PTD 2020 Judgments

2020 P T D (Trib.) 50

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Member (Judicial)/Chairman and Muhammad Sadiq, Member (Technical)

Messrs SAPNA ENTERPRISES, PESHAWAR

Versus

COLLECTOR OF CUSTOMS (ADJUDICATION), MCC, PESHAWAR and 3 others

Custom Appeal No.98/PB of 2017, decided on 29th April, 2019.

Customs Act (IV of 1969)---

----Ss. 32(3A) & 156(1)(14)---Sales Tax Act (VII of 1990), Ss. 4, 3, 6 & 33---SRO No. 1125(I)/2011, dated 31.12.2011---Mis-declaration---Zero rating---Scope of sales tax---Time and manner of payment of sales tax---Synthetic monofilament of 67 decitex or more---Scope---Appellant imported 11 consignments of monofilament yarn; classified the goods under HS Code 5404.1900; claimed exemption of sales tax under SRO No. 1125(I)/2011, dated 31.12.2011 and got cleared the goods on payment of duty and tax after availing benefit of said SRO---Chief Collector's office, during scrutiny, pointed out that monofilament yarn did not qualify for exemption from sales tax under SRO No. 1125(I)/2011, dated 31.12.2011---Collector of Customs (Adjudication) ordered the appellant to pay the short paid amount under Ss. 3 & 6 of Sales Tax Act, 1990 and S. 148 of Income Tax Ordinance, 2001---Validity---Port authorities had not spelled out the "decitex" in the examination report at the time of assessment of impugned goods declarations---During the course of subsequent scrutiny and investigation another consignment of the importer was got tested by the customs authorities---Decitex in that particular consignment was 8.41, hence the correct classification of the goods was HS Code 54.02---Evidence produced by department confirmed the stance of the appellant---Goods imported by appellant were not hit by exclusion under clause 2 of Table 1 of SRO No. 1125(I)/2011, dated 31.12.2011---Appeal was accepted and order-in-original was set aside. Irshad Ahmad Durrani for Appellants.

Al-Haj Gul, Superintendent/D.R. for Respondents.

2020 P T D (Trib.) 172

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah (Member Judicial-III)

Messrs BUSINESS COMMUNICATION, KARACHI and another

Versus

The DEPUTY COLLECTOR, CUSTOMS INTELLIGENCE UNITS, MCC OF PMBQ, KARACHI and 2 others

Customs Appeals Nos.K-950 and K-951 of 2017, decided on 17th April, 2019.

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

----Ss. 186, 83, 80, 2(s), 179 & 202---Customs Rules, 2001, Rr. 438 & 442---Detention of goods pending payment of fine and penalty---Assessment---Clearance of goods for home consumption---"Smuggling"---Jurisdiction of Deputy Collector of Customs, Intelligence Units---Recovery of government dues--- Scope---Deputy Collector of Customs, Intelligence Units, detained the goods of appellant on exit gate after their release by Clearance Collectorate and charged appellant for mis-declaration---Validity---Section 186 of Customs Act, 1969 would be attracted during the course of imports, meaning thereby that if any case had been adjudicated by competent authority against an importer and through which it had held the charges established as leveled in the show-cause notice and imposed fine and penalty and the importer had not paid that or any inquiry or investigation in respect of any goods was underway and imposition of penalty was under consideration---Appropriate officer was empowered to detain the forthcoming goods of the same importer till the time, fine and penalty was not paid---Lawfully cleared goods could not be detained under any pretext by any officer of Customs---Deputy Collector of Customs Intelligence Units and his subordinates coulddetain the goods which were smuggled but not imported goods---Power to detain imported goods under the provision of S. 186, Customs Act, 1969 was only available to the officials of Clearance Collectorate upon availability of either of two conditions mentioned in subsection (1) of S.186, Customs Act, 1969---Detention of goods of an importer was not permitted even by the officials of Clearance Collectorate in the absence of availability of any of the two conditions---Deputy Collector of Customs Intelligence Units was not empowered to detain the consignment of any importer due to the fact that he was not empowered either to pass assessment order or clearance order against the imported goods or pass order under S.179 for imposing penalty or even recover the adjudged amount under the provisions of S. 202 of Customs Act, 1969---Appellate Tribunal declared the detention of goods by Deputy Collector of Customs Intelligence Units to be without authority/jurisdiction, void ab initio and coram non judice---Appeal was allowed.

Amir Siddiqui v. Federation of Pakistan and 3 others 2014 PTD 582 and Messrs O.S. Corporation v. FOP and others 2015 PTD 560 rel.

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

----Ss. 2(s), 168, 186, 180, 9, 10, 80, 83 & 3---Customs Rules, 2001, Rr.438 & 442---SRO No.371(I)/2002, dated: 15-06-2002---Smuggling---Detention of goods pending payment of fine and penalty---Seizure of things liable to confiscation---Scope---Clearance of goods---Assessment of goods---Restriction on possession of goods in certain areas---Deputy Collector of Customs, Intelligence Units---Jurisdiction---Scope---Deputy Collector of Customs, Intelligence Units, detained goods of appellant on exit gate after their release by Clearance Collectorate and charged appellant for mis-declaration---Plea of Deputy Collector of Customs, Intelligence Units, was that being watchdog of Revenue Division it was empowered to detain, seize any consignment cleared by Clearance Collectorate in case of mis-declaration of description, quantity, quality, weight, PCT, erroneous/non-application of valuation ruling and allowance of exemption---Validity---Deputy Collector of Customs, Intelligence Units, and his subordinates were appointed as "Officers of Customs" under S.3, Customs Act, 1969 and they derived their power of functioning vide SRO No.371(I)/2002, dated 15-06-2002 for thwarting the act of smuggling as defined in S.2(s) of the Customs Act, 1969---Jurisdiction of Deputy Collector Customs Intelligence Units and his subordinate officers in principle, was restricted to the territory falling within the ambit of Ss. 9 & 10 of Customs Act, 1969---Goods of appellant were not brought into Pakistan from any other route, instead were brought from the defined port after completion of all codal formalities i.e. passing of assessment and clearance order---Consignment of appellant stood ousted from the definition of smuggled goods and could not have been detained under S.186, Customs Act, 1969---Deputy Collector of Customs, Intelligence Units, could only initiate proceedings for the act of smuggling, which could not be invoked against any importer in case of evasion/short payment of duty and taxes on cleared goods---Section 2(s) had to be mandatorily invoked in the contravention report for invoking power of seizure under S.168(1) of Customs Act, 1969---Deputy Collector of Customs, Intelligence Units and his subordinates had not invoked S.2(s), Customs Act, 1969 resultantly, they were not empowered to seize the consignment notionally under S.168 of Customs Act, 1969---Non-invoking of S.2(s) of the Act rendered the detention, preparation of contravention report and subsequent proceedings as of no legal effect and as such null, void ab initio and coram non judice---Appeal was allowed.

2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; PLD 1964 SC 536; 2001 SCMR 883; 2003 SCMR 1505; PLD 1996 Kar. 68; 2006 PTD 978 and PLD 1971 SC 184 ref.

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

----Ss.3A, 3DD, 26 & 26A---SRO No.500(I)/2009 dated 13-6-2009---Directorate General of Intelligence and Investigation---Directorate General of Post Clearance Audit---Procedure for conducting audit---Scope---Deputy Collector of Customs, Intelligence Units, detained the goods of appellant on exit gate after their release by Clearance Collectorate and charged appellant for mis-declaration---Validity---Deputy Collector of Customs, Intelligence Units, assumed the powers of officials of Directorate General of Post Clearance Audit and conducted post clearance audit of goods declaration of appellant in the absence of availability of powers---Deputy Collector of Customs, Intelligence Units and his subordinates were not permitted under law to transgress the jurisdiction/powers of Directorate General of Post Clearance Audit---Post clearance audit conducted by Deputy Collector of Customs, Intelligence Units was held to be without jurisdiction---Appeal was allowed. (d) Customs Act (IV of 1969)---

----Ss. 180 & 156---Sales Tax Act (VII of 1990), Ss. 6 & 33---Income Tax Ordinance (XLIX of 2001), S.148---Show-cause notice---Time and manner of payment of sales tax---Collection of income tax at import stage---Scope---Deputy Collector of Customs, Intelligence Units, detained the goods of appellant on exit gate after their release by Clearance Collectorate; charged appellant for mis-declaration and created recovery of duty, income tax and sales tax---Validity---Section 6, Sales Tax Act, 1990 contained machinery provisions and defined the mode and manner of collection of sales tax as customs duty; it was not a charging section---Section 33, Sales Tax Act, 1990 contained penal clauses synonymous to S.156(1), Customs Act, 1969---Section 148, Income Tax Ordinance, 2001 was also a machinery provision akin to S.6 of Sales Tax Act, 1969, which empowered Customs authorities to collect tax like customs duty on the imported goods---Provisions which provided a mechanism or mode of collection could not be construed as charging provision, even through inapt interpretation, as it could neither abridge nor expand the scope of a charging section in an Act or Ordinance---Said sections were independent and could not be invoked for a charge---No show-cause notice could be issued by a Customs Officer under said sections---Appellate Tribunal declared the issuance of show-cause notice and passing of order-in-original to be illegal and void ab initio---Appeal was allowed.

Section Officers Government of Punjab Finance Department and others v. Ghulam Shabbir 2010 SCMR 1425 and Pakistan Television Corporation, Ltd. v. Commissioner Inland Revenue (Legal), LTU, Islamabad and others 2019 SCMR 282 rel.

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

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

----Ss. 32, 179, 202 & 180---Sales Tax Act (VII of 1990), Ss. 11, 30 & 48---Income Tax Ordinance (XLIX of 2001), Ss.148, 162, 228 & 140---Mis-declaration---Power of adjudication---Recovery of government dues---Assessment of sales tax---Recovery of arrears of sales tax---Recovery of income tax from persons holding money on behalf of a taxpayer---Collection of income tax at import stage---Recovery of income tax from whom tax was not collected or deducted---Internal audit of income tax---Scope---Deputy Collector of Customs, Intelligence Units, detained the goods of appellant on exit gate after their release by Clearance Collectorate; charged appellant for mis-declaration and created recovery of duty, income tax and sales tax---Additional Collector of Customs (Adjudication) issued show-cause notice and passed order-in-original---Plea of department was that incorporation of word "taxes" in Ss. 32 & 179, Customs Act, 1969 was sufficient for creating recovery of sales tax under S. 11, Sales Tax Act, 1990 and the income tax under S.162, Income Tax Ordinance, 2001---Validity---Word "taxes" in S. 32 of Customs Act, 1969 did not empower the Additional Collector of Customs (Adjudication) to assume powers under the provisions of S.11(2) and (3) of Sales Tax Act, 1990 and S.162(1) of Income Tax Ordinance, 2001---Additional Collector of Customs (Adjudication) could not invoke said sections unless legislature appointed him as an "Officer of Inland Revenue/Commissioner of Income Tax"---Insertion of word "taxes" in Ss. 179 & 32 of Customs Act, 1969 was only for assuming powers on the basis of involved amount of duty and taxes by appropriate adjudicating authority---Despite insertion of word "taxes" in both sections, adjudicating authority had to issue show-cause notice within the respective applicable provisions of Customs Act, 1969 only and not under any charging section or S.11 of Sales Tax Act, 1969 or S. 162 of Income Tax Ordinance, 2001---Customs Collectorate had powers to collect sales tax and income tax as duty at import stage---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 of S. 48, Sales Tax Act, 1990 and S.140, Income Tax Ordinance, 2001 but had no powers to adjudicate the cases of short recovery of sales tax and income tax---Show-cause notice issued by Additional Collector of Customs (Adjudication) was held to be void and of no legal effect---Appeal was allowed.

2011 PTD (Trib.) 110; 2010 PTD (Trib.) 2086; SCRA No. 01/2010; 2004 PTD 801; C.P. No. D-216/2013; 2015 PTD 702; 2016 PTD (Trib.) 969; 2016 PTD (Trib.) 1008; 2016 PTD (Trib.) 2125; Appeal No. K-1635/2014; Appeal No. K-1029/2016; Appeal No. K-1030 / 2016; Appeal No. K-1343/2015; 2016 PTD (Trib.) 2463; 2017 PTD (Trib.) 481; 1994 CLC 1612; 1990 PTD 29 and 2005 PTD 23 ref.

Collector of Sales Tax and Federal Excise v. Messrs Qasim International Container Terminal Pakistan Ltd. 2007 PTD 250; Xen Shahur Division v. Collector of Sales Tax (Appeal), Collectorate of Customs, Federal Excise and Sales Tax, Faisalabad 2008 PTD 1973 and DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 rel.

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

----Ss.80, 193, 193A & 180---Customs Rules, 2001, R.438---Constitution of Pakistan, Art. 13 --- SRO No.486(I)/2007 dated 09-06-2007---Assessment of goods---Appeal to Collector (Appeals)---Procedure in appeal---Show-cause notice---Double jeopardy---Scope---After passing of assessment order by competent authority, it could not be disturbed by any authority by preparing contravention report and overlapping the existing assessment order for initiation of adjudication proceedings---Only course available before Customs authorities was to challenge the assessment order before Collector of Customs (Appeals)---Customs authorities were entitled to incorporate all apprehensions, misreading of facts and contraventions of provisions in appeal---Collector of Customs (Appeals), if considered that duty and taxes had been either not levied or short paid on the basis of goods found subsequent to clearance, was empowered to issue show-cause notice---Deputy Collector of Customs Intelligence Units reopened the assessment and clearance order under S. 195, Customs Act, 1969 which power was not vested in him or Additional Collector of Customs (Adjudication)---Where the right of appeal had been accorded by the legislature, S.195 became un-operational and could not be exercised even by the authority defined therein---Transaction in question stood past and closed by virtue of non-filing of appeal against assessment order---Action of issuance of show-cause notice and passing of order-in-original fell under the ambit of "double jeopardy" as envisaged in Art. 13 of the Constitution---Appeal was allowed, accordingly.

Messrs Paramount International (Pvt.) Ltd, Karachi v. Secretary Revenue Division 2014 PTD 1256; Collector of Customs and others CPLA No.105-K of 2014 and Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310 rel.

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

----Ss. 195 & 193---Power of Federal Board of Revenue (Board) or Collector to suo motu pass orders---Appeal to Collector (Appeals)---Scope---When the right of appeal has been accorded by legislature in the provision of S. 193, Customs Act, 1969 provision of S.195 of the said Act is un-operational and cannot be exercised even by the Authority defined therein.

Messrs Paramount International (Pvt.) Ltd, Karachi v. Secretary Revenue Division 2014 PTD 1256; Collector of Customs and other's case CPLA No.105-K of 2014 and Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310 rel.

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

----Ss. 193, 180 & 179---Appeal to Collector (Appeals)---Show-cause notice---Power of adjudication---Scope---Fresh order, in the presence of an appealable order, cannot be passed even in the shape of re-assessment order or through issuance of show-cause notice under S.180, Customs Act, 1969, while exercising powers under the provisions of S. 179 of the Act.

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

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

----S.32---Mis-declaration---Erroneous PCT Heading---No charge of mis-declaration can be invoked on the basis of either transmitting or mentioning erroneous PCT Heading in the goods declaration.

State Cement Corporation v. GOP 2002 MLD 180 and Sadaat Khan v. DG Intelligence and Investigation FBR 2014 PTD 1615 rel.

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

----Ss.180, 198, 79, 80 & 83---Customs Rules, 2001, Rr. 435, 438 & 442---Show-cause notice --- Examination of goods --- Goods declaration---Self-assessment of goods---Clearance of goods---Scope---No charge under S.79(1) can be invoked in the show-cause notice even in general and not particularly when the goods were examined under the provisions of S. 198 of Customs Act, 1969 and R. 435 of Customs Rules, 2001 and were released after passing of assessment and clearance order under Ss. 80 & 83, Customs Act, 1969 and Rr. 438 & 442 of Customs Rules, 2001.

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

----Ss.32 & 223---Customs General Order No. 12 of 2002, dated 15-06-2002, Para 101(B)(ii)---SRO No.374(I)/2002, dated 15-06-2002---SRO No.499(I)/2009, dated 13-06-2009---Mis-declaration---Separate PCT Headings but chargeable to same rate of duty---Officers of Customs to follow order etc of Federal Board of Revenue (Board)---Scope---Deputy Collector of Customs, Intelligence Units, detained the goods of appellant on exit gate after their release by Clearance Collectorate; charged appellant for mis-declaration and created recovery of duty, income tax and sales tax---Validity---Appellant declared his goods to be falling under PCT Heading 3917.3990, whereas, Customs department was of the view that goods fell under PCT Heading 3922.9000---Rate of duty and taxes on both PCTs being one and the same, case of appellant squarely fell within the ambit of clause (ii) of para 101(B) of Customs General Order No. 12 of 2002, dated 15-06-2002---Initiation of case of mis-declaration in such like situation was not warranted under the law---Departmental representative contended that upon roll on of Customs Computerized System, said paragraph of Customs General Order No. 12 of 2002, dated 15-06-2002 was not applicable; that said paragraph was the clarification of SRO No. 374(I)/2002, dated 15-06-2002, which stood cancelled and that it was issued when there was no clearance of consignment through self-assessment under Customs Computerized System---Assertion of departmental representative was misconceived by virtue of the fact that SRO No.499(I)/2009, dated 13-06-2009 was continuation of preceding SROs right from SRO No. 374(I)/2002, dated 15-06-2002---Clause (ii) of para 101(B) of Customs General Order No.12 of 2002, dated 15-06-2002 was incorporated for facilitation and minimizing the hardships of importers---Said direction had not been either amended, altered or rescinded---Compliance with the directions of Board was mandatory under the provisions of S. 223 of Customs Act, 1969 without any exception---No reason was available with the Deputy Collector of Customs, Intelligence Units and his subordinates to drag the appellant in needless litigation---Appeal was allowed.

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 rel.

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

----Ss. 32, 25, 25A, 2(kka) & 79---Customs Rules, 2001, Rr. 117 & 118---Mis-declaration---Presumption---Value of goods---Power to determine customs value---Transaction value of identical and similar goods---Documents---Goods declaration---Scope---Charge of mis-declaration of value under S. 32, Customs Act, 1969 cannot be levelled on an importer on the basis of valuation ruling issued by Directorate General of Valuation or value of identical/similar transaction of goods---Charge of mis-declaration of value can only be invoked on the basis of documents delivered or furnished by the importer or statement given by him before Customs authorities---Valuation ruling or value available in data cannot be deemed to be documents defined under S.2(kka), Customs Act, 1969 warranted for transmitting goods declaration---Allegation under S. 32 of the Act cannot be invoked on the basis of presumption or assumption.

Messrs Shoaib Tayyab International v Additional Collector of Customs, Karachi 2014 PTD (Trib.) 190; Customs Appeal No. K-249/2000/13372; Customs Appeal No. K-35/2002; Customs Appeal No. K-1670/2001; 2005 PTD (Trib.) 617; 1668/LB and 1669/LB of 2002; Customs Appeal No. K-1281/05; 1986 MLD Kar. 790; PLD 1996 Kar. 68; 2006 PTD 909; 2002 PTD 2957; 2007 SCMR 1357 = 2007 PTD 1858; 1992 SCMR 1083; 2008 PTD 1250 and 2008 SCMR 438 ref.

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

----Ss.79 & 32---Pakistan Customs Tariff, Sub-Chapter 17 of Chapter 39---PCT Heading 3917.3990---PCT Heading 3922.9000---Goods declaration---Mis-declaration---Tubes pipes, hoses and fitting thereof (e.g. joints, elbows and flanges)---Scope---Appellant imported a consignment of flexible pipes---Deputy Collector of Customs, Intelligence Units, detained the goods of appellant on exit gate after their release by Clearance Collectorate and charged appellant for mis-declaration---Appellant had declared his goods to be falling under PCT Heading 3917.3990, whereas, Customs department was of the view that goods fell under PCT Heading 3922.9000---Validity---Perusal of goods declaration, examination report and images established that goods imported by appellant were flexible pipes and plastic joints---Goods imported by appellant were in no way similar to 'soap dishes, towel rails, tooth brush holders, toilet paper holders, towel hooks and similar articles for bathroom, toilets and kitchen' as opined by Customs authorities---Goods imported by appellant were not of the sort which were designed to be fixed permanently---Declared description and PCT of appellant's goods was correct in view of the expression of Sub-Chapter 17 of Chapter 39 of Pakistan Customs Tariff which read as 'Tubes pipes, hoses and fitting thereof (e.g. joints, elbows and flanges)'---Goods of appellant were of plastic, which without any exception fell under said Sub-Chapter---Classifying appellant's goods under PCT Heading 3922.9000 was nothing more but abuse of powers for causing loss and mental torture to the appellant without any cause or reason---Appeal was allowed.

(n) Words and phrases---

----"Ware"---Defined.

Dictionary.com ref.

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

----Ss. 32, 207, 208 & 209---Mis-declaration---Liability of Clearing Agent---Scope---Deputy Collector of Customs, Intelligence Units, detained the goods of importer on exit gate after their release by Clearance Collectorate and charged clearing agent along with importer for mis-declaration---Validity---Charge framed in the notices related to the claim made by importer through clearing agent---No specific allegation relating to any act of clearing agent was apparent, only offence of clearing agent was that he transmitted goods declaration for the clearance of goods---Clearing agent had no role to play in the examination conducted by terminal operator---Charges against Clearing Agent were misconceived, as his actions did not fall within the operative mechanism of S. 32, Customs Act, 1969---Where competent authority granted or rejected the claim of importer, no charge of fraud could be linked to the Clearing Agent, whose duty was to submit relevant documents for release of consignment---Liability of Clearing Agent during the course of clearance of consignment had to be evaluated under Ss. 207, 208 & 209, Customs Act, 1969---Until any direct evidence was attributed against clearing agent or when department was not able to prove any criminal intent on his part, he could not be penalized under general provisions of Customs Act, 1969---Clearing Agent, in the normal course of his business, had filed a bill based upon the documents and information provided by the importer---Clearing Agent could not be presumed to be privy to any illegal arrangement, which the importer had coined or intended in his mind---Involvement of Clearing Agent in evasion of taxes could not be presumed unless it was shown that he was directly or indirectly a beneficiary---Appeal was allowed. (p) Words and phrases---

----"Declaration"---Meaning.

Vithoba Syamna v. Union of India AIR 1957 Bom. 321 ref.

(q) Words and phrases---

----"Claim"---Meaning.

Vithoba Syamna v. Union of India AIR 1957 Bom. 321 ref.

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

----S.32---Mis-declaration---In order to attract penal provision of S.32, Customs Act, 1969 it must be established that person who had allegedly made a false statement in documents submitted to the Customs authorities had the knowledge of it.

Eastern Rice Syndicate v. Collector of Customs PLD 1959 SC 364 rel.

Nadeem Ahmed Mirza (Consultant) for Appellant.

Manzoor Rajpar, P.A. and Noor Ellahi Appraiser for Respondents.

2020 P T D (Trib.) 241

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs BLUE ENTERPRISES LAHORE

Versus

The DEPUTY COLLECTOR OF CUSTOMS, (GROUP-IV), MCC OF APPRAISEMENT-WEST, KARACHI and another

Custom Appeal New No.K-69 of 2017, (Old No.K-2028 of 2016) decided on 15th April, 2019.

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

----Ss.4 & 3---Customs Act (IV of 1969), S. 223---SRO No.1125(I)/2011, dated 31.12.2011---SRO No.682(I)/2013, dated 27.07.2013---SRO No.491(I)/2016, dated 30.06.2016---Zero rating---Scope of sales tax---Ejusdem generis, principle of---Applicability---Power Federal Board of Revenue (Board) to issue clarification---Scope---Interpretation, scope and effect of Notifications---Appellant imported tarpaulin and claimed benefit of zero rating under S.4 of Sales Tax Act, 1990 notified vide SRO No.1125(I)/2011, dated 31.12.2011---Appraising Officer denied the benefit of SRO No.1125(I)/2011, dated 31.12.2011 on the pretext that goods being finished were not entitled to zero rating in terms of Serial No. IV of Table II of SRO No.1125(I)/2011, dated 31.12.2011---Appellant filed first review which was dismissed---Second review was also rejected on the ground that the goods were cut to side with eyelets and was not in rolls form, therefore benefit of SRO No.1125(I)/2011, dated 31.12.2011 could not be granted---Collector of Customs (Appeals) although admitted that goods of appellant fell within the ambit of SRO No.1125(I)/2011, dated 31.12.2011 but held that appellant was not entitled to benefit of zero rating or benefit of SRO No.1125(I)/2011, dated 31.12.2011 with the exception of payment of advance income tax at reduced rate of 3% as against 6%, to be paid by non-filer---Plea of department was that Board had issued a clarification dated 21.02.2017 in support of the stance that zero rating under S.4 of Sales Tax Act, 1990 as notified through SRO No.1125(I)/2011, dated 31.12.2011 was not allowable to the appellant---Validity---Held, Collector of Customs (Appeals) misread the essence and spirit of the SRO No.1125(I)/2011, dated 31.12.2011, because he attributed redundancy to the legislation, which was not permitted---Collector of Customs (Appeals) read columns (2) & (3) of SRO No.1125(I)/2011, dated 31.12.2011 in isolation---Opinion formed by Collector of Customs was against the principle of 'ejusdem generis' which mandated that the words and phrases occurring in provision of law were not to be taken in an isolated or detached manner, disassociated from the context, but were to be read together and construed in the light of overall context of the provision of law---Collector of Customs (Appeals) could not have ordered for collection of advance income tax at reduced rate unless benefit of zero rating or SRO No. 1125(I)/2011, dated 31.12.2011 was granted---Payment of advance income tax was interconnected with the benefit of SRO No.1125(I)/2011, dated 31.12.2011, as evident from Serial No. 3 of Part II of First Schedule to the Income Tax Ordinance, 2001---Board's clarification which denied zero rating to the appellant on its imported goods under S. 4, Sales Tax Act, 1990 and SRO No.1125(I)/2011, dated 31.12.2011 was void---Board had no mandate to interpret a provision of statute or expression of notification, it was the sole prerogative of Superior Courts---Appellate Tribunal held that tarpaulin imported by appellant was entitled to zero rating under S. 4 of Sales Tax Act, 1990 and the benefit of SRO No.1125(I)/2011, dated 31.12.2011---Assessment order as well as order-in-appeal being illegal, null and void was set aside---Appeal was allowed, accordingly.

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 and Qazi CNG Station, Gujrat and another v. Directorate General of Intelligence and Investigation FBR, Karachi and 2 others 2016 PTD (Trib.) 107 rel.

(b) Words and phrases---

----"Tarpaulin"---Meaning and usage.

(c) Interpretation of statutes---

----Language employed in a statute must be interpreted and understood in the context of the enactment---Court is bound to evaluate that the interpretation sought to be placed on a particular provision is consistent with the entire scheme of statute---Nothing ought to be read or implied in a statute, particularly a taxing statute. (d) Sales Tax Act (VII of 1990)---

----S.4---Interpretation of S.4, Sales Tax Act, 1990---Zero rating---Object---Federal government is empowered to notify any goods on which sales tax shall be charged at the rate of zero percent, despite availability of S.3 of the Sales Tax Act, 1990 levying payment of sales tax at the rate of seventeen percent of the value of supply and on the goods imported into Pakistan---Wisdom of legislature in framing and inserting S.4 in the Sales Tax Act, 1990 is extremely relevant and needs to be kept in mind while interpreting same---Reading of S.4 brings one to inescapable conclusion that the benefit of zero percent conferred by said provision is meant to support the local industry, which is engaged in manufacturing export oriented product by exempting the payment of sales tax under SRO on the supply and import made by five sectors including textile, carpet, leather, sports and surgical goods---Goods imported by said sectors earn considerable foreign exchange---Supplies and import of the goods of/by these five sectors were therefore declared zero rated to ensure that the manufacturers/importers, exporters and wholesalers be eligible to the input tax credit, and the benefit of the notification was available to such registered persons who appear on the Active Taxpayers List on the website of the Federal Board of Revenue. (e) Interpretation of statutes---

----Non-obstante clause---Scope---Non-obstante clause is a legislative tool employed to give an over-riding effect to a certain provision over a contrary provision that may be found in the same enactment or in a different enactment in order to avoid the operation and effect of all 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. Asha Lata S. Guram 1986 4 SCC 447 rel.

(f) Interpretation of statutes---

----Exemption clause in a statute---Construction---Term of exemption ought to be reasonably construed and if a taxpayer is entitled to an exemption on a reasonable construction of law it ought not to be denied to him by a strained, strict or convoluted interpretation of law.

PTV Ltd. v. CIR (Legal) LTU, Islamabad and others 2019 SCMR 282 rel.

(g) Words and phrases---

----"Article"---Meaning.

Black Law Dictionary; Chambers Dictionary; New Lexicon Webster's Dictionary and Oxford Advanced Learner Dictionary rel.

(h) Interpretation of statutes---

----Words used in a statute---Redundancy cannot be attributed to legislature---Every word used in the statute must be given its true meaning---Provision must be construed together in a harmonious manner---One provision of law cannot render another provision surplus.

PLD 2005 SC 373; PLD 1997 SC 32; PLD 1962 SC 90; 2015 SCMR 1303; PLD 2015 SC 401; 2005 SCMR 1166 and 2016 PTD 1675 ref.

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

----S. 24---Fresh notification amending the existing notification, has to run prospectively unless expressed specifically.

PLD 1974 SC 180; 2004 PTD 2524; S.T. Appeal No.271/2008; 2009 PTD 1; 2005 SCMR 492; 2009 PTD 16; 2009 PTD 1392; 2009 PTD 1112; 2010 PTD (Trib) 1675; 2010 PTD (Trib.) 2406; 2010 PTD (Trib.) 1631; 2010 PTD (Trib.) 1636 and PTCL 2017 CL 75 (sic) ref.

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

----S. 223---Power to issue clarification by Federal Board of Revenue---Clarification so issued in no manner can overrule the expression of the notification by virtue of the fact that clarification is deemed to be an instruction/order and as such has no legal sanction.

(k) Interpretation of statutes---

----Harmonious construction had to be made keeping in view the different provisions of the statute after fully understanding the intention with which the same had been made and the object which was intended to achieve.

Nadeem Ahmed Mirza, Consultant for Appellants.

Prihtvi Suresh, A.O. for Respondents.

2020 P T D (Trib.) 324

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial) and Muhammad Sadiq, Member (Technical)

GUL MULLAH

Versus

The MAJOR MUHAMMAD IMRAN, ANTI-SMUGGLING OFFICER, F.C. (HQR.), PESHAWAR and another

Customs Appeal No.14-PB of 2017, decided on 30th April, 2019.

Customs Act (IV of 1969)---

----Ss.2(s), 168, 16, 156(1)(8) & 156(1)(89)---Imports and Exports (Control) Act (XXXIX of 1950), S. 3---Smuggling---Seizure of goods liable to confiscation---Power to restrict importation and exportation of goods---Scope---Frontier Corps recovered Pakistan currency of Rs.60,00,000 from the possession of appellant and alleged that the seized currency was being smuggled to Afghanistan without valid documents---Additional Collector of Customs (Adjudication) outrightly confiscated the seized currency and imposed personal penalty---Validity---Frontier Corps had not taken into possession the passport, travelling itinerary and had not proved as to how the appellant was going out of Pakistan---Possession of currency by a person was not an offence but its taking out of Pakistan was an offence under S. 2(s) of Customs Act, 1969---No evidence was available on file to suggest that the appellant was making an attempt to smuggle the currency out of Pakistan---Recovery memo prepared by Frontier Corps had no marginal witnesses---Appellant's means of transport were not mentioned in the show-cause notice nor any statement from the driver of vehicle (if so) was obtained/recorded on the spot---Specific place of occurrence/seizure was neither mentioned in the recovery memo. nor in the seizure report---Place of seizure was shown as Torkham Check Post while Torkham Check Post was a Customs Station---Frontier Corps had no jurisdiction to seize any goods at the Customs Station---Documents on file showed that appellant, being a businessman, usually carried a reasonable, justifiable amount with him for dealing with business---Appellant was authorized agent/buyer of a company and company had deputed the appellant to buy sheep skin and other raw material related to animal skin---Adjudicating officer had manifested the appellant as Afghan National, but the available record i.e. CNIC disclosed that appellant was resident of Pakistan---CNIC of appellant was duly verified from the office of NADRA---Appeal was accepted and the impugned order-in-original passed by the Additional Collector of Customs (Adjudication) was set aside.

Malik Hasnain and Anwar Ullah for Appellant.

Alhaj Gul, Superintendent/D.R. for Respondents.

2020 P T D (Trib.) 367

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs ELLAHI CORPORATION, LAHORE

Versus

The DEPUTY COLLECTOR and another

Customs Appeal No.K-1216 of 2016, decided on 20th December, 2018.

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

----Ss. 32 & 25---Qanun-e-Shahadat (10 of 1984), Arts. 117 & 121---Constitution of Pakistan, Art. 13---Mis-declaration---Unit of measurement---Cost of packing---Burden of proof---Double taxation---Scope---Appellant imported goods which were filled in tin containers, onward in bags and then stuffed in cartons---Customs authorities added the weight of essential /non-essential packing to the cost of goods---Validity---Weight of essential/non-essential packing was deemed to be part and parcel of the weight of the goods imported and it had to be construed as unit of measurement/quantity (contents) as mentioned against each PCT Heading of First Schedule to the Customs Act, 1969---Only the weight of imported goods matter and that had to be construed as goods, the weight of essential/non-essential packing could not be considered as an integral part of the goods so imported---Duty and taxes had to be charged/collected on the goods actually imported for use/consumption by the general public---Addition of cost of essential/non-essential packing material in the value of imported goods was permitted in terms of Sr. No. (iii) of clause (b) of subsection (2) of S.25 of Customs Act, 1969---Cost of packing could be imposed on importer only when it was confirmed that importer had incurred the cost of packing but had not included the same in the price actually paid---Burden to prove that cost of packing was actually paid by importer was on Customs Authorities in terms of Arts. 117 & 121 of Qanun-e-Shahadat, 1984---Such addiction was in derogation of the provisions of S. 25, Customs Act, 1969 and Art. 13 of the Constitution and had to be construed as double taxation---Appellate Tribunal allowed the appeal, in circumstances.

1992 PTD 593; 2003 PTD (Trib.) 928; 2010 PTD 1515 and 2009 PTD (Trib.) 2025 ref.

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

----S. 24A---Reasons for decision---Scope---Where any authority, Court or Tribunal gave a finding of fact which was not based on material available on record, same was perverse and such a perverse finding of fact, which was violative of the established principle of appreciation of evidence on record, was not sustainable in law---Every judicial or quasi-judicial finding should be based on reasons containing the justification for the finding in the order itself.

2005 YLR 1019; 2007 PTD 2500; 2004 PTD 1973; 2005 YLR 1719; 2003 PTD 777; 2003 PTD (Trib) 2369; 2002 MLD 357; 1983 CLC 2882; 2005 PTD 2519; 2005 PTD 1189; PLD 1995 SC (Pak) 272; PLD 1970 SC 158; PLD 1970 SC 173; 1984 SCMR 1014 and 2012 PTD (Trib.) 619 ref.

Nadeem Ahmed Mirza, Consultant for Appellant.

Adnan Cheema, Appraiser for Respondents.

2020 P T D (Trib.) 392

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs A.S. AUTOS, KARACHI

Versus

The DEPUTY COLLECTOR, GROUP-VI, MCC OF APPRAISEMENT-WEST, KARACHI and 2 others

Custom Appeal No.K-76 of 2018, decided on 20th December, 2018.

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

----Ss. 194A, 193 & 180---Appeal to the Appellate Tribunal---Appeal to Collector (Appeals)---Show-cause notice---Scope---Appellant filed goods declaration of imported goods---Goods were cleared after payment of duty and taxes---Deputy Collector of Customs (Appraisement), after lapse of two years, passed re-assessment order through which recovery was created ---Appellant filed appeal against the assessment order which was allowed by Collector of Customs (Appeals) on the ground of non-issuance of show-cause notice---Deputy Collector of Customs (Appraisement), thereafter, framed contravention report and Deputy Collector of Customs (Adjudication) issued show-cause notice---Deputy Collector of Customs (Adjudication) passed order-in-original and appeal filed by importer against said order was dismissed---Validity---Proper course of action available with Customs authorities against the order of Collector of Customs (Appeals) was to file appeal before Customs Appellate Tribunal--- Customs authorities could not issue show-cause notice and pass order-in-original in the presence of Collector's earlier order---Only one order had to remain in field, no second order was permitted to pile upon the existing order which had attained finality---Appellate Tribunal allowed the appeal, in circumstances.

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

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

----Ss. 195, 193 & 194A---Powers of Federal Board of Revenue or Collector of Customs to pass certain orders---Appeal to Collector (Appeals)---Appeal to the Appellate Tribunal---Scope---When the right of appeal was available before the officer of customs under Ss. 193 & 194A, Customs Act, 1969; S. 195 became un-operational and could not be exercised under any circumstance.

Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310 and Messrs Paramount International (Pvt.) Ltd. v. FOP and another 2014 PTD 1256 rel.

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

----Ss. 26A, 32(3A) & 3DD---Conduct of audit---Jurisdiction---Scope---Appellant filed goods declaration for imported goods---Goods of appellant were cleared after payment of duty and taxes---Deputy Collector of Customs (Appraisement), after lapse of two years, passed re-assessment order through which recovery was created---Validity---Directorate, Post Clearance Audit was empowered to conduct audit of the record/books of importer---If any discrepancy or mis-declaration was observed, said officials were empowered to frame contravention report under the provisions of S. 32(2A), Customs Act, 1969---Deputy Collector of Customs (Appraisement), in the present case, conducted audit under S. 26A and prepared contravention report under the provisions of S. 32(3A) while usurping the powers of Directorate General of Post Clearance Audit, which was not permitted under the law.

Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184; Omer and Company v. Controller of Customs, (Valuation): 1992 ALD 449; Karachi AAA Steel Mills Ltd. v. Collector of Sales Tax and Central Excise Collectorate of Sales Tax 2004 PTD 624; Ali Muhammad v. Hussain Buksh and others PLD 1976 SC 514; Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others PLD 2001 SC 514; 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.

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

----S. 193A---Procedure in appeal---Extension of time by Federal Board of Revenue after lapse of 120 days---Scope---Collector of Customs had to pass order within a period of 120 days from the date of receipt of appeal---Appeal, in the present case, was filed by appellant on 19-12-2016, order against which had to be passed on or before 19-4-2016---No extension was granted by Collector prior to the lapse of initial period due to the fact that no "exceptional circumstances" existed---Collector, for validating the delay in passing order, placed reliance on extension granted by the Board which was nothing more than exercise in futile---Order passed by Collector of Customs (Appeals) was barred by 254 days, hence void ab initio and not enforceable under law.

Collector of Customs Sales Tax Gujranwala and others v. Super Asia Mohammad Din and Sons and others 2017 PTD 1756 and 2017 SCMR 1427; 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, Consultant for Appellant.

Zakaullah, Appraising Officer for Respondents.

2020 P T D (Trib.) 454

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs MF ENTERPRISES, KARACHI

Versus

THE DEPUTY COLLECTOR, GROUP-V, MCC OF APPRAISEMENT-EAST, KARACHI and another

Custom Appeal No.K-536 of 2017, decided on 20th December, 2018.

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

----Ss. 25, 25A, 32, 180 & 156(1)(14)---Qanun-e-Shahadat (10 of 1984), Arts. 117 & 121---Constitution of Pakistan, Art. 13---Mis-declaration---Unit of measurement---Cost of packing---Burden of proof---Double taxation---Scope---Appellant imported goods which were packed in waxed wrapper and 10 pieces in a packet of paper board, 10 packets in a card and 50 cards in a carton---Examiner reported the weight of goods with addition of waxed wrapper, packet, card and carton---Examiner increased the weight of the goods without reporting any excess quantity or weight---Validity---Examiner added the weight of packing material in the weight of goods in derogation of unit of measurement given in First Schedule to the Customs Act, 1969---Section 25 provided determination of value of "goods" and "category of goods"; S. 25A mentioned "goods" and "classes of goods"---Weight of essential/non-essential packing was immaterial---Addition of cost of essential/non-essential packing material to the value of imported goods was permitted in terms of Sr. No. (iii) of clause (b) of subsection (2) of S. 25 of Customs Act, 1969---Cost of packing could be imposed on importer only when it was confirmed that importer had incurred the cost of packing but had not included the same in the price actually paid---Burden to prove that cost of packing was actually paid by importer was on the Customs Authorities in terms of Arts. 117 & 121 of Qanun-e-Shahadat, 1984---Such addition was in derogation of the provisions of S.25, Customs Act, 1969 and Art.13 of the Constitution and had to be construed as double taxation---Appellate Tribunal allowed the appeal, in circumstances.

1992 PTD 593; 2003 PTD (Trib.) 928; 2010 PTD 1515 and 2009 PTD (Trib.) 2025 ref.

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

----S. 180---Sales Tax Act (VII of 1990), Ss. 3, 6, 7, 33 & 34--- Income Tax Ordinance (XLIX of 2001), S. 148---Show-cause notice---Time and manner of payment of sales tax---Determination of sales tax liability---Offences and penalties---Default surcharge---Collection of income tax on imports---Scope---Section 3 of Sales Tax Act, 1990 is a charging section and under the said section appropriate authority is an officer of Inland Revenue---Section 6 of the Sales Tax Act, 1990 defines the mode and manners of collection of sales tax at import stage by Customs Authorities, while S. 7 of the said Act states about determination of tax liability at the time of filing of sales tax return, thus both the provisions are machinery provisions---Section 33 of the Sales Tax Act, 1990 contains penal clauses synonymous to S. 156(1) of Customs Act, 1969 and S. 34 of the Sales Tax Act, 1990 deals with default surcharge to be paid upon contravention and establishment of charge---Section 148, Income Tax Ordinance, 2000 describes the procedure for collection of income tax at import stage by the authorities referred therein---Said provisions are independent under which no charge can be invoked---No show-cause notice can be issued under aforesaid provisions which are independent and have no nexus with each other---Issuance of show-cause notice while invoking irrelevant/erroneous provisions of law renders the same void ab initio and of no legal effect.

Collector of Customs Sales Tax v. Khursheed Spinning Mills Ltd., and another 2017 PTD 196; Section Officer Government of Punjab Finance Department and others v. Ghulam Shabbir 2010 SCMR 1425; 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; 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.

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

----Ss. 3 & 180---Sales Tax Act (VII of 1990), S.11---Income Tax Ordinance (XLIX of 2001), S. 162---Jurisdiction of officers of customs---Show-cause notice---Assessment of sales tax---Recovery of income tax from the person from whom tax was not collected or deducted---Scope---Officer of Customs appointed under S. 3 of Customs Act, 1969 is not empowered to exercise powers under S. 11 of Sales Tax Act, 1990 and S. 162(1) of Income Tax Ordinance, 2001---Said sections empower the officers of Inland Revenue/Commissioner of Income Tax to initiate adjudication proceedings for recovery of short collected sales tax/income tax either due to collusion or connivance or inadvertence, error or misconstruction.

2011 PTD (Trib.) 110; 2010 PTD (Trib.) 2086; 2004 PTD 801; C.P. No. D-216/2013; 2014 PTD 1963; 2015 PTD 702; 2016 PTD (Trib.) 969; 2016 PTD (Trib.) 1008; 2016 PTD (Trib.) 2125; Appeal No. K-1635/2014; Appeal No.K-1029/2016; Appeal No.K-1030/2016; 2016 PTD (Trib.) 2463 and 2017 PTD (Trib.) 481 ref.

Nadeem Ahmed Mirza, Consultant for Appellant.

Imran Saifi, Appraiser for Respondent.

2020 P T D (Trib.) 497

[Customs Appellate Tribunal]

Before Syed Tanvir Ahmad, Member Technical-III

Messrs ORIENTAL FREIGHT LOGISTICS, KARACHI

Versus

The DEPUTY COLLECTOR OF CUSTOMS, MODEL COLLECTORATE OF CUSTOMS, APPRAISEMENT (WEST), CUSTOMS HOUSE, KARACHI and another

Customs Appeal No.K.447 of 2018, decided on 20th December, 2018.

Customs Act (IV of 1969)---

----Ss. 209, 32, 79, 80, 83 & 156(1)(9) & (14)---Liability of agent---Mis-declaration---Declaration and assessment---Checking of goods declaration---Clearance of goods---Wrong PCT classification---Scope---Import of vehicle---Goods declaration was filed through appellant/Customs Clearing Agent---Vehicle was cleared and importer obtained its possession after realization of leviable duty and taxes---Deputy Collector of Customs, later on, considered that vehicle was assessed under wrong PCT classification and attracted higher rate of duty and taxes; show-cause notice was issued and order-in-original was passed---Collector of Customs (Appeals) dismissed the appeal being barred by time---Validity---Deputy Collector of Customs having passed assessment and clearance orders, could not issue show-cause notice or pass order-in-original against importer's Clearing Agent for the negligence and lapses on his part---No charge of mis-declaration in material particulars was visible from the documents---Order was completely silent with regards to either willful act, negligence or default on the part of the Clearing Agent---Examination and assessment orders had been passed by Customs Officers without any influence of Clearing Agent---Appellate Tribunal annulled the show-cause notice and set aside the orders passed by customs authorities.

Nadeem Ahmed Mirza, Consultant for Appellant.

Hamza Ranj, AO; for Respondent.

2020 P T D (Trib.) 526

[Customs Appellate Tribunal]

Before Syed Tanvir Ahmed, Member Technical-III

Messrs UMAR HAROON TRADERS, PESHAWAR

Versus

The SUPERINTENDENT, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION -- FBR, FIELD INTELLIGENCE, UNIT, HYDERABAD and 2 others

Customs Appeal No.H-17 of 2018, decided on 20th December, 2018.

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

----S. 193A---Procedure in appeal---Extension of time by Federal Board of Revenue after lapse of 120 days---Scope---Appellant filed appeal against the order of Deputy Collector of Customs (Adjudication) whereby his goods were seized---Appeal was filed before Collector of Customs (Appeals) on 23.3.2017---Plea of appellant was that order on appeal should have been passed on or before 21.7.2017 whereas it was passed on 29.12.2017---Validity---Appeal against the order of Deputy Collector of Customs (Adjudication) had to be decided within a period of 120 days---Extension of 60 days was not given by Collector of Customs (Appeals) on the ground that no exceptional circumstances were available---For validating the delay in passing the order Collector of Customs (Appeals) had relied on extension granted by the Federal Board of Revenue on 14.11.2017---Such extension was not valid by virtue of the fact that it had to be given prior to the lapse of currency of initial period of 120 days---Extension granted by the Board was nothing more than flogging a dead horse for giving a lease of life---Order passed by Collector of Customs (Appeals) was barred by 254 days, hence void ab initio and not enforceable under law.

Khalid Mahmood v. Collector of Customs 2009 SCMR 1881; 2017 PTD 1756; Collector of Customs Sales Tax Gujranwala and others v. Super Asia Mohammad Deen and Sons and others 2017 SCMR 1427; Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala and others 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 rel.

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

----Ss. 2(s), 168, 16, 178, 156(1)(89), 156(2) & 177---Smuggling---Seizure of goods---Restriction on import of goods---Punishment of persons carrying, removing, depositing, harbouring, keeping or concealing, or in any manner dealing with smuggled goods---Burden of proof---Scope---Directorate General of Intelligence and Investigation intercepted a trailer and found 50 bags of black pepper---Driver produced import documents but documents did not tally with the goods---Deputy Collector of Customs (Adjudication) issued show-cause notice and vide order-in-original confiscated the smuggled goods---Collector of Customs (Appeals) dismissed the appeal---Validity---Directorate General of Intelligence and Investigation was not empowered to inquire from either the transporter or owner of the transported goods or from the appellant about the legality of transported goods---Person transporting goods within the territory of Pakistan could not be required to keep goods declaration or purchase bill of the goods with himself---Appellant had purchased goods from the importer, who obtained their clearance from Customs Collectorate after fulfillment of all codal formalities---Interception of trailer, detention, seizure, preparation of contravention report, issuance of show-cause notice and passing of order-in-original were held to be void, illegal and of no legal effect---Appellate Tribunal ordered for restoration of goods to the appellant unconditionally.

2005 PTD (Trib.) 135 and PLD 1991 SC 630 rel.

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

----Ss. 2(s) & 177---Smuggling---Restriction on possession of smuggled goods---Scope---Transportation of goods within the territorial limits of Pakistan do not constitute an offence.

Noor Muhammad Son of Muhammad Gul, Imtiaz Ali Son of Pir Buksh v. Deputy Collector of Customs, (Adjudication) Hyderabad Customs Appeal H-185/2009; Collector of Customs v. Rehmat Afridi 2010 PTD 2015 and Sikandar A. Karim v. The State 1995 SCMR 387 ref.

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

----Ss.2(s), 168, 16, 178, 156(1)(89), 156(2), 177 & 187---Qanun-e-Shahadat (10 of 1984), Arts. 117 & 121---Smuggling---Seizure of goods---Restriction on import of goods---Punishment of persons carrying, removing, depositing, harbouring, keeping or concealing, or in any manner dealing with smuggled goods---Burden of proof---Scope---Directorate General of Intelligence and Investigation intercepted a trailer and found 50 bags of black pepper---Driver produced import documents but documents did not tally with the item---Deputy Collector of Customs (Adjudication) issued show cause notice and vide order-in-original confiscated the smuggled goods---Collector of Customs (Appeals) dismissed the appeal---Validity---Appellant submitted import documents/bilties and sales tax invoices/return and respective annexures of transported goods---Appellant discharged burden laid upon him and burden stood shifted to the department---Department failed to prove the allegation of smuggling in the presence of confirmation of sale certificate---Appellate Tribunal annulled the show cause notice, set aside the orders passed thereon and ordered for restoration of goods to the appellant unconditionally.

S.M. Anwar Sethi v. South British Insurance Company Ltd. PLD 1975 Kar. 458; Barkat Ali v. The State PLD 1973 Kar. 659; Mst. Safia Begum v. Mst. Malkani and another PLD 1965 Lah. 576; Akber Ali v. Ehsan Ellahi PLD 1980 Lah. 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. CBR PLD 1959 SC (Pak) 364; The Collector Central Excise and Land Customs v. Imdad Ali 1969 SCMR 708; Messrs Latif Brothers v. Deputy Collector of Customs, Lahore 1992 SCMR 1083; Kamran Industries v. Collector of Customs (Exports) and Order of the Custom Tribunal PLD 1996 Kar. 68; Muhammad Mir v. Collector of Customs (Adjudication), Karachi Customs Appeal No. K-391/04; Collector of Customs, Lahore v. S.M. Saleem C.A. No.68/2002 and Collector of Customs, Sales Tax and Central Excise v. Prof. Muhammad Khan and 6 others 2007 SCMR 10 ref.

Kamran Industries v. Collector of Customs (Exports) and Order of the Custom Tribunal PLD 1996 Kar. 68 rel.

Nadeem Ahmed Mirza, Consultant for Appellant.

Adnan Kafeel, I.O. for Respondent.

2020 P T D (Trib.) 573

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

The DIRECTOR, through Deputy Director

Versus

Messrs EKADA CORPORATION, KARACHI and another

Custom Appeal No.K-74 of 2018, decided on 20th December, 2018.

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

----Ss. 26A & 3DD---SRO No. 500(I)/2009 dated: 13-6-2009---Conducting of audit---Procedure---Directorate General of Post Clearance Audit---Notice---Reasonable time-Scope-Officer of Customs is empowered to conduct audit, inquiry or investigation of an importer for the purpose of ascertaining the correctness of any declaration, document or statement for determining the liability of duty, taxes, fees, surcharge, fines and penalties-Prior to proceed with said exercise, appropriate officer has to either summon or give a notice and reasonable time to an importer for conducting audit or for the purpose of production of accounts.

(b) Administration of justice---

----A thing has to be done as it has been prescribed to be done, doing the same in any other manner renders the same illegal.

2002 PTD 2457; PLD 1971 SC 61; Raunaq Ali's case PLD 1973 SC 236; E.A. Avans's case PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; PLD 1996 Kar. 68; 2006 PTD 978 and Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184 rel.

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

----Ss. 26A & 3DD---Sales Tax Act (VII of 1990), S. 30DD---SRO No.42(I)/2010 dated: 23-1-2010---Conducting of audit---Procedure---Directorate General of Post Clearance Audit---Jurisdiction---Scope---Deputy Director of Post Clearance Audit is not empowered to issue audit observation in the matter of sales tax.

Raunaq Ali's case PLD 1973 SC 236; Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184; Chittaranjan Cotton Mills Ltd. v. Staff Union PLD 1971 SC 197; Messrs Unitex Tower Factory v. The Collector of Customs (Appeals ) and others 2002 PTD (Trib.) 889; 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 37 and Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others PLD 2001 SC 514 ref.

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

----Ss. 26A & 3DD---Income Tax Ordinance (XLIX of 2001), Ss. 228 & 177---Conducting of audit---Procedure---Directorate General of Post Clearance Audit---Jurisdiction---Officials of Directorate General of Post Clearance Audit are not designated as officers of Inland Revenue under S. 228 or any other section of Income Tax Ordinance, 2001 and as such are not empowered to carry out audit under S.177 of the Ordinance.

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

----Ss. 3 & 4---Sales Tax Act (VII of 1990), Ss. 11 & 30---Income Tax Ordinance (XLIX of 2001), Ss. 162(1) & 207---Powers and duties of officers of Customs---Jurisdiction---Assessment of sales tax---Confiscation of goods---Scope---Collector of Customs (Adjudication) is not designated as an officer of Inland Revenue under S. 30, Sales Tax Act, 1990 or under any section of Income Tax Ordinance, 2001 and as such is not empowered to exercise powers under any section of Sales Tax Act, 1990 and S. 207 of Income Tax Ordinance, 2001---Said officer is not empowered to exercise powers either under the provisions of S. 11 of Sales Tax Act, 1990 and S. 162(1) of Income Tax Ordinance, 2001 under which powers have to be exercised by officers of Inland Revenue/Commissioner of Income Tax.

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

----Ss. 195, 180, 80 & 83---Customs Rules, 2001, Rr. 438 & 442---Power of Board or Collector to suo motu pass orders---Show-cause notice---Assessment and clearance of goods---Scope---Order passed by Competent Authority under the provisions of Ss. 80 & 83 of Customs Act, 1969 and Rr. 438 & 442 of Customs Rules, 2001 could only be corrected by revisional Authority in exercise of power under S. 195 of Customs Act, 1969---Section 195, Customs Act, 1969 empowers the Board or Collector of Customs to examine suo motu the record of any proceedings (passing of assessment order is a proceeding by all means/standard) for the purpose of satisfying itself or himself as to the legality or propriety of any decision or order passed by subordinate officer---Federal Board of Revenue or Collector may, after re-opening the existing order, pass fresh order as deems fit after issuance of show cause notice to the affected person.

PLD 1975 SC 331; 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 and 2010 PTD (Trib.) 2523 ref.

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

----Ss. 193, 80 & 83---Customs Rules, 2001, Rr. 438 & 442--- Appeal to Collector (Appeals)---Assessment and clearance of goods---Scope---On conclusion of transaction under the provisions of Ss. 80 & 83, Customs Act, 1969 and Rr. 438 & 442 of Customs Rules, 2001, the order so passed becomes an appealable order before Collector of Customs (Appeals)---Proper course available before officers of Customs is to file appeal in case of any reservation against assessment order--- Failure to file appeal results in assessment order attaining finality which cannot be disturbed by any authority.

(h) Constitution of Pakistan---

----Arts. 4 & 25---Rights of individuals to be dealt with in accordance with law---Equality of citizens---Scope---Persons placed at same pedestal cannot be treated differently.

2002 PTD 976; 2002 SCMR 312; 2009 PTD 1507; 2005 SCMR 492 and 2010 SCMR 431 rel.

Nadeem Ahmed Mirza (Consultant) for Appellant.

2020 P T D (Trib.) 632

[Customs Appellate Tribunal]

Before Jahanzaib Wahlah, Member Judicial-III

Messrs MAC CORPORATION, KARACHI

Versus

The DEPUTY COLLECTOR (PREVENTIVE), SUKKUR, MCC OF HYDERABAD and 2 others

Custom Appeal No.K-208 of 2018, decided on 20th December, 2018.

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

----S. 2(s)(ii)---Smuggling---Transportation of goods valuing less than one hundred and fifty thousand rupees---Scope---Appellant imported goods which were being transported to his buyer when the officers of customs intercepted the vehicle---Officers of Customs detained the goods on failure of driver of the vehicle to produce valid import documents---Deputy Collector of Customs (Adjudication) issued show-cause notice and Collector of Customs (Adjudication) passed order thereon---Validity---Value of transported goods were merely valuing Rs.130,000, that is, beyond the limit specified in Cls. (ii) of S.2(s), Customs Act, 1969---No case of "smuggling" could be initiated in case the value of the goods did not exceed Rs.150,000---Appellate Tribunal held the interception, detention, seizure and framing of contravention report to be without jurisdiction---Appeal was allowed.

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

----Ss. 179 & 180---Power of adjudication---Show-cause notice---Pecuniary jurisdiction---Scope---Appellant imported goods which were being transported to his buyer when the officers of Customs intercepted the vehicle---Officers of Customs detained the goods on failure of driver of the vehicle to produce valid import documents---Deputy Collector of Customs (Adjudication) issued show-cause notice and Collector of Customs (Adjudication) passed order thereon---Validity---Powers had to be assumed on the basis of involved amount of duty and taxes---Power to adjudicate the case rested with the Principal Appraiser in terms of Cls. (vi) of S. 179, Customs Act, 1969---Show-cause notice in the present case was issued by Deputy Collector of Customs (Adjudication) and order in the case had to be passed by him and by none else---Collector of Customs (Adjudication) passed order in exercise of powers of Deputy Collector of Customs (Adjudication)---Action of authority had to be restricted to the specific sphere permitted by the statute--- Appellate Tribunal held the issuance of show-cause notice and passing of order-in-original to be void ab initio, illegal and of no legal effect---Appeal was allowed.

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 and Central Insurance v. CBR 1993 SCMR 1232 ref.

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

----Ss. 177, 2(s), 9 & 10---SRO No. 188(I)/83 dated: 12-12-1983---SRO No. 371(I)/2002 dated: 15-6-2002---Restriction on the possession of goods in certain areas---Smuggling---Officers of Customs---Jurisdiction---Scope---Appellant imported goods which were being transported to his buyer when the officers of Customs intercepted the vehicle---Deputy Collector (Preventive) detained the goods on failure of driver of the vehicle to produce valid import documents---Validity---Deputy Collector (Preventive) and his subordinates were appointed and designated as "officers of Customs" under S. 3, Customs Act, 1969 and they derived their powers for functioning from SRO No. 371(I)/2002 dated, 15-6-2002 within the territory not falling within the ambit of Ss.9 & 10, Customs Act, 1969 and beyond 5 kilometer of the border of India and Iran---Transported goods did not fall within the ambit of Ss.2(s) & 177, instead were lawfully imported after completion of codal formalities---Deputy Collector (Preventive) and his subordinate officers were not empowered to ask from either the importer or owner of transported goods about the legality of the goods in question in the absence of enabling provision in the Customs Act, 1969---Appellate Tribunal held the interception, detention, seizure and framing of contravention report to be without jurisdiction---Appeal was allowed.

2005 PTD (Trib.) 135 and PLD 1991 SC 630 ref.

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

----Ss. 2(s), 187, 156(2), 180 & 177---Qanun-e-Shahadat (10 of 1984), Arts. 117 & 121---Smuggling--- Restriction on the possession of goods in certain areas---Burden of proof---Scope---Appellant imported goods which were being transported to his buyer when the officers of customs intercepted the vehicle---Officers of Customs detained the goods on failure of driver to produce valid import documents---Deputy Collector of Customs (Adjudication) issued show-cause notice and Collector of Customs (Adjudication) passed order thereon---Validity---Appellant had submitted import documents and bilty (transport company's receipt) for transportation from District K to District G---Appellant discharged the burden laid upon him and burden stood shifted on the department which it miserably failed to discharge---Description of imported goods was available with clarity in the invoice and bill of lading---Said documents could not have been ignored summarily by authorities---Decision by the authorities on the ground not taken in the show-cause notice rendered the order palpably illegal---Appellate Tribunal held the issuance of show-cause notice and passing of order-in-original to be void ab initio, illegal and of no legal effect---Appeal was allowed.

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

----Ss. 26, 26A, 3DD & 179---Audit by Directorate General of Post Clearance (Audit)---Procedure---Power of adjudication---Scope---Record of case can only be demanded by Directorate General of Post Clearance Audit for conducting audit under S. 26(2), Customs Act, 1969 after serving notice/summon as per contemplation of S.26A, Customs Act, 1969---Collector of Customs (Adjudication) has no power to conduct audit.

Nadeem Ahmed Mirza (Consultant) for Appellant.

Hidayatullah, Inspector for Respondents.

2020 P T D (Trib.) 713

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs K.B. CORPORATION and another

Versus

The DEPUTY COLLECTOR OF CUSTOMS, KARACHI and another

Customs Appeals Nos. K-05 and K-39 of 2018, decided on 15th December, 2018.

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

----S. 180---Sales Tax Act (VII of 1990), S. 33---Income Tax Ordinance (XLIX of 2001), S. 148---Show-cause notice---Erroneous sections of law invocation of---Effect---Collection of tax at import stage---Scope---Section 33, Sales Tax Act, 1990 contains penal clauses and can only be invoked for contravention of respective provisions of Sales Tax Act, 1990---Section 148, Income Tax Ordinance, 2001 prescribes the procedure for collection of income tax at import stage by the authorities referred therein---Said sections are independent under which no charge can be invoked---Issuance of show cause notice by invoking irrelevant/erroneous sections renders it void ab initio and of no legal effect.

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

----S. 32---Sales Tax Act (VII of 1990), Ss. 11, 30 & 48---Income Tax Ordinance (XLIX of 2001), Ss. 162, 228 & 140---Mis-declaration---Assessment of sales tax---Recovery of sales tax and income tax---Procedure---Scope---Availability of word "tax" in S.32, Customs Act, 1969 does not empower Customs Authorities to exercise powers under the provisions of Ss. 11(2) & (3) of Sales Tax Act, 1990 and S.162(1) of Income Tax Ordinance, 2001---Officers of customs cannot exercise said powers unless legislature appoints them as "Officer of Inland Revenue/Commissioner of Income Tax" under S. 30 of Sales Tax Act, 1990 and S. 228 of Income Tax Ordinance, 2001---Clearance Collectorate can recover the amount of sales tax and income tax upon receipt of notice from the officer of Inland Revenue/Commissioner of Income Tax in terms of S. 48 of Sales Tax Act, 1990 and S. 140 of Income Tax Ordinance, 2001---Officers of Customs have the authority to collect sales tax and income tax at import stage in the capacity of collecting agents but they have no powers to adjudicate the cases of short payment of sales tax and income tax.

2011 PTD (Trib) 110; 2010 PTD (Trib.) 2086; 2004 PTD 801; C.P. No. D-216/2013; 2014 PTD 1963; 2015 PTD 702; 2016 PTD (Trib.) 969; 2016 PTD (Trib.) 1008; 2016 PTD (Trib.) 2125; Appeal No. K-1635/2014; Appeal No. K-1029/2016; Appeal No. K-1030/2016; PTD (Trib.) 2463 and 2017 PTD (Trib.) 481 ref.

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

----Ss. 32, 79(1) & 156(1)(14)---Mis-declaration---Confiscation of goods---Scope---Appellant imported different parts of motorcycle and filed goods declaration---Department alleged that an excess quantity of 4060 kgs of crank case cover of PCT No. 8409.9110 was found in the consignment, as against the contention of appellant that it had declared that the said part in Item No. 3 of goods declaration which reads as "clutch inner and outer katora with cover set and plate kit and intake pipe of motorcycle" weighing 8900 kgs attracting PCT No. 8714.1090---Validity---Examining officer assessed Item No.2 by construing its quantity as 4640 kgs as against declared 8900 kgs and created a new item by segregating one of the integral part from Item No.3 which comprised of complete unit of the motorcycle component---Appellant had not imported "crank case cover" as an individual part rather imported a complete component namely "clutch inner and outer katora with cover set and plate kit and intake pipe of motorcycle"---Appellate Tribunal vacated the show cause notice and set aside the order passed thereon.

Chairman, Federal Board of Revenue, Islamabad v. Al-Technique Corporation of Pakistan, Ltd. and others PLD 2017 SC 99 and Collector of Customs, Sales Tax and Central Now Federal Excise v. Haji Mahmood Essa and Co. and another 2017 SCMR 884 rel.

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

----Ss. 32 & 32A---Customs General Order No. 12 dated 12.06.2002, Para. 101(b)(ii)---Mis-declaration---Scope---Where 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, S. 32 or 32A could not be invoked by virtue of the fact that no false declaration was submitted.

Muhammad Waheed v. Customs Appellate Tribunal 2016 PTD 35 ref.

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

----Ss. 32 & 80---Customs Rules, 2001, R. 438---Mis-declaration---Checking of goods declaration by Customs---Assessment of Customs Authorities---Scope---No charge of mis-declaration could be invoked on the basis of either transmitting or mentioning erroneous PCT in the goods declaration.

State Cement Corporation v. GOP 2002 MLD 180 and Sadaat Khan v. DG Intelligence and Investigation FBR 2014 PTD 1615 rel.

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

----S.25---Declaration---Connotation---Declaration referred to the nature, description and value of goods so that the assessing officer could apply appropriate tariff rates for assessment and charging.

Vithoba Syamna v. Union of India AIR 1957 Bom. 321 foll.

(g) Words and phrases---

----Claim---Meaning---Claim meant a demand for something supposed due to or demanded as a right.

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

----S. 32---Mis-declaration---Conscious knowledge of fraud---Scope---Department must establish that the person who was alleged to have made any statement in a document, submitted to the Customs Authorities, had knowledge which would depend upon the facts and circumstances of each case.

Eastern Rice Syndicate v. Collector of Customs PLD 1959 SC 364 rel.

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

----Ss. 79 & 80---Declaration and assessment for home-consumption---Checking of goods declaration by the Customs---Scope---Importer or his agent has to file goods declaration for release of the goods on which assessing officer has to make an assessment---Any claim made by an importer is subject to scrutiny by the assessing officer who has been vested with unfettered powers to complete an assessment---Claim by an importer is a request subject to approval by a competent officer and where a competent authority grants or rejects the claim, no charge of fraud or otherwise can be linked to the agent or to the principal, whose duty is to submit relevant document for processing for release of consignment.

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

----Ss. 32, 207, 208 & 209---Mis-declaration---Liability of agent---Scope---Agent represents his principal and until and unless any direct evidence is attributed against agent or when department is not able to prove any criminal intent on his part, he cannot be penalized under the general provision of the Customs Act, 1969, unless he violates the governing conditions of his license.

2002 YLR 2651 rel.

Nadeem Ahmed Mirza, Consultant for Appellants.

Safdar Zaman Monen, Appraiser for Respondents.

2020 P T D (Trib.) 853

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs LULU ENTERPRISES, KARACHI

Versus

The ASSISTANT DIRECTOR and 2 others

Customs Appeal No.K-445 of 2018, decided on 4th August, 2019.

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

----S.193---Appeal to Collector (Appeals)---Limitation---Delay in filing appeal---Condonation---Sufficient cause---Scope---Appellant imported consignment of fragrances---Deputy Collector of Customs provisionally released the goods of appellant and transmitted the goods declaration to the Directorate General of Valuation for determination of value---Deputy Collector of Customs thereafter determined the liability of appellant on the basis of value determined by Assistant Director, Directorate General of Valuation---Appellant filed representation to the Director, Directorate General of Valuation but it was not decided---Appellant thereafter assailed the order of Deputy Collector of Customs before Collector of Customs (Appeals), who dismissed the same on the ground of limitation---Validity---Deputy Collector of Customs, prior to passing of assessment order, had not supplied the impugned valuation advice to the appellant---Appellant had no option except to challenge the vires of the value determined by Assistant Director, Directorate General of Valuation and assessment order passed by Deputy Collector of Customs before the Collector of Customs (Appeals)---Conduct of appellant confirmed that he had been pursuing his case with the departments for redressal of his grievances/re-determination of value in accordance with law, therefore, the time so consumed by the appellant was excluded by the Appellate Tribunal---Appellate Tribunal condoned the delay in filing of appeal.

2010 PTD (Trib.) 1491; 2010 PTD (Trib.) 1359; 2012 PTD (Trib.) 637; Laser Praxis Deplix Clinic Lahore v. Customs Central Excise and Sales Tax Appellate Tribunal 2002 PTD 549; Controller of Land Acquisition v. Mst. Katiji and others [1987] 56 Tax 130 (SC India); Rehmat Bibi and others v. Punno Khan and others 1986 SCMR 962; Syed Haji Abdul Wahid and another v. Syed Sirajuddin 1996 SCMR 2296; Ali Muhammad v. Hussain Bux and another PLD 1976 SC 37; Yousuf Ali v. Muhammad Aslam Zia and others PLD 1958 SC (Pak.) 104; Ch. Altaf Hussain and others v. The Chief Settlement Commissioner PLD 1965 SC 68; Syed Ali Abbass and others v. Vishan Singh and others PLD 1967 SC 294 and FOP v. Metropolitan Steel Corporation 2002 PTD 87 ref.

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

----Ss. 81 & 25---Customs Rules, 2001, R. 107---Provisional determination of liability---Value of imported goods---Prerequisites---Evidential invoice of higher value of similar goods---Scope---Appellant imported a consignment of fragrances---Deputy Collector of Customs provisionally released the goods of appellant and transmitted the goods declaration to the Directorate General of Valuation for determination of value---Deputy Collector of Customs thereafter determined the liability of appellant on the basis of value determined by Assistant Director, Directorate General of Valuation---Appellant filed representation to the Director, Directorate General of Valuation but it was not decided---Appellant thereafter assailed the order of Deputy Collector of Customs before Collector of Customs (Appeals), who dismissed the same on the ground of limitation---Validity---Officer of Customs, for opting provisional assessment of goods under S. 81(1), Customs Act, 1969, must have evidential invoice of higher value of the identical/similar goods, imported from the same country and within the same period as enunciated in R. 107(a) of Customs Rules, 2001---Recourse to provisional assessment could not be made merely on assumption/presumption or opinion that the value of the imported goods did not seem to be fair---Appellate Tribunal held that the Deputy Collector of Customs was not within his right to opt for provisional assessment of the imported goods---Appellate Tribunal set aside the orders passed by officers of customs and allowed the appeal.

Rehan Umar v. Collector of Customs 2006 PTD 909 and Collector of Customs v. Pak Arab Refinery 2010 PTD 900 rel.

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

----Ss. 25 & 25A---Value of imported and exported goods---Power to determine customs value---Determination of customs value on the application of local manufacturer---Effect---Appellant imported a consignment of fragrances---Deputy Collector of Customs provisionally released the goods of appellant and transmitted the goods declaration to the Directorate General of Valuation for determination of value---Deputy Collector of Customs thereafter determined the liability of appellant on the basis of value determined by Assistant Director, Directorate General of Valuation---Appellant filed representation to the Director, Directorate General of Valuation but it was not decided---Appellant thereafter assailed the order of Deputy Collector of Customs before Collector of Customs (Appeals), who dismissed the same on the ground of limitation---Validity---Entire exercise was undertaken by the Deputy Collector of Customs on the strength of a complaint forwarded by a Merchants' Association---No action was warranted under the law on receipt of such a complaint---Determination of value under Ss. 25 & 25A, Customs Act, 1969 had no nexus with the prices of locally manufactured goods or the suggested value of the Associations/Trade Bodies or Chambers---None of the said Associations had the right to approach Directorate General of Valuation for determination of value of any imported goods on higher value for benefitting their members or for creating monopoly---Appellate Tribunal held that the act of seeking assistance from manufacturer or the Associations/Trade Bodies or Chambers for determination of value of imported goods or class of goods was illegal---Assessment, in the absence of Valuation Ruling of the imported goods, could have been made with the application of identical/similar value available in the data reservoir---Appellate Tribunal set aside the orders passed by officers of customs and allowed the appeal.

