 1990, was not applicable---Value of supply was to be determined on the basis of open market price and provision of S.2(46)(c) of Sales Tax Act, 1990 was to be invoked---Valuation Committee could not be formed under S.2(46)(e) of Sales Tax Act, 1990, as the same was not attracted---Provision of S.2(46)(e) of Sales Tax Act, 1990, applied to the situation where there were indications that value of supply was not correctly declared in invoice and no such invoices were available---In order to determine open market price the authorities relied upon sale receipts of four distributors of taxpayer, which showed that empty cylinders were sold in the range of Rs.1500/- to Rs. 1750/- and also produced two buyers of the cylinders for cross-examination---Matter pertained to period 1993-1998 while sale receipts produced by the department were dated 3-3-2000 and 8-3-2000, therefore, the same were irrelevant---High Court remanded the matter to Adjudicating Officer for determination of market price of the cylinders---Reference was disposed of accordingly.

[Case-law referred].

Ali Sibtain Fazli for Applicant.

Ms. Kausar Parveen for Respondents.

2018 P T D 287

[Lahore High Court]

Before Shahid Karim, J

D.G. KHAN CEMENT COMPANY LIMITED

Versus

FEDERAL BOARD OF REVENUE and others

Writ Petition No.38612 of 2015, decided on 29th December, 2017.

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

----S. 4B [as inserted by Finance Act (V of 2015)]---Constitution of Pakistan, Arts. 73(3), 77 & 260---Super tax for rehabilitation of temporarily displaced persons---Tax to be levied by law only---Procedure with respect to Money Bill - Bill not deemed to be a money bill---Scope---Specific purpose of tax mentioned in the taxing provision---Petitioners/taxpayer impugned imposition of "super-tax" via S.4B of the Income Tax Ordinance, 2001 on the ground, inter alia, that 'super tax' was not a 'tax' and could not have been levied through a Money Bill (Finance Act) in terms of Art.73(3) of the Constitution and that said tax tantamount to double-taxation and that the special/specific purpose for imposition of "super tax" mentioned in S.4B of the Income Tax Ordinance, 2001 took the same out of the ambit of what constituted "tax"---Validity---Rule against double-taxation was a judge-made law and did not have Constitutional basis, and High Court in the exercise of power of judicial review under Art.199 of the Constitution could only declare a provision unconstitutional if the same ran counter to the express mandate of the Constitution---Definition of "taxation" was given in Art. 260 of the Constitution which had a nexus with the powers to impose tax under Art. 77; which included imposition of any tax or duty whether general, local or special, and "tax" shall be construed accordingly---Legislature had vast powers to impose tax or duty which could be special in nature which meant that tax could be imposed for special purpose, which would include a specific purpose as mentioned in S.4B of the Income Tax Ordinance, 2001---Section 4B of the Income Tax Ordinance, 2001 was a special tax and had been imposed for a special purpose and by virtue of the definition of "taxation" given in Art. 260, Legislature was well within its powers to impose such a tax---Economic wisdom of imposition of a tax was within exclusive province of Legislature and questioning Legislative policy was beyond domain of courts---High Court held provisions of S.4B of the Income Tax Ordinance, 2001 as Constitutional and valid---Constitutional petitions were dismissed, in circumstances.

[Case-law referred]

(b) Taxation---

----"Double-taxation"---Concept, meaning and scope.

The rule is that in case double taxation has expressly been provided by the statute, the court will give effect to it. However, a prohibition has been placed on the courts to avoid construing a provision in such a manner that it leads to double taxation. Thus the two concepts are distinct and separate and must be borne in mind at all times. If an impost has been levied as a tax by clear language of the statute, the courts cannot hold the said imposition as ultra vires on the touchstone of double taxation. However, if the intent is not very clear, the courts will not put a construction on the charging section which will amount to double taxation. This is the distinction which needs to be brought home.

[Case-law referred]

(c) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Taxation---Judicial review of statutory provisions seeking to impose tax---Double taxation---Scope---Rule against double-taxation was a Judge-made law and did not have Constitutional basis, and High Court in the exercise of power of judicial review under Art. 199 of Constitution could only declare a provision unconstitutional if the same ran counter to the express mandate of the Constitution

[Case-law referred]

(d) Words and phrases---

----"Super tax"---Meaning, nature and scope; examined.

[Case-law referred]

Imtiaz Rasheed Siddiqui, Shahryar Kasuri, Mansoor Usman Awan, Shahzad Ata Elahi, Kh. Farooq Saeed, M.M. Akram, Shahbaz Butt, Usman Akram Sahi, Arslan Riaz, M. Hamza, Sajid Ijaz Hotiana, Tanzil ur Rehman, Waseem Ahmad Malik, Tahir Amin, M. Nasir Khan, Ehsan ur Rehman, Monim Sultan, Shahzeen Abdullah, Hussain Ibrahim, Hammad Khan Babur, Majid Jahangir, Abdullah Akhtar Butt and Shahid Sharif for Petitioners.

Sarfraz Ahmad Cheema, M. Asif Hashmi, Shahid Usman, Shagufta Ejaz, Nasar Ahmad and Imraz Aziz Khan, D.A.G. Nadeem Mehmood Mian, Asst. Attorney General and Dr. Ishtiaq Ahmad Khan Director, Law FBR for Respondents.

2018 P T D 336

[Lahore High Court]

Before Shahid Karim, J.

SHERAZ ZAKA

Versus

FEDERATION OF PAKISTAN through Secretary and Ministry of Finance and 2 others

W.P. No.4465 of 2016, decided on 19th October, 2017.

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

----S. 99-A & Ninth Schedule [as amended by Income Tax (Amendment) Act (III of 2016)]---Constitution of Pakistan, Art.25---Constitutional petition---Discrimination---Intelligible differentia---Petitioner assailed benefit granted to traders through amendment made by Income Tax (Amendment) Act, 2016, on the plea of discrimination---Validity---None of the traders belonging to same class raised voice against benefit under the enactment to have been denied to them---Such measure could be regarded as an affirmative action on the part of Federal Government and one which was actuated by good faith and proper purposes---Petitioner could not point out any similarly placed individuals and persons who were discriminated by the provisions of S.99-A and Ninth Schedule to the Income Tax Ordinance, 2001---Whether in case the benefit under the amending Act was handed out to a certain class of trader that any other class of individuals and citizens would stand to be treated differently having the same status and financial standing was not clear---Such was permissible classification and did not impinge upon the right of any individual in terms of Art. 25 of the Constitution---Reasonable classification could be made in respect of similarly situated persons who were required to be treated alike---Reasonable classification in such matter was the class of traders contemplated by the provisions under challenge and petitioner did not claim any other class to be similarly situated---Constitutional petition was dismissed in circumstances.

Anoud Power Generation Ltd. and others v. Federation of Pakistan and others PLD 2001 SC 340 ref.

(b) Constitution of Pakistan---

----Art. 25---Discrimination---Striking down a law---Scope---In order that a law be struck down on the touchstone of Art. 25 of the Constitution, it must be demonstrated that such law is not based on intelligible criteria and does not have a nexus with the purpose of the law.

(c) Judicial Review---

----Fiscal law---Interpretation/analysis---Discretionary powers---Principle---In matters of economic discretionary powers, a broad and expansive leavay is granted to government and courts have always shown restraint in the analysis of such matters in their power of judicial review.

Elahi Cotton Mill's Ltd. v. Federation of Pakistan PLD 1997 SC 582 rel.

Sheraz Zaka for Petitioner in person.

Nadeem Mehmood Mian Asstt. Attorney-General.

2018 P T D 378

[Lahore High Court]

Before Abid Aziz Sheikh, J

Messrs SUFI STEEL INDUSTRIES (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and others

W.P. No.52462 of 2017, heard on 13th December, 2017.

(a) Interpretation of statutes---

----Rules and administrative orders---Scope---Government or Authority issuing provision under rule making power conferred on it by a statutory provision or some specific Constitutional provision, was generally characterized as a rule---Directions are issued under government's/Authority's administrative and not legislative power---Scope for issuance of directions under administrative authority is extremely broad however, government can issue directions on any matter falling within range of its administrative power so long as field is not occupied by any statutory provision or a rule---Statutory rules are on higher pedestal and administrative instructions/circulars/orders could neither change principle contained in statutory rules nor rules can be amended through administrative jurisdiction.

D.D.A. and others v. Joginder S. Monga and others AIR 2004 SC 3291; State of Punjab v. Dalbir Kaur Kalyan (2000) 6 SCC 516; M. Ramachandran v. Govind Ballabh and others AIR 1999 SC 3601; Sitaram v. Ramjibhai AIR 1987 SC 1293 and Shree Ganesh Steel Rolling Mills v. U.O.I. AIR 1989 Cal 230 rel.

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

----Ss. 13, 95, 219, 223 & Schedule-III---Customs Rules, 2001, Rr. 237 to 263---Subordinate legislation---Scope---Petitioners were owners of licensed bonded warehouses---Grievance of petitioners was that only customs officials of Manufacturing Bond Control Office were vested with powers for verification, examination and assessment of goods which were to be exported as per terms and conditions of license---Validity---Matter related to exports, warehousing and examination etc. of exported goods was governed under Schedule-III of Customs Act, 1969---Policy regarding such matters could only be framed through rules under S.219 of Customs Act, 1969 and not through S.223 of Customs Act, 1969---High Court declared letter in question to be without lawful authority and of no legal effect---Constitutional petition was allowed in circumstances.

Messrs Mustafa Impex Karachi and others v. The Government of Pakistan and others PLD 2016 SC 808 = 2016 PTD 2269 distinguished.

Messrs Al Khair Traders through Sole Proprietor v. Collector Customs and 2 others 2015 PTD 2114; M.A. Rahman v. Federation of Pakistan and others 1998 SCMR 691; Collectors of Customs v. Askari Cement Ltd. 2016 PTD 1886; Punjab Healthcare Commission v. Mushtaq Ahmed Ch. and others PLD 2016 Lah. 237; Muhammad Asghar v. Mst. Safia Begum and another PLD 1976 SC 435; Burhauddin Shaikh and 9 others v. National Bank of Pakistan and 58 others 1985 CLC 2003; Aziz Ahmad v. Provincial Police Officer (I.G.P.) Punjab Lahore and 6 others PLD 2005 Lah. 185 and Zarai Taraqiati Bank Ltd. and others v. Said Rehman and others 2013 PLC (C.S.) 1223 ref.

(c) Administration of justice---

----Where a matter is to be done in a particular manner prescribed under law, it must be done in that way and not otherwise.

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

Hashim Aslam Butt for Petitioner.

Izhar ul Haq Sheikh for Respondent.

Hafiz Muhammad Azhar Ali for Respondent No.5.

2018 P T D 419

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

Messrs Z & J HYGINIC PRODUCTS (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and others

I.C.A. No.92401 of 2017, decided on 23rd October, 2017.

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

----Ss.2(3) & 9(2)(b)---Income Tax Ordinance (XLIX of 2001), S.127---Maladministration---Appellant had contended that Federal Tax Ombudsman had the exclusive jurisdiction to entertain a complaint where maladministration was involved and that Federal Tax Ombudsman had passed impugned order without taking into consideration the fact of said maladministration---Validity---Impugned order had been passed mainly on the two grounds viz; that appellant had the remedy of appeal available to him under S.127 of the Income Tax Ordinance, 2001; secondly that S.9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 had clearly barred the jurisdiction of the Ombudsman in matters which pertained to determination of tax liability under Income Tax Ordinance, 2001---Single Judge of the High Court in the impugned order had elaborately dealt with said issues---Where specific remedy under the law was available, applicant could not file complaint before Federal Tax Ombudsman---Federal Tax Ombudsman, in the present case, assumed the jurisdiction without any lawful authority---Remedy under the law of appeal and review being available to the appellant, Federal Tax Ombudsman had rightly passed the impugned order---Single Judge of High Court had rightly dismissed constitutional petition being not maintainable---Intra Court appeal was dismissed.

Hafiz Muhammad Arif Dar v. Income Tax Officer PLD 1989 SC 109 and Federation of Pakistan through Secretary Establishment Division Government of Pakistan, Islamabad v. Muhammad Tariq Peerzada and 2 others 1999 SCMR 2189 ref.

Waheed Shahzad Butt for Appellant.

2018 P T D 459

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

Messrs NIRVANA HOUSE DAY SPA AND SALOON

Versus

ADDITIONAL DIRECTOR, INTELLIGENCE AND INVESTIGATION and others

Custom Reference No.102 of 2015, decided on 9th November, 2016.

Customs Act (IV of 1969)---

----Ss.194 & 193---Appellate Tribunal---Jurisdiction---Scope---Findings of fact ---Scope---Where order of Collector (Appeals) was impugned before Appellate Tribunal, and findings of fact were challenged, it was the duty of Appellate Tribunal to consider and dilate upon such findings of fact arrived at by Collector (Appeals), if such findings of fact were found to be incorrect by the Appellate Tribunal.

Mahmood Ahmed for Applicant.

2018 P T D 657

[Lahore High Court]

Before Shahid Karim, J

Messrs DH TRAVELS

Versus

COMMISSIONER ENFORCEMENT and others

W.P. No.33566 of 2017, decided on 21st February, 2018.

(a) Punjab Sales Tax on Services Act (XLII of 2012)---

---S. 52---Civil Procedure Code (V of 1908), S. 11---Recovery of tax not levied or short-levied---Proceedings under S. 52 of the Punjab Sales Tax on Services Act, 2012---Doctrine of res judicata, applicability of---Scope---Said doctrine was applicable to proceedings under S. 52 of the Punjab Sales Tax on Services Act, 2012.

(b) Punjab Sales Tax on Services Act (XLII of 2012)---

---S. 52---Civil Procedure Code (V of 1908), S. 11---Recovery of tax not levied or short-levied---Proceedings under S. 52 of the Punjab Sales Tax on Services Act, 2012 ("the Act")---Doctrine of res judicata, applicability of---Scope---Petitioner-taxpayer was issued a show cause notice ("the first notice") under S. 52(1) of the Act---Adjudication order ("first order") was passed against the petitioner in terms of S. 52(3) of the Act---Commissioner (Appeals) set-aside the 'first order' on the basis that the mandatory time limit of 120 days as envisaged in S. 52(4) had patently lapsed by the time the 'first order' was made therefore the same was declared to have been made without lawful authority and of no legal effect---Subsequently tax authorities issued a fresh notice ("the second notice") to the petitioner on the same set of allegations and passed an adjudication order ("the second order") in terms of S. 52(3) of the Act---Plea of petitioner that contents of the second notice' were caught by the principle of res judicata as it envisaged the same allegations which had already been settled in favour of the petitioner when the 'first order' was set-aside by the Commissioner (Appeals), held, that where a tax officer had not complied with the mandatory requirements of the law in determining an adjudication within a certain period of time, then the taxpayer could not be relieved of all obligations under the law from payment with regard to the evaded amount of tax---Public exchequer would suffer grievously and the ultimate sufferer would be the general public for whom the tax was collected---Necessary and expedient for the general advantage of the public and for its collective interest that loss to the public revenue should not be occasioned on account of failure of an officer of the department to understand the mandatory nature of the determinate limits provided by law---Public interest required that the petitioner should be prosecuted in respect of a charge or tax for which it was liable and on the basis of a mere technicality the petitioner should not be allowed to circumvent that liability and that too on account of indolence shown by an officer of the department---Doctrine of res judicata was not applicable to the present case---Admittedly no adjudication on merits was made by the Commissioner (Appeals) and, therefore, the matter was not heard and finally decided by the Commissioner in the first round of litigation---However, the matter was directly and substantially in issue before the officer who adjudicated it in the first instance but by the order passed by the Commissioner (Appeals) that order and the findings rendered therein was erased and became non est---Effect of the order passed by the Commissioner was that the 'first order' was an invalid order and would be deemed to have been erased as if it did not exist at any time---Entire proceedings in the 'first notice' were a nullity, as if they did not take place at all, and therefore, the question of res judicata did not present itself---High Court directed that the Chairman of the Provincial Revenue Authority should issue instructions to all officers adjudicating claims under S. 52 of the Act to comply with the time limit provided under the said section and its mandatory nature.

Collector of Sales Tax v. Super Asia Muhammad Din and Sons 2017 SCMR 1427 ref.

(c) Interpretation of statutes---

---Tax statute---Any construction/interpretation leading to a large-scale evasion of tax was to be avoided.

SP Jain v. Director of Enforcement AIR 1962 SC 1764 ref.

Hamza H. Rashid for Petitioner.

Asfand Yar Khan Tareen for Respondents.

Date of hearing: 30th January, 2018.

JUDGMENT

SHAHID KARIM, J.---This petition challenges the order dated 21.03.2017 ("the second order") passed under Section 52(1) read with section 60 of the Punjab Sales Tax on Services Act, 2012 ("the Act, 2012"). One of the defences set up by the petitioner to the adjudication undertaken by the respondent No.2 vide the impugned adjudication order was that the contents of the show-cause notice were caught by the principle of res judicata as the show-cause notice envisaged the allegations which had already been determined on a previous occasion and had culminated in the favour of the petitioner. It is pertinent to mention that an order in original was passed on 15.09.2016 ("the first order") by the same officer i.e. respondent No.2. An appeal was filed which was dealt with by the Commissioner Appeals through an order dated 21.12.2016 and the appeal filed by the petitioner was allowed on the following basis:-

"12. Without going into the details of the facts and merits of the case and other legal grounds raised, the appeal is decided only on point of violation of prescribed limitation. In view of the above discussion and the case-laws cited supra the time limit of 120 days as envisaged in section 52(4) has patently lapsed therefore the appeal is accepted and the impugned order is declared to have been made without lawful authority, of no legal effect and is hereby annulled."

1. Thus it was held that the period of 120 days mentioned in section 52(4) was a mandatory requirement and since the said period had lapsed when the adjudication order dated 15.09.2016 was passed, that order had no legal effect and was thereby annulled in appeal by the Commissioner (Appeals). No further appeal was filed by the department against the said order passed in appeal and this is admitted on all hands. The learned counsel for the Punjab Revenue Authority (PRA) contends that it was not necessary to have filed an appeal against the order passed by the Commissioner (Appeals) as PRA was well within its right to have issued a fresh show-cause notice and to pass an assessment order on the same facts and with regard to the same allegations. This contention has been put forth on the ground that the appellate order dated 21.12.2016 was not passed on merits and was decided on a threshold question regarding the mandatory nature of the period prescribed by section 52(4) of the Act, 2012.

2. To reiterate, it is common ground between the parties that the second order passed under Section 52 and impugned herein has been passed on the same allegations as were contained in the earlier show-cause notice which culminated in the first order dated 15.09.2016. The question that engages this Court is whether the subsequent show-cause notice and the ensuing second order could have been issued on the same allegations.

3. For the purpose of determination of the present controversy, section 52 will have to be referred to and for facility it is reproduced as under:-

"52. Recovery of tax not levied or short-levied.--(1) Where by reason of inadvertence, error, misconstruction or for any other reason, any tax or charge has not been levied or has been short levied, the person liable to pay such amount of the tax or charge shall be served with a notice, within five years of the relevant tax period requiring him to show cause for payment of the amount specified in the notice.

(2) Where by reason of some collusion, abetment, deliberate attempt, misstatement, fraud, forgery, false or fake documents-

(a) any tax or charge has not been paid or is, short paid, the person liable to pay such tax shall be served with a notice within five years of relevant tax period, requiring him to show cause for non-payment of such tax; and

(b) any amount of the tax is refunded which is not due, the person obtaining such refund shall be served with a notice within five years of the receipt of such refund to show cause for recovery of such refund.

(3) The officer shall, after considering the objections of the person served with a notice under subsection (1) or (2) or if the objections are not received within the stipulated period, determine the amount of the tax or charge payable by him and such person shall pay the amount so determined.

(4) Any order under subsection (3) shall be made within one hundred and twenty days of issuance of the notice to show cause or within such extended period as the officer may, for reasons to be recorded in writing, fix provided that such extended period shall not ordinarily exceed sixty days.

(5) In computing the period specified in subsection (4), any period during which the proceedings are adjourned on account of a stay order or proceedings under section 69 or the time taken through adjournments by the petitioner not exceeding thirty days shall be excluded."

1. The statutory structure of section 52 provides for issuance of a show-cause notice where a tax or charge has not been levied or has been short levied on the person liable to pay such amount of tax. Sub-section (4) will have a gravitational pull on the resolution of the controversy. It provides for a certain time frame within which an order under subsection (3) shall be passed by the officer issuing the show-cause notice. It provides that an order shall be made within 120 days of the issuance of the notice to show cause or within such extended period as the officer may for reasons to be recorded in writing fix provided that such extended period shall not exceed sixty days. This provision was interpreted by the Commissioner (Appeals) while deciding the appeal on 21.12.2016 to have a mandatory effect and according to the Commissioner (Appeals) the order of the officer passed under Section 52 was outwith his authority since it had been passed beyond the period specified under subsection (4). By the order dated 21.12.2016, the adjudication made by the officer was held to be without lawful authority and of no legal effect and was thereby annulled. Plainly, the purpose of the order passed by the Commissioner (Appeals) was that it erased the first order and thereby annulled it. It would be a travesty of justice according to the petitioner and a contradiction in terms if the respondent department was permitted to issue a fresh show-cause notice on the same facts and to require the petitioner to go through the rigours of adjudication although in a previous round of litigation the issues in the show-cause notice already stand decided in favour of the petitioner and the decision of the officer passed under Section 52 has been annulled.

2. At the heart of the petitioner's arguments is the doctrine of res judicata. It has been argued that the impugned show-cause notice is caught by the mischief of res judicata as the matter has finally been determined by the appellate tribunal and the claim against the petitioner cannot be re-opened which would impinge upon the rights of the petitioner as in the estimation of the petitioner the matter has attained finality and cannot be determined afresh.

3. PRA seriously disputes the proposition that the doctrine can be invoked to aid by the petitioner in the peculiar circumstances of the case. The principles of res judicata are enshrined in section 11 of the Code of Civil Procedure, 1908. However, by virtue of section 141, C.P.C. the procedure provided for the civil court in regard to suits shall be followed in all proceedings in any court of civil jurisdiction. This provision in my opinion extends the principles of res judicata to all proceedings of civil jurisdiction. Doubtless, the proceedings in the order in original and the appeal before the Commissioner Appeals were before tribunals exercising civil jurisdiction. However, even if section 11 is not applicable in the strict sense to the proceedings under the Act, 2012, the general principles of res judicata will be applicable as the rule is based on the doctrine of public policy. That doctrine simply is that where there is a judgment inter parties, it will prevent a fresh suit between them regarding the same matter (PLD 1987 SC 145). It has been settled by respectable authority that the doctrine is of universal application and in fact a fundamental concept in the organization of every civilized society and requires that every case should be fairly tried and public policy demands that having been tried once all litigation about that cause should be concluded between those parties. For, if it were not for the conclusive effect of such determinations, there will be no end of litigation and the rights of persons will be embroiled in endless litigation. The doctrine is also based on the considerations that it would result in utmost hardship to an individual if he were to be vexed twice for the same cause. It is also in the interest of the state as a provider of justice and the protector of the people's right that there should be an end to litigation. However, for the rule to be made applicable, certain pre-conditions must be urged to exist and for the doctrine of res judicata to be invoked. These rules have once again been settled by the courts over the years and can be summarized as follows:--

"(1) The matter directly and substantially in issue in the subsequent suit or issue must be the same matter which was directly and substantially in issue either actually, or constructively, in the former suit.

(2) The former suit must have been a suit between the same parties or between parties under whom they or any one of them claim.

(3) The parties as afore-said must have litigated under the same title in the former suit.

(4) The court which decided the former suit must have been a court competent to try the subsequent suit in which such issue is subsequently raised.

(5) The matter directly and substantially in issue in the subsequent suit must have been heard and finally decided by the court in the first suit."

The enumerations made in section 11, C.P.C., also embody the above principles.

1. It is a fallacy to argue that the doctrine of res judicata does not apply to these proceedings. It must be borne in mind that that doctrine is based on public policy and it is indeed a matter of public policy that dispute and controversies should have finality attached to them. Litigants should have the assurance that their rights and liabilities, one determined, will not be relitigated and will bind the parties in a future claim. The rendering of a final judgment on the merits of the claim in a previous action involving the same litigants will act as a preclusion of a subsequent action. At the heart of the doctrine is the twin goal: stability and certainty. In The Law of Judicial Precedent by Bryan A. Garner et al. the idea underlying the doctrine has been captured in the following words:--

"Despite these differences, both stare decisis and res judicata promote a similar goal: stability in the law. Res judicata stands for the idea that once an issue has been decided for particular litigants, it should not be undone by a later lawsuit. This doctrine lets parties rest assured that they need not relitigate issues in the future: they can live without a cloud of uncertain future litigation perpetually hovering. Similarly, stare decisis promotes the fundamental notion emphasized throughout this book: that like cases will be decided alike."

1. The generality of the doctrine and its various nuances referred to in the above treaties are being reproduced hereunder in order to understand the concept more fully:

"A judgment is binding and conclusive as res judicata only on the parties to the particular lawsuit and those in privity with them: it creates estopple for disputed matters of fact and law. By contrast, state decisis is conclusive on questions of law, not of fact, and a judicial precedent is applied to a similar state of facts later arising, no matter who the parties are."

"At its highest level of generalization, res judicata takes in two concepts that modern courts call claim preclusion and issue preclusion. Claim preclusion prevents a litigant from bringing a claim if a court that had jurisdiction has already rendered a final judgment on the merits of that claim in a previous action involving the same litigants or their privies. Issue preclusion prevents the same parties from relitigating issues of ultimate fact that they had already litigated in earlier suits. A nonparty to the first action can use issue preclusion offensively against the party who lost the issue decided in the first case, within certain limits. Stare decisis may determine which of these two concepts of res judicata applies in a particular jurisdiction."

"The doctrine of res judicata applies to disputed facts as well as to disputed mixed questions of fact and law, such as whether the defendant drove the car negligently or whether the plaintiff received adequate notice of the rejection of a claim so as to start the running of the statute of limitations."

1. It has been said by Lord Mansfield (father of English Commercial Law) that:-

"The successful conduct of trade, investment and business generally is promoted by a body of accessible legal rules governing commercial rights and obligations. In all mercantile transactions, the great object should be certainty; and therefore it is of more consequence that a rule should be certain."

1. The argument of PRA in alleging that the doctrine does not apply to these proceedings cuts both ways and is counter-productive. In a converse case, the PRA might face the same set of argumentation in a claim which has been decided in its favour previously. Moreover, no one can really harbour any doubt regarding proceedings under section 52 of the Act, 2012 (and appeals arising therefrom) and their true nature. These may be termed as quasi-judicial proceedings while being dealt with by the departmental adjudicators but the fact remains that these officers are obliged to act judicially and so the doctrine of res judicata remains applicable to these proceedings. But the question which engages this Court is whether the doctrine can be invoked by the petitioner in the present case or not.

2. The primary facts in the instant matter have been narrated above. To reiterate, an appeal was filed before the Commissioner (Appeals) which was decided on 21.12.2016 and was allowed. The basic ground on which the appeal was allowed was that the time limit of 120 days mentioned in section 52(4) of the Act, 2012 was a mandatory time limit and any order passed beyond the said time limit was void ab initio. Therefore, admittedly there was no finding on the merits of the claim. The rule that such a time limit provided in a provision of law is a mandatory connotation has been accepted by the Supreme Court of Pakistan in Collector of Sales Tax v. Super Asia Muhammad Din and Sons (2017 SCMR 1427) in the following words:--

"7. From the plain language of the first proviso, it is clear that the officer was bound to pass an order within the stipulated time period of forty-five days, and any extension of time by the Collector could not in any case exceed ninety days. The Collector could not extend the time according to his own choice and whim, as a matter of course, routine or right, without any limit or constraint; he could only do so by applying his mind and after recording reasons for such extension in writing. Thus the language of the first proviso was meant to restrict the officer from passing an order under section 36(3) supra whenever he wanted. It also restricted the Collector from granting unlimited extension. The curtailing of the powers of the officer and the Collector and the negative character of the language employed in the first proviso point towards its mandatory nature. This is further supported by the fact that the first proviso was inserted into section 36(3) supra through an amendment (note:- the current section 11 of the Act, on the other hand, was enacted with the proviso from its very inception in 2012). Prior to such insertion, undoubtedly there was no time limit within which the officer was required to pass orders under the said section. The insertion of the first proviso reflects the clear intention of the legislature to curb this earlier latitude conferred on the officer for passing an order under the section supra. When the legislature makes an amendment in an existing law by providing a specific procedure or time frame for performing a certain act, such provision cannot be interpreted in a way which would render it redundant or nugatory. Thus, we hold that the first proviso to section 36(3) of the Act [and the first proviso to the erstwhile section 11(4) and the current section 11(5) of the Act] is/was mandatory in nature."

1. There is no question that such a mandate in the law is a compulsory mandate and ought to be complied with by the officer making the adjudication. The holding by the Supreme Court of Pakistan leaves it in no manner of doubt that the time limit provided is not directory. However, the consequences of rendering a decision beyond that time limit have not been spelt out in Super Asia Muhammad Din and Sons. This remains a vexed question of law and according to the learned counsel for the petitioner the order having been set aside on this basis operates as res judicata and the claim cannot be reopened.

2. The contention of the learned counsel for the petitioner, if accepted, would lead to anomalous results. The entire gemut of arguments on this basis is in contravention of public policy as also the rule that public interest must outweigh private interest. This means that if an officer has not complied with the mandatory requirements of the law in determining an adjudication within a certain period of time, then the taxpayer is relieved of all obligations under the law from payment with regard to the evaded amount of tax in question. This also means that public exchequer shall suffer grievously on this ground and the ultimate sufferer would be the general public for whom the tax is collected which get accumulated in the provincial consolidated fund to be expended on the welfare of the people and citizens of the Province of Punjab. Such a course of action cannot be countenanced.

3. Regard for public good is always implicit in the retention of rights by individuals. They are circumscribed by political authority to pursue the general welfare. The right of the petitioner to the determination of disputes is also subject to restrictions under laws that promote public good. It has been said that:--

"The principal end of every legislature is the public good".

(Thomas Hayter, An essay on the liberty of the press chiefly as it respect personal stander 18 (London, J. Raymond).

1. It is necessary and expedient for the general advantage of the public and for its collective interest that loss to the public revenue should not be occasioned on account of failure of an officer of the department to understand the mandatory nature of the determinate limits provided by law.

2. As explicated, the entire proceedings in the earlier show cause were a nullity, as if they did not take place at all. And therefore, the question of res judicata does not present itself. The petitioner might have a case if the first order-in-original was a subsisting order capable of being acted upon. On the contrary, that order-in-original will be deemed to be non-existent as an action extra jus.

3. As Crawford said, "an enactment designed to prevent fraud upon the Revenue, is more properly a statute against fraud rather than a taxing statute, and it should receive a liberal construction in the Government's favour".

(Crawford Statutory Constitution, p.508)

1. It is also a rule of interpretation that any construction leading to a large-scale evasion of tax is to be avoided. (SP Jain v. Director of Enforcement) AIR 1962 SC 1764.

2. Cases from the courts of England have gone to the extent of holding that a mandatory provision may simply be vitiated by the dictates of public policy. (See Nagle v. Fielden [1966] 2 Q. B 633; Edwards v. SOGAT [1971] Ch. 354. Such a result is founded upon the interpretation of statutory purpose, rather than upon any strained distinction between statutory provisions.

3. In De Smith's Judicial Review (seventh edition), the following passage will illustrate the point in issue:--

"A related question to that of administrative inconvenience is the extent to which public policy might be employed to rebut the presumption that a statutory provision is mandatory. Public policy is employed here as the public law equivalent of private law equitable principles, such as that which states that no person may benefit from his own wrong. Thus the courts will presume that Parliament did not intend to imperil the welfare of the state or its inhabitants."

1. From the ingredients of the doctrine of res judicata referred to above, it can plainly be seen that the doctrine of res judicata is not applicable to the present facts. Clearly and admittedly no adjudication on merits was made by the Commissioner (Appeals) and, therefore, the matter was not heard and finally decided by the Commissioner in the first round of litigation. However, the matter was directly and substantially in issue before the officer who adjudicated it in the first instance but by the order passed by the Commissioner (Appeals) that order and the findings rendered therein was erased and became non est. The effect of the order passed by the Commissioner was that the order-in-original dated 15.09.2016 was an invalid order and would be deemed to have been erased as if it did not exist at any time. Doubtless this is the effect of the order of the appellate forum and the learned counsel for the petitioner is not in a position to deny the consequence referred to above which was the only consequence which flowed from declaring the order in original as a nullity. Therefore, it cannot be argued that there was anything in law to lay a claim in respect of the tax or surcharge which has not been levied or short levied by the petitioner as the petitioner remained liable to pay such amount or charge. The only prohibition is with regard to the period of limitation of five years within which the show-cause notice can be issued and no one disputes the fact that the period of five years has not run out in the present case. Also the learned counsel for the petitioner has not referred to any prohibition in the law which restrains the department from issuing a fresh show-cause notice in such an eventuality. There is an old legal proverb that what is not prohibited shall be deemed permitted in law.

2. A reference may also be made to the provisions of Order VII, Rule 11, C.P.C. which relate to rejection of plaint. However, Rule 13 of Order VII provides that the rejection of plaint does not preclude the presentation of a fresh plaint. Once again, while reading this provision with section 141, C.P.C. it cannot be doubted that rejection of the earlier show-cause notice would preclude in any manner the department from filing a fresh show-cause notice.

3. Above all, this case will have to be analysed on the touchstone of public interest and the rule that private interest must give way to public interest and it is certainly in the public interest that the prosecution be held against the petitioner in respect of a charge or tax for which the petitioner is liable and on the basis of a mere technicality the petitioner should not be allowed to circumvent that liability and that too on account of indolence shown by an officer of the department. Moreover, the law relating to the mandatory nature of such a time limit had not been crystallized until the judgment of the Supreme Court of Pakistan referred to above and thus the officer was not aware of the implication of passing an order beyond the time limit.

4. In view of the above, this petition is without merit and is, therefore, dismissed. The Chairman of PRA is directed to issue instructions to all officers adjudicating claims under Section 52 of the Act, 2012 to comply with the time limit and its mandatory nature. They should also be made aware of serious consequences which will visit those officers in case the time limit is not adhered to.

MWA/D-3/L Petition dismissed.

2018 P T D 749

[Lahore High Court]

Before Shahid Karim and Tariq Saleem Sheikh, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs SIKA PAINT INDUSTRIES

I.T.Rs. Nos.63, 64, 65 and 66 of 2016, heard on 18th April, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(4)(5) & 133(1)---Definite information---Amendment of assessment---Scope---Assessing officer amended assessment on the basis of material recovered as a result of raid conducted on the premises of assessee---Appellate Tribunal Inland Revenue set aside the order passed by authorities on the ground that there was no definite information available with authorities for making amendment of Assessment order under S. 122(4)(5) of Income Tax Ordinance, 2001---Validity---Entire information on which authorities relied upon was contained in the record seized from assessee---Vouchers, sale invoices, cheque books and Bank statements were loudly telling that assessee’s income chargeable to tax had escaped assessment---Assessing officer had given gist of information gleaned from such records in order-in-original; there could not be a better example of ‘definite information’ than the one in the present case---High Court answered question framed, in the negative.

Income Tax Officer and another v. Messrs Chappal Builders 1993 SCMR 1108; and Commissioner Inland Revenue v. Messrs Khan CNG and Filling Station and others 2013 PTD 884 rel.

Inspecting Assistant Commissioner and another v. Pakistan Herald Ltd. through Director Finance and Corporate Affairs 1997 PTD 1485; Messrs E.F.U General Insurance Co. Limited v. The Federation of Pakistan and others PLD 1997 SC 700; Commissioner of Income Tax Companies Zone-II, Karachi v. Messrs Sindh Engineering (Pvt.) Limited, Karachi 2002 PTD 419 and Commissioner of Income Tax v. Messrs Bashir Brothers 2014 PTD 1377 ref.

Akhtar Ali Monga and Shahid Sarwar Chahil for Applicants.

Waseem Ahmad Malik for Respondent.

Date of hearing: 18th April, 2017.

JUDGMENT

TARIQ SALEEM SHEIKH, J.---By this judgment we shall decide ITR No.63/2016, ITR No.64/2016, ITR No.65/2016 and ITR No.66/2016 as they all arise from a common order dated 9-11-2015 passed by the Appellate Tribunal Inland Revenue (the "Appellate Tribunal").

1. The Respondent is a private company incorporated under the Companies Ordinance, 1984. It is engaged in manufacturing of paints, varnishes and allied products. It filed its income tax return for the Tax Years 2009 and 2011 to 2013. During an investigation under the Sales Tax Act, 1990 (the "Act") the Deputy Director Intelligence and Investigation Inland Revenue (the "I&I") conducted a raid at the business premises of the Petitioner after obtaining search warrants from the Magistrate First Class, Model Town, Lahore, on 19-11-2013. In this raid the I&I seized documents and computer-stored information/records which were subsequently examined and it was found that the Respondent had grossly suppressed it sales. Accordingly, the Department issued Show-Cause Notice under Section 11(2) of the Act to the Respondent. These proceedings culminated in Sales Tax Order-in-Original No.24/2014 dated 17-9-2014 whereby a huge demand of Rs.429,154,990/- and penalty equal to 100% of the sales tax involved was imposed on the Respondent in terms of sections 33(13) and 33(11)(c) of the Act along with default surcharge under Section 34. The parties are in litigation on this matter at different forums.

2. It is noteworthy that the Respondent assailed vires of the Magistrate's Order dated 19-11-2013 in Writ Petition No.30347/2013 before this Court. This petition was dismissed vide order dated 2-12-2013 and it was held that the search warrant was lawfully issued and that the raid was conducted after complying with the prescribed procedure. The Respondent has filed C.P.L.A. No.1788-L/2013 before the Hon'ble Supreme Court of Pakistan which is stated to be pending. Be that as it may, this Court's order dated 2-2-2013 still holds the field.

3. The Department treated the information retrieved from the data acquired during the aforementioned raid as "definite information" and initiated proceedings under Section 122(4)/(5) of the Income Tax Ordinance, 2001 (the "Ordinance") for amendment of assessments for Tax Years 2009, 2011 to 2013. Separate show-cause notice for every tax year were issued. The Respondent submitted its replies thereto but the same were found unsatisfactory. Eventually, the Assessing Officer made orders for amendment of the assessments through separate orders passed for every Tax Year. The Respondent assailed these orders before the CIR (Appeals) who upheld the action of the Assessing Officer vide consolidated Appellate Order Nos.50 to 53 dated 29-4-2015. The Respondent then sought its further remedy before the Appellate Tribunal which vacated the orders of the authorities below. These reference applications by the Department are directed against consolidated order dated 9-11-2015 passed by the Appellate Tribunal.

4. The Petitioner has raised as many as eight questions for determination of this Court. We have, however, found that either they do not arise from the Appellate Tribunal’s order or are argumentative. We have observed that in Paragraph-7 of its order the Tribunal noted that the main controversy between the parties was whether the Assessing Officer had lawfully invoked Section 122(4)/(5) of the Ordinance to amend the assessment of the Respondent on the basis of the sales tax contravention report and the material seized by the intelligence authorities in the raid that they conducted on 19-11-2013. In this view of the matter, we hold that only the following question proposed by the Petitioner is relevant for the present:

Whether on the facts and circumstances of the case, the learned ATIR was justified in adjudicating that there was no definite information available with the Department for making amendment of the Assessment under Section 122(4)(5) of the Income Tax Ordinance, 2001?

1. The aforementioned question brings subsections (1), (4), (5) & (8) of Section 122 of the Ordinance into focus which are reproduced hereunder for ready reference:

2. Amendment of assessments---

(1) Subject to this section, the Commissioner may amend an assessment order treated as issued under section 120 or issued under section 121 [, or issued under section 122C] [, or [\],] by making such alterations or additions as the Commissioner considers necessary [\].

(2)

(3)

(4) Where an assessment order (hereinafter referred to as the "original assessment") has been amended under subsection (1), [or (5A)], the Commissioner may further amend [,as many times as may be necessary,] the original assessment within the later of--

(4A)

(5) An assessment order in respect of a tax year, or an assessment year, shall only be amended under subsection (1) and an amended assessment for that year shall only be further amended under subsection (4) where, on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that.

(i) any income chargeable to tax has escaped assessment; or

(ii) total income has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund; or

(iii) any amount under a head of income has been misclassified.]

(5A)

(5AA)

(5B)

(6)

(7)

(8) For the purposes of this section, "definite information" includes information on sales or purchases of any goods made by the taxpayer, [receipts of the taxpayer from services rendered or any other receipts that may be chargeable to tax under this Ordinance,] and on the acquisition, possession or disposal of any money, asset, valuable article or investment made or expenditure incurred by the taxpayer.

(9)

1. The question as to what constitutes a "definite information" is probably one of the most debated issues not only under Income Tax Ordinance, 2001, but also under the Repealed Income Tax Ordinance, 1979, as the latter also contained a similar concept. This is for the reason, that this term has not been defined in the statute. Some of the most illuminating judgments which explain this concept include: "Income Tax Officer and another v. Messrs Chappal Builders" (1993 SCMR 1108), "Inspecting Assistant Commissioner and another v. Pakistan Herald Ltd. through Director Finance and Corporate Affairs" (1997 PTD 1485 (SC)), "Messrs E.F.U General Insurance Co. Limited v. The Federation of Pakistan and others" ( PLD 1997 SC 700), "Commissioner of Income Tax Companies Zone-II, Karachi v. Messrs Sindh Engineering (Pvt.) Limited, Karachi" (2002 PTD 419), "Commissioner Inland Revenue v. Messrs Khan CNG and Filling Station and others" (2013 PTD 884), "Commissioner of Income Tax v. Messrs Bashir Brothers" (2014 PTD 1377). Following principles (which are expressed mostly in the language of the Court) may be deduced from these cases:--

(i) An assessment cannot be reopened or amended on the basis of every information for the reason that every information is not a "definite information".

(ii) "Definite information" cannot be given a universal meaning. It has to be construed in each case.

(iii) The expression "definite information" means more than mere material which may cause a reasonable belief. There must be definite and direct information without there being any further need to acquire further material to support it. Where the Department has to rely upon further reasoning or inquiry to clothe their information with credibility, it is not definite information.

(iv) Where a taxpayer has disclosed all the material facts without any concealment, in the absence of discovery of any new facts which can be treated as "definite information", the assessment cannot be amended.

(v) The expression "definite information" includes factual information as well as information about the existence of a binding judgment of a competent court of law or forum. However, this does not cover a case where after framing assessment consciously, the Assessing Authorities realize that any provision of law has been ignored or not applied or misapplied.

(vi) Any interpretation of a provision of law by a functionary which is not charged with the duty/function to interpret such provision judicially is not "definite information". Thus, a circular issued by the Board of Revenue whereby it interprets any legal provision cannot be terms as "definite information".

(vii) A different interpretation of a legal provision or deriving a different conclusion from a given set of facts cannot be reckoned as "definite information". It is merely a change of opinion.

1. In the instant case, the Petitioner contends that the Respondent had maintained complete record of the financial transactions in its computers which were seized along with the relevant record from its office on 19-11-2013. They contained soft as well as hard copies of vouchers, sale invoices (including names and addresses of the buyers), cheque books and bank statements. There documents also revealed that the Respondent was maintaining and operating undeclared bank accounts in its own name as well as in the names of its directors and some benami businesses through which it was receiving business proceeds. The Assessing Officer confronted the Respondent with all this information in detail in the show notice under Section 122(9) of the Ordinance read with Section 122(4)/(5). Therefore, the Petitioner contends that all this information was "definite information" and, in the circumstances, amendment of the Respondent’s assessment was justified.

2. On the other hand, the Respondent vehemently controverts the Petitioner’s stance. According to it, the aforementioned information was not "definite information" for two reasons: first, the information in question was secured through unlawful means and was a consequence of an unlawful raid and seizure. It could not be used against the Respondent and no proceedings could be undertaken against it on its basis. Secondly, the information relied upon by the Petitioners was incohate and required further processing/inquiry and could not thus be reckoned as "definite information" in the sense known to law. In order to substantiate this second argument, the Respondent relies on the following statement in the case reported as "Commissioner Inland Revenue v. Messrs Khan CNG and Filling Station and others" (2013 PTD 884):--

"The term 'definite information' in section 122(5) of the Ordinance is not just any information but definite enough to satisfy the concerned officer that income chargeable to tax of an assessee has escaped assessment or total income of an assessee has been under-assessed, etc. "Definite" means indisputable, known for certain, explicitly precise, clearly defined, leaving nothing to implication, established beyond doubt and cut and dried. Definite information is therefore, that select information which falls within the restrictive meaning of the word definite explained above. … The word acquired used in section 122(5) of the Ordinance which literally means to gain possession of in the present context connotes that the information already exists and has to be picked up from the records or documents. This acquisition provides no margin for incomplete, imprecise and inexact information to be completed through further calculation or processing as that would not be acquiring information but analyzing it." [emphasis added]

1. The first contention of the Respondent should get a short shrift because this Court has already held in Writ Petition No.30347/2013 that the raid conducted by the Department was lawful. The said order of this Court still holds the field. As such, any objection to the use of record seized by the Department in that raid is misplaced.

2. As regards the second contention, we observe that it is based on misconception of law and misconstruction of the statement made by this Court in Khan CNG case. There is no cavil with the proposition that an information in order to qualify for "definite information" must be explicit and precise. The highlighted portion of the judgment in Khan CNG case reproduced hereinabove on which the Respondent has placed reliance simply re-emphasizes this point. What the law excludes from the domain of "definite information" is incomplete information that requires further inquiry into the affairs of the taxpayer before the Department can reach a conclusion. Such a roving inquiry is neither appreciated nor permitted. It is noteworthy that this judgment particularly states that the information that already exists in some document or record at the time of acquisition would fall within the ambit of "definite information". This view is also in consonance with the law laid down by the Hon’ble Supreme Court in "Income-Tax Officer and another v. Messrs Chappal Builders" (1993 SCMR 1108).

3. In the present case, the entire information on which the Petitioner Department has relied upon was contained in the records seized from the Respondent. Vouchers, sale invoices, cheque books and bank statements were loudly telling that the Respondent’s income chargeable to tax had escaped assessment. We have observed that the Assessing Officer has given a gist of the information gleaned from these records in his Order-in-Original. In our opinion, there can hardly be a better example of "definite information" than the one in hand.

4. For the above reasons, we answer the above-mentioned in the "negative", i.e. against the Respondent and allow these reference applications.

5. Office shall send a copy of this judgment under the Seal of Court to the Appellate Tribunal as per Section 133(5) of the Ordinance.

MH/C-1/L Reference allowed.

2018 P T D 775

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE, ZONE-II, REGIONAL TAX OFFICE, FAISALABAD

Versus

Messrs MASHA ALLAH PAPER BOARD MILLS, FAISALABAD and another

S.T.R. No. 90 of 2013, decided on 30th October, 2017.

Sales Tax Act (VII of 1990)---

----S. 47---Reference---Finding of facts---Jurisdiction of High Court---Scope---Order assailed before High Court was with regard to findings of Appellate Tribunal on facts---Validity---High Court, in exercise of advisory jurisdiction which was last fact finding forum had to decide reference application on facts and circumstances founded by Appellate Tribunal---High Court could not change finding of facts arrived at by Appellate Tribunal, therefore, High Court had no jurisdiction to adjudicate upon proposed questions while exercising its advisory jurisdiction---High Court declined to answer questions proposed in reference application---Reference was dismissed in circumstances.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907; Commissioner Inland Revenue, Zone-II, Regional Tax Office-II v. Messrs Sony Traders Wine Shop 2015 PTD 2287; Messrs Pak Suzuki Motor Company Limited, Karachi v. Collector of Customs, Appraisement Collectorate, Custom House, Karachi 2005 PTD 2600 and Commissioner of Income Tax, Legal Division, R.T.O. v. Messrs Matrix Press (Pvt.) Ltd. 2016 PTD 97 rel.

Sarfraz Ahmad Cheema for Applicant.

Khubaib Ahmad for Respondent-Taxpayer.

ORDER

MUHAMMAD SAJID MEHMOOD SETHI, J.---Through this reference application under section 47 of the Sales Tax Act, 1990 ("the Act"), following questions of law, asserted to have arisen out of impugned order dated 03.04.2013, passed by the Appellate Tribunal Inland Revenue, Lahore Bench, Lahore ("Appellate Tribunal") have been proposed for our opinion:--

i "Whether the learned Appellate Tribunal is justified to validate an illegal claimed refund/input adjustment in contravention to the provisions of sections 2(14), 7, 8, 8A, 10, 22 and 26 of Sales Tax Act, 1990 read with Sales Tax Refund Rules?

ii Whether the learned Appellate Tribunal has considered that the respondent No.1 has claimed input tax adjustment/refund against fake invoices issued by the blacklisted units which were not valid as per provisions of section 8(1)(d) of Sales Tax Act, 1990?

iii Whether the learned Appellate Tribunal has considered the provisions of section 8(1)(ca) of Sales Tax Act, 1990 according to which the respondent No.1 is not entitled to claim or deduct input tax has not been deposited in the Government treasury by the respective supplier?

iv Whether in the facts and circumstances of the case the learned Tribunal was justified to hold that the effect of blacklisted units cannot operate retrospectively?

v. Whether the learned Appellate Tribunal has ignored that the respondent No.1 could not produce any record or documentary evidence to the effect that the goods were physically acquired and transferred from the supplier to the premises of respondent No.1 and the respondent No.1 has violated the provisions of sections 2(14)(33), 7 and 8 of Sales Tax Act, 1990?

vi Whether the learned Appellate Tribunal has considered the provisions of Rule 12(5) of the Sales Tax Rules, 2006 that once the person/supplier is blacklisted, the refund or input tax credit claimed against the invoices issued by him whether prior or after such blacklisting shall be rejected through a self-speaking appealable order?

vii Whether the learned Appellate Tribunal has considered the admitted facts of the case and law applicable?

viii Whether the impugned judgment is contrary to the provisions of law and is a wrong decision, jeopardizing the collection and recovery of the national exchequer?

1. Brief facts of the case are that respondent taxpayer was served show-cause notice dated 21.05.2010, regarding input tax adjustment claimed at Rs.846,015-, which resulted in passing of order-in-original dated 06.07.2010. Feeling aggrieved, respondent taxpayer challenged the said order through appeal before CIR (Appeals), which was allowed vide order dated 17.01.2011. Being dis-satisfied, applicant-department filed appeal before learned Appellate Tribunal, but the same has been dismissed through order dated 03.04.2013, which has been impugned through instant reference application.

2. Learned counsel for the applicant is confronted with operative part of Appellate Tribunal's order, which is based on finding of fact. He could not rebut the findings of fact arrived at by learned Appellate Tribunal.

3. Heard, record perused.

4. The perusal of impugned order shows that learned Appellate Tribunal gave findings of facts that at the time of transactions the suppliers units were not blacklisted and declared the respondent taxpayer entitled to input tax claim.

5. Record reveals that taxpayer's input tax claim was rejected by the authority on the ground that the supplier was subsequently blacklisted/suspended. The applicant department failed to confront the taxpayer with the specific allegations, in show-cause notice, i.e. (i) tax was not paid against invoices issued by the suppliers; (ii) section 73 was not complied with; (iii) connivance of the taxpayer or knowledge or reasonable suspicion of fake invoices within the contemplation of section 8A; and (iv) taxpayer is guilty of dishonestly and tax fraud. The applicant department has failed to discharge its initial burden of proof. Thus, the impugned findings cannot be displaced by this Court in its advisory jurisdiction.

6. Undeniably, the above findings of learned Appellate Tribunal are of facts, High court has to decide reference application on fact and circumstances founded by Appellate Tribunal, in the exercise of advisory jurisdiction, which is the last fact finding forum. High Court cannot change findings of facts arrived at by the Appellate Tribunal. Reference can be made to Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax (2014 SCMR 907), Commissioner Inland Revenue, Zone-II, Regional Tax Office-II v. Messrs Sony Traders Wine Shop (2015 PTD 2287), Messrs Pak Suzuki Motor Company Limited, Karachi v. Collector of Customs, Appraisement Collectorate, Custom House, Karachi (2005 PTD 2600) and Commissioner of Income Tax, Legal Division, R.T.O. v. Messrs Matrix Press (Pvt.) Ltd. (2016 PTD 97).

7. Since the decision is made on findings of facts, therefore, this Court has no jurisdiction to adjudicate upon the proposed questions, whiel exercising its advisory jurisdiction.

8. For the reasons noted above, we decline to answer the proposed questions.

9. This Reference Application is decided against the applicant.

10. Office shall send a copy of this order under seal of the Court to the Appellate Tribunal as per section 47(5) of the Sales Tax Act, 1990.

MH/C-29/L Reference dismissed.

2018 P T D 778

[Lahore High Court]

Before Shahid Karim, J

PAK ELEKTRON LTD. and another

Versus

FEDERAL BOARD OF REVENUE and others

W.P. No.12272 of 2013, decided on 13th June, 2017.

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

----S. 131 & Sixth Schedule---Exemption---Object---Grant of exemption is a delegated power on Federal Government and Federal Government may prescribe conditions subject to which exemptions are granted---Primary purpose of grant of exemptions is in respect of supply of goods or import of goods specified in Sixth Schedule of Sales Tax Act, 1990 by the Legislature.

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

----Ss. 2(11), 13 & Sixth Schedule, Table 2 Sr. No. 12 [as amended by Finance Act (XVII of 2012)]---Supplies against international tender---Exemption on duty---Retrospective effect---Scope---Petitioner company contended that contracts in question be dealt with in manner provided in Sales Tax Act, 1990 prior to promulgation of Finance Act, 2012---Validity---Petitioner had already been awarded contracts against international tenders and date of awards predate amendment in question---Any amendment made through Finance Act, 2012 could not be deemed to take away or impair vested rights acquired through contracts which in fact created a new obligation on petitioner; it would work discriminately against petitioner and impose substantially enhanced cost of doing business hitherto unforeseen by petitioner at time of submitting its bid for international tenders and award of contract in pursuance thereof---Amendment was a subsequent event and petitioner had not factored in impact of that amendment which in turn imposed a disproportionate financial burden on petitioner---High Court declared that amendment would not apply to contracts concluded by petitioner retrospectively---Constitutional petition was allowed in circumstances.

Munawar ul Islam and Shoaib Rashid for Petitioners.

Ch. Muhammad Zafar Iqbal for Respondents.

Nadeem Mehmood Mian, Assistant Attorney General.

JUDGMENT

SHAHID KARIM, J.--This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 ("the Constitution") seeks a declaration that the contracts mentioned in paragraph 8 of the petition be dealt with in the manner provided in the Sales Tax Act, 1990 ("the Act, 1990") prior to the promulgation of the Finance Act, 2012. Also, the petition seeks to restrain the respondent No. 5 permanently from applying the modification made through the deletion of Serial No. 4 of the Fifth Schedule and insertion at Serial No. 12 in Table 2 of the Sixth Schedule of the Act, 1990 ("the amendment") which was brought about by virtue of Finance Act, 2012. The petition also lays a challenge to the constitutionality of the provisions of Finance Act, 2012 by which deletion of Serial No. 4 of the Fifth Schedule of the Act, 1990 took place as also Serial No. 12 in Table 2 of the Sixth Schedule was inserted by the provisions of Finance Act, 2012.

1. The facts forming the backcloth of this petition is that prior to the promulgation of Finance Act, 2012 the supplies made by the petitioner pursuant to international tenders was classified in the Fifth Schedule of the Act, 1990 and sales tax at the rate of zero per cent was charged on such supplies made by the manufacturers under Section 4 of the Act, 1990. The significance of this was that the manufacturers were entitled to deduct input tax paid on raw material for such supplies from the output tax in terms of section 7 of the Act, 1990. Thus, the petitioner was entitled to the input tax adjustment and according to the contents of the petition the rationale for such zero rating is based on the fact that worldwide exports are zero rated. It was on this basis that the petitioner conducted its feasibility and participated in the international tenders which have been mentioned in paragraph 8 of the petition. The irrevocable bids supported by bid bonds were submitted by the petitioner prior to the promulgation of the provisions under challenge of the Finance Act, 2012. According to the chart which has been drawn up in paragraph 8, the award of contract in each of the five contracts awarded against international tenders to the petitioner pre-dates 30.06.2012, that is, the date of the promulgation of the Finance Act, 2012. Apart from the general challenge to the constitutionality of the provisions as adumbrated, the two other grounds of challenge are as follows:--

i. The amendment brought through the Finance Act, 2012 cannot be applied retrospectively to contracts which stood concluded before the amendments were put into effect.

ii. The amendments work discriminately against the petitioner and similarly placed manufacturers who bid for international tenders and, therefore, the cost of conducting business is increased enormously to the detriment of the petitioner and makes the petitioner uncompetitive to bid against international tenders.

1. Section 13 of the Act, 1990 (at the relevant time) deals with exemptions. It reads as under:-

"13. Exemption.--(1) Notwithstanding the provisions of section 3, supply of goods or import of goods specified in the Sixth Schedule shall, subject to such conditions as may be specified by the Federal Government, be exempt from tax under this Act.

(2) Notwithstanding the provisions of subsection (1)--

(a) the Federal Government may, by notification in the official Gazette, exempt any taxable supplies made or import or supply of any goods or class of goods, from the whole or any part of the tax chargeable under this Act, subject to the conditions and limitations specified therein; and

(b) the Board may, by special order in each case stating the reasons, exempt any import or supply of goods of such description or class, as may be specified from the payment of the whole or any part of the tax chargeable under this Act.

(3) The exemption from tax chargeable under subsection (2) may be allowed from any previous date specified in the notification issued under clause (a) or, as the case may be, order made under clause (b) of char subsection."

1. The amendment which was brought about by Finance Act, 2012 and to which a challenge has been laid is to the following effect:--

"(b) in Table-II--

i. against serial number 2 in column (1), in column (2), after the word "seeds", the words "other than cotton seed" shall be inserted;

ii. after serial number 11 in column (1) and the entries relating thereto in columns (2) and (3), the following new serial number and the entries relating thereto shall be added, namely:--

"12. Supplies against international tender Respective headings".

1. By the amendment, reproduced above, the virtual effect was that the supplies against international tender was included in exempt supplies and this had the unsavory effect on the petitioners' supplies, in that, the petitioners were deprived of input tax adjustment. It is pertinent to mention that the exemption remained in force for one year only and was deleted through the Finance Act, 2013 and so the exemption was withdrawn thereby. Since then, the goods supplied by the petitioners are zero rated and the petitioners continue to enjoy the benefit of input tax adjustment. In a nub, the challenge of the petitioners is that the exemption is ultra vires section 13 of the Act, 1990, in that, the exemption inserted through serial No. 12 in Table 2 of the sixth schedule is in respect of supplies against respective international headings, that is, tender but does not relate to any supply of goods. According to the counsel, only goods can be specified in the sixth schedule of the Act for the purpose of exemption in terms of section 13(1) whereas in the instant case, instead of specifying 'goods' supplies under international tenders' have been exempted.

2. From a reading of section 13, reproduced above, it is evident that the grant of exemption is a delegated power on the Federal Government and the Federal Government may prescribe the conditions subject to which the exemptions are to be granted. However, the primary purpose of the grant of exemptions is in respect of supply of goods or import of goods specified in the Sixth Schedule by the legislature. Juxtaposing the mandate of section 13 with regard to exemptions with serial No. 12 inserted in Table 2 of the Sixth Schedule would show that the exemption is not in respect of any prescribed goods or import of goods but generally specifies the entry that relates to supplies against international tender. Therefore, the ineluctable conclusion upon a holistic reading of an amendment made through serial No. 12 is that all supplies of goods against international tender are to be exempted from tax under the Act, 1990. The contention of the learned counsel for the petitioner to the effect that the supplies against international tender is outwith the authority of the Federal Government as it travels beyond the mandate of section 13 and is thus ultra vires and erroneous. Although, serial No. 12 merely mentions 'supplies against international tender' but the necessary inference is that it relates to supply of goods against international tenders and there could be no other meaning assigned to the said expression as the serial No. 12 in the Sixth Schedule has to be read in conjunction with section 13 of the Act, 1990. Thus, all supplies of goods made against international tenders are granted exemption by virtue of inserting serial No. 12 in Table 2 of Sixth Schedule. This view is supported by a general review of the other entries in Table 2 of the Sixth Schedule in which the legislature has chosen to refer to a broad and general array of goods while granting exemption and serial No. 12 merely follows the pattern that the legislature has put in place while granting exemption to various supplies. This argument finds support from a consideration of the definition of the term 'supply' given in section 2(33) of the Act, 1990, which reads thus:--

"2(33)--supply means a sale or other transfer of the right to dispose of goods as owner, including such sale or transfer under a hire purchase agreement, and also includes--

(a) putting to private, business or non-business use of goods produced or manufactured in the course of taxable activity for purposes other than those of making a taxable supply;

(b) auction or disposal of goods to satisfy a debt owed by a person;

(c) possession of taxable goods held immediately before a person ceases to be a registered person; and

(d) in case of manufacture of goods belonging to another person, the transfer or delivery of such goods to the owner or to a person nominated by him:

Provided that the Federal Government may, by notification in the official Gazette, specify such other transactions which shall or shall not constitute supply."