Yousuf Enterprises v. Collector 2005 PTD 21; Pakistan Dry Battery Manufacturer Association v. FOP and 9 others 2006 PTD 674; Director General Valuation and another v. Al-Amin Cera, Karachi 2019 PTD 301; Messrs S.S. Trading v. Additional Collector of Customs Adjudication-PaCCS, Karachi 2014 PTD (Trib.) 510 and Deen Sons v. The Director, Directorate General of Valuation and another 2018 PTD (Trib.) 2418 ref.

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

----S. 25---Value of imported and exported goods---Failure to pass a reasoned order---Effect---Appellant imported a consignment of fragrances---Deputy Collector of Customs provisionally released the goods of appellant and transmitted the goods declaration to the Directorate General of Valuation for determination of value---Deputy Collector of Customs thereafter determined the liability of appellant on the basis of value determined by Assistant Director, Directorate General of Valuation---Appellant filed representation to the Director, Directorate General of Valuation but it was not decided---Appellant thereafter assailed the order of Deputy Collector of Customs before Collector of Customs (Appeals), who dismissed the same on the ground of limitation---Validity---Assistant Director, Directorate General of Valuation had conveyed online message to the Deputy Collector of Customs to finalize the assessment of appellant's consignment at a certain higher rate---Message was silent regarding the mechanism adopted by Assistant Director, Directorate General of Valuation, in arriving at his conclusion and under which subsection of S. 25, Customs Act, 1969, the value was determined---Copy of the advice prepared by Assistant Director, Directorate General of Valuation should have been supplied to the appellant, which was not supplied, due to the reason that the valuation had no legal footing---Value determined by Assistant Director, Directorate General of Valuation was not based on tangible evidence---Appellate Tribunal set aside the orders passed by officers of customs and allowed the appeal.

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

----Ss. 193 & 193A---Appeals to Collector (Appeals)---Procedure in appeal---Scope---Appellant imported a consignment of fragrances---Deputy Collector of Customs provisionally released the goods of appellant and transmitted the goods declaration to the Directorate General of Valuation for determination of value---Deputy Collector of Customs thereafter determined the liability of appellant on the basis of value determined by Assistant Director, Directorate General of Valuation---Appellant filed representation to the Director, Directorate General of Valuation but it was not decided---Appellant thereafter assailed the order of Deputy Collector of Customs before Collector of Customs (Appeals), who dismissed the same on the ground of limitation---Validity---Appeal was filed on 23-10-2017; an order on the appeal was to be passed by Collector of Customs (Appeals) within 120 days or within further extended period of 60 days, upon availability of exceptional circumstances and recording of those after issuance of notice to the appellant---Collector of Customs (Appeals) passed order on 01-03-2018, when the initial period of 120 days had lapsed---Impugned order was silent about any extension either granted by Collector or Federal Board of Revenue---Order passed by Collector of Customs (Appeals) was barred by time, therefore, was without jurisdiction---Appellate Tribunal set aside the orders passed by officers of customs and allowed the appeal.

Khalid Mahmood v. Collector of Customs 2009 SCMR 1881; 2017 PTD 1756; Collector of Customs Sales Tax Gujranwala and others v. Super Asia Mohammad Din and Sons and others 2017 SCMR 1427; 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.

(f) Administration of justice---

----Law helps the vigilant and not the indolent.

Collector Central Excise and Sales Tax Mirpur v. Commissioner Inland Revenue and another 2018 PTD 2270 ref.

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

----S. 25---Customs Rules, 2001, Rr. 107 to 116---Value of imported and exported goods---Sequential method---Scope---Directorate General of Valuation is empowered to determine the value of imported goods under S. 25 of Customs Act, 1969, while applying the same in sequential manner---Such exercise can be undertaken only in case where it is felt that the declared value least commensurates with the actual transaction value and for that tangible evidence in the shape of invoice of similar goods is required---Directorate General of Valuation is not empowered to dispute the declared value of imported goods in absence of tangible evidence---Directorate General of Valuation has to follow sequential method barring certain exceptional cases where massive group under-invoicing is rampant---Resort to subsequent methods is not permissible without exhausting the sequence indicated in S. 25, Customs Act, 1969 as it would nullify the spirit and essence of the transaction value, which in the first instance has to be established as tainted---Usage of words "may" or "may not" in subsection (13) of S. 25, Customs Act, 1969 does not give a free hand to the Directorate General of Valuation to maneuver the provisions of S. 25, Customs Act, 1969 for making those ineffective and redundant---Discretion has to be exercised judicially and must be based on reason, rationale and fairplay---Legislature has specifically provided in subsection (10) of S.25, Customs Act, 1969 that subsections (1), (5), (6), (7), (8) and (9) define as to how the customs value of the imported goods is to be determined by the defined authority---Methods of customs valuation are normally required to be applied in a sequential order except reversal of the order of subsections (7) and (8) at the importer's, request, if so agreed by the Collector of Customs---Customs value of the imported goods shall be the transaction value i.e. the price actually paid or payable for the goods when sold for export to Pakistan---Subsections (1) to (4) of S. 25, Customs Act, 1969 and Rr. 107 to 116, Customs Rules, 2001 contain primary methods of valuation and in the first instance primary method of valuation is required to be adopted in each case---Customs officials, before resorting to the method provided in subsection (5), shall make an exercise in accordance with the provisions contained in subsections (1) to (4) of S. 25 and if thereafter they find that the customs value of the imported goods cannot be determined, they shall resort to the method provided in subsection (5) and not otherwise---Such an exercise was to reflect on the record so that the appellate forum may examine whether the mandatory requirement of law is carried out or not---Methods of valuation, in addition to the specific provisions contained in subsection (10) of S. 25, are required to be applied in a sequential order.

Rehan Umer v. Collector of Customs Karachi 2006 PTD 909; Messrs Toyo International Motorcycle v. Federation of Pakistan and 3 others 2008 PTD 1494; Najam Impex Lhr v. Assistant Collector of Customs, Karachi and others 2008 PTD 1250; Faco Trading Company v. Members Customs, Federal Board of Revenue and others 2013 PTD 825; Sadia Jabar v. Directorate General of Valuation, Karachi and others 2018 PTD 1746 and Goodwill Traders, Karachi v. FOP 2014 PTD 176 ref.

(h) Interpretation of statutes---

----Taxing statute---Scope---Plain language of the law is required to be applied.

Nadeem Ahmed Mirza, Consultant for Appellant.

Malik Naeem, Appraiser for Respondents.

2020 P T D (Trib.) 877

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs MIAN SHADI AGRICULTURAL MATERIAL, MAMOON KANJAN, TANDLIA WALA, FAISALABAD

Versus

The DEPUTY COLLECTOR (R&D) MCC OF APPRAISEMENT-EAST, CUSTOMS HOUSE, KARACHI and 2 others

Custom Appeals Nos.K-1499 to 1502 of 2018, decided on 6th August, 2019.

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

----Ss. 32 & 79---Sales Tax Act (VII of 1990), Ss. 11 & 65, Sixth Sched. Entry No.99---Mis-declaration---Declaration and assessment for home consumption or warehousing---Assessment and recovery of sales tax not levied or short levied or erroneously refunded---Exemption of tax not levied or short levied as a result of general practice---Scope---Appellant imported compost (non-commercial fertilizer) and claimed exemption from payment of sales tax under Entry No. 99 of Sixth Schedule to the Sales Tax Act, 1990---Goods of appellant were released after acceptance of declaration in all aspects---Deputy Collector of Customs after lapse of about a year conducted audit on his own and thereafter framed contravention report with the allegation that the appellant had availed benefit of sales tax exemption which was not available on imported goods---Additional Collector of Customs accordingly issued show cause notice and vide order-in-original upheld the charges---Validity---Customs officials were mandated to levy/collect duty and taxes correctly in accordance with the provisions of Sales Tax Act, 1990 or infield notification on the imported goods, enabling the importer to declare the same in his monthly return of Sales Tax and Annual Statement of Income Tax as he had to charge the same from the buyer (end consumer) at the time of selling the goods---Where the taxes were not correctly levied/collected by the customs officials due to mis-interpretation, said taxes could not be recovered subsequently through any mechanism e.g. through show cause notice/order-in-original, as against the said short collected/paid amount of taxes---No mechanism was prescribed in any of the provisions of Sales Tax Act, 1990 and Income Tax Ordinance, 2001 for adjustment or claiming the short collected amount of taxes---Short collected amount of taxes could not be recovered except by way of approaching the Federal Board of Revenue as per the expression of S. 65 of Sales Tax Act, 1990 for issuance of notification for regularizing of non-collection of sales tax and income tax under the respective provisions of Sales Tax Act, 1990 and Income Tax Ordinance, 2001 on the imported goods---Appellate Tribunal set aside the order-in-original passed by Additional Collector of Customs and allowed the appeal.

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

----Ss. 32, 79, 80, 83, 26, 193 & 195---Customs Rules, 2001, Rr. 438 & 442---Mis-declaration---Declaration and assessment for home consumption or warehousing---Checking of goods declaration by the Customs---Clearance for home consumption---Conduct of audit---Appeal to Collector (Appeals)---Powers of Board or Collector to pass certain orders---Scope---Appellant imported compost (non-commercial furtilizer) and claimed exemption from payment of sales tax under Entry No. 99 of Sixth Schedule to the Sales Tax Act, 1990---Goods of appellant were released after acceptance of declaration in all aspects---Deputy Collector of Customs after lapse of about a year conducted audit on his own and thereafter framed contravention report with the allegation that the appellant had availed benefit of sales tax exemption which was not available on imported goods---Additional Collector of Customs accordingly issued show cause notice and vide order-in-original upheld the charges---Validity---After passing of assessment and clearance order under the provisions of Ss. 80 and 83, Customs Act, 1969 and Rr. 438 & 442 of Customs Rules, 2001, the orders so passed became appealable and could be assailed before Collector of Customs (Appeals) under S. 193, Customs Act, 1969---Had the Deputy Collector of Customs felt aggrieved of the assessment order, then the appropriate course of action was to assail the same before the Collector of Customs (Appeals), which was not done within the stipulated period---Assessment order passed by the competent authority could not be disturbed by any Authority---Deputy Collector of Customs, through audit under S.26(2), Customs Act, 1969 and Additional Collector of Customs through issuance of show cause notice/passing of order-in-original in fact opted to reassess the goods declaration in the absence of mis-declaration in material particulars in any aspect---Deputy Collector of Customs and Additional Collector of Customs assumed the powers under S.195, Customs Act, 1969 and reopened a validly passed order under S. 80, Customs Act, 1969---Deputy Collector of Customs and Additional Collector of Customs had acted without jurisdiction, therefore, their action was without lawful authority and as such null and void ab initio---Appellate Tribunal set aside the order-in-original passed by Additional Collector of Customs and allowed the appeal.

Messrs Paramount International (Pvt.) Ltd. v. FOP and others 2014 PTD 1256 ref.

Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310 and Glaxo Smith Kline Pakistan Ltd., Karachi v. Collector of Customs, Sales Tax Central Excise, Karachi 2004 PTD 3020 rel.

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

----Ss. 32, 26, 80, 81 & 83---Constitution of Pakistan, Art. 13---Mis-declaration---Conduct of audit---Checking of goods declaration by the Customs---Provisional determination of liability---Clearance for home consumption---Double jeopardy---Scope---Appellant imported compost (non-commercial furtilizer) and claimed exemption from payment of sales tax under Entry No. 99 of Sixth Schedule to the Sales Tax Act, 1990---Goods of appellant were released after acceptance of declaration in all aspects---Deputy Collector of Customs after lapse of about a year conducted audit on his own and thereafter framed contravention report with the allegation that the appellant had availed benefit of sales tax exemption which was not available on imported goods---Additional Collector of Customs accordingly issued show cause notice and vide order-in-original upheld the charges---Validity---Initial assessment order had attained finality by virtue of expiry of stipulated period expressed in subsection (2) of S. 81, Customs Act, 1969 and as such held field and no subsequent order could be piled upon assessment order as the same was not permitted besides being tantamount to double jeopardy barred under Art. 13 of the Constitution---Appellate Tribunal set aside the order-in-original passed by Additional Collector of Customs and allowed the appeal.

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

----Ss. 180, 26 & 3DD---Sales Tax Act (VII of 1990), Ss. 25 & 30---Income Tax Ordinance (XLIX of 2001), Ss. 177 & 228---SRO No.500(I)/2009, dated 13-6-2009---Show-cause notice---Conduct of audit---Directorate General of Post Clearance Audit---Access to record, documents, etc---Scope---Audit by Directorate General of Internal Audit---Scope---Appellant imported compost (non-commercial furtilizer) and claimed exemption from payment of sales tax under Entry No. 99 of Sixth Schedule to the Sales Tax Act, 1990---Goods of appellant were released after acceptance of declaration in all aspects---Deputy Collector of Customs after lapse of about a year conducted audit on his own and thereafter framed contravention report with the allegation that the appellant had availed benefit of sales tax exemption which was not available on imported goods---Additional Collector of Customs accordingly issued show-cause notice and vide order-in-original upheld the charges---Validity---Directorate General of Post Clearance Audit and its officers had been delegated powers through SRO No. 500(I)/2009, dated: 13-06-2009 for conducting audit of the importer's books of account under S.26(2), Customs Act, 1969 after serving notice/summon---Directorate General of Post Clearance Audit was empowered to look into every aspect of the declaration made by the importer and assessment order passed by the Clearance Collectorate---Directorate General of Post Clearance Audit could prepare audit observation and forward the same to the importer for clarification, if the reply failed to settle the issue, frame contravention report and forward that to the Clearance Collectorate for onward transmit to the Collectorate of Customs Adjudication for issuance of show cause notice under S.180 of Customs Act, 1969---Deputy Collector of Customs in the present case assumed the powers of Directorate General of Post Clearance Audit and conducted post clearance audit of the goods declaration of the appellant---Neither Deputy Collector of Customs nor his higher officials were empowered to encroach upon the jurisdiction of Directorate General of Post Clearance Audit---Deputy Collector of Customs was not appointed as an "Officer of Inland Revenue" under S.30 of Sales Tax Act, 1990 and S.228 of Income Tax Ordinance, 2001, resultantly, he was not empowered to conduct audit in the matter of sales tax or income tax under the provisions of S.25 of Sales Tax Act, 1990 and S. 177 of Income Tax Ordinance, 2001---Deputy Collector of Customs had acted without jurisdiction which had rendered the audit and framing of contravention report to be null and void ab initio---Appellate Tribunal set aside the order-in-original passed by Additional Collector of Customs and allowed the appeal.

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

----Ss. 32 & 179---Sales Tax Act (VII of 1990), S. 11---Income Tax Ordinance (XLIX of 2001), S. 162---Mis-declaration---Power of adjudication---Assessment and recovery of sales tax not levied or short levied or erroneously refunded---Recovery of tax from the person from whom tax was not collected or deducted---Scope---Department, after issuance of show cause notice, directed recovery of benefit of sales tax exemption wrongly availed by appellant---Appellant contended that the customs department had no jurisdiction to show cause notice for recovery of sales tax/income tax---Department contended that incorporation of the word "taxes" in Ss. 32 & 179 of Customs Act, 1969 was sufficient to assume jurisdiction under S. 11 of Sales Tax Act, 1990 and S. 162 of Income Tax Ordinance, 2001---Validity---Availability of word "taxes" did not automatically empower the department to assume powers under the provisions of S. 11(2) and (3) of Sales Tax Act, 1990 and S. 162(1) of Income Tax Ordinance, 2001, unless legislature appointed an officer of customs as "Officer of Inland Revenue/Commissioner of Income Tax", who had powers under said sections to take cognizance in the matter relating to sales tax and income tax---Word "taxes" used in Ss. 179 and 32, Customs Act, 1969 were only inserted for assumption of powers of adjudication on the basis of involved amount of duty and taxes by the appropriate adjudicating authority---Despite insertion of the word "taxes" in said sections adjudicating authority had to issue show cause notice within the respective applicable provisions of the Customs Act, 1969 only and not under S. 11 of Sales Tax Act, 1990 and S. 162(1) of Income Tax Ordinance, 2001, which otherwise were non-existent in the show-cause notice---Appellate Tribunal set aside the order-in-original passed by Additional Collector of Customs and allowed the appeal.

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

----S. 180---Sales Tax (VII of 1990), Ss. 3, 6, 7, 8, 26, 33 & 34---Income Tax Ordinance (XLIX of 2001), S. 148---Issue of show-cause notice before confiscation of goods or imposition of penalty---Scope of sales tax---Time and manner of payment---Determination of liability---Tax credit not allowed---Return---Offences and penalties---Default surcharge---Imports---Scope---Section 3 of Sales Tax Act, 1990 is a charging section and under said section the appropriate authority is an Officer of Inland Revenue---Section 6, Sales Tax Act, 1990 defines the mode and manner of collection of sales tax at import stage by the customs authorities, resultantly it is not a charging section instead, it is a machinery section---Liability of sales tax of a registered person is determined for a tax period under S. 7, which stipulates that, subject to the bar contained under S. 8, a registered person is entitled to deduct the input tax that has already been paid from the output tax---Net amount arising thereby is paid along with the monthly return under S.26 of Sales Tax Act, 1990---Section 33 contains penal clauses and S.34 provided default surcharge to be paid upon establishing the charges under the charging sections---Section 148 of Income Tax Ordinance, 2001 prescribes the procedure for collection of income tax at import stage by the authorities referred therein---No charge can be framed under said sections---No show-cause notice can be issued under said sections, which are independent and have no nexus with each other.

Section Officer Government of Punjab Finance Department and others v. Ghulam Shabbir 2010 SCMR 1425 rel.

Asst. Collector v. Khyber Elec. Lamps 2003 PTD 1275; DG Khan Cement v. Collector of Customs 2005 PTD 480; Caltex v. Collector 2003 PTD 1593; Union Playing Card Company v. Collector of Customs 2002 MLD 130; Atlas Tyres v. Addl. Collector 2002 MLD 180; State Cement v. Collector PTCL 2001 CL 558; Kashmir Sugar v. Collector 1992 SCMR 1898 and Rose Color v. Chairman, CBR and 2013 PTD 813 ref.

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

----S. 179---Sales Tax Act (VII of 1990), Ss. 11 & 48---Income Tax Ordinance (XLIX of 2001), Ss. 162 & 140---Powers of ajdudication---Assessment and recovery of sales tax not levied or short levied or erroneously refunded---Recovery of arrears of sales tax---Recovery of tax from the person from whom tax was not collected or deducted---Recovery of tax from persons holding money on behalf of a taxpayer---Scope---Customs Department has the authority to collect sales tax and income tax at import stage in the capacity of collecting agent and can recover escaped/short paid customs duty and regulatory duty after due process of law, but has no power to adjudicate the cases of short recovery of sales tax and income tax under S.11, Sales Tax Act, 1990 and S.162, Income Tax Ordinance, 2001---Customs Department can 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 of S.48 of Sales Tax Act, 1990 and S.140 of Income Tax Ordinance, 2001.

Messrs AGP (Pvt.) Ltd. v. Additional Collector of Customs, Karachi 2011 PTD (Trib.) 110; Messrs Global Marketing Services and another v. Model Customs Collectorate and another 2010 PTD (Trib.) 2086; Collector of Customs, Islamabad v. Global Marketing Services and another v. Model Customs Collectorate and another SCRA No.01/2010; Al-Haaj Industrial Corporation (Pvt.) Ltd., Peshawar v. Collector of Customs (Appraisement) 2004 PTD 801; Messrs Lucky Cement Ltd. v. Federation of Pakistan and others C.P. No. D-216/2013; Shujabad Agro Industry (Pvt.) Ltd. v. Collector of Customs and 8 others 2014 PTD 1963; Muhammad Measum and others v. FOP and 2 others 2015 PTD 702; Asif Textile Trading v. Directorate General I&I-FBR 2016 PTD (Trib.) 969; Phillip Morris (Pakistan) Ltd., Karachi v. Additional Collector of Customs 2016 PTD (Trib.) 1008; Al-Fajer Associates v. Directorate General of Intelligence and Investigations-FBR 2016 PTD (Trib.) 2125; Pepsi Cola Export Corporation, Karachi v. Directorate General of Post Clearance Audit and 2 others Appeal No.K-1635/2014, Messrs M.R. Sons, Karachi v. Directorate General of Intelligence and Investigations-FBR Appeal No.K-1029/2016; Messrs Muhammad Imran, Karachi v. Directorate General of Intelligence and Investigations-FBR Appeal No.K-1030/2016; Messrs Rightway Trading Company, Karachi v. Deputy Collector of Customs, MCC of Appraisement-West and 3 others Appeal No. K-1343/2015; Messrs Zubair Wali Ahmed Zai Ltd. v. The Principal Appraiser, Directorate of Transit Trade and others 2016 PTD (Trib.) 2463; Singer Pakistan Ltd. v. Collector of Customs and 2 others 2017 PTD (Trib.) 481; 1994 CLC 1612; 1990 PTD 29 and 2005 PTD 23 ref.

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 (Appeal), Collectorate of Customs, Federal Excise and Sales Tax, Faisalabad 2008 PTD 1973 and 2006 SCMR 129 titled as DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 rel.

(h) Jurisdiction---

----Objection qua jurisdiction is a basic lacuna on assumption of jurisdiction which can be raised at any stage of the proceedings including appeal in as much as it goes to the very roots of the matter and renders entire proceedings coram-non-judice---Jurisdictional defect cannot be removed by mere conclusion of proceedings.

Collector of Sales Tax v. Khursheed Spinning Mills Ltd. and 2 others 2017 PTD 196 ref.

(i) Interpretation of statutes---

----Federal Board of Revenue and Ministry of Law have no mandate to interpret or amend the law but can only give opinion and it is for the judicial forum to interpret the provisions of a statute.

Messrs Lever Brother Pakistan Ltd. v. Customs Sales Tax and Central Excise Appellate Tribunal, Karachi 2005 PTD 2462 and Qazi CNG Station, Gujrat and another v. Directorate General of Intelligence and Investigation-FBR, Karachi and 2 others 2016 PTD (Trib.) 107 rel.

Nadeem Ahmed Mirza, Consultant for Appellant.

Muhammad Ali, Appraiser for Respondents.

2020 P T D (Trib.) 920

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member Judicial and Muhammad Sadiq, Member (Technical)

Messrs IMRAN AHMED

Versus

The COLLECTOR OF CUSTOMS (APPEALS), KARACHI and 3 others

Customs Appeal No.K-751 of 2011, decided on 9th July, 2019.

Customs Act (IV of 1969)---

----Ss. 16, 163, 168, 171, 181, 187, 17, 129, 156(1)(9), 156(1)(64), 156(1)(89), 156(1)(90) & 156(2)---Imports and Exports (Control) Act (XXXIX of 1950), S. 3---SRO No. 566(I)/2005, dated: 06-06-2005---SRO No. 499(I)/2009, dated: 13-06-2009---Powers to restrict imports and exports---Power to search and arrest without warrant---Seizure of things liable to confiscation---When seizure or arrest is made, reason in writing to be given---Option to pay fine in lieu of confiscated goods---Burden of proof as to lawful authority---Transit of goods across Pakistan to a foreign territory---Illegal removal or concealment of goods in transit---Scope---Directorate General of Intelligence and Investigation raided a private godown and recovered 150 bags of Indian/Vietnamese origin black tea---Owner of the godown failed to produce any legal import documents in support of its lawful possession, therefore, the goods were seized---Adjudicating officer vide order-in-original confiscated the goods and appeal filed thereagainst was dismissed---Contention of appellant was that the show cause notice was barred by time in terms of S. 168(2) of Customs Act, 1969, because the same was issued after a lapse of over four months; that no notice under S. 171, Customs Act, 1969 was issued to the appellant regarding seizure of goods; that the onus of proof was on the department; that since no penalty was imposed, confiscation of goods was illegal and that the goods were locally procured---Validity---Limitation prescribed under subsection (2) of S.168 of Customs Act, 1969, did not apply to the goods regarding which notification was issued under S.181 of Customs Act, 1969---Black tea appeared at Serial No. 35 of SRO 566(I)/2005, dated: 06-06-2005---Time limitation of two months was not attracted in the case, so the show-cause notice was issued within the stipulated time---Notice was duly served upon the possessor of the goods---Appellant, after issuance of show cause notice, was provided ample opportunity to prove lawful possession of the goods, which he failed to do---Goods in question bore inscription "Transit to Afghanistan", therefore, the onus was squarely upon the appellant in terms of Ss. 156(2) & 187 of Customs Act, 1969---Appeal was rejected.

Ch. Rafiq for Appellant.

Nemo. for Respondents.

2020 P T D (Trib.) 931

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial) and Dr. Zulfiqar A. Malik, Member (Technical-I)

MUHAMMAD SHAHID and others

Versus

The COLLECTOR OF CUSTOMS and others

New Customs Appeals Nos. K-420 to K-430 of 2018, Old Customs Appeals Nos. 1705 to 1715 of 2016, Customs Appeals Nos.K-1601, K-1602, K-1606 to K-1610, K-1691 to K-1695, K-1735 to K-1744, K-1746 to K-1750, K-1574 to K-1578 of 2016, decided on 20th May, 2019.

Customs Act (IV of 1969)---

---Ss. 32A, 32, 16, 156(1)(9), 156(1)(14A) & 156(1)(77)---Imports and Exports (Control) Act (XXXIX of 1950), S. 3---Foreign Exchange Regulation Act (VII of 1947), S. 12---SRO No.266(I)/2001, dated: 07-05-2001---Fiscal fraud---False statement, error, etc---Importation or exportation of restricted goods---Falsification of document---Powers to restrict imports and exports---Payment for exported goods---Scope---Appellants were alleged to have been involved in export of gold and jewelry against fake Form-E, therefore, foreign remittances were not received and as such withholding tax and Export Development Surcharge was not collected---Validity---Export of gemstones and jewelry at the relevant time was subject to special procedure provided under SRO No.266(I)/2001---Export was made in accordance with the procedure and hundreds of consignments were cleared by the Department after examination and weighment of goods during the relevant period---Apart from the allegations of fake Form-E, the show-cause notice and orders were silent regarding the goods actually exported and as to whether the exported goods were real gold jewelry or it was fake only to balance out import of gold---Investigation was also silent in that respect---Department did not tally imports with exports to find out actual timing of alleged fraud---Time limit of 180 days was fixed in subsection (2) of S. 32A, Customs Act, 1969 in order to issue notice, as such the show-cause notice was barred by limitation---Department failed to justify its jurisdiction in the presence of special procedure governed by Trade Development Authority of Pakistan---Export Development Surcharge was to be collected by the State Bank of Pakistan or duly authorized bank at the time of realization of proceeds of export and the Customs Department was not the relevant agency under Foreign Exchange Regulation Act, 1947---Collection of withholding tax on realization of export proceeds was not the Customs Department's job---Matter could at the best have been resolved by invoking S.32(3) of Customs Act, 1969 which was missing in the show cause notice as well as original orders---Department opted an omnibus formula and levied penalty without identifying wrongdoing on the part of each appellant---Original orders were set aside and appeals were accepted by the Tribunal.

Aqeel Ahmed and Shoukat Ali Sheroz (in C.As. Nos.K-420 to 430 of 2018, 1601 and 1602 of 2016, 1691 to 1695 of 2016 and 1574 to 1578 of 2016), Muhammad Asif Khan (in C.As. Nos.1606 to 1610 of 2016), Iftikhar Hussain (in C.As. Nos. 1735 to 1744 of 2016), Wajahat Mansha, (in C.As. Nos.1746 to 1750 of 2016) for Appellants.

Khaleeq Ahmed and Sayed Aqeel Akhtar, Investigating Officer for Respondents.

2020 P T D (Trib.) 950

[Customs Appellate Tribunal]

Before Omar Arshad Hakeem, Member Judicial and Muhammad Sadiq, Member (Technical)

Messrs COCA COLA EXPORT CORPORATION, (PVT.) LIMITED, LAHORE

Versus

The COLLECTOR OF CUSTOMS, (ADJUDICATION), CUSTOM HOUSE, LAHORE

Customs Appeal No. 155/LB of 2014, decided on 13th September, 2019.

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

----S. 3, First Sched, Sr. 41---Flavours and concentrates for use in aerated beverages---Scope ---Directorate General of Post Clearance Audit reported that the consignment of flavouring substances imported by appellant for use in aerated beverages was classifiable under PCT heading 3302.1010 instead of 3302.1090---Adjudication proceedings resulted in passing of order-in-original---Validity---Goods imported by appellant were subjected to further processing so as to be transformed into "concentrates to be used in aerated beverages"---Said goods per se were not "for use in aerated beverages"---Balance of probability of classification weighed in favour of the description, "others" attracting PCT heading 3302.1090---Description of goods prevailed upon the tariff classification--- Expression given under the Sr. 41 of the First Schedule to the Federal Excise Act, 2005 was "Flavours and concentrates for use in aerated beverages" whereas the goods imported by appellant were ingredients for concentrates to be used in beverages---Imported goods did not attract Federal Excise Duty---Impugned order was set aside and appeal was disposed of accordingly.

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

----S. 32---Sales Tax Act (VII of 1990), S. 6---Income Tax Ordinance (XLIX of 2001), S. 148---Federal Excise Act (VII of 2005), S. 12---False statement, error, etc---Time and manner of payment of sales tax---Imports---Determination of value for the purpose of excise duty---Collection of evaded taxes by customs authorities---Scope---Appellant assailed order-in-original on the ground that customs authorities had no jurisdiction to realize sales tax, excise duty and income tax---Validity---Not only the customs duty at import stage but other taxes too were within the ambit of the jurisdiction of customs authorities---Section 6(1) of Sales Tax Act, 1990 expressly provided collection of sales tax at import stage as if it was a duty of customs---Subsections (3) and (4) of S.12 of Federal Excise Act, 2005 stipulated that where any goods were chargeable to duty at the import stage, duty would be assessed and paid on the value determined---Section 148 of Income Tax Ordinance, 2001 empowered the Collector to realize income tax import stage in the like manner as if it was duty of customs---Show-cause notice was lawfully issued by the customs authorities while invoking S. 32 of Customs Act, 1969 for recovery of evaded taxes.

Messrs Gulistan Textile Mills Limited v. Federation of Pakistan and others and 2019 PTD 353 and Collector Sales Tax and Central Excise v. Zamindara Paper and Board Mills 2007 PTD 1804 rel.

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

----S. 32---False statement, error---Limitation--- Scope---Appellant assailed the order-in-original on account of the show-cause notice being barred by time---Validity---Section 32(3A), Customs Act, 1969 was the relevant provision which stipulated the audit to be conducted within a period of five years---Audit was conducted within the stipulated period, hence, the objection regarding case being barred by time was held to be untenable.

(d) Interpretation of statues---

----Fiscal statute to be construed strictly.

Akhtar Ali and Asim Zulfiqar, FCA for Appellant.

2020 P T D (Trib.) 1081

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial) and Muhammad Sadiq, Member Technical

MOHAMMAD TAHIR

Versus

ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION), PESHAWAR and others

Customs Appeal No.970/PB of 2015, decided on 3rd May, 2019.

Customs Act (IV of 1969)---

----Ss.2(s), 168 & 156(1)(89)---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Baggage Rules, 2006, R. 16---SRO No.1090(I)/2010, dated: 1-12-2010---SRO No. 556(I)/2006, dated: 5-6-2006---Smuggling---Seizure of things liable to confiscation---Restriction on imports and exports---Entrustment of functions to Frontier Corps---Scope---Frontier Corps, during routine checking, seized Saudi Riyal at Check Post from the possession of appellant and alleged that the seized currency was being smuggled from Pakistan without any valid documents---Validity---Thumb impression or signature of the accused, as per prevailing procedure, was required to be obtained on the recovery memo---Recovery memo revealed that no thumb impression or signature of the accused was obtained and further that there was no witness available on the recovery memo---SRO No. 1090(I)/2010 dated 1-12-2010 stipulated the limits and conditions on the functions of Frontier Corps and Frontier Corps was excluded to function within customs areas, customs stations, etc and further refrained the Frontier Corps from checking bona fide passenger's baggage and goods cleared from any customs area---Appellant was apprehended at Border, where there were several markets and business houses---Confiscation and imposition of personal penalty was unlawful and unjustified---Frontier Corps had not taken into possession the passport or any other itinerary documents in respect of travelling of appellant outside Pakistan---Nothing was available on record which showed that the appellant was taking out the currency from Pakistan to any other country---Appellant, having complied with the instructions of the departmental official, handed over his baggage/currency to the officials without any fuss or hindrance---Such action of appellant did not entail confiscation and imposition of penalty---Appellate Tribunal allowed the appeal and set aside the impugned order-in-original.

Abdul Lateef Afridi and Yasir Khan for Appellant.

Alhaaj Gul, Superintendent Customs for Respondents.

2020 P T D (Trib.) 1091

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial) and Muhammad Sadiq, Member Technical

Messrs SOOFI STEEL INDUSTRIES (PVT.) LIMITED, DEEN ROAD, BADAMI BAGH, LAHORE

Versus

The COLLECTOR OF CUSTOMS SALES TAX AND FEDERAL EXCISE (APPEALS), PESHAWAR

Customs Appeal No.223/PB of 2013, decided on 30th April, 2019.

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

----S.32---Mis-declaration---Scope---Appellant exported steel products---Show-cause notice was issued to appellant that it had exported products of PCT heading 7216.5000 and not of PCT heading 7308.9090---Validity---Consignments of the goods falling under PCT heading 7308.9090 or 7216.5000 were exported from Pakistan on various dates through various goods declarations---PCT heading 7216.5000 was a product of lesser finish and after having been finished the same was to be classified in PCT heading 7308.9090---Consignments were duly examined by Appraisers of the department and they had not objected to PCT heading 7308.9090---Contention of department was that internal Audit Team had objected to the PCT heading 7308.9090 and according to Audit Team, the correct classification was PCT heading 7216.5000---Audit Team, without physical examination, had no cogent footing to rule that the goods were lesser finished goods (PCT heading 7216.5000)---Objection of Audit Team (subsequent to exportation of the goods) without there being samples of the impugned goods was not tenable---Appellate Tribunal set aside the orders of the authorities---Appeal was disposed of accordingly.

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

----S.179---Power of adjudication---Cases to be decided in 120 days---Scope---Show cause notice was issued to the appellant on 10.11.2007; order-in-original was passed on 30.6.2008 and the same was conveyed to the appellant on 3.7.2008---Validity---Order, according to S. 179, Customs Act, 1969, had to be issued within 120 days of issuance of show cause notice---Order-in-original was invalid and time barred unless the extension was allowed by the Collector under S.179(3) of Customs Act, 1969---Department had not produced any document to show that extension was allowed by the Federal Board of Revenue---Appellate Tribunal set aside the orders of the authorities---Appeal was disposed of, accordingly.

(c) Administration of justice---

----When the law demands that a case has to be decided in a manner provided by law it has to be so decided.

Ishtiaq Ahmed for Appellant.

Alhaj Gul, Superintendent Customs for Respondents.

2020 P T D (Trib.) 1102

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial) and Muhammad Sadiq, Member Technical

AAMIR SUHAIL, MESSRS IDEAL BUSINESS PRODUCT, UNIVERSITY ROAD, PESHAWAR

Versus

The COLLECTOR OF CUSTOMS, M.C.C., PESHAWAR and 3 others

Customs Appeal No.121/PB of 2016, decided on 29th April, 2019.

Customs Act (IV of 1969)---

----Ss. 32, 156(1)(14), 156(1)(45), 156(1)(103), 156(1)(10) & 156(1)(10-A)---SRO No.499(I)/2009, dated: 13-06-2009---Mis-declaration---Subscription or attestation of any document relating to any goods on behalf of owner without sufficient authority---Violation of condition for grant of exemption---Unauthorized use of unique user identifier by any person---Scope---Appellant imported medical equipment/dental units and claimed exemption from payment of duty and taxes on the ground that the goods were imported for usage in government hospitals---Customs authorities objected that the license was not properly opened for the transaction; that the user ID of the Health Department was misused and that incorrect PCT heading was mentioned---Goods were detained before they were allowed to pass out of gate---Additional Collector of Customs (Adjudication) allowed the importer to redeem the goods on payment of redemption fine with personal penalty---Validity---Provisions of S. 32, Customs Act, 1969 were not attracted to the case of appellant---Appellant had properly declared the goods and nothing was concealed or mixed with the goods---Appellant was properly exempted and there was no bar on the importation of such goods by the Federal Government, therefore penalty under Cl. (103) of S.156, Customs Act, 1969 was not in accordance with law---Provincial Government had directed the appellant to import medical equipments for their hospital and user ID was shared by the Government for the use of importation of hospital equipments---Adjudicating officer had wrongly imposed redemption fine as well as penalty on the appellant---Appeal was allowed and the order passed by Additional Collector of Customs (Adjudication) was set aside.

Irshad Ahmed Durrani for Appellant.

Alhaj Gul, Superintendent/D.R. for Respondents.

2020 P T D (Trib.) 1113

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial)

NAEEM GUL

Versus

The ADDITIONAL COLLECTOR OF CUSTOMS (ADJUDICATION), CUSTOM HOUSE, PESHAWAR and another

Custom Appeal No.258/PB of 2018, decided on 10th May, 2019.

Customs Act (IV of 1969)---

----Ss.2(s), 168, 16, 157, 156(1)(8), 156(1)(89) & 181---Imports and Exports (Control) Act (XXXIX of 1950), S. 3---SRO No.1455(I)/2018 dated 29-11-2018---Smuggling---Seizure of goods liable to confiscation---Extent of confiscation---Prohibition on imports and exports---Option to pay fine in lieu of confiscation---Scope---Customs Staff recovered foreign origin mobile phones of different brands and models from the vehicle driven by appellant and seized them on failure of the appellant to produce legal/import documents---Additional Collector of Customs (Adjudication), vide order-in-original, outrightly confiscated the seized goods, while the vehicle used in the transportation of the goods was redeemed to its rightful owner on payment of fine @ 20% of its customs value---Validity---Appellant placed reliance on SRO No.1455(I)/2018 dated 29-11-2018, wherein the Federal Board of Revenue (FBR) had directed that mobile devices with SIM or IMEI functionality brought into Pakistan in violation of the provisions of clause(s) of S.2 of the Customs Act, 1969, which had been seized or voluntarily presented to Customs authorities on or before 30-12-2018, would be allowed to be released on payment of applicable duty and taxes payable thereon with imposition of zero fine---Appellate Tribunal set aside the order passed by Additional Collector of Customs (Adjudication) and directed the department to release the mobile phones in accordance with SRO No.1455(I)/2018 dated 29-11-2018---Appeal was disposed of accordingly.

Ms. Saima Haider Tareen and Ms. Nighat Ghani for Appellants.

Alhaj Gul, Superintendent/D.R. for Respondents.

2020 P T D (Trib.) 1119

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs AL-AZHAR INDUSTRIES, KARACHI

Versus

The PRINCIPAL APPRAISER, MCC OF EXPORT, PMBQ, KARACHI and 2 others

Customs Appeal No.K-77 of 2018, decided on 20th April, 2019.

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

----Ss.179, 32, 130 & 131---Customs Rules, 2001, Rr. 444 & 450---Imports and Exports (Control) Act (XXXIX of 1950), S. 3---Export Policy Order, Sched. 1, paras. 4 & 17---SRO No. 371(I)/2002, dated 15-06-2002---Restriction on export of counterfeit goods---Power of adjudication---Mis-declaration---No loss of revenue---Customs authorities to adhere to its own precedent---Scope---Appellant transmitted goods declaration for export of fabric towels/sports goods---Examination of goods confirmed the declaration with the exception of 53 cartons containing 2800 pieces of footballs as of "Nike" Brand, which was said to be not exportable---Contravention report was framed and show cause notice was issued with the allegation of mis-declaration and non-exportability of goods in terms of S. 3(c) of Imports and Exports Control Act, 1950 and Export Policy Order---Adjudicating authority confiscated the offending goods and imposed penalty---Validity---No mis-declaration was apparent and show-cause notice was silent regarding loss of revenue---No value of offending goods was incorporated in the show-cause notice---Power to adjudicate such like cases rested with the Principal Appraiser, who had to take into consideration the examination conducted and documents uploaded---Assistant Collector (Adjudication) issued show-cause notice, despite the fact that there was no revenue loss, while relying on the ground that there existed an element of mis-declaration---Powers of adjudicating authority were specific and had to be used by the authority empowered none else---Superior authority was not empowered to exercise the powers of its subordinate in the course of adjudication---Assistant Collector (Adjudication) had transgressed the powers of Principal Appraiser---Principal Appraiser could not frame contravention report and Assistant Collector (Adjudication) to issue show-cause notice and pass order-in-original, in circumstances---Appellant would have been directed to get the contravening goods removed or allowed to be exported as per practice invoke since last many years---Customs authorities were supposed to adhere to their own precedent in administering taxing statutes---Appellate Tribunal annulled the show cause notice and set aside the order passed by Assistant Collector (Adjudication)---Appeal was allowed, accordingly.

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

----Ss. 179 & 32---Power of adjudication---Mis-declaration---Scope ---Expression of S.179, Customs Act, 1969 was unambiguous with regards to assumption of powers by the adjudicating authorities in cases involving mis-declaration---Adjudicating authority could assume jurisdiction on the basis of involved amount of duty and taxes i.e. "amount of duty and taxes involved excluding the conveyance" in the cases of import, whereas in case of export twice to the monetary limit expressed in subsection (1) of S.179 of the Act.

(c) Jurisdiction---

----Action of authority is to be restricted to the specific sphere permitted by the statute.

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 1995 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; Dewan Farooque Motors Ltd. v. Collector of Customs (Appeal) Order in Custom Appeal No.H-510/2008 and Collector of Customs, Lahore v. South East Trading 2014 PTD 199 ref.

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

----S.32---Mis-declaration---No loss of revenue---Scope--- Provisions of Ss. 32(1) & (2) of Customs Act, 1969 could only be invoked by Customs authorities, where there existed any revenue loss and S. 32 of the Act could not be invoked in isolation.

Messrs Al-Hamd Edible Oil Ltd. and others v. Collector of Customs and others 2003 PTD 552; Messrs Kamran Industry v. The Collector of Customs (Export) and 4 others PLD 1996 Kar. 68 and Collector of Customs Exports and another v. R.A. Hosiery Works 2007 PTD 2215 rel.

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

----Ss. 179, 32, 3CC & 15---Imports and Exports (Control) Act (XXXIX of 1950), S. 3---Export Policy Order, Sched. 1, paras. 4 & 17---Restriction on export of counterfeit goods---Power of adjudication---Jurisdiction of Directorate General of Intellectual Property Rights Enforcement---Scope---Mis-declaration---Appellant transmitted goods declaration for export of fabric towels/sports goods---Examination of goods confirmed the declaration with the exception of 53 cartons containing 2800 pieces of footballs as of "Nike" brand, which was not exportable---Contravention report was framed and show-cause notice was issued with the allegation of mis-declaration and non-exportability of goods in terms of S. 3(c) of Import and Export Control Act, 1950 and Export Policy Order---Adjudicating authority confiscated the offending goods and imposed penalty---Validity---Order of Assistant Collector (Adjudication) of taking cognizance under S.15(a), Customs Act, 1969 and para. 17 and serial No. 4 of Export Policy Order 2016 despite availability of Directorate General of Intellectual Property Rights Enforcement under S. 3CC was without lawful authority---Any action under the Intellectual Property Rights had to be taken by the Authority defined in Trade Marks Ordinance, 2001 and that too after receipt of complaint from the person/company, in whose name that product/item was registered---No action was warranted under law, in absence of any complaint---Any action on a complaint had to be taken by the Authority---Suo motu powers under S.15(a), Customs Act, 1969 and para 17 and serial No. 4 of Export Policy Order were not available to any authority and Assistant Collector (Adjudication) was not an exception---No complaint was filed by the right holder of brands "Mitre" and "Nike" was filed---Appellate Tribunal declared the detention of goods and their subsequent seizure by Assistant Collector (Adjudication) to be without lawful authority/jurisdiction---Appeal was allowed.

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

----S. 193A---Procedure in appeal---Extension of time by Federal Board of Revenue (Board) after lapse of 120 days---Scope---Appeal was filed on 07-04-2017; an order in terms of S.193A(3), Customs Act, 1969, had to be passed by Collector of Customs (Appeals) within 120 days or within further extended period of 60 days, in terms of its proviso upon availability of exceptional circumstances and recording of those after issuance of notice to the appellant---Order on appeal should have been passed on or before 14-07-2017, which Collector of Customs (Appeals) failed to pass; additionally no extention whatsoever was given as evident from the contents of the order, which was silent---Extension granted by Board after lapse of 120 days was nothing more than flogging a dead horse for giving a lease of life---Any medication or cure had to be undertaken prior to demise of an issue, it could not be revived even through artificial support when the issue had gone on to annul---Order passed by Collector of Customs (Appeals) on 22-12-2017 was barred by 69 days, hence void ab initio and not enforceable under law---Appeal was allowed, accordingly.

2017 PTD 1756; Collector of Customs Sales Tax Gujranwala and others v. Super Asia Mohammad Din & Sons and others 2017 SCMR 1427; 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.

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

----S.24A---Reasons for decision---Finding of fact given by any Authority, Court or Tribunal, without discussing and considering the material available on record, and not based on material available on record, was illegal, arbitrary and perverse---Perverse finding of fact was violative of the principles of appreciation of evidence on record and was not sustainable in law---Every judicial or quasi-judicial finding was to be based on reasons, containing the justification for the finding in the order itself, was an established principle of dispensation of justice.

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 ref.

Nadeem Ahmed Mirza, Consultant for Appellant.

Sharan, A.O. for Respondents.

2020 P T D (Trib.) 1135

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial) and Dr. Zulfiqar A. Malik, Member (Technical-I)

COLLECTOR OF CUSTOMS through Assistant Collector of Customs

Versus

Messrs M. SALEEM ENGINEERING WORKS and another

Customs Appeal No.K-428 of 2012, decided on 5th March, 2019.

Customs Act (IV of 1969)---

----S.32---Mis-declaration---Absence of mala fide---Scope---Respondent filed goods declaration of consignment containing Computer UPS---Examination of goods revealed that the goods were Line Interactive UPS and that the importer had imported a number of other undeclared goods/items---Adjudicating officer charged the importer for deliberately mis-declaring the description of goods and having attempted to defraud the government---Collector of Customs (Appeals) modified the order-in-original and remitted the redemption fine---Validity---Goods imported had multiple uses, therefore, the Collector for Customs (Appeals) had reached a conclusion that it was an inadvertent error and not a wilful mis-declaration---Declared classification attracted lower rate of duty as compared to ascertained classification, however, the importer had been contending since the original stage that it was a bona fide error---Adjudicating Officer had not examined the contention of the importer and had passed the order in a mechanical manner---Appellant / department had not adduced any evidence to substantiate that it was a wilful fault and deliberate mis-declaration---Department's desire to levy fine in the absence of incriminating evidence could not be entertained---Department had failed to come up with the cogent reasons to interfere with the order of Collector of Customs (Appeals)---Appeal, being devoid of merits, was dismissed.

Rashid Ali, A.O. for Appellant.

Sardar Faisal Zafar for Respondent.

2020 P T D (Trib.) 1149

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial)

COLLECTOR OF CUSTOMS, MCC, PESHAWAR

Versus

NOOR AKBAR and another

Customs Appeal No.376/PB of 2017, decided on 17th May, 2019.

Customs Act (IV of 1969)---

----Ss. 168, 16 & 19---SRO No. 1240(I)/2005 dated 16-12-2005----SRO No. 576(I)/2006 dated 5-6-2006---Seizure of goods liable to confiscation---Power to prohibit or restrict importation or exportation of goods---General power to exempt from customs-duty---Scope---Intelligence and Special Checking Squad seized a truck from subsequent purchaser under S. 168, Customs Act, 1969 for violation of Ss. 16 & 19 of Customs Act, 1969---Validity---Construction company had imported specialized vehicle and had availed exemption for so much of duty/taxes as specified under SRO No.1240(I)/2005 dated 12-2-2005---SRO No. 576(I)/2006 dated 5-6-2006 restrained the importer from selling, transferring or otherwise disposing of the vehicle in Pakistan without prior permission of the customs authorities or the Federal Board of Revenue (FBR) and without payment of duty and taxes leviable thereon at the time of import---SRO 1240(I)/2005 imposed restriction on the construction company that in case of sale of vehicle it shall take advance permission from the Collector for intended sale---Said notifications had imposed no liability on the purchaser---Liability, according to law, was of the importer/seller and the customs authorities failed to issue show cause notice to the importer---Show-cause notice issued to the subsequent purchaser after 12 years, that too under Ss. 16 & 19 of Customs Act, 1969, had no relevance with the case---Show-cause notice was issued beyond 10 years of limitation---Appeal, being without any substance, was dismissed.

Alhaj Gul, Superintendent/D.R. for Appellant.

Aamir Bilal for Respondents.

2020 P T D (Trib.) 1164

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial)

Messrs MANI ENTERPRISES

Versus

DIRECTOR PCA and 3 others

Customs Appeal No.161/PB of 2018, decided on 10th May, 2019.

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

----Ss. 32, 25-A & 25---Mis-declaration---Transaction value of identical goods---Scope---Appellant imported glass beads and got it cleared without applying the value determined under relevant valuation ruling---Deputy Collector of Customs ordered for recovery of evaded amount of duty/taxes and imposed penalty---Validity---Appellant had filed goods declaration wherein he had mentioned the correct particulars of the goods, which was supported by commercial invoices and bill of lading, etc---Customs officer was bound to specify himself regarding the correctness of the particulars of the imported goods including declaration and assessment under S.80 of Customs Act, 1969---Said valuation ruling was only valid for 90 days---Appellate tribunal allowed the appeal.

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

----S.32---Mis-declaration---Scope---Section 32, Customs Act, 1969 can only be applied on the basis of the document delivered, furnished by the importer or the statement given by him before customs authorities.

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

----S.32---Mis-declaration---Valuation ruling---Past and closed transaction---Scope---Section 32, Customs Act, 1969 is meant to correct an error, modify an assessment and to recover the refund issued inadvertently which means review or correction of the error in a finalized manner---Once a consignment is out of charge after due consideration of relevant facts, it becomes past and closed transaction to the extent of its value, etc---Section 32, Customs Act, 1969 could not be invoked only on the basis of mere estimate, gossip, personal whims or feelings that the value could have been enhanced or it could fetch more taxes, etc---Opening of an appraisement for the purpose of re-valuation of an earlier estimate or adopted figure would require 'reason to believe' and not 'reasons to suspect'---Provisions of S.32, Customs Act, 1969 cannot be invoked on the basis of a valuation ruling.

2006 PTD 2237 ref.

Amir Bilal for Appellants.

Alhaj Gul, Superintendent Customs for Respondents.

2020 P T D (Trib.) 1172

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs ZONISH TRADERS, KARACHI

Versus

The DEPUTY COLLECTOR (GROUP-V) and another

Customs Appeal No.K-195 of 2018, decided on 5th August, 2019.

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

----Ss. 32, 156(1) & 156(4)---SRO No.568(I)/2014, dated: 26-06-2014---Mis-declaration---Absence of mala fide---Effect--- Collector of Customs (Adjudication) confiscated the goods of appellant on the ground that he had claimed benefit of SRO No.568(I)/2014, dated: 26-06-2014 despite being inadmissible, with intent to cause loss to national exchequer---Validity---Appellant had not claimed benefit under SRO No.568(I)/2014, dated: 26-06-2014 whereas he had mentioned HS Code 9338 due to inadvertence/human error of pressing wrong key, which by all means had to be construed as an error and not a mala fide act---Mens rea and actus reus were missing in the case---Appellant had not done any wrongful deed coupled with mens rea which could attract criminal liability under the provisions of S.32, Customs Act, 1969---Bona fide of appellant was established from the fact that he while transmitting goods declaration had informed the officials "to conduct 100% examination, to check all the aspects including quantity, origin, PCT, description, value, weight, valuation ruling because its shipper had not intimated to him these correctly and he transmitted GD on the basis of his best knowledge"---Appellate Tribunal set aside the order passed by Collector of Customs (Adjudication) and allowed the appeal.

2003 PTD (Trib.) 293; 2002 MLD 1980 and 2014 PTD 1615 ref.

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

----S.194A---Appeal to Appellate Tribunal---Limitation---Delay---Sufficient cause---Scope---Appellant assailed order of Collector of Customs (Adjudication) whereby he had confiscated the goods imported by appellant---Appeal filed by appellant was barred by time and the reason assigned by the appellant for delay in filing appeal was that he was infected with chikungunya virus and was advised by the doctor to take complete rest for a period of two months---Appellant had produced medical certificates issued by the concerned doctor---Validity---Movement of the infected person while suffering from chikungunya virus came to zero due to pain in joints and high fever and the only cure was complete rest, which the doctor had advised to the appellant---Appellant had done the needful when he was able to move, therefore, delay in filing appeal was condoned by the Appellate Tribunal.

(c) Jurisdiction---

----Objection qua jurisdiction is a basic lacuna on assumption of jurisdiction which can be raised at any stage of the proceedings including appeal in as much as it goes to the very roots of the matter and renders entire proceedings coram-non-judice---Jurisdictional defect cannot be removed by mere conclusion of proceedings.

Collector of Sales Tax v. Khursheed Spinning Mills Ltd. and 02 others 2017 PTD 196 ref.

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

----S.180---Sales Tax (VII of 1990), Ss.3, 6, 33 & 34---Income Tax Ordinance (XLIX of 2001), S.148---Issue of show-cause notice before confiscation of goods or imposition of penalty---Scope of sales tax---Time and manner of payment---Determination of liability---Tax credit not allowed---Return---Offences and penalties---Default surcharge---Import---Scope---Section 3 of Sales Tax Act, 1990 is a charging section and under this section the appropriate authority is an Officer of Inland Revenue---Section 6, Sales Tax Act, 1990 defines the mode and manner of collection of sales tax at import stage by the customs authorities, resultantly it is not a charging section instead, it is a machinery section---Section 33 contains penal clauses and S.34, Sales Tax Act, 1990 speaks about default surcharge to be paid upon establishing the charges under the charging sections---Section 148 of Income Tax Ordinance, 2001 prescribes the procedure for collection of income tax at import stage by the authorities referred therein---No charge can be framed and show-cause notice cannot be issued under said sections, which are independent and have no nexus with each other.

Section Officer Government of Punjab Finance Department and other v. Ghulam Shabbir 2010 SCMR 1425; Assistant Collector v. Khyber Elec. Lamps 2003 PTD 1275; DG Khan Cement v. Collector of Customs 2005 PTD 480; Caltex v. Collector 2003 PTD 1593; Union Playing Card Company v. Collector of Customs 2002 MLD 130; Atlas Tyres v. Addl. Collector 2002 MLD 180; State Cement v. Collector PTCL 2001 CL 558; Kashmir Sugar v. Collector 1992 SCMR 1898; and Sarwar International v. Additional Collector of Customs 2013 PTD 813 ref.

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

----Ss.32 & 179---Sales Tax Act (VII of 1990), S.11---Income Tax Ordinance (XLIX of 2001), S.162---Mis-declaration---Power of adjudication---Assessment and recovery of sales tax not levied or short levied or erroneously refunded---Recovery of tax from the person from whom tax was not collected or deducted---Scope---Department, after issuance of show-cause notice, confiscated the goods imported by appellant---Appellant contended that the customs department had no jurisdiction to show-cause notice for recovery of sales tax/income tax---Department contended that incorporation of the word "taxes" in Ss. 32 & 179 of Customs Act, 1969 was sufficient to assume jurisdiction under S.11 of Sales Tax Act, 1990 and S.162 of Income Tax Ordinance, 2001---Validity---Availability of word "taxes" did not automatically empower the department to assume powers under the provisions of Ss.11(2) and (3) of Sales Tax Act, 1990 and S.162(1) of Income Tax Ordinance, 2001, unless legislature appointed an officer of customs as "Officer of Inland Revenue/Commissioner of Income Tax", who had powers under said sections to take cognizance in the matter relating to sales tax and income tax---Word "taxes" used in Ss.179 & 32, Customs Act, 1969 were only inserted for assumption of powers of adjudication on the basis of involved amount of duty and taxes by the appropriate adjudication authority---Despite insertion of the word "taxes" in said sections adjudicating authority had to issue show-cause notice within the respective applicable provisions of the Customs Act, 1969 only and not under S.11 of Sales Tax Act, 1990 and S.162(1) of Income Tax Ordinance, 2001, which otherwise were non-existent in the show-cause notice---Appellate Tribunal set aside the order passed by Officer of Customs and allowed the appeal.

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

----S.179---Sales Tax Act (VII of 1990), Ss. 11 & 48---Income Tax Ordinance (XLIX of 2001), Ss. 162 & 140---Powers of adjudication---Assessment and recovery of sales tax not levied or short levied or erroneously refunded---Recovery of arrears of sales tax---Recovery of tax from the person from whom tax was not collected or deducted---Recovery of tax from persons holding money on behalf of a taxpayer---Scope---Customs Department has the authority to collect sales tax and income tax at import stage in the capacity of collecting agent and can recover escaped/short paid customs duty and regulatory duty after due process of law, but has no power to adjudicate the cases of short recovery of sales tax and income tax under S.11, Sales Tax Act, 1990 and S.162, Income Tax Ordinance, 2001---Customs Department can 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 of S.48 of Sales Tax Act, 1990 and S.140 of Income Tax Ordinance, 2001.

Messrs AGP (Pvt.) Ltd. v. Additional Collector of Customs, Karachi 2011 PTD (Trib.) 110; Global Marketing Services and another v. Model Customs Collectorate and another 2010 PTD (Trib.) 2086, Collector of Customs, Islamabad v. Global Marketing Service and another v. Model Customs Collectorate and another SCRA No.01 of 2010; Al-Haaj Industrial Corporation (Pvt.) Ltd. Peshawar v. Collector of Customs (Appraisement) 2004 PTD 801; Messrs Lucky Cement Ltd. v. Federation of Pakistan and others C.P. No.D-216/2013, Shujabad Agro Industry (Pvt.) Ltd. v. Collector of Customs and 8 others 2014 PTD 1963; Muhammad Measum and others v. FOP and 2 others 2015 PTD 702; Asif Textile Trading v. Directorate General I&I-FBR 2016 PTD (Trib.) 969; Phillip Morris (Pakistan) Ltd., Karachi v. Additional Collector of Customs 2016 PTD (Trib.) 1008; Al-Fajer Associates v. Directorate General of Intelligence and Investigations-FBR 2016 PTD (Trib.) 2125; Pepsi Cola Export Corporation, Karachi v. Directorate General of Post Clearance Audit and 02 others Appeal No.K-1635/2014; Messrs M.R. Sons, Karachi v. Directorate General of Intelligence and Investigations-FBR Appeal No.K-1029/2016; Messrs Muhammad Imran, Karachi v. Directorate General of Intelligence and Investigations-FBR Appeal No.K-1030/2016, Messrs Rightway Trading Company, Karachi v. Deputy Collector of Customs, MCC of Appraisement-West and 3 others Appeal No.K-1343/2015; Messrs Zubair Wali Ahmed Zai Ltd. v. The Principal Appraiser, Directorate of Transit Trade and others 2016 PTD (Trib.) 2463; Singer Pakistan Ltd. v. Collector of Customs and 2 others 2017 PTD (Trib.) 481; 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 (Appeal), Collectorate of Customs, Federal Excise and Sales Tax, Faisalabad 2008 PTD 1973 and DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 ref.

Xen Shahpur Division v. Collector of Sales Tax (Appeal), Collectorate of Customs, Federal Excise and Sales Tax, Faisalabad 2008 PTD 1973 and DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 rel.

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

----Ss. 79 & 180---Declaration and assessment for home consumption or warehousing---Issuance of show cause notice---Scope---Section 79, Customs Act, 1969 is not a charging section instead it is a machinery section which outlines the procedure of transmitting goods declaration with the clearance collectorate---No charge under said section can be invoked in the show-cause notice.

Nadeem Ahmed Mirza, Consultant for Appellant.

Ilyas Gichki, Appraiser for Respondents.

2020 P T D (Trib.) 1214

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member Judicial and Qurban Ali Khan, Member Technical

Messrs SHARIF CUSTOMS CLEARING AGENCY, NWR PLAZA, QAYYUM STADIUM, PESHAWAR

Versus

The COLLECTOR OF CUSTOMS (ADJUDICATION), ISLAMABAD and 2 others

Customs Appeal No.62/PB of 2017, decided on 23rd January, 2019.

Customs Act (IV of 1969)---

----S.180---Misdeclaration---Show-cause notice---Object and scope---Customs Clearing Agent and importer were imposed penalty for mis-declaration---Validity---No allegation had been levelled against the Clearing Agent in the show-cause notice---Department could not go beyond the show-cause notice---Object of show-cause notice under S.180 of Customs Act, 1969 was to inform the concerned party indicating the nature of contravention and allegation against him and the proposed action to be taken.

Najeeb ur Rehman Abbasi for Appellants.

M. Zahid Assistant Collector and Alhaj Gul Superintendent Customs for Respondents.

2020 P T D (Trib.) 1222

[Customs Appellate Tribunal]

Before Jahanzaib Wahlah, Member Judicial-III

Messrs YOUSUF ENTERPRISES, KARACHI

Versus

The ASSISTANT DIRECTOR and 3 others

Custom Appeal No.K-81 of 2018, decided on 20th April, 2019.

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

----S. 4, Fifth Schedule, Sr. No.12 & Sixth Schedule, Sr.No.97 of Table I---Zero rating---Stationery items---'Highlighter', connotation---Scope---Appellant imported different stationery items including highlighter pens and claimed exemption under Serial No. 12 of Fifth Schedule to the Sales Tax Act, 1990---Deputy Collector of Customs, after examination, allowed the exemption and cleared the goods---Assistant Director, Directorate General of Post Clearance Audit, after lapse of 2 years, issued audit observations with the opinion that highlighters were not pen and as such exemption as given under Fifth Schedule of Sales Tax Act, 1990 was not available to the appellant---Collector of Customs (Adjudication), after receiving contravention report, issued show-cause notice and upheld the charge of mis-declaration against appellant---Appeal filed before Collector of Customs (Appeals) was dismissed---Validity---Term 'other pens' used in PCT Heading 96.08 and sub-Heading 9608.2000 included "highlighter", which was known as "marker" or "pen"---Words "marker" or "pen" was engraved/printed on every highlighter---Highlighter by all means was a marker or pen and it fell within the ambit of Heading 96.08 and specifically under 9608.2000---Said Heading was duly incorporated by appellant in its goods declaration, which was accepted by the officials of Clearance Collectorate while extending benefit/exemption under clause (vii) of Serial No. 12 of Fifth Schedule of Sales Tax Act, 1990---Interpretation by Assistant Director, Directorate General of Post Clearance Audit was absurd, in the light of clarification issued by Federal Board of Revenue (Board) dated 19-10-2016 that items falling under PCT Heading 96.08 appearing at Serial No. 97 of Table I to Sixth Schedule of the Sales Tax Act, 1991 was equally available to all sorts of pens, including marker and porous tipped pens, akin to extended benefit/exemption under clause (vii) of Serial No. 12 of Fifth Schedule to Sales Tax Act, 1990---Benefit/exemption claimed by appellant, therefore, was admissible---Appellate Tribunal annulled conducting of audit, audit observations, contravention report, issuance of show-cause notice and set aside the orders passed thereon being illegal, null and void ab initio---Appeal was allowed, accordingly.

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

----Ss.26A, 211, 3DD & 32---SRO No. 500(I)/2009 dated: 13-06-2009---Mis-declaration---Conduct of audit---Issuance of notice before conducting the audit---Scope---Assistant Director, Directorate General of Post Clearance Audit issued audit observations and framed contravention report---Collector of Customs (Adjudication) issued show-cause notice alleging mis-declaration of PCT heading and thereafter ordered for recovery of evaded amount of duty and taxes---Appeal filed before Collector of Customs (Appeals) was dismissed---Validity---Audit of importer accounts/ record maintained under the provisions of S. 211, Customs Act, 1969 had to be conducted by officials of Directorate of Post Clearance Audit as per mechanism provided in S. 26A, Customs Act, 1969---Appropriate officer was empowered to conduct audit, inquiry or investigation of an importer for the purpose of ascertaining the correctness of any declaration, document or statement for determining the veracity of any declaration, document or statement; for determining the liability of any person for duty, taxes, fees, surcharge, fines or penalties or for ensuring compliance with all other laws---Appropriate officer, prior to proceeding with said exercise, had to either summon or give a notice and reasonable time to produce accounts and record---Conducting of audit on the basis of record available on the CCS Reservoir was not permitted---Appellate Tribunal annulled the conducting of audit, audit observations, contravention report, issuance of show-cause notice and set aside the orders passed thereon being illegal, null and void ab initio---Appeal was allowed, accordingly.

(c) Administration of justice---

----A thing has to be done as it has been prescribed to be done, doing the same in any other manner renders same illegal and void ab initio.

2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505 and PLD 1971 SC 184 rel.

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

----Ss. 3DD, 32, 32A, 79 & 180---Income Tax Ordinance (XLIX of 2001), Ss. 228, 230A, 207 & 177---Sales Tax Act (VII of 1990), S.30DD---SRO No.42(I)/2010, dated 23-01-2010---Mis-declaration---Recovery of income tax---Recovery of sales tax---Show-cause notice---Audit by Income Tax authorities---Directorate General of Post Clearance Audit---Jurisdiction---Scope---Assistant Director, Directorate General of Post Clearance Audit issued audit observations and framed contravention report---Collector of Customs (Adjudication) issued show-cause notice alleging mis-declaration of PCT Heading and thereafter ordered for recovery of evaded amount of duty, income tax and sales tax---Appeal filed before Collector of Customs (Appeals) was dismissed---Validity---Assistant Director, Directorate General of Post Clearance Audit had not been appointed/designated as officer of Inland Revenue by the legislature, instead Directorate General of Inland Audit had been designated as officer of Inland Revenue under S. 228 Income Tax Ordinance, 2001 and for overseeing the collection of withholding tax, Directorate General of Withholding Taxes had been established under S. 230A of Income Tax Ordinance, 2001---Neither Directorate General of Post Clearance Audit nor its Assistant Director was empowered to exercise the powers of an Officer of Inland Revenue under S. 207 of Income Tax Ordinance, 2001 for conducting audit under S. 177, of the said Ordinance---Assistant Director, Directorate General of Post Clearance Audit was indeed appointed as officer of Inland Revenue under S. 30DD of Sales Tax Act, 1990---Board had delegated powers of audit through SRO No.42(I)/2010, dated: 23-01-2010 to certain officers to the exclusion of others---Entire communication including the audit observations and contravention reports were prepared and served in the capacity of Assistant Director of Post Clearance Audit, which power was not available to him in terms of SRO No.42(I)/2010, dated 23-01-2010---Any superstructure built on such action, no matter how strong, had to crumble down---Appellate Tribunal declared the entire proceedings right from audit, audit observations and contravention reports to be of no legal effect---Appeal was allowed, accordingly.

Chittaranjan Cotton Mills Ltd. v. Staff Union PLD 1971 SC 197; Raunaq Ali's case PLD 1973 SC 236; Messrs Unitex Tower Factory v. The Collector of Customs (Appeals) and others 2002 PTD (Trib.) 889, Messrs Silver Corporation v. The Additional Collector of Sales Tax (Adjudication), Karachi III, Appeal No.K-106 of 2003; 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 37 and Land Acquisition Collector, Noshehra and others v. Sarfraz Khan and others PLD 2001 SC 514. ref.

Waseem Ahmed and others v. FOP and another 2014 PTD 1733 rel.

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

----S.180---Sales Tax Act (VII of 1990), Ss. 3, 6, 7, 33, 34 & 26---Income Tax Ordinance (XLIX of 2001), S. 148---Show-cause notice---Time and manner of payment of sales tax---Determination of sales tax liability---Offences and penalties---Default surcharge---Collection of income tax at import stage---Scope---Section 3, Sales Tax Act, 1990, being a charging section cannot be invoked by anyone other than an officer of Inland Revenue---Section 6 of the said Act contains machinery provision that lays down the procedure relating to collection of sales tax at import stage like customs duty, thus, cannot be used to charge anyone for an offence---Section 148, Income Tax Ordinance, 2001 is a machinery provision akin to section 6 of Sales Tax Act, 1990, which empowers Customs authorities to collected income tax like customs duty on imported goods---Provisions which provide a mechanism/mode of collection are not to be construed as charging provisions even through inapt interpretation as they could neither abridge nor expand the scope of a charging section in an Act/Ordinance---Such provisions are independent ones under which no charge can be invoked---No show-cause notice can be issued under said provisions---Issuance of show-cause notice while invoking irrelevant/erroneous provisions of law renders the same illegal and as such void ab initio.

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

Pakistan Television Corporation, Ltd., v. Commissioner Inland Revenue (Legal), LTU, Islamabad and others 2019 SCMR 282 rel.

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

----Ss.180 & 202---Sales Tax Act (VII of 1990), Ss.11, 3, 6, 7A & 48---Income Tax Ordinance (XLIX of 2001), Ss. 162 & 140---Issuance of show-cause notice for recovery of Sales Tax and Income Tax---Recovery of government dues---Recovery of arrears and assessment of sales tax---Time and mode of payment of sales tax---Recovery of tax from the person from whom income tax was not collected or deducted---Recovery of income tax from persons holding money on behalf of a taxpayer---Scope---Assistant Director, Directorate General of Post Clearance Audit, issued audit observations and framed contravention report---Collector of Customs (Adjudication) issued show-cause notice alleging mis-declaration of PCT Heading and thereafter ordered for recovery of evaded amount of duty, income tax and sales tax---Appeal filed before Collector of Customs (Appeals) was dismissed---Validity---Collector of Customs (Adjudication) figured nowhere in S. 11 of Sales Tax Act, 1990 or S.162(1) of Income Tax Ordinance, 2001---Collector of Customs (Adjudication) was not empowered to lay hands on the matter falling within the ambit of Ss. 3, 6, 7A & 11 of Sales Tax Act, 1990 and S.162(1) of Income Tax Ordinance, 2001---Said sections least empowered the Officer of Customs to initiate adjudication/recovery proceedings for the short collected/paid sales tax and income tax either due to collusion, connivance, inadvertence, error or misconstruction---Show-cause notice had to be issued before proceeding with recovery under the provisions of S.11 of Sales Tax Act, 1990 and S.162(1), Income Tax Ordinance, 2001---Authority to issue show-cause notice under said provisions of Sales Tax Act, 1990/Income Tax Ordinance, 2001 was Officer of Inland Revenue and the Commissioner of Income Tax---Customs Collectorates had the power to collect and enforce payment of Sales Tax and Income Tax at the time of clearance but they were not empowered to recover short paid amount of Sales Tax and Income Tax at import stage under S.202, Customs Act, 1969---Customs Collectorates could recover the amount of sales tax and income tax only upon receipt of notice from the Officer of Inland Revenue and Commissioner of Income Tax in terms of section 48, Sales Tax Act, 1990 and S.140, Income Tax Ordinance, 2001 for recovery of adjudged amount of sales tax and Income tax after due process of law---Appellate Tribunal annulled the conduct of audit, audit observations, contravention report, issuance of show-cause notice and set aside the orders passed thereon being illegal, null and void ab initio---Appeal was allowed, accordingly.

2011 PTD (Trib.) 110; 2010 PTD (Trib.) 2086; 2004 PTD 801; C.P. No. D-216/2013; 2015 PTD 702; 2016 PTD (Trib.) 969; 2016 PTD 1008; 2016 PTD (Trib.) 2125; Appeal No. K-1635/2014; Appeal No. K-1029/2016; Appeal No.K-1030/2016; Appeal No.K-1343 / 2015; 2016 PTD (Trib.) 2463 and 2017 PTD (Trib.) 481 ref.