1. It is plain, therefore, that supply has an essential relation with goods and is the sale or other transfer of the right to dispose of goods as owner. This is further made clear by referring to the definition of "exempt supply" in section 2(11) of the Act, 1990, which says:--

"2(11) -- "exempt supply" means a supply which is exempt from tax under section 13"

1. Nothing turns on this aspect of the matter and the challenge to that extent fails.

2. There is, however, force in the contention of the learned counsel for the petitioner with regard to the retrospective application of the provisions of serial No. 12 in Table 2 of the Sixth Schedule. It is not in dispute that the contracts were concluded for the supply of goods prior to the amendment brought about on 30.06.2012. In this regard, a reference to the rule expounded in Al-Samrez Enterprise v. Federation of Pakistan 1986 SCMR 1917 will become applicable in the facts and circumstances of the case. It was held by the Supreme Court of Pakistan as follows:--

"It is well-settled that an enactment which prejudicially affected vested rights or the legality of past transactions, or impairs contracts cannot be given retrospective operation. Thus, Maxwell's Interpretation of Statutes, 1962 Edition at page 206 observed:

"Every statute, it has been said, which takes away or impairs vested rights acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in respect of transactions or considerations already past, must be presumed, out of respect to the legislature, to be intended not to have a retrospective operation."

"We are, therefore, clearly of the opinion that if a binding contract was concluded between the appellants and the foreign exporter or steps` were taken by the appellants creating a vested right to the then existing notification granting exemption, the same could not be taken away and destroyed in modification of the earlier one, on the ground that under section 21 of the General Clauses Act, the Government could exercise the power of modification. The question before us is not whether the second notification was ultra vires the powers of the Government but whether the second notification would be applicable to the case of the appellants resulting in taking away the exemption already granted "

"These acts including the contractual commitments made by them were done on the assurance contained in the prior notification extending the exemption from the payment of duty."

"It will be inequitable and unjust to deprive a person who acts upon such assurance of the right to exemption and expose him to unforeseen loss in the business transaction by suddenly withdrawing the exemption after he has made legal commitments. It is in this perspective that a right is created in his favour and a subsequent withdrawal of exemption cannot be given retrospective operation by an executive act to destroy this right."

1. Thus, the Supreme Court of Pakistan settled the rule that the acts including the contractual commitments which are made prior to coming into force of enactments taking away those rights, in fact, impinge upon the vested rights which have come to inhere in persons who are prejudicially affected by those acts. Such acts of the legislature or made under the powers of delegated legislation cannot affect vested rights, legality of past transactions and impair contracts which have been concluded and which cannot be upset by giving retrospective operation to a piece of legislation or through a notification. In my opinion, the petitioner had already been, warded contracts against international tenders and the date of the awards pre-date the amendment which is the subject matter of challenge herein. Thus, any amendment made through Finance Act, 2012 cannot be deemed to take away or impair vested rights acquired through the contracts which, in fact, create a new obligation on the petitioner. It would also work utterly discriminately against the petitioner and impose substantially enhanced cost of doing business hitherto unforeseen by the petitioner at the time of submitting its bid for the international tenders and the award of the contract in pursuance thereof. Since the amendment was a subsequent event, the petitioner had not factored in the impact of that amendment which, in turn, imposed a disproportionate financial burden on the petitioner. It was said by Lord Mansfield (considered the father of English commercial law):--

"The successful conduce of trade, investment and business generally is prompted by a body of accessible legal rules governing commercial rights and obligations. In all mercantile transactions, the great object should be certainty; and therefore it is of more consequence that a rule be certain."

1. The learned counsel for the petitioner has drawn the attention of this Court to a letter dated 12.10.2012 issued by the Engineering Development Board (EDB) of the Government of Pakistan which analyzed the impact of changes in the sales tax by Finance Act, 2012 vis a vis supply of goods through international tenders. The following observations are relevant for our purposes:--

"2. EDB has analyzed the matter in detail and is of the view that the above said amendments has put the local industry at a disadvantage vis-a-vis foreign suppliers as the sales tax paid on import/local purchase of inputs for the manufacture of engineering goods for supply against international tenders, has become a part of their cost and adjustment of this sales tax is not allowed under the new scenario thus making the local industry uncompetitive against foreign suppliers. Moreover, the said amendments have created an anomalous situation whereby finished goods are now exempted from sales tax while the inputs, to be used for the manufacture of these goods, are not exempted from sales tax."

1. The learned counsel for the respondents placed his entire reliance on section 6 of the Act, 1990 to contend that by deeming clause, section 31A of the Customs Act, 1969 and its effect has been incorporated in the Act, 1990. Section 6 is as follows:--

"6. Time and manner of payment.---(1) The tax in respect of goods imported into Pakistan shall be charged and paid in the same manner and at the same time as if it were a duty of customs payable under the Customs Act, 1969 and the provisions of the said Act including section 31 A thereof shall, so far as they relate to collection, payment and enforcement including recovery of tax under this Act on such goods where no specific provision exists in this Act, apply.

(IA) Notwithstanding anything contained in any other law for the time being in force, including but not limited to the Protection of Economic Reforms Act, 1992 (XII of 1992), and notwithstanding any decision or judgment of any forum, authority or court whether passed, before or after the promulgation of the Finance Act, 1998 (III of 1998), the provisions of section 31-A of the Customs Act, 1969 (IV of 1969), referred to in subsection (1) shall be incorporated in and shall be deemed to have always been so incorporated in this Act and no person shall be entitled to any exemption from or adjustment of or refund of tax on account of the absence of such a provision in this Act, or in consequence of any decision or judgment of any forum, authority or court passed on that ground or on the basis of the doctrine of promissory estoppel or on account of any promise or commitment made or understanding given whether in writing or otherwise, by any government department or authority.

(2) The tax in respect of taxable supplies made during a tax period shall be paid by the registered person by the date as prescribed in this respect.

Provided that the Board may, by a notification in the Official Gazette, direct that the tax in respect of all or such classes of supplies (other than zero -rated supplies) of all or such taxable goods, as may be specified in the aforesaid notification, shall be charged, collected and paid in any other way, mode, manner or at time as may be specified therein.

(3) The tax due on taxable supplies shall be paid by any of the following modes, namely:-

(i) through deposit in a bank designated by the Board; and

(ii) through such other mode and manner as may be specified by the Board"

1. The consequence is that "the amount of duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the sale of such goods or opening of a letter of credit in respect thereof', shall be included in the rate duty applicable to any goods. This should receive a short shrift. The provision applies to any purported duty becoming payable "in consequence of the withdrawal of the whole or a part of exemption or concession". Here, on the contrary, exemption is being extended to the petitioner to which cavil has been taken and the issue, in essence, relates to determination of tax liability in terms of section 7 of the Act and is not concerned with the withdrawal of exemption and the rate of tax. The question here relates to charging of goods to tax at the rate of zero per cent or their exemption thereof. The consequences that flow out of the two is at the heart of this case.

2. There are other issues like discrimination and rights under Article 18 of the Constitution but I have not felt the need to enter that thicket since the matter can be decided within the narrow confines of retrospectivity.

3. In view of the above, this petition is allowed. It is held that the amendment (since deleted) shall not apply to the contracts concluded by the petitioner and mentioned in paragraph 8 of the petition retrospectively. The notice under Section 38B of the Act, 1990 dated 25.04.2013 is also set aside.

MH/P-5/L Petition allowed.

2018 P T D 821

[Lahore High Court]

Before Ijaz ul Ahsan, J

KOHINOOR SUGAR MILLS

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No. 4691 of 2010, heard on 27th May, 2015.

(a) Interpretation of statutes---

----Amendment in law---Effect---Where any statutory law is changed there is a presumption that it affects change in legal rights to the extent provided by such amendment---Amending provisions have to be read along with un-amended provisions as they are part of the same Act.

[Case-law referred].

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

----Ss.177 & 214-C [inserted through Finance Act (XVI of 2010)]---Audit---Commissioner and Federal Board of Revenue, powers of---Scope---Power of Commissioner under S.177, Income Tax Ordinance, 2001 is independent and exercisable subject in a different set of conditions on basis of record before him as compared to powers available to Federal Board of Revenue in terms of S.214-C of Income Tax Ordinance, 2001 which are not record based, consists of power to select by random or parametric ballot and not subject to same conditions, checks, balances and an obligation to confront and disclose reasons and provide opportunity to taxpayer to defend himself as have been imposed on Commissioner---Such are two independent powers, fundamentally different in nature, genesis, origin, antecedents and conditions and can coexist independently and be exercised independent of each other but are not mutually exclusive and are not meant to be so as clearly and unambiguously declared by legislature by way of Explanation inserted through Finance Act, 2013---No conflict or inconsistency existed between S.177 & S.214-C of Income Tax Ordinance, 2001 and does not require any reconciliation.

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

----Ss. 114(2)(b), 120(1), 122, 177 & 214-C [inserted through Finance Act (XVI of 2010)]---Selection of taxpayer for audit---Prejudice caused to taxpayer---Scope---Mere selection of taxpayer for audit and calling of books of accounts to verify version declared in his return under USAS, which is main theme on which entire structure of Income Tax Ordinance, 2001 has been built does not cause any injury/prejudice to taxpayer.

[Case-law referred].

(d) Interpretation of Constitution---

----Wisdom of legislature---Judicial restraint---Applicability---Judicial restraint needs to be exercised in questioning wisdom of legislature in enacting a law or an amendment therein subject to caveat that it has been made competently and without in any manner transgressing limitations imposed by Constitution.

(e) Interpretation of statutes---

----Retrospective effect---Clarification by legislature---Scope---If there is doubt about true interpretation of a provision, it is open to legislature to clarify its intent by introducing amendments in law which may also be undertaken by adding an Explanation---Such Explanation is for all intents and purposes clarificatory and declaratory in nature and due effect must be given to it---Such clarificatory/declaratory Explanation lawfully inserted into a statute may operate retrospectively.

[Case-law referred].

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

----Ss. 177 & 214-C [inserted through Finance Act (XVI of 2010)]---Notice of audit---Non-mentioning of reasons---Commissioner and Federal Board of Revenue, powers of---Scope---Petitioners were taxpayers and they were aggrieved of notices issued under S.177 of Income Tax Ordinance, 2001 by Commissioner to conduct their audits---Plea raised by taxpayers was that no reasons had been assigned in notices for selection of their cases for audit---Validity---Explanation added to Ss.177 & 214-C of Income Tax Ordinance, 2001 were clarificatory/declaratory in nature and had retrospective effect---Commissioner was at relevant time legally competent and duly authorized to invoke provisions of S.177(1) of Income Tax Ordinance, 2001 to issue notices in question---Powers of Commissioner under S.177 of Income Tax Ordinance, 2001 were subject to restrictions imposed by statute as well as judgments of superior courts---Commissioner was not only required to disclose reasons to taxpayer in writing for calling his record, documents, books, etc., but was also to grant him an opportunity to defend himself by affording him a hearing---Such was only after objections had been decided through a reasoned order that Commissioner could, if necessary, proceed with audit---No prejudice was caused to petitioners on account of non-disclosure of reasons at initial stage as same could be disclosed subsequently---Such would adequately meet requirements of natural justice and due process guaranteed to petitioners by law and Constitution---High Court declined to interfere in notices as notices were validly issued by commissioner who had jurisdiction to issue same in exercise of his powers under S.177 of Income Tax Ordinance, 2001 without selection of person for audit by Federal Board of Revenue under S.214-C of Income Tax Ordinance, 2001---Constitutional petition was dismissed in circumstances.

[Case-law referred].

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

----Ss. 177 & 214-C [inserted through Finance Act (XVI of 2010)]---Audit---Selection of case by Commissioner and Federal Board of Revenue---Procedure---Taxpayer receiving notice from Commissioner calling for his record for purposes of audit and at same time being selected by Federal Board of Revenue for computerized, random or parametric balloting, only one audit would be conducted as procedure for conducting audit is same in both instances.

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

----Ss. 177 & 214-C [inserted through Finance Act (XVI of 2010)]---Audit---Scope---Provisions relating to audit are germane to assessment of taxable income of assessee and are machinery provisions which should be construed in a manner which makes the machinery procedure workable---Audit provisions being machinery provisions, should be liberally construed to ensure that regulatory powers which are designed to keep a check on taxpayers and facilitate recovery of amounts which are lawfully due and payable to State are paid fairly, honestly and transparently---Such provisions are not to be rendered redundant, ineffective and illusionary on basis of technicalities.

[Case-law referred].

Shahbaz Butt, Muhammad Ajmal Khan, Naveed Amjad Andrabi, Muhammad Azhar Siddique, Shahid Parvez Jami, Salman Akram Raja, Syed Ibrar Hussain Naqvi, Rana Munir Hussain, Muhammad Naeem Shah, Khurram Shahbaz Butt, Sajjad Ali Jaffery, Abdul Quddus Mughal, Agha Sarfraz Ahmad, Ahsan ul Haq, Akhtar Ali Monga, Asghar Ahmad Kharl, Ch. Muhammad Aslam, Ch. Shahid Hussain, Ch. Zahid Attique, Dr. Ilyas Zafar, H.M. Majid Siddiqui, Habib ur Rahman, Ikram ul Haq Sheikh, Jan Muhammad Chaudhary, Javed Athar, Javed Iqbal Qazi, Mian Mahmood Rashid, Mian Muhammad Javed, Mirza Anwar Baig, Moeen Qamar, Khurram Shehzad Awan, Mudassar Shuja ud Din, Muhammad Naeem Munawar, Muhammad Aleem Irshad, Muhammad Amir Malik, Muhammad Ijaz Ali Bhatti, Muhammad Iqbal Hashmi, Muhammad Mansha, Muhammad Nadeem, Muhammad Naeem Munawar, Muhammad Waseem Chaudhary, Muhammad Younas Khalid, Muhammad Zahid Rana, Qadir Bakhah, Saeed ur Rehman Dogar, Sarfraz Ahmad, Shahid Shaukat, Shehzad Mehmood Butt, Sufyan Umar, Suhail Ibne Siraj, Syed Ali Imran Rizvi, Syed Irfan Haider Shah, Syed Salman Haider Jaafery and Waqar Azeem for Petitioners.

Imran Aziz, Deputy Attorney General for Pakistan, Muhammad Ilyas Khan, Liaqat Ali Chaudhry, Raja Sikandar Khan, Sarfraz Ahmad Cheema, Muhammad Asif Hashmi, Syed Sajjad Haider Rizvi, Tariq Saleem Sheikh, Muhammad Nawaz Waseer, Mian Yousaf Umar, Javaid Athar, Imran Rasool, Shahid Sarwar Chahal, Ibrar Ahmad, Rai Tariq Saleem, Muqcidar Akhtar Shabbir and Safdar Mehmood for Respondents.

2018 P T D 910

[Lahore High Court]

Before Shahid Karim, J

Messrs RIAZ TEXTILES MILL (PVT.) LTD. through Director

Versus

PAKISTAN CENTRAL COTTON COMMITTEE through President and 5 others

Writ Petition No. 4565 of 2017, heard on 17th January, 2018.

Cotton Cess Act (XIV of 1923)---

----Ss. 3, 13 & Preamble---Imposition of Cotton Cess---Imported cotton---Pakistan Cotton Cess Rules, 2012---Vires of---Interpretation of S.3 of the Cotton Cess Act, 1923---Power to frame Rules under S.13 of the Cotton Cess Act, 1923---Scope---Petitioners, who used imported cotton in their manufacturing processes, impugned notices for payment of cotton cess inter alia on the ground that imposition of said cess under S.3 of the Cotton Cess Act, 1923 was not applicable on imported cotton---Validity---Words "all cotton" used in S.3 of the Cotton Cess Act, 1923 could not be isolated and read separately from rest of contents of said section and said term had been elaborated upon and clarified by the Legislature by providing the cotton under purview of Cotton Cess Act, 1923, was to be either exported from Provinces of Pakistan to any place outside the country or consumed by any Mill meaning thereby that entire purpose of S.3 related to export of cotton and therefore it did not have any nexus to imported cotton---High Court further held that Pakistan Cotton Cess Rules, 2012 framed under S.13 of the Cotton Cess Act, 1923 were ultra vires and unconstitutional and accordingly, were struck down----Constitutional petition was allowed, accordingly.

Messrs Mustafa Impex, Karachi and others v. Government of Pakistan through Secretary Finance, Islamabad and others PLD 2016 SC 808 and Mustafa Impex in W.P. No.26772 of 2016 rel.

Mahmood Ahmad, Bilal Bashir, H.M. Azhar Ali, Hafiz Mudassar Hassan and Mian Mahmood Rashid for Petitioners.

Shakeel Ahmad Awan, M. Fiaz Hussain, Zulfiqar Ali Jehangir for Respondents.

Barrister Khalid Waheed, Addl. A.G. for Respondent.

Tahir Mahmood A. Khokhar, D.A.G. along with Dr. Rashid Mansoor, Director Cotton Cess for Respondents.

2018 P T D 986

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE, FAISALABAD

Versus

Messrs AL-ZAMIN TEXTILE MILLS PRIVATE LIMITED, FAISALABAD

S.T.R. No. 69 of 2015, decided on 15th February, 2018.

Sales Tax Act (VII of 1990)---

----Ss. 8(1)(ca) & 21(3)---Refund or adjustment of input tax (tax credit)---Zero rated supplies made to blacklisted units---Burden of proof---Respondent taxpayer claimed refund of a certain amount---Taxpayer was served with a show cause notice alleging therein that taxpayer claimed refund against invoices of units that were suspended/blacklisted units---Appellate Tribunal set-aside the order-in-original by holding that at the time of transactions, the subject units were admittedly not blacklisted and there was no final order even to date against the allegedly blacklisted units; held, that the Appellate Tribunal had given a finding of fact that suppliers in question were operative during the period when the business/transaction took place---Even otherwise, initial burden laid on the department to show either that invoices had been issued during suspended or blacklisted period or in case invoices were not issued during period of blacklisting, then the cause or reason for blacklisting had some nexus with the invoices---Taxation Officer in the present case did not establish that said invoices were either fake or flying or the claimed tax was not deposited in the Government Exchequer---Judgment of Appellate Tribunal was upheld---Reference application was disposed of accordingly.

Ms. Saba Saeed Sheikh for Applicant.

2018 P T D 1042

[Lahore High Court]

Before Shahid Karim, J

Messrs IMRAN ALI LUBRICANTS through Managing Partner

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division, Islamabad and 3 others

Writ Petition No.39468 of 2016, decided on 2nd April, 2018.

(a) Sales Tax Rules, 2006---

----R. 12---Sales Tax Act (VII of 1990), S. 21(2)---Constitution of Pakistan, Arts. 10-A & 18---Vires of R.12, Sales Tax Rules, 2006---Blacklisting and suspension of registration of a registered person---Power of Commissioner to suspend registration without prior notice [Rule 12 of the Sales Tax Rules, 2006]---Constitutionality---Commissioner could exercise such power under R. 12 if he was satisfied that a registered person had issued fake invoices, evaded tax or committed tax fraud---Commissioner was obliged to make some sort of inquiry before forming an opinion to suspend registration, and he would have to have material evidence before him in order to be satisfied to proceed to suspend registration---Engaging the registered person during such inquiry would, therefore, be inevitable in most cases---Although the Commissioner was under a duty to issue a show-cause notice within seven days of the issuance of suspension, but the proceedings may continue for a period of ninety days during which suspension order shall remain in force---Question was what if at the end of ninety days either the proceedings were not concluded and suspension order became void ab initio, or, the proceedings ended in favour of the registered person---In both said cases, the registered person shall have by then suffered irreparable loss and injury which could not be compensated and for which the registered person did not seem to have a remedy---Although a registered person had ostensibly been afforded due process of law, yet the initial order of suspension of his registration without notice would render illusory the due process which was subsequently sought to be afforded to the registered person---Section 21(2) of the Sales Tax Act, 1990 provided that the Commissioner may have the ultimate power to either suspend a registration or blacklist a person but it could not be culled out from said section that an unbridled and unfettered power could be conferred on the Commissioner concerned to suspend a registration for a period of ninety days without notice and without affording an opportunity of hearing---Rule 12 of the Sales Tax Rules, 2006 spelled out that 'satisfaction' of the Commissioner was relevant for suspension of registration, but it was contradictory to say that a Commissioner was satisfied that a person had issued fake invoices, evaded tax or committed fraud, yet a further inquiry was required to confirm the offence---Term 'satisfaction' connoted that there was enough material to form a definite opinion--- Commissioner could only be satisfied if he had conducted a deep and invasive inquiry praying into the records of a person---Words "is satisfied that a registered person has issued fake invoices..." did not leave anything to imagination that a conclusive opinion had been formed to suspend registration and the subsequent show-cause notice was a mere eye-wash---Rule 12 was irrational and unreasonable on the basis of another ground that once a suspension order had been passed ex-parte,the Commissioner concerned was not required to review that order till the proceedings of blacklisting were concluded nor had a registered person been conferred a right to have that order reviewed pending those proceedings---Even before the stage of blacklisting arrived, the satisfaction of the Commissioner while considering suspension, related to seriously egregious allegations such as fake invoices, evasion of tax and commission of fraud---All said charges were of a criminal nature and thus the registered person was entitled to the protection of Art.10-A of the Constitution and to a fair trial and due process---Indubitably therefore, he was also entitled to a right of hearing at both stages of determination---Furthermore conferring of power on the Commissioner under R.12 was a clear impairment of the right under Art.18 of the Constitution as clearly, the registered person against whom a suspension order had been passed was barred from conducting all kind of business for a period of ninety days at least---Power of suspension of registration without prior notice was, thus, unlawful and impinged upon the rights of the registered persons to be treated in accordance with law and to be afforded due process of law---Rule 12 of the Sales Tax Rules, 2006 to the extent that it provided for suspension of registration of a registered person without prior notice was held to be ultra vires the Constitution as well as the main enactment and was struck down---High Court directed that the Commissioner concerned could only proceed to suspend the registration of a registered person with prior notice and upon affording an opportunity of hearing---Constitutional petitions were allowed accordingly.

(b) Administration of justice---

----Natural justice and fairness---Scope---In all proceedings whether judicial or administrative, the principles of natural justice had to be observed if the proceedings might result in consequences affecting the person or property or other right of the parties concerned---Where a person was empowered to take decisions after factual investigation into the facts which would result in consequences affecting the person, property or other right of any other person, then generally it was implied that the power so given was coupled with a duty to act in accordance with the principles of natural justices and fairness.

The University of Dacca through its Vice-Chancellor and the Registrar, University of Dacca v. Zakir Ahmed PLD 1965 SC 90 ref.

Khubaib Ahmad and Mohsin Virk for Petitioners.

Sarfraz Ahmad Cheema and Tahir Mehmood Ahmad Khokhar, DAG for Respondents.

2018 P T D 1071

[Lahore High Court]

Before Shahid Karim, J

Messrs HAMZA NASIR WIRE

Versus

FEDERATION OF PAKISTAN and others

Writ Petitions Nos. 37295 of 2016, 113697, 62531, 62526, 62348, 62557, 62392, 77996, 7163, 104518, 92863, 62554, 105986 and 62562 of 2017, heard on 8th December, 2017.

Sales Tax Act (VII of 1990)---

----Ss. 11, 30 & 31---Notice of recovery---Power to issue---Scope---Taxpayers had assailed notices issued by Deputy Commissioner Inland Revenue---Plea raised by petitioners was that power to issue such notices was only conferred upon Chief Commissioner and Commissioner Inland Revenue---Validity---Federal Board of Revenue had issued notification by which it expressed its clear intention to confer on Commissioner the functions to be exercised in respect of certain persons or classes of persons of such areas as specified in that notification---Tenor of two notifications in question showed that Federal Board of Revenue intended of Chief Commissioner and Commissioner of Inland Revenue to perform all administrative functions and coordination as given in Column-4 of the Table in the notifications---To such extent, Commissioner's power to confer such functions on officers subordinate to him stood taken away and his power to do so in respect of subject matter of two notifications in question was curtailed---High Court set aside the show cause notices issued to petitioners---Constitution petition was allowed in circumstances.

Zaver Petroleum Corporation Limited through Director, Islamabad v. Federal Board of Revenue through Chairman FBR, Islamabad and another 2016 PTD 2332 fol.

Muhammad Ajmal Khan, Muhammad Azhar Khan Joiya, Mian Abdul Ghaffar, Mudassar Shuja ud Din, Malik Umer Riaz, Ali Husnain, Zulfiqar/Ali, Muhammad Shabbir Hussain, Bilal Bashir, Muhammad Shabbir, Usman Ali Bhoon and Malik Ahsan Mehmood for Appellants.

Sarfraz Ahmad Cheema, Muhammad Asif Hashmi, Muhammad Asif and Rana Muhammad Mehtab for Respondents

2018 P T D 1251

[Lahore High Court]

Before Shamas Mehmood Mirza, J

PUNJAB BEVERAGES CO. (PVT.) LTD.

Versus

FEDERAL BOARD OF REVENUE and others

W.P. No.22028 of 2017, decided on 22nd September, 2017.

Sales Tax Act (VII of 1990)---

---- Ss. 11, 30 & 31--- Notice of recovery--- Power to issue--- Taxpayers had assailed notices issued by Deputy Commissioner Inland Revenue--- Plea raised by petitioners was that no such power was conferred upon Deputy Commissioner Inland Revenue to issue such notices---Validity--- Federal Board of Revenue intended such powers to be exercised by Commissioners of Inland Revenue to exclusion of all other officers of Inland Revenue and such intent of Federal Board of Revenue could not be set at naught by respective Commissioners Inland Revenue by further delegating such powers--- Notification in question did not confer power to delegate on Commissioner's concern and also did not convey impression that act was being performed in delegated exercise of power--- High Court set aside show-cause notices issued to petitioners by authorities as matter had already been settled in an earlier judgment--- Constitutional petition was allowed in circumstances.

Zaver Petroleum Corporate (Pvt.) Limited v. Federal Board of Revenue 2016 PTD 2332; Oil and Gas Development Company v. Federal Board of Revenue 2016 PTD 1675; Government of Pakistan v. Hashwani Hotel PLD 1990 SC 68; Lt. Col. Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty PLD 1961 SC 119 and Messrs Hamza Nasir Wire v. Federation of Pakistan and others 2018 PTD 1071 ref.

Zaver Petroleum Corporation Ltd. through Director, Islamabad v. Federal Board of Revenue Chairman FBR, Islamabad and another 2016 PTD 2332 fol.

Muhammad Ajmal Khan, Mudassar Shuja ud Din, Waseem Ahmed Malik, Sameer Saeed Ahmed and Farid Adil Ch. for Petitioner.

Sarfraz Ahmed Cheema, Muhammad Asif Hashmi, Liaqat Ali Ch. and Muhammad Asif Ahmed for Respondents.

2018 P T D 1272

[Lahore High Court]

Before Shahid Karim, J

WAHEED SHAHZAD BUTT

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division and another

W.P. No.14621 of 2014, heard on 1st March, 2018.

Notification---

----Issuance of---While issuing a notification in terms of delegation powers under an enactment, the Federal Government had to act in a manner laid down by the constitution, and unless procedural formalities had been complied with, the notification so issued must be struck down as void ab initio.

Messrs Mustafa Impex, Karachi and others v. Government of Pakistan through Secretary Finance, Islamabad and others PLD 2016 SC 808 fol.

Dr. Ikram ul Haq for Petitioner.

Sarfraz Ahmad Cheema and Tahir Mahmood Ahmad Khokhar, D.A.G. for Respondents.

2018 P T D 1582

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs HAIER PAKISTAN (PVT.) LTD.

I.T.R. No.118 of 2015, heard on 8th February, 2018.

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

----Ss. 133, 2(22A), & Second Sched., Part-III, Cl. 8---Reduction in tax liability---Meaning of the words "consumer goods" for purpose of benefit of reduction in tax liability---Question before the High Court was whether household electronic goods could be termed as consumer goods for the purpose of Clause 8 of Part III of the Second Schedule to the Income Tax Ordinance, 2001---Held, that term "consumer goods" was not defined in the Income Tax Ordinance, 2001 however, the dictionary meaning for the same was "goods bought or used primarily for personal family or household purpose and not for resale of producing other goods---Definition of "fast moving consumer goods" given in S.2(22A) of the Income Tax Ordinance, 2001 could not be termed as relevant for interpretation of meaning of words "consumer goods" in Cl. 8 of Part III of the Second Schedule to the Income Tax Ordinance, 2001---Words used in said clause were "consumer goods, including fast moving consumer goods" enlarged the scope of the words "consumer goods"---High Court held that electronic goods could be termed "consumer goods" for purpose of Cl. 8 of Part III of the Second Schedule to the Income Tax Ordinance, 2001---Reference was answered, accordingly.

Black's Law Dictionary rel.

(b) Words and phrases---

----"Consumer goods", meaning of---Goods bought or used primarily for personal, family, or household purpose, and not for resale or for producing other goods.

Black's Law Dictionary rel.

(c) Interpretation of statutes---

----Canons of Construction---Principles of "ejusdem generis" and "expressio unius est exclusio alterius", application of---Scope---Meaning of ejusdem generis was 'of the same kind or class' and it was a canon of construction applied when a general word or phrase followed a list of specifics, then such general word or phrase would be interpreted to include only items of the same type as those listed---Said principle applied to resolve a problem of giving meaning to ambiguous or unclear words or phrase of general nature, which is preceded or followed by a group of words showing a list of person(s) or things of same or similar nature and kind and conversely; where some persons or things were expressly mentioned, without general word or phrase, it implied exclusion of other persons or things within same class; which canon of construction was called, 'expressio unius est exclusio alterius' (the express mention of one thing excludes all others)---Recourse to said principles of interpretation was based on presumptions adopted by courts.

Black's Law Dictionary rel.

Liaquat Ali Chaudhry for Applicant.

Akhtar Ali and Sumair Saeed Ahmed for Respondent.

2018 P T D 1633

[Lahore High Court]

Before Shahid Karim, J

ALMOIZ INDUSTRIES LIMITED and another

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.28780 of 2014, decided on 21st May, 2018.

Sales Tax Act (VII of 1990)---

----Ss. 71 & 3---Sales Tax Special Procedure Rules, 2007, Rr.58H, 58H(a), 58H(b) & 58M(c)---SRO No. 421(I)/2014 dated 04.06.2014---Constitution of Pakistan Arts. 18 & 25---Scope of sales tax---Special procedure for payment of sales tax by steel melters, re-rollers and ship breakers---Principles for collection of sales tax on supplies, class of supplies, and class of goods---Power of Federal Board of Revenue to prescribe special procedure for scope and payment of sales tax---Distinction in procedure to be made on basis of supplies, not persons---Scope---Petitioner impugned Rr. 58H, 58H(a), 58H(b) & 58M(c) Sales Tax Special Procedure Rules, 2007 as amended by Notification No. SRO 421(I)/2014 dated 04.06.2014; whereby special rate/procedure for sales tax was made applicable only to those manufacturers of steel that used public sector energy supply, while other manufacturers were excluded from benefit of said special rate/procedure---Validity---Distinction in the present case had been drawn purely on basis of source of energy used by the taxable persons---Where two classes of persons made same taxable supplies and distinction between such persons was not drawn on basis of taxable supplies, then the same course of action was not countenanced by law---Sections 71 & 3(6) of the Sales Tax Act, 1990 empowered Federal Government or the Federal Board of Revenue to prescribe a certain special procedure in respect of supplies but not in respect of persons---Impugned notification was therefore discriminatory, and also offended the Right to Freedom of Trade and Business, guaranteed by Art. 18 of the Constitution---Classification, if it was not to offend against Constitutional guarantees, must be based upon some intelligible differentia bearing a reasonable and just relation to the object sought to be achieved---Means employed for production and manufacture and processes involved had never been considered as yardstick for making a distinction for levying different rates of sales tax---Impugned notification was held to be ultra vires and beyond authority of the Federal Government---Constitutional petition was allowed, accordingly.

Pakcom Limited and others v. Federation of Pakistan and others PLD 2011 SC 44 and Messrs Mustafa Impex, Karachi and others v. Government of Pakistan through Secretary Finance, Islamabad and others PLD 2016 SC 808 rel.

Salman Akram Raja, Malik Ahsan Mehmood, Usman Ali and Bilal Bashir for Petitioners.

Tahir Mahmood Ahmad Khokhar, D.A.G., M. Zafar Iqbal for Respondents.

Mian Ashiq Hussain for Applicant (in C.M. No.4100 of 2014).

2018 P T D 1742

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

Messrs ZAINAB DF (PVT.) LIMITED through General Manager

Versus

CUSTOMS APPELLATE TRIBUNAL, LAHORE and 2 others

Customs Reference No.90913 of 2017, heard on 9th April, 2018.

Customs Act (IV of 1969)---

----Ss. 13(3), 179 & 195---Reference---Private warehouse license---Administration of justice---Applicant was a licensee of private customs warehouse and was running duty free shop---Grievance of applicant was that authorities had cancelled his license and his appeal was dismissed on the ground that remedy of appeal was not available against order passed under S.13(3) of Customs Act, 1969---Validity---Applicant could not be left remediless against order in question, when the same was required, to be examined, in the interest of justice, at least by one independent technical forum---Remedy under Art.199 of the Constitution was available in absence of alternate remedy---High Court directed the Federal Board of Revenue to take cognizance of action in question by authorities to satisfy itself as to legality or propriety of decision in question---Section 195(1) of Customs Act, 1969, required a suo motu notice by Federal Board of Revenue, yet such provision did not stop the High Court, while exercising inherent jurisdiction from referring the matter to Federal Board of Revenue for revision of order in question after providing opportunity of hearing to applicant---Reference was allowed accordingly.

Province of Punjab through Secretary to Government of Punjab, Communication and Works Department, Lahore and another v. Messrs Muhammad Tufail and Company through Muhammad Tufail (deceased) through Legal Heirs PLD 2017 SC 53; Muhammad Sadiq through his Legal Representatives v. Pakistan through Collector, Rawalpindi and 2 others 1988 CLC 123 and Zahiruddin v. Emperor PLD 1947 Privy Council 13 ref.

Zia Haider Rizvi and Muhammad Akhtar for Applicant.

Nadeem Mehmood Mian for Respondents.

2018 P T D 1823

[Lahore High Court]

Before Ali Akbar Qureshi and Jawad Hassan, JJ

Messrs VINTAK PIPE INDUSTRIES through Proprietor

Versus

CUSTOMS APPELLATE TRIBUNAL and 3 others

Custom Reference No.223149 of 2018, decided on 19th July, 2018.

Customs Act (IV of 1969)---

----Ss. 194-C(5) & 196---Reference---Appellate Tribunal---Difference of opinion amongst Members of the Bench---Petitioner company was aggrieved of the order passed by Customs Appellate Tribunal where Members of the Bench had difference of opinion and Member did not resort to the procedure as mandated by S.194-C(5) of Customs Act, 1969---Validity---Members were supposed to formulate point or points on which they differed and send the case to the Chairman for referring matter to a third member; after three members had recorded their opinion, order of Tribunal could be formulated and signed by all three Members who had heard the parties---High Court set aside order of the Tribunal and remanded case to Customs Appellate Tribunal for decision afresh.

Junaid Jabbar Khan for Applicant.

2018 P T D 1897

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Shahid Jamil Khan, JJ

DIRECTOR INTELLIGENCE AND INVESTIGATION-FBR

Versus

SHAMRAIZ KHAN and others

Customs Reference No.33395 of 2017, decided on 7th June, 2018.

Customs Act (IV of 1969)---

----Ss. 194C, 194 & 196---Customs Appellate Tribunal---Procedure---Interpretation of S.194C of the Customs Act, 1969---Judicial and administrative powers of the Chairman of the Customs Appellate Tribunal---Constitution of Benches---Exercise of discretion by the Chairman---Cases of urgency/exigency---Scope---Section 194C(4) of the Customs Act, 1969 authorized Chairman of the Tribunal himself or any other Member of the Tribunal to dispose of a case, sitting singly, where value of the case was not exceeding five million rupees or where goods were confiscated without option to pay fine in lieu of confiscation---Language of S. 194C(4) of the Customs Act, 1969 did not suggest that Division Bench of the Tribunal shall request the Chairman for entrustment of the case to one of the Members of Bench and collective reading of the same showed that it was contemplating a situation where the Division Bench, to whom case was allotted, was nonfunctional due to absence or non-availability of one Member for any reason---Under such situation, the Chairman may himself (if he was Member of the Division Bench) dispose of the case, sitting singly, provided one of the conditions under Ss. 194C(4)(a) & 194C(c) of the Customs Act, 1969 were fulfilled---Case fulfilling such conditions, if allotted to any other Bench, then the Chairman may authorize any available Members to dispose of the same, sitting singly---Words "sitting singly" denoted that constitution of Single Bench, under S. 194-C(4) of the Customs Act, 1969 was not necessary and word "authorized" was used instead of "allotment of a case"; which meant that case was already allotted to the Bench, which was non-functional, thus such cases may be authorized for decision by any available Members of such Bench---Rationale behind Ss. 194-C(4)(a) & 194(C)(b) of the Customs Act, 1969, was that the cases covered by said sections may be heard and decided expeditiously, even if the Division Bench was non-functional.

Collector of Customs, Customs House, Karachi v. Syed Rehan Ahmed 2017 SCMR 152; Director, Intelligence and Investigation (Customs and Excise), Faisalabad and another v. Bagh Ali 2010 PTD 1024 and Messrs Infomax Pakistan (Pvt.) v. The Customs Appellate Tribunal and others Customs Reference No.9 of 2010 rel.

Izharul Haq Sheikh for Applicant.

Mukthar Ahmad Awan for Respondents.

2018 P T D 1942

[Lahore High Court]

Before Shahid Karim, J

TREET CORPORATION LTD.

Versus

FEDERATION OF PAKISTAN and others

W.P. No.11253 of 2017, decided on 21st March, 2018.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 214C & 177---Sales Tax Act (VII of 1990), S. 72B---Federal Excise Act (VII of 2005), S. 42B---Federal Board of Revenue Taxpayers' Audit Policy, 2016---Audit of taxpayers---Random parametric selection of taxpayers for audit---Parameters for computer balloting be clearly defined---Petitioner (taxpayer) impugned notices for selection for audit under Department's Taxpayers' Audit Policy, 2016, on the ground that same was done without defining proper parameters---Validity---Essential requirement for validity of random selection for audit was that risk parameters should be laid down and clearly defined along with audit policy by the Department and such risk parameters should form basis for parametric selection---In the present case, no risk parameters were provided by Department which would give unbridled and unstructured powers to the officers of the Department---Mere framing of Audit Policy was insufficient until it was supported by clearly defined risk parameters on basis of which computer ballot was to be held for selecting cases for audit, and Taxpayers' Audit Policy, 2016 was lacking in the same---Notices for selection for audit of the petitioner were set aside, however the High Court refrained from declaring the Taxpayers' Audit Policy, 2016 as unconstitutional with the observation that the same should not be implemented until risk parameters were clearly defined---Constitutional petition was allowed, accordingly.

Messrs Ittefaq Rice Mills v. Federation of Pakistan and others 2013 YLR 1274; Premier Industries Chemical Manufacturing Co. v. Commissioner Inland Revenue and others 2013 PTD 398 and Defence Housing Authority v. Commissioner Inland Revenue and others 2015 PTD 2538 rel.

Shahzad Ata Elahi and Salman Zaheer Khan for Petitioners.

Shahid Usman and Shahid Sarwar Chahil for Respondents.

2018 P T D 2364

[Lahore High Court]

Before Shams Mehmood Mirza, J

Messrs MKB SPINNING MILLS (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and others

W.P. No.34103 of 2016, decided on 7th January, 2017.

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

----Ss. 3, 4 & 2(29A)---Scope of sales tax---Zero-rating---"Further tax" under the Sales Tax Act, 1990---Nature---Imposition of further tax on supplies made by zero-rated sectors---Scope---Under S. 3(1A) of the Sales Tax Act, 1990; in order to be subject to further tax, a registered person must be making taxable supplies to an unregistered person and such tax was in addition to tax payable under Ss. 3(1),3(1B),3(2), 3(5) and 3(6) of the Sales Tax Act, 1990---"Further tax" was a specie of sales tax in view of the definition of "sales tax" given in S. 2(29A) of the Sales Tax Act, 1990 and nothing existed in S. 3(1A) of the Sales Tax Act, 1990 which took "further tax" outside the ambit of definition of "sales tax"---"Zero rating" facility granted to certain industrial sectors under S. 4 of the Sales Tax Act, 1990 was absolute and therefore they could not be burdened with "further tax" under S. 3(1A) of the Sales Tax Act, 1990---Non-obstante clause contained in S. 4 of the Sales Tax Act, 1990 made reference to S. 3 of the same, and therefore incident of making payment of tax at the rate of zero percent on supplies made to an unregistered person would not be attracted to levy of "further tax".

1999 SCMR 412 = 1999 PTD 1078 and 2012 SCMR 880 = 2012 PTD 969 ref.

Assistant Collector Sales Tax, Peshawar Cantt. and 2 others v. Northern Bottling Company (Pvt.) Limited Jamrud Road Peshawar 2001 PTD 2636 rel.

(b) Interpretation of statutes---

----Language employed in a statute must be interpreted and understood in the context of the enactment---Taxing statute---Nothing ought to be read in or implied in a statute, particularly a taxing statute---Definition of a word or phrase in an interpretation clause would, prima facie, govern meaning ascribed to same in the body of the statute, unless qualified otherwise and such rule was subject to the condition that where context of the provision of a statute made a definition clause inapplicable, then said word or phrase may have to be given a different meaning from one contained in the interpretation clause.

(c) Interpretation of statutes---

----"Non-obstante clause"---Meaning---Non-obstante clause was a Legislative tool employed to give overriding effect to certain provisions over some contrary provisions which were found in the same enactment or in a different enactment in order to avoid operation and effect of all such contrary provisions.

Messrs E.F.U. General Insurance Company Limited v. The Federation of Pakistan PLD 1997 SC 700 = 1997 PTD 1693 and Chandavarkar S.R. Rao v. Ashalata S. Guram (1986) 4 SCC 447 rel.

(d) Interpretation of statutes---

----Conflict between two provisions of an enactment---Principle of harmonious statutory construction---Scope---Court had a duty to avoid head-on clause between two sections of an Act, and to construe provisions which appeared to be in conflict, in such a manner as to harmonize them---Provisions of one section of a statute could not be used to defeat other provisions unless the Court, in spite of its efforts, found it impossible to effect reconciliation between them---When two conflicting provisions in a statute could not be reconciled with each other, the same should be so interpreted that, if possible, effect should be given to both---Interpretation which reduced a provision to a "dead letter" or "useless lumber" was not harmonious construction and to harmonize was not to destroy any statutory provision or to render the same otiose.

Sultana Begum v. Prem Chand Jain AIR 1997 SC 1006 rel.

Ehsan ur Rehman for Petitioner.

M.M. Akram, Mudassar Shuja ud Din, Muhammad Naeem Munawar, Abuzar Hussain and Abdul Waheed Habib for Petitioners.

Sarfraz Ahmad Cheema for Respondent/FBR.

2018 P T D 441

[Peshawar High Court]

Before Rooh-ul-Amin Khan and Muhammad Ghazanfar Khan, JJ

PAKISTAN MATCH INDUSTRIES (PVT.) LTD.

Versus

COLLECTOR OF SALES TAX AND FEDERAL EXCISE, PESHAWAR

Civil Misc. Petitions Nos. 27-P, 28-P of 2017 with C.M. No.1-P of 2017 in Sales Tax References Nos.20-P and 21-P of 2010, decided on 6th December, 2017.

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

----S.47---Reference---Dismissal for non-prosecution---Restoration---Scope---Causing delay in proceedings---Remedy---High Court dismissed Reference for non-prosecution as petitioner was causing delay in decision---Petitioner company sought restoration of its Reference which was dismissed for non-prosecution---Plea raised by authorities was that there was no provision to restore Reference dismissed for non-prosecution---Validity---Provisions of Sales Tax Act, 1990, with regard to Reference to High Court could not be equated with powers of Appellate Court---Under scheme of Sales Tax Act, 1990, there was no power with High Court to dismiss Reference for non-prosecution---High Court was to adjudicate Reference on merits, made to it by an aggrieved person or an appropriate government authority---Once Reference was made, it had to be answered on its own merits and not to be dismissed for non-prosecution---If there was no provision for restoration of Reference dismissed for non-prosecution, then it was equally true that there was no provision for dismissal of Reference for non-prosecution---Petitioner had lingered on proceedings for a long period of about 7 years for no plausible justification---Petitioner wanted to enjoy fruits of interim order passed on first date of hearing i.e. 22-4-2010---High Court keeping in view the deliberate negligence on the part of petitioner, burdened the petitioner with heavy cost---High Court set aside order in question and restored Reference for decision on merits---Application was allowed in circumstances.

Muhammad Sadiq v. Mst. Bashiran and 9 others PLD 2000 SC 820 rel.

(b) Civil Procedure Code (V of 1908)---

----S.115---Revision---Dismissal for non-prosecution---Scope---No provision existed for dismissal of civil revision for non-prosecution, therefore, Civil Procedure Code, 1908, does not provide any remedy for restoration of the same.

Muhammad Sadiq v. Mst. Bashiran and 9 others PLD 2000 SC 820 rel.

Shomail Ahmad Butt for Petitioner.

Ishtiaq Ahmad Junior for Respondent.

2018 P T D 612

[Peshawar High Court]

Before Muhammad Ghazanfar Khan and Ijaz Anwar, JJ

COMMISSIONER INLAND REVENUE-RTO

Versus

Dr. GHULAM RASOOL

Tax Reference No.33-P of 2014, decided on 22nd May, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(1), 128(5) & 133(1)---Reference---Additional documents---Taxation officer initiated proceedings against taxpayer, after finalization of assessment, and amended the assessment under S.122(1) of Income Tax Ordinance, 2001--- Appellate Authority set aside additional tax by requisitioning wealth statement and said order was maintained by Appellate Tribunal Inland Revenue---Validity---Appellate authority had given necessary reasons for admitting additional documents on grounds that assessing officer had given notices to taxpayer under S. 122(1) of Income Tax Ordinance, 2001 but their services on taxpayer could not be verified--- Additional documents were annexed with appeal and appellant had sufficient notices of the same---Appellate authority had taken note of S. 128(5) of Income Tax Ordinance, 2001 which was not violated by appellate authority--- High Court declined to interfere in the matter--- Reference was dismissed in circumstances.

C.I.R. v. Khalid Umar Khan Tax Reference No.40 of 2014 rel.

Ghulam Shoaib Jally for Petitioner.

Ghulam Haroon for Respondent.

Date of hearing: 22nd May, 2017.

JUDGMENT

IJAZ ANWAR, J.---Through this judgment, we intends to answer the tax reference, wherein the following questions of law have been formulated by the appellant(s):--

(a) "Whether under the facts and circumstances of the case, the ATIR was justified to delete the addition made under section 111(1) (b) as unexplained investment by ignoring the facts that the taxpayer failed to produce any documentary evidence to the taxpayer officer at the time of assessment proceedings to explain the source of investment inspite of repeated statutory notices issued to him? "

(b) "Whether on the facts and circumstances of the case, the learned ATIR was justified to rule that the learned CIR (Appeals) has not violated Section 128(5) of the Income Tax Ordinance, 2001 by admitting evidence in appeal which was not produced in the original proceedings despite there being no sufficient cause which prevented the taxpayer from producing the same in the original proceedings?"

1. The relevant facts as narrated by the appellant in the Tax Reference and are necessary for the disposal of this case, that the taxpayer is an individual and derives income from other sources. Return declaring net income at Rs.760368/- filed which was deemed to be assessment under section 120(1) of the Income Tax Ordinance, 2001. Later on the Taxation Officer received definite information that the taxpayer has purchased vehicles to the tune of Rs.1,462,000/- + Registration fee of Rs.50000/- (total Rs.1,512,000/-), therefore, initiated proceedings by issuing statutory notices to explain the source of investment, however, no compliance was made. Therefore, the taxation officer amended the assessment under section 122(1) of the Income Tax Ordinance, 2001 and an amount of Rs.1,511,174/- was added under section 111(1)(b) of the said Ordinance. Total income was assessed at Rs.2,271,542/-. The taxpayer did not comply with the statutory notices issued from time to time and despite proper services of notices as well as show-cause notice he did not comply. The taxpayer submitted details before the CIR (Appeals) and the CIR (Appeals) deleted the addition by requisitioning the wealth statement. The department filed second appeal before the learned ATIR. The learned ATIR vide I.T.A. No.237(PB) of 2013 dated 08.05.2014 rejected the department appeal by holding that "The learned CIR (Appeals was justified in deletion of addition under section 111(1) (b) of the Ordinance and that the departmental objection that learned CIR(A) has violated the provisions of Section 128(5) of the Ordinance is not correct.

2. The learned counsel for the appellant argued that the learned Commissioner Inland Revenue (Appeals) Peshawar {CIR(A)} has by accepting the appeal of Taxpayer, deleted addition made in the assessment orders and based his finding on certain additional documents produced by the taxpayer during hearing of the appeal, and those documents were not produced before the Deputy Commissioner Inland Revenue (Audit-III) Zone-1 Regional Tax Office, Peshawar (Assessing Authority). The learned counsel made specific reference to section 128(5) of the Income Tax Ordinance, 2001 and argued that the CIR(A) while admitting additional documents have not given any reasons. Learned counsel placed reliance on a judgment of this Court rendered in Tax Reference No.40/2014 titled CIR v. Khalid Umar Khan decided on 9.9.2015 that has dealt with similar question.

3. The learned counsel representing the respondent argued that the Assessing Authority has not allowed the taxpayer to explain his position and to produce the relevant documents, and that assessment was made at the back of the respondent. The CIR(A) has rightly admitted those documents and has given reasons for the same.

4. Arguments heard and record perused.

5. This Court has in the case of CIR v. Khalid Umar Khan Tax Reference No.40/2014 discussed the import of Section 128(5) of the Income Tax Ordinance, 2001 and gave the following opinion:--

i. Section 128(4) invest the Commissioner (Appeals) with the power to call for the required particulars being necessary for arrival at just and proper conclusion in appeal and also make further inquiry in the matter involved in the appeal.

ii. The first part of section 128(5) places absolute bar on the Commissioner not to admit any documentary material or evidence which was not produced at the time of initial proceedings while the 2nd part empower the Commissioner to exercise discretion for admitting additional documentary material if the appellant satisfy the CIR(A) that he was prevented by sufficient cause from doing so.

iii. The CIR(A) is under legal obligation to state reason for its satisfaction while admitting the additional material or evidence.

1. The relevant subsection (5) of Section 128 of the Ordinance is reproduced for convenience:--

"128-Procedure in appeal.

(1) .......................................................

(2) .......................................................

(3) .......................................................

(4) .......................................................

(5) The Commissioner (Appeals) shall not admit any documentary material or evidence which was not produced before the Commissioner unless the Commissioner (Appeals) is satisfied that the appellant was prevented by sufficient cause from producing such material or evidence before the Commissioner".

1. From the perusal of the order of CIR(A), it transpired that the necessary reasons for admitting the additional documents were given to the effect that, "though the Assessing Officer has given notices to the taxpayer under section 122(1) but their service on the taxpayer could not be verified". Similarly, the additional documents were annexed with the appeal and the appellant was sufficient notice of the same. Moreover, the very wording of Section 128(5) is very clear, because in the instant case, the respondent taxpayer was prevented by sufficient cause from producing the additional documents before the Assessing Officer, for being proceeded ex-parte. This law point has also been explained by the Appellate Tribunal Inland Revenue, Peshawar in its judgment dated 8.5.2014 in the following words:--

"From the above it is very much clear that the learned CIR(A) was satisfied that the service of notice could not be verified and in view of this aspect, the submission of the documents were admitted in the interest of justice, therefore, in my view the departmental objection that learned CIR(A) has violated the provisions of section 128(5) of the Ordinance is not correct, therefore, his order on this score is confirmed".

1. Thus taking wisdom from the judgment and order dated 9.9.2015 of this Court in Tax Ref. No.40/2014, we came to the conclusion that the CIR (A) has taken note of section 128(5) of the Income Tax Ordinance, 2001, which was further upheld and discussed by the Appellate Tribunal (IR), therefore, we hold that section 128(5) was never violated by the CIR (A).

2. In view of the above discussion, the Tax Ref.No.33-P/2014 is answered in negative, which is accordingly dismissed.

MH/38/P Reference dismisse

2018 P T D 763

[Peshawar High Court]

Before Waqar Ahmad Seth and Ijaz Anwar, JJ

Messrs ASHRAF FLOUR AND GENERAL MILLS, PESHAWAR

Versus

FEDERATION OF PAKISTAN through Secretary and Economic Affairs, Revenue Division and 3 others

W.P. No.2748-P of 2013, decided on 7th November, 2017.

Sales Tax Act (VII of 1990)---

----S. 3(1A)---Notifications SRO No.510(I)/2013 dated 12-06-2013---S.R.O. No.638(I)/2013 dated 09-07-2013---Extra sales tax on billed amount---Electricity and Sui gas bills---Petitioners were flour mills and aggrieved of levy of extra tax at the rate of 5% of total electricity and gas billed amount---Validity---Held, though flour was exempted from levy of sales tax, however, electricity and gas was required for manufacturing process and packing the material etc.---Petitioners were not only registered but were also paying sales tax on such material and were not exempted from payment on sales tax on electricity bills etc.---High Court declined to interfere in the matter---Constitutional petition was dismissed in circumstances.

2013 PTD 1651 and 2017 PTD 138 ref.

Messrs Khyber Pakhtunkhwa Text Book Board, Peshawar v. Deputy Commissioner IR (E & C) and 2 others 2013 PTD 1651 fol.

Ishtiaq Ahmad for Petitioner.

Ghulam Shoib Jally and Asad Jan for Respondents.

Date of hearing: 7th November, 2017.

JUDGMENT

IJAZ ANWAR, J.---This single judgment in Writ Petition No. 2748-P/2013 shall also dispose of the connected Writ Petition No.3067-P/2013 filed by Messrs Sadiq Flour as in both the writ petitions similar facts and law are involved.

1. Petitioners (in Writ Petitions Nos.2748/2013 and 3067/2013) are private limited companies, incorporated under the Companies Ordinance, 1984. They are manufacturing and producing flour. The background of their cases are that the Federal Government issued S.R.O. 509(I)/2013 dated 12.6.2013, vide which extra tax was levied at the rate of five percent of the total billed amount excluding the amount of federal tax, in addition to the tax payable under subsection (1) of section 3 of the Act, on supplies of electric power and natural gas to persons having industrial or commercial connections and whose bill in any month exceeds rupees fifteen thousand, but who have either not obtained sales tax registration number or are not on the active Taxpayers List "(ATL)", maintained by the Federal Board of Revenue. Vide notification No. S.R.O. 510(I)/2013 dated 12.6.2013, a new chapter IVA was added in the Sale Tax Special Procedure Rules, 2007, vide which the PESCO started charging of extra tax and further tax from the petitioners despite the fact that as per section 3 of the Sales Tax Act, 1990, sales tax shall be paid on taxable supplies made by a registered person in the course or furtherance of any taxable activity carried on by him. They averred that after enactment of further tax under section 3(1A), a confusion arose and for the removal of confusion, the Federal Government issued notification No. S.R.O.638(I)/ 2013 dated 9.7.2013, vide which further tax shall not be charged, levied and paid on the taxable supplies made to the persons, namely, electrical energy supplied to domestic and agricultural consumers, natural gas supplied to domestic consumers, motor spirit, diesel oil, jet fuel, kerosene oil and fuel oil, goods sold by retailers to the end consumers, supply of goods directly to the end consumers including food and beverages, fertilizers and vehicles and items falling in the third schedule to the Sales Tax Act, 1990 and as the petitioners are falling under the category of "supply of goods directly to the end consumers including food and beverages, fertilizers and vehicles", therefore, further tax is not attracted to their cases besides as the extra tax is levied on the goods falling under subsections (1), (2) and Subsection (4) of Section 3, which has now been omitted. According to them, as per Rule 4, registration of sales tax is confined to taxable supplies while the supplies of the petitioners are exempted from payment of sales tax under the Sixth schedule to the Sales Tax Act, 1990, therefore, implementation of the provisions of the impugned notifications on the petitioners and in pursuance thereof charging extra tax and further tax is illegal, without jurisdiction and unconstitutional in terms of Articles 4, 18 and 24 of the Constitution of Islamic Republic of Pakistan, 1973. The petitioners, now, through the above referred writ petitions have prayed to declare that:--

(i) notification No. S.R.O. 509(I)/2013 and S.R.O. 510(I)/2013 both dated 12.6.2013 are not applicable to the petitioners, (ii) the petitioners are not liable to pay further tax and extra tax leviable under the impugned notifications, (iii) the monthly consumption bills have been issued incorrectly and further tax and extra tax already charged is refundable to the petitioners by way of adjustment of the amount in future bills, (iv) subjecting the petitioners to illegal levy of further tax and extra tax in the monthly consumption of electricity is illegal and without jurisdiction.

1. Learned counsel for the petitioners referred to Section 13 of the Sales Tax Act, 1990, and argued that under this section the sales tax levied under section 3 of the Act, ibid, is exempted. He also referred to the Sixth Schedule where at S. No.19, Cereals and Product of milling industries are exempted from payment of sales tax. He also referred to Federal Board Revenue letter dated 28.8.2012 whereby clarification were issued to the effect that flour mills (not engaged in any other activity) are not required to be registered under the Sales Tax Act, 1990. He also referred to Clause (a) of section 14 of the Act, ibid, by claiming that the petitioners are not running a cottage industry, therefore, their flour mills are exempted from payment of sales tax. He argued that despite the above provisions, sales tax are being deducted in the names of extra tax and further tax from them in the monthly consumption of electricity bills, which is illegal and without jurisdiction.

2. The learned counsel for the respondents Nos. 1 to 3, conceded that there is no cavil to the legal proposition that cereals and product of milling industry are exempted from the payment of sales tax, however, argued the said exemption is only on the flour, while for the other material used, the petitioners are bound to pay and similar is the case of the electricity charges. In support of his arguments, he referred to the judgments of this court reported in PTD 2013 page 1651 and the apex court 2017 PTD 138. He further argued that under section 14-A, the petitioners are the manufacturer and they are required to register themselves within the meaning of section 14 of the Sale Tax. Learned counsel for the respondent No.4, the PESCO, adopted the same submissions as argued by learned counsel for the respondents Nos. 1 to 3. He, however, submitted that PESCO is only withholding agent of the FBR and has no other concerned with the matter.

5(sic) We have considered the submissions of learned counsel for parties and have gone through record of the case.

6(sic) This Court in the case titled Messrs Khyber Pakhtunkhwa Text Book Board, Peshawar v. Deputy Commissioner IR (E & C ) and 2 others ( 2013 PTD 1651) has dealt with exactly a similar matter, wherein the printers of newspapers, books, journals, periodicals including all sorts of material, which have been mentioned in table 1 of the sixth schedule of Sales Tax Act, 1990 as the items exempted under section 13 of the Sales Tax Act from the levy of taxes. However, this Court elaborately discussed this matter by holding that:--

1. The bare reading of the above order depicts the process of printing is not excluded from the definition as envisaged in sections 2(16)(c), 2 (33) and 2 (46) of the Sales Tax Act, 1990. It is evident from the record that Text Books Board is not only engaged in supply of text books but also engaged in procurement of text books from different printers and also deals in purchase of miscellaneous taxable items used in printing and publishing books. It is not denied by the learned counsel for the petitioner that the petitioner all most perform the role of withholding agent and withheld/deposit the due taxes on behalf other government. It is also not controverted by the learned counsel for the petitioner that the printing of book is not exempted from the tax but he tried to amalgamate the supply of books and printing services, whereas, the supply of books and printing services, are altogether two different functions. Section 3 of the Sales Tax Act, 1990 provides exemption on supply of books but never exempt to printing services providing by various printers/vendors. Any exemption to the Printers server under the garb of S. No. 32 of Table 1 of Sixth Schedule of the Sales Tax Act, would be a sort of amendment in section 13 of the Act, ibid. The Text Book Board is not vested with the power to extend the exemption to third person i.e., the printing server. Had the Text Book Board printed the books from its own sources, it might have claimed exemption provided by S. No. 32 of the Table 1 of Sixth Schedule of the Sales Tax Act. The Punjab Text Book Board do not pay tax on printing of the books, because they have their own printing facility and publish the books from their own Printing Press, but the case of Khyber Pakhtunkhwa Printing Press, is otherwise. Above all, the tax on Printing of the books shall be payable by the Printers while the petitioner, being withholding agent, is under legal obligation to withhold and collect tax from the Printer.

2. The argument of learned counsel for the petitioner that papers, ink, cards and certain other materials are essential ingredients of a book, therefore, these items without any printing shall not be termed as a book. In the same breath, he admitted that Text Book Board purchases the papers in the open market and supply it to the Printers. It was also admitted that the papers are also not exempted from the Sales Tax and the Board regularly use to pay the tax to the sellers. Where the Board pays tax on purchase of the papers from a third party, how the printing services, particularly, provided by private printers can be exempted from the levy of tax. It is admitted fact that the Text Book Board, every year, pay a huge amount to the Printers on account of only printing services and even the raw material, i.e., papers used in the printing of books are also provided by the Board."