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

----Ss. 193, 193A, 195, 80 & 83---Customs Rules, 2001, Rr.438 & 442---SRO No.500(I)/2009 dated 12-6-2009---Appeal to Collector (Appeals)---Issuance of show-cause notice in appeal---Power of Federal Board of Revenue (Board) or Collector of Customs to pass certain orders---Checking of goods declaration by Customs---Clearance of goods for home consumption---Scope---Assistant Director, Directorate General of Post Clearance Audit, after delivery of consignment, issued audit observations and framed contravention report---Deputy Collector (Adjudication) issued show-cause notice alleging mis-declaration of PCT Heading and thereafter ordered for recovery of evaded amount of duty and taxes---Appeal filed before Collector of Customs (Appeals) was dismissed---Validity---Assessment order passed under S.80, Customs Act, 1969 and R. 438, Customs Rules, 2001 and thereafter passing of clearance order under S. 83, Customs Act, 1969 and R.442, Customs Rules, 2001 by the Authority could not be disturbed by any forum for the purpose of preparing contravention report and adjudication proceedings---Only course left for Assistant Director, Directorate General of Post Clearance Audit, was to challenge the clearance order before Collector of Customs (Appeals) under S. 193, Customs Act, 1969 in exercise of powers delegated upon him through SRO No.500(I)/2009, dated: 12-06-2009---Assistant Director, Directorate General of Post Clearance Audit, could incorporate all the apprehensions, misreading of facts and contraventions of the provisions of Customs Act, 1969 or Customs Rules, 2001 in the appeal---Collector of Customs (Appeals) could issue show cause notice, where the duty and taxes had either not been levied or short paid under S.193A, Customs Act, 1969---Assistant Director, Directorate General of Post Clearance Audit instead of adhering to the prescribed method available in Customs Act, 1969 reopened the assessment/clearance order under S.195, Customs Act, 1969 under which said officer or any officer of Directorate General of Post Clearance Audit had any such power---When right of appeal had been conferred by the legislature in the provision of S.193, Customs Act, 1969, the provision of S.195, Customs Act, 1969 was un-operational and could not be exercised even by the Authority defined therein---Transaction in question was a passed and closed one, having attained finality and could not be disturbed by virtue of non-filing of appeal---Appeal was allowed, accordingly.

Messrs Paramount International (Pvt.) Ltd., Karachi v. Secretary Revenue Division 2014 PTD 1256; Messrs Smith Kline French v. Pakistan 2004 PTD 3020 and Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310 rel.

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

----Ss. 32, 80 & 83---Constitution of Pakistan, Art. 25---Mis-declaration on filing of goods declaration---Partial treatment---Scope---Assistant Director, Directorate General of Post Clearance Audit, after delivery of consignment, issued audit observations and framed contravention report---Collector of Customs (Adjudication) issued show-cause notice alleging mis-declaration of PCT Heading and thereafter ordered for recovery of evaded amount of duty and taxes---Appeal filed before Collector of Customs (Appeals) was dismissed---Validity---Authorities charged appellant for mis-declaration on the basis of assumption/presumption that appellant transmitted goods declaration while claiming exemption of sales tax under Serial No. 12 of Fifth Schedule of Sales Tax Act, 1990---Officials of Customs confirmed the declaration and passed assessment/clearance orders while accepting the declaration as true and correct---Alleged mis-declaration could not have been possible unless said officials were hand in glove with appellant---No charges had been leveled under S. 32(2), Customs Act, 1969 against the officials---Said action of authorities proved that appellant had met with partial treatment, which was not permitted under Art. 25 of the Constitution---Appellate Tribunal set aside the orders passed by customs authorities being illegal, null and void ab initio---Appeal was allowed, accordingly.

2002 SCMR 312; 2009 PTD 1507; 2005 SCMR 492 and 2010 SCMR 431 rel.

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

----S. 193A---Procedure in appeal---Extension of time by Federal Board of Revenue (Board) after lapse of 120 days---Scope---Appeal was filed on 28-04-2017; order in terms of S.193A(3), Customs Act, 1969 had to be passed by Collector of Customs (Appeals) within 120 days i.e. on or before 26-08-2017 or within further extended period of 60 days, upon availability of exceptional circumstances and recording of those after issuance of notice to the appellant---Order on appeal was passed on 14-11-2017 without any extension prior to expiry of initial period of 120 days---Collector, for validating the delay in passing order, placed reliance on extension granted by Board which was not right as the issue was liable to be annulled---Order passed by Collector of Customs (Appeals) being barred by 125 days, was void ab initio and not enforceable under law---Appeal was allowed, accordingly.

2017 PTD 1756; Collector of Customs Sales Tax Gujranwala and others v. Super Asia Mohammad Deen and Sons and others 2017 SCMR 1427; 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 of Sales Tax and 4 others 2009 PTD 762; Messrs Syed Bhai Lighting Limited, Lahore 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.

(j) Words and phrases---

----"Highlighter"---Defined.

American heritage (R) Dictionary of the English Language, Fifth Edition, Copyright (C) 2011 by Houghton Miffin Harcourt Publishing Company, Published and Wikipedia ref.

(k) Interpretation of statutes---

----Taxing statute---Principles for interpretation of taxing statute, summarized.

i) There is no intendment or equity about tax and the provisions of taxing statute must be applied as they stand;

ii) The provision creating a tax liability must be interpreted strictly in favour of the taxpayer and against the revenue authority;

iii) Any doubt arising from interpretation of a fiscal provision must be resolved in favour of the taxpayer;

iv) If two reasonable interpretations are possible, the one favouring the taxpayer must be adopted;

v) When a tax is clearly imposed by a statutory provision any exemption from it must be clearly expressed in the statute or clearly implied from it;

vi) Where the taxpayer claims the benefit of expressed or implied exemption, the burden is on him to establish that his case is covered by the exemption;

vii) If a taxpayer is entitled to an exemption on a reasonable construction of the law it ought not to be denied to him by a strained, strict or convoluted interpretation of law.

Messrs Pakistan Television Corporation v. Commissioner Inland Revenue (Legal), Islamabad and others 2017 SCMR 1136 and 2019 SCMR 282 ref.

Nadeem Ahmed Mirza, Consultant for Appellant.

Umair, A.O. and Zaheer Ashraf, A.O. for Respondents.

2020 P T D (Trib.) 1304

[Customs Appellate Tribunal]

Before Jahanzaib Wahlah, Member Judicial III and Syed Tanvir Ahmed, Member Technical III

Messrs DIAMOND FABRICS, FAISALABAD

Versus

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

Customs Appeal No.K-544 of 2018, decided on 20th October, 2018.

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

----Ss. 25, 32, 79, 157 & 194-A---Misdeclaration of description of imported goods---Confiscation of goods---Importer filed declaration, declaring goods as "Polyester Printed Fabric for bed sheet", under PCT heading 5407.5400---Three examinations of goods were conducted and in reports of all said examinations, description of goods was found as Polyester woven furnishing fabric for sofas, as declared by the importer---Declared description was 100% Polyester but the department determined the same as made of 85% Polyester and 15% Cotton---Importer was alleged to have mis-declared for getting the goods assessed on suppressed value for evading legitimate amount of duty or taxes with mala fide intention---Show-cause notice was issued to the importer---Adjudicating Officer vide order-in-original established the charges levelled in the show-cause notice and offended goods were confiscated with the option to the importer to redeem the goods on payment of fine equal to 35% of the value of the offending goods---Validity---Customs department had visually examined the goods to ascertain its description and failed to get the same examined through laboratory test---Description declared by the importer should have been accepted in absence of any valid laboratory test---Department had failed to properly conduct inquiry and decided the description on whims---Department had itself accepted and stated in the examination reports that fabric in question had multiple uses---Imported goods did not fall under heading 5514.2200---No mis-declaration of description of the goods was established, in circumstances---Statutory duties had not been properly performed by the department and transgression from the statutory provisions of law was found and also against constitutional obligations vested under Art.4 of the Constitution---Proceedings in the case were infested with inherent legal infirmities and substantive illegalities, which tantamounted to patent violation of prescribed law; in utter disregard of principles of natural justice---Impugned order-in-original was declared as null and void ab initio and was set aside---Department was ordered to issue delay and detention certificate to the importer.

Khyber Tractor v. Government of Pakistan PLD 2005 SC 842; PLD 1996 Khi. 68; PTCL 1995 Cl. 415; PLD 1991 SC 963; 1995 SCMR 1345; 1992 SCMR 196; Messrs Sunny Trades v. Federation of Pakistan and 4 others 2009 PTD 281; 2002 PTD 2457; PLD 1971 SC 61; PLD 1978 SC 236; 2001 SCMR 838; 2003 SCMR 1505 and Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 ref.

(b) Administration of justice---

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

Central Excise and Land Customs v. Rahim Din 1987 SCMR 1840 rel.

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

----Ss.32 & 156---Imposition of penalty---Principle---Where the evasion of duty was not wilful, the imposition of penalty was not warranted.

Messrs Humayun Ltd. v. Pakistan and others PLD 1991 SC 963 rel.

(d) Constitution of Pakistan---

----Art. 4---Protection of law---Every citizen enjoyed protection of law and to be treated in accordance with law was inalienable right of every citizen, wherever he could be---No action detrimental to the life, liberty, body, reputation or property of a person could be taken except in accordance with law.

Abuzar Hussain for Appellant.

Rashid Ali, A.O. for Respondents.

2020 P T D (Trib.) 1330

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial III and Dr. Zulfikhar A. Malik, Member, Technical I

Messrs MIANOOR ENTERPRISES KARACHI and others

Versus

The DEPUTY DIRECTOR, DIRECTORATE GENERAL OF PCA, KARACHI and others

Customs Appeals Nos.K-917 and K-918 of 2017, decided on 20th May, 2019.

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

----Ss.3, 4, 6, 7, 30, 32 & 34---Income Tax Ordinance (XLIX of 2001), S.148---Notification No.SRO No. 1125(I)/2011 dated 31-12-2011---FBR Letter C.No. 3(2) AT-L&P/2011(Pt) dated 2-2-2012, issued by Federal Board of Revenue---Zero rating---Benefit---Commercial importer, entitlement of---Dispute was with regard to entitlement of Zero rating and authorities issued show cause notice to taxpayer---Plea raised by authorities was that the taxpayer was a commercial importer therefore, he was not entitled to import 'Acrylic Polymer in Primary Form' which was binder and was to be imported by manufacturer which material was used solely and exclusively in 'Diapers'---Validity---Non-invoking S.32 of Sales Tax Act, 1990, and assumption of powers under the provisions of Sales Tax Act, 1990 and Income Tax Ordinance, 2001, rendered the show-cause notice / order-in-original on their face as defective and as such of no legal effect--- Eligibility of entitlement of notification in the capacity of commercial importer stood negated from condition No. 1 of the Notification SRO No.1125(I)/2011, dated 31-12-2011 and the clarification of Federal Board of Revenue vide Letter C. No. 3 (2) AT-L&P/2011(Pt) dated 2-2-2012, whereby all commercial importers importing goods useable as industrial input were eligible for concession under the notification in question---Appellate Tribunal Inland Revenue set aside the show-cause notice issued to taxpayer--- Appeal was allowed in circumstances.

2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; EA Avanu's case PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; PLD 1996 Kar. 68; 2006 PTD 978; PLD 1971 SC 184; Messrs Paramount International (Pvt.) Ltd., Karachi v. Secretary Revenue Division 2014 PTD 1256; 2002 SCMR 312; 2009 PTD 1507; 2005 SCMR 492; 2010 SCMR 431; The Assistant Director Intelligence and Investigation v. B.R Herman Mohattas (Pvt.) Ltd., Karachi PLD 1992 SC 485; (1957) 32 ITR 89; (1967) 64 ITR 516 : I.Ts.As. 2400/2401/KB/91-92; 1995 PTD (Trib.) 580; 1995 PTD (Trib.) 1152; (1982) 1381 ITR 742; 1993 PTD 206; 1997 PTD (Trib.) 2209 and 2013 PTD (Trib.) 353 ref.

(b) Interpretation of statutes---

----Redundancy---Scope---Attributing redundancy to legislature is not permitted under law--- Every word used in statue must be given its true meaning and the provision construed together in harmonious manner---Not legal or proper to apply one provision of law in isolation from the other provision as surplusages or redundancy cannot be attributed to the legislature.

PLD 2005 SC 373; PLD 1997 SC 32; PLD 1962 SC 90; 2015 SCMR 1303; PLD 2015 SC 401; 2005 SCMR 1166 and 2016 PTD 1675 rel.

Nadeem Ahmed Mirza (Consultant) for Appellants.

Arif Mqbool, AD for Respondents.

2020 P T D (Trib.) 1359

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial III

Messrs TAGERS, KARACHI

Versus

The DEPUTY COLLECTOR OF CUSTOMS and another

Custom Appeal No.K-939 of 2016, decided on 8th April, 2019.

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

----Ss.32, 180, 80, 29, 193, 193A, 215, 155Q, 83, 2(a) & 223---Customs Rules, 2001, Rr. 438 & 442---SRO No. 371(I)/2002, dated 15.06.2002---Constitution of Pakistan, Art. 10-A---Mis-declaration---Assessment of duty without issuance of show-cause notice---Assessment of goods---Restriction of amendment of goods declaration---Appeal to Collector of Customs (Appeals)---Word 'order', connotation---Procedure in appeal---Re-assessment order to be served manually---Clearance of goods---Officer of Customs to follow Federal Board of Revenue's Orders---Limitation against void ab initio order---Condonation of delay in filing appeal---Fair trial---Scope---Appellant imported consignment of transparent plastic empty boxes with lids in assorted sizes---Deputy Collector of Customs passed assessment order while accepting the declaration of appellant in respect of PCT Heading and value---Appellant obtained delivery of consignment after clearance of goods---Appellant was thereafter confronted with a view message popping on his homepage for payment of duty, taxes and penalty---Assessment sheet transpired that Deputy Collector of Customs had accepted the contention of appellant regarding PCT Heading and value on 9.1.2013, consequent to which appellant obtained delivery from the terminal---Deputy Collector of Customs on 8.2.2013 amended column Nos. 44, 45 & 47 of goods declaration through re-assessment order while subscribing in the note sheet "As per criteria and instruction of Collector MCC PACCS regarding subject matter" and posted view message for payment of duty and taxes---Appeal filed by appellant on the strength of the view message before Collector of Customs (Appeals) was dismissed on the grounds that view message was not a re-assessment order or even an order under S. 80, Customs Act, 1969 and that appeal was barred by time---Validity---View message contained command and direction for payment of duty, taxes and penalty, despite being formal---View message, by all means, fell within the definition of an order and its vires could be challenged before Collector of Customs (Appeals) under S.193, Customs Act, 1969---Appellant upon knowledge retrieved the order and challenged its vires before Collector of Customs (Appeals)---Deputy Collector of Customs was mandated to intimate the appellant regarding passing of re-assessment order and creating recovery, manually in accordance with the adopted procedure as enunciated in S. 215 of Customs Act, 1969---Collector of Customs (Appeals) had admitted the appeal for regular hearing without any objection of its being time-barred---Collector of Customs (Appeals) was required to decide the appeal on merits in accordance with the spirit of Art.10-A of the Constitution---Collector of Customs (Appeals) had to examine the reasons of delay sympathetically when taxpayer was proceeded against ex parte during the adjudication proceedings---No limitation ran against void ab initio order---View message was posted for recovery of duty and taxes under S.32(3), Customs Act, 1969---No show-cause notice was issued despite being mandated under the law---Issuance of show-cause notice was pre-requisite and could not be dispensed with under any circumstances---Deputy Collector of Customs violated the provisions of S. 32, Customs Act, 1969 and the principles of natural justice while creating recovery through view message---Re-assessment under S.80(3), Customs Act, 1969 after release of goods was permitted only after calling for documents expressed in subsection (2) of said section of the Customs Act, 1969---Description and quantity of goods was the same as declared by appellant---No mis-declaration had been made by appellant in material particulars---Re-assessment was not warranted under S. 80(3), Customs Act, 1969---Collector of Customs had no power to issue orders to the field formation to pass re-assessment order under the provisions of S. 80(3), Customs Act, 1969---Deputy Collector of Customs was not mandated to comply with the order of Collector of Customs---Deputy Collector of Customs had to act independently without any influence and no authority could direct him to act contrary to law---Deputy Collector of Customs re-assessed the goods under S. 80, Customs Act, 1969 despite not being an appropriate officer and created recovery in usurpation of powers delegated to the authority through clause 3(ii) of SRO 371(I)/2002, dated 15.06.2002, namely "Principal Appraiser"---No amendment was allowed in the columns of value, quantity and description of goods after removal of goods from the customs area for home consumption, after passing of valid assessment/clearance order under Ss. 80 & 83, Customs Act, 1969 and Rr. 438 & 442, Customs Rules, 2001---Assessment and clearance order could not be disturbed by any authority for the purpose of re-assessment, preparing contravention report and adjudication proceedings---Only course left for Deputy Collector of Customs was to challenge the clearance order before the Collector of Customs (Appeals) under S. 193, Customs Act, 1969---Deputy Collector of Customs could raise all of his apprehensions, misreadings of facts and contravention of the provisions of Customs Act, 1969 or Customs Rules, 2001 in the appeal---Collector of Customs (Appeals), if considered that duty and taxes had been either not levied or short paid, could issue show-cause notice to the importer (Appellant) under S.32, Customs Act, 1969 as expressed in third proviso to subsection (3) of S.193A, Customs Act, 1969---Deputy Collector of Customs instead of applying the prescribed method reopened the assessment/clearance order under S.195, Customs Act, 1969 which powers were either vested with the Federal Board of Revenue or the Collector of Customs---When the right of appeal was provided by legislature under S. 193, Customs Act, 1969, S.195 was un-operational and could not be exercised even by the authority defined therein---Appellate Tribunal set aside the view message and order-in-appeal being illegal, null and void---Appeal was allowed, accordingly.

2010 PTD (Trib.) 1491; 2010 PTD (Trib.) 1359; 2012 PTD (Trib.) 637; Laser Praxis Deplix Lahore v. Customs Central Excise and Sales Tax Appellate Tribunal 2002 PTD (Trib.) 549; Controller of Land Acquisition v. Mst. Katiji and others [1987] 56 Tax 130 (S.C. India); Rehmat Bibi and others v. Punno Khan and others 1986 SCMR 962; Syed Haji Abdul Wahid and another v. Syed Sirajuddin 1996 SCMR 2296; 2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; PLD 1996 Kar. 68, 2006 PTD 978 and PLD 1971 SC 184 ref.

Ali Muhammad v. Hussain Bux and another PLD 1976 SC 37; Yousuf Ali v. Muhammad Aslam Zia and others PLD 1958 SC (Pak) 104; Ch. Altaf Hussain and others v. The Chief Settlement Commissioner PLD 1965 SC 68 ; Syed Ali Abbass and others v. Vishan Singh and others PLD 1967 SC 294; FOP v. Metropolitan Steel Corporation 2002 PTD 87; Messrs Paramount International (Pvt.) Ltd., Karachi v. Secretary Revenue Division 2014 PTD 1256; Forte Pakistan (Pvt.) Ltd., Karachi v. The Director General of Intelligence and Investigation (Customs and Excise ), Karachi and another 2006 PTD 978; Assistant Collector of Customs, Dry Port Peshawar v. Messrs Khyber Electric Lamp MFG Co., Ltd. Peshawar 2001 SCMR 838; The State v. Zia-ur-Rehman and others PLD 1973 SC 49; 2009 PTD 1083; Section Officer Government of Punjab Finance Department and others v. Ghulam Shabbir 2010 SCMR 1425; Ali Muhammad v. Chief Settlement Commissioner 2001 SCMR 1822; All Pakistan Newspaper Society and others v. FOP and others PLD 2004 SC 600 and Khyber, Tractor (Pvt.) Ltd. v. Pakistan Through Ministry of Finance, Revenue and Economic Affairs PLD 2005 SC 842 rel.

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

----S.80---Sales Tax Act (VII of 1990), Ss. 11 & 6---Income Tax Ordinance (XLIX of 2001), Ss. 162 & 148---Recovery of taxes by Customs authorities---Assessment of sales tax---Time and manner of payment of sales tax---Advance tax to be collected by Customs authorities---Recovery of income tax from whom income tax was not collected or deducted---Scope---Appellant imported consignment of transparent plastic empty boxes with lids in assorted sizes---Deputy Collector of Customs passed assessment order while accepting the declaration of appellant in respect of PCT Heading and value---Appellant obtained delivery of consignment after clearance of goods---Deputy Collector of Customs, later on, through "view message" on homepage of appellant created recovery for short paid sales tax and income tax---Appeal filed before Collector of Customs (Appeals) was dismissed, being barred by time---Validity---Deputy Collector of Customs ignored the fact that S. 80(3), Customs Act, 1969 only spoke about 'duty' and not taxes, for which appropriate authorities were Officer of Inland Revenue and Commissioner of Income Tax as expressed in S.11, Sales Tax Act, 1990 and S.162(1), Income Tax Ordinance, 2001---Customs officials figured nowhere in said sections---Deputy Collector of Customs was not empowered to create recovery of Sales Tax and Income Tax after clearance of goods---Appellate Tribunal set aside the view message and order-in-appeal being illegal, null and void---Appeal was allowed, accordingly.

2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; E.A. Avan's case PLD 1964 SC 536; 2001 SCMR 838; 2003 SCMR 1505; Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129; PLD 1996 Kar. 68; 2006 PTD 978 and PLD 1971 SC 184 rel.

(c) Words and phrases---

----"Order"---Meaning.

Black Law Dictionary Sixth Edition and PLD 1986 Lah. 237 ref.

(d) Limitation---

----No limitation runs against void ab initio order.

Rehmat Bibi and others v. Punno Khan and others 1986 SCMR 962 and Syed Haji Abdul Wahid and another v. Syed Sirajuddin 1996 SCMR 2296 ref.

Ali Muhammad v. Hussain Bux and another PLD 1976 SC 37; Yousuf Ali v. Muhammad Aslam Zia and others PLD 1958 SC (Pak) 104; Ch. Altaf Hussain and others v. The Chief Settlement Commissioner PLD 1965 SC 68 ; Syed Ali Abbass and others v. Vishan Singh and others PLD 1967 SC 294 and FOP v. Metropolitan Steel Corporation 2002 PTD 87 rel.

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

----Ss. 3DD, 26, 26A, 80 & 180---Customs Rules, 2001, R.438---SRO No. 500(I)/2009, dated 13.06.2009---Directorate General of Post Clearance Audit---Obligation to produce documents and provide information---Conduct of audit---Assessment of goods---Issuance of show-cause notice---Scope---Appellant imported consignment of transparent plastic empty boxes with lids in assorted sizes---Deputy Collector of Customs passed assessment order while accepting the declaration of appellant in respect of PCT Heading and value---Appellant obtained delivery of consignment after clearance of goods---Deputy Collector of Customs, later on, through "view message" on homepage of appellant created recovery for short paid sales tax and income tax---Appeal filed before Collector of Customs (Appeals) was dismissed being barred by time---Validity---Legislature had inserted S.3DD, Customs Act, 1969 through which Directorate General of Post Clearance Audit was created and its officials were delegated powers through SRO No. 500(I)/2009, dated 13.06.2009 for conducting audit under S.26(2), Customs Act, 1969 of the importer's books of accounts after giving notice or summon under the provisions of 26A, Customs Act, 1969 which included every aspect of the declaration made by importer and assessment order passed by the competent authority of the Clearance Collectorate under S.80 of the Customs Act, 1969 and R.438 of Customs Rules, 2001 and prepare audit observations and forward to the importer for clarification and if the reply failed to settle the issue, frame contravention report and forward to the Clearance Collectorate for onward forward to the respective Collectorate of Customs Adjudication for issuance of show-cause notice under S.180, Customs Act, 1969 and passing order-in-original as per expression of S.179, Customs Act, 1969---Deputy Collector of Customs, in the present case, assumed the powers of officials of Directorate General of Post Clearance Audit and conducted post clearance audit of the goods declaration of the appellant under S. 26(2), Customs Act, 1969 while exercising the powers specifically delegated to the officials of Directorate General of Post Clearance Audit---Neither Deputy Collector of Customs nor his higher officials were empowered to encroach the sovereign jurisdiction of Directorate General of Post Clearance Audit under any circumstances, as it rendered the formation of Directorate General of Post Clearance Audit redundant---Appellate Tribunal set aside the view message and order-in-appeal being illegal, null and void---Appeal was allowed, accordingly.

(f) Jurisdiction---

----Exercise of---Exercise of jurisdiction by an authority was mandatory requirement and its non fulfillment entailed the entire proceedings to be coram non judice.

PLD 1963 SC 663; PLD 1971 SC 184; PLD 1976 SC 514; 1983 SCMR 1232; 1984 CLC 1517; PLD 1995 Kar. 587; PLD 1992 SC 486; 2001 SCMR 103; 2004 CLD 373; PLD 2004 SC 600; PLD 2005 SC 842; 2009 PTD (Trib.) 1996; 2009 PTD 1112; 2010 PTD (Trib.) 832; 2010 PTD 465; 2010 PTD (Trib.) 1636; 2011 PTD (Trib.) 2114; 2011 PTD (Trib.) 2557 and PLD 2014 SC 514 ref.

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

----Ss. 205, 29, 80, 83, 130, 131 & 2(a)---Customs Rules, 2001, Rr.438, 442, 444 & 450---SRO No. 371(I)/2002, dated 15.06.2002---Amendment of documents---Restriction on amendment of bill of entry or bill of export or goods declaration---Assessment of goods---Clearance of goods---Clearance for exportation---Words "assessed for duty", connotation---Scope---No amendment under section 205, Customs Act, 1969 is allowed in the columns of the value, quantity and description after removal of goods from the customs area for home consumption, after passing of valid assessment/clearance order under Ss. 80 & 83, Customs Act, 1969 and Rr. 438 & 442 of Customs Rules, 2001 or after shipment of the exported goods, through goods declaration for export transmitted under S.130, Customs Act, 1969 and R. 444, Customs Rules, 2001, after completion of codal formalities defined in S.131, Customs Act, 1969 and R.450, Customs Rules, 2001 or where Customs Reference Number is allotted to the goods declaration electronically---Cap has been laid on the importer/exporter for obtaining amendment after out of charge of the goods declaration in case of import or shipped in full in case of goods declaration for export or post filing of goods declaration---Phrase "assessed for duty" lays restriction on the officials of Customs not to amend themselves the contents of goods declaration after clearance under Ss. 83 and 130, Customs Act, 1969 and Rr. 442 & 450, Customs Rules, 2001, on the strength of valid assessment orders for levy of duty and taxes under Ss.80 and 131, Customs Act, 1969 and Rr. 438 & 442, Customs Rules, 2001 by appropriate authority defined in S.2(a), in exercise of powers vested upon him through SRO No.371(I)/2002, dated 15.06.2002

Nadeem Ahmed Mirza, Consultant for Appellants.

Ejaz Ahmed, A.O. for Respondents.

2020 P T D (Trib.) 1517

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs AFU INTERNATIONAL, KARACHI

Versus

The DEPUTY COLLECTOR, KARACHI and another

Customs Appeal No.K-841 of 2018, decided on 7th August, 2019.

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

----S.32---SRO No.1261(I)/2007, dated: 31-12-2007---Mis-declaration---Scope---Appellant assailed order passed by Additional Collector of Customs whereby he had ordered for payment of short levied amount of duty and taxes---Validity---Appellant was charged for mis-declaration under the provisions of S.32, Customs Act, 1969, merely on the basis of assumption/presumption that the appellant transmitted goods declaration while claiming exemption under SRO No.1261(I)/2007, dated, 31-12-2007, for the imported fruit juices other than orange and pineapple flavoured, which resulted in short payment/evasion of taxes---Customs officials had examined the goods of the appellant, wherein, they had confirmed the goods imported by the appellant---Impugned order was set aside and the appeal was allowed.

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

----Ss. 194-A, 180 & 215---Appeals to the Appellate Tribunal---Issuance of show-cause notice before confiscation of goods or imposition of penalty---Service of order, decision, etc---Scope---Appellant assailed order passed by Additional Collector of Customs in appeal which was barred by 541 days---Validity---Appellant stated under oath that the Additional Collector of Customs did not dispatch the impugned show-cause notice or hearing notices---Non-receipt of show-cause notice and hearing notices fell within the expression of the words "not served" as per the provisions of S.215, Customs Act, 1969---Mere preparation of show-cause notice was not enough rather it had to be served on the effected person---Date of filing appeal before Appellate Tribunal had to be reckoned from the date of serving the order---Appeal having been filed within 48 days of the service of order, in circumstances, was held to be filed within time.

2004 PTD (Trib.) 1324; Messrs Darbar Impex v. Central Board of Revenue 1989 ALD 518(2) and Sheikh Rashid Ahmed and another v. The Assistant Collector, Special Recovery Cell, Collector of Customs (Exports) Karachi and 4 others 2006 PTD 1207 rel.

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

----Ss. 83 & 80---Checking of goods declaration by Customs---Clearance for home consumption---Scope---Appellant assailed order passed by Additional Collector of Customs whereby he had, after clearance of goods, ordered for payment of short levied amount of duty and taxes---Validity---Assessment order was appealable and could have been assailed before the Collector of Customs (Appeals)---Tribunal observed that appropriate course of action for the Deputy Collector of Customs, if he had any reservations against the assessment order, was to assail it before the Collector of Customs (Appeals), which was not done within the stipulated period and the order so passed could not have been disturbed by any authority---Officers of customs through audit, in fact, re-assessed the goods declaration under S.80(3) of Customs Act, 1969---Entire exercise was held by Appellate Tribunal to be void.

Messrs Paramount International (Pvt.) Ltd. v. FOP and others 2014 PTD 1256; Messrs World Trade Corporation v. Central Board of Revenue 1989 MLD 4310 and Glaxo Smith Kline Pakistan Ltd., Karachi v. Collector of Customs, Sales Tax Central Excise, Karachi 2004 PTD 3020 rel.

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

----S.179---Power of adjudication---Scope---Appellant assailed the order passed by Additional Collector of Customs whereby he had ordered for payment of short levied amount of duty and taxes---Validity---Amount involved in the case was Rs.3,333,331.00 (paid Rs.1,282,895.00 for obtaining clearance + paid additional amount of duty and taxes of Rs.622,429 + revenue loss shown in the show-cause notice of Rs.1,428,007.00)---Competent authority to adjudicate the case being Collector of Customs, impugned order was set aside and the appeal was allowed.

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

----Ss.2(b) & 32---SRO No.371(I)/2002, dated, 15-06-2002---Appropriate officer---False statement, error, etc---Scope---Appellant assailed order passed by Additional Collector of Customs whereby he had ordered for payment of short levied amount of duty and taxes---Validity---No mis-declaration in material particulars was found in the goods declaration submitted by the appellant therefore, S.32(2), Customs Act, 1969, was not applicable and the case of appellant fell within the ambit of S.32(3) of Customs Act, 1969---For recovery of short paid duty and taxes in such like situation, show-cause notice had to be issued by the Principal Appraiser in terms of clause 2(iii) of SRO No.371(I)/2002, dated, 15-06-2002---Impugned order was set aside and the appeal was allowed.

PLD 1958 SC 104; PLD 1973 SC 326; PLD 2002 SC 630; 2003 SCMR 50; 2004 SCMR 25; 2004 SCMR 1798 and PLD 2005 SC 842 ref.

Izhar Alam Farooqi Advocate v. Sheikh Abdul Sattar Lasi and others 2008 SCMR 240; Sardar Ahmed Yar Khan Jogzai v. Province of Balochistan 2002 SCMR 1022; Faqir Abdul Majeed Khan v. District Returning Officer and others 2006 SCMR 1713 and Ali Muhammad v. Chief Settlement Commissioner 2001 SCMR 1822 rel.

(f) Natural justice, principles of---

----Applicability---Scope---Principles of natural justice have to be read in each and every statute unless and until prohibited by the wording of the statute itself.

University of Dhaka v. Zakir Ahmed PLD 1965 SC 90; 1994 SCMR 2232; M.D the Bank of Punjab v. Syed Shahzad Hussain 2006 SCMR 1023; Sir Edward Snelson's case PLD 1961 SC 237; Fazal-ur-Reham's case PLD 1964 SC 410; Pakistan Crome Mines' case 1983 SCMR 1208 and Pakistan's case PLD 1987 SC 304 ref.

(g) Limitation---

----Void order---Limitation does not run against void ab initio order.

Rehmat Bibi and others v. Punno Khan and others 1986 SCMR 962; Syed Haji Abdul Wahid and another v. Syed Sirajuddin 1996 SCMR 2296 ; Ali Muhammad v. Hussain Bux and another PLD 1976 SC 37; Ch. Altaf Hussain and others v. The Chief Settlement Commissioner PLD 1965 SC 68; Syed Ali Abbassi and others v. Vishan Singh and others PLD 1967 SC 294; FOP v. Metropolitan 2002 PTD 87 and 2010 PTD (Trib.) 1636 rel.

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

----Ss.3DD, 26 & 26-A---SRO No. 500(I)/2009, dated, 13-06-2009---Directorate General of Post Clearance Audit---Obligation to produce documents and provide information---Conducting of audit---Scope---Directorate General of Post Clearance Audit and its officers have been delegated powers through SRO No. 500(I)/2009, dated: 13-06-2009 for conducting audit of the importer's books of account under S.26(2), Customs Act, 1969, after serving notice---Directorate General of Post Clearance Audit is empowered to look into every aspect of the declaration made by the importer and assessment order passed by the Clearance Collectorate---Directorate General of Post Clearance Audit can prepare audit observation and forward the same to the importer for clarification, if the reply fails to settle the issue, frame contravention report and forward the same to the Clearance Collectorate for onward transmission to the Collectorate of Customs Adjudication for issuance of show-cause notice under S.180 of Customs Act, 1969.

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

----S.179---Power of adjudication---Scope---Section 179(1), Customs Act, 1969, reveals 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 Federal Board of Revenue 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 S.179(2), Customs Act, 1969.

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

----S.180---Sales Tax Act (VII of 1990), S. 33---Income Tax Ordinance (XLIX of 2001), S. 148---Issuance of show-cause notice before confiscation of goods or imposition of penalty---Imports---Scope---Section 33 of Sales Tax Act, 1990, contains penal clauses synonymous to S.156(1) of Customs Act, 1969---Section 33, Sales Tax Act, 1990, cannot be invoked in isolation unless charging/respective contravening sections of Sales Tax Act, 1990, are not invoked---Section 148 of Income Tax Ordinance, 2001, is a machinery section as it contains the procedure for collection of income tax levied at import stage on the value determined either under S.25, Customs Act, 1969, or with application of valuation ruling issued by Director, Directorate General of Valuation, by the authorities mentioned in subsection (8) of S.148, Income Tax Ordinance, 2001---Neither charge under said sections can be invoked nor can show-cause notice be issued.

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 2013 PTD 813 ref.

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

----Ss.32 & 179---Sales Tax Act (VII of 1990), S.11---Income Tax Ordinance (XLIX of 2001), S. 162---False statement, error, etc---Power of adjudication---Assessment of sales tax---Recovery of tax from the person from whom tax was not collected or deducted---Scope---Availability of word "taxes" in Ss.32(2) & (3) of Customs Act, 1969, do not automatically empower the Customs Department to assume powers under the provisions of S.11(2) & (3) of Sales Tax Act, 1990, and S.162(1) of Income Tax Ordinance, 2001, unless legislature appoints an officer of Customs as "Officer of Inland Revenue/Commissioner of Income Tax", who has powers under said sections to take cognizance in the matter relating to sales tax and income tax---Words "taxes" used in Ss. 179 & 32, Customs Act, 1969, are only inserted for assumption of powers of adjudication on the basis of involved amount of duty and taxes by the appropriate adjudication authority---Despite insertion of the word "taxes" in said sections adjudicating authority has to issue show-cause notice within the respective applicable provisions of the Customs Act, 1969, only and not under S.11 of Sales Tax Act, 1990 and S.162(1) of Income Tax Ordinance, 2001.

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

----Ss.32 & 179---Sales Tax Act (VII of 1990), S.11---Income Tax Ordinance (XLIX of 2001), S. 162---False statement, error, etc---Power of adjudication---Assessment of sales tax---Recovery of tax from the person from whom tax was not collected or deducted---Scope---Officers of Customs are not empowered to exercise the powers under S.11 of Sales Tax Act, 1990, and S.162(1) of Income Tax Ordinance, 2001.

(m) Jurisdiction---

----Federal Board of Revenue or Ministry of Law and Justice have no mandate to interpret the provisions of an Act or amend its provisions.

Messrs Lever Borhter Pakistan Ltd. v. Customs Sales Tax and Central Excise Appellate Tribunal, Karachi 2005 PTD 2462 and Qazi CNG Station, Gujrat and another v. Directorate General of Intelligence and Investigation FBR, Karachi and 2 others 2016 PTD (Trib.) 107 rel.

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

----S.202---Sales Tax Act (VII of 1990), S.48---Income Tax Ordinance (XLIX of 2001), S. 140---Recovery of Government dues---Recovery of arrears of tax and recovery of tax from persons holding money on behalf of a taxpayer---Scope---Customs Collectorate has the power to collect sales tax and income tax as duty at import stage but the officers of customs are not empowered to recover the short paid amount of sales tax and income tax at the import stage under S. 202 of Customs Act, 1969---Customs Collectorate can 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 of S.48 of Sales Tax Act, 1990 and S.140 of Income Tax Ordinance, 2001, for recovery of adjudged amount of sales tax and income tax after due process of law.

Messrs AGP (Pvt.) Ltd. v. Additional Collector of Customs, Karachi 2011 PTD (Trib.) 110; Messrs Global Marketing Services and another v. Model Customs Collectorate and another 2010 PTD (Trib.) 2086; Collector of Customs, Islamabad v. Global Marketing Services and another v. Model Customs Collectorate and another SCRA No. 01/2010, Al-Haaj Industrial Corporation (Pvt.) Ltd., Peshawar v. Collector of Customs (Appraisement) 2004 PTD 801; Messrs Lucky Cement Ltd. v. Federation of Pakistan and others C.P. No. D-216/2013, Shujabad Agro Industry (Pvt.) Ltd. v. Collector of Customs and 8 others 2014 PTD 1963; Muhammad Measum and others v. FOP and 2 others 2015 PTD 702; Asif Textile Trading v. Directorate General I&I-FBR 2016 PTD (Trib.) 969; Phillip Morris (Pakistan) Ltd., Karachi v. Additional Collector of Customs 2016 PTD (Trib.) 1008; Al-Fajer Associates v. Directorate General of Intelligence and Investigations-FBR 2016 PTD (Trib.) 2125; Pepsi Cola Export Corporation, Karachi v. Directorate General of Post Clearance Audit and 02 others Appeal No. K-1635/2014; Messrs M.R. Sons, Karachi v. Directorate General of Intelligence and Investigations-FBR Appeal No. K-1029/2016; Messrs Muhammad Imran, Karachi v. Directorate General of Intelligence and Investigations-FBR Appeal No.K-1030/2016; Messrs Rightway Trading Company, Karachi v. Deputy Collector of Customs, MCC of Appraisement-West and 3 others Appeal No.K-1343/2015; Messrs Zubair Wali Ahmed Zai Ltd. v. The Principal Appraiser, Directorate of Transit Trade and others 2016 PTD (Trib.) 2463; Singer Pakistan Ltd. v. Collector of Customs and 2 others 2017 PTD (Trib.) 481; 1994 CLC 1612; 1990 PTD 29; 2005 PTD 23 and 2007 PTD 520 ref.

Xen Shahpur Division v. Collector of Sales Tax (Appeal), Collectorate of Customs, Federal Excise and Sales Tax, Faisalabad 2008 PTD 1973 and DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 rel.

Nadeem Ahmed Mirza, Consultant for Appellant.

Faisal Bashir Appraiser for the Respondents.

2020 P T D (Trib.) 1553

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs KHURRAM ENTERPRISES, KARACHI

Versus

The INTERNAL AUDITOR, MCC OF APPRAISEMENT-WEST, KARACHI and 3 others

Custom Appeal No.K-80 of 2018, decided on 20th April, 2019.

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

----Ss. 193A, 193, 195 & 194A---Procedure in appeal---Power of Collector (Appeals) to give direction---Word "modify", connotation---Mis-declaration--- Power of Federal Board of Revenue (Board) to pass certain orders, etc---Appeal to be filed before Appellate Tribunal against the order of Collector (Appeals)--- Scope---Appellant imported consignment of perfumed dash board car polish in aerosol container, assorted fragrance and car carburetors---Internal Auditor, after delivery of goods, passed re-assessment order---Appellant assailed the re-assessment order in appeal before Collector (Appeals), who declared same to be without lawful authority and allowed the appeal---Collector (Appeals) however, observed that Customs authorities were at liberty to take legal course of action under Ss. 32, 193 & 195 of Customs Act, 1969---Validity---Collector (Appeals) was empowered to pass order in writing through which he could either extend, confirm, modify or annul the decision against which appeal was filed---No further action or direction was warranted under the law---Observation passed by Collector (Appeals) did not fall within the ambit of word "modify"---Collector (Appeals) tried to remand the case in a veiled manner in derogation of S.193A(3), Customs Act, 1969---Incorporation of S.193, Customs Act, 1969 by Collector (Appeals) was senseless, as no appeal could be filed under the said section against his order and that also before him---Order passed by Collector (Appeals) could only be assailed before Customs Appellate Tribunal under S.194A(1) of Customs Act, 1969---Action under S. 195, Customs Act, 1969 was out of context as none of the officers of Clearance Collectorate was empowered to re-open the order of Collector (Appeals)---Collector was empowered to re-open the assessment order under S. 195, which was not done and could not be opened at later stage---Right of appeal having been accorded under the provisions of S.193, Customs Act, 1969 the provisions of S.195 of the said Act became un-operational and could not be exercised---Appellate Tribunal expunged the observation of Collector (Appeals) being illegal, void ab initio and of no legal effect---Appeal was allowed, accordingly.

Messrs Paramount International (Pvt.) Ltd., Karachi v. Secretary Revenue Division 2014 PTD 1256 rel.

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

----Ss. 193A, 32 & 180---Procedure in appeal---Mis-declaration---Issuance of show-cause notice in presence of an order of Collector (Appeals)---Scope---Collector (Appeals), while allowing appeal against re-assessment order, observed that Customs authorities were at liberty to take action against the importer under S. 32 of the Customs Act, 1969---Validity--- Section 32 Customs Act, 1969 could be invoked on an importer upon availability of deliberate act or connivance, error, ommission or misconstruction---No deliberate act, connivance, error, ommission or misconstruction was apparent on the record and for that reason no show cause notice was issued---Customs authorities had instead passed re-assessment order under S.80(3) of the Act in isolation and without having recourse to the provisions of S.80(2) of the Customs Act, 1969---No show cause notice at belated stage could be issued by any officer and that also in the presence of the order of Collector (Appeals), by virtue of non-availability of enabling provision in Customs Act, 1969---Appellate Tribunal expunged the observation of Collector (Appeals) being illegal, void ab initio and of no legal effect---Appeal was allowed, accordingly.

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

----Ss. 195 & 193---Appeal to Collector (Appeals)---Power of Federal Board of Revenue (Board) to pass certain orders, etc---Scope---Where right of appeal had been accorded under the provisions of S. 193, Customs Act, 1969 the provisions of S.195 of the Act became un-operational and could not be exercised.

Messrs Paramount International (Pvt.) Ltd., Karachi v. Secretary Revenue Division 2014 PTD 1256 rel.

(d) Administration of justice---

----When a law required an act to be done in a particular manner, it had to be done in that manner alone and not otherwise.

Muhammad Hussain and another v. Muhammad Shafi and another 2004 SCMR 1947; Munawar Hussain and 2 others v. Sultan Ahmed 2005 SCMR 1388 and DGI&I and others v. Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 rel.

(e) Words and phrases---

----"Extend"---Meaning.

Black's Law Dictionary and Mariam Webster ref.

(f) Words and phrases---

----"Confirm"---Meaning.

Black's Law Dictionary and Mariam Webster ref.

(g) Words and phrases---

----"Modify"---Meaning.

Black's Law Dictionary and Mariam Webster ref.

(h) Words and phrases---

----"Annul"---Meaning.

Black's Law Dictionary and Mariam Webster ref.

Nadeem Ahmed Mirza (Consultant) for Appellant.

Akhtar Abbas, A.O. for Respondents.

2020 P T D (Trib.) 1566

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial) and Dr. Zulfiqar A. Malik, Member (Technical-I)

Messrs STEEL CRAFT (PVT.) LTD. through Director and others

Versus

DIRECTOR GENERAL OF VALUATION and others

Customs Appeals Nos.K-1099 to K-1101 and K-1158 of 2018, decided on 20th May, 2019.

Customs Act (IV of 1969)---

----Ss.25 & 25A---Value of imported and exported goods---Power to determine customs value---Failure to follow sequential manner---Effect---Involvement of local manufacturer---Effect---Appellants assailed valuation ruling issued by Director (Customs Valuation)---Contention of appellants was that no material was available to doubt the actual price paid/declared value and that impugned valuation ruling had just subtracted the assumed rate of discount from 'prime quality goods' as mentioned under LMB (London Metal Bulletin)---Validity---Valuation Department was not empowered under any law to determine the customs values by taking the average LMB (London Metal Bulletin) prices of four countries/zones (no evidence privy to it)---Department had applied for the purported formula for determination of customs values in total disregard to S.25 of Customs Act, 1969---Director (Customs Valuation) had determined the customs values and finalized it in the impugned Valuation Ruling under S.25(9) of Customs Act, 1969 without adopting the sequential manner envisaged under S.25 of Customs Act, 1969, which was a mandatory requirement under the law---Inclusion/involvement of a local manufacturer in the matter of issuance of Valuation Ruling under S.25A(1), Customs Act, 1969 rendered the same tainted with illegality---Appeals were accepted.

Adeel Awan for Appellants.

Shahnawaz Khoso, A.O. for Respondents.

2020 P T D (Trib.) 1579

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member (Judicial) and Muhammad Sadiq, Member (Technical-I)

Messrs GLOBAL TECHNOLOGIES

versus

The COLLECTOR (ADJUDICATION-II) and another

Customs Appeals Nos.K-694 of 2017 and K-2288, 2289 of 2016, decided on 8th July, 2019.

Customs Act (IV of 1969)---

----Ss.32, 79, 156(1)(14) & 156(1)(45)---Mis-declaration---False statement, error, etc---Declaration and assessment for home consumption and warehousing---Scope---Appellant, according to department, imported a Concrete Batching Plant correctly classifiable under PCT Heading 8474.3120, attracting import duty @ 5%, by declaring the same as Concrete Mixer Machine and misdeclaring PCT Heading as 9474.3190, in order to avail benefit of Free Trade Agreement, (FTA) whereby the rate of customs duty was 0%---Contention of appellant was that the department had changed its stance, as earlier the same item was being classified as Concrete Batching Machine---Validity---Department had wrongly treated the Concrete Batching Machine (PCT Heading 8474.3190) as Concrete Batching Plant (PCT Heading 8474.3120)---Imported consignment was a Concrete Batching Machine classifiable under PCT Heading 8474.3190---Appellate Tribunal allowed the appeals and directed the department to assess the consignment accordingly.

Muhammad Adeel Awan for Appellant.

2020 P T D (Trib.) 1592

[Customs Appellate Tribunal]

Before Ch. Naimat Ullah, Chairman

COLLECTOR OF CUSTOMS, through Deputy Collector of Customs

Versus

Messrs SARWAT ENTERPRISES and another

Customs Appeal No.K-940 of 2011, decided on 7th May, 2013.

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

---S. 80---Sales Tax Act (VII of 1990), S. 2(46)---SRO 732(I)/2006, dated, 13-07-2006---Checking of goods declaration by the Customs---Value of supply---Scope---Question before Appellate Tribunal was "whether the impugned order through which assessment of the goods was carried out was unlawful to the extent of charging sales tax on the goods in terms of SRO 732(I)/2006, dated, 13-07-2006 for the reason that the said notification was rescinded nearly two years before passing of the impugned order"---Held, passing of order on the basis of notification which was not in existence and determination of value of the goods on the basis of non-existent notification was nullity in the eyes of law---Only legal course of action left with the assessing officer was to determine value of the goods for sales tax purposes under Cl. (d) of subsection (46) of S.2 of Sales Tax Act, 1990---Appellate Tribunal held that the Appellate Authority had rightly set aside the impugned order---Appeal was dismissed.

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

----S.2(46)---Value of supply---Scope---Question before Appellate Tribunal was "whether subsection (46) of S.2 of Sales Tax Act, 1990, allowed fixation of value of imported goods at import stage for the purpose of levying sales tax"---Held, Cl. (g) of subsection (46) of S. 2 of Sales Tax Act, 1990, did not authorize fixation of value of imported goods at the import stage for the purpose of levying sales tax.

Ghulam Yasin for Representative.

G.A. Khan for Respondents.

2020 P T D (Trib.) 1703

[Customs Appellate Tribunal]

Before Jahanzaib Wahlah, Member Judicial-III

Messrs SHAHRUKH JAMAL and others

Versus

The COLLECTOR OF CUSTOMS (APPEAL) KARACHI and others

Customs Appeals Nos.K-234, K-236, K-204, K-466, K-467, K-468, K-229, K-230, K-239, K-240, K-241, K-605, K-606, K-232, K-235, K-238 and K-244 of 2018, decided on 2nd October, 2019.

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

----Ss.32, 32-A, 15 & 156(1)(9)---SRO No.886(I)/2012, dated: 18-07-2012---False statement, fiscal fraud, prohibition of importation and exportation---Scope---Customs department alleged that the consignments of Polyester Fabric were actually shipped from country 'U' instead of 'C' as declared in the IGM (Import General Manifest) and House Bill of Lading provided by Freight Forwarder and that the goods were actually of Indian origin, shipped through country 'U'---Adjudicating officer vide order-in-original imposed penalties upon the importer, Clearing Agent and Freight Forwarder---Validity---Collectorate had allowed the clearance of the consignment after physical examination, assessment and thorough scrutiny---Assessed duty and taxes were paid; as such there was no evasion of taxes and in absence of evasion, no question of applicability of S.32-A, Customs Act, 1969, arose---Fabric was freely importable from India as per Import Policy Order and was not on the banned list---Adjudicating officer had no concrete evidence to believe that the fabric was of Indian origin---SRO No.886(I)/2012, dated; 18-07-2012 barred the Collectorate of Adjudication from dealing with contraventions wherein no evasion of duty and taxes was involved---Order-in-original was set aside and the appeals were accepted.

PLD 1991 SC 630; PLD 1996 Kar. 68; Messrs Kamran Industries v. The Collector of Customs (Export) Karachi and 4 others 2004 PTD 2977; Messrs AL-Hamd Edible Oil (P) Limited and others v. Collector of Customs and others 2003 PTD 552; Pakistan v. Hardcastle PLD 1967 SC 101; Finest Corporation v. Collector of Customs PLD 1990 Kar. 338 and Sikandar and Brothers v. Government of Pakistan PLD 1986 Kar. 3783 ref.

Collector of Customs (Exports) and another v. R.A. Hosiery Works 2007 SCMR 1681 rel.

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

----Ss.32, 32-A, 156(1)(14) & 156(1)(14A)---False statement, fiscal fraud---Scope---Customs department alleged that the consignments of Polyester Fabric were actually shipped from country 'U' instead of country 'C' as declared in the Import General Manifest (IGM) and House Bill of Lading provided by Freight Forwarder and that the goods were actually of Indian origin, shipped through country 'U'---Adjudicating officer vide order-in-original imposed penalty on the importer---Validity---Clauses 14 & 14-A of S.156(1), Customs Act, 1969, provided punishment for committing offence under Ss. 32 & 32-A, Customs Act, 1969---Assessed duty and taxes were paid; as such there was no evasion of taxes and in absence of evasion, no question of applicability of Ss. 32 & 32-A, Customs Act, 1969, arose---Order-in-original was set aside and the appeal of importer was accepted.

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

----Ss.156(1)(45) & 79---Declaration and assessment for home-consumption and warehousing---Scope---Customs department alleged that the consignments of Polyester Fabric were actually shipped from country 'U' instead of 'C' as declared in the IGM (Import General Manifest) and House Bill of Lading provided by Freight Forwarder and that the goods were actually of Indian origin, shipped through country 'U'---Adjudicating officer vide order-in-original imposed penalty on the importer---Validity---Clause 45 of S.156(1), Customs Act, 1969, provided punishment for any concealment of goods, mixed within the goods so declared in order to injure the revenue---No injury was caused to the revenue---Order-in-original was set aside and the appeal was accepted.

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

----Ss.156(1)(23)(ii), 45 & 53---Signature and contents of import manifest and amendment thereof---Application and port clearance of vessels---Scope---Customs department alleged that the consignments of Polyester Fabric were actually shipped from country 'U' instead of 'C' as declared in the IGM (Import General Manifest) and House Bill of Lading provided by Freight Forwarder and that the goods were actually of Indian origin, shipped through country 'U'---Adjudicating officer vide order-in-original imposed penalty on the Clearing Agent---Validity---Adjudicating officer could not establish through documentary evidence that the Clearing Agent had delivered the manifest which contained untrue specification---Manifest was delivered through automated WeBOC electronic system 24 hours prior to arrival of vessel, which was delivered by shipping agent/shipping company and not by the Clearing Agent---Invocation of Cl. 23(ii) of S.156(1), Customs Act, 1969 was irrelevant---Order-in-original was set aside and the appeal was accepted.

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

----S.156(1)(90)---Unlawful removal of goods from a warehouse---Scope---Customs department alleged that the consignments of Polyester Fabric were actually shipped from country 'U' instead of 'C' as declared in the IGM (Import General Manifest) and House Bill of Lading provided by Freight Forwarder and that the goods were actually of Indian origin, shipped through country 'U'---Adjudicating officer vide order-in-original imposed penalty on the importer---Validity---Clause 90 of S.156(1) of Customs Act, 1969, related to the goods which were either lying in the warehouse or which were chargable with a duty which was not paid and the goods were removed illegally and unlawfully from the warehouse---Subject consignments had already been cleared legally and lawfully, therefore, invocation of Cl. 90 of S.156(1) of Customs Act, 1969 was irrelevant---Order-in-original was set aside and the appeal was accepted.

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

----Ss.156(1)(101), 156(1)(103), 155-I & 155-K---Unauthorized access to or improper use of the Customs Computerized System---Offences in relation to the security of or unauthorized use of unique user identifiers---Scope---Customs department alleged that the consignments of Polyester Fabric were actually shipped from country 'U' instead of 'C' as declared in the IGM (Import General Manifest) and House Bill of Lading provided by Freight Forwarder and that the goods were actually of Indian origin, shipped through country 'U'---Adjudicating officer vide order-in-original imposed penalties upon the importer, clearing agent and Freight Forwarder---Validity---No documentary evidence was available with the adjudicating officer to establish that importer or clearing agent had unauthorized access to the shipping company in order to alter the contents of IGM---Penalty imposed under Cls. 101 & 103 of S.156(1) of Customs Act, 1969, could not have been imposed---Order-in-original was set aside and the appeals were accepted.

Madan Lal for Appellant.

Amir Hussain, A.O. and Pirthvi, A.O. for Respondents.

2020 P T D (Trib.) 1856

[Customs Appellate Tribunal]

Before Jahanzaib Wahlah, Member Judicial-III

Messrs IDEAL INDUSTRIES and others

Versus

The DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION, KARACHI and others

Customs Appeals Nos.K-1423 and K-1424 of 2018, decided on 26th September, 2019.

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

----S.32---Sales Tax Act (VII of 1990), S.4---S.R.O. No.1125(I)/2011, dated, 31-12-2011---Mis-declaration---Zero rating---Incorrectly claiming benefit of exemption---Scope---"Styrene Butadiene Rubber 1502" was imported and declared the same by claiming the benefit of Serial No. 100 of Table-I of S.R.O. No.1125(I)/2011, dated, 31-12-2011 for the purpose of sales tax---Directorate General of Intelligence and Investigation, after clearance of goods, initiated the proceedings on the ground that benefit of S.R.O. No.1125(I)/2011, dated, 31-12-2011 was available to Styrene Butadiene Rubber in latex form only and not otherwise---Validity---Exemption available at Serial No. 99 of S.R.O. 1125(I)/2011, dated, 31-12-2011, applied to all rubber in latex form---Incorrectly claiming benefit of exemption could not be treated as mis-declaration under S.32 of Customs Act, 1969---Show-cause notice was vacated and the appeals were allowed.

Saadat Khan v. Federation of Pakistan through Secretary Revenue Division and 2 others 2014 PTD 1615 rel.

(b) Interpretation of statutes---

----Redundancy---Scope---Redundancy cannot be attributed to Legislature.

M. Siddique Zia for Appellants.

Ejaz Khan, Investigating Officer for Respondents.

2020 P T D (Trib.) 1890

[Customs Appellate Tribunal]

Before Syed Tanvir Ahmad, Member Technical-III

Messrs SYMBIOS PK, KARACHI

Versus

DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATIONS FBR and 2 others

Customs Appeal No.K-1056 of 2017, decided on 28th February, 2019.

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

----Ss.2(s), 16, 156(1)(8), 156(1)(89), 156(2), 168 & 177---Qanun-e-Shahadat (10 of 1984), Arts. 117 & 121---Smuggling---Power to prohibit or restrict importation or exportation of goods---Possession of smuggled goods---Seizure of goods liable to confiscation---Restriction on possession of goods in certain areas---Production of purchase invoices---Onus to prove---Scope---Appellant's warehouse was raided by officials of Directorate General of Intelligence and Investigation and seized items of different kinds---Deputy Collector of Customs (Adjudication) ordered for confiscation of some goods and imposed redemption fine on others---Appeal filed before Collector of Customs was dismissed---Validity---Goods displayed/warehoused by appellant were purchased/procured from the local market against valid invoices---Appellant discharged the initial burden of proof laid upon him by producing valid invoices/bill/payment vouchers and the onus to prove the allegation stood shifted on the shoulders of department---Validity of invoices and payment vouchers was not disputed by the department nor were they proved fake or fabricated---Negative inference could not be drawn as none of the suppliers denied the issuance of invoices and receipts of payments---Department lost sight of the presumption that if the goods found during search were freely available in the local market without restriction then such goods did not fall within the degree of "smuggled goods"---Appellate Tribunal allowed the appeal and set aside the orders passed by Customs authorities.

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 Lah. 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. CBR PLD 1959 SC (Pak) 364; The Collector Central Excise and Land Customs v. Imdad Ali 1969 SCMR 708; Messrs Latif Brothers v. Deputy Collector of Customs, Lahore 1992 SCMR 1083 and Kamran Industries v. Collector of Customs (Exports) and Order PLD 1996 Kar. 68 ref.

Sikandar A. Karim v. The State 1995 SCMR 387 and Muhammad Mir v. Collector of Customs (Adjudication), Karachi Customs Appeal No.K-391 of 2004 rel.

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

----S.193A(3)---Order in appeal---Delay of 109 days---Effect---Appeal was filed on 29.12.2016, in terms of subsection (3) of S.193A of Customs Act, 1969---Order had to be passed within 120 days or within further extended period of 60 days, upon availability of exceptional circumstances and recording of those after issuance of notice to the appellant---Order on appeal was passed on 12.08.2017, i.e. after 120 days, without any extension---Said illegality rendered the order passed by Collector of Customs, barred by 109 days, rendering same without power/jurisdiction, hence void ab initio and not enforceable under law.

Khalid Mahmood v. Collector of Customs 2009 SCMR 1881; 2017 PTD 1756 = Collector of Customs Sales Tax Gujranwala and others v. Super Asia Mohammad Deen and Sons and others 2017 SCMR 1427; 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.

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

----Ss. 168, 3A, 2(s), 9, 10 & 177---S.R.O. No.486(I)/2007, dated 9.6.2007---S.R.O. No.118(I)/83, dated 02.02.1983---Seizure of goods---Restriction on possession of goods in certain areas---Jurisdiction of Directorate General of Intelligence and Investigation within city---Scope---Appellant's warehouse was raided by officials of Directorate General of Intelligence and Investigation and seized items of different kinds---Validity---Director of Intelligence and Investigation and his subordinates were appointed and designated as "Officer of Customs" under S.3A and they derived their powers for functioning under S.R.O. No. 486(I)/2007 dated: 09.06.2007 within the territory of Pakistan for thwarting the act of "smuggling"---Such authority did not mean that they had unfettered powers to approach any office/warehouse situated either within the city or country for inspection of the displayed/warehoused goods---Jurisdiction of said authorities in principle was restricted to the territory not beyond the ambit of Customs Ports/Airports, landing places and limits of customs station as expressed in Ss. 9 and 10 of Customs Act, 1969 and within 5 kilometers of the borders of India and Iran as contemplated in S.177 and S.R.O. No. 118(I)/83, dated 02.02.1983---Goods available in appellant's warehouse could not be subjected to scrutiny under S.2(s), Customs Act, 1969---Appellate Tribunal declared the conducting of search to be of no legal effect and as such void ab initio.

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

----Ss.162 & 163---Power to issue search warrant---Power to search and arrest without warrant---Scope---Appellant's warehouse was raided by officials of Directorate General of Intelligence and Investigation without search warrant---Officials of Directorate General of Intelligence and Investigation seized items of different kinds---Validity---Requirement for issuance of search warrant by Magistrate could be dispensed with under S.163, Customs Act, 1969, which empowered Assistant Collector of Customs or any other officer of the like rank to make search without warrant, if he was satisfied that there was danger of removal of goods if search warrant was obtained and 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---Search, in the present case, was conducted at the appellant's warehouse under S.163, Customs Act, 1969 without having recourse to the mandated requirements of S.162, Customs Act, 1969---Appellate Tribunal declared the search conducted by department to be without lawful authority and jurisdiction.

PLD 1991 SC 630; 2003 PTD 1034; 2003 PTD 2037; 2004 PTD 2952; 2005 PTD 1933; 2006 PTD 1884; 2007 SCMR 1039 and 2009 PTD 1083 ref.

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

----S.177---Restriction on possession of goods in certain areas---Scope---Director General Intelligence and Investigation and his subordinates are not even empowered to ask from the owner of the office/displayed/warehoused goods about the legality of those, unless there existed any provision in the Customs Act, 1969 or notification to the said effect containing direction that the person, who is operating office or warehouse of those goods to display the relevant documents in the office or the supply to the official on demand---In the absence of availability of any provision in Customs Act, 1969 and the notification, demanding documents/invoices/bills is nullity to law and holds no ground.

2005 PTD (Trib.) 135; PLD 1991 SC 630; 2014 PTD (Trib.) 1566; 2016 PTD (Trib.) 659; 2016 PTD (Trib.) 2190 and Collector of Customs, Sales Tax and Central Excise v. Prof. Muhammad Khan and 6 others 2007 SCMR 10 ref.

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

----Ss.80, 83 & 2(s)---Customs Rules, 2001, Rr. 438 & 442---S.R.O. No. 371(I)/2002, dated 15.06.2002---Checking of goods declaration by customs---Clearance of goods---"Smuggling"---Scope---After clearance of goods under the provisions of S.83, Customs Act, 1969 and R.442 of Custom Rules, 2001 on the strength of valid assessment order passed under S.80, Customs Act, 1969 and R.438 of Custom Rules, 2001 by the appropriate officer in exercise of the powers vested upon him through S.R.O. No.371(I)/2002, dated 15.06.2002 by Customs either from the area of sea port or dry port, goods are out of the ambit of Customs department including Directorate General of Intelligence and Investigation by virtue of having become functus officio---Any subsequent search of the displayed/warehoused goods within the territory of Pakistan is beyond their jurisdiction as none of the provisions of the Customs Act, 1969 authorized any designated official of customs to search the office/warehouse on the plea of "smuggling".

2005 PTD (Trib.) 135 and PLD 1991 SC 630 ref.

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

----S.24-A---Exercise of power under enactment---Where any Authority, Court or Tribunal gave a finding of fact which was not based on material available on record or without discussing and considering the material available on record, it became perverse---Perverse finding of fact was violative of the established principle of appreciation of evidence---Principle that every judicial or quasi-judicial finding should be based on reasons containing the justification for the finding on the order itself is an established principle of dispensation of justice.

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 and 2012 PTD (Trib.) 619 ref.

Nadeem Ahmed Mirza (Consultant) for Appellant.

Syed Mohsin Ali, Investigating Officer, Appraiser for Respondents.

2020 P T D (Trib.) 1960

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Member Judicial

COLLECTOR OF CUSTOMS MODEL CUSTOMS COLLECTORATE (PREVENTIVE) CUSTOMS HOUSE PESHAWAR

Versus

BILAL HUSSAIN and 3 others

Custom Appeal No.Cus-55/PB of 2019, decided on 30th July, 2019.

Customs Act (IV of 1969)---

----Ss.17, 156(1)(8)(89) & 211---Smuggling---Import documents, retention of---Limitation---Authorities seized vehicle in question on the ground that the owner failed to show import documents---Appellate Authority released the vehicle to its owner---Validity---Vehicle in question was of 1994 model and was registered with Motor Registration Authority on 29-9-1994---Vehicle was running on roads till the date of seizure---Registration of vehicle was sufficient proof of the fact that vehicle was legally imported in country---As soon as vehicle and papers were presented before Motor Registration Authority for registration, it was their responsibility to check documents and physically examine vehicle thoroughly with reference to their genuineness before registration---Registration offices confirmed registration of the vehicle---Vehicle in question was 1994 model whereas action on charge of smuggling was taken on 30-9-2018 i.e. after lapse of 25 years--- Party could not be called upon to produce bill of entry and other import documents as by virtue of S.211 of Customs Act, 1969, importer was liable to maintain importation record / documents only for a period of 5 years--- Customs Appellate Tribunal declined to interfere in release order passed by Appellate Authority--- Appeal was dismissed in circumstances.

Abdul Hadi, Suptd/DR for Appellant.

Jalal-ud-Din for Respondent.

2020 P T D (Trib.) 2004

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Judicial Member

ZIA-UD-DIN

Versus

COLLECTOR OF CUSTOMS, MCC, PESHAWAR and 2 others

Custom Appeal No.109/PB of 2019, decided on 22nd July, 2019.

Customs Act (IV of 1969)---

----Ss.17, 156 (1)(8)(89) & 211---Qanun-e-Shahadat (10 of 1984), Art.117 & 120--- Smuggling--- Onus to prove--- Import documents, retaining of--- Limitation--- Authorities seized 1997 model vehicle for the reason that the owner failed to show import documents--- Appellate Authority declined to release the vehicle to its owner--- Validity--- Adjudicating officer while examining documents failed to explore that Registration Book was sufficient proof of the fact that vehicle was legally imported in the country--- When vehicle and papers were presented before Motor Registration Authority for registration, it was their responsibility to check documents and physically examine vehicle thoroughly with reference to their genuineness before registration--- Charge of smuggling was leveled on 7-5-2018, i.e. after lapse of 12 years, party could not be called upon to produce import documents---By virtue of S.211 of Customs Act, 1969, importers or exporters were liable to maintain their record and documents only for a period of 5 years--- Individual importer who imported goods for private or personal use was excluded from the purview of S.211 of Customs Act, 1969---Once the importer had produced Registration documents, the burden of proof shifted to the authorities, which they had failed to discharge--- Customs Appellate Tribunal directed the authorities to release the vehicle to its owner and set aside the order passed by Appellate Authority---Appeal was allowed accordingly.

Gulab Shah Afidi for Appellant.

Mir Zaman, Superintendent for Respondent.

2020 P T D (Trib.) 2028

[Customs Appellate Tribunal]

Before Jahanzaib Wahlah, Member Judicial-III

Messrs A.S. AUTOS, KARACHI

Versus

The DEPUTY COLLECTOR OF CUSTOMS, GROUP-III, MCC, KARACHI and 3 others

Customs Appeal No.K-75 of 2018, decided on 9th October, 2019.

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

----Ss.25-D, 79, 80, 81 & 193-A---Assessment order---Finalization---Limitation---Valuation Ruling---VDB (Value Data Base)---Applicability---Importer was aggrieved of the Valuation Ruling applied by Assessing Officer to assess his goods---Validity---Appeal before Appellate Authority was filed by importer on 7-4-2017 in terms of S.193-A (3) of Customs Act, 1969, order was to be passed in 120 days or within further extended period of 60 days in terms of its proviso by Federal Board of Revenue, upon availability of exceptional circumstances and recording of those after issuance of notice---Order should have been passed on or before 14-7-2017 which Appellate Authority failed and no extension was given by Federal Board of Revenue---Levying of duty and taxes in excess of declared value with application of value of VDB (Value Data Base) was without lawful authority / justification and the same was to be refunded to importer, as keeping the same by Clearance Collectorate was immoral and was tantamount to extortion, neither leviable nor payable under law, ergo paid under compulsion / duress only for saving him from accumulation of container detention / rental and terminal demurrage / storage charges--- Customs Appellate Tribunal set aside the orders passed by authorities as the same were illegal and void ab initio---Appeal was allowed in circumstances.

Khalid Mahmood v. Collector of Customs 2009 SCMR 1881; 2017 PTD 1756; Collector of Customs Sales Tax Gujranwala and others v. Super Asia Mohammad Deen and Sons and others 2017 SCMR 1427; 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; Pak Electron Ltd. v. Collector of Customs, Lahore and others 2012 PTD (Trib.) 1650; Messrs Nayatl (Pvt.) Ltd. v. Appellate Tribunal Customs, Islamabad and others 2019 PTD 288 and Messrs S.S. Trading v. Additional Collector of Customs Adjudication-PaCCS, Karachi 2014 PTD (Trib.) 510 rel.

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

----S.223---Federal Board of Revenue, orders, instructions and directions--- Scope--- Compliance of orders, instructions and directions of Federal Board of Revenue are mandatory under S.223 of Customs Act, 1969, and no defiance is permitted to be made.

Syed Muhammad Razi v. Collector of Customs, (Appraisement), Karachi and 2 others 2003 PTD 2821 rel.

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

----S.81---Provisional clearance---Principle---Authorities are bound to accede to the request of importer without any exception---No exception can be made by any authority, including Collector of Customs, under law he has to exercise delegated powers independently and judiciously and for the benefit of exchequer as well as importer.

Waseem Radio Trader v. FOP 2014 PTD 525 and Alpha Chemical (Pvt.) Ltd. v. FOP and 4 others 2013 PTD 2064 rel.

Nadeem Ahmed Mirza, Consultant for Appellant.

Amjad Jagarani A.O. for Respondents.

2020 P T D (Trib.) 2069

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Chairman/Member Judicial

Messrs FAIR TRADING COMPANY

Versus

ADDITIONAL COLLECTOR OF CUSTOMS and another

Customs Appeal No.K-1612 of 2014, decided on 4th March, 2019.

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

----Ss.32(1)(2), 32(A) & 171---Pending clearance---Intelligence Directorate---Examination of consignment---Jurisdiction---Notice, non-issuance of---Dispute was with regard to re-examining of consignment in question when it was still not out of the charge of customs---Validity---Official of Customs Intelligence Directorate had no authority to detain and examine any consignment which was still not out of customs charge--- Consignment which was still under consideration by customs staff and not out of charge was put illegally on hold by Intelligence Staff, then re-examined unilaterally without any legal authority, seized illegally without legal jurisdiction---Intelligence Official stepped out of his jurisdiction which was legally not sustainable--- Authorities did not serve notice under S.171 of Customs Act, 1969, to importer or appellant whereas his name and address was depicted on Goods Declaration--- Importer could not be held guilty of S.32(1)(2) or 32(A) of Customs Act, 1969, without conclusive proof and the same was not available on record---Charges framed against importer were not proved, show-cause notice was vacated and Order in original was set aside---Appeal was allowed in circumstances.

PLD 1971 SC 61; Anisa Rehman v. PIA 1994 SCMR 2234; Muhammad Hashim Paracha v. Collector of Customs (Appraisement) Customs, Excise and Sales Tax Appellate Tribunal Bench-III 2003 PTD (Trib.) 902; 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 and AR Hosiery Works v. Collector of Customs (Export) 2004 PTD 2977 rel.

(b) Maxim---

----Expressum facit cassare tacitum---Scpoe---Maxim is accepted and practiced by all superior Courts around the world as it reflects that where a law prescribes a particular way to doing something, it is implied that such is the only way that something can be done.