In the instant case too, though, the flour has been exempted from the levy of sales tax, however, as discussed earlier in the judgment, the electricity and sui gas required for the manufacturing process and the packing material etc, the petitioners have not only duly registered themselves, but are also paying sales tax on such material, therefore, it cannot be said that they are also exempted from the payment of sales tax on the electricity bills etc.

1. Since this issue has already been dealt with by this Court in the authoritative judgment, as such, we while relying and following the judgment of this Court, supra, are not inclined to hold another view than the one already delivered, thus, this and the connected Writ Petition No. 3067-P/2013 are dismissed.

MH/37/P Petition dismissed.

2018 P T D 806

[Peshawar High Court]

Before Yahya Afridi, C.J. and Ikramullah Khan, J

MUHAMMAD ASIF and others

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.4747-P of 2016, decided on 20th April, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 12, 148 & Second Schedule, Part-I, Item 39---Notification No. FD(SOSR-II) 8-43/2010 dated 27-07-2010---Exemption---Special judicial allowance---Petitioners were judicial officers and were aggrieved of deduction of income tax on special judicial allowance---Plea raised by authorities was that judicial allowance was not covered under Item-39, Part-II of Second Schedule of Income Tax Ordinance, 2001---Validity---Income chargeable to income tax could only be exempted from taxation if same fell within purview of entries provided in Second Schedule of Income Tax Ordinance, 2001---Scope of allowances or benefit mentioned therein supplemented clear exclusion provided under S. 12(2)(c) of Income Tax Ordinance, 2001---Such were allowances and were solely granted for better performance of duties of officers---Plea raised by authorities was not relevant and issue of exemption was crucial and relevant only if special judicial allowance granted to petitioners was part of their salary---High Court declared that special judicial allowance granted to judicial officers was not liable to deduction of income tax at source within contemplation of S. 148 of Income Tax Ordinance, 2001---High Court directed that petitioners could seek appropriate remedy under enabling provisions of Income Tax Ordinance, 2001 with regards to deductions already made---Constitutional petition was allowed accordingly.

Muhammad Sher Shah and others v. Government of Khyber Pakhtunkhwa and others W.P. No.1098 of 2010 ref.

Qaisar Ali for Petitioners.

Manzoor Khan Khalil, DAG, Ghulam Shoaib Jally and Mukhtiar Ahmad Maneri for Respondents.

Date of hearing: 20th April, 2017.

JUDGMENT

YAHYA AFRIDI, C.J.---Muhammad Asif and others, petitioners, seek the constitutional jurisdiction of this Court praying that:--

"It is most humbly prayed that this Hon'ble High Court on acceptance of this writ petition, may kindly hold direct, declare and order;

i. That deductions and collections of Income Tax, assessment and charging of tax against the Special Judicial Allowance and Judicial Allowance by the respondents is ab initio illegal and discriminatory, therefore, deduction of Income Tax from the same, assessment and charging of Tax on these allowances may be stopped henceforth and the deducted, collected, assessed and recovered Tax against the said Allowances may be refunded to Petitioners since 1st July, 2009.

ii. Any other remedy and relief considered just and appropriate in favour of the petitioners, not specifically prayed may also be granted, if deemed fit and appropriate in the circumstances of the case."

1. The petitioners are Judicial Officers of the District Judiciary of Khyber Pakhtunkhwa and Officers and Staff Members of the Establishment of the Peshawar High Court, Peshawar; and they contend that they are receiving Special Judicial Allowance vide Notification dated 27th July, 2010 which cannot be termed as salary, and thus not taxable under the enabling provisions of the Income Tax Ordinance, 2001 ("Ordinance").

2. The Notification dated 27 reads:--

"Government of Khyber Pakhtunkhwa

Finance Department

(Regulation Wing)

Dated Peshawar, the 27th July, 2010.

No.FD(SOSR-II)8-43/2010. In pursuance of the judgment of Peshawar High Court, Peshawar, announced on 06.07.2010 in Writ Petition No.1098/2010 titled "Muhammad Sher Shah and others v. Government of Khyber Pakhtunkhwa and others", and without prejudice or detriment to, or compromising on, or vitiating the claims, interests and administrative authority of this Provincial Government, inter-alia including its right to prefer an appeal before Supreme Court of Pakistan, the Government of Khyber Pakhtunkhwa has been pleased to sanction w.e.f 1/7/2010, Special Judicial Allowance to all the Judicial Officers of the District Judiciary, including those working on ex-cadre posts, and to the members of the Establishment of Peshawar High Court, Peshawar, equal to one initial basic pay in their respective pay scale, plus 50% of running basic pay, with arrears of only one initial basic pay from 1st July, 2009.

The arrears of one initial basic pay, from 1st July, 2009 to 30th June, 2010, shall be paid in two equal installments. First installment shall be paid along with salary for the month of August, 2010, in the first week of September, 2010, and the second installment shall be paid along with the salary for the month of December, 2010, in the 1st week of January, 2011.

The Ad-hoc Allowance-2010, sanctioned vide Finance Department, Government of Khyber Pakhtunkhwa Province letter No.FD(PRC)1-1/2010 dated 15/7/2010, shall not be admissible to the recipient of the above mentioned Special Judicial Allowance.

Sd/-xxxxxxx

Secretary to Government of

Khyber Pakhtunkhwa

Finance Department

1. The respondents were put to notice and the worthy Commissioner Inland Revenue, RTO, Peshawar, in his response has, inter alia, refuted the claim of the petitioners, contending that:--

"Preliminary Objections; The writ petition filed by the petitioners is not maintainable in view of the fact that from the petitioner, tax was deducted by their employer, while payment of salary and subsequently return was filed before the respondent. The respondents, till date, neither any objection upon the any return filed by the petitioners, nor issued any notice, nor any assessment have been made, hence on the one hand petitioner has no locus standi to file the petition and one the other hand petition is premature. This petition not being maintainable should be dismissed in limine. Reply to grounds.

A. Not admitted. The acts of the department/ respondents are not unconstitutional and mala fide because any income including salary and allowances is chargeable to tax unless it is specifically treated as exempt under the Second Schedule to the Income Tax Ordinance, 2001.

B. Not admitted. Special Judicial Allowance/ Judicial allowance is chargeable to tax and does not come under the ambit of exclusion mention in section 12(2)(c) and Clause (39) Part-II of the Second Schedule to the Income Tax Ordinance, 2001.

Section 12(2)(c) excludes those allowances from the chargeability of taxation which are solely expended in the performance of the employees duties of employment. Legislature has however, inserted clause (39) in Part I of the Second Schedule to the Income Tax Ordinance, 2001 to this effect out of abundant caution.

Clause (39) ibid allows exemption to any special allowance or benefit (not being entertainment or conveyance allowance) or other perquisites specially granted to meet expenses wholly or necessarily incurred in the performance of the duties of an office or employment of profit.

Plain reading of the above two provisions of the Ordinance reveal that the intent of the legislature is to treat only those allowance as exemption, the expenditure of which is incurred, claimed and reimbursed to the employee by the employer while discharging their official duties.

Special Judicial Allowance and Judicial Allowance are not the allowances, the expenditure of which is incurred and reimbursed to the petitioners rather this allowance is paid to all the judges across the board like other allowances being employees of the judiciary, hence, not exempt under the law."

1. Let us first take the preliminary objections raised by the worthy counsel for the Revenue that the instant petition is hit by laches and that the petitioners have an alternative remedy to invoke the provisions of an appeal, as provided under section 127 of the Ordinance.

2. As far as the objection to the petition being hit by laches is concerned, this Court is not inconsonance with the contention of the worthy counsel for the Revenue, as the impugned deduction made from the petitioners is being carried out every month, thus, the same is a recurring cause of action, and can surely be raised at any stage, as has been done by the present petitioners.

3. Moving on to the second objection regarding the petitioners having an alternative remedy under section 127 of the Ordinance, this Court finds that the orders, which could be challenged under section 127 ibid has not been passed in the instant case, hence, it would not be appropriate for this Court to reject the claim of the petitioners on this ground alone. Moreover, the petitioners are simply seeking a declaration challenging the authority of the official respondents not to deduct income tax from the Special Judicial Allowance granted to them by orders of this Court. Seeking such a declaration would surely come within the domain of this Court exercising constitutional jurisdiction under Article 199 of the Constitution.

4. Now moving on to the merits of the case; the terms 'salary' has been defined under section 12 (2) of the Ordinance, in terms that:-

"12. Salary.---(1) Any salary received by an employee in a tax year, other than salary that is exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head "Salary".

(2) Salary means any amount received by an employee from any employment, whether of a revenue or capital nature, including--

(a)

(b)

(c) the amount of any allowance provided by an employer to an employee including a cost of living, subsistence, rent, utilities, education, entertainment or travel allowance, but shall not include any allowance solely expended in the performance of the employee's duties of employment."

(emphasis provided)

1. The salary of a person, as defined in the Ordinance is clearly chargeable to Income Tax under subsection (1) of Section 12 of the Ordinance. However, the crucial issue to note is that the very definition of the salary expressly excludes from its purview and scope any allowance, which is solely "expended" in performance of the employee's duties of employment. The word expended has not been defined in the Ordinance, and so this Court following the cardinal principle of the interpretation of statutes, would render the said word its ordinary dictionary meanings. In doing so, it is noted that the word expended means;

"Spend or Use up"

(Concise Oxford English Dictionary).

To open up; UNFOLD, To increase the extent, number, volume, or scope of; ENLARGE

To express at length or in greater detail;

To write out in full;

To subject to mathematical expansion;

To open out; SPREAD

To increase in extent, number, Volume, or scope.

To speak or write fully or in detail;

To feel generous or optimistic.

(Webster's New Explorer Encyclopedic Dictionary)

To use or spend.

(Chambers 21st-century Dictionary)

Spend or Use up

(The Australian Oxford Dictionary)

To use up time, Energy, Efforts, or

Some other resource.

(Encarta Dictionary (North America)

To spend;

To lay out;

To disburse;

To employ;

To waste

(Gem Practical Dictionary)

1. On going through the above ordinary dictionary meaning of the word expend, one comes to the conclusion that it simply means to give or spend. Now, when we employ the said meaning to the word expended, the term 'salary', as explained in clause (c) of subsection (2) of section 12 of the Ordinance would not include any allowance, which is solely spent or given in furtherance of the performance of the employee's duties of employment.

2. In the present case, it is noted that the Special Judicial Allowance was allowed to the petitioners keeping in view the functions they were performing vide judgment of this Court dated 06.07.2010 in W.P.No.1098/2010 titled "Muhammad Sher Shah and others v. Government of Khyber Pakhtunkhwa and others". The relevant paras of the cited judgment, reads that:--

"It is the constitutional obligation of the Government to provide speedy and inexpensive justice to the people. All the Judges, like the petitioners and their colleagues, and establishment / staff of the High Court are matchlessly confronting the phenomena without any let and lose, however, they are not paid the emoluments/salaries and allowances according to the cumbersome job done and according to their duration of working hours, as stated above, therefore, the inaction on the part of the Provincial Government for the last more than one year, not enhancing the judicial allowance, it has now agreed to enhance, was a grave omission on its part and the petitioners and others alike were grossly discriminated as the same were enhanced in the other two Provinces, much earlier without the intervention of the High Court. The Asian Development Bank has highlighted on its website that under the Access to Justice Program the Peshawar High Court and the District Judiciary of the Khyber Pakhtunkhwa has excellently achieved the target by deciding huge number of old cases. This message with commendable remarks alone was enough for the Provincial Government to have taken timely steps much prior to the other Provinces, providing the incentives for infusing new spirit in the Judicial Officers and the Staff of the High Court to do more. Such action would have produced more positive effects by compensating these devoted hard workers on one hand and thwarting anyone in the cadre to indulge in corruption. In our view, the Executive limb more particularly the Financial Managers of the Province were jealously thwarting the process and was putting a wrong picture before the democratically elected Government. Probably, it was, for this reason that the matter was delayed. This fact was more perceivable during the hearing of this petition at different occasion, as we closely watched them and their antecedents in this regard.

Despite of these omissions, we are constrained to appreciate the elected Government of Khyber Pakhtunkhwa for agreeing to the negotiated formula, without much reluctance, initially exhibited by the Administrative Secretaries and their Advisors. In our view, probably, the Chief Executive of the Province, the head of elected government, was improperly briefed rather misguided by vested interest, however, when the ground realities were discovered, the agreed formula/settlement was thus materialized.

As the petitioners and others alike have worked hard day and night for more than two years for longer duration much beyond the office working hours required by the law, but they were not compensated, therefor, in the circumstances, it is highly justifiable to grant the petitioners and others alike, including the establishment / staff of the High Court one year arrears of the enhanced Special Judicial Allowance on the pattern and in the manner elaborately mentioned in our short order of the even date which shall be treated as part of this detailed judgment. The same is reproduced below for the sack of convenience:--

"For the detailed reasons to be recorded later, this petition is partially allowed. The respondents (Provincial Government of Khyber Pakhtunkhwa) is issued a writ, directing it to pay Special Judicial Allowance on the basis of one initial basic pay plus 50% of running basic pay with arrears of one initial pay but from 1st July, 2009 to all the Judicial Officers of the District Judiciary including those working on ex-cadre posts which shall include the District and Sessions Judges, Additional District and Sessions Judges, Senior Civil Judges/Special Magistrates and all Civil Judges/Magistrates working under the control and jurisdiction of the Peshawar High Court, Peshawar.

Similarly, the Establishment of the Peshawar High Court, Peshawar is also granted the same relief as is allowed through this order to the Judicial Officers referred to above and in the same manner/way.

Keeping in view the plea of financial constraints of the Provincial Government, we further direct that the arrears from 1st July, 2009 to 30th June, 2010 shall be paid in two installments, i.e. the 1st one shall be paid along with the monthly salary of August, 2010 in the first week of September, 2010 and the second half of the amount/installment be paid in the 1st week of January, 2011 with the monthly pay of December, 2010.

We further direct the respondents, particularly, the Establishment Department/Ministry, the Finance Department / Ministry, the Law Department/Ministry and the learned Advocate-General of Khyber Pakhtunkhwa to sit with the team of experts/Administrative Officers including the Registrar of the High Court to invent ways and means, to ascertain the areas where Court Fee on certain Petitions, Appeals, Revisions, Tax References, Review Petitions, Suits, Process Fee and on other alike matters can be reasonably levied and / or enhanced without burdening and taxing the poor litigants or the public-at-large. Further to raise the existing slab of Court Fee on different kind of cases/petitions to a reasonable extent not because the Province is suffering due to financial crises in view of the peculiar circumstances but also because that the local currency has constantly shown down trend due to depreciation and devaluation vis-a-vis foreign currency particularly, US $, the main source of exchange with it. No deviation from this order shall be made by the respondents in any manner whatsoever and on any pretext."

(emphasis provided)

1. The dicta of the above judgment clearly reflects that the Special Judicial Allowance granted to the petitioners was in appreciation of their performance of duties and thus would not fall within the scope of "Salary", and thereby not chargeable to Income Tax under the charging subsection (1) of section 12 of the Ordinance.

2. There is no cavil to the proposition that income chargeable to income tax can only be exempted from taxation if the same falls within the purview of the entries provided in the Second Schedule of the Ordinance. Much emphasis has been made by the worthy counsel for the Revenue that the Special Judicial Allowance does not fall within the Special Allowance or benefit provided under Item 39 of Part-I of the Second Schedule appended to the Ordinance, the same provides;-

"Any special allowance or benefit (not being entertainment or conveyance allowance) or other perquisite within the meaning of section 12 specially granted to meet expenses wholly and necessarily incurred in the performance of the duties of an office or employment of profit."

1. The bare reading of the aforementioned entry provides that the scope of allowances or benefit mentioned therein, supplements the clear exclusion provided under clause (c) of subsection (2) of Section 12 of the Ordinance. These are allowances, which are solely granted for the better performance of the duties of officers, as is in the case in hand.

2. In this view of the matter, the contention of the worthy counsel for the Revenue that the judicial allowances being not covered under Item 39 Part-I of the Second Schedule of the Ordinance would not be relevant to the case in hand. The issue of exemption would have been crucial and relevant, only if the Special Judicial Allowance granted to the petitioners was part of their salary, which is not the case in hand.

3. Accordingly, for the reasons stated hereinabove, this Court declares that Special Judicial Allowance granted to the Judicial Officers of the District Judiciary of Khyber Pakhtunkhwa, Officers of the Peshawar High Court, Peshawar and its employees are not liable to deduction of income tax at source within the contemplation of section 148 of the Ordinance. As far as the deductions already made from the petitioners, they may seek their appropriate remedy as provided under the enabling provisions of the Ordinance.

This writ petition is disposed of, in the above terms.

MH/54/P Order accordingly.

2018 P T D 1617

[Peshawar High Court]

Before Yahya Afridi, C.J.

CHIEF COMMISSIONER INLAND REVENUE, REGIONAL TAX OFFICE

Versus

Messrs CHERAT CEMENT COMPANY LTD. and 2 others

Writ Petition No.2132-P of 2015, decided on 30th January, 2017.

(a) Interpretation of statutes---

----Amendment---Effect---Any amendment introduced in law has prospective effect, unless the amendment expressly provides for it to have retrospective effect.

(b) Federal Excise Act (VII of 2005)---

----S.46(5) [as inserted by Finance Act (V of 2015)]---Central Excise Act (I of 1944), [since repealed] S.3-D---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9(2) & 32---Constitution of Pakistan, Art. 199---Constitutional petition---Locus standi---Excise duty, refund of---Retrospective effect of amendment in the statute (Federal Excise Act, 2005)---Scope---Dispute was with regard to refund of Excise Duty paid by respondent companies---Federal Tax Ombudsman directed respondent companies to get audit conducted through audit firm to determine amount of Central Excise Duty---Order passed by Federal Tax Ombudsman was maintained by Appellate Authority---Validity---What was crucial to note was that if an amendment introduced had dealt purely with procedure in an action, and did not affect rights of parties, the new procedure would apply to all such pending and future proceedings---No party had a vested right to a particular procedure or to a particular forum---Amendment in question was not purely procedural but it affected the substantive rights that had not only accrued but matured into vested rights in favour of respondent company, as special audit was ordered by Federal Ombudsman and Appellate Authority---Any procedural change, if it was detrimental to the rights of respondent company could not be retrospectively applied to their cases---Chief Commissioner Inland Revenue being aggrieved person (as he was Head of Revenue Collecting Organ of the Federation), was to agitate matters relating to revenue collection within his jurisdiction---Constitutional petitions filed by the Chief Commissioner Inland Revenue, in his official capacity, before Constitutional Court were maintainable and subject to judicial review---Decision of the President as Appellate Authority under Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 was a qusi judicial order and not an executive or administrative order passed by the Appellate Authority (the President) under the Constitution, which required to fulfill legal attributes of a lawful order---Quasi judicial order of appellate authority (the President) passed under Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, was justiceable and was subject to judicial review---During the period in question (1996-1999) under audit and when the decisions in question were passed, there was no legal bar on appointment of Chartered Accountants duly registered under the enabling laws---No legal requirement existed for special audit to be headed by Chairman who had to be an officer of Inland Revenue---Insertion of S.46(5) of Federal Excise Act, 2005, vide Finance Act, 2015, would have prospective effect and could not be retrospectively applied to the cases of respondent company---High Court declined to interfere in the decisions passed by Federal Tax Ombudsman and Appellate Authority---Constitutional petition was dismissed in circumstances.

Lucky Cement's case 2007 PTD 1656; AD Silva's case PLD 1953 PC 58; Syed Sharifuddin Pirzada's case PLD 1973 Kar. 132; Muhammad Idris's case 1986 MLD 1794; Rana Fazal-e-Haq's case PLD 2003 Lah. 726; Barrister Sardr Muhammad's case PLD 2013 Lah. 343; Ghazanfar Abbas Shah's case 2015 SCMR 1585; Province of West Pakistan's case PLD 1964 SC 21; Al-Khair Traders's case 2015 PTD 2114; 1999 SCMR 2189; 2006 PTD 181; 2006 SCMR 382; PLD 2005 SC 686; PLD 2003 Lah. 371; 1998 MLD 1219; 1999 MLD 3112; Muhammad Tariq Pirzada's case 1999 SCMR 2189; Akhlaq Cloth House's case 2008 PTD 965; Prof. Dr. Anwar's case 2006 SCMR 382; Messrs Siddique Sons' case 2006 PTD 181 Raza Facto Tractor's case 2015 PTD 438 and Shah Nawaz's case 2011 PTD 1558 ref.

Ghulam Shoaib Jally and Qaiser Abbas Bangash for Petitioner.

Khalid Mehmood Siddiqui and Asif F Vardag for Respondents.

2018 P T D 1716

[Peshawar High Court (Bannu Bench)]

Before Abdul Shakoor and Shakeel Ahmad, JJ

BHUTTO KHAN and 4 others

Versus

INSPECTOR-GENERAL OF POLICE KHYBER PAKHTUNKHWA, PESHAWAR and 4 others

Writ Petition No.634-B of 2016, decided on 27th February, 2018.

Customs Act (IV of 1969)---

----S. 19---Government of Khyber Pakhtunkhwa Home and Tribal Affairs Department Circular No.SO(AR)/HD/1-8/NCP/2014/KC, dated 3-10-2014---Non-customs paid vehicle---Release of such vehicle on Superdari---Petitioners were owners of vehicles which were brought into Pakistan without payment of customs duty and the same were seized by authorities---Validity---Notification regarding exemption of any goods imported into Pakistan could only be issued by the Federal Government; there were certain other provisions of Customs Act, 1969, which had empowered Central Board of Revenue also to issue certain notifications in matters pertaining to delegated legislation and exemptions while scope and extent thereof under S.19 of Customs Act, 1969, were exclusively within the competence of Federal Government---Vehicles in question were neither brought into settled area in accordance with the provisions contained in Customs Act, 1969, nor customs duty nor any duties and taxes leviable thereon were paid by its importers---Neither High Court nor Sessions Judges or Judicial Magistrates had power to release such vehicles on Superdari---Such vehicles were subject to departmental adjudication as envisaged under Customs Act, 1969---Constitutional petition was dismissed in circumstances.

Criminal Petitions Nos.802 of 2015 and 22 of 2016 rel.

Shahid Khan Bangash for Appellants.

Shahid Hameed Qureshi, Addl. A.G. for Respondents.

Muhammad Anwar Khan Mamashkhel, Aftab Mubarak Islam AETO, Naimatullah Inspector, Javed ur Rehman, Inspector and Farooq Khan, Inspector.

2018 P T D 1729

[Peshawar High Court]

Before Yahya Afridi, C.J.

AGRO PACK

Versus

FEDERATION OF PAKISTAN

Writ Petition No.753-P of 2013, heard on 23rd June, 2015.

Sales Tax Act (VII of 1990)---

----S.4---Notification SRO No.190 (I) 2002 dated 2-4-2002---Refund of sales tax---Zero rating, principle of---Applicability---Question was with regard to supply of goods manufactured by petitioner to Afghanistan and applicability of Notification SRO No.190(I)/2002, dated 2-4-2002---Provision of S.4 of Sales Tax Act, 1990, was the parent law and provided for Zero Rate of sales tax on goods exported from Pakistan---Such concession of Zero Rate of sales tax was not to be extended in respect of supply of goods to a country notified by Federal Government through delegated legislation---Parent law mandated Federal Government to only specify a country through notification to which supply of goods were not to be rendered concession of Zero Rate of sales tax---Mandate for Federal Government was to specify country and not any goods or class of goods---Any restriction on concession or facility provided in parent Act through subordinate Legislation had to be viewed strictly and not liberally---Federal Government exceeded its powers in issuance of Notification SRO No.190(I)/2002, dated 2-4-2002, by excluding selected supply of goods, including those manufactured by companies, such as petitioner having Bonded Licenses for export to Afghanistan---Constitutional petition was dismissed in circumstances.

Civil Petitions Nos. 271-P to 295-P of 2011 ("Agro Packs's case"); Mian Manzoor Ahmad Wattoo's case 2002 YLR 3433; Faiz Bakhsh's case 1986 CLC 507; Aziz Ahmed's case 1975 PCr.LJ 105 and Zafar Ahmad Khan's case 2009 PLC (C.S.) 415 rel.

Ishtiaq Ahmed for Petitioner.

Manzoor Khan Khalid, D.A.G., Mian Naveed Gul Kaka Khel and Hasham Raza for Respondents.

2018 P T D 1856

[Peshawar High Court]

Before Waqar Ahmad Seth and Qalandar Ali Khan, JJ

Messrs GOKUL. S. ARORA Proprietor G.N. Textile (Pvt.) Ltd. through Attorney

Versus

GOVERNMENT OF PAKISTAN through Chairman (Revenue Division) FBR Islamabad and 3 others

W.P. No.2046-P of 2012, decided on 9th May, 2018.

Customs Act (IV of 1969)---

----Ss. 186(11) & 202---Sale of Goods Act (III of 1930), S. 23---Goods delivered to carrier---Effect---Goods in question were in transit to Afghanistan but same were detained and were not released for onward movement to Afghanistan---Petitioner was an Indian national who sought release of goods on the grounds that he had exported goods to reach its destination in Afghanistan---Validity---Exporter/seller unconditionally apportioned and property passed to buyer/consignee when goods were delivered to carrier as per principles as enshrined in S. 23 of Sale of Goods Act, 1930---When goods were delivered to the carrier for their transmission to buyer in Afghanistan in transit through Pakistan, exporter/seller diverted himself of right of ownership with respect to goods so as to lodge constitutional petition in Pakistan all the way from India to claim ownership of goods and plead cause of buyer/consignee who was involved in a criminal case and was an absconder/fugitive from law who could not put forth a legal claim to goods---Petitioner had failed to show that he was entitled to any benefit under Trade Transit Agreement between Pakistan and Afghanistan especially in the face of recovery proceedings against importer based in Afghanistan who did not surrender to process of law in Pakistan and remained absconder---Constitutional petition was dismissed in circumstances.

Ghulam Mohy-ud-Din Malik for Petitioner.

Abdur Rauf Rohaila for Respondents.

2018 P T D 2121

[Peshawar High Court]

Before Rooh-ul-Amin Khan and Syed Arshad Ali, JJ

Messrs SPINZER ENTERPRISES (PVT.) LTD. through Chief Executive/authorized Attorney and another

Versus

GOVERNMENT OF KHYBER PAKHTUNKHWA through Chief Secretary, Civil Secretariat, Peshawar and 5 others

Writ Petitions Nos.4254-P of 2015 and 4223-P of 2017, decided on 5th June, 2018.

Sales Tax Act (VII of 1990)---

----Ss. 3, 13, 8, 2(41), 2(37) & Sixth Sched., Entry 21----Sales Tax Special Procedure (Withholding) Rules, 2007, R. 2---Scope of sales tax---Taxable activity---Taxable goods---Supply of goods---Determination of tax liability---Tax credit not allowed---Claim of input tax---Exemption from sales tax---Withholding of sales tax---Responsibility of withholding agent---Printing and supply of books to Provincial Textbook Board---Scope---Question before the High Court related to the applicability of sales tax upon printing and subsequent supply of textbooks to Provincial Textbook Board; and whether Provincial Textbook Board was required to withhold sales tax in such transactions---Held, that in order to attract applicability of S. 3 of the Sales Tax Act, 1990 which was the charging section, all essential ingredients must exist in a transaction rendering a person liable to sales tax and a transaction was "taxable supply" when the same was in furtherance of a "taxable activity"---When a manufacturer made supply of goods which were exempt from sales tax under S. 13 of the Sales Tax Act, 1990 then such manufacturer was not required to pay sales tax at time of supply of goods as said exemption would take such supply outside the regime of "taxable supply"; which was condition precedent for invoking S. 3 of the Sales Tax Act, 1990---In the present case, printing and supply of textbooks to Textbook Board pursuant to an agreement would constitute a taxable activity however, the same could not be termed as taxable supply per S. 2(41) of the Sales Tax Act, 1990----Textbook Board was not required to withhold sales tax on such transactions as under R. 2 of the Sales Tax Special Procedure (Withholding) Rules, 2007; withholding of sales tax was only required when withholding agent was making payment against taxable goods and supply of books was exempt from levy of sales tax under Entry 21 of the Sixth Schedule to the Sales Tax Act, 1990---High Court observed that printing of books fell within definition of "manufacturing" under Sales Tax Act, 1990 and was therefore not a service rendered under the said Act and thus, claim of input tax could not be made by a person on goods that were used in making supplies exempt from sales tax---Constitutional petition was disposed of, accordingly.

Messrs Mayfair Spinning Mills Ltd., Lahore v. Customs, Excise and GST Appellate Tribunal, Lahore and others PTCL 2002 CL 115 and Coca Cola Beverages Pakistan Limited v. Customs, Excise and Sales Tax Appellate Tribunal 2017 PTD 2380 rel.

Amir Javed for Petitioners.

Abdul Hameed for Respondents Nos.2 to 5.

Rehman Ullah Khan for Respondent No.6.

2018 P T D 2154

[Peshawar High Court]

Before Qaiser Rashid Khan and Syed Arshad Ali, JJ

COMMISSIONER OF INCOME TAX (LEGAL), REGIONAL TAX OFFICE, PESHAWAR

Versus

Messrs CHASHMA SUGAR MILLS LTD., D.I. KHAN

Income Tax Reference Application No.31 of 2008, decided on 12th April, 2018.

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

----S.12(9A) & Second Sched., Part-IV, Cl. 59---S.R.O. No.969(I)/99, dated 27.08.1999---Income deemed to accrue or arise in Pakistan---Assessee a public limited company---Applicability of S.12(9A) of the Income Tax Ordinance, 1979---Scope---Words "profit", "revenue" and "reserve" in the context of the S.12(9A) of the Income Tax Ordinance, 1979---Connotation---Earmarking by a public limited company of an amount payable as "excise duty"---Retrospective effect of S.12(9A) of the Income Tax Ordinance, 1979---Scope---No law prohibited an assessee company from earmarking an amount determined by a competent authority (excise duty) and payable under command of a statute and such amount was an admissible expense of the asseseee company which may constitute revenue but was not profit available for distribution as cash dividend to shareholders---Word "reserve" in context of S.12(9A) of the Income Tax Ordinance, 1979 meant amount of money out of the profit (minus all liabilities accruing or legally payable) as reflected in account statement of a public limited company listed on the stock exchange, which amount said company did not distribute to shareholders within period prescribed under S.12(9A) of the Income Tax Ordinance, 1979; and was not the amount of revenue of an assessee company---Section 12(9A) (as inserted in July, 1999) was a charge on the fictional income of a company and could not be given retrospective effect to an income year which ended on September, 1998.

Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279; Government of KPK and others v. Khalid Mehmood 2012 SCMR 619; Additional Commissioner Inland Revenue, Audit Range, Zone-I and others v. Messrs Eden Builders Limited and others 2018 SCMR 991; Shaukat Khan and Company through Shaukat Ali v. Commissioner Inland Revenue Zone-II, Regional Tax Office, Peshawar 2015 PTD 630 and Muhammad Ilyas Qureshi v. Federal Board of Revenue through Member Legal and others 2017 PTD 1528 rel.

(b) Words and phrases---

----"Profit"; "Revenue" and "reserves"---Distinction---"Profit meant excess of revenue over expenditure in a business transaction; the "revenue" was defined as "gross income or receipt" and the "reserve" was defined as "something retained or stored for future use".

Black's Law Dictionary (Ninth Edition) rel.

(c) Interpretation of statutes---

----Subordinate legislation---Rules framed under a statute could not enlarge the scope of the parent statute; more particularly when such parent statute was penal in nature or created liability.

Pakistan through Secretary Finance Islamabad and 5 others v. Aryan Petro Chemical Industries (Pvt.) Limited Peshawar 2003 SCMR 370 and National Electric Power Regulatory Authority v. Faisalabad Electric Supply Company Limited 2016 SCMR 550 rel.

Rehmanullah for Petitioner.

Issac Ali Qazi for Respondent.

2018 P T D 2181

[Peshawar High Court]

Before Qaiser Rashid Khan and Syed Arshad Ali, JJ

Messrs SOHAIL VEGETABLE GHEE MILLS (PVT.) LTD. through Accountant

Versus

ADDITIONAL COMMISSIONER INLAND REVENUE (AUDIT), REGIONAL TAX OFFICE, PESHAWAR and another

Tax References Nos. 19-P and 20-P of 2012, decided on 12th April, 2018.

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

----Ss. 148 & 154 ---Imports---Exports---Nature of minimum tax under S. 148 of the Income Tax Ordinance, 2001---Double taxation---Final tax under S. 154 of Income Tax Ordinance, 2001 as an imposition independent from imposition under S. 148 of the Income Tax Ordinance, 2001---Nature---Imported goods, if subsequently exported, were subject to imposition of income tax at two stages / twice---Scope---Question before the High Court was whether importer of edible oil, after paying tax under S. 148(8) of the Income Tax Ordinance, 2001, was liable to refund of such tax if such importer then exported the same goods and paid final tax under S. 154 of the Income Tax Ordinance, 2001---Held, that per S. 148(8) of the Income Tax Ordinance, 2001, tax paid at import stage was minimum amount of tax and importer was also subject to payment of income tax under the Normal Tax Regime ---Tax paid / imposed at the time of import being minimum tax was not refundable, however, the same was credited towards final liability of tax under the Normal Tax Regime if such total tax liability exceeded the paid minimum tax---Such impost was an independent incidence of income tax governed under S. 148(8) of the Income Tax Ordinance, 2001---Importer, if it exports the same goods or portion thereof (after processing), then such transaction was an independent transaction which fell under the Final Tax Regime under S. 154(4) of Income Tax Ordinance, 2001---Whilst it was true that such imported goods were subject to payment of income tax at two stages but the same was intention of the Legislature in very categorical words---High Court observed that incidence of income tax twice, if the same had been expressly provided in the statute, had to be given effect---Reference was answered, accordingly.

D.G. Khan Cement Company Ltd. Federal Board of Revenue and others 2018 PTD 287 rel.

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

----Ss. 122, 120 & 170---Assessment---Order deemed to be passed by Commissioner under S. 120 of the Income Tax Ordinance, 2001---Nature---Amendment of assessment---Refund---Nature of power of Commissioner to amend assessment order under S. 122(5A) of the Income Tax Ordinance, 2001, as distinct from power of adjudication of refund claims under S. 170 of the Income Tax Ordinance, 2001---Scope---Question before the High Court was whether Commissioner had jurisdiction to amend an assessment order when on basis of same assessment order, a refund had been made to the taxpayer under S. 170 of the Income Tax Ordinance, 2001---Held, under Income Tax Ordinance, 2001 power to amend assessment order was a different concept having its own parameters as provided under S. 122(5A) of the Income Tax Ordinance, 2001 whereas claim of refund was to be adjudicated under S. 170 of the Income Tax Ordinance, 2001 which had its own attributes---Power under S. 122 of the Income Tax Ordinance, 2001 was inherent in its nature and was not para meteria to power of review by an authority---Such power was only exercised when Commissioner was of the opinion that an assessment order was erroneous or prejudicial to interests of the revenue---Claim for refund under S. 170 of Income Tax Ordinance, 2001 had different parameters and limitations and thus, said section could not make power of Commissioner under S. 122(5A) of the Income Tax Ordinance, 2001 redundant---Reference was answered, accordingly.

Messrs Shell (Pakistan) Ltd. through Associate Legal Counsel v. Pakistan through Secretary Revenue Division and 2 others 2013 PTD 1012 and Pakistan Tobacco Company Limited v. Federation of Pakistan 2016 PTD 596 rel.

(c) Interpretation of statutes---

----Any statutory provision which conferred jurisdiction could not be made redundant on mere assumptions or implications.

Issac Ali Qazi for Petitioner.

Ishtiaq Ahmad (Junior) along with Siraj Muhammad and Muhammad Humayun, Inland Revenue Officers for Respondents.

2018 P T D 2212

[Peshawar High Court]

Before Qaiser Rashid Khan and Syed Arshad Ali, JJ

COMMISSIONER INLAND REVENUE, REGIONAL TAX OFFICE, PESHAWAR

Versus

Messrs SHERAZ ARENA DEANS TRADE CENTER, PESHAWAR and another

Sales Tax Reference No. 01-P of 2015, decided on 12th April, 2018.

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

----Ss.3, 2(33), 2(25) & 2(44)---Scope of sales tax---Taxable activities---Scope---Time of supply---Wedding Hall---Provision of certain services---Severability in a transactions, doctrine of---Applicability---Contractual payment received against services to constitute a different head of payment---Scope---Doctrine of severability in a transaction was fully applicable where food as well as services were provided to a client and any business concern which provided both services and goods simultaneously either in one transaction or more, was liable to pay sales tax on activity of supply of goods to a client.

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

----S.72, proviso---Officers of the Department to follow Department's orders---Interpretation of S.72 of the Sales Tax Act, 1990---Officers conducting quasi-judicial functions---Scope---Under S.72 of the Sales Tax Act, 1990; instructions issued by the Department were binding on subordinate officers, however, the same were subject to two exceptions; firstly the said instruction must not contravene the applicability/ chargeability of sales tax under the Sales Tax Act, 1990 and secondly that such instructions were only binding on officers who were carrying out administrative functions and were not binding on officers conducting quasi-judicial functions.

The Central Board of Revenue, Islamabad v. Sheikh Spinning Mills Ltd., 1999 SCMR 1442 rel.

(c) Interpretation of statutes---

----Subordinate legislation---Rules/notifications being subordinate legislation were subservient to the parent statute and issuance of any instrument/notification under delegated authority was aimed to fulfill and advance the aim of the parent statue and could not nullify express provisions of the parent statute/Act.

Mian Zainuddin v. Punjab Local Government 1985 SCMR 365; Pakistan through Secretary Finance v. Aryan Petrochemical Industries (Pvt.) Limited 2003 SCMR 370; National Electric Power Regulatory Authority v. Faisalabad Electric Supply Company Limited 2016 SCMR 550 and Sadiq Hussain Majid v. Secretary Government of Pakistan" 2007 PTD 2188 rel.

Ishtiaq Ahmad along with Nadeem Zadi, Audit Officer, Sales Tax Department for Petitioner.

Issac Ali Qazi for Respondents.

2018 P T D 415

[Balochistan High Court]

Before Jamal Khan Mandokhail and Muhammad Kamran Khan Mulakhail, JJ

Messrs KHAN GUL GOVERNMENT CONTRACTOR

Versus

FEDERATION OF PAKISTAN through Secretary/Chairman, Federal Board of Revenue, Islamabad and another

C.P. No.1107 of 2017, decided on 21st November, 2017.

Customs Act (IV of 1969)---

----Ss. 2(rr), 168 & 171---Seizure of vehicles---Show-cause notice, non-issuance of---Effect---Petitioner was importer of vehicles which were seized by customs authorities---Validity---Vehicles were seized by customs authorities on 30-06-2017 but neither a seizure memo was prepared nor a show-cause notice issued to petitioner within two months of seizure---Collector Customs did not extend period further as provided by Customs Act, 1969---Mere issuance of notice under S. 171 of Customs Act, 1969 was not a substitute of show-cause notice nor it had absolved customs authorities of their responsibility to complete adjudication process in accordance with law within prescribed time---When a statute provided an act to be done in a particular manner, it must be done---Needful was not done which showed that customs authorities were either convinced that no proceedings were required as provided by S. 168 of Customs Act, 1969 or due to negligence proceedings were not initiated in time---Mandatory provision of law was violated by customs authorities, therefore, they had no jurisdiction to detain the vehicles benefit of such inaction must go to the petitioner---High Court directed customs authorities to release the vehicles---Constitutional petition was allowed in circumstances.

Asad Khan and Waleed Hakeem Baloch for Petitioner.

2018 P T D 816

[Balochistan High Court]

Before Mrs. Syeda Tahira Safdar and Abdullah Baloch, JJ

NOOR ALI

Versus

ASSISTANT COLLECTOR (AFU) and another

Custom Reference No. 11 of 2015, decided on 18th December, 2017.

Customs Act (IV of 1969)---

----Ss.15, 16, 156(8)(89) & 196---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Foreign currency---Seizure---Applicant claimed to be the owner of foreign currency recovered from a person at the airport---Held, to prove his claim, applicant neither before Adjudicating Authority nor before Appellate Tribunal produced any paper to show that in fact he was travelling in the same flight with the accused---Neither passport was produced nor ticket or boarding pass to establish that they were in fact traveling in the same flight---Plea taken by the applicant and another claimant of the currency was not only illogical but also irrational---Foreign currency might have been purchased from authorized currency dealer though authenticated but the same had not brought any change as the case was not of purchase of foreign currency, rather it was carrying of money aboard in excess contrary to Foreign Exchange Manual, 2002, thus to be dealt with accordingly---High Court declined to interfere in the order-in-original passed with correct appreciation of facts law which suffered with no illegality---Appellate Tribunal had rightly upheld the same---Both the forums below having not committed any illegality, reference was dismissed in circumstances.

Naseebullah Khan Achakzai for Petitioner.

Akhlaq Ahmed Shah, Assistant Attorney General for Respondents.

Date of hearing: 5th December, 2017.

ORDER

MRS. SYEDA TAHIRA SAFDAR, J.---The applicant Noor Ali son of Abdul Ghaffar approached this Court to question legality of the order-in-original dated 31st July 2012 passed by the Assistant Collector Model Customs Collectorate, Chaman Road, Quetta, whereby his claim for return of the foreign currency already seized was declined, rather its confiscation was ordered as mandated by Section 156 (8), and (89) Customs Act, 1969 (Act, 1969), and order dated 12th August 2014 of the Customs Appellate Tribunal, whereby the request in the appeal was declined, while the order-in-original was upheld.

1. The applicant pressed the instant Reference on the following question of law:

"Whether the impugned order passed by the respondent No.3 confirm to judicial propriety, as the same being the final fact finding authority, was required to record, the core issue, the contention of the parties and to give full devotion for determination of the variance therein, by applying judicial mind but not on presumptions, conjectures and surmises?"

1. The learned counsel for the applicant and learned Assistant Attorney General were heard at length. The learned counsel for the applicant narrated the facts and was of the view that the material before the customs hierarchy was not properly appreciated, resulted to deprived him of the money legally obtained. The learned counsel referred to a letter issued by the Consulate General of Pakistan (Community Welfare Wing) to the Joint Director(s) Overseas Pakistanis Foundation dated 17th May 2012, which was with a request to look into the matter and to refer his case to A.S.F Custom Department Quetta. A receipt issued by Karwan Exchange Company B-Private Limited was also referred to press that he purchased the currency from an authorized dealer, thus he could not have been deprived of it.

2. In reply the learned Assistant Attorney General strongly contested the case of the applicant, while pressed that there was no question of purchase and selling of the currency, rather the recovery was from a person who was travelling abroad, and was carrying the currency in excess to the prescribed limit. He further referred to the punishment awarded to Ali Khan, the person from whose possession the currency was recovered; vide judgment dated 10th June 2015 of the Special Judge, Customs, Quetta, who was charged for the offence of smuggling.

3. The brief facts of the case as contained in the First Information Report dated 1st May 2012, order-in-original and order of the Appellate Tribunal that a person namely Ali Khan son of Muhammad Noor was apprehended on 1st May 2012 by the Airport Security Force Staff, and on search foreign currency comprising of 20,000 US Dollars, and 5200 UAE Dirhams were recovered from his possession. On recovery the currency was seized, and the person was arrested with service of notice under section 171 Customs Act, 1969, with proper documentation. On this report the case was placed before the Special Judge, Customs, Quetta, and also the adjudication started under the Customs Laws. During course of adjudication two claimants of the recovered currency namely Daroo Khan and Noor Ali (present applicant) appeaed, and filed separate applications, which were dealt by the Adjudicating Authority, but were dismissed. The case to the extent of Ali Khan was dealt on merit, with the decision that there was violation of law, thus an amount of 10000 US Dollars was returned to Ali Khan, while the remaining 10000 US Dollars and 5200 UAE Dirhams were confiscated. This resulted in filing of the appeal before the Appellate Tribunal by all the three, but the plea taken was disbelieved, resulted in dismissal of the appeal.

4. This order dated 12th August 2014 of the Appellate Tribunal was questioned in the instant Reference, which was filed on 19th March 2015 with an application for condonation of delay. Thus before going into merit of the case the initial question would be whether the Reference was filed within the stipulated period of ninety (90) days, and if not what would be its fate? The learned counsel for the applicant contended, and also as per the contents of the application that the certified copy was not issued to the applicant at the relevant date when the judgment was announced, nor the order was served on him as mandated by the law, rather he himself obtained the copy in March 2015, and without any further loss of time approached this Court. Though the respondent filed parawise comments, but silent to the extent. In absence of any specific plea taken in rebuttal the assertion made by the applicant is to be believed, thus the delay if any occurred in filing of the instant Reference is condoned for the reason.

5. Now reverting to the merit of the case, the recovery was from Ali Khan at Quetta Airport on 1st May 2012 not denied by the applicant. The recovered currency was 20000/- US Dollars and 5200 UAE Dirhams, thus held to be in violation of Section 3 (1) Import and Export (Control) Act, 1950, and also of Sections 2 (s), read with sections 15 and 16 the Customs Act, 1969, also violative of S.R.O. 566(I)2005 dated 6.6.2005. S.R.O. 499(I)/2009, dated 13th June, 2009, thus constituted an offence punishable under Section 156 (1) clauses (8), (9), (89) and (90) the Customs Act, 1969, read with paragraph 10 of Chapter 18 of the Foreign Exchange Manual, 2002 issued under the Foreign Exchange Regulation Act, 1947. Thus apart from revistration of the case a show-cause notice was issued to Ali Khan, and the adjudication commenced. During course two persons namely Daroo Khan and Noor Ali (present applicant) entered in the picture with a claim that out of the recovered money 9000 US Dollars were of Daroo Khan, while the remaining 2000 US Dollar and 5200 UAE Dirhams were of Noor Ali (present applicant). Thus the adjudication was not only against the accused Ali Khan, but the claims of Daroo Khan and Noor Ali were also considered and through a joint order the Adjudicating Authority decided the matter on 18th July 2012. The currency within allowed limit was returned to Ali Khan and the remaining was confiscated.

6. The applicant Noor Ali claimed to have purchased the currency from an authorized dealer, while at the Airport on the respective date the amount of 9000 US Dollars was claimed to be recovered from Ali Khan, and 9000 US Dollars from Daroo Khan and 2000 US Dollars with 5200 UAE Dirhams from him, separately. It was their cases that due to shortage of time their flight was going to be missed, thus they left the money with the Airport Security Force Staff with a request to Ali Khan to collect the currency, but Ali Khan never returned, their efforts to contact him failed, thus in Dubai they approached the Consulate General of Pakistan, who on their request issued letter to the Joint Director Overseas Pakistanis Foundation. It was their plea that no act of smuggling was on part of Ali Khan, rather the excessive amount was owned by them (Daroo Khan and Noor Ali).

7. The Adjudicating Authority disbelieved the plea taken by the applicant and Daroo Khan and dismissed their application mainly for the reason that the recovery was from Ali Khan and claim of the remaining two persons were afterthought. This resulted in filing of the appeal before the Appellate Tribunal, who also disbelieved the claim taken by the applicant resulted in dismissal of the appeal.

8. The applicant before this Court though was with the same plea, but in fact only pressed the Reference, that the order of the Appellate Tribunal failed to fulfill the legal requirement, the necessary ingredients were missing, thus it was not an order as mandated by law. A judgment required to contain concise statement of case, the points for determination, the decision thereon and the reason for such decision. The judgment passed by the Appellate Tribunal though failed to fulfill the described requirement, but in view of the facts that this Reference was filed as far as back in March 2015 and a considerable time has already been lapsed. The question of law raised by the applicant purely technical in nature, though established even then due to the time consumed in the proceedings it would neither appropriate, nor just to decide the Reference exclusively on the question of law raised by the applicant, as the only possible order would be remand of the case for re-writing of the judgment to the Appellate Tribunal, this would not bring any change in the decision of the case. Thus it would be in interest of the parties and also to meet the ends of justice to deliver a decision on merit of the case, specifically with reference to the law.

9. It was for the reason that the applicant was with the plea that he was travelling in the same flight along with Ali Khan, and recovery of the foreign currency was in the ratio, as narrated in the preceding para, thus there was no violation of the law, nor anyone of them was carrying the foreign currency in excess to the provided limit. It was further his case that he rushed to take the flight, thus left the amount with Ali Khan with the understanding that he (Ali Khan) would bring the money with him as both of them were travelling to Dubai. He only pressed purchase of the currency from an authorized dealer, to prove his claim, but it was not enough. For the reasons that the currency was asserted to be recovered from one person i.e. Ali Khan, who was apprehended and charged. To prove his claim he (applicant) neither before the Adjudicating Authority, nor before the Appellate Tribunal produced any paper to show that in fact he was travelling in the same flight, with Ali Khan. Neither the passport was produced, nor the ticket or the boarding pass to establish that they in fact were travelling in the same flight. In addition the plea taken that he (applicant) and Daroo Khan left the money with Airport Security Force Staff with the request to return it to Ali Khan not only seems to be illogical, but also irrational. The foreign currency might have been purchased from the authorized currency dealer, though authenticated, but would not bring any change as the case was not of purchase of foreign currency, rather it was carrying of money aboard in excess contrary to the Foreign Exchange Manual 2002, thus to be dealt accordingly. The Assistant Attorney General was with the statement that said Ali Khan was also convicted for the offence of smuggling by the competent court and the conviction sustained. He referred to the judgment passed on 10th June 2015 in support thereof, which was also with a direction for confiscation of the amount i.e. 10000 US Dollars and 5200 UAF Dirhams in favour of the State.

10. In view of the above discussion the order-in-original was passed with correct appreciation of the facts and the law, and suffered with no illegality, and the Appellate Tribunal rightly upheld the order-in-original, thus no illegality committed by the respective forums. The applicant has failed to make out a case to establish any illegality in the impugned orders, thus the Reference is dismissed for want of merit.

MH/3/Bal Reference dismissed.

2018 P T D 483

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J. and Ijaz ul Ahsan, J

SAADAT ALI KHAN and others

Versus

The STATE and others

Criminal Appeals Nos. 394-L to 441-L of 2017, decided on 29th December, 2017.

(Against the judgment dated 29.6.2016 of the Lahore High Court, Lahore passed in Cr. Rs. Nos. 156, 154 and 155 of 2010)

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

----S. 37-A(3)---Tax fraud---Offences and penalties---Fine, quantum of---Exercise of discretion by Trial Court---Scope---Trial Court should exercise its discretion of imposing a fine in a fair, transparent and structured manner---Court should impose a fine which was commensurate with the amount of loss that the accused had caused to the exchequer through tax fraud---Expression, "may extend" used in S. 37-A(3) of the Sales Tax Act, 1990 did not mean that the court had an unbridled and unrestricted discretion to impose as much or as little fine, as it may deem fit---Discretion had to be exercised keeping in view the facts and circumstances of the case.

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

----S. 37-A(3)---Tax fraud---Offences and penalties---Fine, quantum of---Exercise of discretion by Trial Court---Scope---On the basis of voluntary confessional statements of the accused persons, the Trial Court convicted them, however, the sentence awarded was the period they had already spent in jail which was treated as sentence already undergone---Further, a fine/penalty in the sum of Rs.3000/- was imposed in each case---High Court maintained the punishment of sentence undergone but enhanced the amount of fine imposed by the Trial Court to the amount equal to loss of tax fraud committed; held, that the question of discretion in imposing fine had become totally irrelevant on account of the clear and unequivocal admission/confession made by the accused persons that they had committed the offence and defrauded the exchequer of an amount of Rs.2,04,60,105/----After having allowed the imprisonment as that already undergone, the amount of fine imposed should have been equivalent to the loss caused to the exchequer---No justification or reason had been recorded by the Trial Court for the exercise of discretion in favour of the accused persons by imposing a paltry sum of Rs.3000/- as fine in a mechanical manner---High Court validly and for appropriate reasons, enhanced the amount of fine---Appeal was dismissed accordingly.

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

----S. 37-A(3)---Tax fraud---Offences and penalties---Erroneous application of law in imposing fine---Fine imposed by Trial Court enhanced by the High Court under an incorrect provision of law---No prejudice caused to accused---High Court may have relied upon a wrong provisions of law (in the Sales Tax Act, 1990], and enhanced the amount of fine imposed by the Trial Court, but the same power was also available to the High Court under S. 37-A(3) of the said Act, therefore, no prejudice had been caused to the accused persons on account of erroneous application of the relevant provision of the Sales Tax Act, 1990 by the High Court---Appeal was dismissed accordingly.

Ahmed Awais, Advocate Supreme Court for Appellants (in all cases).

Khalid Chaudhry, Advocate Supreme Court, Mrs. Tasneem Amin, Advocate-on-Record and M. Imran, Deputy Commissioner, Customs for Respondent (in all cases).

2018 P T D 1128

[Supreme Court of Pakistan]

Present: Ejaz Afzal Khan, Maqbool Baqar and Faisal Arab, JJ

COMMISSIONER OF INCOME TAX, LARGE TAXPAYERS UNIT, KARACHI

Versus

INTERNATIONAL POWER GLOBAL DEVELOPMENTS LIMITED, KARACHI

Civil Appeal No. 27 of 2009, decided on 21st February, 2018.

(On appeal against the judgment dated 09.10.2008 passed by the High Court of Sindh, Karachi in I.T.R.A. No. 186 of 2017)

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 23(xviii)---Income from business, computation of---Deductions allowed---Scope---Expenditure incurred for setting up a sports and recreational facility for employees---Respondent-company derived its income by rendering operational and maintenance service to a power production company---In the subject assessment year the respondent incurred an expenditure of Rs.1,200,000/- for setting up a sports and recreational facility for its employees who resided within its residential colony---Respondent deducted such expense while computing its income---Tax department while passing the assessment order disallowed such deduction, which order was upheld up to the Appellate Tribunal---High Court decided the matter in favour of the respondent and allowed the deduction of such expenditure; held, that plain reading of S. 23 of the Income Tax Ordinance, 1979 showed that only such allowances and deductions were permissible which in some manner had nexus with the income that was derived from a business or profession---Expense in question was not a part of the salary or perk or privilege which the respondent paid to its employees under the contractual obligations for rendering service---Said expenditure was simply incurred to setup a complimentary facility for the employees which had no direct nexus with the generation of the respondent's income derived from rendering operational and maintenance services to a power production company---Expense in dispute neither fell under S. 23(xviii) of the Income Tax Ordinance, 1979 nor any other category of allowances or deductibles listed in rest of the provisions of S. 23, so as to justify its deduction while computing respondent's income---Expenditure in question, therefore, could not be taken into consideration while computing business income of the respondent---Impugned judgment of High Court was set aside and that of the Appellate Tribunal restored---Appeal was allowed accordingly.

Dr. Farhat Zafar, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellant.

Muhammad Idris, Advocate Supreme Court for Respondent.

2018 P T D 1204

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Ijaz ul Ahsan, JJ

PAKISTAN through Chairman FBR and others

Versus

HAZRAT HUSSAIN and others

Civil Appeals Nos. 633 to 637 of 2007, 130 to 145 of 2009, 68-70 of 2011, 1229 of 2013, 158 to 160, 983 to 999, 1025-1026 of 2015, 1337, 1353-1356 of 2016, 172-174 of 2017 and Civil Petitions Nos. 261-P to 265-P of 2011, 3697 and 3698 of 2016, decided on 14th December, 2017.

(On appeal from the judgments/orders dated 19.10.2006, 21.02.2002, 03.06.2002, 3-7-2002, 17-7-2003, 25.11.2004, 3-2-2005, 23-12-2005, 28-4-2006, 25-2-2003, 9-10-2003, 3-9-2003, 10-3-2004, 18-12-2009, 30.5.2013, 04.02.2016, 30.04.2015, 14.05.2015, 27.05.2015, 28.01.2016, 14.01.2016, 20.07.2016, 24.02.2011, 13.10.2016 of the Peshawar High Court, Peshawar passed in W.Ps. Nos.1669/2004, 53/2006, 154, 1846, 2023/2005, 988/2001, 226/2002, 594/2003, W.P.1443/2003, 1826, 453, 453/2004, 589/2005, 657/2002, 662/2002, 1148/2002, 118/2003, 872/2003, 796/2003, 1008/2003, 1824/2004, 1134/2004, 1191/2004, 1246/2004, 1506/2001, 157 and 158/2005, 854-P/2006, 1830-P /2014, 192-P,195-P, 194-P, 221-P/2015, 916-P to 917-P, 919-P, 920-P/2013, 1644-P/2014, 190-P/2015, 2195-P, 2196-P/2012, 1831-P/2014, 191-P/2015, 193-P, 222-P/2015, 3643-P/ 2012, 3644-P/12, 220-P/2016, 3525-P, 3526-P/2015, 5-P/2016, R.P. 8/2016 in W.P. 3526-P/2015, 2751-P, 2752-P, 3776-P/2015, 1845/05, 2212/06, 2213/06, 535, 536/07, 2952-P and 2953-P/2016).

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

----Ss. 148(1) & 148(5)---Constitution of Pakistan, Art. 247(3)---Provincially Administered Tribal Areas ("PATA")---Advance income tax on import of raw material/machinery meant for "PATA"---Non-applicability of Income Tax Ordinance, 2001---Constitution itself granted complete immunity for, and in relation to income tax in "PATA"---Tax department, thus, lacked the jurisdiction to collect advance income tax on goods meant and intended for "PATA" under S. 148 of the Income Tax Ordinance, 2001.

Commissioner of Income Tax, Peshawar v. Gul Cooking Oil and Vegetable Ghee (Pvt.) Ltd. 2008 PTD 169 distinguished.

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

----Ss. 3(1)(b) & 6---Constitution of Pakistan, Art. 247(3)---Plant located in Provincially Administered Tribal Areas---Sales tax on import of raw material/machinery meant for "PATA"---Non-applicability of Sales Tax Act, 1990---Constitution itself granted complete immunity for, and in relation to sales tax in "PATA", therefore, provisions of the Sales Tax Act, 1990 did not justify the levy and collection of sales tax on goods meant and intended for "PATA".

Master Foam Pvt. Ltd. v. Government of Pakistan PLD 2008 SC 373 distinguished.

(c) Appeal---

----Government department---Appeals should not be filed as a matter of routine or because a decision has been rendered against the (Government) department---Decisions should be taken on a reasonable basis and it was not advisable for government departments to waste public time and money by filing appeals routinely.

(d) Interpretation of statutes---

----Provision of a statute in conflict with the Constitution---Such provision must yield to the superior mandate of the basic law (i.e. the Constitution) which conferred on Parliament the power to enact laws.

(e) Exemption---

----Discretion of Government to allow an exemption---Scope---Policies in relation to grant of exemptions should be applied on a uniform and a non-discriminatory basis---While the power of granting exemptions was discretionary, it was equally true that the said power could not be exercised in a discriminatory manner---Exemptions were to be granted and regulated in terms of consistent policies for sound reasons---Exemptions should not be granted or refused arbitrarily or on the ipse dixit of the concerned officials---Power to grant an exemption or to decline to grant an exemption, must be exercised in accordance with the general principles relating to good governance.

Abid Hassan v. PHC 2005 SCMR 25 ref.

Khalid Abbas Khan, Advocate Supreme Court for Appellant/Petitioners (in C.A. No. 633/07).

Hafiz Ahsan Ahmad Khokhar, Advocate Supreme Court for Appellants/Petitioners (in C. As. Nos. 633-637/07 and 130-136, 138-140/09).

Issac Ali Qazi, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Appellants/Petitioners (in C.As. Nos. 68-70/11 and 158-160/15)

Dr. Farhat Zafar, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Appellants/Petitioners (in C.As. No. 1229/13).

Ghulam Shoaib Jally, Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Appellants/Petitioners (in C.As. Nos. 983-999/15, 1025, 1026/15, 1337/16, 1353-1356/16, C.Ps. Nos. 3697 and 3698/16).

Rehmanullah, Advocate Supreme Court for Appellants/ Petitioners (in C.As. Nos. 172-174/17).

Raja M. Iqbal, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellants/Petitioners (in C.As. Nos. 135, 136/09).

Shumail Butt, Advocate Supreme Court and Tariq Aziz, Advocate-on-Record for Appellants/Petitioner (in C.A. No. 137/09).

Ahmed Raza Kasuri, Senior Advocate Supreme Court for Appellants/Petitioners (in C.A. No. 141/09).

Nemo for Appellants/Petitioners (in C.Ps. Nos. 261-265/11).

Khalid Anwar, Senior Advocate Supreme Court for Respondents (in C.As. Nos. 983 and 996/15).

Issac Ali Qazi, Advocate Supreme Court and Raja M. Iqbal, Advocate Supreme Court for Respondents (in C.As. Nos. 984-999/15, 1025-1026/15 and 1229/13) (also in C.A. No.134/09).

Dr. Farhad Zafar, Advocate Supreme Court for Respondents (in C.Ps. Nos. 263-P, 265-P/11).

Shumail Butt, Advocate Supreme Court for Respondents (in C.Ps. Nos. 1353-1356/16).

Ghulam Shoaib Jally, Advocate Supreme Court, Raja M. Iqbal, Advocate Supreme Court, Farhat Nawaz Lodhi, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in C.As. Nos. 158-160/15).

Raja M. Iqbal, Advocate Supreme Court for Respondents (in C.A. No. 137/09).

Nemo for Respondents (in C.As. Nos. 633, 634, 636, 637/07 and 130-133/09).

Shumail Butt, Advocate Supreme Court for Respondents (in C.As. Nos. 635/07 and 137/09).