Director General of Intelligence and Investigation and others v. Messrs Al-Faiz Industries (Pvt.) Ltd. and others 2006 SCMR 129 rel.

Afzal Bhatti for Appellant.

Dilshad, I.O. for Respondents.

2020 P T D (Trib.) 2099

[Customs Appellate Tribunal]

Before Syed Sardar Hussain Shah, Member Judicial/Chairman and Muhammad Sadiq, Member Technical

DIRECTOR, DIRECTORATE OF INTELLIGENCE AND INVESTIGATION (CUSTOMS), FBR, PESHAWAR

Versus

COLLECTOR OF CUSTOMS (ADJUDICATION), COLLECTORATE OF CUSTOMS ISLAMABAD and 3 others

Appeal No.Cus.384/PB of 2017, decided on 2nd May, 2019.

Customs Act (IV of 1969)---

----Ss.168 & 83---Seizure of goods liable to confiscation---Clearance for home consumption---Scope---Vehicles imported by respondent were seized for being mis-declared---Adjudicating officer vacated the show-cause notice vide order-in-original---Validity---Goods, assessed to duties and taxed and released in terms of S.83, Customs Act, 1969, could not be detained---Director General of Intelligence and Investigation (Customs) was not authorized to determine the value of the vehicles as he was not authorized to make valuation under S.80 or 83 of Customs Act, 1969---Adjudicating officer had decided the case on merits by properly appreciating the different aspects of the controversy---Order-in-original was upheld and the appeal was dismissed.

Amir Bilal for Appellant.

Saleem Ahmed, I.O. for Respondents.

2020 P T D (Trib.) 2172

[Customs Appellate Tribunal]

Before Jehanzaib Wahlah, Member Judicial-III

Messrs RADIUM SILK FACTORY, KARACHI and others

Versus

The DEPUTY COLLECTOR, GROUP-IV, MCC OF APPRAISEMENT-EAST CUSTOMS HOUSE, KARACHI and 2 others

Custom Appeals Nos.K-638 to K-645 of 2019, decided on 26th November, 2019.

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

----Ss. 2(a), 83, 130,193, 193A & 205--- Customs Rules, 2001, Rr. 438, 442 & 450---Notification SRO No.371(I)/2002, dated 15-6-2002--- Clearance of goods--- Reassessment--- Despite payment of all duties and taxes levied by authorities, goods in question were not released by Customs Authorities---Validity---No appeal was filed either by authorities despite mandated under law, instead the Assessing authorities assumed powers under S.195 and reopened valid assessment / clearance order passed under the provisions of Ss.80 & 83 of Customs Act, 1969, and Rr. 438 & 442 of Customs Rules, 2001--- Assessing authorities were not empowered to reopen valid assessment order passed by authority defined in S.2(a) of Customs Act, 1969, in exercise of powers vested upon him through S.R.O. No.371(I)/2002, dated 15-6-2002---Assessing authorities acted without power/jurisdiction and their action was without any lawful authority and as such ab initio, null and void---Appeal before Appellate Authority was filed in terms of S.193A(3) of Customs Act, 1969 and order was to be passed within 120 days or within further extended period of 60 days in terms of its proviso by Appellate Authority upon availability of exceptional circumstances and recording of those after issuance of notice to taxpayer---Order was not passed by Appellate Authority on or before 20-2-2018 which he failed---No extension was given by Appellate Authority prior to lapse of initial period of 120 days--- Order passed by Appellate Authority was barred by 8 days---Re-assessment orders passed /transmitted by Assessing officer in Goods Declarations of importers and as well as the orders in appeal passed by Appellate Authority suffered from legal infirmities--- Customs Appellate Tribunal set aside the orders of re-assessment as the same were illegal, null and void--- Appeal was allowed in circumstances.

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; Messrs Paramount International (Pvt.) Ltd. v. FOP and others 2014 PTD 1256; Collector of Customs and other's case CPLA No.105-K of 2014; Collector of Customs, MCC, Quetta v. Al-Habib Enterprises and Engineering and others 2019 PTD 1712; Forte Pakistan (Pvt.) Ltd., Karachi v. The Director General of Intelligence and Investigation (Customs and Excise), Karachi and another 2006 PTD 978; Assistant Collector of Customs, Dry Port Peshawar v. Messrs Khyber Electric Lamp MFG Co., Ltd. Peshawar 2001 SCMR 838; The State v. Zia-ur-Rehman and others PLD 1973 SC 49; 2009 PTD 1083; PLD 1963 SC 663; PLD 1971 SC 184; PLD 1976 SC 514; 1983 SCMR 1232; 1984 CLC 1517; PLD 1995 Kar. 587; PLD 1992 SC 486; 2001 SCMR 103; 2004 CLD 373; PLD 2004 SC 600; PLD 2005 SC 842; 2009 PTD (Trib.) 1996; 2009 PTD 1112; 2010 PTD (Trib.) 832; 2010 PTD (Trib.) 1636; 2011 PTD (Trib.) 2114; 2011 PTD (Trib.) 2557; 2010 PTD 465; 2014 SC 514; 2002 PTD 2457; PLD 1971 SC 61; PLD 1973 SC 236; PLD 1964 SC 536; 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; 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 03 others 2008 PTD 1968; Khalid Mahmood v. Collector of Customs 2009 SCMR 1881; 2017 PTD 1756; Collector of Customs Sales Tax Gujranwala and others v. Super Asia Mohammad Deen & Sons and others 2017 SCMR 1427; 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 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.

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

----S.80(3)---Re-assessment---Principle---Re-assessment under S.80(3) of Customs Act, 1969, after release of goods was permitted only after calling for documents--- Upon receipt of documents or information so transmitted / submitted or statement given by importer to Customs Authority if were found to be incorrect in respect of earlier assessment.

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

----S.205---Declared value of goods---Amendment---Principle---No amendment under S.205 of Customs Act, 1969, is allowed in the columns of declared value, quantity or description after removal of the goods from customs area for home consumption.

Nadeem Ahmed Mirza, Consultant for Appellant.

Ghulam Muhammad Bhutto A.O. for Respondents.

2020 P T D (Trib.) 2220

[Customs Appellate Tribunal]

Before Jahanzaib Wahlah, Member Judicial-III

Messrs ZAHID MAJEED CORPORATION, KARACHI

Versus

The DEPUTY COLLECTOR, GROUP-VI, MCC, APPRAISEMENT-EAST, CUSTOMS HOUSE, KARACHI and another

Customs Appeals No.K-891 of 2018, decided on 9th October, 2019.

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

----S.194-A(4)---Appeal---Cross objections, non-filing of--- Effect--- When no cross objection under S.194-A(4) of Customs Act, 1969, is filed within stipulated period of 30 days by respondent, the same is tantamount to admission and deposition made by and on behalf of appellant in memo of appeal and affidavit deems to be true and correct.

(1974) 94 ITR-I; PLJ 1979, 71 & 72; 1986 CLC 745; (1984) 146 ITR 140; 1986 PTD (Trib.) 119; 1986 CLC 1119; 1986 CLC 1408; 1991 MLD 1243; 1992 SC 317; 1993 SCMR 662; PLD 1996 Kar. 68, PLJ 197 Quetta 66 and 2003 PTD 2118 rel.

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

----Ss. 25-D, 79, 80, 81 & 193-A--- Assessment order--- Finalization--- Limitation--- Revision application, pendency of--- Importer was aggrieved of the Valuation Ruling applied by Assessing Officer to assess his goods--- Despite pendency of revision application before Director General Valuation, the Assessing Officer finalized the Assessment and the Appellate Authority had dismissed the appeal--- Validity--- Appeal before Appellate Authority was filed by importer on 19-1-2018 in terms of S.193-A of Customs Act, 1969, order was to be passed in 120 days or within further extended period of 60 days in terms of its proviso by Federal Board of Revenue, upon availability of exceptional circumstances and recording of those after issuance of notice--- Order should have been passed on or before 19-5-2018 which Appellate Authority failed and no extension was given by Federal Board of Revenue--- Such vital illegality rendered the order passed by Appellate Authority barred by 33 days---Customs Appellate Tribunal set aside the orders passed by authorities---Appeal was allowed in circumstances.

Sadia Jabbar v. FOP and others 2018 PTD 1746; 2016 PTD 702; (1974) 94 ITR-I; PLJ 1979 71 & 72; 1986 CLC 745; (1984) 146 ITR 140; 1986 PTD (Trib.) 119; 1986 CLC 1119; 1986 CLC 1408; 1991 MLD 1243; 1992 SC 317; 1993 SCMR 662; PLD 1996 Kar. 68; PLJ 197 (sic) Quetta 66; 2003 PTD 2118; Khalid Mahmood v. Collector of Customs 2009 SCMR 1881; 2017 PTD 1756; Collector of Customs Sales Tax Gujranwala and others v. Super Asia Mohammad Deen & Sons others 2017 SCMR 1427; 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 2009 PTD (Trib.) 1263; Leo Enterprises v. President of Pakistan and others 2 [(2009) 100 TAX 32; 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; Pak Electron Ltd. v. Collector of Customs, Lahore and others 2012 PTD (Trib.) 1650; CBR v. Chanda Motors 1993 SCMR 39; Ghulam Nabi v. FOP of the Honorable Supreme Court of Pakistan 2013 PTD 581; Messrs AFU International v. The Director General Valuation and another 2016 PTD (Trib.) 1305 and Government of Khyber Pakhtunkhwa and others v. Lucky Cement 2019 SCMR 46 rel.

(c) Interpretation of statutes---

----Rules---Conflict with parent statute---Effect---Rules are subordinate legislation and cannot undo the provision of statute, which has to prevail on subordinate legislation--- In case of any conflict between the two, statute prevails over rules.

Superior Textile Mills Ltd. v. FOP 2000 PTD 399 and Messrs Arjun Salt Chemical v. UC gharo 1982 SCMR 522 rel.

Nadeem Ahmed Mirza for Appellant.

Mujahid Iqbal, A.O. for Respondents.

2020 P T D 293

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY REVENUE DIVISION, ISLAMABAD : In the matter of

OM 0085 of 2019, decided on 19th December, 2019.

Sales Tax Rules, 2006---

----R. 11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3) --- Jurisdiction, functions and powers of the Federal Tax Ombudsman --- Own motion complaint --- Maladministration ----Bogus sales tax refunds --- Own motion complaint against maladministration committed by Department and its officials in field formations, in processing and sanctioning of bogus sales tax refunds --- Federal Tax Ombudsman observed after issuance of Red Alert letters, failure to retrieve loss and not initiating action against culprits involved in bogus sales tax refunds was gross maladministration and except suspension of Registered Persons, two years after receipt of Red Alert, no effort to initiate proceedings to retrieve loss caused by such bogus refunds had been made by the Department ---- Federal Tax Ombudsman directed that Department make investigations against officials and Registered Persons involved in bogus sales tax refunds and recover amount swindled from public exchequer ---Complaint was disposed of, accordingly.

Syed Ayaz Mahmood, Advisor for Dealing Officer.

Shahid Ahmad, Advisor for Appraisal Officer.

Fazle Subhan, AdCIR (HQs), Mushtaq Ali Tunio, DCIR/DR, Ansar Ali Khan, ACIR and Tanweer Siddique, Audit Officer for Departmental Representative.

FINDING/RECOMMENDATIONS

MUSHTAQ AHMAD SUKHERA, FEDERAL TAX OMBUDSMAN.----This is an own motion investigation initiated while exercising powers conferred under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 to investigate irregularities committed by the FBR field formations in processing and sanctioning of bogus sales tax refund during the period 2011-14 as identified by the Directorate General I&I-IR, FBR. The "Red Alerts" in such case were issued to the field formations concerned but neither any action was initiated against the fake claimants and their connivers in the Deptt, who were involved in bogus registration, processing and sanctioning of fraudulent refund and issuance of refund cheques, nor was any action proposed against the related officers/officials of bank branches concerned and PRAL management.

1. In the case of Messrs AZ Printers STRN 1700381604612 NTN 3374552-8, a Registered Person (RP), engaged in the manufacturing of pulp, paper and paperboard, investigation was conducted by the I&I-IR FBR. It was revealed that on the basis of fake and flying input from Messrs Popular Board (Pvt.) Limited the RP had claimed bogus sales tax refund for the tax period May, June, July, August and September 2012 aggregating to Rs.28.725 million. Out of the above claim, the RP had already been issued on 02.01.2013 sales tax refund amounting to Rs.7.507 million.

2. Thus, Red Alert was issued by the Directorate of l&I-IR Karachi vide letter dated 23.01.2013 for retrieval of bogus sales tax refund already issued and concomitant necessary action against the person(s)/official(s) involved in the nefarious and unlawful activities.

3. The Deptt's sleeping over such crucial anti tax evasion exercise carried out by I&I-IR led to serious instances of maladministration on account of certain acts of omission and commission, reflecting improper motives, jeopardizing good governance and transparency in tax administration.

4. Comments of the Secretary, Revenue Division, Islamabad were sought in terms of Section 10(4) of the FTO Ordinance read with Section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013. In response thereto, the Chief Commissioner-IR (CCIR), RTO-III, Karachi submitted parawise comments vide letter dated 15.11.2019. It was contented that Red Alert in the instant case was issued by Directorate of I&I-IR, Karachi vide letter dated 23.01.2013. However, case record of the RP was transferred from RTO-II Karachi to RTO-III vide FBR's Jurisdiction order dated 21.07.2016. The Commissioner-IR-Zone-II of RTO-II Karachi had already suspended status of the RP for consecutive non filing of sales tax returns, vide order dated 16.03.2015. However, while transferring the RP's case record, the RTO-II Karachi did send copy of the Red Alert letter hence no further action could be taken. It was further contended that after issuance of Red Alert, no further refund was issued to the RP status of which continued to be suspended till to date.

5. Averments of the Deptt considered and case record perused.

6. It is observed that a country-wide investigation against huge bogus sales tax refunds, issued on the basis of fake and flying invoices, was carried out by the Directorate General I&I-IR FBR. After painstaking exercise, I&I-IR unearthed number of cases, where fake RPs were registered with the connivance of the field staff. The fake RPs claimed on the basis of fake and flying vouchers, bogus refund and in most of the cases get away with fraudulent refund, causing colossal loss to already cash starved exchequer. In the case of instant RP also on the basis of investigation, Red Alert was issued by the Director I&I-IR Karachi vide letter dated 23.01.2013, pointing out various discrepancies and inconsistencies requiring the Deptt for further investigation and retrieval of bogus sales tax refund amounting to Rs.7.507 million for tax period August 2012. Unfortunately, the Deptt did not grasp gravity of the state of affairs, and except suspending status of the RP i.e. after prolonged delay of more than 2 years on 16.03.2015; no serious effort appeared to had been made for retrieving loss of revenue incurred on account of issuance of sales tax refund amounting to Rs.7.507 million. The Deptt also did not make any effort whatsoever, to unearth the culprits from within and without, who were involved in sales tax registration of the fake RP. Obviously, the registration and issuance of refund was not a simple task but required a team work, involving not only the main beneficiaries of fraudulent refund but also having connivers in the Deptt and bank officials who facilitated in opening the fake bank accounts through which refund cheques were drawn.

2020 P T D 344

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY, REVENUE DIVISION, ISLAMABAD: In the matter of

O.M. No.0047 of 2019, decided on 20th December, 2019.

Sales Tax Rules, 2006---

----R. 11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3) --- Jurisdiction, functions and powers of the Federal Tax Ombudsman ---- Own motion complaint --- Maladministration ----Bogus sales tax refunds ---- Own Motion complaint against failure of Department to initiate action against claimants of bogus sales tax refunds and their connivers in the Department, bank officials and PRAL management ---- Federal Tax Ombudsman observed that registration and issuance of refund was not a simple task but required teamwork involving not only beneficiaries of such fraud but also officials in departments and banks who facilitated in opening of bank accounts from which refund cheques were drawn ---Failure of Department to initiate action against such persons tantamount to maladministration --- Federal Tax Ombudsman recommended that Department direct concerned Commissioner to investigate and identify officials involved in registration of fake Registered Persons, and take disciplinary and criminal action and recover amount swindled from public exchequer --- Complaint was disposed of, accordingly.

Syed Ayaz Mahmood, Advisor, Dealing Officer.

Shahid Ahmad, Advisor, Appraisal Officer.

2020 P T D 376

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY REVENUE DIVISION, ISLAMABAD : In the matter of

O.M. No.0002 of 2018, decided on 6th November, 2019.

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

----Ss.10, 9(1) & 2(3) --- Jurisdiction, functions and powers of the Federal Tax Ombudsman ---- Own motion complaint against Department for not realizing full potential of the collectable "Federal Excise Duty " and "Sales Tax" from cigarette manufacturers, by failing to conduct audit and by insufficient monitoring of production ---Federal Tax Ombudsman observed that Departmental records revealed, inter alia, that audits had not resulted in major tax detections and Departmental actions under Sales Tax Act, 1990 and Federal Excise Act, 2006 had been diluted to mere physical presence of Department officers at manufacturers' premises without access to record of production ---- Federal Tax Ombudsman gave extensive recommendations to improve monitoring in order to check tax evasion and to increase revenue collected from the cigarette manufacturing sector.

Abrar Ahmad Khan, Advisor for Dealing Officers.

Abdul Wadood, Advisor for Dealing Officer.

Shahid Ahmad, Advisor for Appraisal Officer.

Nemo for Authorized Representative.

2020 P T D 435

[Federal Tax Ombudsman]

Before Mushtaq Ahmed Sukhera, Federal Tax Ombudsman

The SECRETARY REVENUE DIVISION, ISLAMABAD : In the matter of

O.M. No.0046 of 2019, decided on 19th December, 2019.

Sales Tax Rules, 2006---

----R. 11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3) --- Jurisdiction, functions and powers of the Federal Tax Ombudsman ---- Own motion complaint --- Maladministration ----Bogus sales tax refunds ---- Own motion complaint against maladministration committed by Department and its officials in field formations, in processing and sanctioning of bogus sales tax refunds -----Federal Tax Ombudsman observed that a country-wide investigation against issuance of bogus refunds was carried out by a Directorate of Department, however except mere blacklisting of Registered Person, no effort had been made for retrieving loss of revenue or to unearth culprits involved in such activity---Such failure of Department tantamount to maladministration and Federal Tax Ombudsman directed that Department make investigations against officials and Registered Persons involved in bogus sales tax refunds and recover amount swindled from public exchequer ----Complaint was disposed of, accordingly.

Syed Ayaz Mehmood, Advisor Dealing Officer.

Shahid Ahmad, Advisor Appraisal Officer.

2020 P T D 477

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY REVENUE DIVISION, ISLAMABAD : In the matter of

O.M. 0097 of 2019, decided on 20th December, 2019.

Sales Tax Rules, 2006---

----R. 11----Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Own motion complaint---Maladministration---Bogus sales tax refunds---Own motion complaint against maladministration committed by Department and its officials in field formations, in processing and sanctioning of bogus sales tax refunds---Federal Tax Ombudsman observed that despite issuance of red alert, Department's sleeping over such an important tax evasion exercise, had led to serious instances of maladministration, which jeopardized transparency in tax administration---Failure of Department to initiate action against persons and officials involved in registration of fake Registered Persons and retrieval of refunds already issued prior to issuance of Red Alert was tantamount to maladministration---Federal Tax Ombudsman recommended that Department identify officials who failed to complete backlisting proceedings and those involved in processing of refunds on basis of fake and flying invoices and take appropriate legal action against them---Federal Tax Ombudsman further recommended that Department initiate appropriate action, including criminal proceedings leading to prosecution of Registered Persons involved in such activities and recover amount of loss caused to national exchequer---Complaint was disposed of, accordingly.

Syed Ayaz Mahmood, Advisor Dealing Officer.

Shahid Ahmad, Advisor Appraisal Officer.

2020 P T D 510

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

SH. QAISER MEHMOOD

Versus

The SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.1395/GWL/IT of 2018, decided on 12th April, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(1), 122-A, 127 & 221---Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3)(i)(a) & (d) & 10(1)---Maladministration---Income tax assessment---Amendment---Complainant was income tax assessee who was aggrieved of action taken under S. 122(1) of Income Tax Ordinance, 2001 by income tax authorities and same had been set aside by Commissioner Inland Revenue in exercise of powers under S.122-A of Income Tax Ordinance, 2001---Plea raised by authorities was that complaint was not maintainable--- Validity--- Order passed by tax authorities under S.122(1) of Income Tax Ordinance, 2001 was appealable under S.127 of Income Tax Ordinance, 2001 and provisions of S.122-A of Income Tax Ordinance, 2001 were attracted--- Action taken by Commissioner Inland Revenue in setting aside assessment by taking action under S.122-A of Income Tax Ordinance, 2001 was contrary to law--- Amendment in assessment was made on 29-09-2018 and demand notice was served on complainant on 02-10-2018 when he had sufficient time of filing appeal before Commissioner Inland Revenue (Appeals) till 11-02-2018 and during such period no activity under S. 122 of Income Tax Ordinance, 2001 could be made--- Complaint had become infructuous but action of Commissioner Inland Revenue setting aside order passed under S. 122(1) of Income Tax Ordinance, 2001 by invoking provisions of S. 122-A of Income Tax Ordinance, 2001 was contrary to law, procedure, established departmental practice and involving exercise of powers for corrupt motives was established and same tantamount to maladministration as defined in S.2(3)(i)(a) & (d) of Federal Tax Ombudsman Ordinance, 2000--- Federal Tax Ombudsman directed Federal Board of Revenue to direct concerned Zonal Commissioner Inland Revenue to rectify order passed under S.122-A of Income Tax Ordinance, 2001 while exercising powers conferred under S.221 of Income Tax Ordinance, 2001--- Federal Tax Ombudsman further directed Federal Board of Revenue to initiate disciplinary proceedings in terms of S.14(6) of Federal Tax Ombudsman Ordinance, 2000 against Zonal Commissioner Inland Revenue for passing order under S. 122-A of Income Tax Ordinance, 2001 as same was contrary to law, procedure, established departmental practice and involving exercise of powers for corrupt motives to extend illegal benefit to complainant and causing substantial loss of revenue to the State--- Complaint was dismissed accordingly.

Abdur Rehman Dogar, Advisor Dealing Officer.

None for Authorized Representative.

2020 P T D 557

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

BOARDS OF INTERMEDIATE AND SECONDARY EDUCATION, ABBOTTABAD

Versus

THE SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.028/ISB/IT of 2019, decided on 19th December, 2019.

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

----Ss.14(8), 9 & 2(3)---Income Tax Ordinance (XLIX of 2001), S.171---Review of findings of Federal Tax Ombudsman---Maladministration---Additional payment for delayed refunds---Complainant/taxpayer sought review of order of Federal Tax Ombudsman whereby complaint against, inter alia, non-payment of additional payment for delayed refund, was rejected on ground that Federal Tax Ombudsman lacked jurisdiction---Validity---Reappraisal of record revealed that no formal rejection order was passed by Department on request of complainant for additional payment under S.171 of the Income Tax Ordinance, 2001 --- No remedy of appeal against an order under S. 171 of the Income Tax Ordinance, 2001 was available to complainant therefore jurisdiction of the Federal Tax Ombudsman was not barred under S.9(2)(b) Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman observed that failure to settle additional payment for delayed refund in terms of S. 171(2)(a) of the Income Tax Ordinance, 2001 was tantamount to maladministration under S. 2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended the Department to direct concerned Commissioner to issue additional payment for delayed refund after providing opportunity of hearing to complainant / taxpayer---Impugned findings in original order were recalled, and Review Petition was allowed, accordingly.

CIR v. Messrs Chicago Metal Works 2015 PTD 1913 ref.

Aftab Ahmad Advisor Dealing Officer.

Manzoor Hussain Kureshi, Advisor Appraisal Officer.

Waheed Shahzad Butt and Muddasir Malik, Authorized Representative(s).

2020 P T D 602

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

NISAR AHMAD

Versus

The SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint Nos.2209 and 2210/MLN/IT of 2019, decided on 30th December, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170, 171 & 120---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 10, 2(3) & 9---Federal Tax Ombudsman, jurisdiction of---Maladministration---Disposal of complaints---Delay in issuance of refunds---Scope---Complaint against non-issuance of refund / compensation under Ss. 170 & 171 of the Income Tax Ordinance, 2001---Complainant sought findings against Department for inordinate delay in issuance of refund on account of excessive deduction of tax ----Validity---Federal Tax Ombudsman, upon assurance of Department to dispose of refund application within a period of 30 days, disposed of the complaint without adjudicating on legal and factual merits of complaint.

Saleem Raza Asif, Advisor Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

2020 P T D 642

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

SHAKIR ALI RAJPUT

Versus

The SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1397/KHI/IT of 2018, decided on 28th December, 2018.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114, 115(3)(d), 231-A & 236-P---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 10---Federal Ombudsman Institutional Reforms Act (XIV of 2013), S. 9(1)---Tax deduction---Foreign remittances---Non-Resident / Overseas Pakistani---Exemption ---Complainant was a Non-Resident/Overseas Pakistani who was aggrieved of deduction of tax on his remittances exceeding fifty thousand rupees---Validity---Complainant, who was Non-Resident working abroad and who had no source of income in Pakistan was exempt from filing of return in terms of S. 115(3)(d) of Income Tax Ordinance, 2001--- Non-Resident who had no Pakistan-source taxable income was exempt from filing return of income under S. 114 of Income Tax Ordinance, 2001--- Federal Tax Ombudsman declared that application of Ss. 231-A & 236-P of Income Tax Ordinance, 2001 on money remitted by Non-Residents expatriates through proper banking channels who were otherwise exempt from filing their returns of income, tantamount to negate benefit of S. 115(3)(b) of Income Tax Ordinance, 2001---Federal Tax Ombudsman directed Federal Board of Revenue to issue necessary clarification/explanation to bring conformity in case of non-filer Non-Resident expatriates in application of Ss. 231-A & 236-P of Income Tax Ordinance, 2001 with S.115(3)(b) of Income Tax Ordinance, 2001---Federal Tax Ombudsman further directed the authorities to facilitate complainant in getting refund of amount deducted/collected from his Bank withdrawals under S.231-A of Income Tax Ordinance, 2001---Complainant was allowed the deduction accordingly.

Manzoor Hussain Kureshi, Advisor for Dealing Officer.

Complaint-in-Person, for Authorized Representative.

2020 P T D 654

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY, REVENUE DIVISION, ISLAMABAD: In the Matter of

Own Motion No.0008 of 2018, decided on 15th May, 2019.

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

----Ss.9 & 2(3)---Sales Tax Rules, 2006, Rr.4 & 5---SRO No.1125(I) / 2011 dated 31.12.2011---Maladministration---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Suo Motu complaint against systemic maladministration by Department upon newspaper item regarding ghost entities registered as manufacturers under the Sales Tax Act, 1990, with fictitious addresses, and having been setup for tax evasion by claiming benefit of SRO No. 1125(I)/2011 dated 31.12.2011---Review of rules regarding sales tax registration and risk score weightage assigned to risk parameters employed in the registration process revealed that IRIS based registration module failed to timely incorporate revised registration rules which lead to misuse of "manufacturer" status by registered persons for purpose of tax evasion---Federal Tax Ombudsman observed that the Department had failed to take timely action in integrating the registration module in IRIS system thereby providing opportunity to unscrupulous elements to take advantage of weaknesses in registration procedure---Modification in registration module was carried out after nine months after the revision of the Sales Tax Rules, 2006 and no exercise was carried out by field formations to verify that existing manufacturers were registered in conformity with provisions of the revised rules---Federal Tax Ombudsman, inter alia, recommended to the Department to seek initiation of criminal proceedings against owners entities which were registered as ghost manufacturers along with delinquent tax functionaries; and recommended development of a comprehensive risk management framework, audit of all manufacturers who availed benefit of SRO No.1125(I)/2011 dated 31.12.2011, development and implementation of a software for live data synchronization with regard to sales tax registration and further recommended that direction be given to all Commissioners to conduct half-yearly physical verifications of all units registered in respective jurisdictions as "manufacturers"---Complaint was resolved, accordingly.

Shahid Ahmad, Advisor Dealing Officer.

2020 P T D 687

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY REVENUE DIVISION, ISLAMABAD : In the matter of

O.M. No. 0004 of 2018, decided on 27th May, 2019.

Customs Act (IV of 1969)---

----Preamble---Prevention of Smuggling Act (XII of 1977), Preamble---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9 & 2(3)---Maladministration---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---Complaint against presence of non-custom paid vehicles in showrooms---Federal Tax Ombudsman observed that failure to exercise statutory powers against smuggling of non-duty-paid (NPD) vehicles and providing protection to offenders reflected inefficiency and ineptitude in discharge of duties by Department's officers, which tantamount to maladministration in terms of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance---Federal Tax Ombudsman recommended Chief Customs Collector to form a task force for action against NPD vehicles, to regularly conduct raids on car showrooms, to examine past seizure reports, and to initiate disciplinary action against officials engaged in violation of law and ensure that all future seizures of vehicles are made complying with all legal requirements as provided for, inter alia, in Customs Act, 1969 and Smuggling Act, 1977---Complaint was disposed of, accordingly.

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

Ashraf Ali Khan, Collector MCC, Quetta, Muhammad Yaqoob Mako, Collector, MCC, Gwadar, Maqbool Ahmed, Deputy Collector, MCC, Quetta, Ehsan Shah, Deputy Collector, MCC, Gwadar, Akram Ch., Director, Directorate I&I Customs, Quetta, Muhammad Azam, Deputy Director, Directorate I&I Customs, Quetta and Hameed Ullah Dasti, PDSP, Quetta Departmental Representative.

FINDING/RECOMMENDATIONS

MUSHTAQ AHMAD SUKHERA, FEDERAL TAX OMBUDSMAN.----This is an Own Motion investigation initiated while exercising powers conferred under section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance), to investigate wide spread reports of presence of show rooms dealing in Non Duty Paid (NDP) smuggled vehicles on main roads of Quetta and further transportation of NDP vehicles to other parts of the country.

1. Notices under section 10(4) of the FTO Ordinance read with Section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013 were issued to the Secretary, Revenue Division, Inspector General Frontier Constabulary and Deputy Inspector General of Police. The Collectors, Model Customs Collectorate (MCC), Customs House, Quetta, Gwadar at Gaddani, Directorate Intelligence and Investigation (I&I) (Customs), along with Inspector General Frontier Constabulary and Deputy Inspector General (DIG) of Police submitted comments.

2. The Collector MCC, Quetta submitted that the whole of Pak-Afghan border and about 450 km of Pak-Iran border fall within the jurisdiction of MCC Quetta. Added that entire Pak-Afghan and Pak-Iran borders are guarded by Frontier Corps, Baluchistan (FC) and other Law Enforcement Agencies (LEAs). Contended that numerous measures had been taken to curb the smuggling of NDP vehicles from unauthorized routes by establishing new check posts at the outlets of the city, as well as the entire province. Close liaison had also been maintained with LEAs for joint operation in inaccessible areas. Further informed that 130 new sepoys had been recruited and posted at different stations. However, due to lack of weapons, their utility/performance in anti-smuggling related activities, is generally hampered as the smugglers are better equipped with latest automatic and semi-automatic weapons. The Deptt had issued SOP for sale and purchase of vehicles and notices were also issued to the owners of showrooms informing them not to indulge in the illegal business of smuggled vehicles. Added that Raids were conducted on the showrooms in collaboration with other LEAs. After hectic efforts, the Deptt seized following NDP vehicles during period from 2013 to march 2018.

| | | | | --- | --- | --- | | Financial Year | Non Duty Paid Vehicles seized by the Customs, Quetta | | | | Number of vehicles | CIF Value (Rs.in million) | | 2013-14 | 126 | 96.000 | | 2014-15 | 199 | 198.000 | | 2015-16 | 636 | 575.000 | | 2016-17 | 610 | 451.000 | | 2017-18 (upto 8th March 2018) | 563 | 582.000 |

1. It had been pleaded that the Deptt. would continue to keep strict vigilance and enhance its efforts to impound non-duty paid vehicles.

2. The Collector MCC Gwadar, Customs House, Gaddani in his comments contended that about 359 km border is being shared with Iran and 640 km coast line falls within the jurisdiction of MCC Gwadar. The entire Pak-Iran border is guarded by FC and other LEAs. Added that there is an acute shortage of officers and officials. However, despite the above shortcoming, the Collectorate had taken various steps to curb the smuggling and illegal transfer of NDP/ smuggled vehicles from unauthorized routes. Despite all operational difficulties, the Collectorate seized 108 NDP vehicles from 2013 to February 2018. Further contended that in order to curb the menace of smuggling of NDP vehicles, inter alia, there is a dire need for centralized data warehousing through computerization of record for legal imports vis-a-vis subsequent registration of such vehicles with the Provincial Excise Motor Registration Authorities (MRA) across the country. The Collector maintained that in many instances such NDP vehicles had been registered with MRAs against fake Customs documents/antecedents. Requested that in this regard necessary direction may also be issued to the concerned quarter, to refrain from registration of imported vehicles till verification of respective customs clearance record and forensic checks and to impound and hand over suspected vehicles to Customs.

3. The Deputy Director I&I Customs submitted comments stating that the Directorate had jurisdiction to the extent of Chaman Customs Station and Quetta City, which are guarded by the FC and other LEAs. Besides, during financial year 2017-2018, the Directorate had effected 192 cases of smuggled/NDP vehicles valuing Rs.306.255 million and 21 vehicles worth Rs.21.800 million had been seized after July-2018. The Directorate pleaded that Anti-Smuggling activities are carried out since few years back with a Director, Deputy Director, five Intelligence officers and 11 Sepoys. According to the Directorate due to lack of weapon/Arms and Ammunition, the activities are greatly hampered. The Directorate complained about non-cooperation of LEAs.

4. The Deputy inspector general of police submitted comments contending that due to prevailing law and order situation, district police Quetta had issued instructions to all the motor showroom owners to abide by the legal obligation and responsibilities. District Police Quetta had nominated all Superintendents of Police (Operation) Quetta, focal persons to coordinate with Customs Authorities during their campaign against NDP vehicles dumped in showrooms and superbs of Quetta city. Further, all concerned SDPOs and SHOs of Quetta police had strictly been directed to assist and coordinate with customs authorities during their campaign against NDP vehicles and conduct the operation with full strength in presence of duty magistrate. Moreover, a format had been circulated to the owners of the showrooms with direction to maintain a register according to the format. Joint checking teams had been constituted with customs authorities for the said purpose to launch campaign against NDP smuggled vehicles in Quetta city and surrounding areas. District police had strictly directed all the showroom owners to refrain from dealing in NDP vehicles. In case anyone is found involved in illegal activities, legal action will be taken as per prevailing law.

5. FC in their comments informed that FC (North) does not possess anti-smuggling powers due to increase of other multi-farious tasks. However, FC (North) assisted Customs Authorities while conducting raids on showrooms to recover NDP vehicles. It was further reported that FC (North) in year 2017/2018, handed over 611 NDP vehicles to the Customs Authorities.

6. Comments were sought from other LEAs including Chief Secretary and Secretary, Home and Tribal Affairs Department, regarding action against smuggling and business of NDP vehicles. The issues seem to be taken lightly as no response was made despite repeated reminders.

7. Series of hearings were held wherein the DRs expressed non-cooperation of LEAs, especially FC. They however, appreciated cooperation extended by the police. Request was made for issuance of direction to F.C. to extend help during raids conducted on showrooms.

8. Being dissatisfied by the comments and progress in the matter, it was observed that serious efforts needed to be made to eradicate this menace. In this regard, reference was made to Section 7 of the Customs Act, 1969 (the Act) whereby all officers of Central Excise, Police and Civil Armed Forces, along with officers engaged in the collection of land-revenue had been empowered and required to assist officers of Customs in the discharge of their functions under the Act.

9. In view of the legal position referred to above, it was felt that a joint meeting of Collectors Customs, Quetta and Gwadar with officers of the departments referred to in Section 7 of the Act be held to discuss strategy for preventing smuggling and sale/purchase of NDP vehicles. However, in the meanwhile, the Deptt was required to take action against NDP vehicles and put in all out efforts to make it impossible to shift/transport NDP vehicles to other provinces by setting check posts on all the outlets.

10. The Deptt. conducted survey of showrooms and submitted report mentioning the number of vehicles found parked in each and every showroom and contended that presence of NDP vehicles in these showrooms could not be ruled out and it was added that about 8 to 10 persons were found present at each showroom and the owners of these showrooms were in close liaison, in case of any threat from law enforcement agencies to their business. According to the report, in the wake of random raids conducted on the showrooms by the Collectorate, the owners desisted from parking NDP vehicles in their showrooms. They were apparently dealing with NDP vehicles from some unidentified places/homes. However, this Collectorate is continuously maintaining strict vigilance on the showrooms for seizure of NDP vehicles and a number of vehicles had been seized during this campaign. The Collectorate also forwarded data of seized vehicles. It had further been pleaded that Customs staff had kept strict vigilance on entry/exit points and major check points of the city. In order to ensure more intensive and coordinated snap checking, the Collectorate approached SSF Traffic Quetta, vide letter C.No.02(02)FTO/2018/3034 dated 13.08.2018, to constitute teams for joint checking at different check points of city.

11. The Deptt. informed that in compliance of undertaking made by the DRs joint meeting of provincial and federal departments referred to in section 7 of the Customs Act was held on 28.09.2018 under the chairmanship of Collector, MCC, Quetta. Copy of minutes of meeting was submitted which reads as under:-

"In pursuance of the directive of the Honorable Federal Tax Ombudsman's vide letter Nos.444.54/C and 455-61/C-04/OM / FTO-QTA/2018, a joint meeting of the Provincial and Federal Departments referred to in Section 7 of the Customs Act, 1969, to discuss strategy for preventing smuggling and sales/business of petroleum products and NDP vehicles in and around Quetta City, was held on 28.09.2018, under the Chairmanship of Collector Customs, MCC, Quetta in his chamber and following participants attended:-

i) Mr. Zubair Shah, Additional Collector (Preventive), MCC, Quetta

ii) Mr. Moin-ur-Rehman, Additional Commissioner, Quetta Division.

iii) Mr. Naseeb Khan, SSP (Operations) Balochistan Police, Quetta.

iv) Mr. Maqbool Ahmad, Deputy Collector (Preventive), MCC, Quetta.

v) Major Ahmad Faraz, Anti-Smuggling Officer, FC, Balochistan (North).

vi) Muhammad Javed, SP Traffic, Traffic Police, Quetta.

1. The Following points/issues were discussed and decisions thereof are appended blow:

| | | | | --- | --- | --- | | S.No. | Points discussed | Action By | | 1. | Joint teams to survey and identify suspicious/non-registered showrooms, godowns, petrol pumps and dumping places will be constituted having two members each from Customs, District Administration and Police. | - DC Customs (Preventive) MCC Quetta - Additional Commissioner Quetta Division - SSP (Operation), Quetta | | 2. | A letter will be written to OGRA authorities seeking list of registered Petrol Pumps operating in Quetta and in vicinity of Quetta with OGRA. | Additional Collector Customs, MCC Quetta | | 3. | Provision of lists/data of petrol pumps and showrooms registered with District Administration, if any | Deputy Commissioner, Quetta | | 4. | Customs and FC carry out joint snap checking of vehicles at entry and exist point of Quetta | - DC Customs (Preventive) MCC Quetta - Anti-Smuggling Officer, FC (North) Balochistan, Quetta | | 5. | FC to play active role in joint action against smuggling of Iranian Diesel, Illegal petrol pumps and showrooms | - Anti-Smuggling Officer, FC (North) Balochistan, Quetta | | 6. | Joint snap checking of Customs and Traffic Police Teams at important chocke point of Quetta City | - DC Customs (Preventive), MCC, Quetta - SP Traffic Quetta Police | | 7. | Survey teams will be constituted by 2nd October, 2018 and next follow up meeting will be held on 10th October, 2018 in the Chamber of Collector Customs, MCC Quetta | - DC Customs (Preventive), MCC, Quetta - Deputy Commissioner, Quetta - SSP (Operation), Quetta - Anti-Smuggling Officer, FC (North) Balochistan, Quetta. |

1. The meeting ended with a vote of thanks from the chair."

2. The submissions made by the Deptt as well as by the Directorate, Police and FC reflect that menace of smuggling of NDP vehicles, its business and being openly plied not only in Balochistan but all over the country is an undisputed fact. The actions taken by the Deptt. on the face of it seem to be having no effect. The Deptt. at each hearing submitted reports about seizure of NDP vehicles. The data provided by the Deptt reflects that during financial years 2017-18 and 2018-19 till Jan following NDP vehicles were seized by MCC Quetta, FC and Police.

NO OF NDP VEHICLE SEIZED DURING FY 2017-18 AND 2018-19

| | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Year | Customs Cases | | FC Cases | | Police Cases | | Grand Total | | | | Veh. | Amount in mn | Veh. | Amount in mn | Veh. | Amount in mn | Veh. | Amount in mn | | 2017-18 | 464 | 556.606 | 335 | 275.906 | 72 | 67.77 | 871 | 900.212 | | 2018-19 (July to Jan) | 564 | 633.683 | 362 | 323.004 | 43 | 43.456 | 969 | 1000.143 |

1. The data provided by Directorate of I&I (Customs) shows that 390 NDP vehicles were seized from Jan-2018 till March-2019, whereas MCC Gwadar seized 42 vehicles from Jan-2018 till March- 2019.

2. The data provided by MCC Quetta and Directorate reflects that influx of NDP vehicles instead of decreasing has increased due to lack of deterrence as no action is taken against the smugglers or the individuals involved in the business of NDP vehicles encouraging smuggling and business of NDP vehicles. At this juncture, it is observed that in all cases the accused are stated to be unknown so much so, the recoveries made from showrooms are also shown to have been made from unknown individuals. Admittedly seizure made under Section 168 of the Customs Act, 1969 for violation of provisions of Sections 2(s) and 16 of the Customs Act read with subsection (I) of Section 3 of Import and Export Act, 1950 in addition to adjudication proceedings is also punishable under Clauses 8 and 89 of Section 156(1) of the Customs Act. Failure to initiate proceedings under Clauses 8 and 89 of Section 156(1) of the Customs Act, is result of the practice adopted by the Deptt as well as Directorate of I&I and other LEAs of not apprehending the accused. The reports submitted by the Deptt highlight the revenue collected from auction of seized NDP vehicles which indicate that the Deptt takes benefit of smuggling vehicles to achieve revenue target, therefore, no action is taken against smugglers and individuals involved in business of NDP vehicles, fearing that action may adversely effect inflow of smuggling of vehicles making it difficult for the Deptt to achieve its revenue targets.

3. It would not be out of place to observe that the excuse advanced by the Deptt. especially MCC, Quetta about non-cooperation of FC and LEAs, is negated by the minutes of meeting as FC, Police as well as local administration not only attended the meeting but also offered full cooperation for raids on showrooms and snap checking. Since the Deptt has remained dormant, therefore, it does indicate that the customs officials collusively did not want to take legal action against the smugglers and owners of showrooms for their ulterior motives. Thus, failure in exercise of powers for corrupt motives, inefficiency, inattention and neglect in the discharge of duties is evident.

Findings:

1. Failure in exercise of powers for corrupt motives against smuggling of NDP vehicles and providing protection to offenders also reflect inefficiency, inattention and ineptitude in the discharge of duties and responsibilities by the officers/officials of the Deptt, which does tantamount to maladministration, as defined under Section 2(3)(i)(d)&(ii) of the FTO Ordinance.

Recommendations:

1. FBR to direct Chief Collector (Enforcement) Quetta to:

(i) form Task Force;

(a) for action against smuggling of NDP vehicles;

(b) to seize/impound NDP vehicles being plied in Balochistan; and

2020 P T D 900

[Federal Tax Ombudsman]

Before Mushtaq Ahmed Sukhera, Federal Tax Ombudsman

The SECRETARY, REVENUE DIVISION, ISLAMABAD : In the matter of

O.M. No.0054 of 2019, decided on 28th January, 2020.

Sales Tax Rules, 2006---

----R. 11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Own motion complaint---Maladministration---Bogus sales tax refunds---Misuse of SROs---Own motion complaint against maladministration committed by Department and its officials in field formations, in processing and sanctioning of bogus sales tax refunds---Federal Tax Ombudsman observed that despite receipt of Red Alert, Department failed to process sales tax refunds or initiate action to determine tax liability and it failed to start proceedings to recover short-levied sales tax / value added tax on imports through misuse of concessionary SROs---Such conduct was criminal negligence and a case of gross maladministration---Federal Tax Ombudsman recommended to the Department to direct Chief Commissioner to identity and take actions against officials who failed to take action against tax evaded through misuse of SROs and initiate criminal proceedings to recover evaded tax---Complaint was disposed of, accordingly.

Syed Ayaz Mahmood, Advisor Dealing Officer.

Shahid Ahmad, Advisor Appraisal Officer.

2020 P T D 966

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY, REVENUE, DIVISION, ISLAMABAD/STATE BANK OF PAKISTAN, KARACHI : In the matter of

O.M. No. 25 of 2019, decided on 13th May, 2019.

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

----Ss. 9 & 2(3)----Income Tax Ordinance (XLIX of 2001), S.114--- State Bank of Pakistan EPD Circular No.7, dated 19-4-2019---Maladministration---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Return of income for non-residents---Suo motu investigation against systemic maladministration by Department as non-residents were being required to file return of income by Banks before opening a foreign currency account---Scope---Federal Tax Ombudsman observed that such treatment to non-residents was prima facie in violation of the express provisions of S. 114 of the Income Tax Ordinance, 2001 whereby non-residents were not under an obligation to file returns on their foreign income---Complaint was resolved upon clarification issued by the State Bank of Pakistan vide EPD Circular No.7 dated 19.04.2019 whereby it was clarified that non-residents were not required to be filers of income under the Income Tax Ordinance, 2001 to be able to open foreign currency accounts.

Aftab Ahmad, Advisor Dealing Officer.

Manzoor Hussain Kureshi, Advisor Appraisal Officer.

2020 P T D 976

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY REVENUE DIVISION, ISLAMABAD : In the matter of

Own Motion No.0011/OM of 2018, decided on 21st May, 2019.

Customs Act (IV of 1969)---

----S.156---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 10, 9 & 2(3)---SRO No.266(I)/2001 dated 18.06.2001---SRO No.760(I)/2013 dated 02.09.2013---Maladministration---Incentive schemes for import and exports of gold and other precious metals---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Own Motion complaint against misuse of import-cum-export facility and special incentive schemes in respect of gold, jewelry and other precious metals at various Customs Stations---Scope---As per audit reports, repeated exports were made whereby foreign exchange was not repatriated against prescribed forms, which subsequently turned out to be fake, and no explanation was provided by Department as to how such exports were allowed when no foreign exchange was repatriated within the specified period---Certain weaknesses existed in the scheme notified under SRO No.760(I)/ 2013 dated 02.09.2013 which needed to be revisited to provide for a performance based quota scheme for import of gold, for meeting timelines, and authentication of passbook entries---Federal Tax Ombudsman observed that failure of Departmental officers to take timely actions under S. 156 of the Customs Act, 1969 and failure to exercise due precaution resulted in massive loss of revenue which fell within definition of maladministration under S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended the Department to ensure that inquiry is initiated against officials involved in illegal and inadmissible exports/imports in violation of SRO No.266(I)/2001 dated 18.06.2001 and SRO No.760(I)/ 2013 dated 02.09.2013, and to request Ministry of Commerce to constitute a committee compromising of representatives from the State Bank, FBR, TDAP to review the SRO No.760(I)/2013 dated 02.09.2013, SRO No.266(I)/2001 dated 18-6-2001 and propose amendments---Federal Tax Ombudsman further recommended to the Ministry of Commerce to conduct study to measure impact analysis of incentive schemes for import and export of gold and gemstones and to examine a proposal to prescribe Bank guarantee against import value of pervious metals instead of one-percent case margin---Complaint was disposed of, accordingly.

Shahid Ahmad, Advisor and Justice (Rtd.) M. Nadir Khan, Advisor Dealing Officer.

2020 P T D 1029

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

Messrs SHAH SONS PAKISTAN (PVT.) LTD.

Versus

The SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1938/MLN/ST of 2019, decided on 8th January, 2020.

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

----Ss. 9(2)(a), 2(3) & 10---Sales Tax Act (VII of 1990) Ss. 26---Complaint against delay in granting approval of application for revision in sales tax return---Jurisdiction, functions and powers of Federal Tax Ombudsman---Maladministration----Record showed that application of complainant for revision in sales tax return was pending for three months and no action was taken by Department despite follow-up reminders---Delay in disposal of complainant's application was evident, which was tantamount to maladministration---Federal Tax Ombudsman recommended Department to direct concerned Commissioner to dispose of the application of Complainant after providing opportunity of hearing and report compliance of same within 45 days---Complaint was disposed of accordingly.

Saleem Raza Asif, Advisor for Dealing Officer.

Shahid Ahmad, Advisor for Appraisal Officer.

Riaz Ahmad Raja, ITP for Authorized Representative.

2020 P T D 1057

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

MUHAMMAD SHABBIR

Versus

The SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint Nos.2207 and 2208/MLN/IT of 2019, decided on 6th January, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170, 171 & 120---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 10, 2(3) & 9---Federal Tax Ombudsman, jurisdiction of---Maladministration---Disposal of complaints---Delay in issuance of refunds---Scope---Complaint against non-issuance of refund and for compensation under Ss. 170 and 171 of the Income Tax Ordinance, 2001---Complainant sought findings against Department for inordinate delay in issuance of refund on account of excessive deduction of tax---Validity---Federal Tax Ombudsman, upon assurance of Department to dispose of refund application within a period of 30 days, disposed of the complaint without adjudicating on legal and factual merits of complaint.

Saleem Raza Aasif, Advisor for Dealing Officer.

Manzoor Hussain Kureshi, Advisor for Appraisal Officer.

Riaz Ahmad Raja, ITP for Authorized Representative.

2020 P T D 1111

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY, REVENUE DIVISION ISLAMABAD : In the matter of

O.M. No.0162 of 2019, decided on 29th January, 2020.

Sales Tax Rules, 2006---

----R.11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Own motion complaint---Maladministration---Bogus sales tax refunds ---Own motion complaint against maladministration committed by Department and its officials in issuing bogus sales tax refund---Federal Tax Ombudsman observed that except backlisting the registered person, Department failed to initiate any proceedings to verify genuineness of input tax or locate the registered person, which was tantamount to maladministration---Federal Tax Ombudsman recommended to the Department to direct concerned commissioner to conduct timely investigative audit to identify the officials involved in registration of fake registered person and initiate criminal and disciplinary action against the same---Complaint was disposed of, accordingly.

Syed Ayaz Mahmood, Advisor Dealing Officer.

Shahid Ahmad, Advisor Appraisal Officer.

2020 P T D 1116

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY, REVENUE DIVISION, ISLAMABAD : In the matter of

O.M. No.0163 of 2019, decided on 29th January, 2020.

Sales Tax Rules, 2006---

----R.11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Own motion complaint---Maladministration---Bogus sales tax refunds---Fake verification / Registration of persons under the Sales Tax Act, 1990---Own motion complaint against maladministration committed by Department and its officials in field formations, in processing and sanctioning of bogus sales tax refunds and fake registered persons---Federal Tax Ombudsman observed that entity in question was registered on basis of active collusion of the Department officials and said entity was one of 42 units registered through one email address and all said units were dubious and engaged in fraud---Federal Tax Ombudsman further observed that such matter was a case of criminal negligence and gross maladministration and recommended to Department to investigate officials involved in fake registration and initiate investigative audit against the entity on basis of income tax return filed---Complaint was disposed of, accordingly.

Syed Ayaz Mahmood, Advisor for Dealing Officer.

Shahid Ahmad, Advisor for Appraisal Officer.

2020 P T D 1250

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

SOHAIL IMRAN SIDDIQUE

Versus

The SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No.2257/MLN/ST of 2019, decided on 21st January, 2020.

Sales Tax Rules, 2006---

----R.14(3)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9(2)(a), 2(3) & 10---Complaint against delay in granting approval for filing of sales tax return---Jurisdiction, functions and powers of Federal Tax Ombudsman---Maladministration---Federal Tax Ombudsman disposed of complaint upon undertaking of Department to decide matter of application of complainant for filing of sales tax return, within a period of 30 days, under R. 14(3) of Sales Tax Rules, 2006.

Shehzadi Polypropylene Industries v. Federation of Pakistan and others W.P. No.5999 of 2017 distinguished.

Saleem Raza Asif, Advisor Dealing Officer.

Shahid Ahmad, Advisor Appraisal Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

2020 P T D 1300

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY, REVENUE DIVISION, ISLAMABAD : In the matter of

O.M. No.0059 of 2019, decided on 28th January, 2020.

Sales Tax Rules, 2006---

----R.11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Own motion complaint---Maladministration---Bogus sales tax refunds ---Misuse of SROs---Own motion complaint against maladministration committed by Department and its officials in field formations, in processing and sanctioning of bogus sales tax refunds---Federal Tax Ombudsman observed that failure to initiate actions against persons and officials involved in fake registration of registered persons and issuance of bogus refund via misuse of SROs was tantamount to maladministration---Federal Tax Ombudsman recommended to Department to investigate and identify such officials and take action against the same, as well as to recover tax evaded by misuse of SROs---Complaint was disposed of, accordingly.

Syed Ayaz Mahmood, Advisor Dealing Officer.

Shahid Ahmad, Advisor Appraisal Officer.

2020 P T D 1352

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY, REVENUE DIVISION, ISLAMABAD: In the matter of

O.M. No.0053 of 2019, decided on 28th January, 2020.

Sales Tax Rules, 2006----

----R.11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Own motion complaint---Maladministration---Bogus sales tax refunds---Own motion complaint against maladministration committed by Department and its officials in field formations, in processing and sanctioning of bogus sales tax refunds---Federal Tax Ombudsman observed that Department after detecting fraudulent activities and issuing letters of Red Alerts to field formations did not pursue the matter to fruition---Country-wide investigation against issuance of bogus refunds was carried out by Department, fake registered persons with connivance of staff of Department claimed in basis of fake and flying invoices refund ,causing loss to exchequer---Such failure of Department tantamount to maladministration---Federal Tax Ombudsman recommended Department to identify officials involved in registration of fake registered persons and initiate criminal/disciplinary action against the same, and furthermore initiate the proceedings to recover the swindled amounts---Complaint was disposed of, accordingly.

Syed Ayaz Mahmood, Advisor Dealing Officer.

Shahid Ahmad, Advisor Appraisal Officer.

2020 P T D 1388

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY REVENUE DIVISION, ISLAMABAD : In the matter of

O.M. No.0063 of 2019, decided on 11th February, 2020.

Sales Tax Act (VII of 1990)---

----S.21---Sales Tax Rules, 2006, R.11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman----Own motion complaint---Maladministration---Bogus sales tax refunds---Own motion complaint against maladministration committed by Department and its officials in field formations, in processing and sanctioning of bogus sales tax refund---Contention of Department, inter alia, was that after issuance of red alert, proceedings under S.21(2) of Sales Tax Act, 1990 were initiated and registration of taxpayer was suspended, and said taxpayer was backlisted---Validity---Matter was promptly attended to by Department upon receipt of red alert, therefore no case of maladministration could be attributed to Department---Complaint was closed, in circumstances.

Syed Ayaz Mahmood, Advisor Dealing Officer.

Shahid Ahmed, Advisor Appraisal Officer.

2020 P T D 1394

[Federal Tax Ombudsman]

Before Mushtaq Ahmad Sukhera, Federal Tax Ombudsman

The SECRETARY REVENUE DIVISION, ISLAMABAD : In the matter of

O.M. No.0045 of 2019, decided on 11th February, 2020.

Sales Tax Rules, 2006---

----R.11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.10, 9(1) & 2(3)---Jurisdiction, functions and powers of Federal Tax Ombudsman---Own motion complaint---Maladministration---Bogus sales tax refunds---Own motion complaint against maladministration committed by Department and its officials in field formations, in processing and sanctioning of bogus sales tax refunds---Federal Tax Ombudsman observed that registration of persons and issuance of refunds was not a simple task but required teamwork involving not only main beneficiaries but also connivers in the Department----Failure of Departmental officials in retrieving huge loss of revenue due to bogus sales tax refund and not initiating action against culprits was a case of gross maladministration---Federal Tax Ombudsman recommended to the Department to direct Chief Commissioner to identity and take actions against officials who failed to take action against tax evaded and who delayed suspension of registered persons and initiate criminal proceedings to recover evaded tax --- Complaint was disposed of, accordingly.

Syed Ayaz Mahmood, Advisor Dealing Officer.

Shahid Ahmad, Advisor Appraisal Officer.

2020 P T D 1217

[High Court (AJ&K)]

Before Muhammad Sheraz Kiani and Chaudhary Khalid Yousaf, JJ

Sheikh MUHAMMAD TUFAIL PROPRIETOR DATA CLOTH HOUSE SHAHEED CHOWK, KOTLI AZAD KASHMIR

Versus

The COMMISSIONER OF INCOME TAX AZAD JAMMU AND KASHMIR COUNCIL, MUZAFFARABAD (AZAD KASHMIR) and anothers

Reference/Tax Appeal No.365 of 2008, decided on 4th March, 2020.

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

----Ss.122, 120, 114 & 133---Amendment of assessment---Complete return filed under S.114 of the Income Tax Ordinance, 2001 to be taken as an assessment order---Filing of incomplete return---Scope---Question before High Court was whether after filing of return by taxpayer under S.114 of Income Tax Ordinance, 2001; could the Department after issuance of notice S.120(3) of the same, proceed to amend assessment of taxpayer---Held, that where tax return filed by taxpayer was incomplete, the same shall be treated as invalid and as having not been furnished and in such a case, Department was competent to issue notice under S.120(3) of Income Tax Ordinance, 2001, and after non-compliance of said notice, proceed to amend such assessment---Reference was answered, accordingly.

Sheikh Masood Iqbal for Applicant.

2020 P T D (Trib.) 54

[Inland Revenue Appellate Tribunal]

Before Justice (R) Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik, Technical Member

Messrs JSN TRADERS, HYDERABAD

Versus

ASSISTANT COMMISSIONER, SRB, KARACHI

Appeal No. AT-61 of 2018, decided on 22nd November, 2018.

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

----Ss. 3, 4 & 24B, Second Sched.---Supply chain management or distribution (including delivery) services---Taxable service---Economic activity---Compulsory registration---Scope---Appellant was engaged in providing taxable services of distribution of goods---Assessing officer passed order of compulsory registration under S. 24B of Sindh Sales Tax on Services Act, 2011 for the service falling under Tariff Heading 9845.0000 [Supply chain management or distribution (including delivery) services] of the Second Schedule and imposed penalty---Commissioner (Appeals) maintained the order of compulsory registration---Validity---Appellant under an agreement was appointed as a distributor to deliver the products of the manufacturer---Appellant could not exercise full control over the goods and was bound by the instructions of the manufacturer regarding sale, fixation of price and the area in which the goods were to be sold---Appellant, as distributor, used to acquire goods against cash consideration or credit for supplying to the whole-salers or retailers and in that way it supplied goods of its principal against fixed margin---Reading S. 3 of Sindh Sales Tax on Services Act, 2011 with Tariff Heading 9845.000 showed that the distribution including delivery service was a "taxable service"---Appeal was dismissed.

(b) Interpretation of documents---

----Whole document is to be read while construing an instrument and considering its scope and object---One was to look into the substance and not the form to determine the true purpose of the document.

Kamran Industries v. Collector of Customs PLD 1996 Kar 68 and Habib Insurance Limited v. Commissioner of Income Tax (Central), Karachi PLD 1985 SC 109 rel.

Asif Haroon, FCA, Uzair Memon, ACA and Ms. Motia Badruddin, ACA for Appellant.

S. Rizwan Ali, DC-SRB for Respondent.

2020 P T D (Trib.) 63

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Syed Ayaz Mahmood, Accountant Member

Messrs PAKISTAN RE-INSURANCE CO. LTD., KARACHI

Versus

The COMMISSIONER INLAND REVENUE, ZONE-III, LTU, KARACHI

I.T.A No.204/KB of 2016, decided on 15th August, 2018.

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

----Ss. 122(5A), 132 & Fourth Sched., R.6-B [as amended by Finance Act (XXIX of 2016)]---Reinsurance, income of---One basket income---Rate of tax---Taxpayer, an Insurance Company, was aggrieved of order passed by Commissioner Inland Revenue (Appeals) affirming order passed by Assistant Commissioner Inland Revenue---Validity---Amendment made in Fourth Schedule through Finance Act, 2016 was made, in which R. 6-B was substituted whereby besides capital on disposal of shares, dividend of listed companies, vouchers of Pakistan Telecommunication Corporation, Mudariba Certificates or instruments of redeemable capital and derivative products were made part of income of insurance companies to be taxed and same was expressed intention of Legislature---Legislature, by said amendment in the Fourth Schedule intended to tax dividend and capital gains received by insurance companies at corporate tax rate and such intention was not earlier manifested---Commissioner Inland Revenue (Appeals) erred in treating dividend income as well as rental income of taxpayer as business income chargeable at rate of 35% and his decision on such score was not sustainable in law---Appellate Tribunal Inland Revenue set aside orders passed by Commissioner Inland Revenue (Appeals)---Appeal was allowed in circumstances.

EFU General Insurance Company Limited's case 1997 PTD 1693; Muslim Insurance Co. Ltd.'s case 2002 PTD 577; Muslim Insurance Company Limited's case 2004 PTD 2707; Security General Insurance Company Limited's case 2017 PTD 495; 1993 PTD 766 = 1993 SCMR 1232; 2011 PTD 2042; 2016 PTD 910 and 2016 PTD 2695 rel.

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

----S. 2-F---Workers Welfare Fund, levy of---Principle---Corporation established by government with its majority shares owned by government is not liable to levy of Workers' Welfare Fund.

Pakistan Petroleum Limited (PPL)'s case 2009 PTD 662 and East Pakistan Chrome Tannery (Pvt.) Limited's case PLD 2017 SC 28 rel.

Atif Mufassir, FCA and Safdar Imam, ACMA for Appellant.

Abdul Salam, D.R. for Respondent.

2020 P T D (Trib.) 328

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Member and Wajid Akram, Accountant Member

Messrs HUMA TEXTILES, FAISALABAD

Versus

The CIR (A), RTO, FAISALABAD

S.T.A. No.451/LB of 2019, decided on 20th September, 2019.

Sales Tax Act (VII of 1990)---

----Ss. 25 & 30---SRO No. 1195(I)/90 dated 17-12-1990---Access to record, documents, etc---Appointment of officers---Jurisdiction of Auditor General of Pakistan---Scope---Audit of the registered person's refund was conducted by officers of Directorate General of Revenue Receipts Audit and it was alleged that the registered person had shown consumption of 34,828 kgs raw material i.e. yarn and fabrics in exports but actual weight of goods exported were 32,828 kgs as was evident from its commercial invoice and shipping bills meaning thereby, the registered person had shown excess consumption of 1,990 kgs and received excess refund of sales tax---Deputy Commissioner Inland Revenue adjudged liability of sales tax along with default surcharge and penalty vide order-in-original---Registered person being aggrieved by the said order filed appeal before Commissioner Inland Revenue (Appeals), who dismissed the appeal---Validity---Audit was conducted by the staff of Directorate General of Revenue Receipts Audit which was a branch of Auditor General of Pakistan and its officers were neither sales tax officers under S.30 of Sales Tax Act, 1990 nor they were authorized under Sales Tax Act, 1990 to have access to premises and accounts of any registered unit---Officers of Directorate General of Revenue Receipts Audit did not fall within the category of "officers" mentioned in S. 25 of Sales Tax Act, 1990---Staff of Directorate General of Revenue Receipts Audit was non-existent authority as far as private registered units were concerned and they could not have access to their books of accounts and other record under the Sales Tax Act, 1990---Perusal of SRO No. 1195(I)/90 dated 17-12-1990 revealed that the President of Pakistan had required the Auditor General of Pakistan to audit the receipt of Federal Government and not the record of the private enterprises/industrial units licensed/registered under the Sales Tax Act, 1990---Whole exercise conducted by the Department of Revenue Receipt Audit in the case was illegal and coram non judice---Charge of excess consumption was false and unfounded as the alleged wastage of fabrics was sold in the local market and due tax was also charged and paid in the national exchequer but due to bona fide mistake and error, the same was not accounted for in its documents filed at the time of filing refund claim---Appellate Tribunal set aside the impugned show cause notice and consequent orders of both the authorities below being illegal, unlawful and void ab initio---Appeal filed by registered person was accepted.

2007 PTD (Trib.) 1600; 2008 PTD (Trib.) 261; 2010 PTD 1355 and 2012 PTD (Trib.) 759 ref.

Khubaib Ahmad for Appellant.

M. Ali Taj, D.R. for Respondent.

2020 P T D (Trib.) 359

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar Chairman and Dr. Muhammad Naeem Accountant Member

Messrs BILAL STEEL MILLS (PVT.) LTD. LAHORE

Versus

The CIR, RTO, LAHORE

M.As. Nos.252/LB and 253/LB of 2019 in I.T.As. Nos.2010/LB and 2056 of 2016, decided on 21st March, 2019.

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

---- S. 65-D--- Newly established industrial undertaking--- Tax credit--- Object--- Spirit of S. 65-D of Income Tax Ordinance, 2001 is to give 100 (Percent) tax credit to new industrial undertaking so as to boost economy on one hand and encourage investment in country on the other.

2013 PTD 1883 rel.

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

---- Ss. 39(3), 65-D, 19 & 221 --- Tax credit--- Newly established industrial undertaking--- Rectification of mistake--- Fishing inquiries--- Taxpayer was a newly established industrial undertaking and was aggrieved of assessment erroneously made--- Validity--- Benefit under S. 65-D of Income Tax Ordinance, 2001 was available to taxpayer since he had submitted requisite record and documents which were necessary for availing 100 (percent) tax credit--- Fishing enquiries on basis of assumptions as resorted by authorities were neither warranted under the law nor conducive for boosting economy--- Appellate Tribunal Inland Revenue allowed facility under S. 65-D of Income Tax Ordinance, 2001 as requisite documents which were also furnished adequately fulfilled requirement of S. 65-D of Income Tax Ordinance, 2001 and were inadvertently not considered--- Appellate Tribunal Inland Revenue deleted additions made under Ss. 21(c) & 111 of Income Tax Ordinance, 2001 which were not properly considered and additions were made on assumption and presumption basis--- Orders were rectified accordingly.

1983 PTD 246; 2017 PTD 2227; 1998 PTD (Trib.) 3866 and 2000 PTD 2407 ref.

Tahir Mahmood for Applicant.

Attique-ur-Rehman, DR. for Respondent.

2020 P T D (Trib.) 403

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Dr. Muhammad Naeem, Accountant Member

RAJA M. RAHEEL

Versus

The COMMISSIONER INLAND REVENUE, REGIONAL TAX OFFICE, SIALKOT

I.T.A. No.488/IB of 2018, decided on 8th May, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 82, 111, 121, 122, 122-C, 129, 140 & 218--- Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income, between Government of Islamic Republic of Pakistan and Government of French Republic, Arts. 4(2) & 25--- Notification SRO No. 729 (I) / 96, dated 2-9-1996---Double taxation--- Non-resident--- Foreign national--- Appellant was foreign national filing his tax returns in France and he was aggrieved of attachment of Bank accounts by authorities in lieu of tax default on property purchased in Pakistan--- Validity--- Appellant was liable to be assessed in accordance with Art.4 of the Convention between Government of Islamic Republic of Pakistan and Government of French Republic for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income, vide SRO No. 729 (I) / 96 dated 02-09-1996--- Once it was established that center of vital interest was not Pakistan, S. 111 of Income Tax Ordinance, 2001 read with S.82 of the Ordinance, were thus superseded by and thus quashed by Art. 4 of Convention between Government of Islamic Republic of Pakistan and Government of French Republic for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income--- Provisions of Income Tax Ordinance, 2001 could not be invoked because Convention between Government of Islamic Republic of Pakistan and Government of French Republic for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income had an overriding effect on Income Tax Ordinance, 2001--- Appellant was filing his tax returns in France, in light of tax treaty between Pakistan and France, no action could be perpetuated in Pakistan by Pakistan tax authorities--- Appellant had center of vital interest in France by virtue of his personal and economic interests abroad--- Appellant who had his habitual abode abroad and his income was assessed in France, was absolved from Pakistan taxation and no provision of Income Tax Ordinance, 2001 was attracted as he did not have any plausible source of income that was deemed to have accrued to him--- Provisions of S.111 of Income Tax Ordinance, 2001 was applicable to residents of Pakistan only and could not be extended to appellant who was resident abroad and did not have taxable income in Pakistan--- Appellate Tribunal Inland Revenue deleted levy of tax under S.111 of Income Tax Ordinance, 2001 made by department--- Appellate Tribunal Inland Revenue directed authorities to return the amount to appellant which was extorted from his Bank accounts--- Appeal was allowed accordingly.

I.T.A. No. 57/IB/2015 dated 16.02.2015; I.T.A. No.1066/LB/2013 dated 15.08.2013; Phillip Baker Double Taxation Conventions 3rd Edition; Black v. R 16 ITLR 573; Yates v. Revenue and Customs Commissioners 15 ITLR 205; Garcia v. Canada 10 ITLR 179; Abdul Razzak A Meman v. CIT (International Taxation) 9 ITLR 139; Alchin v. R 7 ITLR 851; Podd v. Commissioner (1999) 1 I.T.L.R. 485; Indian Double Taxation Agreements and Tax Laws with OECD Commentaries on Articles of Model Tax Convention by D. P. Mittal (Sixth Edition), Paras 10.13 at page 1.406 and Landmark Book Double Taxation Treat by Philip Baker ref.

Tahir Razzaque Khan, FCA and Shaheer Bin Tahir for Appellant.

Tariq Iqbal, DR. for Respondent.

2020 P T D (Trib.) 465

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Dr. Muhammad Naeem, Accountant Member

Messrs HILAL CHEMICAL, LAHORE

Versus

COMMISSIONER INLAND REVENUE APPEAL-II, LAHORE

S.T.A. No.1249-LB of 2016, decided on 28th November, 2018.

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

----Ss. 2(37), 73, 3, 6, 7, 8(1)(d), 8A, 21, 22, 23, 26, 37, 38B, 34 & 33---Tax fraud---Blacklisting and suspension of registered person---Effect---Transactions to be made through Banking channel---Scope of sales tax---Time and manner of payment---Determination of sales tax liability---Tax credit not allowed---Joint and several liability of registered persons in supplying chain where tax unpaid---De-registration---Tax invoices---Power to summon persons or record---Obligation to produce documents and provide information---Imposition of penalty---Additional tax---Scope---Officer of Inland Revenue, during audit, came to know that appellant had claimed inadmissible input tax on account of fake/flying invoices issued by fraudsters (blacklisted persons)---Deputy Commissioner Inland Revenue, after issuance of show-cause notice, directed appellant to pay the input tax, it had claimed along with default surcharge and a penalty equal to 100 percent of the amount involved---Appeal filed by appellant before Commissioner Inland Revenue (Appeals) was dismissed---Validity---Appellant had duly complied with S. 73 of Sales Tax Act, 1990 for it had made payments through Bank---Input tax credit claimed against invoices issued by blacklisted persons could not be denied---Input tax was to be allowed if payments were made through Banking channel irrespective of the fact that the supplier's units were subsequently blacklisted or their registration was suspended---Second supplier of appellant was blacklisted on 3-7-2013 while the purchases were made in December 2010 and January 2011---Said business unit was active and operative at the time of purchases and registration was not suspended---Appellant could not be penalized if the supplier unit had committed tax fraud---Imposition of 100 percent penalty and default surcharge without first establishing that the appellant committed anything wrong or contravened any provision of law, knowingly and dishonestly, was declared to be patently illegal, harsh, unjustified and without any logic---Orders passed by the authorities below were annulled.