Habib Qureshi, Advocate Supreme Court for Respondents (in C.As. Nos. 68-70/2011).

M. Waqar Rana, Additional, A.-G.P. on Court's Notice.

2018 P T D 1306

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Faisal Arab and Ijaz ul Ahsan, JJ

PAKISTAN STATE OIL LTD.

Versus

COMMISSIONER OF INCOME TAX, KARACHI

Civil Appeals Nos. 859 and 860 of 2007, decided on 3rd January, 2018.

(Against the judgment dated 17.11.2006 of the High Court of Sindh, Karachi, passed in I.T.As. Nos. 60 and 61 of 1999)

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 80C--- Presumptive tax/deemed income tax--- Oil products imported by the Federal Government through Pakistan State Oil ("PSO") as its Handling Agent---Commission on handling charges was paid to PSO for the assessment year in question and income tax was duly paid on the said amount by PSO---Assessing officer dealing with the case took a different view of the matter, and focused on the fact that all the documents in the case pertaining to the purchase and import of the cargo were in the name of PSO; that the Letters of Credit were opened by PSO in its own name and the oil was also cleared by it, and that Bills of Entry were also prepared in the name of PSO---Assessing officer concluded that PSO was the actual importer of the oil products hence it was liable to pay deemed income tax in terms of S. 80C of the Income Tax Ordinance, 1979; held, that oil was admittedly purchased by the Federal Government and it was also imported by the Government---Contract for the purchase of the oil was entered into directly by the Federal Government with the foreign seller---One of the clauses of the contract for import of oil products clearly provided that the title in the oil products would pass to the Federal Government on the happening of either one of two events, whichever was earlier; first, was upon receipt and acceptance by the Federal Government of the documentation of title and the second was "just prior to entry of the vessel into the territorial waters of Pakistan."---Since title passed to the Federal Government prior to the entry of the vessel into the territorial waters of Pakistan it necessarily followed that the import was made by the Federal Government---Pakistan State Oil ("PSO") had no role to play at such stage---Fact that the Bills of Entry and other import documents were subsequently executed by PSO was not really relevant---Furthermore on a commission (income) of Rs.45,643,000 the tax demand created on PSO under S. 80C of the Income Tax Act, 1979 was Rs.469,806,560, which was about ten times more than the actual income---Tax could be levied up to, or below, the total income, but if the levy, exceeded 100 percent of the income it prima facie amounted to a confiscation of the property of the assesse since he had to meet it from his other unrelated assets, if any---While some allowance could be made to deal with cases of tax evasion (and the present was obviously not such a case), it was on the face of it, unjustifiable to create a tax demand which was ten times more than the total income received as had been done in the present case---No tax was payable by PSO under S. 80C of the Income Tax Ordinance, 1979---Appeal was allowed accordingly.

Khalid Anwar, Senior Advocate Supreme Court for Appellant (in both cases).

Mrs. Misbah Gulnar Sharif, Advocate Supreme Court for Respondent (in both cases).

2018 P T D 1403

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Ijaz ul Ahsan, JJ

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Federal Board of Revenue, Islamabad and others

Versus

Messrs HORIZON INTERNATIONAL, KARACHI and others

Civil Appeals Nos. 1577 to 1579 of 2017, decided on 6th February, 2018.

(On appeal from the judgment/order 18.09.2017 passed by High Court of Sindh, Karachi in C.Ps. Nos. 6000, 6927 and 6951 of 2010)

Customs Act (IV of 1969)---

----Ss. 26, 79 & 155-M---Import Policy Order, 2016, Para. 5(B)(iii)---Qanun-e-Shahadat (10 of 1984), Arts. 122 & 129(g)---Goods imported from a 'banned' country---Burden of proof---Scope---Provisions of the Ss. 26, 79 & S. 155M of the Customs Act, 1969, empowered the customs authorities to demand information, documents and record to satisfy themselves about, inter alia, the validity of the import of the goods, therefore it would be erroneous to presume that the burden of proof rested upon the customs authorities for establishing the origin of the imported goods from a banned jurisdiction---Material in relation to the origin of goods laid in the hands of the importers because they possessed knowledge about the specific details of the manufacturer, shipper, carrier, trans-shipper and ports of movement of the imported goods---Both, under the provisions of the Customs Act, 1969 and the ordinary principles of the law of evidence as provided in Arts. 122 & 129(g) of the Qanun-e-Shahadat, 1984, the primary onus of proof rested upon the importers to demonstrate the origin of the goods whereafter the secondary burden of disproof rested upon the customs authorities---Supreme Court remanded the present matter to the adjudicating authority for decision about the factual dispute between the parties relating to the origin of the subject goods---Appeal was disposed of accordingly.

Nemo for Appellants (in C.A. 1577 of 2017).

Raja M. Iqbal, Advocate Supreme Court for Appellants (in C.As. 1578 and 1579 of 2017).

Rasheed A. Rizvi, Senior Advocate Supreme Court, Shafqat Mehmood Chohan, Advocate Supreme Court and Ghulam Haider Sheikh, Advocate Supreme Court for Respondents (in C.As. 1577 and 1579 of 2017).

Nemo for Respondents (in C.A. 1578 of 2017).

2018 P T D 1444

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Ijaz ul Ahsan, JJ

COMMISSIONER OF INLAND REVENUE, SIALKOT and others

Versus

Messrs ALLAH DIN STEEL AND ROLLING MILLS and others

Civil Petitions for Leave to Appeals Nos. 2370-L, 2375-L, 2425-L, 2442-L to 2445-L, 2453-L to 2455-L, 2466-L, 2467-L, 2478-L to 2481-L, 2496-L, 2504-L, 2505-L, 2511-¬L to 2515-L, 2521-L to 2527-L, 2541-L to 2549-L, 2551-L to 2557-L, 2567-L to 2580-L, 2584-L, 2586-L, 2587-L to 2591-L, 2597-L to 2599-L, 2638-L to 2648-L, 2657-L to 2708-L, 2711-L to 2717-L, 2725-L to 2732-L, 2736-L to 2744-L, 2749-L to 2769-L, 2777-L, 2779-L to 2806-L, 2814-L to 2826-L, 2835-L, 2844-L, 2856-L to 2865-L, 2873-L to 2879-L, 2888-L to 2916-L, 2921-L to 2949-L, 2972-L to 2983-L, 2985-L to 3055-L, 3059-L to 3068-L, 3071-L, 3084-L, 3085-L, 3136-L to 3145-L, 3153-L, 3154-L, 3180-L to 3185-L, 3201-L to 3204-L, 3251-L to 3254, 3322-L to 3333-L, 3345-L, 3357-L to 3360-L of 2017, 3-L to 7-L, 9-L, 10-L, 33-L to 35-L, 39-L, 40-L, 197-L to 199-L and 226-L of 2018, decided on 13th March, 2018.

(Against judgments dated 18.07.2017 of Lahore High Court, Lahore passed in Infra Court Appeals Nos.711/2017, 845/2017, 453/2017, 1084/2017, 1087/2017, 968/2017, 1197/2017, 507/2017, 780/2017, 1154/2017, 1026/2017, 880/2017, 727/2017, 798/2017, 1055/2017, 397/2017, 604/2017, 811/2014 603/2017, 894/2017, 790/2017, 629/2017, 426/2017, 996/2017, 732/20014, 545/2017, 748/2017, 768/2017, 823/2017, 578/2017, 926/2017, 481/2017, 1249/2017, 1160/2017, 1253/2017, 749/2017, 1209/2017, 1107/2017. 1264/2017, 546/2017, 552/2017, 914/2017, 472/2017, 615/2017, 557/2017, 618/2017, 864/2017, 929/2017, 934/2017, 1110/2017, 1263/2017, 824/2017, 853/2017, 1000/2017, 779/2017, 731/2017, 814/2017. 821/2017, 869/2017, 889/2017, 898/2017, 900/2017, 904/2017. 916/2017, 959/2017, 817/2017, . 999/2017, 1011/2017, 1048/2017, 1072/2017, 1139/2017, 1140/2017, 1108/2017, 689/2017, 850/2017, 887/2017, 784/2017, 750/2017, 1025/2017, 1027/2017, 1149/2017, 966/2017, 691/2017, 936/2017, 950/2017 930/2017, 868/2017, 693/2017, 873/2017, 1208/2017, 1158/2017, 820/2017, 957/2017, 1007/2017, 1206/2017, 635/2017, 883/2017, 1065/2017, 1142/2017, 791/2017, 994/2017, 1174/2017, 84/2017, 870/2017, 872/2017, 963/2017, 932/2017, 1182/2017, 833/2017, 753/2017,, 752/2017, 699/2017, 698/2017, 1022/2017, 992/2017, 878/2017, 730/2017, 960/2017, 1207/2017, 953/2017, 694/2017, 1003/2017, 933/2017, 923/2017, 974/2017, 747/2017, 897/2017, 733/2017, 695/2017, 961/2017, 1258/2017, 874/2017, 839/2017, 1256/2017, 848/2017, 877/2017, 1204/2017, 1060/2017, 1001/2017, 490/2017, 1143/2017, 1366/2017, 1098/2017, 1195/2017, 946/2017, 624/2017, 804/2017, 787/2017, 1014/2017, 1094/2017, 918/2017, 1056/2017, 766/2017, 815/2017, 937/2017, 1103/2017, 1063/2017, 1064/2017, 1059/2017, 1096/2017, 924/2017, 881/2017, 882/2017, 793/2017, 548/2017, 395/2017, 544/2017, 1016/2017, 925/2017, 865/2017, 782/2017, 899/2017, 866/2017, 902/2017, 844/2017, 838/2017, 892/2017, 1262/2017, 954/2017, 859/2017 in W.P. No. 342/2017, I.C.As. Nos. 852/2017, 896/2017, 915/2017, 938/2017, 754/2017, 875/2017, 1103/2017, 554/2017, 981/2017, 726/2017, 888/2017, 1156/2017, 978/2017, 818/2017, 1339/2017, 1202/2017, 729/2017, 466/2017, 551/2017, 1138/2017, 795/2017, 1147/2017, 690/2017, 1102/2017, 411/2017, 541/2017, 661/2017, 501/2017, 628/2017, 846/201. 1004/2017, 410/2017, 854/2017, 826/2017, 558/2017, 987/2017, 1005/2017, 855/2017, 1046/2017, 973/2017, 1043/2017, 819/2017, 1193/2017, 901/2017, 1020/2017, 951/2017, 862/2017, 922/2017, 885/2017, 697/2017, 778/2017, 1158/2017, 783/2017, 807/2017, 1259/2017, 990/2017, 1017/2017, 802/2017, 707/2017, 448/2017, 803/2017, 687/2017, 943/2017, 1105/2017, 630/2017, 901/2017, 1020/2017, 951/2017, 862/2017, 922/2017, 813/2017, 847/2017, 849/2017, 1058/2017, 1070/2017, 1095/2017, 1099/2017, 1106/2017, 1057/2017, 1168/2017, 725/2017, 734/2017, 773/2017, 816/2017, 832/2017, 835/2017, 965/2017, 919/2017, 1148/2017, 1170/2017, 1181/2017, 911/2017, 822/2017, 1252/2017, 340/2017, 476/2017, 626/2017, 547/2017, 342/2017, 680/2017, 917/2017, 958/2017, 471/2017, 1203/2017, 809/2017, 632/2017, 876/2017, 1260/2017, 692/2017, 1015/2017, 542/2017, 462/2017, 549/2017, 1024/2017, 831/2017, 797/2017, 977/2017, 1006/2017, 550/2017, 1044/2017, 1165/2017, 837/2017, 935/2017, 941/2017, 944/2017, 1047/2017, 1068/2017, 1111/2017, 1141/2017, 1167/2017, 1173/2017, 1200/2017, 1100/2017, 1002/2017, 970/2017, 928/2017, 1104/2017, 895/2017, 142/2017, 1093/2017, 674/2017, 620/2017, 769/2017, 1019/2017, 555/2017, 1047/2017, 1113/2017, 940/2017, 828/2017, 969/2017, 1060/2017, 1145/2017, 843/2017, 905/2017, 1146/2017, 1133/2017, 1238/2017, 810/2017, 812/2017, 1023/2017, 1192/2017, 1255/2017, 348/2017, 634/2017, 638/2017, 699/2017, 1126/2017, 1130/2017, 1237/2017, 781/2017, 886/2017, 891/2017, 952/2017, 983/2017, 473/2017, 627/2017, 1328/2017, 1331/2017, 911/2017, 945/2017, 984/2017, 986/2017, 1010/2017, 1054/2017, 1166/2017, 964/2017, 972/2017, 343/2017, 857/2017, 1198/2017, 813/2017, 927/2017, 452/2017, 1169/2017, 785/2017, 553/2017, 1053/2017, 477/2017, 971/2017, 786/2017, 988/2017, 480/2017 1263/2017, 540/2017, 1205/2017, 341/2017, 913/2017, 956/2017, 1152/2017, 1157/2017, 1197/2017, 801/2017, 806/2017, 502/2017 and dated 09.01.2017 passed in Writ Petitions Nos.1462/2016, 1486/2016, 14360/2016)

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

----S. 214C---Sales Tax Act (VII of 1990), S. 72B---Federal Excise Act (VII of 2005), S. 42B---Audit Policy, 2015---Random ballot for selection of taxpayers for audit---Non-framing of rules for selecting taxpayers for audit---Question as to whether there was any discrimination or arbitrariness in the process of selection for audit in the absence of specific rules, and whether a timeframe should be placed for purpose of completion of audit for a tax year; held, that mere selection for audit did not cause an actionable injury to the taxpayer---Once a taxpayer was selected for audit and till such audit was completed the taxpayer was provided ample and multiple opportunities at every step to defend his position, support his returns and offer explanations for the information provided and entries made in the tax returns---Even if a discrepancy was discovered taxpayer was provided yet another opportunity to explain his position before his assessment was revised---Real purpose of conducting audit and laying parameters for the same was to ensure that uniform standards were put in place in the interest of consistency in the process of audit, the manner in which the audit was to be conducted, and the standards which the audit officers were required to follow and consistently apply---Process of balloting for the subject year was conducted from amongst a pool of persons objectively determined by the Federal Board of Revenue ("Board") in accordance with a transparent policy, uniformly applied in accordance with law---Such process was undertaken through an automated computer aided selection process---Further, in order to conduct the audit, an Audit Policy for the year 2015 was framed to regulate the process of audit, rationalize it, provide guidelines and streamline the process---Said Audit Policy provided adequate and efficient guidelines regarding the scope, parameters and methodology to be adopted and followed---No elaborate or specific rules were thus required to be framed in the present case as it was a pure and simple computer aided random selection---Nothing had been placed on record that even remotely indicated that there was any bias, arbitrariness or partiality on part of the Board or that certain sets or classes of taxpayers were targeted to the exclusion of others---Statutory framework together with the overarching umbrella of constitutional guarantees furnished adequate and sufficient safeguards to the taxpayer where there was a possibility of overstepping by the tax authorities---While the power of the Board to conduct an audit could not be denied, it was equally important that a taxpayer should not be allowed to be pestered and dragged indefinitely through an unending process of scrutiny and audit of his accounts---Audit of a selected taxpayer must be completed within a reasonable time, which fact was implicit in the relevant statutes and had explicitly been spelt out in the Audit Policy for the relevant year---Issues and problems relating to delays in conclusion of the audits stemmed from shortage of capacity and non-availability of adequately trained officers to conduct and complete audit in a professional and efficient manner within a reasonable time---Supreme Court directed that the timeframe mentioned in the relevant policy guidelines namely completion of the audit within the same financial year in which a taxpayer was selected for audit was fair and reasonable, however, if delays were inevitable, beyond the control of the Tax department and did not occur on account of any act or omission on the part of the taxation officers and happened on account of litigation and grant of stay orders, the audit officer may seek extension of audit after recording reasons in writing for seeking such extension explaining reasons for his inability to complete the audit within the stipulated time; that the Board may on consideration of such reasons grant reasonable extension in order to enable completion of the audit, and that extension if granted should be supported by due application of mind and appropriate reasoning on the part of the Board---Petitions for leave to appeal were dismissed accordingly and leave was refused.

(b) Interpretation of statutes---

----Where the letter of law was clear, unambiguous and explicit there was no room to interpret it in a manner that expanded or shrunk its scope, meaning and tenor---Only exception to such rule was where mala fides and blatant discrimination was evident.

Ibrar Ahmed, Advocate Supreme Court for Petitioners (in C.Ps. Nos.2370, 2375, 2425-L, 3251 and 3252-L of 2017).

Irshad Ullah Chattha, Advocate Supreme Court for Petitioners (in C.Ps. Nos. 2442-2445, 2453, 2454, 2455, 2466, 2467, 2476, 2479, 2480, 2481, 2496, 2504, 2505, 2521, 2527, 2546-2547, 2586, 2587, 2588, 2598, 2599, 2777-L/2017, 197, 198 and 199-L of 2018).

Ch. M. Zafar Iqbal, Advocate Supreme Court and Dr. Ishtiaq Ahmed, Commissioner, IR, RTO, Lahore for Petitioners (in C.Ps. Nos.2511-2515, 2567, 2568, 2584, 2589, 2590, 2591, 2638-2548, 2657-2708, 2711-2717, 2725-2732, 2736-2744, 2749-2758-L/2017, 2779-2806, 2814-2826, 2835-2844, 2856-2865, 2874-2879-L/2017, 2921-2949, 2972-2983, 3059-3068, 3085, 3136-3145, 3153, 3154, 3180-3185, 3201-3204, 3322-3333, 3345, 3357-3360-L/2017, 3-7, 9, 10, 33, 34, 35, 39, 40-L/2018 and 226-L of 2018).

Mrs. Kausar Parveen, Advocate Supreme Court for Petitioners (in C.Ps. Nos. 2541-2544, 2548, 2549, 2551-2557, 2569-2579, 2584-L/2017, 2759-2769-L/2017, 2873, 2888, 2889-2916, 2985-3055, 3071 and 3084-L of 2017).

Sardar Ahmed Jamal Sukhera, Advocate Supreme Court for Petitioners (in C.P. No. 2597-L of 2017).

Munawar us Salam, Advocate Supreme Court for Petitioners (in C.Ps. Nos. 3253 and 3254 of 2017).

Ch. M. Zafar Iqbal, Advocate Supreme Court and Dr. Ishtiaq Ahmed, Commissioner IR, Lahore for Respondents (in C.Ps. Nos. 3253 and 3254 of 2017).

Nemo for Respondents (in all other cases).

2018 P T D 1474

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Sh. Azmat Saeed, Umar Ata Bandial, Ijaz ul Ahsan and Sajjad Ali Shah, JJ

ADDITIONAL COMMISSIONER INLAND REVENUE, AUDIT RANGE, ZONE-I and others

Versus

Messrs EDEN BUILDERS LIMITED and others

Civil Appeal No. 2148/2016 and Civil Petitions Nos.813-L and 814-L of 2015, 579-L, 606-L to 608-L, 658-L, 1055-L, 1075-L, 1109-L, 1110-L, 2029-L, 2157-L, 2365-L, 3292-L of 2016, 179-L, 802-L, 1490-L, 1634-L, 2041-L to 2050-L, 3195-L, 3210-L, 3385-L of 2017, 88-L and 95-L to 97-L of 2018, decided on 4th April, 2018.

(Against the orders/judgments dated 2.3.2015, 12.1.2015, 25.11.2015, 16.11.2015, 24.11.2015, 18.11.2015, 28.10.2015, 19.1.2016, 1.2.2016, 23.2.2016, 20.4.2016, 7.4.2016, 9.3.2016, 18.5.2016, 28.11.2016, 19.1.2017, 19.4.2017, 28.4.2017, 5.6.2017, 1.6.2017, 11.10.2017, 25.10.2017, 14.11.2017, 2.11.2017 and 24.10.2017 of the Lahore High Court, Lahore passed in W.P. No.15430/2014, P.T.Rs. Nos.233 and 234/2012, I.T.Rs. Nos.356, 321, 369 and 340/2015, I.T.A. No.286/2015, I.T.Rs. Nos.5 and 34/2016, W.Ps. Nos.18231 and 19677/2014, I.T.Rs. Nos.118, 108/2016 and 87/2015, P.T.R. No.26/2016, I.T.Rs. Nos.343/2016 and 9/2017, P.T.R. No.7/2013, W.P. No. 15659/2013, I.T.Rs. Nos.34486, 34516, 35358, 35364, 35369, 35373, 33411, 33422, 33470, 33518, 85689, 85691 and 89724/2017, 105/2016, 23149, 90000 and 90026/2017).

(a) Limitation---

----Tax matters---Law of limitation in so far as it regulated the period in which one party could avail a remedy against another was not to be lightly disturbed as the certainty created by limitation was necessary for the success of trade and business, more so when such limitation governed tax matters.

Khushi Muhammad v. Fazal Bibi PLD 2016 SC 872 ref.

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

---S. 122(2) [as amended by Finance Act (I of 2009)]---Assessment, amendment of---Amendment made in S. 122(2) of the Income Tax Ordinance, 2001 through Finance Act, 2009 dated 30-06-2009 was not retrospective in effect---Taxpayers who filed their tax returns before S. 122(2) of the Income tax Ordinance, 2001 was amended through the Finance Act 2009 dates 30-06-2009 would be governed by S. 122(2) as it stood before the said amendment.

Sajid Ijaz Hotiana, Advocate Supreme Court and Abdul Hameed Anjum, Secy. Legal, FBR for Petitioners (in C.A. No.2148/2016).

Sarfraz Ahmed Cheema, Advocate Supreme Court for Petitioners (in C.Ps. Nos.813-L and 814-L/2015, 579-L, 606-L, 1055-L, 1075-L, 2157-L, 2365-L and 2392-L/2016, 802-L, 1490-L, 1634-L, 2041-L to 2050-L, 3195-L and 3210-L/2017, 88-L, 95-L to 97-L/2018).

Ibrar Ahmed, Advocate Supreme Court for Petitioners (in C.Ps. Nos.579-L, 606-L, 1055-L, 1075-L, 1109-L, 1110-L/2016).

Ijaz Ahmed Awan, Advocate Supreme Court for Petitioners (in C.P. No.3195-L/2017).

Waqar A. Sheikh, Advocate Supreme Court for Petitioners (in C.P. No.3385-L/2017).

Ms. Ayesha Hamid, Advocate Supreme Court for Respondents (in C.A. No.2148/2016).

Imtiaz Rasheed Siddiqui, Advocate Supreme Court and Shehryar Kasuri, Advocate Supreme Court for Respondents (in C.P. No.813-L/ 2015).

Shahbaz Ahmed Butt, Advocate Supreme Court for Respondents (in C.Ps. Nos.2157-L, 608-L, 658-L, 1075-L/2016 and 1634-L, 2043-L, 2046-L to 2050-L/2017).

M. Ajmal Khan, Advocate Supreme Court for Respondents (in C.Ps. Nos.606-L, 579-L/2016, 1490-L/2017 and 88-L/2018).

Mansoor Usman Awan, Advocate Supreme Court for Respondents (in C.P. No.2392-L/2016).

M. Iqbal Hashmi, Advocate Supreme Court and Faiz-ur-Rehman, Advocate-on-Record for Respondents (in C.Ps. Nos.1055-L/ 2016 and 95-L to 97-L/2018).

2018 P T D 1559

[Supreme Court of Pakistan]

Present: Gulzar Ahmed, Maqbool Baqar and Munib Akhtar, JJ

COMMISSIONER INLAND REVENUE, KARACHI---Appellant

Versus

PAKISTAN BEVERAGES LIMITED, KARACHI---Respondent

Civil Appeal No. 116-K of 2016, decided on 14th June, 2018.

(On appeal from the judgment dated 13.8.2015 passed by the High Court of Sindh at Karachi in C.P. No. D-3977 of 2014)

(a) Administrative law---

----Discretionary power, exercise of---Scope---Law recognizes no such thing as an unfettered discretion---All discretionary powers, especially that as conferred by statute, must be exercised in terms of well-established principles of administrative law, which were of longstanding authority and had been developed, enunciated and articulated in many judgments of the Supreme Court.

(b) Administrative law---

----Discretionary power, exercise of---Scope---Discretionary statutory power could only be exercised on a ground or to achieve an object or purpose that was lawfully within the contemplation of the statute.

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

----S. 40B---Posting of Inland Revenue Officers at premises of tax payer---Question as to whether such posting was time bound---Power under S. 40B of the Sales Tax, 1990 had been granted to "monitor" the "production, sale of taxable goods and stock positions" of a registered person or class of such persons, by posting Inland Revenue officers at the relevant premises---Such monitoring was not intended to be indefinite and could only be for some object, ground or purpose that was legitimately and lawfully within the contemplation of the Sales Tax Act, 1990---Once the purpose of monitoring had been served or object achieved or the ground stood exhausted, the monitoring must come to an end; it could not be left to the unfettered discretion of the Board, the Chief Commissioner or the Commissioner (as the case may be) to determine when the purpose had been served or object achieved---Exercise of the power conferred by S. 40B was time bound in the sense that some timeframe or period must be given in any order made under the section---Relevant authority would always have the option to reassess the situation at or near the conclusion of the period, and if there were legitimate grounds for extension, then a further period may be granted---Equally, it would be open to the concerned person/taxpayer to challenge any exercise of the statutory power or any extension in the period, in accordance with law.

Muhammad Siddiq Mirza, Advocate Supreme Court for Appellant.

Respondent ex parte.

2018 P T D 1664

[Supreme Court of Pakistan]

Present: Mian Saqib Nisar, C.J., Umar Ata Bandial and Ijaz ul Ahsan, JJ

INCOME TAX OFFICER

Versus

AKBAR GUL

Civil Appeal No. 1663 of 2008, decided on 9th April, 2018.

(Against judgment dated 08.08.2008 of High Court of Sindh at Karachi, passed in Income Tax Reference No. 154 of 1993)

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 151 & Second Sched., Part-I, Cl. 99---Exemptions from total income---Partnership engaged in poultry business---Income of partnership exempted from tax---Prohibition on extending benefit of such exemption to partners (second recipients) when receiving their share of profits from the partnership---Respondent/assessee was carrying on business of poultry in partnership with another person through an unregistered partnership firm---Total income of the firm was entitled to certain exemptions under Cl. 99 of Part-I of Second Sched. to the Income Tax Ordinance, 1979, which exemption was duly availed---Respondent, however, also claimed the same exemption for his share of the profit received from the business of the firm, which was declined by the income tax officer in view of the provisions of S. 151 of the Income Tax Ordinance, 1979---Legality---Perusal of S. 151 of the Income Tax Ordinance, 1979 showed that the exemption available under Cl. 99 of Part-I of Second Sched. to the said Ordinance was limited to the original recipient of that income and did not extend to any person receiving any payment wholly or in part out of that income---Partnership firm whether registered or unregistered was an independent assessee and was treated as a legal entity; it was distinct from its partners for the purposes of filing returns, payment and calculation of taxes---In the present case, the income was admittedly received by the unregistered partnership firm which (as a legal entity) enjoyed exemption from payment of income tax, however, any part of its income which was received by the respondent (partner) was taxable in view of the provisions of S. 151 of the Income Tax Ordinance, 1979 which provided that exemption shall not extend to any person receiving payment from the original recipient---Second recipient, such as the respondent-partner, was not entitled to claim any exemption from tax---Appeal was allowed accordingly.

Julian Housing Dinshaw Trust v. Income Tax Officer 1992 PTD 1 = 1992 SCMR 250 and Commissioner of Income Tax, Karachi (West), Karachi v. Muhammad Yousuf & Co. Karachi 1984 PTD 74 distinguished.

M. Habib Qureshi, Advocate Supreme Court for Appellant.

Ex parte for Respondent.

Habib Ullah Khan, Member IR, FBR on Court's Call.

2018 S C M R 1134

[Supreme Court of Pakistan]

Present: Maqbool Baqar and Mazhar Alam Khan Miankhel, JJ

The TAXATION OFFICER/DEPUTY COMMISSIONER OF INCOME TAX, LAHORE

Versus

Messrs RUPAFIL LTD. and others

Civil Appeal No. 723 of 2013, decided on 14th March, 2018.

(Against the judgment dated 29.05.2009 of the Lahore High Court, Lahore passed in W.P. No. 1363 of 2003)

(a) Limitation---

----Law prescribing period of limitation was to be considered as procedural rather than substantive.

(b) Limitation---

----Enlargement of time through an amendment---Where right to commence proceedings had already become time barred then a subsequent enlargement of time through an amendment would be of no avail---With the lapse of prescribed time, the transaction became a past and closed transaction, vesting a party with a right thus accrued which could not be taken away by a subsequent amendment.

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

----S. 221(4)---Income Tax Ordinance (XXXI of 1979) [since repealed], Ss. 62 & 156---Rectification of mistake---Assessment orders passed under the provisions of the repealed Income Tax Ordinance, 1979 ["the assessment orders']---Notices issued by the tax department under S. 221(2) of the Income Tax Ordinance, 2001 requiring the tax payers to show cause as to why their "assessment orders" for the relevant assessment years be not amended/rectified---Question as to whether provisions of S. 221 of the Income Tax Ordinance 2001 could be applied to the assessment orders passed under the provisions of the repealed Income Tax Ordinance, 1979; held, that the assessment order sought to be rectified through the impugned notices were finalized under S. 62 of Income Tax Ordinance, 1979 between May 2001 and June 2002, whereas said Ordinance prescribed a period of four (4) years for rectification of the assessment made under S. 62---Income Tax Ordinance, 1979 was repealed on 30-06-2002, whereafter, in July 2002, Income Tax Ordinance, 2002 came into force---Period of limitation prescribed through S. 156 of Income Tax Ordinance, 1979 had, therefore, not expired at the time of promulgation of Income Tax Ordinance, 2001---Such period during its currency thus stood extended through subsection (4) of S. 221 of Income Tax Ordinance, 2001 which provided a period of 5 (five) years for rectification of mistakes, from the date of the assessment order, sought to be rectified---Procedural amendments applied to all cases which had not become past and closed transactions, therefore, the provisions of S. 221, Income Tax Ordinance, 1979 had been rightly invoked in the present case---Appeal was disposed of accordingly.