2001 SCMR 1161; 2002 PTD 976; 2014 PTD 558 and 2005 SCMR 492 ref.

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

---S. 2(37)---Tax fraud---Burden of proof---Legislative intention under S.2(37) of the Sales Tax Act, 1990 is not to opt for fishy or suppositional exercise and the initial burden lies on the department to show that an assessee knowingly, dishonestly or fraudulently and without any lawful excuse has done any act or has caused to be done or has omitted to take any action or has caused the omission in contravention of his duties or obligations imposed under the Sales Tax Act, 1990 or rules or instructions issued thereunder with the intention of underpaying the tax liability---Once such burden was discharged by the department only then the burden is shifted to the assessee to establish that the act done was without any knowledge on his part or without any intention of dishonesty or fraud and was not done without any lawful excuse.

2015 PTD 1490 and 2002 SCMR 134 ref.

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

----S. 21A---Active taxpayers list---Purpose---Federal Board of Revenue (FBR) is to be assumed as custodian and watch dog of all those who work under its umbrella---Section 21A Sales Tax Act, 1990 holds FBR responsible for maintaining the list of Active Taxpayers---Taxpayer is to transact its business once the supplier produces a copy of its status to be active in accordance with the scheme of law.

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

----Ss. 33 & 34---Imposition of penalty---Essential conditions---No penalty could be imposed without first establishing mens rea---Nature of penal provisions being quasi criminal, existence of mens rea is an essential and mandatory condition for levying penalty--- Department must establish mens rea before levying penalty.

2004 PTD 1048; 2007 PTD 901 and 2011 PTD 693 rel.

Shoaib Ahmed and Salman Ali Bhatti for Appellants.

Dr. Tanveer Hussain Bhatti, DR for Respondent.

2020 P T D (Trib.) 543

[Inland Revenue Appellate Tribunal]

Before Dr. Muhammad Naeem Accountant Member and Ch. Shahid Iqbal Dhillon, Judicial Member

Messrs AL-IKHLAS PACKAGES, FAISALABAD

Versus

THE CIR(A), RTO, FAISALABAD

S.T.A. No.312-LB of 2019, decided on 17th April, 2019.

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

----Ss. 11, 7, 8B & 73---Assessment of tax or recovery of tax not levied or short levied or erroneously refunded---Tax liability, determination of---Transactions not admissible---Scope---Adjustable input tax---Subsequent suspension of registration of supplier---Effect---Department, during audit proceedings, concluded that registered person had illegally adjusted inadmissible input tax against invoices issued by suspended unit---Validity---Registered person did hold valid sales tax invoices duly incorporated in supplier's sales tax return and summary statement for the relevant tax period---Subsequent suspension of registration did not disentitle the buyer from his lawful right of input tax in respect of invoices issued when the supplier was registered and active person unless, those invoices were specifically declared fake through speaking order and had direct nexus with the suspension---Invoices, in the present case, had no direct nexus with the subsequent suspension of registration of the supplier and registered person had also transacted all payments to his supplier through banking channel by complying with the mandatory provisions of S. 73, Sales Tax Act, 1990---Input tax could not be denied to the registered person merely for the reason that the supplier was subsequently suspended---Appeal was accepted, show cause notice and consequent orders of both the authorities below, being devoid of substance, were set aside.

Commissioner Inland Revenue v. Messrs Amtex Limited, Faisalabad 2016 PTD 1695 and Commissioner Inland Revenue v. Messrs Al-Zamin Textile Mills (Pvt.) Ltd., Faisalabad 2018 PTD 986 ref.

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

----S. 11---Assessment of tax or recovery of tax not levied or short levied or erroneously refunded---Issuance of show cause notice---Vague allegations---Non-specification of material particulars---Effect---Department conducted audit of registered person's sales tax records which resulted into certain discrepancies on the basis of which show cause notice was issued---Commissioner Inland Revenue (ACIR) passed sales tax order-in-original---Being dissatisfied and aggrieved by the said order registered person filed appeal before Commissioner Inland Revenue (Appeal) (CIR(A)), which was dismissed---Validity---Show cause notice was vague, defective and legally invalid as it did not contain the necessary particulars of the suppliers and details of invoices, etc, nor was the detail of the transactions confronted therefore, show-cause notice failed to meet the foundational legal requirements---Non-specification of material particulars vitiated the whole proceedings---Authority had to state and disclose in the show-cause notice the purpose for which the party was required to produce the documents or to supply information for proving the genuineness of the transactions and unless, such purpose was specified in the notice, it would be a matter of anybody's guess and the accused party would be put into dragging inquiry without any specific particulars of the allegation or facts disclosed to him---Even in cases of suspicion of commission of illegality, details had to be provided to the party to enable him to have an opportunity to produce all the relevant documents and disclose information---All charges upon the registered person had to be imposed by clear and unambiguous words---No room for any intentment existed nor was there any equity or presumption as to a tax---Appeal was accepted, show cause notice and consequent orders of both the authorities below, being devoid of substance, were set aside.

Assistant Director Intelligence and Investigation, Karachi v. Messrs B.R. Herman and others PLD 1992 SC 485 ref.

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

----S. 3---Sales tax---Scope---Tax on sales cannot be imposed and levied without establishing, clandestine removal of goods and receipt of money consideration in its respect---Without building said relationship, no tax can be assessed and recovered thereon.

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

----S. 7A---Levy and collection of tax on specified goods on value addition---Scope---Allegation against the registered person was that he had declared value addition @ 8% which was on much lower side when compared with the other units engaged in the same business---Validity---Neither the goods in question were notified by the Federal Government under S. 7A, Sales Tax Act, 1990 for levy and collection of tax on the basis of value addition nor the registered person had been charged with the violation of any provisions of S. 7A, Sales Tax Act, 1990 in the impugned show cause notice and consequent orders without which, the question of low or nil value addition had no legal force---No benchmark for the value addition was ever specified by the Federal Government hence, recovery of sales tax on the basis of value addition was illegal and without lawful jurisdiction---Appeal was accepted, show-cause notice and consequent orders of both the authorities below, being devoid of substance, were set aside.

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

----S. 7A---Levy and collection of tax on specified goods on value addition---Scope---No provision in the Sales Tax Act, 1990 empowers the revenue authorities to fix value addition---No addition can be made in the value merely on the basis of estimates and presumptions or even by comparing sales and profitability of a registered person over its years of business as it is not a divine factum that a business always earns profit without embracing any loss.

Khubaib Ahmad for Petitioner.

Mrs. Bushra Jaffar, (DR) for Respondent.

2020 P T D (Trib.) 562

[Inland Revenue Appellate Tribunal]

Before Ch. Shahid Iqbal Dhillon, Judicial Members and Dr. Muhammad Naeem Accountant Member

Messrs FAMOUS SWEETS, FAISALABAD

Versus

THE CIR(A), RTO, FAISALABAD

S.T.A. No.526/LB of 2019, decided on 13th May, 2019.

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

----Ss. 26, 23, 2(40), 3 & 25---Sales Tax Rules, 2006, R. 6---Tax invoice---Scope of sales tax---Compulsory registration---Non-filing of sales tax return by unregistered person---Audit of unregistered person---Effect---Department, during scrutiny of income tax returns of taxpayer, observed certain discrepancies and issued a show cause notice to the taxpayer confronting sales tax liability along with default surcharge and penalty---Validity---Taxpayer was registered as a manufacturer with the department in the year 1993 and it was deregistered by the department in the year 2004 as its supplies and utility bills were below the basic threshold---Taxpayer was a non-registered person, therefore, it was not required to observe the provisions of Sales Tax Act, 1990---Term 'tax invoice' had been defined in S 2(40) of the Sales Tax Act, 1990, which stated that 'tax invoice' meant a document required to be issued under S. 23 and sales tax invoice could be issued under S. 23 of Sales Tax Act, 1990 by the specified persons only and its subsection (2) in unequivocal terms forbade that "no person other than a registered person" or a person paying retail tax could issue an invoice hence, a person not registered under the Sales Tax Act, 1990 could not issue a sales tax invoice---Section 26 of Sales Tax Act, 1990 required every 'registered person' to furnish a true and correct return within the due date, thus, an un-registered person or a person liable to be registered could not file its return, since no procedure was provided for an unregistered person to file its return and to collect tax from the recipient, without issuance of sales tax invoice---Under the provisions of Sales Tax Act, 1990 and the Sales Tax Rules, 2006, only a registered person having sales tax registration number, ID, Pin code and password, could file sales tax returns and without sales tax registration number, a person liable to be registered could not file sales tax return, charge, levy and pay sales tax or be subjected to audit under S.25 of the Act hence, imposition of sales tax by the department without first assigning sales tax registration number did not find any support from R. 6 which explained and laid down the procedure for carrying out the spirit of Sales Tax Act, 1990---Where a person did not register himself voluntarily, it became the 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---Where a person was liable to be registered, departmental authorities were first required to register that person compulsorily or otherwise in accordance with law and then charge sales tax from him under S. 3(1)(a) of the Sales Tax Act, 1990, which stipulated that there would be charged, levied, or paid a tax known as sales tax at the rate of seventeen percent of the value of the taxable supplies made by a registered person in the course or furtherance of any taxable activity carried on by him---Appellate Tribunal set aside the impugned show-cause notice and consequent orders of both the authorities below being illegal, unlawful and void ab initio---Appeal was accepted.

Commissioner Inland Revenue, Gujranwala v. Messrs S.K. Steel Casting, Gujranwala 2019 PTD 1493 rel.

(b) Taxation---

----Scope---Tax cannot be charged and levied unless it falls squarely within the purview of the charging provisions.

(c) Interpretation of statutes---

----Taxing statute---Scope---Only the letter of law, in fiscal statutes, has to be looked into and there is no room for any intendment, equity or presumption---Fiscal statutes were to be strictly constructed, as far as liability to tax is concerned.

Messrs Avari Hotel Limited v. Collector Sales Tax and 3 others 2000 PTD 3765 ref.

(d) Taxation

----Person was to be taxed only if he comes within the letter of law otherwise, he is free even though his case falls within the spirit of the law.

Khubaib Ahmad for Appellant.

Ashfaq Ahmad, D.R. for Respondent.

2020 P T D (Trib.) 585

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Dr. Muhammad Naeeem, Account Member

Messrs ISLAM SOAP INDUSTRIES (PVT.) LTD. SIALKOT

Versus

THE CIR, ZONE-IV, LTU, LAHORE

STA No.1058/LB of 2018, decided on 11th December, 2018.

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

----Ss. 11(2) & 38---Constitution of Pakistan, Art. 13---Difference in stocks---Recovery of sales tax---Issuance of second show-cause notice---Double jeopardy---Double taxation---Autre fois acquit and autre fois convict, principle of---Scope---Assessing Authority, on physical stock taking of registered person under S.38 of Sales Tax Act, 1990, observed considerable difference between declared closing stocks and physical closing stocks of finished goods---Assessing Authority held that difference of stocks was sold out by the registered person without payment of sales tax---Validity---Commissioner Inland Revenue passed impugned order on the basis of stock taking carried out on 11-12-2017 under S. 38 and passed the impugned order pertaining to the tax periods starting from April 2015 to October 2017, whereas the department in earlier proceedings initiated under S. 38 had passed an order on 6-3-2017 wherein sales tax amount of Rs. 5,530,183 was adjudged as payable by the appellant---Issuance of second show-cause notice regarding the same tax periods was imposition of double taxation and double jeopardy which could not be given legal credence---Second show-cause notice offended the Fundamental Right set out in Art. 13 of the Constitution which provided that no person shall be prosecuted or punished for the same offence more than once---Doctrine of double jeopardy corresponded to the principle of "autre fois acquit and autre fois convict" which prohibited a duplicate trial and a duplicate punishment for the same offence---Re-agitating of the same issue by the tax functionaries was against the principles of administration of justice and fair play---Appellate Tribunal observed that in the presence of earlier order, another order of the adjudicating authority could not hold the field for the simple reason that two contrary orders could not exist at one and the same time---Appellate Tribunal declared the subsequent proceedings initiated with issuance of second show-cause notice and adjudication thereon to be patently illegal, null and void ab initio having no legal effect.

(b) Constitution of Pakistan---

----Art. 13---Double jeopardy---Person cannot be vexed twice for the same matter.

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

----Ss. 3(1A), 6, 7, 8, 22, 23, 26, 11 & 38---Difference in stocks--- Taxable supplies made to unregistered person---Time and manner of payment of sales tax---Determination of sales tax liability---Tax credit not allowed---Record---Sales tax invoices--- Sales Tax Return---Assessment and recovery of sales tax--- Assessing Authority, on physical stock taking of registered person under S. 38 of Sales Tax Act, 1990, observed considerable difference between declared closing stocks and physical closing stocks of finished goods---Assessing Authority presumed that appellant did not declare complete sales of stock in his sales tax returns---Calculation was made on the basis of work in progress, stock taking report dated 31-12-2016 and 11-12-2017---Validity---Impugned tax demand was created for the tax periods relevant to months of April 2015 to October 2017 on the basis of stock taking carried out on 11-12-2017---Each tax period was an independant period and had to be treated as a separate unit---Stock taking carried out of a particular tax period for estimation of sales/supplies was relevant only for the said tax period and it could not be made basis for earlier or subsequent tax periods---Whole estimation of alleged concealed supplies was made on the basis of presumption and there was no room for presumption in the sales tax law---Inference drawn by the department from one tax period to other tax periods was mere assumption that the sales would have been suppressed in other tax periods---In the absence of any deeming provision, the department was required to establish that transaction fell within the parameters of taxable supplies or in furtherance of any taxable activity---Exercise carried out to impose the impugned tax was not sustainable in the eyes of law---Appeal filed by taxpayer was accepted; impugned show-cause notice and consequent order was set aside being illegal and void ab initio.

2004 PTD 868 ref.

(d) Interpretation of statutes---

----Taxation---Presumption---Taxpayer can only be subjected to tax under unambiguous and clear provision of law---No room for intentment and no presumption as to tax.

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

----Ss. 38 & 25---Authorized officers to have access to premises, stocks, accounts and records---Audit of record---Scope---No provision existed for conducting an audit of a taxpayer in S. 38, Sales Tax Act, 1990---Officer of Inland Revenue empowered by Federal Board of Revenue or Commissioner could have free access to the premises, stocks, accounts and records to examine and take into custody such records to inquire and investigate cases of tax fraud---Conducting of audit and scrutiny of seized record could only be made in a way and procedure given under S. 25, Sales Tax Act, 1990---Section 38 alone could not be used to conduct audit of a taxpayer without its counterpart provision as given in subsection (2) of S. 25 of Sales Tax Act, 1990.

Muhammad Imran Rashid for Appellant.

Naveed Akhtar, DR for Respondent.

2020 P T D (Trib.) 614

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Dr. Muhammad Naeem, Accountant Member

Messrs ISLAM SOAP INDUSTRIES, SHAHKOT

Versus

The COMMISSIONER INLAND REVENUE, LTU, LAHORE

S.T.A. No.959/LB of 2018, decided on 1st February, 2019.

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

----Ss. 3, 25, 38, 45-B, 72-B & 73--- Exclusion of Audit Policy, 2015, Part-6, Para. 6.3(e)--- Notification S.R.O. No. 648(I)/2013 dated 09-07-2013--- Second appeal--- Tax assessment--- Second/Duplicate audit--- Supplies to end-consumers--- Double jeopardy--- Effect--- Taxpayer was a registered person who was audited by tax authorities and was imposed surcharge and penalty on account of discrepancies against which taxpayer filed appeal before Commissioner Inland Revenue (Appeals) who remanded matter to the assessing authority--- Taxpayer filed second appeal on grounds that Commissioner Inland Revenue (Appeals) could not remand matter and that entire assessment proceedings were presumptive because he was already audited before--- Validity--- Audit for alleged tax periods had already been carried out by department, subsequent audit carried out by department under S.72-B of Sales Tax Act, 1990 and consequential assessment order passed was not sustainable being sheer violation of Federal Board of Revenue on instructions contained in Exclusion of Audit Policy, 2015---Sales made to end-consumers were excluded and exempted for purpose of levy of further tax in terms of Notification SRO No. 648(I)/2013 dated 09-07-2013 issued under first Proviso to S.3(1A) of Sales Tax Act, 1990 therefore, no further tax was payable by taxpayer against supplies made to end-consumers---Detecting agency had raised exorbitant demand of sales tax merely on assumptions and presumptions without tangible basis and failed to provide documentary or any other corroborating evidence regarding physical delivery of goods, receipt of any consideration of money and more so, existence of any buyer without no supply could be effected under S.3 of Sales Tax Act, 1990---Appellate Tribunal Inland Revenue declared that case was totally based on hypothetical calculations without any solid proof which established beyond shadow of doubt that liability of sales tax was based on figures and calculations, which were imaginary and presumptive, without any logical and legal basis and no tax could be levied on basis of presumption and assumption--- Sales tax imposed on presumption or presumption not warranted in law was to be struck down--- Appellate Tribunal Inland Revenue cancelled show-cause notice and consequent orders by two authorities below as same were illegal, void ab initio and without jurisdiction---Appeal was allowed accordingly.

2017 PTD 846; 2018 PTD 1436; 2004 PTD 868; 2017 PTD 373; 2015 PTD 931; 2017 PTD 686; Commissioner Inland Revenue v. Messrs Chawala Enterprises, Faisalabad S.T.R. No. 207/2016, decided on 16-10-2018 and 2011 PTD (Trib.) 2679 ref.

2001 PTD 2982 rel.

(b) Interpretation of statutes---

----Ejusdem Generis, principle of--- Connotation--- Principle of Ejusdem Generis provides that words and phrases occurring in a provision of law are not to be taken in an isolated and detached manner, disassociated from context but these are to be read together and construed in light of overall context of provision of law.

Muhammad Imran Rashid for Appellant.

Muhammad Suleman, DR (LTU) for Respondent.

2020 P T D (Trib.) 648

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Dr. Muhammad Naeem Accountant Member

Messrs GENERATION (PVT.) LTD., LAHORE

Versus

The CIR, LTU, LAHORE

S.T.A. No.965/LB of 2018, decided on 28th November, 2018.

Sales Tax Act (VII of 1990)---

----Ss. 3(9A) & 2(43A)---Scope of sales tax---Tier-1 retailers---Option to pay sales tax under the turnover regime---Scope---Taxpayer as per provisions of S. 3(9A) of Sales Tax Act, 1990 applied to the Commissioner Inland Revenue, Large Taxpayers Unit for exercising its option to pay sales tax at the rate of 2% under the turnover regime on its total sales---Request of taxpayer was declined by Commissioner on the ground that first proviso to subsection (9A) of S. 3 of Sales Tax Act, 1990 barred taxpayer to exercise the option under turnover regime---Validity---Taxpayer fell within the second proviso to subsection (9A) of S.3 of Sales Tax Act, 1990 and was entitled to exercise the option of payment of 2% sales tax on turnover basis---Taxpayer was a Tier-1 retailer having multiple sale outlets in air-conditioned malls in various cities and had rightly exercised its option as per the third proviso to S. 3(9A), Sales Tax Act, 1990---Appeal was accepted and taxpayer was held entitled to pay sales tax on turnover basis.

Muhammad Iqbal Hashmi for Appellant.

Naveed Akhtar, DR for Respondent.

2020 P T D (Trib.) 666

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and

Dr. Muhammad Naeem, Accountant Member

Messrs ISLAM SOAP INDUSTRIES (PVT.) LTD. SIALKOT

Versus

THE CIR, LTU, LAHORE

S.T.A. No. 991/LB of 2018, decided on 13th May, 2019.

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

----Ss. 38, 25 & 11---Authorized officer to have access to premises, stocks, accounts and records---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Scope---Directorate General of Intelligence and Investigation, during the course of raid/investigation, allegedly compelled the appellant to deposit sales tax demand---Assessing authority, after lapse of two years, issued show-cause notice and held that the sales tax recovered during the raid stood adjusted against the appellant's liability as mentioned in investigation audit report---Commissioner Inland Revenue (Appeals) dismissed the appeal being infructuous for the reason that the evasion of sales tax was admitted by the appellant during the course of raid/investigation---Validity---Department had defrauded the whole scheme of law and had recovered the alleged sales tax demand before adopting the procedure as laid down under S. 11 of Sales Tax Act, 1990---Issuance of show-cause notice under S. 11, Sales Tax Act, 1990 was a precondition for the determination of tax liability and a legal mechanism which could not be put at naught---Sales tax was recovered merely on the basis of opinion of raiding/investigating party and that too during the course of investigation---Audit investigation report was issued/signed on 10-09-2015 and it was duly mentioned in the investigation audit report that the appellant had deposited the due sales tax on 03-09-2015 and 09-09-2015---Investigation report revealed that even the audit team prior to completion of audit report had recovered the alleged due sales tax---Appellate Tribunal held that the present case was merely of extortion of money without adhering to the due process of law---Appeal was accepted and the impugned recovery of sales tax was declared to be illegal and without jurisdiction.

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

----Ss. 38, 40 & 11---Criminal Procedure Code (V of 1898), S. 103---Authorized Officer to have access to premises, stocks, accounts and records---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Searches under warrant---Search to be made in presence of witnesses---Scope---Directorate General of Intelligence and Investigation, during the course of raid/investigation, allegedly compelled the appellant to deposit sales tax demand---Assessing authority, after lapse of two years issued show-cause notice and held that the sales tax recovered during the raid stood adjusted against the appellant's liability as mentioned in investigation audit report---Commissioner Inland Revenue (Appeals) dismissed the appeal being infructuous for the reason that the evasion of sales tax was admitted by the appellant during the course of raid/investigation---Validity---Prior notice was not served before the raid was conducted under S. 38(1) of Sales Tax Act, 1990 to establish the fact that the person who was alleged to have concealed his sales or due tax, failed to produce record through ordinary process---Section 38 of Sales Tax Act, 1990 gave way for coercive search if the compliance to the provisions of S. 38 were not made---Department failed to establish reasonable belief for the search, therefore, the same was premature and against the mandatory provisions of law---Use of word "shall" in subsection (2) of S. 40 of Sales Tax Act, 1990, made the procedure contained in Criminal Procedure Code, 1898 as mandatory---Provisions of S. 103, Cr.P.C. required that search had to be conducted in the presence of two or more respectable inhabitants of the locality which was not done---Department had not conducted raid in a lawful manner---Appellate Tribunal accepted the appeal and declared the impugned recovery of sales tax to be illegal and without jurisdiction.

Collector of Sales Tax v. Messrs Food Consultants (Pvt.) Ltd. and Messrs Diplex Beauty Clinic and others 2007 PTD 2356 and PLD 1996 SC 574 rel.

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

----S. 11---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Scope---Sales tax is premised on a self-assessment paradigm, where the sales tax due is self-assessed by a taxpayer and deposited along with the monthly sales tax return---Supervision and monitoring of the self-assessment regime is through the process of audit provided under Ss. 25, 38 & 72B of the Sales Tax Act, 1990---Where the taxpayer is selected through audit and the department is of the view that the taxpayer has an outstanding tax liability the case undergoes assessment of tax through the process of adjudication under S. 11 of Sales Tax Act, 1990---Self-assessed amount of tax due by the taxpayer in its sales tax return can only be altered through audit---Section 11 provides for assessment of tax where a taxpayer fails to file a return, or pays an amount which is less than the amount of tax due or has made short payment or has claimed an input tax credit or refund which is not admissible---Section 11 further provides that where by reason of collusion or deliberate act any tax has not been levied or has been short levied or has been erroneously refunded, or by reason of inadvertence, error or misconstruction any tax has not been levied or short levied or has been erroneously refunded, the Officer of Inland Revenue passes an assessment order along with penalty and default surcharge---Section 11 is the only provision under the Sales Tax Act, 1990 which provides for assessment of tax through adjudication in case the self-assessed tax of the taxpayer, according to the department, is unpaid or short paid for the said reasons.

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

----S. 11---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Scope---Issuance of show-cause notice under S. 11, Sales Tax Act, 1990 is a precondition for determination of tax liability and a legal mechanism which cannot be put at naught.

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

----S. 11---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Scope---Recovery of tax from a taxpayer, without due process of adjudication of the case cannot be equated with confession or admission of the charge---Coercive recovery from the taxpayer under the threat of suspension of registration/detention of its directors, without final determination of liability is illegal, without lawful authority and amounts to punishment without due process of law.

Messrs G.M.H. Traders v. The Deputy Director, Directorate of Intelligence, Lahore 2009 PTD 1894 and Messrs Ashraf Steel Mills v. The Director Intelligence and others 2014 PTD 1506 ref.

Messrs Taj International (Pvt.) Ltd. and others v. The Federal Board of Revenue and others 2014 PTD 1807 and Muhammad Afzal Shaheen v. Federation of Pakistan and others 2014 PTD 1919 rel.

(f) Administration of justice---

----If a thing is required to be done in a particular manner, the same has to be done in that manner---If the same is not done in the manner required under the law, any superstructure built thereon is required to be abolished.

2006 SCMR 129 rel.

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

----S. 2(37)---Tax fraud---Burden of proof---Scope---Initial burden, in order to attract the provisions of S. 2(37), Sales Tax Act, 1990, lies on the department to show that the registered person, knowingly, dishonestly or fraudulently and without any lawful excuse has done any act or caused any act to be done or has omitted to take any action or has caused the omission to take any action in contravention of duties or obligations imposed under the Sales Tax Act, 1990 or rules or instructions issued thereunder with the intention to understate the tax liability or underpay the tax.

2015 PTD 2256 rel.

Zahoor Nasir Tibba for Appellant.

Bilal Qasim, DR (LTU) for Respondent.

2020 P T D (Trib.) 698

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Dr. Muhammad Naeem, Accountant Member

MUHAMMAD HANIF

Versus

THE CIR, RTO, LAHORE

I.T.As. Nos. 3463/LB to 3467/LB of 2019, decided on 27th November, 2019.

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

----S. 221---Rectification of mistake---Limitation---Scope---Taxpayer filed normal returns for the tax year 2013 which was deemed to have been assessed under S. 120(1), Income Tax Ordinance, 2001---Assessing authority observed that the taxpayer was engaged in the business of supply of medicines, therefore, normal return was illegal and unlawful as the taxpayer was under legal obligation to file statement under S. 115(4) of Income Tax Ordinance, 2001---Show-cause notice was issued confronting the taxpayer with proposed rectification, in response to which the taxpayer filed reply which was found unsatisfactory by the assessing authority---Assessment was amended by creating demand for the tax years 2013---Taxpayer, being aggrieved, filed appeal before the Commissioner Inland Revenue (Appeals), who vide impugned order rejected the appeal of the taxpayer---Validity---Initiation and subsequent conclusion of proceedings under S. 221 of Income Tax Ordinance, 2001 on 15-02-2019 to rectify the deemed assessment order for the tax year 2013 on 15-12-2013 was not sustainable in the eyes of law being barred by time limitation as provided under subsection (4) of S. 221, Income Tax Ordinance, 2001---Order passed by assessing authority and Commissioner (Appeals) were consequently vacated---Appeal was disposed of accordingly.

2016 PTD 2579; 1992 PTD 570; Commissioner of Income Tax v. Abdul Ghani 2007 PTD 967; Commissioner of Income Tax, Karachi v. Shadman Cotton Mills Ltd., 2008 PTD 253; 2013 PTD 508; 2017 PTD 903; 2016 PTD 270; 2017 PTD 547; 2014 PTD 484; 2017 PTD 1785; 2018 PTD 1480; 1993 SCMR 1108; PLD 1997 SC 700 and Commissioner of Income Tax v. National Food Lab. 1992 SCMR 687 ref.

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

----Ss. 115(4), 153, 221 & 122---Persons not required to furnish a return of income---Payment for goods, services or contracts by prescribed persons---Rectification of mistake---Amendment of assessment---Mistake apparent on record---Definite information---Sales falling under normal tax regime or final tax regime---Debatable issue---Scope---Taxpayer filed normal returns for the tax years 2013 to 2017 which were deemed to have been assessed under S. 120(1), Income Tax Ordinance, 2001---Assessing authority observed that the taxpayer was engaged in the business of supply of medicine, therefore, normal returns were illegal and unlawful as the taxpayer was under legal obligation to file statement under S. 115(4) of Income Tax Ordinance, 2001---Show-cause notices were issued confronting the taxpayer with proposed rectification, in response to which the taxpayer filed reply which was found unsatisfactory by the assessing authority---Assessments were amended by creating demands for the tax years 2013 to 2017---Taxpayer, being aggrieved, filed appeal before the Commissioner Inland Revenue (Appeals), who vide impugned order rejected the appeals of the taxpayer---Validity---Section 221 of Income Tax Ordinance, 2001 left no room for doubt that only those mistakes were rectifiable which were apparent from the record and floating on the surface and which did not require any long drawn process of reasoning, deliberation on a moot or debatable point---Question, whether the receipts declared by the taxpayer fully or partly fell under the ambit of Final Tax Regime (FTR) or normal tax regime was a debatable issue between the department and the taxpayer, which was outside the scope of rectification provisions as contained in S. 221, Income Tax Ordinance, 2001---If at all assessing authority deemed it necessary to make alteration or addition to the deemed assessments completed, then such exercise was required to be done by invoking powers under S. 122 of Income Tax Ordinance, 2001 with existence of definite information and the invoking of the powers under S.221, Income Tax Ordinance, 2001 was outside the authority of the assessing officer, hence, not sustainable in the eyes of law---Orders passed by assessing authority and those passed by Commissioner (Appeals) were consequently vacated---Appeals were disposed of accordingly.

2016 PTD 2579; 1992 PTD 570; Commissioner of Income Tax v. Abdul Ghani 2007 PTD 967; Commissioner of Income Tax, Karachi v. Shadman Cotton Mills Ltd., 2008 PTD 253; 2013 PTD 508; 2017 PTD 903; 2016 PTD 270; 2017 PTD 547; 2014 PTD 484; 2017 PTD 1785; 2018 PTD 1480; 1993 SCMR 1108; PLD 1997 SC 700 and Commissioner of Income Tax v. National Food Lab. 1992 SCMR 687 ref.

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

----Ss. 115(4), 153 & 122---Persons not required to furnish a return of income---Payment for goods, services or contracts by prescribed persons---Amendment of assessments---Non-availability of definite information---Effect---Taxpayer filed normal returns for the tax years 2013 to 2017 which were deemed to have been assessed under S.120(1), Income Tax Ordinance, 2001---Assessing authority observed that the taxpayer was engaged in the business of supply of medicines, therefore, normal returns were illegal and unlawful as the taxpayer was under legal obligation to file statement under S.115(4) of Income Tax Ordinance, 2001---Show-cause notices were issued confronting the taxpayer with proposed rectification, in response to which the taxpayer filed reply which was found unsatisfactory by the assessing authority---Assessments were amended by creating demands for the tax years 2013 to 2017---Taxpayer, being aggrieved, filed appeal before the Commissioner Inland Revenue (Appeals), who vide impugned order rejected the appeals of the taxpayer---Validity---Taxpayer himself had declared income under normal tax regime as well as under final tax regime which stood subjected to withholding provisions of 153(1)(a) of Income Tax Ordinance, 2001---Assessing authority without any basis presumed that all the sales declared under normal tax regime also fell under final tax regime without pointing out any instance to support such an assumption---Order of assessing authority was silent as to how he had presumed that all sales were made to the "prescribed person" as defined in S. 153(7) of Income Tax Ordinance, 2001---Assessing authority had not given even a single instance of any sale out of sales subject to normal tax regime to draw any adverse inference with regard to the declaration made by the taxpayer---Assessing authority had failed to point out any of the customers of the taxpayer who was found to be the "prescribed person" as per S.153(7) of Income Tax Ordinance, 2001---Invoking the provisions of S.122(5) without any material "definite information" was not justified---Orders passed by assessing authority and those passed by Commissioner (Appeals) were also consequently vacated---Appeals were disposed of accordingly.

2016 PTD 2579; 1992 PTD 570; Commissioner of Income Tax v. Abdul Ghani 2007 PTD 967; Commissioner of Income Tax, Karachi v. Shadman Cotton Mills Ltd., 2008 PTD 253; 2013 PTD 508; 2017 PTD 903; 2016 PTD 270; 2017 PTD 547; 2014 PTD 484; 2017 PTD 1785; 2018 PTD 1480; 1993 SCMR 1108; PLD 1997 SC 700 and Commissioner of Income Tax v. National Food Lab. 1992 SCMR 687 ref.

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

----S.221---Rectification of mistake---Error apparent from the record---Debatable issue---Scope---Application of S. 221, Income Tax Ordinance, 2001 is only permissible if the error is apparent, obvious and floating on the face of the judgment and can be rectified without long drawn arguments and proceedings for appreciating facts and interpretation or application of any provision of law---Mistake had to be so obvious that it should strike to one's mind without there being long drawn process of reasoning, interpretation of some sections/statute, dilation upon a moot or debatable issue which falls squarely outside the scope of rectification of mistake.

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

----S. 221---Rectification of mistake---Scope---Cases where there can conceivably be two views or opinions fall outside the scope and ambit of rectification of mistake.

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

----S.221---Rectification of mistake---Limitation---Scope---No order under S. 221, Income Tax Ordinance, 2001 shall be made after five years from the date of the order sought to be rectified.

Suhail Mutee Babri, ITP for Appellant.

Talat Mahmood, DR for Respondent.

2020 P T D (Trib.) 733

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Dr. Muhammad Naeem, Accountant Member

MUSHARAF GULZAR and others

Versus

COMMISSIONER IR, RTO, RAWALPINDI and others

I.T.As. Nos.1752/IB to 1754/IB of 2017, M.A. (Rect.) No. 03/IB of 2017 in I.T.As. Nos.1836/IB, 1078/IB of 2017, M.A. (Rect.) No. 04/IB of 2017 in I.T.As. Nos.1837/IB, 1071/IB of 2017, M.A. (Rect.) No.05/IB of 2017 in I.T.As. Nos.1838/IB and 1072/IB of 2017, decided on 6th May, 2019.

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

----S.111(1)(b)---Qanun-e-Shahadat (10 of 1984), Art. 117---Documents in custody--- Burden of proof---Penalty, imposition of---Taxpayer was aggrieved of confirmation of additions to value of property as well as foreign remittances made by the authorities---Validity---Stance of taxpayer was not properly adjudicated as required under law---Contention of taxpayer that all records were in custody of department was found correct as Commissioner (IR) had directed the department to rerun back impounded records---Commission while adjudicating issue of submission of evidence regarding payments of investors against purchase of plot in question had observed that taxpayer failed to submit evidence---Appellate Tribunal Inland Revenue remanded the case back to Deputy Commissioner Inland Revenue to return whole records of taxpayer and allow revision of tax return and directed the authorities to allow taxpayer ample opportunity of hearing and pass fresh order if so required after verification of all documents relating to purchase of plot in question and investment of investors which was source of purchase of plot in question---Appeal was allowed accordingly.

(b) Administration of justice---

----Principle of consistency---Object, purpose and scope---Object of principle of consistency is to maintain uniformity and consistency of views/decisions in different Benches of Court/Tribunal and is aimed at to foster, develop and channelize system of justice to an extent sufficient enough for general public to repose its firm confidence in same---Principles of consistency and certainty occupy a very prominent position in law of precedent which has to be adhered to in order to maintain discipline in administration of justice.

Syed Tauqeer Bukhari, Syed Tanseer Bukhari and Syed Muhammad Abbas for Appellants (in I.T.As. Nos.1752/IB to 1754/IB of 2017).

Zaheer Qureshi, D.R. for Respondents (in I.T.As. Nos.1752/IB to 1754/IB of 2017).

Zaheer Qureshi, D.T. for Appellants (in M.A. (Rect.) No.03/IB of 2017 in I.T.As. Nos.1836/IB, 1078/IB of 2017, M.A. (Rect.) No.04/IB of 2017 in I.T.As. Nos.1837/IB, 1071/IB of 2017, M.A. (Rect.) No.05/IB of 2017 in I.T.As. Nos.1838/IB and 1072/IB of 2017).

Syed Tauqeer Bukhari, Syed Tanseer Bukhari and Syed Muhammad Abbas for Respondents (in M.A. (Rect.) No. 03/IB of 2017 in I.T.As. Nos.1836/IB, 1078/IB of 2017, M.A. (Rect.) No. 04/IB of 2017 in I.T.As. Nos.1837/IB, 1071/IB of 2017 in I.T.As. Nos. 05/IB of 2017 in I.T.As. Nos.1838/IB and 1072/IB of 2017).

2020 P T D (Trib.) 836

[Inland Revenue Appellate Tribunal]

Before Justice (R) Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik, Technical Member

ASSISTANT COMMISSIONER, SRB, KARACHI

Versus

Messrs MOHSIN MEHMOOD (MANZOOR AHMAD)

Appeal No.AT-113 of 2018, decided on 17th May, 2019.

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

----First & Second Schedule, Tariff Heading 9809.0000--- General Heading--- Object, purpose and scope--- Tariff Heading 9809.0000 is a general Heading to cover contractual execution of work or furnishing supplies not falling in any other tariff heading---Benefit under tariff Heading 9809.0000 can only be taken if service provided or rendered is not listed in First or Second Schedule to Sindh Sales Tax on Services Act, 2011 and provided under contractual execution of work or furnishing supplies--- Tariff Heading 9809.0000 has two components, i.e., providing or rendering execution of work or furnishing supplies--- To attract Tariff Heading 9809.0000 it is necessary that both components are available in contract or agreement.

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

----Ss. 2(49), 23, 43, 44 & Second Schedule, Tariff Headings 9809.0000 & 9824.0000---Tax exemption---Service category, determination of---Taxpayers were aggrieved of penalties imposed in order-in-original for providing construction services beyond registered Tariff Heading which order was set aside by Commissioner (Appeals)--- Plea raised by authorities was that Commissioner (Appeals) changed Tariff Headings erroneously--- Validity--- Services of construction (9824.0000) and contractor of buildings (9814.2000) were specifically listed in First and Second Schedule of Sindh Sales Tax on Services Act, 2011---Tariff Heading 9809.0000 was not available and Commissioner (Appeals) rightly changed Tariff Heading 9809.0000 to 9824.0000---Mere voluntary registration in a particular Tariff Heading was not enough to tax service which was actually not provided---Taxpayer after getting registration under a particular heading could provide or render some other service and was required to be assessed on basis of services actually provided and rendered and not on basis of service for which it was registered---Tax was levied on services and before charging/taxing determination of proper nature of service and Tariff Heading was necessary and Tariff Heading 9824.0000 was rightly invoked by Commissioner (Appeals)---Appellate Tribunal Inland Revenue set aside both order-in-original and order-in-appeal as both suffered from legal infirmities and were not sustainable in law---Appellate Tribunal Inland Revenue remanded matter to assessing officer to pass fresh assessment order---Appeal was disposed of accordingly.

Central Board of Revenue v. WAPDA PLD 2014 SC 766; Collector of Sales Tax and Central Excise Lahore v. WAPDA 2007 SCMR 1736; Pakistan Machine Factory v. Commissioner Sales Tax 2006 SCMR 1577; Hashwani Hotels Limited v. Government of Pakistan 2007 SCMR 1131 and Book titled Income Tax Ordinance, 2001 (2016-1017) edition, amended up to 15th February, 2017 by Tariq Najeeb Chaudhary) ref.

Rashid Ali, AC-SRB for Appellant.

Abbas, FCA-Consultant along with Waqas Ahmed of Abbas & Co. for Respondent.

2020 P T D (Trib.) 907

[Inland Revenue Appellate Tribunal]

Before Dr. Muhammad Naeeem, Accountant Member and Muhammad Waseem Ch., Judicial Member

Messrs SWEETY TEXTILE (PVT.) LIMITED, FAISALABAD

Versus

CIR, CORPORATE ZONE, RTO, FAISALABAD

S.T.A. No.170/LB/2019, decided on 2nd October, 2019.

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

----Ss.11 & 45A---Assessment of tax---Power of Federal Board of Revenue and Commissioner to call for records---Issuance of second show cause notice---Scope---Adjudication Officer, during the course of examination of Sales Tax and Federal Excise returns of the registered person for the tax periods July 2012 to June 2013, observed certain discrepancies and show-cause notice was issued which culminated into an order-in-original---Appeal filed before the Commissioner Inland Revenue (CIR) (Appeals) was dismissed---Contention of registered person was that the Adjudication Officer had issued impugned second order-in-original in spite of the fact that first order for the same tax periods July 2012 to June 2013 was finalized by his predecessor by invoking the provisions of S.11(2) of the Sales Tax Act, 1990---Validity---Perusal of the first order-in-original passed as a consequence of post refund audit carried out under S.25, Sales Tax Act, 1990, appellate order passed by CIR (Appeals) and the Tribunal's order revealed that said orders were passed for the tax periods July 2012 to June 2013 which was again adjudicated by Adjudication Officer---Adjudication Officer lacked power to reopen, re-adjudicate and review proceedings in the garb of second show-cause notice under S. 11 of Sales Tax Act, 1990---Subsequent action to review or improve the first order could have been carried out by the higher authority i.e. either by the Federal Board of Revenue under S. 45A(1) or by the Commissioner under S.45A(4) of Sales Tax Act, 1990---Initiation of second adjudication through show cause notice and its completion through second order-in-original was not sustainable, which was accordingly annulled and the order of the CIR (Appeals) was accordingly vacated---Appeal of the registered person was allowed.

2016 PTD 483 and Messrs Ashur International (Pvt.) Ltd. Faisalabad v. C.I.R., Faisalabad 2011 PTD (Trib.) 2347 ref.

2016 PTD 527 rel.

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

----Ss. 8 & 73---Tax credit not allowed---Transactions to be made through banking channel---Scope---Adjudication Officer after scrutinizing the detail of suppliers through computer database system observed that certain suppliers had not declared or less declared the sales made to the registered person in summary filed under S. 26(5) of Sales Tax Act, 1990 and thus it was found that the registered person had claimed such input tax credit---Appeal filed before CIR (Appeals) was dismissed---Validity---Registered person had claimed input tax adjustment on the purchases from those suppliers who were active taxpayers and payments thereof were also made in compliance of S.73 of Sales Tax Act, 1990, therefore, no justification existed for denial of input tax adjustment---Tax charged by Adjudication Officer was deleted by the Appellate Tribunal being not sustainable in the eyes of law---Appeal of the registered person was allowed.

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

----S. 8---Tax credit not allowed---Scope---Adjudication Officer during the course of examination of sales tax return of the registered person observed that it had adjusted input tax on the invoices of certain suppliers against the goods/services which did not relate to taxable activities---Validity---Adjudication Officer without discussing any of the invoices and without identifying the goods or services had disallowed the input tax adjustment, whereas the claim of registered person was that it had purchased different goods from suppliers which were ultimately directly or indirectly used for taxable activities---Appellate Tribunal allowed the input tax adjustment.

2017 PTD 2380 rel.

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

----S. 8---Tax credit not allowed---Scope---Adjudication Officer during the course of examination of sales tax return of the registered person observed that it had received excess input tax adjustment/sales tax refund in the tax period of June 2013 at the rate of 17% instead of 16%---Validity---Registered person had paid the tax at the rate of 17% and the same was proved from the invoices and suppliers' returns---Registered person had rightly claimed the refund at the rate of 17%---Appeal was allowed.

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

----Ss. 8 & 21---Tax credit not allowed---Blacklisted/Suspended units---Scope--- Adjudication Officer during the course of examination of sales tax return of the registered person observed that it had claimed/adjusted input tax against the invoices issued by the suspended/blacklisted units---Validity ---Registered person had fulfilled all the legal formalities which were required under the law---Both the units, at the time of transaction, were active and much after the transaction date, one unit was suspended, which could not be blamed upon the registered person---Appellate Tribunal accepted the appeal of taxpayer and allowed the adjustment of input tax.

2015 PTD 2256; 2016 PTD 1695; 2018 PTD 1081 and 2018 PTD 986 ref.

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

----S. 8---Tax credit not allowed---Scope---Adjudicating Officer during the comparison of supplies made by the registered person and purchases declared by the buyers observed that supplies to certain extent of sales tax were not declared by the buyers in their sales tax returns---Validity---Registered person had supplied the goods against which valid sales invoices were issued and payments were received in accordance with law, therefore, no justification existed for denial of input tax adjustment---Supplier could not be held responsible of the default on the part of the buyers---Order of Adjudicating Officer being not sustainable in the eyes of law was vacated---Appeal was allowed.

Syed Zulqarnain Tirmizi, ITP for Appellant.

2020 P T D (Trib.) 940

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Syed Ayaz Mahmood, Accountant Member

Messrs HONDA PALACE, HYDERABAD

Versus

The CIR WHT ZONE, RTO, HYDERABAD

I.T.As. Nos.863 to 866/KB of 2017, decided on 6th March, 2019.

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

----Ss. 182(1)(1A) & 165---Failure to furnish statement---No revenue loss---Effect---Appellant assailed orders passed by Deputy Commissioner Inland Revenue whereby he had charged penalty under serial No. (1A) of S. 182(1), Income Tax Ordinance, 2001 for delay in filing statements under S. 165, Income Tax Ordinance, 2001---Contentions of appellant were that show-cause notice was issued with intent to impose penalty of Rs. 10,000 but penalty was imposed at different figures; that the officer had not confronted with the number of days of default and quantum of penalty to be imposed for late filing of statement and that the appellant had voluntarily filed nil statements before issuance of show cause notice, therefore, no loss to the revenue was caused---Validity---Appellant could not be penalized unless it was shown that the default had resulted in loss of revenue---Penalty was to be imposed with reference to the tax payable---No tax was required to be deposited by the appellant---Appellant had filed nil statements and the department had failed to establish that tax was required to be deposited by the appellant---Deputy Commissioner Inland Revenue was not certain about the quantum of penalty and days of alleged default---Appellate Tribunal held that late filing of nil statement under S. 165, Income Tax Ordinance, 2001 did not entail any penalty---Orders passed by department were set aside and the appeals were allowed.

ITA No. 659/KB/2014, dated 5-9-2016; 2005 PTD 1; 1998 PTD (Trib.) 3507; 2007 PTD 1810; 2017 PTD 1579 (LHC) and ITA No.742/KB/2014 dated 28.7.2016 rel.

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

----S. 182(1)(1A)---Failure to furnish statement---No revenue loss---Effect---Section 182, Income Tax Ordinance, 2001 is not a charging section, rather it is penal in nature---Intention of legislature in enacting S.182 is not to generate revenue---Section 182 cannot be used as a source of resource mobilization or collecting targeted budget---Taxpayer cannot be penalized unless it is shown that the default has resulted in loss of revenue---Penalty is to be imposed with reference to the tax payable---Penalty for late filing of nil statement does not entail any penalty as penalty would be leviable when there is a tax payable.

2016 PTD (Trib.) 2610 and ITA No. 659/KB/2014, dated 5-9-2016 rel.

(c) Interpretation of statutes----

----Taxing statute---Scope---Taxing statute is to be interpreted strictly and to be followed as per its language, without stretching its meaning.

Muhammad Irtiza, ITP for Appellant.

Ashok Kumar, DR for Respondent.

2020 P T D (Trib.) 1020

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Syed Ayaz Muhammad, Accountant Member

Messrs AWAN GOODS TRANSPORT CO. KARACHI

Versus

The COMMISSIONER-IR ZONE-III, RTO-II, KARACHI

I.T.A. No.737/KB of 2018, decided on 8th March, 2019.

Income Tax Ordinance (XLIX of 2001)---

----S.161---Failure to pay tax collected or deducted---Transactional failure---Effect---Taxpayer assailed order passed by Deputy Commissioner Inland Revenue (DCIR) under SS. 161 & 205, Income Tax Ordinance, 2001 on the grounds that predecessor of the DCIR had already passed an order to that effect for the same tax year and that subjecting the entire profit and loss account expenses to a uniform rate of 6% tax being not justified---Validity---DCIR had failed to establish transactional failure on the part of taxpayer---Section 161(1) of Income Tax Ordinance, 2001 could only be invoked when a failure to collect or deduct the tax was established---Taxpayer was responsible to collect or deduct the tax in respect of certain transactions of payment---Each transactional failure had to be determined which was a condition precedent for initiation and conclusion of the proceedings---Predecessor of the DCIR had already examined the case and had passed an order accordingly---No justification existed for passing the impugned order---Appellate Tribunal annulled the impugned order.

CIR, Zone-I, RTO-Hyderabad v. Messrs Medimakers Pharmaceuticals (AOP), Hyderabad 2018 PTD 1533 foll.

Syed Riazuddin and Vishno Raja Qavi for Appellants.

Naib Ali Pathan, DR for Respondent.

2020 P T D (Trib.) 1045

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Saif Ullah Khan, Accountant Member

MUHAMMAD SALEEM JAMALI ST AGENCIES, KARACHI

Versus

COMMISSIONER INLAND REVENUE, ZONE-III, LTU-III, KARACHI

I.T.A. No.1489/KB of 2018, decided on 24th June, 2019.

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

----S.122---Amendment of assessment---Condemned unheard---Scope---Appellant attacked the order-in-original on the ground that mandatory show-cause notice was posted one day after the date fixed for appearance of appellant---Validity---Section 122 of Income Tax Ordinance, 2001 provided that the assessment could only be amended if it was found that the deemed order was erroneous and prejudicial to the interest of revenue subject to affording an opportunity of being heard to the taxpayer---Appellant was not provided fair opportunity of hearing---Appellant ought to have been given 15 days time for submitting reply---Only three days time, as per department, was given to the appellant for submitting reply to the notice, which in fact was not received by the appellant till finalization of the proceedings---Orders passed by Additional Commissioner Inland Revenue and Commissioner Inland Revenue (Appeals) were vacated by the Tribunal.

2013 PTD 1536 = PLD 2013 Lah. 634; 2016 PTD 2422; 2009 PTD 1507; 2007 PTD (Trib.) 2601; 2012 PTD (Trib.) 312; The Commissioner Inland Revenue, Zone-I, RTO, Sukkur v. Messrs Ranipur CNG Station, Sukkur 2017 PTD 1839; 2000 PLC (C.S.) 295 and Engineer Majeed Ahmed Memon v. Liaquat University of Medical and Health Science Jamshoro and others 2014 SCMR 1263 rel.

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

----S.122---Constitution of Pakistan, Art. 10-A---Amendment of assessment---Right to fair trial---Opportunity of being heard---Scope---Fair trial and due process of law are guaranteed by the Constitution---Fair trial means issuance of notice by the competent authority and decision after providing opportunity of being heard and examining the details/documents provided by the taxpayer, if any---Article 10-A of the Constitution unambiguously provides that every executive, judicial and quasi-judicial order affecting the rights of the citizen shall not be passed without providing reasonable opportunity of being heard to the taxpayer.

(c) Administration of justice---

----No adverse order can be passed by the public functionary, more particularly the taxing authorities, without providing reasonable opportunity of being heard to the aggrieved person.

Sahiwal v. Muhammad Akhtar 1971 SCMR 681 rel.

(d) Administration of justice---

----Where the law requires a thing to be done in a particular manner, it would be legal and valid only if it is in that manner and not otherwise.

Khalid Saeed v. Shamin Rizvi 2003 SCMR 1505; Messrs MFMY Industry Ltd. v. Federation of Pakistan 2015 SCMR 1550; Messrs Allah Tawakkal Steel Mill v. Federation 2016 PTD 1003; Collector of Custom v. Shafiq Traders 2011 SCMR 967; Khalid Mehmood v. Collector 2009 SCMR 1881 and Messrs Shafiq Traders v. Collector 2007 PTD 2092 ref.

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

----S.122---Amendment of assessment---Show-cause notice---Pre-requisites---Scope---Show-cause notice must supply grounds/reasons in clear and explicit words to the taxpayer and the provisions of law being invoked against him---Failure on the part of taxing authority to specify the same renders the show cause notice as invalid. [p. 1051] F

2006 SCMR 1519; CIR v. Ayesha Wollen Mills (Pvt.) Ltd. 2014 SCMR 154 = 2014 PTD 215; 2010 PTD 1315; Sardar Ahmed Khan Jogezai v. Province of Balochistan 2002 SCMR 122; PLD 1958 SC 104; PLD 1973 SC 1973; 2003 SCMR 50; 2004 SCMR 25 and 2004 SCMR 1790 ref.

(f) Administration of justice---

----One cannot be a judge in his own cause.

Mrs. Riffat Naeem for Appellant.

Muhammad Arif, D.R. for Respondent.

2020 P T D (Trib.) 1068

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Ch. Shahid Iqbal Dhillon, Judicial Members and Muhammad Tahir, Accountant Member

Messrs PESHAWAR ELECTRIC SUPPLY COMPANY (PESCO) WAPDA HOUSE, PESHAWAR

Versus

COMMISSIONER INLAND REVENUE R.T.O., PESHAWAR

S.T.As. Nos.129/PB, 130/PB and 131/PB of 2018, decided on 26th September, 2019.

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

----Ss. 3 & 2(46)---Sales Tax Special Procedures Rules, 2007, Rr. 13 & 14---Scope of sales tax---Taxable supplies---Value of supply---Levy and collection of sales tax---Filing of returns and deposit of sales tax---Subsidy provided by government---Scope---Department sought recovery of sales tax on subsidy received by appellant, Electric Supply Company, from the Federal Government---Validity---Words "payment in kind" as used in S. 2(46), Sales Tax Act, 1990 were linked with delivery of goods or rendering of services---Regulatory Authority had fixed the price of electricity and the appellant was bound to bill the consumers in accordance with that price---Sales tax was not payable on the amount of tariff subsidy received from the government as social welfare measure to keep the price of electricity at a lower level---Rule 14 of Sales Tax Special Procedures Rules, 2007 provided that the appellant had to deposit sales tax on 'accrual basis' i.e. the amount of sales tax actually billed---Commissioner Inland Revenue (Appeals) had wrongly held that R.13(2)(b) of Sales Tax Special Procedures Rules, 2007 was equally applicable to the amount of subsidy received by the appellant---Subsidy did not fall within the category of "charge", "surcharge", "rent", "commission", "duty" or "taxes" and hence was not part of value of supply---Rule 14, Sales Tax Special Procedures Rules, 2007 being specific excluded the general provisions of R. 13, Sales Tax Special Procedures Rules, 2007---Subsidy paid by the government was not the consideration received from the recipient of the supply---Subsidy provided by the government was sort of compensation rather than revenue in nature, therefore, the same could not be brought under the ambit of taxable supplies---Appeals filed by registered person were accepted and sales tax on subsidy was deleted.

2014 PTD (Trib.) 1629 and PESCO v. CIR 2015 PTD (Trib.) 1112 rel.

(b) Words and phrases---

----"Subsidy"---Meaning.

Advance Law Lexicon 3rd Edition Book 4 page 4525 and Black's Law Dictionary (Annex 11) rel.

(c) Words and phrases---

----"Payment in kind"---Meaning.

Law Lexicon 3rd Edition, (Book 3 page 3508) rel.

(d) Administration of justice---

----"Public functionaries"---Scope---No one should be prejudiced by an act of State functionaries.

Jawad Mir Muhammadi and others v. Haroon Mirza PLD 2007 SC 472; Zulifqar and others v. Shahdat Khan PLD 2007 SC 582 and Sajawal Khan v. Wali Muhammad 2002 SCMR 134 rel.

(e) Interpretation of statutes---

----Special law---Scope---Special law/procedure excludes the general law/procedure.

Akbar Ali v. Chairman A.K. M.I.D.C. 1999 MLD 236; Muhammad Akbar v. WAPDA and 3 others 1999 CLC 1198 and Buner Gul v. The State 1999 PCr.LJ 728 rel.

(f) Appeal---

----Appeal is a continuation of the original/initial proceedings and the orders given at earlier stage merge in the final order.

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

----S.46---Decision of Appellate Tribunal---Binding effect---Scope---Decision given by a superior judicial forum is binding on the lower hierarchy.

1996 PTD (Trib.) 388 rel.

Hussain Ahmad Shirazi and Shahbaz Ahmad for Appellant.

2020 P T D (Trib.) 1084

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar Chairman and Nadir Mumtaz Warraich Accountant Member

CITY SUPER STORE-II, ISLAMABAD

Versus

The COMMISSIONER INLAND REVENUE, RTO, ISLAMABAD

I.T.A. No.1868/IB of 2017, decided on 22nd May, 2019.

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

---S. 121---Best judgment assessment---Scope---Taxpayer assailed orders passed by Assessing Officer and Commissioner (Appeals) whereby they had made additions in his declared income---Validity---Taxpayer, at first, was issued notice under S.177 of the Income Tax Ordinance, 2001, however, proceedings were finalized on the basis of "best judgment assessment"--- Section 121 of the Income Tax Ordinance, 2001 provided that where a person failed to furnish return of income in response to notice under subsection (3) or (4) of S. 114, Income Tax Ordinance, 2001 then the "best judgment assessment" could be made---Assessing Officer had embarked upon undue haste in passing the order under S. 121 of the Income Tax Ordinance, 2001---Taxpayer had filed manual income tax return before Assessing Officer instead of furnishing the same electronically, which might be a procedural impropriety but no loss was caused to the revenue---Appellate Tribunal observed that the taxpayer could not be burdened with undue and unwarranted additions---Impugned orders were set aside and the appeal was disposed of accordingly.

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

----S. 120---Assessment---Scope---Subsections (3) and (4) of S. 120 of Income Tax Ordinance, 2001 provide that if a taxpayer fails to furnish the return by due date or where the return of income furnished is incomplete, the Commissioner shall issue a notice to the taxpayer for informing him about the deficiencies other than incorrect amount of tax payable and directing him to provide such information, particulars, statement or documents by such date specified in the notice---Return of taxpayer shall be treated as "invalid" unless the requirements of the notice under subsection (3) are complied with.

(c) Administration of justice---

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

1989 Crl.J. 631; Civil Petitions Nos.287 to 530 of 2005; PLD 2014 SC 232 and 2012 SCMR 1235 rel.

Abid Mehmood, ITP for Appellant.

Tariq Iqbal, DR for Respondent.

2020 P T D (Trib.) 1258

[Inland Revenue Appellate Tribunal]

Before Mrs. Ambreen Aslam, Judicial Member

ABDUL ASIF

Versus

COMMISSIONER INLAND REVENUE ZONE (WHT), RTO-III, KARACHI

I.T.As. Nos.535/KB and 536/KB of 2018, decided on 11th December, 2019.

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

----S. 12 & Cl. 39, Part. I, Second Sched.---Salary---Exemption from total income---Allowances---Special Judicial Allowance---Scope---Question before Appellate Tribunal was whether the "Special Judicial Allowance" was "part of the salary" or an allowance solely expended in the performance of the employee's duties of employment within the meaning of S. 12(2)(c) and Cl. 39 of Part I of Second Schedule to the Income Tax Ordinance, 2001---Validity---Special Judicial Allowance was extended to staff and officers of the judiciary by the Chief Justice of High Court, therefore, as per the definition mentioned in S.12(2)(c) of Income Tax Ordinance, 2001, the allowance was expended in the performance of the staff on account of their performance---"Special Judicial Allowance" did not fall within the scope of salary, as such, the same was not chargeable to income tax---Impugned orders were set aside and the appeals were accepted.

2018 PTD 806 ref.

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

----S.12(2)(c)---Salary---Allowance solely expended in the performance of the employee's duties of employment---Scope---Salary of a person is chargeable to income tax so far as chargeability of tax of allowance is concerned, in that context S.12(2)(c), Income Tax Ordinance, 2001 is relevant---Section 12(2)(c), Income Tax Ordinance, 2001, categorizes the allowances and after specification of allowances Cl. (c) starts in the middle from the expression "but"---Expression "but" segregates other allowances from the allowance which is solely expanded in the performance of the employee's duties---Use of words "shall not" after "but" means that the legislature intended through the above clause that the allowance expended in the performance shall be excluded from the definition of salary.

Aqeel Ahmed for Appellant.

Ali Hassan, DR for Respondent.

2020 P T D (Trib.) 1279

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manazar, Chairman and Dr. Muhammad Naeem, Accountant Member

Messrs ESCORT INTERNATIONAL, LAHORE

Versus

COMMISSIONER INLAND REVENUE, CRTO, LAHORE

S.T.A. No.641/LB of 2018, decided on 4th April, 2019.

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

----S.3---Sales tax, demand of---Procedural mistake---Scope---Acts of inadvertence on the part of taxpayer due to any procedural mistake does not create demand of sales tax.

Messrs Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64 rel.

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

---- Ss. 3 (1)(a) & 73--- Sales tax, payment of--- Liability of supplier--- Scope--- Liability to pay sales tax is on supplier under S. 3(1)(a) of Sales Tax Act, 1990--- Such liability is independent to the provisions of S. 73 of Sales Tax Act, 1990---Supplier has to make payment of sales tax at time of filing of sales tax return for a tax period and sales tax has to be paid even in cases of credit transaction as well.

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

----Ss.3, 4 & 49(2)--- Sales tax, demand of---Zero rating---Procedural mistake---Delayed payment---Taxpayer was aggrieved of notice of demand to pay tax not paid in due time---Validity---Sales tax was to be charged under S.4 of Sales Tax Act, 1990, at the rate of zero percent--- Transaction in question did not have any revenue implication and mistake was mere procedural lapse, therefore, such demand was deleted--- Entire proceedings in account in question were fraught of presumption, surmises and wishful mind without any support from legal provision or even it had no backing under basic accounting cognition---Appellate Tribunal Inland Revenue set aside penalty demand on non-filing / late filing as no loss of revenue was involved---Appeal was allowed in circumstances.

Sales Tax Reference vide PTR No.07 of 2016/BWP dated 31-01-2017; Messrs AI-Hilal Motors and others v. CST and CE Karachi 2004 PTD 868 and Messrs Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64 ref.

Imran Hussain C.A. for Appellant.

Dr. Tanveer Hussain Bhatti, DR for Respondent.

2020 P T D (Trib.) 1292

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Nadir Mumtaz Warraich, Accountant Member

AZHAR MAHMOOD RANJHA through Tauseef-ul-Islam

Versus

The COMMISSIONER INLAND REVENUE, RTO, SARGODHA

I.T.A. No.1527/IB of 2017, decided on 24th June, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111(1)(b)(c), 114(4), 116(1) & 172(3)---Income tax return, non-filing of---Non-resident---Determination---Scope---Non-appointing of representative---Taxpayer was aggrieved of notices issued by authorities for non-filing of income tax and wealth tax returns after he had purchased certain properties--- Plea raised by taxpayer was that no proper service of notices was made to him, he was non-resident and even no representative was appointed under S.172 (3) of Income Tax Ordinance, 2001---Validity---Ex parte order was passed by Assessing Officer who while passing the order was unaware about non-resident status of the taxpayer--- Appellate Tribunal Inland Revenue set aside orders passed by authorities below and the matter was remanded to Assessing Officer to conduct detailed inquiry regarding non-resident status of taxpayer by following proper procedure of law---Appellate Tribunal Inland Revenue directed Assessing Officer to probe source of investment after providing proper opportunity of hearing to taxpayer---Appeal was allowed accordingly.

2013 PTD 914 ref.

2006 SCMR 129 and (2010) 102 Tax 149(sic) rel.

Tariq Maqbool Khakwani, ITP for Applicant.

Zaheer Qureshi, DR for Respondent.

2020 P T D (Trib.) 1345

[Inland Revenue Appellate Tribunal]

Before Dr. Farrukh Ansari, Accountant Member

Messrs MAGNUM MANAGEMENT SOLUTIONS (PVT.) LTD. KARACHI

Versus

The COMMISSIONER INLAND REVENUE, ZONE-I KARACHI

I.T.As. Nos.1533/KB, 1534/KB and 1535/KB of 2018, decided on 20th January, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 161, 165, 182 & 205---Failure to pay tax collected or deducted---Statements---Offences and penalties---Default surcharge---Failure to establish mens rea---Effect---Appellant filed monthly statements under S.165, Income Tax Ordinance, 2001 but the assessing officer observed that the tax was not properly withheld---Assessing officer held that out of the salaries paid at Rs.22,937,920/-, taxable payments were shown at Rs.14,729,456/- and the record of the remaining amount of Rs.8,208,464/- was not produced; out of the other expenses amounting to Rs.74,690/-, only record relating to the amount of Rs.4500/- was produced and that the amounts of Rs.74,164/- and Rs.49,598/- on account of repair, maintenance, printing and stationery were not supported by the required details---Validity---Assessing officer had not specifically mentioned the details which were withheld---Assessing officer had imposed the penalty without confronting the appellant and without establishing mens rea---Appellate Tribunal remanded the matter to the assessing officer with directions to specifically identify the payments for which details were not provided---Appeals were disposed of accordingly.

Muhammad Aleem for Appellant.

Tassawar Iqbal, D.R. for Respondent.

2020 P T D (Trib.) 1502

[Inland Revenue Appellate Tribunal]

Before Mrs. Seema Imran, Judicial Member and Saif Ullah Khan, Accountant Member

Messrs ORIENT TEXTILE, KARACHI

Versus

The COMMISSIONER INLAND REVENUE, ZONE-I, RTO-III, KARACHI

S.T.A. No.331/KB of 2018, decided on 14th December, 2018.

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

----Ss. 4, 2(16) & 2(17)---SRO No.1125(I)/2011, dated, 31-12-2011---Zero rating---"Manufacture" or "produce"---"Manufacturer" or "producer"---Scope---Question before Appellate Tribunal was whether the appellant was a "manufacturer" or not---Appellant imported finished cloth in big rolls which were cut into smaller rolls and sold---"Manufacture" meant a process whereby an article singly or in combination of other articles was converted into another distinct article---Appellant had imported finished cloth and sold it in same form without any process of manufacture---Appellant was not entitled to benefits as manufacturer under SRO No.1125(I)/2011, dated, 31-12-2011---Order passed by Commissioner (Appeals) was upheld.

PLD 2017 SC 99; 2002 PTD 470; 2006 PTD (Trib.) 1056 and 2004 PTD (Trib.) 1328 rel.

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

----Ss.2(16) & 2(17)---Manufacture or produce---"Manufacturer" or "producer"---Scope---"Manufacturer" is a person engaged in manufacture of goods---"Manufacture" is defined under S.2(16), Sales Tax Act, 1990, as a process whereby an article singly or in combination with other articles is either converted into another distinct article or it is so changed, transformed or reshaped that it becomes capable of being put to use differently or distinctly---Such activity includes processes incidental or ancillary to the completion of a manufactured product, such as process of printing, publishing, lithography, graving and operations of assembling, mixing, cutting, diluting, bottling, packing, repacking or preparation of goods in any other manner.

PLD 2017 SC 99; 2002 PTD 470; 2006 PTD (Trib.) 1056 and 2004 PTD (Trib.) 1328 rel.

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

----S. 2(16)---"Manufacture" or "produce"---Scope---Analysis of S.2(16) of Sales Tax Act, 1990---Definition of "manufacture" provided in S.2(16), Sales Tax Act, 1990, comprises of three clauses which are connected with each other through a semi-colon between Cls. (a) and (b) and the word "and" between Cls. (b) and (c)---Clause (a) starts with words "any process" while Cls. (b) and (c) start with word "process" which further elaborate the words "any process incidental or ancillary" used in clause (a)---Such details manifestly explain that all the three clauses of S.2(16), Sales Tax Act, 1990, are interconnected and it is a compact definition of "manufacture or produce".

PLD 2017 SC 99; 2002 PTD 470; 2006 PTD (Trib.) 1056 and 2004 PTD (Trib.) 1328 rel.

Aqeel Ahmed for Appellant.

Mukhtar Ahmed Shar, DR. for Respondent.

2020 P T D (Trib.) 1540

[Inland Revenue Appellate Tribunal]

Before Muhammad Jawed Zakaria, Judicial Member and Saif Ullah Khan, Accountant Member

Messrs MUJAHID OIL REFINERY (PVT.) LIMITED, KARACHI

Versus

COMMISSIONER, IR ZONE-IV, LTU, II, KARACHI

M.A. (AG) 700/KB and S.T.A. No.464/KB of 2018, decided on 7th January, 2020.

Sales Tax Act (VII of 1990)---

---Ss. 3 & 13, Sr. 24, Sixth Sched.---Federal Excise Act (VII of 2005), S.3---SRO No.24(I)/2006, dated, 07-01-2006---Sales tax---Exemption---Further tax---Non-taxable supplies---Scope---Assessing officer taxed the appellant for its failure to charge further tax on supplies made to unregistered persons---Commissioner (Appeals) upheld the treatment meted out to the appellant by the assessing officer---Validity---Further tax was to be levied at 3% of the value of supply made to a person who had not obtained registration number, but only in cases where supply was taxable---Appellant was a supplier of edible oils and vegetable ghee, its local supply was specifically exempt from levy of sales tax in terms of Serial No. 24 of the Sixth Schedule to Sales Tax Act, 1990 as well as exempt from levy of Federal Excise duty in terms of SRO No.24(I)/2006, dated, 07-01-2006---Supplies made by appellant did not meet the requirements stipulated in S.3(1A) of Sales Tax Act, 1990, for levy of further tax---Orders passed by assessing officer and Commissioner (Appeals) were annulled by the Tribunal---Appeal was allowed.

2016 PTD 648 and S.T.A. No. 244/KB of 2017, dated 21-11-2017 rel.

Shoukat Hussain Mirza, (ITP) for Appellant.

Naveed Dost Chandio, D.R. for Respondent.

2020 P T D (Trib.) 1559

[Inland Revenue Appellate Tribunal]

Before Imtiaz Ahmed Accountant Member and Mian Abdul Basit, Judicial Member

CIR, RTO, ISLAMABAD

Versus

Messrs STAR MARKETING (PVT.) LTD., ISLAMABAD

I.T.As. Nos.833/IB to 836/IB of 2013, decided on 18th March, 2020.

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

----S. 182---Failure to furnish a return within due date---Scope---Department assailed orders passed by Commissioner (Appeals) whereby he had reduced the penalty imposed on the respondent tax-payer for delay in filing income tax returns---Validity---Notice under S.182, Income Tax Ordinance, 2001, was issued before insertion of Explanation to Column No. 3 of Entry No. 1 of the Table of S.182, Income Tax Ordinance, 2001, therefore, only a penalty of Rs.5000 could have been imposed---Appellate Tribunal agreed with the findings of Commissioner (Appeals) and dismissed the appeals.

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

----S.182---Failure to furnish a return within due date---Explanation added in the Column No. 3 of the Entry No. 1 of the Table of S.182, Income Tax Ordinance, 2001 changes the scope/meaning of "tax payable" and equates the same with the expression "tax chargeable" whereas the application and spirit of both the expressions are different---Tax payable is the tax which is required to be paid with the return of total income at the time of its submission and tax chargeable demonstrates the total tax required to be paid on the total income for a particular tax year which includes the tax withheld by the withholding agents of the taxpayer and admittedly the tax payable will never by more than the tax chargeable---Said Explanation has enhanced the liability of a taxpayer and thus it will be operative from the date of insertion but not prior to its promulgation in the statute book---Explanation in a statute ordinarily operates to clarify the law prospectively---Retrospective liability is imposed when an Explanation attributes a meaning to a substantive provision or expression whereby the burden, obligation or liability of a person is increased for a past period.

(c) Interpretation of statutes---

----Taxing Statute---Explanation added to a provision of statute---Nature---Prospective---Explanation increasing the liability of a taxpayer will operate prospectively and not retrospectively.

Commissioner Inland Revenue, RTO, Rawalpindi v. Messrs Trillium Pakistan (Pvt.) Ltd., Rawalpindi and others 2019 SCMR 1643 ref.

(d) Interpretation of statutes---

----Taxing Statute---Explanation added to a provision of statute---Nature--- Retrospective liability is imposed when an Explanation attributes a meaning to a substantive provision or expression whereby the burden, obligation or liability of a person is increased for a past period.

Mrs. Naheed Akhtar Durrani, DR for Appellant.

Asmar Tariq Mayo for Respondent.

2020 P T D (Trib.) 1569

[Inland Revenue Appellate Tribunal]

Before Dr. Farrukh Ansari, Accountant Member

Messrs HUSSAIN MILLS LIMITED, KARACHI

Versus

The COMMISSIONER INLAND REVENUE, ZONE-III, LARGE TAXPAYER UNIT, KARACHI

I.T.A. No.452/KB of 2019, decided on 5th March, 2020.