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

----S. 221---Income Tax Ordinance (XXXI of 1979) [since repealed], Ss. 9, 10 & 80-D---Rectification of mistake---Notices issued by the tax department under S. 221(2) of the Income Tax Ordinance, 2001 requiring the tax payers to show cause as to why their assessment orders for the relevant assessment years be not amended/rectified by levying surcharge on the tax levied under section 80-D of the repealed Income Tax Ordinance, 1979---Question as to whether surcharge could be levied on the "minimum tax" payable under S. 80-D and other paramateria sections of the repealed Income Tax Ordinance, 1979; held, that income tax in terms of S. 9 of Income Tax Ordinance, 1979 was charged and levied in respect of the total income of the assessee and at the rate specified in the First Schedule, whereas S. 80-D unlike the provision of S. 9 provided for levying "minimum tax" where no tax was payable in terms of the later provision, and in a certain specified situation, also provided for levying and charging tax in excess of what may otherwise be payable under S. 9 of the Income Tax Ordinance, 1979---Section 80-D of the said Ordinance dealt with a situation where either no tax was payable by the assessee, or the tax payable was less than one-half percent of the amount representing its turnover---Both the situations envisioned under S. 80-D did not allow for levying any surcharge, as surcharge was charged on income tax only, whereas in the first of the above situation, no income tax was payable, and in the second what was charged by way of "minimum tax"/"tax", rather than income tax, was already in excess of the income tax payable in terms of S. 9 of Income Tax Ordinance 1979, and therefore there was no justification for levying of any surcharge thereon, more so when all ingredients essentially required for such levy, were clearly missing---Surcharge could not be levied in the present case on the "minimum tax" payable under S.80-D and other paramateria sections of the repealed Income Tax Ordinance, 1979---Appeal was disposed of accordingly.

Ibrar Ahmed, Advocate Supreme Court for Appellant.

Mian Ashiq Hussain, Advocate Supreme Court for Respondents Nos.1 - 3.

2018 P T D 1808

[Supreme Court of Pakistan]

Present: Gulzar Ahmed, Qazi Faez Isa and Sajjad Ali Shah, JJ

CIVIC CENTRES COMPANY (PVT.) LIMITED

Versus

COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE, ISLAMABAD

Civil Appeals Nos. 145 to 148 of 2010, decided on 28th May, 2018.

(On appeal from the judgment dated 08.05.2009 of the Islamabad High Court, Islamabad passed in Tax Reference No. 46/02, Tax Appeal No. 53/02 and Tax Appeals Nos.33 and 39/03)

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 19(1), 19(2)(a), 22(a), 22(b) & 22(c)---Wealth Tax Act (XV of 1963), Ss. 2(1)(16) & 3---Rental income---"Income from business or profession"---"Income from house property"---Properties belonging to two State owned entities were transferred to a private limited company ('the appellant-company') owned by the Federal Government on directions of the Prime Minister Secretariat---Subsequently, the Prime Minister recalled his earlier decision and the appellant-company was directed to return the properties to their owners---Rental income of the subject properties during the period they were in the possession of the appellant-company was declared by the appellant in its income tax returns for the relevant tax years under the head "Income from business or profession" in terms of S. 22 of the erstwhile Income Tax Ordinance, 1979 ("the Ordinance") and income tax was paid on the rate prescribed for the said section---Tax department alleged that since the appellant-company was the owner of the properties it should have declared its rental income from the properties under the head "Income from house property" under S. 19 of the Ordinance, which attracted a higher income tax rate in comparison to S. 22---Tax department also issued notices to the appellant-company requiring it to the pay wealth tax for the subject properties---Contentions of appellant-company that it was not the owner of the subject properties, therefore, the rental income had been correctly declared under "Income from business or profession" in terms of S. 22 of the Ordinance, and that it was not liable to pay wealth tax for the subject properties---Validity---Admittedly, there was no document on record with regard to the sale, conveyance or acquisition of the properties by the appellant-company---Neither any sale/conveyance/transfer deed was executed in favour of the appellant-company nor any consideration was ever paid---Appellant-company had also returned the possession of the properties to the owners---Owner of a property could not be deprived of his property and it be bestowed on another through a Prime Minister's dictate; such concept was completely alien to the laws of the country---Moreover, neither the language of the Income Tax Ordinance, 1979 nor of the Wealth Tax Act, 1963 supported the contention of the tax department that the appellant-company was the owner of the subject properties---Tribunal had rightly decided the matter in favour of the appellant-company by finding that it was not the owner of the subject properties---Appeals were allowed accordingly.

Nawab Sir Mir Osman Ali Khan v. C.W.T. 1986 I.T.R. 888 SC; B.D. Avari v. C.I.T. 1989 PTD 670 and Bachu Bai F.E. Dinshaw v. C.I.T. 1967 PTD 170 ref.

Khalid Anwar, Senior Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Appellant (in all cases).

Muhammad Habib Qureshi, Advocate Supreme Court and Ahmed Nawaz Ch., Advocate-on-Record for Respondent (in all cases).

2018 P T D 1933

[Supreme Court of Pakistan]

Present: Gulzar Ahmed, Qazi Faez Isa and Faisal Arab, JJ

GOVERNMENT OF PAKISTAN through Secretary Revenue Division/CBR House, Islamabad and others

Versus

MUHAMMAD JUNAID TALAT

Civil Appeal No. 1950 of 2007, decided on 7th May, 2018.

(On appeal against the judgment dated 24.09.2007 passed by the High Court of Sindh, Karachi in Constitutional Petition No. D-2373/2006)

Income Tax Ordinance (XXXI of 1979)---

----S. 9---Reward Order dated 14-5-1974---"Definite information" with regard to tax evasion---Payment of 'reward' to informant---Scope---Respondent was the author of an article published in a daily newspaper wherein he mentioned issue of non-payment of income tax by seafarers of Pakistan discharging duty on foreign flagships---Pursuant to such article the income tax department raised a demand against 812 seafarers for the payment of income tax to the tune of Rs.86.606 million, which was followed by ex parte assessment orders---Respondent being the author of such article sought recovery of reward in his capacity as informer on the amount which led to recovery proceedings against the seafarers---Held, that a person could take benefit of the Reward Order only if he had supplied some definite information relating to a taxpayer who had evaded tax---Condition precedent for reward to informant was 'detection of evasion of tax', which must have taken place before the question of reward arose---Merely giving general information that tax was not being paid by a person on his otherwise taxable income would not ipso facto entitle the informant to claim a reward as non-payment of tax was not always a case of tax evasion---Merely drawing the attention of the tax department towards a particular person or a category of persons who had failed to pay tax on their incomes would not constitute 'definite information' falling within the ambit of 'tax evasion' as it was the evasion of tax that was key in granting of an award not failure to pay tax---Philosophy of awarding a reward was that if on the basis of some specific information the income of an assessee which he had concealed through manipulation or by adoption of some deceitful mechanism came to light through an informant, whereby tax liability of an assessee increased beyond his declared income or his declared loss stood reduced, only then such information would amount to detection of tax evasion qualifying the informant to claim reward not otherwise---Such a situation did not emerge in the present case, therefore, the respondent was not entitled to the reward---Appeal was allowed accordingly.

Regional Commissioner, Income Tax Companies II v. S. Sultan Ali Jeoffrey 1993 SCMR 266 ref.

Muhammad Habib Qureshi, Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record and Ms. Sonia Anwar Rana, D.C. Income Tax for Appellants.

Respondent in person.

2018 P T D 2009

[Supreme Court of Pakistan]

Present: Umar Ata Bandial and Ijaz ul Ahsan, JJ

FARRUKH SHAHZAD

Versus

COMMISSIONER INLAND REVENUE (LEGAL) RTO, RAWALPINDI and others

Civil Petition No. 945 of 2018, decided on 10th April, 2018.

(Against the order dated 24.01.2018 passed by the Lahore High Court, Rawalpindi in I.T.R. No. 20 of 2017)

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

----S. 37(1)(A)---Capital gains tax on sale of immovable property---Zero percent capital gains tax---Contention of tax payer/petitioner that by virtue of S. 37(1)(A) of the Income Tax Ordinance, 2001 the petitioner was not liable to pay Capital gains tax as the subject property was purchased in the year 2008 and sold in the year 2013---Validity---Section 37(1)(A) read with Division VIII of Part 1 of the First Schedule to the Income Tax Ordinance, 2001 provided that where holding period of immovable property was more than two years, the rate of capital gains shall be zero percent---Tax department however, found that the petitioner was engaged in the real estate business for a number of years before 2014 which was the year the petitioner claimed that he started his business of real estate---Tax department relied upon the material (which was not rebutted) indicating that the petitioner had been engaged in the real estate business for many years before 2014---Consequently, it was correctly held that the benefit of zero percent capital gains tax was not available to the petitioner on the sale and purchase of property in the absence of reliable material necessary to avail the benefit of S. 37(1)(A)---Petition for leave to appeal was dismissed accordingly.

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

----Ss. 18 & 111(1)(b)---Amendment of assessment by addition to accumulative wealth of tax payer---Contention of tax-payer/petitioner that by virtue of S. 111(1)(b) of the Income Tax Ordinance, 2001 there was no justification for adding Rs. 60 million in the accumulative wealth of the petitioner for the year 2013; that S. 111(2) of the Ordinance only permitted inclusion of the amounts mentioned in subsection (1) of S. 111 in the person's income chargeable to tax, in the tax year to which such amount related; that the petitioner filed his return for the first time in 2013, as such, the amount of wealth shown for the year 2012 amounting to Rs.60 million could not be taxed in terms of S. 111(2) of the Ordinance by treating the same as an investment for the tax year 2013---Validity---Addition of Rs.60 million was made in the taxable income of the petitioner under S. 111(1)(b) of the Income Tax Ordinance, 2001 on account of the petitioner's failure to furnish material in support of his defence during reconciliation proceedings---Said provision stipulated that where a person failed to offer a satisfactory explanation about the nature and source of the investment, the value of the investment shall be included in the person's income chargeable to tax to the extent it is not adequately explained---Record indicated that the petitioner had shown his net wealth as of 30-06-2013 to be Rs.64,346,112, however, the department was not satisfied with the veracity of the return and called upon him through show-cause notice to explain net wealth amounting to Rs.60,360,912 as on 30-06-2012 which had remained unexplained---Although petitioner submitted his reply but the same was neither satisfactory nor did it substantiate his source of investment---Petitioner had all along taken the stance that he had started his real estate business in the year 2014 and as such he could not be assessed for the year 2013---Petitioner was unable to explain the accretion of his net wealth as on 30-06-2012---Petitioner was unable to refer to any material that may even remotely explain such accretion---Findings of the subordinate fora that the said accretion was chargeable to tax for the year 2013, thus, did not suffer from any error of interpretation or application of the relevant provisions of law---Petition for leave to appeal was dismissed accordingly.

Hafiz Muhammad Idrees, Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Petitioner.

Dr. Farhat Zafar, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Respondents.

2018 P T D 2082

[Supreme Court of Pakistan]

Present: Gulzar Ahmed, Qazi Faez Isa and Maqbool Baqar, JJ

AL-NOOR SUGAR MILLS LIMITED and another

Versus

FEDERATION OF PAKISTAN and others

Civil Appeals Nos. 1475 and 1476 of 2007, decided on 26th February, 2018.

(On appeal against the judgment dated 16.11.2006 passed by the High Court of Sindh, Karachi, in C.Ps. Nos. D-1965 and D-1966 of 1992)

(a) Central Excises and Salt Act (I of 1944)---

----S. 12-A---Excise duty, exemption from---Section 12-A of the Central Excises and Salt Act, 1944 granted power to the Federal Government to grant exemption (from levy of excise duty), including the power to withdraw such exemption---Exemption notification could be regulated by the Federal Government through subsequent notifications.

(b) Central Excises and Salt Act (I of 1944)---

----S. 12-A---Excise duty, exemption from---Notification cancelling benefit of exemption obtained under a previous notification---Prospective effect---Although an exemption granted by a notification remained in field but the authority to regulate such exemption was retained by the Government---Such regulation of exemption could only operate prospectively and not retrospectively---Notification which was prospective in operation would not breach a party's vested right of availing incentive of exemption under a previous notification---Notification (taking away the right of exemption) could not apply to past and closed transactions.

(c) Interpretation of statutes---

----Fiscal statute---Generally, tax exemptions were given rigid interpretation against the assertion of tax payers and in favour of the taxing power but at the same time it was also established rule that the burden of taxation should be distributed equally and fairly among the tax payers.

Khalid Anwar, Senior Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Appellants (in both appeals).

Muhammad Waqar Rana, Additional Attorney General for Pakistan for the Federation (in both appeals).

M. Bilal, Senior Advocate Supreme Court, Babar Bilal, Advocate Supreme Court and Mehr Khan Malik, Advocate-on-Record for Respondent No.2 (in both appeals).

Shakeel Ahmed, Advocate Supreme Court and A.S.K. Ghori, Advocate-on-Record for Respondents Nos. 3-4 (in both appeals).

2018 P T D 693

[Supreme Court (AJ&K)]

Before Ch. Muhammad Ibrahim Zia, C.J. and Sardar Abdul Hameed Khan, J

COMMISSIONER INLAND REVENUE, AZAD JAMMU AND KASHMIR COUNCIL, MIRPUR

Versus

MOHAMMAD NASEER QURESHI and others

Civil Appeals Nos.197 and 198 of 2016, decided on 13th November, 2017.

(On appeal from the judgment of the High Court dated 23.02.2016 in Writ Petitions Nos. 1151 and 1306 of 2014)

Income Tax Ordinance (XLIX of 2001)---

----S.206 & Second Sched. Pt. III, Cl.1(2)---Finance Act (III of 2006), Preamble---Finance Act (XXII of 2013), Second Sched. Pt. I, Cl.58-A---Federal Board of Revenue Circular No.6 of 2013 dated 19-07-2013---Teachers performing administrative jobs---Payment of tax on income from salary---Term 'full time teacher'---Scope---Federal Board of Revenue issued Circular No.6 of 2013 dated 19-07-2013 whereby tax liability on income from salary equivalent to 75% had been reduced to 40% with the clarification that teachers performing administrative jobs were not entitled for such tax concession---Contention of petitioners was that recovery of tax from with retrospective effect i.e. from the date when they were promoted as headmasters was illegal, arbitrary and without lawful authority---Writ petitions by the petitioners were accepted---Validity---No change through Finance Act, 2006 or Finance Act, 2013 with regard to term 'full time teacher' had been made or introduced rather only rate of reduction in the tax liability had been substituted---Circular issued by Board which had been issued for clarification of Finance Act, 2013 could not be applied against the practice operative in the department since long---Said Circular had to be issued in consistency with the provision of Income Tax Ordinance, 2001 and only such circular was binding upon the tax payers---Appeal filed by Commissioner Inland Revenue were dismissed in circumstances.

Accountant General and another v. Shahid Mehmood and another 2005 SCR 255 ref.

Raja Iqbal Rasheed Minhas, Advocate for Appellant (in Civil Appeals Nos.197 amd 198 of 2016).

Miss Kokab Al Saba Roohi, Advocate for Respondents (in Civil Appeals Nos.197 and 198 of 2016).

Shakil Ahmed, Additional Commissioner Inland Revenue for Respondents (in Civil Appeal No. 198 of 2016).

Date of hearing: 1st November, 2017.

JUDGMENT

CH. MUHAMMAD IBRAHIM ZIA, C.J.---The captioned appeals by leave of the Court have arisen out of the consolidated judgment of the High Court dated 23.02.2016, whereby the writ petitions filed by the respondents, herein, have been accepted.

1. Some of the respondents, herein, are retired Headmasters, whereas, the others are holding the offices of Headmasters and Principals in the respective institutions. They claim that according to Part III of Second Schedule of Income Tax Ordinance, 2001 (hereinafter to be referred as Ordinance, 2001) they are entitled to reduction up to 75% of tax payable on income from salary. They were enjoying the said tax concession, however, vide Finance Act, 2013 certain amendments have been made in Ordinance, 2001 which have been explained vide Circular No.6 of 2013 issued on 19.07.2013 by the Federal Board of Revenue Government of Pakistan. According to the said circular the tax liability on income from salary equivalent to 75% has been reduced to 40% with the clarification that the teachers performing the administration jobs such as Principals, Headmasters, Directors, Vice-Chancellors etc. are not entitled for such tax concession. Subsequently, the Commissioner (Inland Revenue) appellant, herein, issued letter dated 21.08.2013 to all the officers of Inland Revenue directing them to implement the Circular No.6 of 2013. The respondents, herein, feeling aggrieved filed separate writ petitions before the High Court while claiming therein that the recovery of tax from them with retrospective effect i.e. from the date when they were promoted as Headmasters etc., is against their rights accrued in the light of Ordinance, 2001, hence, the amendment in Part III clause (2) of Second Schedule of Income Tax Ordinance, 2001, is illegal, arbitrary and without lawful authority. They prayed for declaring the letter dated 21.08.2013 against law, rules and the fundamental rights. The learned High Court after necessary proceedings accepted the writ petitions as under:--

"In view of above, by accepting both the petitions it is ordered that the respondents shall not recover the arrears of Income Tax, rebate given equal to 75% for the period of 2001 to 2013 and it is held that the petitioners are entitled to the same benefits/ concessions as were available to their counterparts in the province of Punjab and it is further declared that the amended clause to the extent of exclusion of the petitioners from the category of full time teachers is against the law and facts and in-operative upon the rights of the petitioners."

As identical legal and factual propositions are involved, hence, it is felt advised to decide both the appeals through this single judgment.

1. Raja Iqbal Rasheed Minhas, Advocate, the learned counsel for the appellants (in both the appeals) after narration of necessary facts submitted that the impugned judgment of the High Court is against the facts and law. It appears that the judgment has been delivered basically relying upon the decision of Federal Tax Ombudsman, Islamabad who has got no legal and territorial jurisdiction. According to the provisions of section 9 of the Federal Tax Ombudsman Ordinance, 2000 the Federal Tax Ombudsman has got no jurisdiction to investigate or inquire into the matters relating to the assessment of income or wealth, determination of liability of tax or duty, classification of liability or tax or duty, classification or valuation of goods, interpretation of the rules and regulations relating to such assessment, determination, classification or valuation in respect of which legal remedies of appeal, review or revision are available under the relevant Legislation. He further argued that under law, the Board of Revenue is empowered to issue circular, thus, impugned Circular No.6 of 2013 dated 19.07.2013 has been rightly issued. The learned High Court has fell in error of law while handing down the impugned judgment as the respondents are not full time teachers, thus, they cannot claim the exemption. He further argued that the writ petition can only be filed in absence of alternate remedy, whereas, in the present case under section 127 of the Ordinance, 2001 the alternate remedy of appeal is available, thus, the constitutional writ petitions were not competent.

2. Conversely, Miss Kokab Al Saba Roohi, Advocate, the learned counsel for the respondents in both the appeals forcefully defended the impugned judgment and submitted that the arguments advanced on behalf of the appellant are misconceived. Neither any substantial amendment has been introduced nor given retrospective effect. The respondents approached the High Court against illegal retrospective enforcement of the circular. According to the constitutional provisions, the right once accrued cannot be snatched through such interpretation and extending retrospective effect, thus, the High Court has rightly accepted the writ petitions. The appellant has got no locus standi. She referred to the case reported as Accountant General and another v. Shahid Mehmood and another [2005 SCR 255].

3. We have considered the arguments of the learned counsel for the parties and examined the record made available. The respondents approached the High Court with the following common prayer in the writ petitions:--

"In view of above it is very humbly prayed that by accepting this writ petition the amendment in part (iii) clause (2) of Income Tax Ordinance, 2001 regarding in Tex concession and excluding the petitioners from such concession which has been implemented by the respondents through circular dated 21.08.2013 may kindly be declared against the law rules and fundamental rights of the petitioners. It is further more prayed that the respondents may kindly be restrained from calculating tax demand from the petitioners under the garb of circular dated 21.8.2013 with retrospective effect from the date whereby petitioners were promoted, transferred as Headmasters. The respondents may kindly be directed to issue NOC in favour of the petitioners. Any other relief which the Hon'ble Court deems fit may also be granted."

The circular dated 21.08.2013 has been challenged in the writ petitions which has been actually issued for implementation of the adopted Circular No.6 of 2013 dated 19.07.2013. For resolution of the controversy, the said circular is reproduced as under:--

"Government of Pakistan

Revenue Division

Federal Board of Revenue

C.No.4(36)ITP/2013 Islamabad, the 19 July, 2013

CIRCULAR NO.6 OF 2013

Income Tax

Subject: Finance Act, 2013 ---Explanation regarding important amendments made in the Income Tax Ordinance, 2001.

Salient features of the amendments made in the Income Tax Ordinance, 2001 through Finance Act, 2013 are explained as under:--

1. ...............................

2. ...............................

3. ...............................

4. Amendments in Second Schedule:

(a) ...............................

(b) In Part-I a new clause (58A) has been added providing that income of a university or other educational institution being run by a non-profit organization as defined in subsection (36) of section 2 of the Income Tax Ordinance, 2001 existing solely for educational purposes and not for purposes of profit shall be exempt.

(c) In Part-II in clause (1) a proviso has been added that the reduction in tax liability is available @ 2.5% on so much amount of the flying allowance or the submarine allowance as does not exceed an amount equal to the basic salary received by pilots, flight engineers, navigators of Pakistan Armed Forces, Pakistani Airlines or Civil Aviation Authority, Junior Commissioned Officers or other ranks of Pakistan Armed Forces, and submarine allowance by the officers of the Pakistan navy.

(d) In Part-III in clause (2) reduction in tax liability of the tax payable on income from salary equal to 75% has been reduced to 40% in the case of:

(i) a full time teacher employed in a non profit educational institution duly recognized by Higher Education Commission, a Board of Education or a University recognized by the Higher Education Commission, including government training institutions.

(ii) a full time researcher employed in a research institution duly recognized by Higher Education Commission, a Board of Education or a University recognized by the Higher Education Commission, including government research institution.

(iii) It is further clarified that a full time teacher means a person employed purely for teaching and not performing any administrative or managerial jobs e.g. principals, headmasters, directions, vice chancellors, chairman, controllers etc. Similarly a full time researcher means a person purely employed for research job only in a research institution and such institution is purely performing research activities.

(e) ...............................

(f) ..............................."

The pivotal proposition in this case revolves around the term "full time teacher" For determination of this proposition the survey of legislative history of the fiscal law is necessary which reveals that through the Finance Act, 2013 relating to the subject matter neither any amendment has been introduced nor any change in the relevant provisions of law has been made. Schedule II, Part I, clause 58A of Finance Act, 2013 does not relate to the individual rather it relates to income of University or any other educational institution, however, same has been omitted through enforcement of Finance Act, 2014 (Act IX of 2014) thus, it is no more on the statute book. The controversy involved in this case relates to Schedule II, Part III (Reduction in tax liability) sub-clause (2) of clause (1) of Ordinance, 2001 which reads as follows:--

"(2) The tax payable by a full time teacher or a researcher, employed in a non profit education or researcher institution duly recognized by Higher Education Commission, a Board of Education or a University recognized by the Higher Education Commission, including government training and research institution, shall be reduced by an amount equal to 40% of tax payable on his income from salary."

This referred clause was substituted through Finance Act, 2006. Prior to this, the clause was as follows:--

"(2) In addition to reduction specified in sub-clause (1), the tax payable by a full time teacher or a researcher, employed in a non profit education or recognized by a Board of Education or a University or the Higher Education Commission, shall be further reduced by an amount equal to 75% of the tax payable after the aforesaid reduction."

Thus, from the legislative history it is crystal clear that through Finance Act, 2006 or 2013 no change relating to the term "full time teacher" has been made or introduced rather only the rate of reduction in the tax liability has been substituted which prior to the year 2006 was 50%, substituted with 75% vide Finance Act, 2006 and now with 40% through Finance Act, 2013. Thus, except substitution of rate of reduction in tax liability no amendment relating to the term "full time teacher" has been introduced. It is clear that since long the term "full time teacher" has been interpreted and enforced without any explanation made by the Federal Board of Revenue through any circular. The instant controversy has arisen on issuance of impugned Circular No.6 of 2013 regarding explanation relating to important amendments made in the Ordinance, 2001 through Finance Act, 2013.

1. As mentioned hereinabove that through Finance Act, 2013 no amendment or change has been made in relation to term "full time teacher", thus, the circular which has been issued for clarification of Finance Act, 2013 cannot be applied against the practice operative in the department since long. Even otherwise, according to the provisions of section 206 of Ordinance, 2001 the circular has to be issued in consistency with the provisions of the Ordinance and only such circular is binding upon the tax payers.

2. So far as the argument of counsel for the appellant that the writ petitions were not maintainable in view of availability of the alternate remedy under section 127 of Ordinance, 2001 is concerned, it appears to be misconceived. According to this section the remedy of appeal is provided against the order passed under the sections enumerated therein, whereas, the instant matter relates to legality of the circular which has been issued under the provisions of section 206 which finds no place under the provisions of section 127. Thus, this argument appears to be misconceived as according to the nature of the proposition involved no remedy of appeal is available.

3. The next argument of the counsel for the appellant is that the Federal Tax Ombudsman has got no jurisdiction, appears to be result of superficial approach. According to the provisions of section 9 of Federal Tax Ombudsman Ordinance, 2000 there is no total ouster of jurisdiction rather it is conditional that the matters relating to which the legal remedy of appeal, review or revision is available under the relevant legislation shall not be entertained by the Federal Tax Ombudsman. As in view of the proposition involved, no such remedy is available, thus, the Federal Tax Ombudsman's jurisdiction does not stand ousted. So far as the question that the Federal Tax Ombudsman has got no territorial jurisdiction to the extent of Azad Kashmir is concerned, there is no cavil in this regard but it is not the matter of implementation of the judgment of the Federal Tax Ombudsman rather it has only been referred in context of legal reference.

4. As hereinabove mentioned that the appellant has based his stand on the circular dated 19.07.2013 issued under section 206 of the Ordinance, 2001 and this circular relates to the interpretation of provisions of law introduced through Finance Act, 2013, whereas, through Finance Act, 2013 no legal change has been introduced relating to the proposition in hand, thus, it can safely be held that the circular which relates to the Finance Act, 2013 has got no relevance.

5. For the above stated reasons, finding no force, both these appeals stand dismissed with no order as to costs.

Before parting with the judgment we would also like to appreciate efforts of Mr. Shakeel Ahmed, Additional Commissioner Income Tax Department who has taken keen interest in pleading the case. He remained present in the Court during hearing of the case and also filed written arguments. The efforts of the officer are commendable, irrespective of the result of the case.

ZC/14/SC(AJ&K) Appeals dismissed.

2018 P T D 1922

[Supreme Court (AJ&K)]

Before Ch. Muhammad Ibrahim Zia, C.J. and Raja Saeed Akram Khan, J

ADDITIONAL COLLECTOR CENTRAL EXCISE AND SALES TAX

Versus

MANGLA METALS (PVT.) LTD. through Chief Executive/Principle Officer, Mirpur

Civil Appeal No.266 of 2017, decided on 26th April, 2018.

(On appeal from the judgment of High Court dated 25.10.2017 in Civil Appeal No.15 of 2004)

Sales Tax Act (VII of 1990)---

----Ss. 31, 32, 47 & 37I---Powers of officers of Inland Revenue / sales tax department---Delegation of powers---Adjudication by officers of the Department---Adjudication by High Court under the Sales Tax Act, 1990 vis-a-vis delegation of powers under the Sales Tax Act. 1990---Scope---Officer(s) of the Sales Tax Department could exercise all powers and discharge all duties conferred or imposed upon any officer subordinate to such officer(s) and in cases under the Sales Tax Act, 1990, High Court was to adjudicate the same with proper appreciation and interpretation of Ss. 31 & 32 of the Sales Tax Act, 1990.

Haji Muhammad Afzal, Advocate for Appellant.

Mian Sultan Mehmood, Advocate for Respondent.

2018 P T D 2228

[Supreme Court (AJ&K)]

Before Ch. Muhammad Ibrahim Zia, C.J. and Ghulam Mustafa Mughal, J

COMMISSIONER INLAND REVENUE, MIRPUR

Versus

SHAKEEL AHMED and others

Civil Appeals Nos.23 to 32 of 2018, decided on 8th May, 2018.

(On appeal from the judgment of the High Court dated 6.10.2017 in References Nos.18 of 2012, 2, 3, 4, 5, 6, 8, 9, 10, 11 and 13 of 2013).

Income Tax Ordinance (XLIX of 2001)---

----S.133---Adjudication of reference under S.133 of the Income Tax Ordinance, 2001---Determination of all questions of law---Scope---High Court whilst acting under S.133 of the Income Tax Ordinance, 2001 was enjoined to resolve all questions of law---Where High Court had not resolved all material questions of law raised in a reference, order of High Court in the same was not sustainable---Case was remanded to the High Court.

Government of AJ&K and others v. Messrs Kashmir Tobacco Industries Ltd. 1992 SCR 20; Messrs Star Textile Limited and others v. Government of Sindh and others 2002 SCMR 356; Al Noor Textile Mills and others v. Federation of Pakistan and others PLD 1994 SC 568; Rashid Ahmed and another's case Appeal No.26 of 2018; Shahnawaz (Pvt.) Ltd. v. Pakistan through Secretary Ministry of Finance 2011 PTD 1558 and Messrs Progressive Weavers v. CIT Faisalabad 2011 PTD 2026 ref.

Babar Ali Khan, Advocate for Appellant (in Civil Appeals Nos.23, 24, 25, 26, 27, 28, 29, 30, 31, 32 of 2018).

Ch. Liaqat Afzal, Advocate for Respondents (in Civil Appeals Nos.23, 24, 25, 27, 28, 30, 31, 32 of 2018).

Respondent for Ex parte (in Civil Appeal No.29 of 2018).

Mian Sultan Mahmood, Advocate for Respondents (in Civil Appeal No. 26 of 2018).

2018 P T D 2270

[Supreme Court (AJ&K)]

Before Ch. Muhammad Ibrahim Zia, C.J. and Ghulam Mustafa Mughal, J

COLLECTOR CENTRAL EXCISE AND SALES TAX, MIRPUR, COMMISSIONER INLAND REVENUE) and another

Versus

JAVED MINHAS and 13 others

Civil Appeal No.10 of 2018, decided on 26th June, 2018.

(On Appeal from the order of the High Court dated 27.09.2017 in Reference No.38 of 2012).

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

----S. 47---Reference to High Court---Adjudication under S.47 of the Sales Tax Act, 1990 --- Reference filed against deceased assesee / tax payer---Non-impleadment of legal heirs of such assessee/taxpayer---Scope---Department impugned order of High Court whereby its reference under S.47 of the Sales Tax Act, 1990 was dismissed on ground that the same was filed against a deed person---Validity---Perusal of record revealed that when process-server reported that taxpayer had died, the Department was directed to file application for impleading his legal heirs, which was not done---Department was duty-bound to bring on record legal heirs of deceased when it was known to Department that the respondent assessee had died and no proceeding could continue against a dead person and a reference under S.47 in such case could not be treated as valid---No illegality existed in the impugned order---Appeal was dismissed, in circumstances.

Azad Goverment of the State of Jammu and Kashmir v. Sarfraz Alam and others 1997 MLD 383 rel.

(b) Administration of justice ---

----Law helped the vigilant and not the indolent, and a party who was not vigilant could only blame itself for negligence committed by such party and not the Court.

Haji Muhammad Afzal, Advocate for Appellants.

Ch. Kamran Tariq, Advocate for Respondents.