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

----Ss. 165, 182(1)(1A) & 182(1)(14)---Statements---Failure to furnish requisite statements---Scope---Appellant was imposed upon a penalty under the Entry at Serial No. 14 of subsection (1) of S. 182, Income Tax Ordinance, 2001, for its failure to file the statements of tax deduction under S.165 of Income Tax Ordinance, 2001, in the prescribed format---Appellant only gave the cumulative figure of the tax deposited by it for each month---Validity---Statement filed by the appellant was an invalid statement---Repeated filing of such invalid statements for twelve months gave a positive indication of mens rea on the part of the appellant---Plea regarding problems at the Federal Board of Revenue (Board) portal was not tenable due to prolonged period of default and the failure on the part of the appellant to adduce any evidence to show that the matter was taken up with the Board---Appellant did not bring any evidence of filing the statements manually if it faced any problem with the electronic filing of the same---Default committed by appellant attracted the provisions of the Entry at Serial No. (1A) of S.182(1) of Income Tax Ordinance, 2001, as it was a special provision and thus, it prevailed over the general provision of the Entry No. 14 of S.182(1), Income Tax Ordinance, 2001---Appellate Tribunal remanded the matter to the assessing officer to look into the case afresh vis-à-vis the presence of mens rea and to take action under the correct entry of S.182(1) of Income Tax Ordinance, 2001---Appeal was disposed of accordingly.

(b) Administration of justice---

----If the law prescribes a particular manner and procedure in which the things are required to be done, the same must be done that way or not at all.

Commissioner of Income Tax / Wealth Tax, Companies Zone III, Lahore v. Idara-I-Kissan Lahore 2006 PTD 2569 ref.

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

----S.182---Offences and penalties---Mens rea---Scope---Penalty provisions are at least quasi-criminal proceedings and the presence of mens rea is essential for imposition of any penalty under the Income Tax Ordinance, 2001.

Bhola Weaving Factory v. Custom, Excise and ST AT 2004 PTD 1048 ref.

(d) Words and phrases---

----"Mens rea"---Defined.

Mens rea. [Law Latin "guilty mind]. The state of mind that the prosecution, to secure a conviction, must prove that a defendant had when committing a crime; criminal intent or recklessness. Mens rea is the second of two essential elements of every crime at common law, the other being actus reus. - Also termed mental element; criminal intent; guilty mind". The recklessness may in turn be defined as the lack of proper caution or carelessness about the consequences of an act.

CIT v. Habib Bank Limited 2007 PTD 901 ref.

(e) Words and phrases---

----Mens rea---Scope---Mens rea denotes the state of mind that would compel a person to deviate from the law or to commit an offence, which also encompasses recklessness within its ambit---Concept of mens rea basically revolves around the state of mind and the conduct of the person.

Muhammad Siddique for Appellant.

Amjad Hussain Janwri, D.R. for Respondent.

2020 P T D (Trib.) 1583

[Inland Revenue Appellate Tribunal]

Before Mrs Seema Imran, Judicial Member and Saif Ullah Khan, Accountant Member

Messrs ZIAUDDIN UNIVERSITY, KARACHI

Versus

The COMMISSIONER INLAND REVENUE, ZONE-I

I.T.A. No.1367/KB of 2018, decided on 6th May, 2019.

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

----Ss.100C, 2(36), 159, 122 & 177---Tax credit for certain persons---Non-profit organization (University run by a non-profit organization)---Exemption or lower rate certificate---Amendment of assessment---Audit---Scope---Assessing officer disallowed the claim of exemption/tax credit of appellant on the grounds that Cls. 92 & 58A of Part I of Second Schedule to the Income Tax Ordinance, 2001, were omitted and the appellant had failed to fulfill the conditions laid down in S. 100C for 100% tax credit---Appeal filed before Commissioner (Appeals) was dismissed---Appellant claimed the status of non-profit organization and possessed an approval under S.2(36)(c) of Income Tax Ordinance, 2001---Validity---Income of a University run by a non-profit organization was eligible for tax credit under S.100C(2)(d), subject to the conditions laid down in S.100C(1) of Income Tax Ordinance, 2001---Scheme of tax credit first required determination of taxable income and tax liability of such non-profit organization or University---Section 100C, Income Tax Ordinance, 2001, also provided tax credit against minimum tax and final taxes which meant that such entities were liable to taxes if such entities did not get exemption certificate under S.159(1)(c) of Income Tax Ordinance, 2001---Appellant could neither produce an exemption certificate nor any supporting evidence to show that it fulfilled the conditions laid down in S.100C(1) of Income Tax Ordinance, 2001---Assessing officer, on the other hand, had invoked S.122(5A), Income Tax Ordinance, 2001, to tax the appellant which was beyond the scope of said section as determination of taxable income, tax liability and tax credit required detailed enquiries and investigation---Assessing officer had erred in levying tax on gross declared receipts of the appellant which was illogical because if the appellant was not eligible for exemption or for tax credit then it was still eligible for treatment as a University being run for profit, where expenses incurred were allowed against gross receipts---Orders passed by officers below were not sustainable---Appellate Tribunal remanded the matter to the officer authorized under S.177, Income Tax Ordinance, 2001, to make proper investigations---Appeal was disposed of accordingly.

2018 PTD 1787 and 2017 PTD 1911 ref.

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

----S.2(36)---Non-profit organization---Scope---Approval under S.2(36), Income Tax Ordinance, 2001, provides status of a non-profit organization to an entity by virtue of which such entity can obtain donations more easily because the donors can get tax credit under S.61 of Income Tax Ordinance, 2001---Mere availability of an approval under S.2(36), Income Tax Ordinance, 2001, does not provide exemption of income to a non-profit organization.

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

----Ss. 100C & 2(36)---Income Tax Rules, 2002, R.220A---Tax credit for certain persons---Procedure for approval for purpose of Cls. (c) of subsection (2) of S.100C of Income Tax Ordinance, 2001---Non-profit organization---Scope---Entity, for getting the status of a non-profit organization, is required to obtain an approval from Commissioner under S.2(36)(c) of Income Tax Ordinance, 2001 but for availing the benefits of S.100C, of the Ordinance it is required to obtain approval from Chief Commissioner under S.100C(2)(c), Income Tax Ordinance, 2001, read with R. 220A of Income Tax Rules, 2002.

Abdul Rahim Lakhany and Vishwa Mittar Sahitya for Appellants.

Naveed Dost Chandio, DR for Respondent.

2020 P T D (Trib.) 1692

[Inland Revenue Appellate Tribunal]

Before Mrs. Ambreen Aslam, Judicial Member

COMMISSIONER INLAND REVENUE, ZONE-I, RTO, HYDERABAD

Versus

SUJNANI WINE STORE

I.T.A. No.542/KB of 2015, decided on 29th November, 2019.

Income Tax Ordinance (XLIX of 2001)---

----S.122---Amendment of assessment---Scope---Department assailed order passed by Commissioner (Appeals) whereby he had held that the order passed under S.120 of Income Tax Ordinance, 2001, had been merged twice in the appellate order and the assessment under S.120, Income Tax Ordinance, 2001, was not in field at the time of issuance of show-cause notice, therefore, the order under S.122(5A) of Income Tax Ordinance, 2001, was illegal---Validity---Additional Commissioner Inland Revenue while passing order under S.122(5A), Income Tax Ordinance, 2001, had observed that the orders passed by authorities had not put bar on the assessment under S.122(5A), Income Tax Ordinance, 2001---Taxpayer, in every forum, had tried to delude the authorities with one reason or the other and had also tried to demonstrate that the authorities were raising the issue again and again but the fact of the matter was that the huge difference between sales declared in return of income and sales declared in sales tax returns was never taken into account---Commissioner had not appreciated the entire record and had passed the order on conjectures and surmises therefore, the same was set aside---Matter was remanded to the adjudication officer for decision afresh---Appeal was disposed of accordingly.

Abid Aziz Memon, DR for Appellant.

Salman Ahmed for Respondent.

2020 P T D (Trib.) 1725

[Inland Revenue Appellate Tribunal]

Before Haroon Latif Khan (D&SJ), Chairperson and Imran Hayee Khan Accountant Member

Messrs MUMTAZ CITY

Versus

ADDITIONAL COMMISSIONER PRA, RAWALPINDI COMMISSIONER (APPEALS) PRA, LAHORE

Appeal No.69 of 2018, decided on 12th February, 2020.

Punjab Sales Tax on Services Act (XLII of 2012)---

----Ss. 3, 35, 2(43), 49, 24 & Sr.No.15, Second Sched.---Taxable service, return, tax fraud, default surcharge, assessment of tax, services provided by developers, builders and promoters---Scope---Appellant, being property developer, was required to pay sales tax as per Serial No. 15 of Second Schedule to the Punjab Sales Tax on Services Act, 2012, in lieu of developing a housing society---Contention of appellant was that a huge chunk of land was surrendered to the public authorities for which appellant did not gain or receive any financial benefit and that no bifurcation was made between saleable and non-saleable area---Validity---Contention for surrendering the land for construction of interchange was initiated by the appellant itself---Construction of interchange had in fact enhanced the price/value of the Housing Society, which ultimately benefited the appellant in financial terms---Law did not provide distinction between "saleable" and "non-saleable" area---Commissioner (Appeals) had categorically observed that the default was committed due to wrong interpretation of statute and that it did not establish willful default on the part of appellant---Willful default was a condition precedent for imposition of default surcharge hence, same was set aside---Appellate Tribunal partially allowed the appeal accordingly.

2002 PTD 877; 2008 PTD 838; 2006 PTD 2726; 2005 PTD 2525; 2018 PTD 1487 and 2017 PTD 2456 ref.

D.G. Khan Cement Ltd. v. Federation of Pakistan 2004 SCMR 456 rel.

M. Mansoor Ali Malik for Appellant.

2020 P T D (Trib.) 1732

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Nadir Mumtaz Warraich Accountant Member

Messrs MAAKSONS, ISLAMABAD

Versus

The COMMISSIONER INLAND REVENUE, RTO, ISLAMABAD

I.T.As. Nos.797, 798 and 799/IB of 2018, decided on 10th December, 2018.

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

----Ss.121(1)(d) & 137(2)---Successive assessment---Quashing of order---Taxpayer was aggrieved of demand notice on the basis of second assessment order passed in presence of earlier order---Validity---Authorities did not consider that first order was in field and in presence of the same another assessment by Authorities was contrary to the provision of law as well as norms of justice and the same could not be endorsed at any forum---Second assessment order under S.121(1)(d) of Income Tax Ordinance, 2001, as framed by Assessing Officer was a lucent demonstration of excess of authority and denial of justice--- Appellate Tribunal Inland Revenue emphasized that such practice should be curbed at appropriate levels---Appellate Tribunal declared second assessment order as illegal and unlawful in presence of original order, resultantly the order was quashed--- Appeal allowed in circumstances.

2006 PTD (Trib.) 1665 and 2007 PTD (Trib.) 345 rel.

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

----Ss.161 & 205---Income Tax Rules, 2002, R.44(4)---Contract work---Assessment order, unexplained delay in---Reconciliation statement---Observation, non-confronting of---Taxpayer was aggrieved of charging of tax under S.161 of Income Tax Ordinance, 2001, along with imposing of surcharge by Assessing Officer for income generated through contract work---Validity---Observation of Assessing Officer was not based on facts as income tax was deducted by taxpayer and was duly reflected in reconciliation statement, which had been provided to the Assessing Officer---Observation of Assessing Officer, if any, should have been confronted to taxpayer through a specific notice under Ss.161/205 of Income Tax Ordinance, 2001, which had not been done---Assessing Officer proceeded to make assessment after a lapse of almost one year and four months which was totally ridiculous and against the provisions of law as well as norms of justice--- Appellate Tribunal set aside charge of tax under S.161 of Income Tax Ordinance, 2001, on account of 'contract work' as the same was unjustified and uncalled far---Appeal was allowed accordingly.

1971 SCMR 681; 2002 PTD 102; 2002 PTD 1496 and 2007 PTD (Trib.) 1048 ref.

Kamil Fatah, ACA for Appellants.

Tariq Iqbal, DR for Respondent.

2020 P T D (Trib.) 1809

[Inland Revenue Appellate Tribunal]

Before Justice (Retd.) Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik Technical Member

Messrs SHAHEEN FOUNDATION (PAF)

Versus

COMMISSIONER-III, SRB, KARACHI

Appeal No.AT-38 of 2019, decided on 16th May, 2019.

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

----S.55---Revision before the Commissioner---Non-filing of order-in-original---Rejection of revision by Staff Officer of Commissioner---Maxim: "Audi alteram partem"---Scope---Appellant assailed the rejection of its revision petition by the Staff Officer of Commissioner---Contention of department was that copy of order-in-original was not filed with the revision and it also suffered from various defects---Validity---Appellant was not called upon to remove the defects in the revision petition, if any---Commissioner, for exercising the power under S.55, Sindh Sales Tax on Services Act, 2011, was required to call for and examine the record of the proceedings, even if the copy of order-in-original was not filed with the revision petition---Decision was communicated to the appellant in the form of a letter signed by Staff Officer of Commissioner and not in the form of an order---Powers vested with the Commissioner under section 55, Sindh Sales Tax on Services Act, 2011, were in the nature of quasi-judicial and had to be exercised judicially and not arbitrarily---Rejection letter was set aside by the Tribunal and the revision filed by appellant was deemed to be pending before the Commissioner---Appeal was disposed of accordingly.

2004 SCMR 456 and AC v. Wateen Appeal No.109/2018 ref.

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

----Ss.55 & 57---Revision before the Commissioner---Scope---Procedure mentioned in S.57, Sindh Sales Tax on Services Act, 2011, is for filing of appeal and it is not applicable to filing of revision under S.55 of Sindh Sales Tax on Services Act, 2011.

(c) Natural justice, principles of---

----Applicability---Scope---Maxim: Audi alteram partem applies to the judicial, quasi-judicial and administrative bodies.

PLD 1997 Kar. 1 ref.

(d) Interpretation of statutes---

----Right of hearing has to be read in every statute even if it does not provide right of hearing.

PLD 1981 Kar. 311 ref.

(e) Constitution of Pakistan---

----Art.10A---Right to fair trial---Scope---Article 10A of the Constitution entitles a person to a fair trial and due process of law---"Due process of law" includes the right to be treated according to law and the right to hearing is also part of due process.

Imran Hussain for Appellant.

Zaheer Hussain AC-SRB and Syed Waqas Zaidi AC-SRB for Respondent.

2020 P T D (Trib.) 1834

[Inland Revenue Appellate Tribunal]

Before Justice (Retd.) Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik, Member Technical

The ASSISTANT COMMISSIONER, SRB

Versus

Messrs JADOON FLYING COACH SERVICES

Appeal No.AT-114 of 2018, decided on 16th April, 2019.

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

----S.3---Taxable service---Scope---Assessing officer issued show-cause notice and made assessment under tariff heading 9836.0000 on the basis of credit entries available in the bank account statement of respondent---Validity---Nothing was available with the assessing officer to connect the entries in the Bank account statement with the providing or rendering of service under Tariff Heading 9836.0000---Documents produced before Commissioner (Appeals) and Appellate Tribunal showed that the respondent was not engaged in providing or rendering services of inter-city transportation or carriage of goods by road or through pipeline or conduit---Assessing officer was required to establish that the transaction fell within the parameters of taxable service in furtherance of any taxable/economic activity, failing which the sales tax imposed on the basis of some assumption or presumption was not warranted in law---Order passed by Commissioner (Appeals) was upheld---Appeal was dismissed.

Caretex v. Collector Sales Tax and Federal Excise 2013 PTD 1536 and Al-Hilal Motors v. Collector Sales Tax 2004 PTD 868 rel.

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

----S.23---Assessment of tax---Scope---Show-cause notice is a basic document and it sets the assessment proceedings in motion and is necessary to confront the taxpayer with the grounds on the basis of which show cause notice is issued so that the taxpayer may prepare his defence accordingly---Taxpayer cannot be taken by surprise and condemned unheard---Deviation from Tariff Heading confronted in the show cause notice is violative of law.

The Collector Central Excise and Land Customs and others v. Rahirn Din 1987 SCMR 1840 rel.

Tashkeel Hussain, AC-SRB for Appellant.

Muhammad Aqeel, ITP for Respondent.

2020 P T D (Trib.) 1850

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch., Judicial Member and Dr. Muhammad Naeem, Accountant Member

Messrs ISLAM SOAP INDUSTRIES (PVT.) LTD.

Versus

COMMISSIONER INLAND REVENUE, LTU, LAHORE

I.T.A. No.2998/LB of 2019, decided on 24th February, 2020.

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

----S.122---Amendment of assessment---"Definite information"---Scope---Appellant assailed order passed by Assessing Officer whereby he had, after issuance of show-cause notice, enhanced the liabilities of appellant---Commissioner (Appeals), on appeal, had remanded the matter to the Assessing Officer for de novo consideration---Validity---"Definite information" was a pre-requisite to attract the provisions of S.122(5) of Income Tax Ordinance, 2001---Such information might have been acquired from audit or otherwise but no audit of sales tax and income tax affairs was conducted---Mere fishing and roving enquiries did not qualify the definition of "definite information"---Appellant had already provided with the return of total income as well as during re-assessment proceedings---Impugned orders were not sustainable; hence, the appellate order was vacated by the Tribunal and the order under Ss.122(1) & 122(5) of the Income Tax Ordinance, 2001, was annulled---Appeal was allowed.

2018 PTD 749 and 2019 PTD 1828 ref.

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

----S.122---Amendment of assessment---"Definite information"---Scope---"Definite information" must be manifest in the show-cause notice and must not be subsequently required to be established by fishing inquiry---Main difference between "information" and "definite" one is that in case of definite information no probe is required.

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

----S.122---Amendment of assessment---"Definite information"---Scope---If a taxpayer discloses all the material facts without any concealment and the assessment has been consciously completed, in such a case, in the absence of discovery of any new fact, which can be treated as "definite information", there cannot be any scope for re-opening the assessment under S.122(5) of the Income Tax Ordinance, 2001.

M. Imran Rashid Appellant.

Waqas Aslam, DR for Respondent.

2020 P T D (Trib.) 1876

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Dr. Muhammad Naeem, Accountant Member

Messrs PGS CONSORTIUM LTD., LAHORE

Versus

The COMMISSIONER INLAND REVENUE, RTO, LAHORE

I.T.A. No.168/LB of 2019, decided on 7th March, 2019.

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

----Ss.152, 2(54)(e) & 18(1)(c)---Avoidance of Double Taxation Treaty between Pakistan and Singapore, Arts. 7 & 12---Payments of royalty, income from business to non-residents---Business profit---Royalty---Scope---Appellant obtained Floating Storage and Re-gasification Unit (FSRU) on lease from a resident company of Singapore for a period of 15 years---Appellant, while considering that there existed Avoidance of Double Taxation Treaty between Pakistan and Singapore (Treaty) and that the income of non-resident company fell under Art. 7 of the said 'Treaty', notified the Commissioner under S.152(5), Income Tax Ordinance, 2001, for making payment to the non-resident company, without deduction of tax---Commissioner rejected the request of taxpayer for payment to non-resident without deduction of tax on the ground that 'FSRU' was an equipment and that the payment made towards right to use the equipment was chargeable to tax in Pakistan under Art.12 of the 'Treaty'---Commissioner (Appeals) upheld the order of Commissioner---Validity---Definition of royalty as given in S.2(54)(e) was general in nature whereas S.18(1)(c), Income Tax Ordinance, 2001 was a specific provision as it charged to tax income from lease of tangible movable asset---'FSRU', a ship on which re-gasification plant was fitted, was a tangible movable asset, therefore, lease income was chargeable to tax under the head "Income from Business"---'FSRU' was not an equipment, therefore, rent paid to non-resident company did not call for any deduction under Art.12 of the 'Treaty'---Payments came within the scope of Art.7 of the Treaty, hence, no tax was liable to be deducted---Appellate Tribunal allowed the appellant to make payment to the non-resident company without deduction of tax.

ITA No.2495/LB/2018 dated 30-7-2018 rel.

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

----S.107---Agreements for the avoidance of double taxation and prevention of fiscal evasion---Scope---Provisions of agreements for avoidance of double taxation override tax law.

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

----S.152---Payments to non-residents---Scope---Giving of notice to the Commissioner under S.152(5), Income Tax Ordinance, 2001, for making payment to non-resident without deduction of tax and passing of order by Commissioner under S.152(5A), Income Tax Ordinance, 2001, is directory in nature.

2010 PTD 1159 rel.

(d) Interpretation of statutes---

----Specific and general provisions---Scope---Specific provisions overrule general provisions and when two interpretations are possible, the one that favours the taxpayer is to be adopted.

1993 SCMR 1644; 2008 PTD 838; 2011 PTD 2042 and 2011 PTD (Trib.) 382 rel.

Shahid Bashir, ITP for Appellant.

Attique-ur-Rehman, (DR) for Respondent.

2020 P T D (Trib.) 1911

[Inland Revenue Appellate Tribunal]

Before Haroon Latif Khan (D&SJ), Judicial Member and Imran Hayee Khan Accountant Member

Messrs CITI BANK N.A.

Versus

COMMISSIONER HQs-PRA, LAHORE

Appeal No.71 of 2019, decided on 21st November, 2019.

(a) Punjab Sales Tax on Services Act (XLII of 2012)---

----S.48---Offences and penalties---Scope---Appellant was imposed a penalty for not providing documentary evidence---Validity---Commissioner had failed to look into the record/evidence produced before him---Reply of the appellant to show-cause notice was accompanied by copies of invoices and break up/summary of expenses in the prescribed format---Commissioner had passed the order on the same date when the reply was filed, which indicated that the documents provided by appellant were not even looked into properly---Appeal was accepted, impugned order was set aside and the case was remanded for decision afresh.

(b) Punjab Sales Tax on Services Act (XLII of 2012)---

----S.60---Powers of adjudication---Scope---Initial show-cause notice was issued by the Additional Commissioner but thereafter the proceedings were carried out by the Commissioner without mentioning any reason for the change of forum---Validity---Subsection (2) of S.60 of Punjab Sales Tax on Services Act, 2012, empowered the Commissioner to adjudicate any case falling within the jurisdiction and powers of any officer subordinate to him---Such power meant that the Commissioner could initiate proceedings which otherwise fell within the pecuniary jurisdiction of the subordinate officer but it did not mean that a case initiated by the subordinate officer could be taken up by the Commissioner without mentioning the reason for the same because same amounted to curtailment of a forum for the taxpayer.

(c) Taxation---

----No presumption or guess work is allowed to be the basis of tax demand/assessment rather the demand/assessment, essentially requires to be in exactness.

Aamir Younis ACA/AR for Appellant.

2020 P T D (Trib.) 1924

[Inland Revenue Appellate Tribunal]

Before Haroon Latif Khan (D&SJ), Judicial Member and Imran Hayee Khan, Accountant Member

Messrs PRIX PHARMACEUTICAL (PVT.) LTD.

Versus

ADDITIONAL COMMISSIONER ENF-III, PRA LAHORE

Appeal No.47 of 2019, decided on 16th October, 2019.

Punjab Sales Tax on Services Act (XLII of 2012)---

----Ss. 52, 14, 48 & 49---Recovery of tax not levied---Special procedure and tax withholding provisions---Offences and penalties---Default surcharge---Scope---Appellant assailed order passed by Commissioner (Appeals) whereby he, while adjudicating the matter in first appeal, had confirmed the tax demand under the heads 'carriage out charges', 'advertisement and printing expenses'---Validity---Commissioner (Appeals) had passed the order after detailed discussion in line with the relevant provisions of law and available documents---Appellant could not come up with any justification/supporting documents and merely reiterated its stance as stated mainly in the grounds of appeal---Appeal, being devoid of merits, was dismissed.

Shaukat Amin Shah CA for Appellant.

2020 P T D (Trib.) 1964

[Inland Revenue Appellate Tribunal]

Before Justice (Rtd.) Nadeem Azhar Siddiqi, Chairman

and Agha Kafeel Barik, Member Technical

The ASSISTANT COMMISSIONER, SRB, KARACHI

Versus

Messrs TELENOR PAKISTAN LTD.

Appeal No.AT-24 of 2019, decided on 14th May, 2019.

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

----S.3---Taxable service---Telecommunication services---Transfer of money including telegraphic transfer, mail transfer or electronic transfer---Scope---Question before Appellate Tribunal was whether the branchless Banking services provided by respondent to a Bank was a Banking service covered under Tariff Heading 98.13 or a telecommunication service under Tariff Heading 98.12---Held, respondent was providing two types of services, one was its normal telecommunication service and the other was providing funds transfer service (branchless Banking services)---Services provided by respondent to the Bank fell under Tariff Heading 9813.4600 of the Second Schedule to the Sindh Sales Tax on Services Act, 2011---Appeal was dismissed.

Vickey Dhingra, SRB for Appellant.

Arsalan Siddiqui ACMA, Tax Manager and Junaid Siddiqui, Assistant Manager Tax for Respondent.

2020 P T D (Trib.) 1980

[Inland Revenue Appellate Tribunal]

Before Justice (Rtd.) Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik, Technical Member

Messrs FUMICON SERVICES (PVT.) LTD.

Versus

ASSISTANT COMMISSIONER, SRB, KARACHI

Appeal No.AT-47 of 2018, decided on 16th October, 2018.

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

----Ss.30 & 43---Failure to furnish return within the due date---Absence of mala fide---Scope---Appellant was imposed upon a penalty under Serial No. 2 of Table under S.43 for violation of S.30 of Sindh Sales Tax on Services Act, 2011---Validity---Held, nowhere in the order-in-original the wilfulness, mala fide and mens rea of the appellant was established---Word "default" necessarily imported an element of negligence or fault and meant something more than mere non-compliance of statutory provision---Department, to establish default, had to prove that the non-compliance of statutory provision was due to some avoidable cause---Mere non-deposit of tax without element of wilfulness, mala fide or contumaciousness did not entail penalty---Appellant had tried to explain the reasons for non-payment of tax and non-filing of returns but it was prime duty of the department to prove mens rea and only then the burden could have shifted upon the appellant to explain the reason for non-filing of returns---Penalty imposed by assessing officer was set aside---Appeal was allowed.

Pakistan through Secretary Ministry of Finance and others v. Hardcastle Waud (Pakistan) Limited PLD 1967 SC 1; Commissioner of Income Tax v. Habib Bank Limited 2007 PTD 901; Deputy Collector, Central Excise and Sales Tax, Lahore v. ICI Pakistan Limited, Lahore PTD 2006 1132 and Slingshot v. AC Appeal No.AT-92/16 rel.

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

----S.43---Offences and penalties---Mens rea---Scope---Penalty can only be imposed if non-payment of tax on the part of taxpayer is proved as mala fide, wilful, contumacious and having an element of mens rea.

Abdul Sattar Adamjee, Director for Appellant in person.

Ms. Irfan Sohu, AC-SRB for Respondent.

2020 P T D (Trib.) 1988

[Inland Revenue Appellate Tribunal]

Before Mrs. Ambreen Aslam, Judicial Member

DILDAR HUSSAIN

Versus

The COMMISSIONER INLAND REVENUE, ZONE-II, RTO, HYDERABAD

I.T.A. No.444/KB of 2018, decided on 27th November, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss.140 & 182(1)(14)---Recovery of tax from persons holding money on behalf of a taxpayer---Absence of mens rea---Scope---Appellant, Branch Manager of a Bank, was imposed upon a penalty for failure to fulfill his legal obligation on receipt of notice under section 140 of Income Tax Ordinance, 2001---Validity---Appellant had marked debit block to the account of the taxpayer---Amount available in the Bank account of taxpayer at the relevant time was less than the amount mentioned in the recovery notice---Appellant being Head of compliance, vigilance and fraud risk department had sought relevant approval for the Bank audit trail and record---No mens rea was found on the part of appellant---Department had revoked the recovery notice issued to the taxpayer---Impugned order was set aside and appeal was accepted.

Syed Nayyar Raza Zaidi, ACMA for Appellant.

Abid Aziz Memon, DR for Respondent.

2020 P T D (Trib.) 1999

[Inland Revenue Appellate Tribunal]

Before Muhammad Waseem Ch. Judicial Member and Dr. Muhammad Naeem Accountant Member

Messrs ISHAQ TEXTILE MILLS LTD. FAISALABAD

Versus

COMMISSIONER INLAND REVENUE, RTO, FAISALABAD

S.T.A. No.389/B of 2019, decided on 7th February, 2020.

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

----Ss.11 & 73---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Certain transactions not admissible---Transaction on credit---Payment after 180 days of issuance of tax invoice---Scope---Appellant was held liable to pay sales tax for non-compliance of S.73 of Sales Tax Act, 1990, by making late payments to its suppliers beyond the specified period of 180 days---Validity---Appellant had made payments through banking channel in the name of alleged suppliers as required under S.73 of Sales Tax Act, 1990, but due to certain financial constraints, payments could not be made within specified time period of 180 days---Recovery of already refunded amount of sales tax on account of late payments was vacated---Appeal was accepted.

CIR (Zone-II), RTO, Faisalabad v. Messrs Chawala Enterprises, Faisalabad 2019 PTD 298 ref.

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

----Ss.11, 7 & 73---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Determination of tax liability---Inadmissible input tax---Transactions through banking channel---Scope---Appellant was held liable to pay sales tax for claiming inadmissible input tax which was not declared by the suppliers in their returns---Validity---Appellant had duly incorporated the purchase invoices in its summary statements and sales tax returns for that very tax period and the payments were transacted through bank---Any default on the part of appellant's suppliers for not showing sales or showing less sales in their respective monthly sales tax returns could not be made basis for creating sales tax liability against the appellant---Show-cause notice as well as consequents orders were set aside---Appeal was accepted.

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

----Ss.11, 7, 3 & 73---Assessment of tax and recovery of tax not levied or short levied or erroneously refunded---Determination of tax liability---Non-payment of further tax---Supplies made to registered persons---Transactions through banking channel---Scope---Appellant was held liable to pay sales tax for non-payment of further tax on account of supplies not owned by the buyers in their returns---Validity---Any default on the part of alleged registered buyers for not showing the purchases made from the appellant could not be made basis for creating tax liability against the appellant---Appellant had declared sales vis-à-vis output tax thereon in its respective monthly sales tax returns, hence, no further tax was chargeable in case of supplies made to registered persons as the provisions of S.3(1A), Sales Tax Act, 1990, were not attracted---Show-cause notice as well as consequent orders were set aside---Appeal was accepted.

2019 PTD (Trib.) 56 ref.

(d) Administration of justice---

----No one shall suffer for the act of another and nobody can be punished for the wrong of others.

S.T.A. No. 246/LB/2019 ref.

Khubaib Ahmad for Appellant.

Mrs. Sehar Aftab, D.R. for Respondent.

2020 P T D (Trib.) 2015

[Inland Revenue Appellate Tribunal]

Before M.M. Akram, Judicial Member and Nadir Mumtaz Warraich, Accountant Member

SHAHEEN FOUNDATION PAF COMPLEX, ISLAMABAD

Versus

COMMISSIONER INLAND REVENUE, LTU, ISLAMABAD

I.T.A. No.1127(IB) of 2016, decided on 20th January, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss.21, 161 & 169---Deductions not allowed---Failure to pay tax collected or deducted---Tax collected or deducted as final tax---Scope---Assessing officer disallowed the deduction of salaries paid by appellant to its employees under S.21(c), Income Tax Ordinance, 2001 for its failure to withhold tax---Validity---Appellant although claimed that its income was attributable to FTR and was exempt from tax but it did not mean that appellant was exempt from carrying out its duties as a withholding agent---Where withholdee was exempt from deduction of tax the withholding agent had to either provide a valid exemption certificate or to be covered under a specific provision of the Income Tax Ordinance, 2001 and in either condition the name of the withholdee had to be specified, yet not in general terms but each and single payment found to be below taxable limit had to be documented---Appellate Tribunal remanded the matter to the assessing officer with direction that each salary payment and its corresponding deduction of tax or otherwise be incorporated in the body of the assessment order---Appeal was disposed of accordingly.

2016 PTD 2074 and Ms. Bliz (Pvt.) Multan's case 2002 PTD 1 ref.

2009 PTD 2219 and 2010 PTD (Trib.) 2219 ref.

I.T.A. No.7174/LB of 2005 rel.

Saqib Latif, FCA for Appellant.

Dr. Muhammad Khurram, DR, for Respondent.

2020 P T D (Trib.) 2048

[Inland Revenue Appellate Tribunal]

Before Wajid Akram Accountant Member and Ch. Shahid Iqbal Dhillon, Judicial Member

Messrs HABIB SWEETS PRODUCTS FAISALABAD

Versus

The COMMISSIONER INLAND REVENUE (APPEAL), RTO, FAISALABAD

S.T.A. No.173/LB of 2019, decided on 20th September, 2019.

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

----S.11---Sales Tax Rules, 2006, R. 6---Tax not levied or short levied or erroneously refunded---Compulsory registration---Liability to pay sales tax for the period prior to registration---Scope---Appellant was found to be involved in the business of manufacturing taxable goods and making taxable supplies but had not got himself registered with the sales tax department, therefore, sales tax liability was adjudged vide order-in-original---Appeal against order-in-original was dismissed by Commissioner (Appeals)---Validity---Commissioner (Appeals) had rejected the appeal on the sole ground that since the online system of FBR indicated that the appellant was registered with the department from the year 2004, therefore, he was under legal obligation to collect and pay sales tax---Appellant was registered with the income tax department in the year 2004 whereas he was compulsorily registered with the sales tax department in the year 2017---Liability of sales tax was created against the appellant through show cause notice for the date much prior to registration---Demand of sales tax created against the appellant for the periods prior to sales tax registration was illegal and unlawful---Appeal filed by registered person against impugned orders was accepted.

Commissioner Inland Revenue, Gujranwala v. M/s. S.K. Steel Casting, Gujranwala 2019 PTD 1493 rel.

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

----S.11---Sales Tax Rules, 2006, R.6---Tax not levied or short levied or erroneously refunded---Compulsory registration---Liability to pay sales tax for the period prior to registration---Scope---Demand of sales tax created against a registered person for the periods prior to sales tax registration is illegal and unlawful.

Commissioner Inland Revenue, Gujranwala v. Messrs S.K. Steel Casting, Gujranwala 2019 PTD 1493 rel.

(c) Taxation---

----Person can be taxed only if he comes within the letter of law otherwise, he is free even though his case falls within the spirit of law.

Khubaib Ahmad for Appellant.

M. Ali Taj, D.R. for Respondent.

2020 P T D (Trib.) 2058

[Inland Revenue Appellate Tribunal]

Before Imran Hayee Khan, Accountant Member and Haroon Latif Khan, Judicial Member

Messrs PAKISTAN STATE OIL LTD.

Versus

ADDITIONAL COMMISSIONER ENF-III, PRA, LAHORE

Appeal No.89 of 2018, decided on 9th December, 2019.

(a) Punjab Sales Tax on Services Act (XLII of 2012)---

----S.14---Special procedure and tax withholding provisions---Withholding agent, determination of---Scope---Appellant was taxed for its failure to withhold/deduct and deposit the due amount of sales tax on services---Question whether the appellant was a withholding agent or not went to the root of the cause but neither such ground was raised before the forums below nor was it decided---Court of law was duty bound to attend and decide the questions of law even if not raised by the parties---Order passed by Commissioner (Appeals) was set aside and the case was remanded to the competent officer for decision afresh---Appeal was accepted.

2017 SCMR 1136 - 2017 PTD 1372 ref.

(b) Punjab Sales Tax on Services Act (XLII of 2012)---

----Ss.66 & 67---Appeal to Appellate Tribunal---Disposal of appeals by the Appellate Tribunal---Additional ground---Scope---Appellant sought permission to submit additional grounds of appeal---Validity---No specific provision dealt with the question of allowing the submission of additional grounds of appeal---Had it been the intention of legislature to bar the jurisdiction of the Appellate Tribunal on such issue, a specific provision barring the same would have been inserted in the Punjab Sales Tax on Services Act, 2012 or Rules made thereunder---Appellate Tribunal allowed the appellant to submit additional grounds.

2002 PTD 541; 2018 PTD 314; 2017 SCMR 1136 - 2017 PTD 1372; Judgement of ATIR dated 25.02.2018 Judgement of ATIR dated 09.05.2018; PLD 1958 Lah. 63; PLD 2004 SC 860; 2003 PTD 577 and 1994 PTD 1728 ref.

(c) Administration of justice---

----Question of law---Scope---No bar exists to raise legal questions at any stage of the proceedings and before any forum.

(d) Administration of justice---

----Duty of court---Scope---Court of law is duty bound to attend and decide the questions of law even if not raised by the parties.

Asim Zulfiqar Ali FCA, for Appellant.

2020 P T D (Trib.) 2065

[Inland Revenue Appellate Tribunal]

Before Shahid Masood Manzar, Chairman and Nadir Mumtaz Warraich, Accountant Member

NEELUM STEEL INDUSTRIES, HATTAR

Versus

COMMISSIONER INLAND REVENUE, RTO, ABBOTTABAD

S.T.A. No.224/IB of 2018, decided on 6th May, 2019.

Sales Tax Act (VII of 1990)---

----S.7---Sales Tax Special Procedures Rules, 2007, R.58H---Determination of tax liability---Payment of sales tax by Steel Re-Rollers---Scope---Commissioner Inland Revenue issued show-cause notice to the appellant stating therein that as per R. 58H(2C) of Sales Tax Special Procedures Rules, 2007, adjustment of sales tax paid on imported remeltable iron and steel scrap against the sales tax payable through electricity bills was admissible only to "steel melters", therefore, appellant was liable to pay sales tax in cash---Contention of appellant was that it was covered under R. 58H(1) of Sales Tax Special Procedures Rules, 2007, which provided that every steel melter, steel re-roller, composite unit of melting, re-rolling and MS cold drawing and composite unit of steel melting and re-rolling (having a single electricity meter) would pay sales tax at the rate of ten and a half rupees per unit of electricity consumed, which would be considered as their final discharge of sales tax liability---Validity---Payment of sales tax according to the prescribed tax rates along with electricity bills constituted full and final payment of tax liability in case of steel re-roller---No further tax liability could be created---Appellant's claim was in conformity with the relevant provisions of law---Assessment order was vacated and the demand under appeal was deleted---Appeal was disposed of accordingly.

Ch. Naeem Ul Haq for Appellant.

Zaheer Qureshi, DR for Respondent.

2020 P T D (Trib.) 2087

[Inland Revenue Appellate Tribunal]

Before Justice (Rtd.) Nadeem Azhar Siddiqi, Chairman

ASSISTANT COMMISSIONER, SRB, KARACHI

Versus

Messrs BATA PAKISTAN LIMITED

Appeal No.AT-15 of 2018, decided on 16th August, 2018.\

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

----Ss.23 & 47---Assessment of tax---Recovery of tax not levied or short-levied---Scope---Assessing officer determined the sales tax to be payable by respondent on finding that the respondent had paid trade mark fee and management services fee on account of franchise services---Commissioner (Appeals) set aside the order-in-original by holding that respondent's place of business did not exist in Sindh and that both services were being received in another Province---Validity---Assessing officer had failed to consider the place where the respondent had acquired the services and where such services were used---Department had failed to establish that the franchise services were exclusively acquired within the territory of Sindh and such services were exclusively used for manufacturing in Sindh---Respondent had not disputed that its retail outlets were spread over in the entire province of Sindh---Services acquired by respondent were partly used in retailing and marketing in Sindh---Both the forums below had failed to consider such aspect of the case---Order-in-original and order-in-appeal were set aside, in circumstances---Case was remanded to the assessing officer to determine as to what part or portion of services acquired by the respondent were used in marketing and retailing in Sindh---Appeal was allowed.

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

----S.3---Federal Excise Act (VII of 2005), S. 3---Constitution of Pakistan, Art. 270AA---Taxable service---Declaration and continuance of laws, etc---Scope---Respondent on being called upon to pay sales tax contended that it had paid tax to the Federal Board of Revenue (FBR) under Federal Excise Act, 2005---Validity---Provisions of Federal Excise Act, 2005, related to the levy of excise duty on the rendering or providing of services became ultra vires the Constitution of Pakistan after coming of Sindh Sales Tax on Services Act, 2011 into force---Payment to FBR had no relevance and in case the tax was payable in Sindh and the same was deposited with the FBR or some other authority it could not absolve the respondent from its liability to pay Sindh Sales Tax.

Pakistan International Freight and Forwarders Association v. Province of Sindh and another 2017 PTD 1 fol.

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

----S.4---Economic activity---Scope---For levying tax it is essential that an economic activity was carried on that involved or intended to involve provision of services to another person. [p. 2092] B

Turab Ali, AC, SRB for Appellant.

Mehmood Arif for Respondent.

2020 P T D (Trib.) 2103

[Inland Revenue Appellate Tribunal]

Before Justice (Retd.) Nadeem Azhar Siddiqi, Chairman

Messrs KASHAF FOUNDATION, LAHORE

Versus

COMMISSIONER (APPEALS-I), SRB, KARACHI and another

Appeal No.AT-63 of 2019, decided on 26th August, 2019.

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

----Ss.24B & 43---Compulsory registration---Imposition of penalty---Failure to justify imposition of maximum penalty---Effect---Appellant, being a non-banking finance company, was compulsorily registered under S.24B of the Sindh Sales Tax on Services Act, 2011---Validity---Tariff heading No. 9813.8100 was a sub-heading under Tariff Heading No. 98.13 for taxing the services provided by the institutions mentioned therein and non-banking financial institution was one of the listed institutions---Appellant was rendering taxable services in the Province and since it had failed to get itself voluntarily registered, therefore, it was compulsorily registered under S.24B of the Sindh Sales Tax on Services Act, 2011---Assessing Officer, while imposing penalty, had not discussed as to why the maximum penalty was imposed instead of minimum penalty---Appellate Tribunal observed that where two types of penalties were provided, the Assessing Officer was duty bound to justify the imposition of maximum penalty---Appellate Tribunal partly allowed the appeal and reduced the penalty.

Messrs Zarai Taraqiati Bank Limited v. The Commissioner, SRB, Appeal No. AT-51 of 2014; Citi Bank's case 2014 PTD 284 and Habib Safe Deposit Vault v. Province of Sindh 2016 SCMR 484 rel.

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

----Ss.24 & 24B---Registration---Compulsory registration---Scope---Section 24 of the Sindh Sales Tax on Services Act, 2011 provides that registration shall be required for all persons who are residents and provide services, listed in the Second Schedule, from their registered office or place of business in the province---Section 24B, Sindh Sales Tax on Services Act, 2011 provides that if a person is required to be registered under the Act and that person has not applied for registration, the officer of the Provincial Revenue Board shall, after such enquiry as may deem fit and after notice, register the person through an order to be issued in writing and such person shall be deemed to have been registered from the date he became liable to registration.

Muhammad Umer ITP for Appellant.

Kaleemullah Siddiqi, AC-DR, SRB for Respondent.

2020 P T D (Trib.) 2115

[Inland Revenue Appellate Tribunal]

Before Mrs. Ambreen Aslam, Judicial Member and Saifullah Khan, Accountant Member

COMMISSIONER-IR, ZONE-I, LTU, KARACHI

Versus

Messrs INTERNATIONAL BRAND (PVT.) LTD. KARACHI

I.T.A. No.609/KB of 2015, decided on 10th October, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss.147 & 113---Advance tax paid by the taxpayer---Minimum tax on the person of certain persons---Scope---Deputy Commissioner Inland Revenue (DCIR) charged default surcharge to the taxpayer for the reason that the taxpayer failed to pay advance tax under S.147, Income Tax Ordinance, 2001, on account of tax paid under S.113, Income Tax Ordinance, 2001---Appeal filed by taxpayer was allowed---Validity---Assessment year under consideration was 2004 and in that year companies were required to pay advance tax on the basis of tax assessed for the latest tax year---Advance tax liability in terms of S.113 of Income Tax Ordinance, 2001 was inserted through S.147(4AA) of Income Tax Ordinance, 2001 in the year 2009---Impugned order did not require interference---DCIR had unjustly observed that short payments were made in quarterly advance tax payments---Appeal was dismissed.

Arslan, DR for Appellant.

Mrs. Asra Rauf, FCA for Respondent.

2020 P T D (Trib.) 2131

[Inland Revenue Appellate Tribunal]

Before Justice (Retd.) Nadeem Azhar Siddiqi, Chairman

Messrs TICS (PVT.) LTD.

Versus

ASSISTANT COMMISSIONER, SRB, KARACHI

Appeal No.AT-19 of 2018, decided on 15th August, 2018\

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

----Ss. 3, 9 & 30---Taxable service---Person liable to pay tax Return---Failure to furnish return---Scope--- Department during scrutiny of withholding statements of different companies found that they had received taxable service from the appellant for which appellant had collected service tax but the same was not deposited with the department, therefore, Assistant Commissioner ordered its recovery---Validity---Appellant had charged service tax on invoices and the recipients of service after deducting 20% tax had forwarded the remaining tax to the appellant and the appellant was liable to deposit the same with the department---Appellant although had claimed that it had deposited tax with the revenue authority of another Province, but it could not be treated as valid deposit of tax---Appellant had provided services in Sindh and it was liable to deposit the same with the Sindh Revenue Board---Appeal was dismissed.

Muhammad Umer, ITO for Appellant.

Ms. Ambreen Fatima, AC, SRB for Respondent.

2020 P T D (Trib.) 2146

[Inland Revenue Appellate Tribunal]

Before Haroon Latif Khan, Judicial Member and Imran Hayee Khan, Accountant Member

Messrs INTERLOOP LTD.

Versus

COMMISSIONER FAISALABAD PRA, LAHORE

Appeal No.99 of 2019, decided on 22nd October, 2019.

(a) Punjab Sales Tax on Services Act (XLII of 2012)---

----Ss.66, 67 & 60---Appeal to the Appellate Tribunal---Powers of adjudication---Scope---Appellant assailed order passed by Commissioner on the ground that the Appellate Tribunal had remanded the case to the Additional Commissioner therefore, Commissioner had no authority to pass the impugned order---Validity---Appellate Tribunal, while remanding the case, had made specific directions that the matter would be heard by the first forum i.e. the assessing officer (Additional Commissioner)---Appellate Tribunal had further directed that the observations made by the Tribunal would be taken into consideration and a speaking order would be passed but none of the directions were complied with---Commissioner had circumvented the jurisdiction of the assessing officer and issued fresh show cause notice without having any need for the same---Reference to S.60(2) of Punjab Sales Tax on Services Act, 2012 was of no avail as the case was one of non-compliance of specific direction made by the Appellate Tribunal---Appellate Tribunal set aside the order passed by Commissioner and remanded the case to the Additional Commissioner for decision afresh.

1990 PTD 948; PLD 2005 SC 605; PLD 2016 SC 808 = 2016 PTD 2269; 2013 PTD (Trib.) 2130 and 2017 SCMR 197 = 2017 PTD 1540 ref.

(b) Administration of justice---

----Action by Authority must be taken in the manner as provided or directed by the law.

Hashim Aslam Butt for Appellant.

2020 P T D (Trib.) 2163

[Inland Revenue Appellate Tribunal]

Before M.M. Akram, Judicial Member

COMMISSIONER INLAND REVENUE (LEGAL DIVISION), LTU, ISLAMABAD

Versus

Messrs OPI GAS PRIVATE LIMITED, ISLAMABAD

I.T.A. No.565-A/IB of 2015, decided on 17th February, 2020.

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

----Ss.120(1), 122 & 221---Assessment and rectification---Principle---Assessment under S.120 of Income Tax Ordinance, 2001 filed by taxpayer was not accepted by department and notice under S.221 of Income Tax Ordinance, 2001, was issued---Validity---Section 120(1) of Income Tax Ordinance, 2001, created fiction of deemed assessment but did not create fiction of deemed mistake contagiously to resort to S.221 of Income Tax Ordinance, 2001---Word 'mistake' was peculiar to human actions taken with application of mind and must not be given extended scope in situations where an act was performed in a mechanical manner or was deemed to have been performed under any fiction of law---Words 'an assessment order treated as issued under S.120" used in S.221 of Income Tax Ordinance, 2001, were distinguishable from the words used in S.221 of Income Tax Ordinance, 2001, which said, 'any order passed by him'---Act of passing of formal order by any officer of Inland Revenue presupposed an application of mind and in most cases adjudication on merits after hearing the parties--- Marked distinction existed between "deemed order" and the "order passed by the authority after fully applying its mind and giving proper opportunity of being heard to the person"---Provision of S.221 of Income Tax Ordinance, 2001 could not be invoked in respect of an assessment order treated to have been issued under S.120(1)(b) of Income Tax Ordinance, 2001---If at all Commissioner deemed it necessary to make an amendment in "deemed order" passed under S.120(1)(b) of Income Tax Ordinance, 2001, the same could have to be done by invoking provisions of S.122 of Income Tax Ordinance, 2001---Appellate Tribunal Inland Revenue annulled orders passed by both forums below---Appeal was allowed accordingly.

PLD 1970 SC 29; CIT, Zone-C, Lahore v. Haroon Medical Store, Sheikhupura 2003 PTD 1530; PLD 1964 SC 410; CIT Karachi v. Shadman Cotton Mills Ltd., Karachi 2008 PTD 253 and CIT v. National Foods Laboratories 1992 SCMR 687 ref.

(b) Interpretation of statutes---

----Redundancy---Applicability---Every word used in a statue has to be given effect to and no word of provisions of a statute is to be treated as surplusage and redundant--- Letter of law has to be interpreted in the sense it has been used and expressed--- Words used are to be construed in their ordinary and natural sense.

East and West Steambship Co. v. Queensland Insurance Co. Ltd. PLD 1963 SC 395 and Jalal Muhammad Shah v. Federation of Pakistan PLD 1999 SC 395 rel.

(c) Interpretation of statutes---

----Taxing statute---Benefit---Where provision in a taxing statute can be reasonably interpreted in two ways, interpretation which is favourable to the assessee has to be accepted.

CIT v. Naga Hills Tea Co. Ltd. AIR 1973 SC 2524; Sun Export Corporation v. Collector of Customs (1997) 6 SCC 564 and Messrs Ibrahim Fibers Limited v. Federation of Pakistan and others W.P. No.13284 of 2012 rel.

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

----S.221---Rectification---Principle---If a 'mistake apparent on the face of record' is brought to the notice, S.221 of Income Tax Ordinance, 2001, empowers authorities and Tribunal to amend the order passed under S.221 of Income Tax Ordinance, 2001---Amendment of an order does not mean obliteration of order originally passed and as substitution by a new order.

Asad Bilal, DR for Appellant.

Muhammad Waheed Iqbal, FCA for Respondent.

2020 P T D (Trib.) 2189

[Inland Revenue Appellate Tribunal]

Before M.M. Akram, Judicial Member

M. TARIQ PROPRIETOR, RAWALPINDI

Versus

The COMMISSIONER INLAND REVENUE, ZONE-II, RTO, RAWALPINDI

I.T.A. No.414/IB of 2015, decided on 10th February, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss.121(1)(d), 122(9), 127, 131 & 221---Rectification---Appeal, pendency of---Merger, doctrine of---Scope---Taxpayer was aggrieved of show-cause notice issued by authorities to conduct audit---During pendency of appeal, Appellate Authority decided rectification application--- Validity---Provision of S.221 of Income Tax Ordinance, 2001, was restricted to rectify a mistake which must be apparent from record--- Scope of rectification could not be construed as that of a statutory right of appeal provided under Ss. 127 & 131 of Income Tax Ordinance, 2001---When appeal was pending before a superior forum, application for rectification on the same subject at the same time could not be entertained by a subordinate forum as a rule--- Appeal filed by authorities earlier was dismissed by Appellate Tribunal Inland Revenue whereby earlier order passed by Appellate Authority was confirmed and no reference under S.133 of Income Tax Ordinance, 2001, was filed against said order of Appellate Tribunal Inland Revenue--- Such earlier order of Appellate Tribunal Inland Revenue had attained finality in terms of S.132(10) of Income Tax Ordinance, 2001--- On the basis of doctrine of merger the earlier order of Appellate Authority was merged in the order of Appellate Tribunal Inland Revenue--- Doctrine of merger was based on the principle that at one and the same time not more than one order could be operative--- Appellate Tribunal Inland Revenue set aside order passed by Appellate Authority as application for rectification was not maintainable and authorities could not avail two parallel remedies for same relief--- Appeal was allowed in circumstances.

Industrial Equipment Company Chandigarh v. Income Tax Appellate Tribunal and another Civil Writ Petition No.25152 of 2013; Mrs. Amina Bibi v. Nasrullah 2000 SCMR 296; Trading Corporation of Pakistan v. Devan Sugar Mills Limited and others PLD 2018 SC 828; Daan Khan (deceased) through Legal Heirs v. Assistant Collector (Notified), 2019 CLC 483; Jai Singh v. Union of India and others AIR 1977 SC 898; Chemech Engineers (Pvt.) Ltd. v. The Director of Industries and others AIR 1994 Mad. 14 and Sahabzadi Maharunisa and another v. Mst. Ghulam Sughran and another PLD 2016 SC 358 rel.

Muhammad Bilaluddin Butt for Appellant.

Zaheer Qureshi, DR for Respondent.

2019 P T D 7

[Islamabad High Court]

Before Miangul Hassan Aurangzeb, J

Messrs HONGKONG HUIHUA GLOBAL TECHNOLOGY LTD.

Versus

FEDERATION OF PAKISTAN through Secretary Ministry of Finance, Revenue Division and others

W.P. No.3448 of 2017, decided on 30th September, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 2(41)(c), 101, 122-B & 152(2A)(7)(a) [as amended by Finance Act (XXX of 2018)]---Exemption---Foreign supplies and local services--- Pakistan-source income--- Petitioner was an international company having its permanent office in Pakistan and was awarded a contract for which supplies and services were sought from both foreign and domestic sources--- Petitioner sought issuance of tax exemption certificate but same was concurrently denied by Commissioner Inland Revenue and Chief Commissioner Inland Revenue--- Validity--- Petitioner who was a non-resident entity had a permanent establishment in Pakistan, therefore, respondent/authority while making payment of contract price (whether for local supplies or for supply of equipment from abroad) shall at time of making payment, deduct tax from gross amount payable in accordance with S. 152(2A) of Income Tax Ordinance, 2001--- Supply was not made between associates and it was also not made by resident person or Pakistan permanent establishment of non-resident person---Section 152(7)(a)(iii) and (iv) of Income Tax Ordinance, 2001 was not applicable in circumstances---Matter pertaining to supply of equipment from abroad by petitioner to respondent/Authority in furtherance of contract for which payment was made through letter of Credit in foreign country did not fall in any of exceptions enumerated in S.152(7)(a)(i) to (iv) of Income Tax Ordinance, 2001---Inland Revenue Authorities had rightly turned down application of petitioner for exemption from deduction of tax under S.152(5) of Income Tax Ordinance, 2001--- High Court declined to interfere in concurrent orders passed against petitioner as they did not suffer from any procedural impropriety---Constitutional Petition was dismissed in circumstances.

Cress LPG (Pvt.) Ltd. through Authorized Representative v. M.T. Maria III through Master/Chief Engineer/ Chief Officer and others 2018 CLD 972; Tahir Zaman v. Jin Wei (M) SDN BHD and others 2004 CLD 603; Commissioner, Sindh Employees Social Securities Institution and another v. Messrs E.M. Oil Mills and Industries Ltd., S.I.T.E., Karachi and 2 others 2002 SCMR 39; Quetta Textile Mills v. Pakistan through Secretary, Ministry of Finance 2000 YLR 2683; Federation of Pakistan through Ministry of Finance and others v. Messrs Noori Trading Corporation (Private) Limited and 14 others 1992 SCMR 710; Pir Bakhsh v. Chairman, Allotment Committee PLD 1987 SC 145; Ishikawajma Harima Heavy Industries Limited v. Director of Income Tax, Mumbai AIR 2007 SC 929; Linde AG, Linde Engineering Division and another v. Deputy Director of Income Tax 2014 Indlaw DEL 1504, [2014] 365 ITR 1 and Rameshwar Prasad and others v. State of Uttar Pradesh and others AIR 1983 SC 75 ref.

Salman Akram Raja, Malik Muhammad Sabir and Barrister Asad Ladha for Petitioner.

Barrister Umer Aslam Khan for Respondents Nos.2 to 4.

Nadeem Hassan Gondal for Respondent No.5.

Muhammad Faheem, Deputy Commissioner (IR), LTU, Islamabad.

2020 P T D 110

[Islamabad High Court]

Before Aamer Farooq, J

Messrs PAKISTAN OILFIELDS LIMITED through General Manager

Versus

FEDERATION OF PAKISTAN through Ministry of Finance and 4 others

Writ Petitions Nos.1750 of 2015, 1061 of 2016 and 1453 of 2019, decided on 16th September, 2019.

(a) Constitution of Pakistan---

----Art. 199--- Constitutional petition--- Maintainability--- Show-cause notice--- Exceptions--- General rule is that a Constitutional petition under Art.199 of the Constitution is not maintainable against show-cause notice---Certain exceptions existed against such general rule---Exceptions under which Constitutional petition against a show-cause notice is maintainable are where notice in question is without jurisdiction/lawful authority, is non-est in eyes of law, patently illegal, issued with premeditation or without application of mind for extraneous reasons; where aggrieved person does not have adequate and efficacious remedy; issues of show-cause notice violate any Fundamental Rights of aggrieved person and where there is an important question of law that requires interpretation of any fiscal law or any other substantive law.

The Special Director and another v. Mohd. Ghulam Ghouse and another AIR 2004 SC 1467 = (2004) 3 SCC 440; State of Uttar Pradesh v. Brahma Datt Sharma and another AIR 1987 SC 943; The Executive Engineer, Bihar v. Ramesh Kumar Singh and others 1996 SCC (1) 327 = AIR 1996 SC 691; Messrs Siemens Ltd. v. State of Maharashtra and others (2006) 12 SCC 33; The Secretary, Ministry of Defence and others v. Prabhash Chandra Mirdha AIR 2012 SC 2250; Union of India and another v. Kunisety Satyanarayana AIR 2007 SC 906 = (2006) 12 SCC 28; Pushpanjali Silk Private Limited v. The Chief Commissioner of Customs, Custom House No.60, Rajaji Salai, Chennai (2006) 4 MLJ 968; Electrolux Kelvinator Ltd. v. Union of India and others RLW 2005 (3) Raj 1949 = 2005 (3) WLC 743; Rameshwar Dass Aggarwal v. MCD and others (W.P. (C) 1932/2010 and CM No.3845/2010; Namrata Marketing (Pvt.) Ltd. v. Competition Commission of India and others Writ Petition No.42783 of 2013; Messrs Bajaj Auto Ltd. v. Union of India and 3 others 2014 (4) ECS (11) (HC) and Bhunesh Mishra v. State of U.P. and others 1998 (2) AWC 990 rel.

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

----Ss. 120 & 122--- Constitution of Pakistan, Art. 199--- Constitutional petition--- Show-cause notice---Efficacious and alternate remedy--- Pendency of tax reference--- Taxpayer assailed show-cause notice issued by authorities on grounds that tax reference was pending before High Court--- Validity--- Mere pendency of tax references was no bar for notice issuing authority to proceed further in the matter and/or petitioner agitated matter directly before High Court--- High Court declined to exercise Constitutional jurisdiction under Art. 199 of Constitution---Constitutional petition was dismissed in circumstances.

Messrs Shamim and Co. v. Tehsil Municipal Administration, Multan City through Nazim and 2 others 2004 YLR 366; Bank of Punjab through Group Head of its Special Projects v. Accountability Court No.1, Lahore and 2 others PLD 2014 Lah. 92; Attock Cement Pakistan Ltd. v. Collector of Customs, Collectorate of Customs and Central Excise, Ouetta and 4 others 1999 PTD 1892; Iqbal Hussain through Authorized Attorney v. Federation of Pakistan through the Secretary, Revenue Division and 2 others 2010 PTD 2338; Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232; Collector of Customs, Multan v. Muhammad Tasleem 2002 MLD 296; Engro Vopak Terminal Ltd. through Manager Finance and Corporate Service, Karachi v. Pakistan through Secretary Finance, Islamabad and another 2012 PTD 130; Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVII South Zone, Karachi and others 1992 SCMR 250 = 1992 PTD 1; Karachi Bulk Storage and Terminals (Pvt.) Ltd. v. Collector of Central Excise and Land Customs and others 2011 PTD 2103; Messrs Usmania Glass Sheet Factory Limited, Chittagong v. Sales Tax Officer, Chittagong PLD 1971 SC 205; Nagina Silk Mill, Lyallpur v. The Income Tax Officer, A-Ward Lyallpur and another PLD 1963 SC 322; Rishad Choudri and another v. Cantonment Board, Karachi and another PLD 2014 Sindh 1; Pakistan Broadcasters Association and 7 others v. Pakistan Electronic Media Regularity Authority and another 2014 CLC 197; Nadeem Ellahi through Special Attorney v. Deputy District Officer and another 2011 MLD 1961; C.I.T. Gujarat v. Vijaybhai N. Chandrani (2013) 14 SCC 661; Attock Cement Pakistan Ltd. v. Collector of Customs, Collectorate of Customs and Central Excise, Quetta and 4 others 1999 PTD 1892; Messrs Ocean Pakistan Ltd. v. Federal Board of Revenue, Islamabad and others 2012 PTD 1374 and United States v. Clarke and others 573 US (2014) ref.

Ali Sibtain Fazli, Malik Sardar Khan, Abad ur Rehman, Hafiz Muhammad Idrees and Muhammad Mohsin Nazir for Petitioner.

Syed Ishfaq Hussain Naqvi and Babar Bilal for Respondents.

2020 P T D 568

[Islamabad High Court]

Before Aamer Farooq and Lubna Saleem Pervez, JJ

Messrs HUMAK ENGINEERING (PVT.) LTD. through CEO

Versus

The MODEL COLLECTORATE OF CUSTOMS (MCC), ISLAMABAD through Collector and 4 others

Customs Reference No.43 of 2017, heard on 18th December, 2019.

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

----Ss. 196 & 176---Adjudication, power of---Order passed after stipulated time---Effect---Petitioner assailed order-in-original passed by Collector of Customs (Adjudication) whereby he, after issuance of show cause notice, had ordered recovery of short payment of customs duty as confronted in show-cause notice---Appeal preferred before Customs Appellate Tribunal was dismissed solely on the ground that the appeal was hit by limitation as same was filed after 102 days---Validity---Order-in-original was a time-barred order---Officer of Customs was bound to pass order within the stipulated time period---Collector could not extend time according to his choice and whim, he could only do so by applying his mind after recording reasons for such extension---Order passed beyond the stipulated period was invalid---Order passed by Appellate Tribunal was not sustainable in the eyes of law---Reference was disposed of in favour of the petitioner.

The Collector of Sales Tax Gujranwala and others v. Super Asia Muhammad Din and Sons 2017 SCMR 1427 = 2017 PTD 1756 foll.

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

----S. 196---Reference to High Court---Scope---Question relating to fundamental rights enshrined in the Constitution cannot be agitated in Reference/advisory jurisdiction of High Court as the scope of advisory jurisdiction is limited to the extent of questions of law arising out of the order passed by Appellate Tribunal.

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

----S. 196---Reference to High Court---Scope---Legal proposition settled by the Supreme Court do not require determination by the High Court in Reference/advisory jurisdiction.

Farhat Nawaz Lodhi for Applicant.

Ms. Farah Yasmin for Respondents.

2020 P T D 776

[Islamabad High Court]

Before Mohsin Akhtar Kayani and Lubna Saleem Pervez, JJ

COLLECTOR SALES TAX AND FEDERAL EXCISE, PESHAWAR

Versus

Messrs FLYING KRAFT PAPER MILLS (PVT.)

LIMITED, CHARSADA and another

Sales Tax Reference No. 14 of 2008, decided on 11th March, 2020.

(a) Words and phrases---

----"Residence", meaning of---"Residence" was act or duration of dwelling in a place; or living in place required by regulations or performance of functions; a stay in a place, a dwelling-house, especially one of pretension that in which anything permanently inhered or had its seat---"Residence" could also be defined as bodily presence as an inhabitant in a given place, and required intention to make such place one's home---Person may have more than one residence at a time but only one domicile---"Residence" was also defined as a house or other fixed abode, a dwelling and place where a corporation or other enterprise did, or was registered to do, business.

The Chamber Dictionary 10th Edition 2006 and Black's Law Dictionary 8th Edition 2004 rel.

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

----Ss. 7, 8 & 47---Determination of sales tax liability---Input tax adjustment---Taxable supplies---Manufacturing unit---Utility Bills---Residential colony located within premises of manufacturing unit---Question before High Court was whether taxpayer which was a manufacturing unit, could claim input tax adjustment on payment of utility (Gas and Electricity) bills consumed in its labour residential colony---Contention of Department, inter alia, was that electricity and gas used by labour residential colony could not be termed as "taxable supplies", and would not attract lawful adjustment on input tax against sales tax paid on such utility bills---Validity---Residential accommodation to labour was located within premises of factory of taxpayer which had been provided to workers engaged in process of manufacturing of taxable goods, thus cost of consumption of utilities by such workers were directly connected with taxable activity and were considered to be direct manufacturing expenditure in relation to cost of goods---Meters of electricity and gas were in taxpayer's name and were paid on basis of commercial rates---High Court observed that S.7 of Sales Tax Act, 1990, being a beneficial provision, was to be interpreted liberally in favour taxpayer and held that all such utility bills were legally entitled to be adjusted as input tax for determination of tax liability under S. 7 of Sales Tax Act, 1990---Reference was answered, accordingly.

Karachi Shipyard and Engineering Works Limited v. Government of Pakistan 2010 PTD 1652 and Shiekoo Sugar Mills v. Government and Pakistan and others 2001 PTD 2097 = 2001 SCMR 1376 rel.

Dr. Farhat Zafar for Applicant.

Malik Qamar Afzal for Respondent.

2020 P T D 1252

[Islamabad High Court]

Before Miangul Hassan Aurangzeb and Fiaz Ahmad Anjum Jandran, JJ

COMMISSIONER INLAND REVENUE, LEGAL DIVISION, REGIONAL TAX OFFICE, ISLAMABAD

Versus

Messrs PAK STEEL RE-ROLLING MILLS

Tax Reference Applications Nos.127 to 131 of 2011, decided on 13th May, 2020.

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

----S.133---Reference to High Court---Jurisdiction of High Court under S.133 of the Income Tax Ordinance, 2001---"Question of law"---Meaning---Scope---"Question of law" was a question which court was bound to answer in accordance with a rule of law and also meant a question as to what law was---Question of law could also be taken to mean what the law was on a particular point, which provision of law was applicable to a particular factual situation and what true rule of law was on a certain matter.

Messrs Pakistan Television Corporation Limited v. Commissioner Inland Revenue (Legal) LTU Islamabad and others 2017 SCMR 1136 rel.

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

----Ss.85, 108, 109 & 133---Income tax provisions in relations to persons and association of persons---Tax avoidance---Transactions between associates---Recharacterization of income and deductions---Question before High Court was whether two Association of Persons ("AOPs") having the same partners with the same percentage, complete common ownership and same nature of business, were liable to be assessed jointly for purposes of income tax assessment---Held, that Department, in the present case, had itself allotted independent / separate National Tax Numbers (NTNs) to the two "AOPs" and nature of their business was distinct --- Department had itself acknowledged separate significance of said "AOPs" by not disallowing salary expense of either "AOP"---Separate income tax assessment of said "AOPs" was therefore justified---Reference was answered, accordingly.

Messrs Pakistan Television Corporation Limited v. Commissioner Inland Revenue (Legal) LTU Islamabad and others 2017 SCMR 1136 and Commissioner Inland Revenue (Legal), Islamabad v. Messrs WI-TRIBE Pakistan Ltd. Islamabad 2020 SCMR 420 rel.

Saeed Ahmed Zaidi for Petitioner.

Sardar Abdul Wahab for Respondent.

2020 P T D 1275

[Islamabad High Court]

Before Aamer Farooq and Lubna Saleem Pervez, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, RAWALPINDI and others

Versus

Messrs DANDOT CEMENT COMPANY LTD., LAHORE and others

T.As. Nos.13 of 2003, 85 and 91 of 2002, decided on 14th January, 2020.

Sales Tax Act (VII of 1990)---

----Ss.47 & 30---Appeal to High Court under S.47 of the Sales Tax Act, 1990---Persons competent to file appeal---Jurisdiction defect---"Law officer" filing / verifying appeal on behalf of Department---Scope---Legislature for purposes of instituting appeal under S. 47 of the Sales Tax Act, 1990 had specifically assigned such responsibility to Collector and made him competent authority and thus neither he could delegate nor any other person / officer could substitute for Collector without Legislative approval to sign, verify and file appeal before High Court---Under S.30 of the Sales Tax Act, 1990 no officer had been listed as "law officer", therefore such officer could not sign, verify and file appeal on behalf of Department under S. 47 of Sales Tax Act, 1990.

Director Directorate General of Intelligence and Investigation, Customs and Excise, Karachi v. Al-Faiz Industries (Pvt.) Ltd., 2004 PTD 2987 and 2006 SCMR 129 rel.

Dr. Farhat Zafar for Appellant (In all Cases).

Ms. Shaista Altaf for Respondents (in T.A. No.13 of 2003).

Farhat Nawaz Lodhi and Sajid Ijaz Hotiana for Respondents (in T.A. No.85 of 2002).

2020 P T D 1316

[Islamabad High Court]

Before Miangul Hassan Aurangzeb, J

TERADATA IRELAND LIMITED and another

Versus

FEDERATION OF PAKISTAN through Secretary Finance and 4 others

Writ Petition No.3056 of 2016, decided on 2nd June, 2020.

(a) Interpretation of documents---

----Construction of agreements / contracts---Scope---Agreement was to be interpreted by reading the same as a whole and not by picking and choosing a particular paragraph or portion thereof.

Aurangzeb through L.Rs. v. Muhammad Jaffar 2007 SCMR 236; Raja Ali Shan v. Messrs Essem Hotel Limited 2007 SCMR 741; Abdur Razzaq v. Shah Jehan 1995 SCMR 1489; In the matter of Reference by the President of Pakistan PLD 1957 SC 219; Dr. Abdul Hakim Abrash v. ACE Securities (Pvt.) Limited 2009 CLC 731; Safiuddin Kazi v. Moslem Ali Howlader and others PLD 1960 Dacca 555 and Anwar ul Haq v. Federation of Pakistan 1995 SCMR 1505 rel.

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

----Ss.152 & 152A---"Convention between Ireland and Pakistan for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income---Signed at Paris on April 13, 1973" ("Double Taxation Treaty"), Art. II---Payments to non-residents---Withholding / deduction of tax on payment to non-residents---Determination whether taxpayer was "permanent establishment" of non-resident company---Scope---Petitioner sought direction to Department to exempt it from deduction of income tax under Ss.152 & 152A of Income Tax Ordinance, 2001 on its payments to a non-resident company, inter alia, on ground that petitioner was not such non-resident company's "permanent establishment" in Pakistan and said non-resident company was exempt from payment of tax under the Income Tax Ordinance, 2001 read with "Double Taxation Treaty"---Validity---Perusal of distribution agreement between petitioner and non-resident company revealed that petitioner was not wholly independent of the said non-resident company, and therefore Department was not wrong to hold that petitioner was such non-resident company's "permanent establishment" in Pakistan---High Court held that petitioner could not make payment to such non-resident company without deduction of tax under S.152 of Income Tax Ordinance, 2001 as determined by Department---Constitutional petition was dismissed, in circumstances.

(c) Constitution of Pakistan---

----Art.199---Constitutional jurisdiction of High Court---Writ of certiorari---Nature and scope---Writ of certiorari was not a writ of right but one of discretion and object of same was to curb excess of jurisdiction and to keep inferior Courts and Tribunals within bounds---High Court while judicially reviewing proceedings and judgments of inferior Courts or Tribunals could not substitute their decision(s) with its own decision---Writ of certiorari may be invoked where there was an error of law apparent on of face of record and where not every error of law or fact could be corrected by an Appellate Authority---Issuance of writ of certiorari was exercise of supervisory and not appellate authority---High Court under Art.199 of the Constitution could not judicially review findings of fact reached by an inferior Court or Tribunal unless there existed manifest error on face of proceedings or where such proceedings were in disregard of provisions of law.

Rashid Anwar and Awais Z. Sarki for Petitioners.

Babar Bilal for Respondents Nos.3 to 5.

Muhammad Nadeem Khan Khakwani Learned Assistant Attorney-General.

Ahmed Shuja Khan, Commissioner, Inland Revenue and Naveed Mukhtar, Additional Commissioner, Inland Revenue.

2020 P T D 1646

[Islamabad High Court]

Before Miangul Hassan Aurangzeb, J

Messrs TECNIMONT SpA through Special Attorney

Versus

PAKISTAN through Secretary, Ministry of Finance and 3 others

Writ Petition No.268 of 2017, decided on 30th July, 2020.

Income Tax Ordinance (XXXI of 1979)---

---S.50---Sales Tax Act (VII of 1990) S. 48---Sales Tax Rules, 2006, R.71(1)---Constitution of Pakistan, Art.199---Deduction of tax at source---Payments to non-residents---Withholding of income tax on payments to non-residents, nature of---Recovery of arrears of sales---Adjustment of arrears of sales tax against funds of taxpayer at disposal or in the control of officer of Income Tax---Scope---Petitioner non-resident company, sought refund of amount of tax deducted at source on payments made to it by respondent company, inter alia, on ground that as non-resident company it had no income tax liability and such amount was due back to petitioner---Question before High Court was whether the tax deposited by respondent company, after deduction of tax at source for payments made to non-resident company, could be adjusted against sales tax liability of said respondent company under provisions of S. 48(1) of Sales Tax Act, 1990 read with R.71(1) of Sales Tax Rules, 2006---Held, that respondent company by deducting tax at source on payments made to petitioner non-resident company, did not discharge its own tax liability but acted as a withholding agent for Department, and therefore said amount could not be adjusted against such respondent company's sales tax liability ----Such deduction of tax at source was in discharge of tax liability (if any) of petitioner non-resident company, and since such deduction of tax at source was made from payments due to petitioner, therefore rightful ultimate receipt of refund of said amount would also be the petitioner, and said amount could not be adjusted against the independent tax liability of the withholding agent --- Constitutional petition was allowed, accordingly.

2010 PTD 1827; Federation of Pakistan v. Metropolitan Steel Corporation 2002 PTD 87; PLD 2005 SC 605; PLD 1969 SC 223; [2007] 1 All ER 449; [1998 4 All ER 513; [1992] 3 All ER 737 and [1985] 1 All ER 589 ref.

Tapal Energy v. Federation of Pakistan 1999 PTD 4037; Continental Chemical v. Pakistan 2001 PTD 570 and Federation of Pakistan v. Metropolitan Steel Corporation 2002 PTD 87 rel.

Mohammad Akram Sheikh and Natalya Kamal for Petitioners.

Muhammad Naeem Khan Khakwani learned Assistant Attorney-General for Respondents.

Riaz Hussain Azam Bopara for Respondents Nos.2 and 3.

Sajid-ur-Rehman Mashwani for Respondent No.4.

2020 P T D 1670

[Islamabad High Court]

Before Lubna Saleem Pervez, J

SHABNAM ASHRAF, PROPRIETOR OF PREPARATORY SCHOOL, ISLAMABAD

Versus

The DEPUTY COMMISSIONER INLAND REVENUE, AUDIT UNIT-III, ZONE-I, REGIONAL TAX OFFICE (RTO), ISLAMABAD and 3 others

Writ Petition No.3108 of 2011, decided on 16th July, 2020.

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

----Ss. 122(5A), 122(9) & 177---Amendment in assessments ---- Further amendments---Selection for audit under S. 177 of Income Tax Ordinance, 2001---Scope---Petitioner impugned notices under Ss.122(5A) & 122(9) of Income Tax Ordinance, 2001 for amendment of assessment, along with initiation of proceedings of audit under S.177 of Income Tax Ordinance, 2001 inter alia on ground that said notices were based on mala fide and that selection for audit was illegal and such audit could not proceed simultaneously along with proceedings under Ss. 122(5A) & 122(9) of the said Ordinance---Validity---Record revealed that after initiation of audit proceedings under S. 177 of Income Tax Ordinance, 2001 no further notice under S.122(5) was issued and therefore simultaneous proceedings were not conducted---Nothing on record indicated that proceedings against petitioner were based on any mala fide---Action as prescribed under S.177 of Income Tax Ordinance, 2001 was commenced after Department was of view that petitioner had not declared certain income and fact that she revised her wealth statement twice required further verification---No illegality existed in impugned actions of Department---Constitutional petition was dismissed, in circumstances.

Messrs Chenone Stores Ltd. through Executive Director (Finance Accounts) v. Federal Board of Revenue through Chairman 2012 PTD 1815 and Federal Board of Revenue v. Messrs Chenone Stores Ltd. 2018 PTD 208 rel.

Commissioner Inland Revenue v. Messrs Allah Din Steel and Rollong Mills 2018 SCMR 1328 distinguished.

Rana Muhammad Sarwar v. Government of Punjab 1990 SCMR 999; Messrs Pakistan Synthetics Limited v. Waqar Ahmed and others 2011 SCMR 11; Commissioner Inland Revenue v. Khan CNG and Filling Station 2013 PTD 884; Roots Montessori and High School, Rawalpindi v. Commissioner of Income Tax (Audit), Rawalpindi 2010 PTD 395; Pakistan Telecommunication Company Ltd. v. Federation of Pakistan 2016 PTD 1484; Commissioner Inland Revenue v. Messrs Allah Din Steel and Rollong Mills 2018 SCMR 1328; Northern Bottling Company (Pvt.) Ltd. Industrial Estate, Peshawar v. Federation of Pakistan 2013 PTD 1552; Messrs Chenone Stores Ltd. through Executive Director (Finance Accounts) v. Federal Board of Revenue through Chairman 2012 PTD 1815; Lala Musa Flour and General Mills, Gujrat v. Chairman, Federal Board of Revenue, Islamabad 2013 PTD 391; Nestle Pakistan Ltd. v. Federal Board of Revenue 2017 PTD 686; Justice Khurshid Anwar Bhinder v. Federation of Pakistan PLD 2010 SC 483 and Tasnim Jalal v. Deputy Director, A.N.F. 2010 SCMR 72 ref.

Abdul Raheem Bhatti for Petitioner.

Saeed Ahmad Zaidi for Respondents.

2020 P T D 1683

[Islamabad High Court]

Before Miangul Hassan Aurangzeb, J

Messrs PAKISTAN TELECOMMUNICATION AUTHORITY

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.1462 of 2020, heard on 9th July, 2020.

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

----S.49---Constitution of Pakistan, Arts. 165A, 165 & 199---Exemption of certain public property from taxation under Art. 165 of the Constitution---Liability of income tax on statutory bodies / entities---Benefit of exemption of levy of income on income of Federal and Provincial Governments and local authorities under S.49 of the Income Tax Ordinance, 2001---Sale of Telecom Spectrum License and renewal thereof---Spectrum License Fee to be treated as income of Federal Government---Scope---Petitioner Pakistan Telecommunication Authority ("PTA") impugned show-cause notice issued by Department whereby income tax was sought to be assessed on Spectrum License Fee and renewal of the same received by PTA from telecommunication companies on ground that said fees were exempt from tax under S.49 of Income Tax Ordinance, 2001 as the same was income of Federal Government---Contention of Department, inter alia, was that such exemption sought was prejudicial to interest of revenue and against Art.165A of the Constitution---Validity---Spectrum License Fees including renewal fee had been deposited entirely by PTA into Federal Consolidated Fund and PTA had not retained any part thereof---Income of Federal Government under S.49(1) of Income Tax Ordinance, 2001 was exempt from tax and proviso to S.49(4) of said Ordinance, specifically provided that income from sale of spectrum licenses and renewals was to be treated as "Income of Federal Government", therefore, Department could not call upon PTA to pay income tax on the same---Pakistan Telecommunication Authority was merely a regulator and owner of telecom spectrum was the Federal Government---Legislature had inserted proviso to S. 49(4) of Income Tax Ordinance, 2001 which was neither repugnant to Art. 165A of Constitution nor to any other Constitutional provision---High Court held that impugned show-cause notices and demands for payment of tax were therefore patently illegal and set aside the same---Constitutional petition was allowed, accordingly.

(b) Constitution of Pakistan---

----Art.199---Constitutional jurisdiction of High Court---Show-cause notice---Scope---High Court under Art. 199 of Constitution ordinarily ought not to entertain a challenge to show-cause notice and only when proceedings pursuant to show-cause notice culminated in an order that a person aggrieved may challenge same under Art. 199 of Constitution provided there existed no alternate remedy in law---However, there existed exceptions and Constitutional petition against show-cause notice may be maintainable where impugned notice was without jurisdiction, non est, patently illegal; or issued with premeditation or without application of mind for extraneous reasons; where aggrieved person did not have any adequate or efficacious remedy; where issuance of show-cause notice violated Fundamental Rights and where there was an important question of law that required interpretation of any fiscal or substantive law.

Pakistan Oilfields Limited v. Federation of Pakistan 2020 PTD 110 rel.

Muhammad Mohsin Nazir for Petitioner (in Writ Petition No.1462 of 2020).

Muhammad Umar Khan Vardag for Petitioner (in Writ Petitions Nos.2218/2018, 2219/2018, 2220/2018 and 2221/2018).

Syed Ishfaq Hussain Naqvi for Respondents.

Naeem Hassan, Commissioner (IR) and Israr Ahmed Cheema, Deputy Commissioner, (IR) Zone-IV, LTU, Islamabad.

2020 P T D 1826

[Islamabad High Court]

Before Lubna Saleem Pervez, J

Messrs OIL AND GAS DEVELOPMENT COMPANY LTD.

Versus

COMMISSIONER INLAND REVENUE, ZONE-II, LTU, ISLAMABAD and another

Writ Petition No.3537 of 2013, decided on 8th July, 2020.

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

----Ss.34A, 34, 7 & 11---SRO No.494(I)/2013 dated 10.06.2013---Determination of sales tax liability---Default surcharge---Exemption from penalty and default surcharge---Beneficial notification, application of---Scope---Question before High Court was whether petitioner was entitled to benefit of, and amnesty provided by, SRO No.494(I)/2013 10.06.2013 which allowed exemption from payment of default surcharge and penalty under Sales Tax Act, 1990; when admittedly petitioner had already paid principal amount of sales tax before issuance of said SRO---Held, that said SRO did not provide any condition of limiting dates for payment of principal amount of tax between date of issuance of SRO and end of financial year on 30.06.2013---Due amount of principal of sales tax determined had been paid by petitioner before cut-off date stated in said SRO and petitioner therefore could not be deprived from availing its benefit on ground that such payment was made by petitioner before issuance of said SRO --- Beneficial SRO / notification had retrospective effect --- High Court held that petitioner was entitled to benefit of SRO No.494(I)/2013 dated 10.06.2013---Constitutional petition was allowed, in circumstances.

Shiekh Wahid ud Din Industries v. ACST 2006 PTD 336; PLD 1979 SC 550 and PLD 1997 Kar. 62 ref.

Shiekh Wahid ud Din Industries v. ACST 2006 PTD 336 rel.

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

----Ss. 33 & 45---Offences and penalties under Sales Tax Act, 1990---Determination of sales tax liability---Terms "adjudication" and "prosecution" in context of Sales Tax Act, 1990---Scope---Terms "adjudication" and "prosecution" were two separate, distinct and independent proceedings and term "prosecution" could not be equated with adjudication / determination of shortfall of sales tax recoverable.

Messrs Prime Chemicals v. Government of Pakistan 2004 PTD 1388; Shahzad Hussain v. Judge Family Court, Lahore 2011 CLC 820 and Ismail Abdul Rahman v. Mohammad Sadiq and 3 others PLD 1990 Kar. 286 rel.

Hussain Abuzar Pirzada for Petitioner

Sheikh Anwar ul Haq for Respondents.

2020 P T D 1843

[Islamabad High Court]

Before Miangul Hassan Aurangzeb and Lubna Saleem Pervez, JJ

MUHAMMAD ZUBAIR

Versus

CUSTOMS APPELLATE TRIBUNAL, ISLAMABAD and 7 others

Customs Reference No.16 of 2015, decided on 9th September, 2020.

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

----Ss.2(s), 16, 156(1), (8), 157, 158, 179(3) & 196---Imports and Exports (Control) Act (XXXIX of 1950), S.3---Import and Export of Gold, Gold Jewelry and Gemstones Order, 2001, Cl.5---Smuggling---Recovery of gold---Gold weighing 23,664 grams was recovered from a passenger who arrived at the airport from Dubai---Customs authorities forfeited the gold as smuggled goods---Appellant claimed to have lawfully imported the gold under Cl. 5 of Import and Export of Gold, Gold Jewelry and Gemstones Order, 2001---Validity---Legality / illegality / genuineness / validity of import document and Goods Declaration were neither questioned nor agitated before the forums below and there was no finding in that regard incorporated in order of forfeiture---Gold claimed by appellant was brought into Pakistan illegally by a carrier---Gold for which appellant claimed entitlement on the basis of import documents had attained status of smuggled goods and was confiscated under prevailing laws---Collector of Customs was empowered to extend time limit of 120 days or further 60 days, hence maximum limit of finalizing adjudication proceedings were 180 days---Order in Original was passed within the period prescribed under S.179(3) of Customs Act, 1969, therefore, there was no violation of law committed by the Collector---Reference was dismissed in circumstances.

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

----S.196---Reference---High Court, jurisdiction of---General interpretation of law---Scope---Questions requiring general interpretation of any provision of law without relating it to the facts and circumstances of the case have been declined by Courts---Only substantial question of law arising out of order of Customs Appellate Tribunal is referred to High Court.

Commissioner Income Tax v. Hassan Associate (Pvt.) Ltd. 1994 SCMR 1321; Commissioner Inland Revenue, Zone-III Large Taxpayers Unit, Lahore v. Messrs Tetrapak Pakistan Limited 2020 PTD 917; Commissioner of Income Tax, Companies, Lahore v. Crescent Art Fabric Limited, Lahore 2001 PTD 2553 and Muhammad Umer v. Commissioner Income Tax 2009 PTD 284 ref.

Tofeeq ul Irfan Raja for Applicant.

Ch. Mohammad Nawaz and Ghulam Jafar, Investigating Officer for Respondents.

2020 P T D 1917

[Islamabad High Court]

Before Lubna Saleem Pervez, J

SHABNAM ASHRAF, PROPRIETOR OF PREPARATORY SCHOOL, ISLAMABAD

Versus

The DIRECTOR (HQ) I&I-IR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION IR and 5 others

Writ Petition No.4792 of 2014, decided on 16th July, 2020.

Income Tax Ordinance (XLIX of 2001)

----Ss.139 & 176---Collection of tax in the case of private companies and associations of persons --- Recovery from Director and Chief Executive of taxpayer company, from which tax was due --- Notice to obtain information or evidence --- Power of Department to obtain Bank Statements / Records under S.176 of Income Tax Ordinance, 2001---Scope---Petitioner, who was Director and Chief Executive of taxpayer company, impugned notices under S.176 of Income Tax Ordinance, 2001 issued by Department to obtain her bank statements, inter alia, on ground that same were based on mala fide as petitioner had already challenged proceedings initiated against her under S.139 of said Ordinance and furthermore, since petitioner was immune from audit, notice under S.176 of Income Tax Ordinance, 2001 could not be issued---Validity---Sections 139 and 176 of Income Tax Ordinance, 2001 were independent of each other and had different applications under different circumstances---Contention of taxpayer that no notice under S.176 could be issued for reason that taxpayer was immune from audit had no force as initiation of audit was altogether a separate issue---Section 176 of Income Tax Ordinance, 2001 unambiguously provided vast powers to Department to obtain any information or evidence from any person through notice in respect of tax leviable under income Tax Ordinance, 2001, therefore notice under S.176 of said Ordinance, in present case, was valid---Constitutional petition was dismissed, in circumstances.

Rana Muhamad Sarwar v. Government of Punjab 1990 SCMR 999 and Messrs Pakistan Synthetics Limited v. Waqar Ahmed and others 2011 SCMR 11 ref.

Messrs Chenone Stores Ltd. v. Federal Board of Revenue 2012 PTD 1815 distinguished.

Federal Board of Revenue v. Messrs Chenone Stores Ltd. 2018 PTD 208 and Bank Alfalah Limited v. Federation of Pakistan and others 2020 CLD 634 rel.

Abdul Raheem Bhatti for Petitioner.

Saeed Ahmad Zaidi for Respondents.

2020 P T D 2119

[Islamabad High Court]

Before Mohsin Akhtar Kayani and Lubna Saleem Pervez, JJ

Messrs ASKARI BANK LIMITED, RAWALPINDI

Versus

COMMISSIONER OF INCOME TAX (LEGAL), LARGE TAXPAYER UNIT, ISLAMABAD and others

I.T.Rs. Nos. 24 to 27 of 2009, decided on 16th July, 2020.

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

----Ss.23 , 22 & 133----Computation of income tax ---Deductions----Deduction for depreciation as initial allowance----Depreciable assets---Eligible depreciable assets for initial depreciation allowance---Purchase of old/used buildings by taxpayer---Interpretation of S.23 of Income Tax Ordinance, 2001---Scope----Question before High Court was whether immoveable properties purchased by taxpayer for purposes of business could avail benefit of initial depreciation allowance under S.23 of Income Tax Ordinance, 2001, when such immoveable properties / buildings were old and used, and not newly constructed ---- Held, that Legislature used the phrase "placed into service" with the words "for the first time" for purpose of allowance of initial depreciation under S. 23 of Income Tax Ordinance, 2001 and thus when read in concomitance, same meant the point in time when a fixed asset was put into use for first time --- Words "placed into service" had been used to determine starting point of depreciation, which was date of purchase of building and its use for first time by taxpayer ---- Intention of Legislature was not to allow benefit of section 23 of Income Tax Ordinance, 2020 only for purchase of newly constructed buildings and was not to deprive taxpayer who invested large amount in immoveable proprieties from such benefit--- High Court held that immoveable properties were included in definition of "eligible depreciable assets" and therefore investment made in such asset, whether new or old, by a person in Pakistan for purposes of business would be entitled to benefit of initial depreciation allowance under S.23 of Income Tax Ordinance, 2001 ---- Reference was answered accordingly.

A&B Food Industries Limited v. Commissioner of Income Tax/Sales, Karachi 1992 PTD 545; A&B Food Industries Limited v. Commissioner of Income Tax/Sales, Karachi 1992 PTD 663; Messrs Pakistan Services Ltd. Karachi v. Commissioner of Income Tax, Central Zonal 'C' (COS-1), Karachi 1999 PTD 2901; Nishat Mills Ltd., Lahore v. Collector of Customs, Karachi and another 2006 PTD 2726; Commissioner of Agricultural Income Tax East Bengal v. B.W.M. Abdul Rehman 1989 PTD 909; Commissioner of Income Tax v. Muhammad Kassim 2000 PTD 280; Messrs Micropak (Pvt.) Ltd., Lahore v. Income Tax Appellate Tribunal, Lahore and 2 others 2001 PTD 1180; B.P. Biscuit Factory Ltd., Karachi v. Wealth Tax Officer and another 1996 SCMR 1470; Collector of Customs (Appraisement) Karachi and others v. Messrs Abdul Majeed Khan and others 1977 SCMR 371; Commissioner Inland Revenue, Zone-II, Karachi v. Messrs Kassim Textile Mills (Pvt.) Limited, Karachi 2013 PTD 1420; Messrs Colibrative Heavy Industries (Pvt.) Ltd., Lahore v. C.I.T/W.T, Coys Zone-II, Lahore 2005 PTD 2525; and Messrs Al-Rai Flour Mills, Lahore v. Commissioner of Income Tax/Wealth Tax, Companies Zone-I, Lahore 2008 PTD 838 ref.

(b) Interpretation of statutes----

----Fiscal statute---Construction---Scope---Provisions should not be interpreted in isolation but rather the complete provision should be read to understand intent of Legislature for a particular purpose --- When a provision was capable of two or more interpretations, the one which favored taxpayer should be adopted and any ambiguity should be resolved in favour of taxpayer.

Commissioner of Agricultural Income Tax East Bengal v. B.W.M. Abdul Rehman 1989 PTD 909; A & B Food Industries Limited v. Commissioner of Income Tax/Sales, Karachi 1992 SCMR 663; B.P. Biscuit Factory Ltd., Karachi v. Wealth Tax Officer and another 1996 SCMR 1470; Collector of Customs (Appraisement) Karachi and others v. Messrs Abdul Majeed Khan and others 1977 SCMR 371; Saudi-Pak Industrial and Agricultural Investment Company (Pvt.) Ltd., Islamabad v. Messrs Allied Bank of Pakistan and another 2003 CLD 596 and Kissan Support Services (Pvt.) Ltd. v. Commissioner Inland Revenue, LTU, Islamabad and another 2019 PTD 1694 rel.

Muhammad Mohsin Nazir and Hafiz Muhammad Idrees for Applicant .

Saeed Ahmed Zaidi for Respondents.

2020 P T D 27

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

Messrs A.F. FERGUSON & CO. through Partner and 49 others

Versus

PAKISTAN through Secretary, Revenue Divisional Chairman, Islamabad and 3 others

Suits Nos.2013, 2014 of 2015, 2287, 2344, 2345 of 2014, 2514, 2515 2516 of 2016, 2276, 2277, 2278 of 2017, 2452, 2453 and 2454 of 2018, decided on 9th August, 2019.

(a) Interpretation of statutes---

----Power of court---Penal or taxing statute---Principles---Courts are only required to interpret a statute and not to add and/or delete any provision in statute--- While interpreting a specific provision of a statute, intent of Legislature and language employed is determinative of legislative intent and courts have to interpret same while keeping such intention in mind--- In interpreting a penal or taxing statute, court must look to words of statute and interpret them in light of what is clearly expressed--- Court cannot imply anything which is not expressed, it cannot import provisions in statute so as to support assumed deficiency--- Statute is an edict of Legislature and conventional way of interpreting or construing a statute is to seek intention of maker--- If a statutory provision is open to more than one interpretation court has to choose that interpretation which represents true intention of Legislature--- Function of court is only to expound and not to legislate.

Collector of Customs (Appraisement) v. Abdul Majeed Khan and others 1977 SCMR 371 rel.

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

----S. 92---Specific Relief Act (I of 1877), Ss. 42 & 54---Chartered Accountants of Pakistan Ordinance (X of 1961), S. 23---Suit for declaration and injunction---Super tax---Tax return, filing of---Firm and partners---Exemptions---Plaintiffs were both partnership firm and its partners who assailed that there was no compulsion or restriction as per vires of S. 92 of Income Tax Ordinance, 2001 that partners were required to pay tax and file returns after firm had already done so---Validity---Held, there was no prohibition or restriction in S.92(1) of Income Tax Ordinance, 2001 to effect that either association of persons or partners could pay their taxes and if it was so, then association of persons was not liable to pay any further tax---Under S. 92 of Income Tax Ordinance, 2001 it was only association of persons or firm which had to file its return of total income and pay tax accordingly and not partners individually in respect of income received from association of persons or firm---Once tax was paid by firm, partners were not required to pay any tax on such part of income of which tax was already paid, however, they were required to file independent return and pay tax on other income if any--- High Court set aside applications made by firm and its partners as firm had not deposited any such amount---Suit was dismissed accordingly.

Muhammad Zafar Iqbal v. The Secretary Revenue Division, Islamabad 2017 PTD 1405; Messrs Al-Haj Industrial Corporation (Pvt.) Ltd. Peshawar v. Collector of Customs (appraisement), Customs House, Karachi 2004 PTD 801; Messrs Hashwani Hotels Limited through Executive Director v. Government of Pakistan through Secretary Ministry of Finance, Islamabad and 5 others 2004 PTD 901; Commissioner of Income Tax Legal Division, Lahore v. Khursheed Ahmed PLD 2016 SC 545; Messrs Pakistan Television Corporation Limited v. Commissioner Inland Revenue (Legal), LTU, Islamabad and others 2017 PTD 1372; Messrs Pakistan Television Corporation Limited v. Commissioner Inland Revenue (Legal), LTU, Islamabad and others 2017 SCMR 1136; Artistic Denim Mills Ltd. v. Federal Board of Revenue and others 2017 PTD 730; Oxford University Press v. Commissioner of Income Tax, Companies Zone-I, Karachi and others 2019 SCMR 235; Collector of Sales Tax and Federal Excise v. Messrs Abbott Laboratories (Pakistan) Ltd. Karachi 2010 PTD 592; Messrs Mehran Associates Limited v. The Commissioner of Income Tax, Karachi 1993 SCMR 274 at 286; Commissioner of Income Tax v. Messrs Gilani Transport Company 2017 PTD 1540; Messrs Pakistan Television Corporation Limited v. Commissioner Inland Revenue (Legal), LTU, Islamabad and others 2017 SCMR 1136 at 1146; Pakistan Industrial Development Corporation v. Pakistan through the Secretary, Ministry of Finance 1992 SCMR 891; Joti Prasad Agarwal and others v. Income Tax Officer (B) Ward Mathura AIR 1959 Allahabad 456 at 458; The Commissioner of Income Tax U.P. Lucknow v. The Kanpur Coal Syndicate, Kanpur AIR 1965 SC 325 at 326; The Commissioner of Income Tax Bombay, South Poona v. Murlidhar Jhawar and Purna Ginning and Pressing Factory, Dharmabad AIR SC 1536 at 1537; Commissioner of Income Tax v. Omprakash Premchand and Co. 1999 PTD 1814; Messrs X.E.N Shahpur Division (LJC) Quarry Sub-Division, Sargodha v. The Collector of Sales Tax (Appeals) Collectorate of Customs Federal Excise and Sales Tax Faisalabad and others 2016 SCMR 1030 at 1036; JDW Sugar Mills Limited v Province of Punjab PLD 2007 Lah. 68; Income Tax Officer v. Akbar Gul 2018 PTD 1664, Gulistan Textile Mills Ltd. and another v. Soneri Bank Ltd. and another 2018 CLD 203; Askari Bank Limited v. DCD Services Limited and 3 others 2018 CLD 799; Arshad Mahmood v. Secretary Education 1992 PLC 1044; Dr. Zahid Javed v. Dr. Tahir Riaz Chaudhry and others PLD 2016 SC 637; District Bar Association, Rawalpindi and others v. Federation of Pakistan and others PLD 2015 SC 401 and Searle IV Solution (Pvt.) Limited v. Federation of Pakistan 2018 SCMR 1444 ref.

(c) Civil Procedure Code (V of 1908)---

----O. XXXIX, Rr. 1 & 2---Ad-interim orders---Scope---Any order passed by High Court as an ad-interim measure does not become final until it is so decided finally---Plaintiffs cannot under garb of an ad-interim order given to them seek any protection nor same could be used as a shield for protecting them from any final liability which may arise as a consequence of final dismissal of applications as ad-interim orders are subject to finality of proceedings.

Khalid Jawed Khan and Umer Akhund for Plaintiffs (in all Suits).

Muhammad Aqeel Qureshi, Dr. Shah Nawaz, Kashif Nazeer and Shahid Ali for Defendants (in all Suits).

Osman A. Hadi, Assistant Attorney General for Federation of Pakistan.

2020 P T D 47

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Zulfiqar Ahmad Khan, JJ

The COLLECTOR OF CUSTOMS through Additional Collector of Customs (Law), Karachi

Versus

Messrs CHAUDHRY STEEL RE-ROLLING MILLS (PVT.) LTD., LAHORE and another

Special Customs Reference Application No. 442 of 2018 and C.M.As. Nos. 3761 of 2018, 1956 of 2019, decided on 22nd August, 2019.

Customs Act (IV of 1969)---

----Ss. 196, 27-A & 32---Reference to High Court---Allowing mutilation or scrapping of goods---Mis-declaration---Absence of mens rea---Scope---Importer imported consignment of scrap substantially consisting of steel re-rollable bars---Adjudicating officer issued show-cause notice on the ground that steel bars were oversized and not within the permissible limit of Import Policy Order---Importer, in terms of S.27-A, Customs Act, 1969, requested the Adjudicating Officer to allow mutilation and scrapping of oversized scrap, which was allowed---Contention of Department was that such request could have been entertained only before filing of the goods declaration---Validity---No time frame was given to an importer to make a request for mutilation or scrapping of the imported goods---Department could not point out as to how mens rea could be attributed to the importer by importing scrap, having oversized re-rollable steel bars which had admittedly lost tensile strength and could not be used as scrap for melting purposes---Provisions of S. 27-A, Customs Act, 1969 under the facts and the circumstances of the case were correctly interpreted and no factual discrepancy or legal error was apparent in the impugned judgment---Reference application was dismissed.

Khalid Rajper for Applicant.

2020 P T D 129

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

MUMTAZUDDIN

Versus

THE STATE

Special Criminal Miscellaneous Application No.186 of 2016, decided on 12th October, 2018.

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

----S. 9---Notified place---Smuggling, cognizance of---Procedure---Matter of smuggling at notified place is required to be checked by Customs Officials only or any other Provincial or Federal Government Officer who has been notified by Federal Government to function as 'Officer of Customs'---Even if any other officer is authorized by Federal Government to function as Customs Officer, he cannot interfere in function of a regular Customs Officer at a notified place.

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

----Ss. 2(b), 6, 9, 161, 162 & 185-A--- Criminal Procedure Code (V of 1898), Ss.265-K, 439 & 561A--- Quashing of proceedings--- Probability of conviction--- Raid by Federal Investigation Authority (FIA)--- Non-producing of incriminating articles before Trial Court--- Effect--- Accused was arrested by FIA officials by raid on airport and parts of weapons in question were recovered---Trial Court dismissed application of accused under S. 265-K, Cr.P.C.---Plea raised by accused was that FIA was not authorized to conduct raid as the same was duty of customs officials--- Validity---Nothing was available on record which indicated that FIA officers who conducted raid at the airport and recovered alleged contraband articles were actually authorized for such function by Federal Government through special notification---FIA accepted that there was no such notification of authorization issued in their favour or any other prosecution witness to act as 'Customs Officer'--- Without issuing a notification in 'Official Gazette', none of the raiding party was authorized to take action in respect of any offence punishable under Customs Act, 1969--- Weapons/parts in question were not produced during examination of important prosecution witnesses before whom arrest and recovery took place--- Items in question were required to be produced before Trial Court at the time of examination of said important prosecution witnesses as 'real evidence' to be identified as same items which were recovered from accused---No probability of conviction existed against accused persons---High Court acquitted accused and absconding co-accused persons of the charge as proceeding further would be a futile exercise--- Application was allowed in circumstances.

PLD 1986 SC 192; 2011 PTD (Trib.) 174; 2005 PTD 23; 1991 PCr.LJ 644; PLD 1995 SC 34; 1993 PCr.LJ 500; 1980 PCr.LJ 663; PLD 1991 SC 630; PLD 1987 Kar. 399; PLD 1989 Lah. 435; 1977 PCr.LJ 346; 1980 PCr.LJ 116; SBLR 2011 Sindh 1565; 2011 MLD 1075; 2005 SCMR 1540; 1999 MLD 1632; 2011 SCMR 1957; PLD 2013 SC 401; PLD 1997 SC 275; 2002 SCMR 634 and PLD 2002 SC 298 ref.

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

----S. 139---Declaration of goods---Customs Officer, duty of---Scope---Mandatory for Customs Officer to provide an opportunity for declaring goods carried by passenger---If passenger declares goods he was carrying, his act of bringing said articles does not amount to an offence.

Feroz Rehman Batla v. The State 1980 PCr.LJ 663 rel.

Khawaja Shamas-ul-Islam along with Shehzad Mehmood, Taj Muhammad and Khalid Iqbal for Applicant.

Muhammad Javed K.K., Asst. Attorney General along with Inspector Siraj Panhwar, FIA.

2020 P T D 163

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION, KARACHI

Versus

NAFEES-UR-REHMAN BARRY and another

Special Criminal Acquittal Appeal No.28 of 2017, decided on 3rd November, 2018.

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

----Ss. 33(13) & 13, Sixth Sched. Sr. 80 & Eighth Sched. Sr. 9---Tax fraud---Illegal claim of exemption---Appeal against acquittal---Absence of mens rea---Scope---Case against accused persons was that they were involved in unlawful and illegal claim of zero rated exemption of sales tax on import of processed cheese aiming to evade duty/taxes leviable thereon---No sales tax category as 'processed cheese' was mentioned in the Sixth and Eighth Schedules of Sales Tax Act, 1990 therefore, the customs officials were treating the "processed cheese" under the category of "simple cheese"---Complainant had admitted such mistake and had stated that even the software of the customs department was carrying out the same position---Prosecution had to establish criminal intention or mens rea to prove criminal responsibility---No interference was required in the impugned judgment, which was otherwise based on settled principles of appreciation of evidence---Appeal against acquittal was dismissed.

(b) Criminal trial---

----Mens rea---Scope---Prosecution has to establish criminal intention or mens rea to prove criminal responsibility.

Ashiq Ali Anwar Rana for Appellant.

Aqeel Ahmed for Respondents.

2020 P T D 203

[Sindh High Court]

Before Irfan Saadat Khan and Fahim Ahmed Siddiqui, JJ

The COMMISSIONER (LEGAL), INLAND REVENUE, REGIONAL TAX OFFICE, HYDERABAD

Versus

Messrs FATEH TEXTILE MILLS LTD.

Special Sales Tax Reference Application No.354 of 2010 and C.M.A. 2357 of 2015, decided on 16th September, 2019.

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

----Ss. 8, 10, 36, 46 & 47--- Income Tax Ordinance (XLIX of 2001), Ss. 131 & 132--- Sales Tax Refund Rules, 2002, R. 8---Tax reference---Pecuniary jurisdiction of Assistant Collector--- Sales Tax Automated Refund Repository (STARR) System--- Blacklisted, deregistered or suspended sellers--- Flying invoices--- Taxpayer sought tax refund but same was denied due to invoices received of blacklisted, deregistered or suspended companies--- Authorities were aggrieved of orders passed by Appellate Tribunal Inland Revenue suspending order-in-appeal against taxpayer--- Validity--- Order-in-original was passed by Assistant Collector and amount of refund claimed was Rs.86,152,520/- and same did not fall within pecuniary jurisdiction of Assistant Collector--- Order-in-original was passed without jurisdiction as same was beyond monetary competence of passing such order of Assistant Collector--- Unless status of a registered person was declared as blacklisted, deregistered or suspended in Sales Tax Automated Refund Repository System it could not be said that invoices issued by such registered person were fake and flying invoices--- No invoice issued by registered person could be declared as invalid or fake retrospectively--- Invoices were validly issued as per law as when invoice was issued to taxpayer by seller, nothing adverse was showing against him and department did not mention him as blacklisted, deregistered or suspended, therefore such invoices were validly issued as per law--- If any derogatory action was done by seller, department was justified to take action against seller---Action taken against those purchasers who purchased goods from seller during period when he was enjoying status of 'registered person' was unfair--- Refund claims preferred by taxpayer in respect of invoices issued by seller during period when no adverse action was taken against him were valid for preferring such refund claims and such refund claims were proper and legal--- High Court declined to interfere in orders passed by Appellate Tribunal Inland Revenue--- Reference application was dismissed in circumstances.

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

---- S. 132--- Power of Appellate Tribunal--- Words 'annul' and 'set-aside'--- Connotation--- Words 'annul' and 'set-aside' are synonym to each other and may be used for same meaning--- Annulment includes power of setting aside of order-in-original.

Kafeel Ahmed Abbasi for Applicant.

Muhammad Adeel Awan for Respondent.

2020 P T D 213

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

MIR JEEAND BADINI through Special Attorney

Versus

MODEL COLLECTORATE OF CUSTOM APPRAISEMENT through Collector and 6 others

Suit No.621 and C.M.A. No.4726 of 2017, decided on 5th July, 2019.

Import Policy Order---

----Para.4---State Bank of Pakistan Circular No.33/2007 dated 29-09-2007--- Letter of Credit---Import of vehicle---Restrictions---Change in policy--- Retrospectivity--- Plaintiff imported old specialized vehicles and sought declaration against authorities to release said vehicles--- Plea raised by authorities was that plaintiff was in violation of amended Import Policy Order--- Plaintiff sought interim release of vehicles on grounds that same had been purchased prior to amendment in Import Policy and were only transported after amendment--- Validity---Held, provisions of Para. 4 of Import Policy Order were applicable to such imports where Bill of Lading and Letter of Credit were established prior to issuance of amending order--- Bill of Lading was subsequent in time to amendment in Import Policy, whereby, age limit of vehicle in question was restricted to five years and it was only on basis of Standby Letter of Credit that plaintiff sought relief---No protection was provided to any Standby Letter of Credit but only to Letters of Credit which were dealt with differently in banking industry--- Matter of shipment was a private arrangement between plaintiff and supplier and once an amendment was in the knowledge, then there was no need to complete transaction---Supplier could have been requested not to make any shipment as there was enough time to withhold such shipments---No vested right existed as claimed by the plaintiff/importer--- Bill of Lading in question did not involve banks in question which was normally a must in shipment affected on basis of irrevocable Letter of Credit---Goods Declaration in column of terms of payment stated that it was on collection of documents basis which was again contrary to terms of payment involved in imports through Letter of Credit--- High Court declined to interfere in the matter as benefit of para 4 of Import Policy Order was not available to plaintiff--- Application was dismissed in circumstances.

Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917; Hajji Abdul Raziq Khan v. Federation of Pakistan and others 2014 SCMR 1821; http://www.businessdictionary.com/definition/performance; https://www.investopedia.com/terms/p/performancebond.asp.;

https://www.lawinsider.com/dictionary/performance-guaranteeand

https://www.investopedia.com/terms/l/letterofcredit.asp.ref.

Salahuddin Ahmed along with Nadeem Ahmed for Plaintiff.

Ms. Masooda Siraj for Defendant No.1.

Osman A. Hadi Assistant Attorney General for Defendants Nos.2 and 4.

Manzoorul Haq for Defendant No.3.

Muhammad Rizwan for Defendant No.6.

Kashif Nazeer for Defendant No.7.

2020 P T D 227

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

MUHAMMAD IBRAHIM

Versus

THE STATE

Special Criminal Bail Application No.18 of 2018, decided on 9th August, 2019.

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

----Ss.2(37), 2(9), 2(14)(a), 3, 6, 78, (1)(a) & 73, 33(3), (5), (8), (11c), (13), (16), (18)---Criminal Procedure Code (V of 1898), S. 498---Tax fraud---Tax evasion---Bail before arrest, confirmation of---Applicant, named in supplementary final report (challan) without any specific role challenged the order of recovery passed by Assistant Commissioner of Sales Tax before Commissioner of Sales Tax which was allowed---Department did not challenge said order---Purpose of pre-arrest bail was to protect those in whose favour a strong plea of innocence was in existence to consider the availability of malice and ulterior motive, which were very much present for the applicant---Bail before arrest was confirmed.

Waseem Ahmed and another v. Federation of Pakistan and others 2014 PTD 173; Azeem Khan v. The State 1996 SCMR 1569 and The Deputy Director, Directorate of Intelligence and Investigation, IR v. Sajid Hussain 2016 PCr.LJ 1737 distinguished.

(b) Criminal Procedure Code (V of 1898)---

----S. 498---Bail before arrest---White collar offence---If, prima facie accused was involved in white collar offence court was not to show generosity to such accused.

Waseem Shaikh for Applicant.

Ashique Ali Rana, Special Prosecutor Customs for Respondent.

2020 P T D 237

[Sindh High Court]

Before Fahim Ahmed Siddiqiui, J

ASIF IQBAL

Versus

THE STATE

Special Customs Criminal Appeal No.10 of 2009, decided on 26th August, 2019.

Sales Tax Act (VII of 1990)---

---- S. 33--- Criminal Procedure Code (V of 1898), S. 382-E--- Forgery, manipulation, falsification and preparation of bogus invoices--- False implication--- Benefit of doubt--- Accused was convicted and sentenced by Trial Court for receiving illegal tax refunds through forged, manipulated, falsified and bogus invoices--- Validity--- Process of registration of a concern was manifold in which physical verification was required and same was to be done by some of officials of sales tax department attached to registration process--- Appellant had stated that he had never worked for or remained associated with the actual culprits, he being a poor employee had been falsely implicated, he had rightly taken the plea of his being innocent--- If such scam had taken place in department then responsible officers of that department should have been put to task for registration of fake concern with office of sales tax department--- No effort was taken during investigation to associate those who were involved in the scam and only a dispatcher was involved as culprit---Many doubts in the case of prosecution existed and apparently a low grade employee of department were made scapegoat to save skin of influential black-sheep of department--- High Court set aside conviction and sentence awarded to accused by Trial court as prosecution could not establish case against accused--- Appeal was allowed accordingly.

Syed Jamil Raza Zaidi for Appellant.

Ms. Durdana Tanveer, Assistant Attorney General for the State.

2020 P T D 263

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

SAFE MIX CONCRETE LIMITED through Company Secretary

Versus

PAKISTAN through Secretary (Revenue Division) and 4 others

C.M. No. 8874 of 2018 in Suit No.1180 of 2018, decided on 12th September, 2019.

(a) Civil Procedure Code (V of 1908)---

----S. 20(c)--- Jurisdiction of court---Principle---Provisions of S.20(c), C.P.C. confer jurisdiction on court in a civil suit when cause of action arises wholly or in part within territorial jurisdiction of a court--- Suit is competent before a court where even a part or fraction of a cause of action arises---Only contents of plaint are to be looked into in deciding such matters.

(b) Civil Procedure Code (V of 1908)---

-----Ss. 20 & 9, O. VII, R. 10 & O. XXXIX, Rr. 1 & 2---Territorial jurisdiction of court---Plaint, return of---Scope---Plaintiff was taxpayer who was issued show-cause notice by defendant authorities on discrepancies found during audit and sought restraining order from court---Authorities assailed maintainability of restraining order on grounds that court lacked territorial jurisdiction---Validity---Held, in such matters it was to be seen what main relief was sought by plaintiff---Main relief sought by plaintiff was legality and jurisdiction in issuing show-cause notice by defendant authorities--- Merely for fact that some letters/clarifications issued by Federal Board of Revenue were also impugned, no cause of action could be claimed to have accrued within territorial jurisdiction of court--- Existence of plaintiff within territorial jurisdiction of court did not confer any such jurisdiction as no cause of action accrued within territorial jurisdiction of court either wholly or partly--- Case of plaintiff was against defendant directly and it was only a consequential relief which was being claimed against other defendants--- Such relief would only be available once it was granted as prayed against defendant--- High Court declined to interfere in the matter and returned plaint under O.VII, R.10, C.P.C. as there was no territorial jurisdiction to pass any judgment or decree---Suit was disposed of accordingly.

Sh. Abdul Sattar Lasi v. Federation of Pakistan through Secretary, Ministry of Law, Justice and Parliamentary Affairs, Islamabad and 6 others 2006 CLD 18; LPG Association of Pakistan through Chairman v. Federation of Pakistan through Secretary, Ministry of Petroleum and Natural Resources, Islamabad and 8 others 2009 CLD 1498; Messrs Land Mark Associates through Partner v. Sindh Industrial Trading Estate Ltd. through Chief Executive Officer and another 2018 YLR 2143; Sandalbar Enterprises (Pvt.) Ltd. v. Central Board of Revenue and others PLD 1997 SC 334 and Messrs Ibrahim Fibres Ltd. through Secretary/Director Finance v. Federation of Pakistan through Secretary/Revenue Division and 3 others PLD 2009 Kar. 154 distinguished.

Murlidhar P. Gangwani (Engineer v. Engineer Aftab Islam Agha and others 2005 MLD 1506 and Messrs Dewan Scrap (Pvt.) Limited and another v. Customs, Central Excise and Sales Tax Appellate Tribunal and others 2003 PTD 2127 rel.

Ahmed Hussain for Plaintiff.

S. Mohsin Imam Wasti for Defendant No.2.

Ameer Bux Metlo for Defendant No.3.

2020 P T D 271

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Ashraf Jahan, JJ

Messrs SERVICES through Authorised Person

Versus

THE ASSISTANT COLLECTOR OF CUSTOMS and 2 others

C.P. No.D-5968 and CMA No.31746 of 2014, decided on 26th September, 2018.

Customs Act (IV of 1969)---

----S.209---Petitioner, a Clearing Agent, assailed demand notice issued by Assistant Collector of Customs towards short recovery of surcharge on importation of an old car--- Liability of principal and agents---Scope---Held; unless there was an allegation against the Clearing Agent for having committed any willful act, negligence or default, he could not be held liable for payment of duty and tax not levied or short-levied or erroneously refunded to the importer---Demand notice issued to the Clearing Agent was without lawful authority, which was set aside---Constitutional petition was allowed.

Zia-ul-Hassan for Petitioner.

Masooda Siraj for Respondents Nos.1 and 2.

2020 P T D 281

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

FAZAL E RABBI through Authorised Attorney

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division/Chairman, Federal Board of Revenue, Ministry of Finance, Revenue and Economic Affairs, Islamabad and 3 others

Suit No. 676 and C.M.A. No. 5511 of 2019, decided on 2nd August, 2019.

Customs Act (IV of 1969)----

----Ss. 3D, 4, 15 & 219 ---- Customs Rules, 2001, Rr. 680 & 682 ---- Intellectual Property Rights ("IPR") ----Import/export/smuggling of IPR violating goods ---- Directorate General of IPR Enforcement ---- Powers of seizure of goods --- Enforcement actions for IPR, initiation of --- Application by right-holder for enforcement action ---- Mandatory nature of requirements prescribed by R. 680 of the Customs Rules, 2001 ---- Scope---- Rules 680 & 682 of Customs Rules, 2001 provided for two distinct situations for enforcement of Intellectual Property Rights ("IPR") and per R. 680 of the Customs Rules, 2001; a right-holder could approach as an applicant, the Directorate General of IPR Enforcement alleging infringement of intellectual property in import of goods, and such application had to be made after fulfilling various requirements including a Bank guarantee, etc --- Rule 682 of Customs Rules, 2001 however, empowered concerned Collectorate to approach the Directorate General of IPR Enforcement for taking cognizance of alleged infringement ---- Department could not first illegally detain goods and then complete the formalities and fulfilling the procedure set out in Rr. 680 & 682 of the Customs Rules, 2001 --- Mandatory procedure provided for in said Rules for must be followed and if not, then an entire enforcement action was to be deemed without lawful authority --- Legislature in order to protect rights of importer had provided certain requirements which had to be fulfilled first before an action was taken, and Directorate General of IPR Enforcement was mandated to act in a certain manner ---- Directorate General of IPR Enforcement did not have any independent jurisdiction of its own under R. 680 of the Customs Rules, 2001 to initiate any enforcement proceedings and could only act and proceed if an applicant / complainant had approached it with proper and complete application fulfilling requirements as prescribed under R. 680 of Customs Rules, 2001.

Khyber Tractors (Pvt.) Ltd. through Manager v. Pakistan through Ministry of Finance, Revenue and Economic Affairs, Islamabad PLD 2005 SC 842; Government of the Punjab, Food Department through Secretary Food and another v. Messrs United Sugar Mills Ltd. and another 2008 SCMR 1148; Abdul Bashir and others v. Government of Baluchistan through Chief Secretary, Civil Secretariat, Quetta and 3 others 2001 CLC 1579; Shan Food Industries v. Eastern Products (Pvt.) Ltd. and others 2012 SCMR 1504 and Mehboob Ali v. The Director, Kachi Abadi and another 1996 MLD 865 ref.

Kashif Nazeer for Plaintiff.

Osman A. Hadi, Assistant Attorney General for Defendant No.1.

Dr. Shahnawaz for Defendants Nos.2 and 3.

2020 P T D 297

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

INDUS MOTOR COMPANY LIMITED through Authorized Officer and others

Versus

FEDERATION OF PAKISTAN through Secretary Finance and others

Suits Nos.2249, 2467 of 2016 and 35 of 2018, decided on 13th December, 2019.

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

----S.25 ---- Federal Excise Act (VIII of 2005), Ss. 45 & 46---Access to record, documents, etc under S. 25 of the Sales Tax Act, 1990 --- Exercise of discretion by Commissioner in authorizing audit after access to record of taxpayer ---- Access to record and audit of taxpayer under Federal Excise Act, 1990 --- Scope----Question before High Court was whether Department under S. 25 of Sales Tax Act, 1990 and Ss. 45 & 46 of the Federal Excise Act, 2005; could select a taxpayer for audit without assigning any reasons for such selection ----Held, that Commissioner under S. 25(1) of the Sales Tax Act, 1990 was fully empowered to access record of taxpayer as and when required and phrase "as and when required" did not require Commissioner to give reason while asking for record from taxpayer and taxpayer could not deny access to such record --- Once such record had been furnished, Commissioner could then apply his / her independent mind and authorize an officer of Department to conduct audit on basis of such record, and same could not be done without assigning of reasons --- Commissioner could not therefore, issue notice for access record under S. 25(1) of the Sales Tax Act 1990 and then simultaneously issue notice to authorize audit under S. 25(2) of the Sales Tax Act, 1990 --- Decision to authorize audit of taxpayer must be made with reasons and not merely on the ground that law empowered Commissioner to do so.

Commissioner of Inland Revenue Sialkot and others v. Messrs Allah Din Steel and Rolling Mills and others 2018 SCMR 1328 distinguished.

Wateen Telecom Ltd. through Authorized Attorney v. Sindh through The Secretary of Ministry of Finance Government of Sindh, Karachi and 2 others 2019 PTD 1030; Commissioner Inland Revenue v. Pakistan Beverages Limited 2018 SCMR 1544 and Pakistan Telecommunication Company Ltd. v. Federation of Pakistan 2016 PTD 1484 rel.

Commissioner of Inland Revenue Sialkot and others v. Messrs Allah Din Steel and Rolling Mills and others 2018 SCMR 1328; Iqbal Hussain through Authorized Attorney v. Federation of Pakistan 2010 PTD 2338, Kohinoor Sugar Mills v. Federation of Pakistan and others 2018 PTD 821; Commissioner of Income Tax and others v. Messrs Media Network and others 2006 PTD 2502; Faisalabad Electric Supply Limited (FESCO) v. The Federation of Pakistan and others 2019 PTD 1780; The Federal Board of Revenue and others v. Messrs Chenone Stores Ltd. 2018 PTD 208; Defence Housing Authority v. Commissioner Inland Revenue and others 2015 PTD 2538; Azee Securities (Pvt.) Ltd. through Authorized Officer v. Federation of Pakistan through Secretary of Finance, Revenue Division and 3 others 2019 PTD 903; Election Commission of Pakistan v. Asif Iqbal and others PLD 1992 SC 342; Trustees of the Port of Karachi v. Muhammad Saleem 1994 SCMR 2213; Muhammad Mal Khan v. Allah Yar Khan 2002 SCMR 235; Pakistan Steel Mills Corporation (Pvt.) Limited through Corporate Secretary v. Karachi Water and Sewerage Board through Chief Executive and 2 others 2012 CLC 577; Quinn v. Leathem 1901 (A.C.) 495 and Pakistan Petroleum Limited through Authorized Officer v. Pakistan through Secretary Finance and 4 others 2016 PTD 2664 ref.

(b) Constitution of Pakistan---

----Arts. 198 & 201---High Court---Precedential value of decisions / orders of High Court---Principles---Scope---For decision on a question of law to be binding within the meaning of Arts. 198 & 201 of Constitution, it was not enough that a legal proposition followed logically from it; and that question must have been actually decided---Every judgment must be read as applicable to particular facts proved, or assumed to be proved, since generality of expressions which may be found therein were not intended to be expositions of the whole law, but governed and qualified by particular facts of a case in which such expressions were found---Decision was only an authority for what was actually decided---What was of the essence in a decision was its ratio and not every observation found therein nor what logically followed from various observations made therein.

Trustees of the Port of Karachi v. Muhammad Saleem 1994 SCMR 2213; Quinn v. Leathem 1901 AC 495 also followed in 1994 SCMR 2213; 2012 CLC 577 and State of Orissa v. Sudhansu Sekhar Misra and others AIR 1968 SC 647 by following Quin v. Leathem rel.

Hussain Ali Almani along with Ms. Benish Jawad for Plaintiff (in Suit No.2249 of 2016).

Kafeel Ahmed Abbasi, Deputy Attorney General for Defendants Nos.1 and 2 (in Suit No.2249 of 2016).

Dr. Shah Nawaz Memon for Defendants Nos.3 and 4 (in Suit No.2249 of 2016).

Ahmed Hussain for Plaintiff (in Suit No.2467 of 2016).

Kafeel Ahmed Abbasi, Deputy Attorney General for Defendant No.1 (in Suit No.2467 of 2016).

Dr. Shah Nawaz Memon for Defendants Nos.2 and 3 (in Suit No.2467 of 2016).

Sami-ur-Rehman Khan for Plaintiff (in Suit No.35 of 2018).

Kafeel Ahmed Abbasi, Deputy Attorney General for Defendant No.1 (in Suit No.35 of 2018).

Ameer Bakhsh Metlo for Defendants Nos.2 and 3 (in Suit No.35 of 2018).

2020 P T D 386

[Sindh High Court]

Before Irfan Saadat Khan and Fahim Ahmed Siddiqui, JJ

Messrs SCHLUMBERGER SEACO INC. KARACHI

Versus

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE C-12, COMPANIES I, KARACHI

I.T.R. No.178 of 1997, decided on 29th October, 2019.

Income Tax Ordinance (XXXI of 1979)---

---- Ss. 15, 136(1) & 163--- Pakistan/UK Double Taxation Convention, 1986, Arts. 2 & 7--- Convention for avoidance of Double Taxation between United States of America and Islamic Republic of Pakistan, 1957, Art. III--- Convention for avoidance of Double Taxation between United Kingdom and Islamic Republic of Pakistan, 1986, Art.7---Double taxation, avoidance of--- Non-resident company--- Permanent establishment--- Overriding effect--- Applicants were non-resident insurance companies who had paid premium amounts in United Kingdom and United States--- Plea raised by appellants was that their income could not be charged with tax in Pakistan due to International Treaties (conventions) on double taxation signed between Pakistan, USA and UK--- Validity--- Pakistan/UK Double Taxation Convention, 1986 and USA/Pakistan Taxation Convention, 1957 did not lay any embargo upon insurance companies--- Provisions of Art. 7 of Pakistan/UK Double Taxation Convention, 1986 and Art. III of USA/Pakistan Taxation Convention, 1957 rendered income of a non-resident insurance company having permanent establishment in United Kingdom and United States respectively as non-taxable in Pakistan--- Applicants were non-resident insurance companies and had no permanent establishment in Pakistan as per definition mentioned in Pakistan/UK Double Taxation Convention, 1986 and USA/Pakistan Taxation Convention, 1957--- Both insurance companies were permanent establishments of United Kingdom and United States and as such they were squarely covered under Avoidance to Double Taxation Treaties signed by Pakistan with countries of their origin--- Income of applicants was not liable to imposition of income tax in Pakistan and premium paid by assessee to insurance companies was not chargeable to income tax--- High Court declared that income of non-resident insurance companies was not chargeable to tax in Pakistan under provisions of Income Tax Ordinance, 1979--- Reference was answered accordingly.

Messrs EFU General Insurance Ltd. v. Federation of Pakistan 2010 PTD 1159; Commissioner of Income Tax, Karachi v. Grindlays Bank PLC, Karachi 2010 PTD 2012 and Commissioner Inland Revenue (Legal Division) v. Messrs Geofizyka Krakow Pakistan Ltd. 2017 SCMR 140 rel.

Arshad Siraj for Applicant.

Muhammad Aqeel Qureshi for Respondent.

2020 P T D 439

[Sindh High Court]

Before Irfan Saadat Khan and Fahim Ahmed Siddiqui, JJ

Messrs PAKISTAN SERVICES LIMITED KARACHI

Versus

THE COMMISSIONER OF INCOME TAX, COMPANIES-II, KARACHI

I.T.R. No.325 of 1997, decided on 19th October, 2019.

Income Tax Ordinance (XXXI of 1979)---

----Ss.25(c), 2(26) & 136 ---- Tax liability --- Amounts subsequently recovered in respect of deductions, etc. trading liability not paid within three years of the expiration of income year ---- Computation of "income year", "assessment year" and "date of default of liability" under S. 25(c) of the Income Tax Ordinance, 1979 --- Scope----Question before High Court was whether unpaid trading liability from tax years 1983-84 could be deemed to be income of the taxpayer in assessment year 1986-87 after applying S. 25(c) of the Income Tax Ordinance, 1979 --- Held, that per definition of term "income year" in S. 2(26) of the Income Tax Ordinance, 1979, "income year" meant the next financial year meaning therefore that for income for the year 1982-83 assessment year would be 1983-84 ---- Application of S.25(c) to the present case would mean that third income year ended on 30.6.1986 which was income for the year 1986-87 and for assessment year 1987-88 ---- Default in discharge of unpaid trading activity in the present case therefore would take place after 01.07.1986 and in assessment year 1987-88 --- Reference was answered accordingly.

1996 PTD (Trib.) 100 and CEBEE Industries (Pvt.) Ltd. Lahore v. Income Tax Appellate Tribunal and others 2006 PTD 348 ref.

Iqbal Salman Pasha for Applicant.

Mohsin Imam Wasti for Respondent.

2020 P T D 474

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

KASHIF ANWAR and others

Versus

THE STATE

Special Criminal Bail Applications Nos.34 and 35 of 2019, decided on 19th August, 2019.

Sales Tax Act, 1990---

----Ss. 2(37), 2(9), 2(14)(a), 3(1)(a)&(b), 6(1)&(2)(i)(ii), 8(1)(a), (ca)&(d), 8A, 21, 22(1), 23(1), 25, 26(1) & 73---Criminal Procedure Code (V of 1898), S.498---Pre-arrest bail, confirmation of---Further inquiry---Use of login and passwords of a Company by some fraudsters to file fake sales tax returns and issue fake sales tax invoices to generate illegal input tax adjustments/refunds amounting to Rs.36,815,821/---Illegal and inadmissible input tax had fraudulently been adjusted in the name of units/accused persons mentioned in the FIR----Although names of accused persons appeared in the supplementary charge sheet but their role was not deciphering from the charge sheet---Record was silent as to how the hacking of login and password was made---Real offender behind the generation of fake sales tax invoices was yet to be traced out---Matter was still under adjudication as such accused persons had been implicated prematurely---Case against the accused persons needed further inquiry---Accused persons had successfully been made out a case for grant of bail---Interim pre-arrest bail already granted to accused persons was confirmed, in circumstances.

Iftikhar Hussain for Applicant.

Syed Mohsin Imam for the State.

2020 P T D 493

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

OBAID JAMSHED

Versus

THE STATE

Special Criminal Bail Application No.79 of 2019, decided on 3rd September, 2019.

Sales Tax Act (VII of 1990)---

----Ss. 2(37) & 33---Criminal Procedure Code (V of 1898), S. 497---Tax fraud, offences and penalties---Bail, grant of---Allegation against accused was that he being broker and consultant had facilitated the main accused in committing tax fraud/evasion worth million of Rupees---Nothing was available on record to establish the allegation that accused was getting share of 10% in the invaded tax money---Allegations were based upon extra-judicial confession of the accused, which was uncorroborated---Nothing was available to establish that accused was in league with the main accused---Co-accused persons had succeeded in getting bail and case of accused was at par to them---Accused was admitted to bail, in circumstance.

Salman Raza Khan for Applicant.

2020 P T D 519

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

MUHAMMAD SUHAIL and others

Versus

THE STATE

Special Criminal Bail Applications Nos.68 and 50 of 2019, decided on 24th July, 2019.

Sales Tax Act (VII of 1990)---

----Ss. 2(37) & 33---Criminal Procedure Code (V of 1898), S. 497---Tax fraud, offences and penalties---Bail, grant of---Further inquiry---Allegation against the applicants/accused was that they being Clearing Agent and broker had facilitated the main accused in committing tax fraud/evasion worth million of Rupees---Applicants had acted in the case after going through the documents i.e. the import documents and registration certificate with Sales Tax Department for getting benefit of SRO 1125(I)/2011, dated 31-11-2011---Applicants after going through Sales Tax Registration Certificate were legally not bothered to ensure whether the registered person was actually having a manufacturing unit for using the imported goods or not---Nothing had been collected by the investigating agency that accused were in conscious knowledge of the fact that the main accused had got himself registered with sales tax authorities by playing some trick---Convincing evidence was not available to believe that the accused were having any nexus with the main accused---Case of accused was that of further inquiry---Accused were admitted to bail, in circumstance.

Aqil Ahmed Applicant (in Special Criminal Bail Application No.50 of 2019).

Muhammad Barkat for Applicant (in Special Criminal Bail Application No.68 of 2019).

Ashiqe Ali Anwar Rana Special Prosecutor Customs.

Zahid Khan, Assistant Attorney General.

2020 P T D 604

[Sindh High Court]

Before Irfan Saadat Khan and Fahim Ahmed Siddiqui, JJ

SHAFQAT ELAHI SHAIKH

Versus

The DEPUTY COMMISSIONER OF INCOME TAX

I.T.As. Nos.325 and 549 of 2000, decided on 25th September, 2019.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 135---Capital gain---Taxable income---"Adventure in nature of trade"---Taxpayer sold his property and relocated to another place due to security concerns but tax authorities added capital gain from sale of property as taxable income under adventure in nature of trade---Plea raised by department was that income received was taxable as it was akin to real estate business---Validity---Intention of a person could be traced out from some of his overt acts as well as surrounding circumstances---Assessing authorities were to give a convincing reasoning regarding overt act and its surrounding circumstances specially at a time of purchase of property under which assessee/taxpayer indulged into transaction before declaring the same as an 'adventure in nature of trade'---Reason given by taxpayer for selling both his plots was quite logical and coherent---When a person had decided to severe all his connections from a town, there remained no logic to keep properties there, which were retained by him for some time with intention to use the same for his personal affairs---Ingredient of 'intention of making profit' was missing in the entire episode and as such act of taxpayer did not fall under category of 'adventure in the nature of trade'---High Court set aside order passed by Income Tax Appellate Tribunal as taxpayer had rightly declared amount of capital gain accrued to him due to sale of two plots in his income tax returns and wealth statement as 'exempt' from provisions of Income Tax Ordinance, 1979---Appeal was allowed in circumstances.

2007 PTD 1687; 2011 PTD 1317; 1992 PTD 621; Commissioner Income Tax, East Pakistan, Dacca v. The Liquidator, Khulna Bagerahat Railway Company Ltd. PLD 1962 SC 128; (1989) 176 ITR 393; (1976) 102 ITR 202; 1989 PTD 445; 1990 PTD 345; (1959) 37 ITR 242; 2017 PTD 1687 and G. Venkataswami Naidu and Co v. The Commissioner of Income-Tax 1959 AIR 359 ref.

Major General (Rtd.) M. Jalaluddin v. ACIT-IV, Zone-C, Karachi 2011 PTD 1377 rel.

Iqbal Salman Pasha for Petitioner.

Kafeel Ahmed Abbasi for Respondent.

2020 P T D 627

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Mahmood A. Khan, JJ

The COLLECTOR OF CUSTOMS through Additional Collector of Customs

Versus

MUHAMMAD ARIF UR REHMAN and another

Special Customs Reference Application No.155 of 2016 decided on 12th December, 2019.

Customs Act (IV of 1969)---

----Ss. 156 & 196---Smuggling---Onus to prove--- Question of law---Old rickshaw parts were seized by customs authorities through order-in-original on allegation of being smuggled goods---Customs Appellate Tribunal (Tribunal) set aside order-in-original---Validity---Decision of Tribunal was based on finding of facts---Customs authorities could not dispute sale/purchase transaction however, insisted upon production of ten years' old import documents--- Customs authorities could not refer to any provision of law whereby record of import more than ten years old could be demanded from importer---Mere presumption as to allegation of smuggling in absence of any tangible material or evidence could not be approved particularly in respect of importable articles beyond period available to customs authorities for calling of such documents or record under Customs Act, 1969--- High Court declined to interfere in exercise of jurisdiction under S. 196 of Customs Act, 1969 as there was no factual error and legal infirmity in order passed by Customs Appellate Tribunal---Application was dismissed in circumstances.

Messrs Allied Business Corporation's case Customs Appeal No.K-153 of 2014 rel.

Khalid Mahmood Rajpar for Applicant.

2020 P T D 645

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

SHEHARYAR AHMED

Versus

THE STATE

Special Criminal Bail Application No.73 of 2019, decided on 24th July, 2019.

Customs Act (IV of 1969)---

----Ss. 156(1), 8, 9, 14A, 77, 86 & 89--- Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---Import Policy Order, 2016, Appendix-E---Criminal Procedure Code (V of 1898), S. 497---Income Tax Ordinance (XLIX of 2001), S. 148---Sales Tax Act (VII of 1990), Ss. 16, 32(i), 32-A(1)(a), 33, 34 & 192 read with Ss.3, 6 & 36---Bail, grant of---Import of a vehicle under a fake Proceed Realization Certificate (PRC)---Allegedly, accused, a Clearing Agent, was instrumental in the entire rip-off for illegally importing a vehicle with intention to cause loss to exchequer---Admittedly, accused was not the main culprit of the alleged offence, as such it required further investigation whether he had a conscious knowledge that the PRC placed by him was a fake document---Accused being a Clearing Agent, could not seek verification of PRC himself, as such a letter was written by or on behalf of him to the Customs Authorities for verification of the said document---Presumption could be that on such request of accused, the enquiry regarding the PRC was carried out, as such mens rea was missing on the part of accused---Vehicle so imported was still available with the Customs Authorities, as such no loss to the exchequer had caused and at the most it could be said that the vehicle was illegally imported---Case of bail had been made out by the accused therefore, he was admitted to bail, in circumstances.

Nasrullah Korai for Applicant.

Ashiq Ali Anwar Rana, Special Prosecutor Customs.

Zahid Khan, Assistant Prosecutor General for Respondent.

2020 P T D 660

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Zulfiqar Ahmed Khan, JJ

MOIN JAMAL ABBASI

Versus

FEDERATION OF PAKISTAN through Secretary and 2 others

Constitutional Petition No.D-4124 of 2019 in C.M.A. No.18195 of 2019, decided on 30th August, 2019.

Customs Act (IV of 1969)---

----Ss. 19, 223 & First Schedule, PCT Code 87.03--- Import Policy Order, 2016, Para. 20---Notification SRO No. 833(I)/2018 dated 03-07-2018---Vintage vehicle, import of---Exemption---Payment of cumulative amount--- Petitioner imported a vintage vehicle but delivery of same was denied on grounds that there was ambiguity in law regarding imposition of taxes on vintage vehicles---Validity---No reference to any other restriction or prohibition existed as could be attracted in terms of Import Policy Order, 2016 in respect of other imported vehicles which showed clear intention of Federal Government not only to exempt vintage or classic cars from payment of duty and taxes in excess of cumulative amount of US $ 5000/- per unit but also to relax other prohibition or restriction, if any, in respect of other vehicles as per Import Policy Order, 2016---No ambiguity existed regarding import of vintage or classic cars and jeeps on payment of US $ 5000/- falling under PCT Code 87.03 of First Schedule to Customs Act, 1969 provided it was manufactured prior to January 01, 1968---High Court directed authorities to release vehicle of petitioner on payment of US $ 5000/- as per Notification SRO No. 833(I)/2018 dated 03-07-2018 issued by Federal Government---Customs authorities were under legal obligations to abide by all such notifications issued by Federal Government under S. 223 of the Customs Act, 1969---Constitutional petition was allowed in circumstances.

Qazi Umair Ali for Petitioner.

Khalid Rajper for Respondent along with Amanat Khan, Dy. Collector MCC West, Customs.

2020 P T D 679

[Sindh High Court]

Before Irfan Saadat Khan and Fahim Ahmed Siddiqui, JJ

The COLLECTOR OF SALES TAX AND FEDERAL EXCISE

Versus

Messrs AGRO CHEMICAL (PVT.) LTD.

Special Sales Tax Reference Application No.79 of 2006, decided on 29th November, 2019.

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

----Ss.7(2)(ii), 14, 33 & 47--- Customs Act (IV of 1969), Ss.79 & 104---Input tax adjustment---Amendment in law---Retrospectivity---Taxpayer claimed input tax adjustments against bill-of-entry of its sister concern on goods imported---Authorities in order-in-original denied input tax adjustment but Lower Appellate Court allowed the same---Authorities assailed order-in-appeal on grounds that amendment in law was declaratory in nature and could be applied retrospectively---Validity---After amendment in S. 7(2)(ii) of Sales Tax Act, 1990 it was necessary that input tax adjustment was available to such importer only who was owner of imported goods and should be registered with sales tax department---Prior to amendment, no such condition was imposed under law---Requirement, in circumstances, was that person, who was claiming input tax adjustment should be holder of bill-of-entry cleared by customs department under S. 79 or 104 of Customs Act, 1969 irrespective of fact that who was importer of goods used in finished product---Language of statute was clear that only holder of bill-of-entry could be sufficient for claiming input tax adjustment--- Phrase 'showing his sales tax registration number' was inserted in statute by amendment, (2003) therefore, it was not necessary before the said amendment (1996) that importer should be registered with sales tax department---Such registration was made mandatory by subsequent amendment in S.14 of Sales Tax Act, 1990 through Finance Act, 1998--- High Court declined to interfere in order-in-appeal as input tax adjustment was available to taxpayer on bill-of-entry issued to their unregistered sister concern---Reference was dismissed in circumstances.

Collector Sales Tax and Central Excise (West) v. Al-Hadi Industries (Pvt.) Ltd. 2002 PTD 2457; Naryan v. State AIR 1938 Mad. 441; Jati Ram Khan v. Janaki Nash Ghosh 33 IC 54 (Cal); Habibullah v. Suleman Kader (1920) 24 CN 18 and AF Ferguson v. Lalit Mohan AIR 1954 Pat. 594 ref.

Pakistan Beverage Ltd. v. LTU 2010 PTD 2673; Messrs Mayfair Spinning Mills Ltd., Lahore v. Customs, Excise and Sales Tax Appellate Tribunal Lahore PTCL 2002 CL 115; Ansari Sugar Mills Ltd. v. Commissioner Income Tax, Karachi 2010 PTD 755; A&B Food Industries Ltd. v. Commissioner, Income Tax and Sales 1992 SCMR 663; City District Government, Karachi v. Muhammad Irfan 2010 SCMR 1186; Commissioner, Income Tax v. Shahnawaz Ltd. 1993 SCMR 73; Commissioner Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 and Additional Commissioner Inland Revenue v. Eden Builders Ltd. 2018 PTD 1474 rel.

(b) Interpretation of statutes---

---- Referential legislation--- Types--- Referential legislation is of two types--- One is where an earlier legislation or some of its provisions are incorporated in subsequent legislation; in such case, provision of earlier legislation or its portion so incorporated are considered as part of subsequent legislation--- Other type of referential legislation is that where earlier legislation may not be made part of subsequent legislation but same is used only for reference of a broad nature as law on the subject generally, and the same is clarified from context of the subsequent statute---Such method of referential legislation may be advantageous for parliamentary and administrative point of view---Whether legislation falls under the first or the second category for which context of statute is to be considered is always question of construction.

(c) Interpretation of statutes---

----Declaratory amendment---Retrospectivity--- Object, purpose and scope---Every statute, prima facie, has prospective application unless it is expressly provided that same will have retrospective operation---Not necessary that a declaratory amendment would be applied retrospectively--- Rule is that if a declaratory amendment is made to supply some obvious omission in previous statute or to 'explain' something only then subsequent declaratory amendment will have a retrospective application.

Gurbachan Singh v. Satpal Singh and others 1990 AIR 209 rel.

(d) Interpretation of statutes---

----Tax and fiscal statutes---Retrospectivity---Principle---Legislation that touches vested rights of an individual cannot be given retrospective effect---Tax/Fiscal statutes operate prospectively and not retrospectively unless clearly indicated by legislature.

Pakistan Beverage Ltd. v. LTU 2010 PTD 2673 and Member (Taxes) BOR, Punjab and others v. Qaisar Abbas and others 2019 SCMR 446 rel.

Amjad Javed Hashmi for Applicant.

Khalid Javed Khan for Respondent.

2020 P T D 696

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Zulfiqar Ahmad Khan, JJ

Messrs BAWANY SUGAR MILLS LIMITED through Senior Manager Taxation

Versus

FEDERATION OF PAKISTAN through Secretary Revenue and 4 others

Constitutional Petition No.D-4547 of 2019 in C.M.As. Nos.26502 and 19833 of 2019, decided on 24th September, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss.131 & 132---Civil Procedure Code (V of 1908) O.XXXIX, Rr. 1 & 2---Disposal of appeals by Income Tax Appellate Tribunal ----Petitioner / taxpayer sought direction of High Court under Constitutional jurisdiction to set aside order of Appellate Tribunal whereby taxpayer's application under O.XXXIX Rr. 1 & 2, C.P.C. was rejected---Contention of taxpayer, inter alia, was that as consequence of said order, its Bank accounts had been frozen, which offended its Constitutionally protected fundamental right to carry on lawful business---Validity---Impugned order did not record finding on three basic factors in grant / rejection of application under O.XXXIX, Rr.1 & 2, C.P.C., which were, prima facie case, balance of convenience and irreparable loss or injury---High Court remanded matter to Appellate Tribunal to decide application under O.XXXIX Rr. 1 & 2, C.P.C. afresh in accordance with law, High Court observed that it could not direct unfreezing of Bank accounts of taxpayer at present stage, as the same may cause prejudice to the case of either party---Constitutional petition was allowed accordingly.

Taimoor Ahmed Qureshi for Petitioner.

Ameer Bakhsh Metlo for Respondent.

2020 P T D 710

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

MUHAMMAD AKRAM YOUSUF

Versus

THE STATE

Special Criminal Pre-Arrest Bail Application No.S-28 of 2018, decided on 12th July, 2019.

Sales Tax Act (VII of 1990)---

----S. 33(3), (5), (8), (11C), (13), (16) & (18)---Criminal Procedure Code (V of 1898), S. 498---Use of login and passwords of a company by some fraudsters to file fake sales returns and issue fake sales tax invoices to generate illegal input tax adjustments/refunds --- Pre-arrest bail, confirmation of---Further enquiry allegedly, through that practice, a loss of Rs. 10.401 billion was caused to government exchequer---Illegal and inadmissible input tax had fraudulently been adjusted in the name of units/accused persons mentioned in the FIR----Present accused had allegedly issued flying invoices, as such the entire case against him rested on documentary evidence; therefore, there was no chance of tampering with the prosecution evidence---Allegedly, it was revealed after investigation that the login and password of a company were used by some fraudsters but record was silent about hacking of login and password---Chances of leaking or passing off existed in respect of the login and password from the said company and on that aspect the investigators did not bother to probe---Investigators yet not succeeded in tracing out the phone number, device location and base station of the IP address from where the said invoices were generated---Interim report revealed that Pakistan Telecommunication Authority was unable to locate the longitude and latitude to pinpoint the address due to lapse of time---Real offender behind the generation of fake sales tax invoices was yet to be traced out---Case against accused needed further probe, in circumstances---Accused had successfully made out a case of pre-arrest bail---Interim bail order passed in favour of accused was confirmed, in circumstance.

Khan Zaman for Applicant.

Zahid Khan A.A.G. for the State.

2020 P T D 791

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

ALI AFZAL SHAIKH and another

Versus

The STATE and another

Special Criminal Miscellaneous Application No.80 and Special Criminal Revision Application No.65 of 2017, decided on 21st October, 2019.

Customs Act (IV of 1969)---

----Ss. 19, 26, 32(1)(2), 185-F, 192 & 209---Criminal Procedure Code (V of 1898), Ss. 222, 265-K, 439 & 561-A---Incorrect goods declarations---Deficient taxes and duties---Proof---Loss to public exchequer---Charge, omission of---Particular details---Effect---Importers sought their acquittal on grounds that there was no incriminating evidence against them---Validity---At time of submission of final challan, taxes and duties were already paid---During adjudication, not only entire amount had been recovered but fine and penalty were also recovered---No loss to public exchequer was caused by accused persons---F.I.R. as well as interim and final challans were silent about time and place of occurrence as in specific column only it was mentioned, 'during working hours at customs house'---Absence of particular details regarding offence was fatal for case of prosecution and time or duration in which offence had taken place and place or places of offence were initial and important details which were missing---Charge, due to such omission, itself had become baseless---High Court acquitted accused persons as there was no possibility of their conviction even after full-fledged trial on account of deficiencies in investigation---Application was allowed in circumstances.

Khan Muhammad Yousuf Khan Khattak v. S.M. Ayub and others PLD 1973 SC 160; Asghar Ali v. State PLD 2003 SC 250; Messrs Al-Hamd Edible Oil (Pvt.) Ltd. and others v. Collector of Customs and others 2003 PTD 552; Collector of Customs v. Hilal Muhammad 2003 PTD 562; Shaikh Rashid Ahmed v. Assistant Collector 2006 PTD 1207; State v. M. Idrees Ghauri 2008 SCMR 1118; Assistant Director v. Messrs B.R. Herman and others PLD 1992 SC 485 and Messrs Kamran Industries v. The Collector of Customs-Export PLD 1996 Kar. 68 ref.

Ali Zaheeruddin for Applicant (in Special Criminal Miscellaneous Application No.80 of 2017).

Mohsin Shahwani for Applicant (in Special Criminal Revision Applications Nos.65 of 2017 and 49 of 2016).

Ch. Waseem Akhtar, Assistant Attorney-General.

Ms. Dil Khurram Shaheen, Special Prosecutor (Customs)

Syed Abbas Raza, I.O. of the case is present.

2020 P T D 808

[Sindh High Court]

Before Aqeel Ahmad Abbasi and Mehmood A. Khan, JJ

NEXT CAPITAL LIMITED through Chief Financial Officer

Versus

The ASSISTANT COMMISSIONER and 2 others

Miscellaneous Nos.30934, 30935 and 30936 of 2019 in Constitutional Petition No.D-6971 of 2019, decided on 1st November, 2019.

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

----S.3---Constitution of Pakistan, Art. 199---Taxable service---Petitioner sought a declaration to the effect that the consultancy services provided by him were not liable to be taxed under S. 3 of Sindh Sales Tax on Services Act, 2011 as consultancy services were not listed in the Second Schedule and prayed for setting aside an order-in-original passed by Assistant Commissioner to that effect---Petitioner while adverting to the question of maintainability of constitutional petition in the presence of alternate remedy contended that similar question of law was pending adjudication before High Court in its Reference jurisdiction therefore alternate remedy of appeal against the order-in-original would be a futile exercise---Validity---Held; pendency of a legal question before the High Court in a Reference jurisdiction and similar treatment given by the departmental authorities to a legal controversy alone could not be considered as valid ground to abandon and bypass a statutory forum---High Court issued pre-admission notice to the respondents in order to examine the legal issue agitated by petitioner and directed the petitioner to avail appropriate remedy against the order-in-original, if so advised.

(b) Constitution of Pakistan---

----Art.199---Constitutional jurisdiction---Scope---Violation of Fundamental Rights---Legislative competence---Aggrieved party, in appropriate cases, can approach the High Court by filing a constitutional petition against violation of Fundamental Rights or in order to agitate a constitutional point relating to legislative competence.

2020 P T D 827

[Sindh High Court]

Before Irfan Saadat Khan and Fahim Ahmed Siddiqui, JJ

BANK ALFALAH LIMITED

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division and 4 others

C.P. No.D-5165 of 2014, decided on 13th November, 2019.

Income Tax Ordinance (XLIX of 2001)---

----S.176(1)(a)---Banking Companies Ordinance (LVII of 1962), S.33-A---Protection of Economic Reforms Act (XII of 1992), S.9---Privileged information--- Fishing inquiry--- Petitioner Bank assailed notice issued by income tax authorities regarding providing of details in connection with debit/credit card machines installed by petitioner to different commercial establishments at their sale points---Validity---Income tax authorities had vast powers in respect of getting information not only about a taxpayer but also a non-taxpayer in order to bring non-filers in tax net---Income tax authorities were justified under S. 176(1)(a) of Income Tax Ordinance, 2001 in issuing notice to obtain any information or evidence relevant to any tax leviable under Income Tax Ordinance, 2001---Seeking such information did not amount to getting any financial information of clients or private account holders of petitioner bank---Such information was not privileged by normal Banking practice as well as under any statutory obligation under which petitioner was claiming privilege regarding their clients or to term same as fishing expedition---High Court declined to interfere in the matter as there was nothing illegal or unlawful in notice issued by Income Tax authorities which could render it invalid or void ab initio---Petition was dismissed in circumstances.

Caretex v. Collector Sales Tax and Federal Excise PLD 2013 Lah. 634; Messrs Ghulam Hussain and Co. v. Messrs National Bank of Pakistan 2004 CLD 1640; Caretex v. Collector Sales Tax and Federal Excise 2013 PTD 1536; Mohsin Raza v. Chairman, FBR and others 2009 PTD 1507 and Assistant Director, Intelligence and Investigation v. Messrs B.R. Herman and others PLD 1992 SC 485 ref.

Aijaz Ahmed for Petitioner.

Kafil Ahmed Abbasi for Respondents.

2020 P T D 1288

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Mrs. Ashraf Jahan, JJ

Messrs ZORLU ENERJI PAKISTAN LIMITED

Versus

SINDH REVENUE BOARD and others

Constitutional Petition No.D-2187 of 2018, decided on 20th March, 2018.

Sindh Workers Welfare Fund Act (XXXIII of 2014)--

----S.5---Show-cause notice---Constitutional petition impugning issuance of show-cause notice(s)---Scope---Petitioner impugned issuance of show-cause notice for recovery of levy under Sindh Workers Welfare Fund Act, 2015----Validity---No jurisdictional defect or illegality had been pointed out by petitioner on part of respondent Revenue Board while issuing impugned notices and Board was competent to issue such notices---Petitioner, through impugned show-cause notices, had been provided opportunity to explain its stance and raise all legal and factual objections---High Court deprecated the tendency to challenge issuance of show-cause notices through Constitutional petitions---Constitutional petition, being not maintainable, was dismissed in circumstances.

Messrs Maritime Agencies (Pvt.) Ltd v. Assistant Commissioner-II of SRB and 2 others 2015 PTD 160; Messrs Pakistan Mobile Communications Ltd. v. Sindh Revenue Board and 2 others 2014 PTD 2048; Roche Pakistan Ltd. v. Deputy Commissioner of Income-Tax and others 2001 PTD 3090 and Sitara Chemical Industries Ltd. v. Deputy Commissioner of Income Tax 2003 PTD 1285 rel.

Naveed A. Andrabi and Anwar Kashif Mumtaz for Petitioner.

Nemo. for Respondents.

2020 P T D 1407

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Muhammad Junaid Ghaffar, JJ

YAQOOB AHMED through Attorney and others

versus

FEDERATION OF PAKISTAN through The Secretary of Law, Ministry of Law Sand others

C.P. No.D-3757 of 2013 along with 575 petitions, decided on 2nd July, 2020.

(a) Income Support Levy Act (XXII of 2013) ---

----Ss.3, 5 & 9 & Preamble---Constitution of Pakistan, Arts. 25 & 73---Finance Act (IX of 2014), S.10---Income support levy ('the levy') at the rate of 0.5% imposed on the value of Net Moveable Assets---Constitutionality---Income Support Levy Act, 2013, vires of---Plea that imposition of said levy through Income Support Levy Act, 2013, was introduced through Finance Act, 2013 in terms of Art. 73 of the Constitution, whereas, it did not possess the characteristic of a tax, and that it was also discriminatory as it created unreasonable classification within the same class, hence, ultra vires to the Constitution---Held, that levy imposed though Income Support Levy Act, 2013 along with the Money Bill, did not possess the characteristics of a tax, as it was not a common burden for raising revenue to be utilized for general public purpose, on the contrary, it was a levy in the nature of fund to be charged and utilized for a specific purpose i.e. to provide for financial resources for raising an income support fund for the economically distressed persons and their families---Accordingly Income Support Levy Act, 2013 could not be introduced through the Finance Act, 2013 in terms of Art. 73 of the Constitution, thus, it was ultra vires the Constitution---Levy was also discriminatory in nature since it created unreasonable classification within the same class of persons having net moveable assets exceeding Rs. 1 million---Incidence and charge of levy fells unequally upon the existing taxpayers only, who filed or were required to file wealth statement along with income tax returns under the Income Tax Ordinance, 2001---However, non-existing taxpayers, who were not required or did not file wealth statement and tax returns, in spite of having much higher net moveable wealth exceeding Rs. 1 million, had been excluded from the incidence and charge of such levy, which was in clear violation of Art. 25 of the Constitution---High Court declared and directed that all the notices and the proceedings, including assessment orders passed under S.5 of the Income Support Levy Act, 2013 after repeal of said Act under S.10 of the Finance Act, 2014, in the absence of any saving or validation clause to protect or validate the Income Support Levy Act, 2013 were without jurisdiction and lawful authority.

Mst. Rashida Begum v.P Assistant Controller, Estate Duty,Karachi 1992 PTD 1001; Muhammad Tariq Badr and others v. National Bank of Pakistan and others 2013 SCMR 314; Workers' Welfare Funds, Ministry of Human Resources Development, Islamabad through Secretary and others v. East Pakistan Chrome Tannery (Pvt.) Ltd. through G.M. (Finance), Lahore and others PLD 2017 SC 28; Imran Ahmed v. Federation of Pakistan through Ministry of Law and 3 others 2014 PTD 225; Inamur Rehman v. Federation of Pakistan 1992 SCMR 563 and Elahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555 ref.

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

----S.6---Effect of repeal---Scope---Where there was no saving or validation clause provided in the repealing enactment, then reference to S.6 of the General Clause Act, 1897 became relevant, which explained the effect of repealing of an enactment in such circumstances.

Mst. Rashida Begum v. Assistant Controller, Estate Duty, Karachi 1992 PTD 1001 and Muhammad Tariq Badr and others v. National Bank of Pakistan and others 2013 SCMR 314 ref.

(c) Constitution of Pakistan---

----Art.73 & Fourth Sched.---Imposition of taxes through Money Bill---Scope---Taxes could be levied upon a class of persons in terms of various entries of the Federal Legislative List of Fourth Schedule to the Constitution through a Finance Act in terms of Art.73 of the Constitution---However, unless the incidence of tax fell upon the class of persons for which it had been meant, and charge was created through process of assessment while creating a liability to pay tax in accordance with law, liability to pay tax under such an enactment, even after its repeal, would not become payable by mere fiction of law, as it would violate the legal requirements, including assumption of jurisdiction to create a charge upon such class of persons, making assessment and quantification of tax liability in accordance with law.

Dr. Farough Naseem, Abid H. Shaban, Naveed A. Andrabi, Hyder Ali Khan, Ali Almani along with Sami-ur-Rehman, Mushtaque Hassan Qazi, Arshad Siraj along with Asif Ali Lakhair, Umaima Mansoor Khan, Mustafa Lakhani, Nasir Latif, Khalid Mehmood Siddiqui, Muhammad Aleem, Amin M. Bandukhda, Salman Aziz, Adil Saeed, Abdul Khaliq Khatri, Muhammad Ajmal Khan, Atir Aqeel Ansari, Naeem Suleman, Arshad Shehzad, Imran Iqbal Khan, Muhammad Waleed, S. Mohsin Ali, Manzar Hussain, Muhammad Faheem Bhayo, Muhammad Din Qazi, Aizaz Ali, Sofia Saeed, Ameeruddin, Shams Mohihuddin Ansari, Saifullah holding brief for Salman Mirza, Ajeet Sundar, Ovais Ali Shah, Qazi Umair Ali, Ghazanfar Ali Jatoi, Zafar Hussain, Rizwan Ali Junejo, Fazle Rabbi, Dil Khurram Shaheen, Gazain Zafar Magsi, Daanish Ghazi, Sufiyan Zaman, M. Zeeshan Merchant, Munir Qidwai, Shahid Iqbal Rana, Syed Muhammad Ahsan, Kashif Hanif, Muhammad Arshad Qaiser, Taimoor Ahmed Qureshi, Jawaid Farooqi and Usman Alam for Petitioners.

Amjad Jawaid Hashmi along with Shahid Ali, Dr. Shahnawaz Memon, Ameer Baksh Metlo, Muhammad Aqeel Qureshi, Syed Riazuddin, S. Mohsin Imam, S. Asif Ali, Muhammad Taseer Khan, Muhammad Khalid, Zubair Ahmed Hashmi, Pervez Ahmed Memon and Haider Naqi for Respondents.

Salman Talibuddin, Additional Attorney General for Pakistan.

Mir Hussain, Assistant Attorney General.

Aminullah Siddiqui, Assistant Attorney General.

2020 P T D 1614

[Sindh High Court]

Before Mohammad Ali Mazhar and Agha Faisal, JJ

A.P. MOLLER MAERSK and others

Versus

The COMMISSIONER INLAND REVENUE and others

Income Tax Reference Applications Nos.22, 27 till 32 and 34 till 40, 51 till 64 of 2014 and 74 till 75 of 2018, decided on 31st May, 2019.

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

----Ss. 7 & 107---Organisation for Economic Co-operation and Development ("OCED") Model Tax Convention, 2010, Art. 8---Tax on shipping and air transport income of a non-resident person---Container Detention Charges ("CDC"), Container Service Charges ("CSC") and Termination Handling Charges---Nature---Convention for Avoidance of Double Taxation Treaties, enforcement of---Statutory sanction to benefit of Avoidance of Double Taxation Treaties---Scope---Question before High Court was whether CDC, CSC and THC charges qualified within definition of "profits" from operations of ships in international traffic, falling within purview of Danish, and Belgian Double Taxation Treaties with Pakistan---Contention of Department, inter alia, was that such revenue receipts fell outside exemption provided by said Double Taxation Treaties---Validity---OCED Model Tax Convention, along with guidelines and commentary with respect to Art. 8 of same were an important tool to employ in interpretation of Double Taxation Treaties---Per said Art. 8 income derived, inter alia, from providing containers for transportation, transferring containers to and from a ship, transportation on board ship, unloading containers and providing containers for transportation from port of destination to customer were said to fall within broader category of "profit" from operation of ships as said income was considered auxiliary to core income---Such OCED guidelines therefore provided, inter alia, that profit from activities facilitating international shipping operations were encompassed in category of profits from operation of ships in international traffic so long as such activities were ancillary to international shipping operations---CDC, CSC and THC were ancillary to operation of ships in international traffic and profits derived therefrom also fell within category of "profits from operations of ships in international traffic"---Insertion of specific provisions in respect of Agreements for Avoidance of Double Taxation in Income Tax Ordinance, 2001 demonstrated that said category was dealt with under an express provision of said Ordinance itself and thus it followed that provisions of S. 7 of the said Ordinance read with S. 107 of the same would provide statutory sanction for availing of benefits under such fiscal double-taxation treaties---While interpreting a double taxation treaty it was necessary to bear in mind as to which method had been adopted in relation to income under consideration and S. 107 of Income Tax Ordinance, 2001 provided the statutory gateway through which a double taxation treaty was given effect in municipal law---High Court held that CDC, CSC and THC qualified as "profits from international shipping operations" and benefits of Danish and Belgian Double Taxation Treaties with Pakistan were applicable on the same---Reference was answered, accordingly.

Commissioner (Legal) Inland Revenue v. E.N.I. Pakistan (M) Limited, Karachi 2011 PTD 476; Commissioner Inland Revenue, Zone-II, Karachi v. Kassim Textile Mills (Private) Limited, Karachi 2013 PTD 1420; 2005 PTD 830 and PLD 2008 SC 446 = 2008 PTD 1157 ref.

Judicial Interpretation of Tax Treaties, by Carlo Garbarino and published by Edward Elgar Publishing Limited United Kingdom; Double Taxation Conventions by Sweet and Maxwell 2013; Edition; A.P. Moller v. Taxation Officer of Income Tax and another 2012 PTD 1460 and A.P. Moller v. Commissioner of Income Tax, Zone I, Karachi and another 2012 SCMR 557 rel.

(b) Words and phrases---

----"Container Detention Charges", (Shipping and maritime terms) nature and meaning of---"Container Detention Charges" were the amounts collected on account of rent of container which was charged if a customer held said container beyond the stipulated time required to discharge goods at intended port of disembarkation.

(c) Words and phrases---

----"Container Service Charges", nature and meaning of---"Container Service Charges" were collected by shipping lines on account of services in respect of containers which may be required due to discharge of goods at a destination and it was a requirement of the Hague and Rotterdam Rules that only neat and clean containers in perfect conditions may be shipped on board.

(d) Words and phrases---

----Terminal Handling Charges", (Shipping and maritime terms) nature and meaning of---"Terminal Handling Charges", were collected by shipping lines on account of terminal charges incurred / to be incurred at the port of disembarkation.

(e) Interpretation of statutes---

----Construction of fiscal statutes---Scope---Interpretation with respect to fiscal statues required Courts to apply words of such statute literally however, if two reasonable interpretations were possible, then one favoring taxpayer was applicable---Boundary, in realm of fiscal statutes, and particularly for a charging provisions, tended to be drawn in favor of taxpayer.

Citibank NA v. Commissioner Inland Revenue and another 2014 PTD 284 rel.

Barrister Khalid Javed Khan for Applicants.

Kafeel Ahmed Abbasi and Zulfiqar Ali Jalbani for Respondent (in Income Tax Reference Applications Nos. 74 and 75 of 2018).

2020 P T D 1667

[Sindh High Court]

Before Fahim Ahmed Siddiqui, J

DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION FBR, KARACHI

Versus

MUHAMMAD JUNAID

Special Criminal Appeal No.03 of 2018, decided on 24th September, 2019.

Customs Act (IV of 1969)---

----Ss. 168, 156(8), 156(1) & 156(2)---Seizure of things liable to confiscation---Scope---Directorate General of Intelligence and Investigation, on credible information, raided the customs bonded carrier's trailer and found that seals of the container were broken and the goods were removed under the process of loading in a mini truck---Driver of the trailer and respondent, present in a car near the trailer, were arrested---Special Judge (Customs and Taxation) vide impugned order issued directions to release all the personal articles belonging to respondent except the property involved in criminal case i.e. the case properties---Validity---Neither the currency nor the vehicle recovered from the respondent was made case property---None of the smuggled articles were recovered from the car of respondent---Confiscation was only allowed as per Cls. (8), (1) or (2) of S. 156 of Customs Act, 1969, according to which only the smuggled goods and/or packing of smuggled goods as well as conveyance used for smuggled goods could be confiscated---None of the properties belonging to respondent fell under the definition of "smuggled goods", while the car of respondent was also not used as a conveyance for the purpose of transportation of smuggled goods---Impugned order did not require interference---Appeal was dismissed.

Ashiq Ali Anwer Rana, Special Prosecutor Customs for Appellant.

Zain A. Jatoi for Respondent.

2020 P T D 1742

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ

Messrs HBL STOCK FUND through Trustee and others

Versus

ADDITIONAL COMMISSIONER INLAND REVENUE and others

C.P. No.1849 of 2016 and 2018 others and Suit No.2181 of 2015 and 35 others, decided on 21st July, 2020.

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

----Ss.4B & 4---Constitution of Pakistan, Arts.72 & 25 & Fourth Sched.---Super tax for rehabilitation of temporarily displaced persons---Tax to be levied by law only---Nature of "super tax" and distinction of "super tax" from "fee"---Procedure with respect to Money Bill---Bill not deemed to be a money bill---Specific purpose of tax mentioned in the taxing provision---Petitioners impugned imposition of "super-tax" via S.4B of the Income Tax Ordinance, 2001 on the ground, inter alia, that same was not a "money bill" in terms of Art.73(3) of the Constitution, that said tax was tantamount to double-taxation and that same suffered from various Constitutional defects---Validity---Super tax imposed through S.4B of Income Tax Ordinance, 2001 was independent, separate and distinct from income tax charged under S.4 of Income Tax Ordinance, 2001 and had been imposed on a particular class of persons---Legislature was competent to choose a particular class of persons for purposes of charging tax at rates as may be specified without discrimination within same class of persons---Classification created by impugned provision was not unreasonable and did not create any discrimination within the said classification---Nature of super tax was not confiscatory in nature---Said super tax did not possess characteristics of "fee" as there as not element of quid pro quo---High Court observed that impugned super tax did not amount to double-taxation nor offended Art.25 of the Constitution and that Legislative competence under Art.73 of the Constitution existed to impose the same---Constitutional petitions were dismissed.

Mumtaz Hussain Khan v. Additional Commissioner 2016 PTD 1667; Iqbal Zafar Jhagra v. Federation of Pakistan 2014 SCMR 220; Shakeel Ahmed v. Federation of Pakistan 2016 PTD 577; Sohail Jute Mills Ltd. and others v. Federation of Pakistan PLD 1991 SC 329; Workers Welfare Funds v. East Pakistan Chrome PLD 2017 SC 28; Federation of Pakistan v. Durrani Ceramics 2014 SCMR 1630; Collector of Customs v. Sheikh Spinning Mills 1999 SCMR 1402; Sheikh Muhammad Ismail v. Chief Cotton Inspector PLD 1966 SC 388; Pakcom Limited v. Federation of Pakistan PLD 2011 SC 44; Flying Cement Co. v. Federation of Pakistan PLD 2016 Lah. 35; Shell Pakistan Limited v. Capital Development Authority PLD 2015 Isl. 36; Builders Association of India Union of India 129 (2007) DLT 578; Fatima Enterprises v. Federation of Pakistan 1999 MLD 2889; Cocacola Beverages Pakistan v. City District Government 2014 CLC 1135; Sindh High Court Bar Association and another v. Federation of Pakistan PLD 2009 SC 879; Mir Muhammad Idris v. Federation of Pakistan PLD 2011 SC 213; Federation of Pakistan v. Durrani Ceramics PLD 2015 SC 354; Federation of Pakistan v. Durrani Ceramics 2015 SCMR 354; Shahtaj Sugar Mills v. Province of Punjab 1998 CLC 1912; Syed Nasir Ali v. Pakistan 2010 PTD 1924; Salim Raza v. Federation of Pakistan 2012 PTD 302; Inam-ur-Rehman v. Federation of Pakistan 1992 SCMR 563; Haji Farmanullah v. Latif-ur-Rehman 2015 SCMR 1708; Muhammad Amin v. Muhammad Yasin 2002 CLC 231; The Secretary, Government of Madras v. Zenith Lamp and Electrical Ltd. AIR 1973 SC 724; Chairman, Federal Board of Revenue v. Al-Technique Corporation of Pakistan Ltd. PLD 2017 SC 99; Shafiquddin v. Federation of Pakistan 2018 CLC 1088; Member Board of Revenue/Chief Settlement Commissioner, Punjab, Lahore v. Abdul Majeed PLD 2015 SC 166; D.G. Khan Cement Company Ltd. and another v. Federation of Pakistan and others ICA No. 134758 of 2018; Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Fauji Foundation v. Central Board of Revenue and others 1987 MLD 106; Lotte Pakistan PTA Ltd. v. Federation of Pakistan and 4 others 2011 PTD 2229; Imran Ahmed v. Federation of Pakistan through Ministry of Law and 3 others 2014 PTD 225 and Pakistan Industrial Development Corporation v. Pakistan through the Secretary, Ministry of Finance 1992 SCMR 891 ref.

Shahbaz Garment (Pvt.) Ltd. and others v. Pakistan through Secretary Ministry of Finance, Revenue Division, Islamabad and others 2013 PTD 969; Chamber 21st Century Dictionary (Revised Edition); Pakistan Industrial Development Corporation v. Pakistan (PICD) 1992 SCMR 891 and Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340 rel.

(b) Constitution of Pakistan---

----Arts.73, 25 & Fourth Sched.----Adjudication on challenge to vires of fiscal statutory enactment---Power of Legislature to impose tax---Imposition of tax twice on a subject-matter---Striking down a statutory provision---Scope---Test to examine vires of any enactment, particularly imposition, abolition, remission, alteration or regulation of any tax through Finance Act as a "Money Bill" under Art.73 of the Constitution was to see whether there existed Legislative competence to impose such tax in terms of Federal Legislative List provided under Fourth Sched. to the Constitution---Furthermore it had to be seen whether such imposition violated Fundamental Rights and whether such imposition was discriminatory and/or based on unreasonable classification---Impugned Legislation, if established that the same did not suffer from said Constitutional defects, then High Court ought not to interfere with Sovereign Right of Legislature mandated under the Constitution to impose taxes while creating common burden to generate revenue to be used for general purpose---In absence of any prohibition or restriction under Entry 47 of Federal Legislative List of the Fourth Sched. to the Constitution, more than one tax could be imposed on income of a person, however, same must be done in clear and unambiguous language.

(c) Taxation---

----Principles---"Tax" and "Fee"---Distinction---Scope---Quid pro quo was an essential ingredient which brought a levy within the definition of term 'fee'---Fee could be regarded as a charge or payment for a service rendered by government to its payer---Utilization of a service available with Government against a charge of money would make said charges to be paid, "fee"---Charge of money by Government, if the same was not against a service provided by Government, then such levy could not be termed as "fee"---"Fee" could not be regarded as a general levy as same was meant for those who wanted to avail benefit of service(s) provided by the Government---In case of imposition of parking fee, parks fee, tuition fee, registration fee, license fee etc., direct beneficiary of such payment was the person who paid it and got reciprocated, though not in exact terms, the benefit out of such payment---"Tax" was not co-related to a particular service to be provided by Government to taxpayers and was in fact is a compulsory exaction of money by public authority for public purposes enforceable by law and was not a payment for service rendered.

Shahbaz Garment (Pvt.) Ltd. and others v. Pakistan through Secretary Ministry of Finance, Revenue Division, Islamabad and others 2013 PTD 969; Chamber 21st Century Dictionary (Revised Edition); Black's Law Dictionary (Sixth Edition); Wharton's Law Lexicon Dictionary (Fifteenth Edition); Judicial Dictionary 13th Edition KJ Aiyar; Legal Terms and Phrases 2006 Edition by M. Ilyas Khan; Supreme Court on Words and Phrases by Justice M.L. Singhal; Legal Terms and Phrases 2006 Edition by M. Ilyas Khan; Wharton's Law Lexicon Dictionary (Fifteenth Edition); Judicial Dictionary 13th Edition KJ Aiyar; Collector of Customs v. Sheikh Spinning Mills 1999 SCMR 1402; Pakistan Burmah Sheel Ltd. v. Federation of Pakistan 1998 PTD 1804; Pakistan Flour Mills Association v. Government of Sindh 2003 SCMR 162 and Messrs Mutual Funds Association of Pakistan (MUFAB) v. Federation of Pakistan 2010 PLC 306 rel.

(d) Constitution of Pakistan---

----Arts.73, 25 & Fourth Sched.---Taxation---Legislative competence to impose taxation---Judicial review of fiscal enactments---Principles enumerated.

Following are the Principles pertaining to judicial review of fiscal enactments;

(i) That in view of wide variety of diverse economic criteria, which are to be considered for the formulation of a fiscal policy, Legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events etc. for taxation. But with all this latitude certain irreducible desiderata of equality shall govern classification for differential treatment in taxation law as well.

(ii) That Courts while interpreting laws relating to economic activities view the same with greater latitude than the laws relating to civil rights such as freedom of speech, religion etc., keeping in view the complexity of economic problems which do not admit of solution through any doctrinaire or strait jacket formula as pointed out by Holmes, J. in one of his judgments.

(iii) That Frankfurter J., in Morey v. Doud (1957) U.S. 457 has remarked that "in the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to the legislative judgment".

(iv) That while interpreting Constitutional provisions Court should keep in mind, social setting of the country, growing requirements of the society/nation, burning problems of the day and the complex issues facing the people, which the Legislature in its wisdom through legislation seeks to solve. The judicial approach should be dynamic rather than static, pragmatic and not pedantic and elastic rather than rigid.

(v) That the law should be saved rather than be destroyed and the Court must lean in favour of upholding the constitutionality of a legislation keeping in view that the rule of Constitutional interpretation is that there is a presumption in favour of the constitutionality of the legislative enactments unless ex facie it is violative of Constitutional provision.

(vi) That what is not "income under the Income Tax Act can be made "income" by Finance Act. An exemption granted by the Income Tax Act can be withdrawn by the Finance Act or the efficacy of that exemption may be reduced by the imposition of a new charge, of course, subject to Constitutional limitations.

(vii) That the taxing power is unlimited as long as it does not amount to confiscation and that the Legislature does not have the power to tax to the point of confiscation.

(viii) That income-tax is a tax on a person in relation to his income. It is a tax imposed upon a person (natural or juristic) in relation to his income.

(ix) That there is a clear distinction between the subject-matter of a tax and the standard by which the amount of tax is measured keeping in view the practical difficulties, which are encountered by the Revenue to locate the persons and to collect the tax due in certain trades, if the Legislature in its wisdom thought that it would facilitate the collection of tax due from specified traders on a presumptive basis, the same is not violative of the Fundamental Right relating to equality.

(x) Tax is compulsory exaction of money by public authority for public purposes enforceable by law. In contrast, a fee is a sort of consideration for the services rendered, which necessitate that there should be an element of quid pro quo. Therefore co-relationship must exist between the fee charged and services rendered against it, like parking fee. It is, however, not necessary those services mathematically are proportionate or equal with the benefit to the person charged. At the same time it may not be excessively disproportionate.

(xi) Tax is imposed for public purposes and is not, and need not, be supported by any consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it.

(xii) The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. On the other hand a fee is generally defined to be a charge for special service rendered to individuals by some governmental agency.

(xiii) Tax is a common burden and the only return which the tax-payer gets is participation in the common benefits of the state. Fees, on the other hand, are payments primarily in the public interest, but for some special service rendered or some special work done for the benefit of those from whom the payments are demanded. Thus, in fees, there is always an element of quid pro quo which is absent in a tax.

(xiv) The distinction between "tax" and "fee" lies primarily in the fact that a tax is levied as a part of common burden while a fee is paid for a special benefit or privilege.

(xv) No doubt both tax and fee are compulsory exactions, but the difference between the two lies in the fact that the tax is not correlated to a particular service rendered but is intended to meet the expenses of the Government and a fee is meant to compensate the Government for expenses incurred in rendering services to the person from whom fee is collected.

(xvi) The expression "Money Bill" has been defined by clause (2) of Article 73 of the Constitution and paragraph (a) thereof indicates that a Bill dealing with the imposition, abolition, remission, alteration or regulation of any "tax" would fall within the purview of the said definition.

Messrs Mutual Funds Association of Pakistan (MUFAB) v. Federation of Pakistan 2010 PLC 306 rel.

(e) Interpretation of statutes---

----Interpretation of fiscal statutes---Imposition of tax liability via statutory enactments---Principles of construction---For interpretation of taxing statute, charging provision was the most relevant provision to determine scope and intent of an enactment, as there was no scope for any intendment or for drawing inference, while interpreting charging provisions of taxing statute.

Naveed A. Andrabi, Anwar Kashif Mumtaz, Khalid Javed Khan, Mansoor-ul-Arfin, Rashid Anwar, Abid H. Shaban, Arshad Siraj, Hyder Ali Khan, Ali Aziz along with Sami-ur-Rehman, Pooja Kalpana, Munawar Hussain, Jawaid Farooqi, Lubna Pervez, Qazi Umair Ali, Shafqat Zaman, Ovais Ali Shah, Kashif Hanif, Ali Almani, Jam Zeeshan Ali, Iqbal Salman Pasha, Mushtaq Hussain Kazi, Atir Aqeel Ansari, Mariam Riaz, Taimoor Ahmed Qureshi, Taimoor Ali Mirza, A. Rahim Lakhani, A. Jabbar Mallah, Atta Muhammad Qureshi, Shahzad Rahim, Faiz Durrani, Samiya F. Durrani, Emadul Hassan, Gazain Zafar Magsi, Zain A. Jatoi, Zeeshan Merchant, Faraz Merchant, Muhammad Aleem, S. Ahsan Ali Shah, Fazle Rabbi, Khawaja Aizaz Hassan, Aijaz A. Zahid, Ijaz Ahmed, Rabia Khan, Muhammad Ramzan, Mansoor Usman Awan, Suffiyan Zaman, Ajmal Khan, Darvesh K. Mandhan, S. Mohsin Ali, Arshad Shehzad, Imran Iqbal Khan, Waleed ur Rehman Khanzada, Shafqat Zaman, Sattar Muhammad, Dilkhurram Shaheen, Adnan Ahmed, Fasih-uz-Zaman, Mukesh G. Karara, Ghulam Hyder Shaikh, Irfan Ali, Ameen M. Bandukda, Kashan Ahmed and Ghulam Nabi Shar for Petitioners/Plaintiffs.

Amjad Jawaid Hashmi, Ameer Bakhsh Metlo, Dr. Shahnawaz Memon, Kashif Nazeer, Muhammad Bilal Bhatti, Khalid Mehmood Rajpar, S. Asif Ali, S. Mohsin Imam, Masooda Ssiraj, Muhammad Aqeel Qureshi, M. Taseer Khan, Atif Awan, Afsheen Aman, Irfan Mir Halepota, Z.A. Khan Jalbani, Sarfaraz Khan for the Respondents/Defendants.

Muhammad Ameenullah Siddiqui, Asstt. Attorney General.

2020 P T D 1815

[Sindh High Court]

Before Irfan Saadat Khan and Fahim Ahmed Siddiqui, JJ

COMMISSIONER OF INCOME TAX

Versus

NATIONAL BANK OF PAKISTAN

Income Tax Appeal No.31 of 2000, decided on 3rd March, 2020.

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

----Ss.27, 62 & 136---Assessment of income---Income of Banking Company---Capital Gains---Income derived in respect of Securities ---"Rollover of securities/bonds"---Scope---Question before High Court was whether taxpayer Banking Company could claim capital gain on rollover of certain bonds (securities) or whether capital gain could arise only after transfer / sale of such bonds---Held, that profit or gain would arise only from transfer of a capital asset which would be deemed to be income of an assessee; and where no transfer of such asset took place, then claim of taxpayer with regard to capital gain on such bonds / securities was not justified---Only on transfer of an asset, as referred to in S. 27 of Income Tax Ordinance, 1979, the taxpayer would be justified to claim income by way of capital gain and therefore rollover of bonds would not be considered capital gain --- Reference was answered, accordingly.

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

----S.14 & Second Sched. Part I, Cl. 128---Export Processing Zones Authority Ordinance (IV of 1980) S.2(e)---Exemptions from total income---Industrial undertaking, definition of---Export Processing Zones ("EPZ")---Banking Companies---Income of Branch of Banking Company located within an EPZ---Scope---Question before High Court was whether income derived by a Banking Company from Branch located within an EPZ was entitled to exemption provided under Cl.128 of Part I of the Second Schedule to the Income Tax Ordinance, 1979---Held, that any income accruing to an industrial undertaking outside Pakistan, set up in EPZ, was exempt from tax and such undertakings working in EPZs were to be considered to be working outside Pakistan---Any industrial undertaking accruing income in an EPZ was therefore exempt from tax---Claim of exemption of Banking Company in respect of its Branch located within an EPZ did fall within exemption provided for in Cl. 128 of Part I of the Second Schedule to the Income Tax Ordinance, 1979 read with S.14 of the same---Reference was answered, accordingly.

Ameer Bakhsh Metlo for Appellant.

Iqbal Salman Pasha for Respondent.

2020 P T D 1865

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

SHAN FOODS (PVT.) LTD.

Versus

PAKISTAN and 2 others

Suit No.938 of 2018, decided on 31st May, 2019.

(a) Interpretation of statutes---

----Word 'and' used in an enactment---Scope---Word 'and' can always be read as 'or'.

Iqbal Hussain v. Federation of Pakistan 2010 PTD 2338 rel.

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

----Ss.3, 13, Sixth Sched. Entries Nos. 29 & 107 --- Suit for declaration---Show-cause notice --- Levy of sales tax --- Principle--- Plaintiff assailed show cause notice issued by authorities for recovery of short levy of sales tax for year 2014 and onwards---Validity---"Import" and "supply" were two distinct transactions under Sales Tax Act, 1990---Sales tax was payable when either there was a taxable supply, or an import---Such two transactions were distinctly mentioned in charging section drawing an inference that those were not similar or identical transactions---Plaintiff was exempted from payment of sales tax in respect of goods in question under Entry No. 107 of Sixth Sched. of Sales Tax Act, 1990, for tax period 2014 onwards---Goods in question did not fall under Entry No. 29 of Sixth Sched. of Sales Tax Act, 1990---High Court set aside show cause notice for tax period 2014 onwards as the same was without lawful authority---Suit was decreed accordingly.

Abbasia Cooperative Bank v. Hakeem Hafiz Muhammad Ghaus PLD 1997 SC 3; Attock Cement Pakistan Ltd. v. Collector of Customs 1999 PTD 1892; Collector of Customs v. S. M. Ahmed and Company 1999 SCMR 138; Habib Safe Deposir Vault (Pvt.) Ltd. v. Sindh 2016 PTD 1180; Citibank NA v. Commissioner Inland Revenue 2014 PTD 284; Association of Builders and Developers of Pakistan v. Sindh 2018 PTD 1487; Digicom Trading (Pvt.) Ltd. v. Federation of Pakistan and another 2016 PTD 648; Khadim Hussain v. Additional District Judge, Faisalabad PLD 1990 SC 632; Abdul Razzak v. Karachi Building Control Authority PLD 1994 SC 512; College of Physicians and Surgeons, Pakistan v. Wafaqi Mohtasib PLD 2003 Kar. 667; Jawad Ali v. Election Commissioner 1999 CLC 19; Sarfraz Ahmed Tarrar v. Punjab PLD 2007 Lah. 57; Federation of Pakistan v. Haji Muhammad Sadiq 2007 PTD 67; Nizar Ali v. Karachi Water and Sewerage Board 2004 CLC 578; Market Committee Khudian v. Town Committee Khudian 1992 SCMR 1403; Qazi Hussain Ahmed v. General Pervez Musharraf PLD 2002 SC 853; Shah Foods (Pvt.) Limited v. Pakistan and others 2005 SCMR 1166; Aftab Shahban Mirani v. Muhammad Ibrahim PLD 2008 SC 779; Shell (Pakistan) Ltd. v. Pakistan 2013 PTD 1012; Commissioner of Income Tax v. Abdul Mateen 2008 PTD 182; Al-Karam CNG v. Pakistan 2011 PTD 1; C.W.S. India Ltd. v. Commissioner of Income Tax 1995 PTD 741; Mumtaz Ali Khan Rajban v. Pakistan PLD 2001 SC 169; Tanveer Hussain v. Divisional Superintendent, Pakistan Railways PLD 2006 SC 249; Commissioner Inland Revenue v. Al-Mehdi International 2013 PTD 2125; Muhammad Sheraz v. Chief Secretary PLD 2014 Pesh. 170; Shaw Wallace & Co. Ltd. v. State of Karnataka 1993 91 STC 37; Kirloskar Electric Co. Ltd. v. Karnataka AIR 1999 Karnataka 60; Pradip Kumar Maity v. Chinmoy Kumar Bhunia (2013) 11 SCC 122; American International School System v. Muhammad Ramzan 2015 SCMR 1449; Pakistan Tobacco Co. Ltd. Karachi Municipal Corporation PLD 1967 SC 241; State Life Insurance Corporation of Pakistan v. Mercantile Mutual Insurance Company Limited 1993 SCMR 1394; S. Zafar Ejaz v. Chairman, Steel Mills Corporation 1998 CLC (C.S) 777; Gul Cooking Oil and Vegetable Ghee (Pvt.) Ltd. 2007 PTD 526; Oxford University Press v. Commissioner of Income Tax, Companies Zone-I, Karachi and others 2019 SCMR 235; Central Board of Revenue and another v. WAPDA and another 2014 PTD 1861; Liaquat National Hospital v. Province of Sindh and 2 others PLD 2015 Sindh 123; Varan Tours Rawalpindi v. The Federation of Pakistan and others PTD 2004 CL 27; Federation of Pakistan v. Durrani Ceramics and others PLD 2015 SC 354 and Commissioner IR v. Messrs IGI Insurance Company Limited 2018 PTD 114 ref.

Searle Solution (Pvt.) Limited v. Federation of Pakistan 2018 SCMR 1444 rel.

(c) Interpretation of statutes---

----Court, duty of---Scope---Court is not supposed to add or insert any word which has not provided in statute by legislature.

Hyder Ali Khan for Plaintiff.

Osman A. Hadi Assistant Attorney General for Defendant No.1.

Shahid Ali Qureshi for Defendants Nos.2 and 3.

2020 P T D 1927

[Sindh High Court]

Before Muhammad Junaid Ghaffar, J

KIRTHAR PAKISTAN BV through Authorize Attorney

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division Ministry of Finance Government of Pakistan, Islamabad and 2 others

Suit No.574 of 2012 and C.M.As. Nos.5247, 11279 of 2012, 5807, 5920 of 2013, 600, 18742 of 2015 and 6870 of 2016, decided on 19th March, 2020.

Income Tax Ordinance (XLIX of 2001)---

----S.172(3) & (5)--- Specific Relief Act (I of 1877), Ss. 42 & 54--- Suit for declaration and injunction--- show-cause notice, assailing of--- Taxpayer instead of responding to show-cause notice issued by authorities to him assailed the same by filing a suit---Validity---Show-cause notice could not be challenged directly before a Court and instead taxpayer should have responded the same before departmental hierarchy---Exception was notice without jurisdiction or with mala fide intention and such was not present in the present matter--- Suit filed by taxpayer was premature and without a proper cause of action the same was instituted against merely a show-cause notice for providing explanation as to the allegations---High Court directed the taxpayer to respond to show-cause notice in question and authorities were directed to proceed in accordance with law---Suit was dismissed in circumstances.

Searle IV Solution (Pvt.) Ltd. and others v. Federation of Pakistan and others 2018 SCMR 1444; Commissioner of Income-tax, Calcutta, v. T.I. &M. Sales Ltd. AIR 1987 SC 1234; Commissioner of Income Tax, Tamil Nadu-V v. Fried Krupp Industries 1981 (128) ITR 27; Commissioner of Income-Tax, Bombay City-I v. Gulf Oil (Great Britain) Ltd. 108 ITR 874; Asia Petroleum Limited through Kh. Izz Hamid, Managing Director v. Federation of Pakistan through Secretary Finance, Ministry of Finance, Government of Pakistan Pak Secretariat, Islamabad and 3 others 1999 PTD 1313; General Bank of Netherland Limited v. Commissioner of Income Tax, Central Karachi PLD 1991 SC 675; Deputy Commissioner of Income Tax Wealth Tax, Faisalabad and others v. Messrs Punjab Beverage Company (Pvt.) Ltd. 2007 PTD 1347; Commissioner of Income Tax, Companies-II and another v. Hamdard Dawakhan (Waqf), Karachi PLD 1992 SC 847; Messrs Amin Textile Mills (Pvt.) Ltd. v. Commissioner of Income-Tax and 2 others 2000 SCMR 201; Messrs Pakistan Petroleum Ltd. through Deputy Chief Commercial v. Additional Commissioner Inland Revenue and 2 others 2015 PTD 2168; Commissioner of Income Tax v. Messrs ELI Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279; Messrs Maritime Agencies (Pvt.) Ltd. through Company Secretary v. Assistant Commissioner-II of SRB and 2 others 2015 PTD 160; Sitara Chemical Industries Ltd. and another v. Deputy Commissioner of Income-Tax reported in 2003 PTD 1285; Dr. Seema Irfan and 5 others v. Federation of Pakistan through Secretary and 2 others 2019 PTD 1678 and Indus Trading and Contracting Company v. Collector of Customs (Preventive) Karachi and others 2016 SCMR 842 ref.

Hussain Ali Almani for Plaintiff.

Ghulam Mohiuddin, Assistant Attorney General for Defendants Nos.1 and 2.

Ameer Bakhsh Metlo along with Abdul Salam Assistant Commissioner and Ghulam Murtaza Nizamani, Deputy Commissioner Inland Revenue for Defendant No.3.

2020 P T D 1952

[Sindh High Court]

Before Muhammad Shafi Siddiqui and Zulfiqar Ahmad Khan, JJ

QASIM INTERNATIONAL CONTAINER TERMINAL PAKISTAN LTD. Through Authorized Attorney and others

Versus

FEDERATION OF PAKISTAN through Secretary and others

C.P. No.D-4867 of 2013, decided on 6th January, 2020.

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

----S.14A [as inserted by Finance Act (XXII of 2013)]---Customs Rules, 2001, R.556(a)(iv)---Constitution of Pakistan, Art.73---Money Bill---Amendment in Customs Act, 1969---Petitioners were owners and operators of container terminals at various ports and they were aggrieved of insertion of S.14A in Customs Act, 1969, through Money Bill---Validity---Main object of Customs Act, 1969, was to make it expedient to consolidate and amend law relating to levy and collection of customs duties, fee and service charges and to provide for other allied matters---High Court observed that it did not matter that the amending provision had not itself qualified as one imposing duties and taxes etc.--- All other ancillary and allied provisions in Customs Act, 1969, were meant to facilitate the officials to carry out their main objective and mandate and that was collection of duties and taxes by applying law--- Amendment in question was nothing but to toe and facilitate the main object of statute; it was ancillary and incidental to the main object of imposition, abolition, remission, alteration or regulation of any tax which they would ultimately perform while performing their duties within the premises of private port/terminal operators to whom licences were issued--- Imposition, abolition etc. as mentioned in Art. 73(2)(a) of the Constitution, had not operated in vacuum as it related to fiscal statute which could generate sales tax, income tax, customs duties and thus was revenue generating tool for the government--- Amendment in question was in aid to a primary object of the statute and to mobilize and foster the cause of Customs Act, 1969---Constitutional petition was dismissed in circumstances.

2018 PTD 861 and Divisional Superintendent PWR Multan v. Abdul Khaliq 1984 SCMR 1311 ref.

(b) Interpretation of statutes---

----"Word", meanings of---Principle---Each statute carry different mechanics to assign a varying meaning of the same word---Meaning of same word may vary from one legislation to another; it is the statute and the very provision itself that determines as to which varying definition would come into play to carry the object of such legislation--- In order to find intent of word in any provision of statute, it is always wise or logical to discover individual meaning of a solitary word first; at time it is to be read in connection with entire provisions to find logical meaning closer to the functioning of the statute and provisions---Word may have potential to be explained differently--- Meaning of a word discovered judicially to understand a provision of a statute does not necessarily be applied to provision of another statute as it may disbalance the scheme of that statute; it may tend to carry same meaning in a similar statute if used in different provisions / sections etc. but may not necessarily carry same intent in another statute.

Makhdoom Ali Khan along with Ms. Beenish Jawed and Fahad Khan for Petitioners.

Kafeel Ahmed Abbasi, Deputy Attorney General for Respondents Nos.1 and 2.

Sarfaraz Ali Metlo for Respondent No.3.

2020 P T D 1972

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Zulfiqar Ahmad Khan, JJ

Messrs PRIME ENTERPRISES through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Federal Board of Revenue, Islamabad and 4 others

Constitutional Petition No.D-5031 of 2018 and Miscellaneous No.22030 of 2018, decided on 11th October, 2019.

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

----S.25---Customs Rules, 2001, R. 107(a)---Value of imported and exported goods---Term 'at or about the same time'---Scope---Valuation ruling must ordinarily be regarded as valid for a period of ninety days from the date of issuance, and an aggrieved importer has the right to approach the concerned officer after the ninety days period and he would then have to give reasons as to why the ruling has to be revised or rescinded.

Sadia Jabbar v. Federation of Pakistan 2018 PTD 1746 fol.

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

----Ss.25 & 81---Value of imported and exported goods---Provisional determination of liability---Scope---Where valuation ruling is more than ninety days old and an importer has approached the Director Valuation for provision of reasons as to why the ruling has to be revised or rescinded; fresh consignments of such importer shall be allowed provisional release in terms of S.81 of Customs Act, 1969, by securing the differential amount of duty and taxes in the shape of pay order/Bank guarantee.

Danish Jahangir v. The Federation of Pakistan through Secretary/Chairman and 2 others 2016 PTD 702 fol.

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

----Ss.25, 25-D & 81---Value of imported and exported goods---Revision of the value determined---Provisional determination of liability---Scope---Where a proper revision application has been filed by an importer in terms of S.25-D, Customs Act, 1969, before the Director General, Valuation, and pending such review/revision, a fresh consignment is imported, then at the request of the importer who has filed such revision/review, the consignment in question shall be released in terms of S.81 of Customs Act, 1969 after securing the differential amount of duty and taxes in the shape of pay order/Bank guarantee.

Danish Jahangir v. The Federation of Pakistan through Secretary/Chairman and 2 others 2016 PTD 702 fol.

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

----S.223---Officers of Customs to follow Board's orders---Scope---Federal Board of Revenue (FBR) has no authority to issue a Circular and Administrative Direction of the nature, which may interfere with the judicial or quasi-judicial functions entrusted to the various functionaries under the Statute---Any Circular or Instructions issued by the FBR or by any other officer performing functions under the administrative control of FBR relating to interpretation of any statutory provision, rule or regulation, cannot be treated as judicial interpretation, hence not binding on authorities performing judicial and/or quasi-judicial functions.

Central Insurance Company v. Central Board of Revenue 1993 SCMR 1232 rel.

M. Adnan Moton for Petitioner.

Mirza Nadeem Taqi for Respondent No.3.

Khalid Rajpar for Respondents Nos.4 and 5.

2020 P T D 1985

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Mahmood A. Khan, JJ

SURFACTANT CHEMICAL COMPANY (PVT.) LTD. through Authorized Officer

Versus

FEDERATION OF PAKISTAN through Secretary Ministry of Finance and 3 others

C.Ps. Nos. D-8496 of 2017 and D-4805 of 2018, decided on 12th December, 2019.

Sales Tax Act (VII of 1990)---

----Ss.3, 13 & Sched. VI, Cl. 133---Agricultural Pesticides Ordinance (II of 1971), S.4---Exemption from sales tax---Inactive ingredients of pesticides---Registration with authorities---Petitioners imported inactive ingredients of pesticides and Customs Authorities refused to exempt the same from sales tax---Validity---Exemption for payment of sales tax was available to pesticides and their active ingredients registered by authorities under Agricultural Pesticides Ordinance, 1971, as well as to stabilizers, emulsifiers and solvents, which were inactive ingredients, to be used for manufacturing pesticides--- Importer of inactive ingredients of pesticides was not required to be registered with authorities under Agricultural Pesticides Ordinance, 1971---No restriction was imposed in Cl.133 of Sched. VI to Sales Tax Act, 1990, that exemption from payment of sales tax would be available to the manufacturers of pesticides only---Sketchy assessment made by Customs authorities was misconceived and contrary to express language of exemption clause of the Sales Tax Act, 1990---High Court declared that imported inactive ingredients for pesticides i.e. stabilizers, emulsifiers and solvents were covered under Cl. 133 of Sched. VI to Sales Tax Act, 1990---Constitutional petition was allowed in circumstances.

Asad Manzoor Halepota for Petitioner.

Ms. Masooda Siraj for Respondent.

Khalid Rajpar for Respondent.

2020 P T D 2008

[Sindh High Court]

Before Muhammad Junaid Ghaffar and Agha Faisal, JJ

VAN OORD DREDGING AND MARINE CONTRACTOR B.V. through authorized attorney

Versus

PAKISTAN through Secretary Revenue and 3 others

C.P. No.2867 of 2018, decided on 13th October, 2020.

Income Tax Ordinance (XLIX of 2001)---

----S.122---Constitution of Pakistan, Art.199---Constitutional jurisdiction of High Court---Amendment in assessments---Show-cause notice under S.122 of Income Tax Ordinance, 2001----Factual controversy---Scope---Petitioner taxpayer impugned show-cause notice under S.122 of Income Tax Ordinance, 2001 whereby petitioner's tax-exempt status under a Double Taxation Treaty had been called in question by Department---Validity---No case of abuse of process or want of jurisdiction was manifest in impugned show-cause notice and there existed no reason to consider same as mala fide, unjust or prejudicial towards petitioner---Questions as to petitioner's status under Double Taxation Treaty and availing of tax emptions rested on conflicting facts leading to divergent interpretations and such disputed questions of fact were not amendable for determination under Constitutional jurisdiction of High Court---High Court observed that petitioner ought to place its case without limitations before forum denoted in impugned show-cause notice and directed Department to conclude same with a speaking order---Constitutional petition was disposed of, accordingly.

1971 PTD 1; 2009 SCMR 1279; 2000 SCMR 201; 2003 PTD 1285; 2007 PTD 1347; 2015 PTD 2168 and 2019 PTD 1678 ref.

Dr. Seema Irfan and others v. Federation of Pakistan and others PLD 2019 Sindh 516; K-Electric Limited and others v. Federation of Pakistan and others C.P. D-4346 of 2017; 2016 CLC 1; 2015 PLC 45; 2015 CLD 257; 2011 SCMR 1990; 2001 SCMR 574; PLD 2001 SC 415 and Province of Sindh v. Abdul Sattar Arbani (C.P. 654-K of 2018) rel.

Hyder Ali Khan for Petitioner.

Muhammad Ahmer (Assistant Attorney General) and Ameer Bux Maitlo for Respondents.

2020 P T D 2038

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Mahmood A. Khan, JJ

GHULAM ALI BHATIA and others

Versus

The FEDERATION OF PAKISTAN through Ministry of Finance Economic Affairs and others

C.Ps. Nos.D-8633 of 2017 along with D-4165 of 2015 and D-8634 of 2017, decided on 9th October, 2020.

Sales Tax Special Procedure Rules, 2017---

----R.58-H (4)---Notification SRO No.583(I)/2017, dated 1-7-2017--- Constitution of Pakistan, Art. 25---Discrimination---Vires of law---Petitioners were manufacturers of steel products and importers of its raw material, such as re-rollable and re-meltable iron and steel scrap--- Plea raised by petitioners was that the taxes and duties charged from them were discriminatory as compared to those charged from ship breaking industry--- Validity--- While challenging vires of any law, rule, regulation or notification on the ground of discrimination, particularly in tax matters, aggrieved party had to establish that any tax duty or levy imposed by legislature or government was unjust and had created discrimination amongst the same class of persons and was violative of Art.25 of the Constitution---Ship breaking involved process of ship breaking and cutting through heavy machines and other equipment to get re-rollable and re-meltable scrap out of imported ship (vessel)--- Such industry also attracted risk and financial implications, which were not attracted in the case of importers of scrap--- Such was a simple case of granting reduction of tax liability and to give incentive to ship breaking industry as a matter of policy decision, whereas there was no legal impropriety while making such amendment through SRO No.583(I)/2017, dated 1-7-2017---Petitioners failed to establish that their business activity was similar to business activity of ship breaking industry, hence could not be classifiable under same PCT Heading nor the same could be treated as the same class---Any incentive granted to ship breaking industry did not amount to create any discrimination among same class of persons---Constitutional petition was dismissed in circumstances.

Collector of Customs, Excise and Sales Tax, Peshawar and 3 others v. Messrs Flying Kraft Paper Mills (Pvt.) Ltd. 1999 SCMR 709; Messrs Pak Ocean and others v. Government of Pakistan through Secretary, Ministry of Finance, Central Secretariat, Islamabad and others 2002 PTD 2850; Imran Ahmed v. Federation of Pakistan and others 2014 PTD 225; Messrs Elahi Cotton Mills Ltd and others v. Federation of Pakistan and others PLD 1997 SC 582; Dr. Mobashir Hassan and others v. Federation of Pakistan and others PLD 2010 SC 265; Ittefaq Foundry v. Federation of Pakistan and others PLD 1999 Lah. 121; Brig. (Retd.) F. B. Ali and another v. The State PLD 1975 SC 506; Miss Asma Jilani v. The Government of Punjab and another PLD 1972 SC 139; Dr. Mobashir Hassan and others PLD 2010 SC 265 and Watan Party and others v. Federation of Pakistan and others PLD 2012 SC 299 ref.

Messrs Elahi Cotton Mills Ltd. and other's case PLD 1997 SC 582 rel.

Ms. Navin Merchant for Petitioners.

Muhammad Khalil Dogar, S. Mohsin Imam, Masooda Siraj and Ghulam Rasool for Respondents.

Khalid Jawed Khan for Intervener along with Uzair Qadir Shoro for Respondent.

Osman Hadi and Muhammad Ameenullah Siddiqui, Assistant Attorney General.

2020 P T D 2052

[Sindh High Court]

Before Muhammad Junaid Ghaffar and Agha Faisal, JJ

UNILEVER PAKISTAN LIMITED through Company Secretary and General Attorney

Versus

PAKISTAN through Secretary Law and Justice and 5 others

C.P. D-3541 of 2017, decided on 14th October, 2020.

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

----Ss.9(3), 2(7) & 2(10)---Constitution of Pakistan, Art. 199---Constitutional jurisdiction of High Court----Jurisdiction, functions and powers of Federal Tax Ombudsman---Non-maintainable complaints before Federal Tax Ombudsman---Personal Grievance / service matter of employee of public limited company-Scope---Petitioner Company impugned show-cause notice issued by Federal Tax Ombudsman in respect of complaint alleging non-payment / short-payment of pension of complainant, on ground, that Federal Tax Ombudsman had no jurisdiction in the said matter---Validity----Per section 9 of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 jurisdiction on Federal Tax Ombudsman was conferred to investigate allegations of maladministration on part of Revenue Division or any Tax Employee, and definition of said terms did not extend to petitioner, which was a public limited company---Section 9(3) of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 specifically excluded matters in respect of any personal grievance relating to service---Impugned notice and proceedings contemplated therein appeared to have been rendered in excess of jurisdiction, and could not be sustained, and were set aside---Constitutional petition was allowed, accordingly.

PLD 1972 SC 279; 1998 SCMR 841; PLD 2016 SC 940; PLD 1992 Kar. 339; PLD 1992 Kar. 65; PLD 2001 Kar. 304; PLD 2003 Kar. 405; PLD 1966 SC 1; PLD 1987 SC 447 and 2018 SCMR 1444 rel.

Province of Sindh v. Abdul Sattar Arbani (C.P. 654-K of 2018) and connected matters ; Dr. Seema Irfan and others v. Federation of Pakistan and others PLD 2019 Sindh 516 and Peshawar Electric Supply Company Limited v. Wafaqi Mohtassib (Ombudsman) Islamabad and others PLD 2016 SC 940 rel.

(b) Constitution of Pakistan---

----Art.199---Constitutional jurisdiction of High Court---Show-cause notice---Maintainability of Constitutional petition against issuance of show-cause notice---Scope---Show-cause notice ordinarily was not justiciable in Constitutional jurisdiction of High Court unless it was manifest that same suffered from want of jurisdiction, amounted to abuse of process of law and / or was mala fide, unjust or prejudicial towards the recipient.

2016 CLC 1; 2015 PLC 45; 2015 CLD 257; 2011 SCMR 1990; 2001 SCMR 574 and PLD 2001 SC 415 rel.

Hyder Ali Khan for Petitioner.

Muhammad Ahmer (Assistant Attorney General) for Respondent.

Amir Bakhsh Maitlo for Respondent No.6.

M. Mazhar-ul-Hassan for Respondent No.4.

2020 P T D 2079

[Sindh High Court]

Before Muhammad Faisal Kamal Alam, J

BEECHAM PAKISTAN (PRIVATE) LIMITED

Versus

ASSISTANT COLLECTOR OF CUSTOMS and another

Suit No.1696 of 2000, decided on 20th April, 2020.

Customs Act (IV of 1969)---

----S.25---Customs Valuation (Determination of Value of Imported Goods) Rules, 1999---Customs General Order No. 57/99 dated 30-12-1999---Civil suit---Customs valuation--- Importer was aggrieved of determination of value of goods imported--- Validity--- Goods in question were assessed in terms of S.25(9) of Customs Act, 1969 and assessment was made in line with Customs General Order No.57/99 dated 30-12-1999 on the basis of market survey---Authorities had admitted that initial 40% loading was later reduced to 10% under the instruction from Special Monitoring Team---Imposition of disputed 10% loading charges was in effect a levy, which could not have been imposed or recovered except through a valid legislation or other permissible statutory method---Such loading of 10% was illegal per se and could not be sustained and was void ab initio---Subject goods / consignment of plaintiff was assessed as per S.25 of Customs Act, 1969 and Customs Valuation (Determination of Value of Imported Goods) Rules, 1999, except imposing of 10% loading, which was an illegality--- Suit was decreed accordingly.

Rehan Umar's case 2006 PTD 909; Najam Impex's case 2008 PTD 1250 and New Allied's case 2017 PTD 130 ref.

Muhammad Umer Soomro for Plaintiff.

Ms. Dil Khurram Shaheen and Aminullah Siddiqui, Assistant Attorney General for Pakistan for Defendants.

2020 P T D 2200

[Sindh High Court]

Before Aqeel Ahmed Abbasi and Mahmood A. Khan, JJ

MUHAMMAD AYAZ KHAN and others---Petitioners

Versus

FEDERATION OF PAKISTAN and others---Respondents

Constitutional Petitions Nos. D-1019 and 1046 of 2019, decided on 24th July, 2020.

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

----Ss. 12, 149 & Second Sched., Part-I, Item 39---Deduction of income tax at source---Salary---Allowance---Allowance solely expended in performance of an employee's duties of employment----Judicial allowance and special judicial allowance----Exemption from income tax---Petitioners, who were judicial officers, impugned deduction of income tax at source on "judicial allowance" and "special judicial allowance" paid to them---Contention of petitioners, inter alia, was that such allowance fell within ambit of exemption provided under S.12(2)(c) read with Item 39, Part-I of the Second Sched. to the Income Tax Ordinance, 2001---Validity---Held, issue in the present case did not relate to the claim of exemption from payment of income tax under the Second Schedule to the Income Tax Ordinance, 2001, for reason that according to petitioners, the amount of judicial allowance and special judicial allowance received by them towards performance of their judicial services and expended in the performance of duties of employment, was not part of taxable income under the head of "salary" in view of exclusion provided under S.12(2)(c) of Income Tax Ordinance, 2001 and intention of the Legislature, while providing exclusion of such allowances from the charge of taxation seemed clear---"Judicial allowance" and "special judicial allowance" did not form part of salary of petitioners under S.12(2)(c) of Income Tax Ordinance, 2001 and therefore deduction of income tax on same under S.149 of said Ordinance was illegal---Department was directed not to deduct income tax at source on such allowances and refund income tax already deducted---Constitutional petitions were allowed, accordingly.

Muhammad Asif and others v. Federation of Pakistan and others 2018 PTD 806; Syed Shabbir Shah v. Federation of Pakistan and others in W.P. No.243868 of 2018 and Amanullah Khan Yousufzai and others v. Federation of Pakistan and others PLD 2011 Kar. 451 rel.

(b) Constitution of Pakistan---

----Arts. 73, 8 & Fourth Sched.---Constitutional mandate for imposition of taxes by Legislature---Federal taxes---Procedure with respect to money bills---Fundamental Rights---Construction of fiscal/taxing enactments---Scope---While imposing any tax or levy, Legislature had to impose the same through clear and unambiguous language as per its Constitutional mandate and Legislative competence---Federation had authority to impose Federal taxes under Art. 73 of Constitution as per various Entries of the Federal Legislative List, provided under Fourth Schedule to the Constitution---Such authority was to be exercised while ensuring imposition of tax did not violate Constitutional Fundamental Rights of citizens, and did not create any discrimination amongst the same class of persons, upon whom such charge of tax had been created---Unless charge of tax was created through clear and unambiguous language, there was no scope of any intendment or presumption about a tax and charging provisions were required to be strictly interpreted---Any income, person or class of persons, could not be brought within tax net by mere intendment, presumption or fiction of law, unless such charge had been created through clear and unambiguous language reflecting intention of Legislature.

Collector of Sales Tax and Federal Excise v. Messrs Abbott Laboratories (Pakistan) Ltd. 2010 PTD 592 rel.

Khalid Javed Khan and Ms. Amber Lakhani, Muhammad Ali Lakhani along with Syed Ali Zaidi for Petitioners.

Shahid Ali Qureshi and Irfan Mir Halepota for Respondents.

Muhammad Ameenullah Siddiqui, Assistant Attorney General for Federation of Pakistan.

2020 P T D 1

[Lahore High Court (Multan Bench)]

Before Jawad Hassan and Muzamil Akhtar Shabir, JJ

COMMISSIONER OF INCOME TAX

Versus

BANK OF PUNJAB and others

Tax Reference No.15 of 2004, decided on 16th October, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss.17(1)(a) & 133(4)---Charge of Tax on interest on securities---Procedure---Question of law---Authorities were aggrieved of order passed by Income Tax Appellate Tribunal interpreting the tax mechanism---Validity---Question of law that was framed in reference did not raise any substantive question of law arising out of order of Income Tax Appellate Tribunal as in advisory jurisdiction, court could only answer questions of law---High Court framed questions of law arising out of tax reference yet primary and foremost question to be determined was interpretation of S.17(1)(a) of Income Tax Ordinance, 2001 which related to interest earned by Bank on government securities whether on accrual basis or on receipt basis---High Court declined to interfere in order passed by Income Tax Appellate Tribunal and maintained the same---Reference was dismissed in circumstance.

Messrs F.M.Y. Industries (Pvt.) Ltd. v. Deputy Commissioner of Income Tax and others 2014 SCMR 907; Commissioner Income Tax v. Habib Bank Limited and ANZ Grindlays Bank PLC 2014 SCMR 1557 and Deputy Commissioner of Income Tax, Circle C-4, Karachi v. National Bank of Pakistan, Karachi 2019 SCMR 1011 ref.

Syed Khalid Javed Bukhari for Applicant.

2020 P T D 101

[Lahore High Court]

Before Ayesha A. Malik, J

NISHAT MILLS LIMITED

Versus

FEDERATION OF PAKISTAN and others

W.P. No.21245 of 2014, heard on 24th October, 2019.

Sales Tax Act (VII of 1990)---

----Ss. 8, 7 & 3---Sales Tax---Determination of tax liability---Input tax adjustment---Tax Credit not allowed---Nature of right to adjust input tax under S.7 of the Sales Tax Act, 1990---Adjustment of input tax on goods having direct nexus to taxable supply of registered persons---Scope---Petitioners impugned vires of S. 8(1)(h) & S.8(1)(i) of the Sales Tax Act, 1990 on ground that the same denied adjustment of input tax on goods which had a direct nexus with their taxable supply---Contention of petitioners, inter alia, was that input tax adjustment was a substantive right which could not be deviated upon---Validity---Goods utilized by petitioners in the present case fell under Ss.8(1)(h) & 8(1)(i) of Sales Tax Act, 1990 and were not part of their supply chain and in most of the cases, were not directly related to taxable supplies---Such goods, although were bought for improvement of buildings or businesses of the petitioners, but same were not directly related to their taxable supply nor they were part of the supply chain----Registered person had to establish a direct nexus between goods adjustment which was claimed on to the taxable supply and taxable activity---Right to input tax adjustment in S.7 of the Sales Tax Act, 1990 was subject to the restrictions given in S.8 of the same and as such Ss.8(1)(h) & S.8(1)(i) of the Sales Tax Act, 1990 in no manner infringed upon the rights of the petitioners to claim input tax adjustment which was directly related to the supply chain---High Court observed that the underlining feature of S.8 of the Sales Tax Act, 1990 was that the goods remain part of the supply chain for claiming of input tax adjustment, which was a reasonable restriction and it did not deprive the registered person of any amount due to it---No merit therefore existed in the petitioners' arguments---Constitutional petitions were dismissed, in circumstances.

Messrs Ghandhara Nissan Diesel Ltd. v. Collector, Large Tax-Payers Unit and 2 others 2006 PTD 2066; Collector of Customs Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902; Collector of Sales Tax v. Messrs Dhan Fibre Limited 2005 PTD 2012; Treet Corporation Ltd. through Company Secretary and others v. Federation of Pakistan through Ministry of Finance and others 2014 PTD 1285; Pakistan International Airlines Corporation through Secretary PIA v. Pakistan through Secretary, Islamabad and 2 others 2015 PTD 245; Lahore Development Authority through D.G and others v. Ms. Imrana Tiwana and others 2015 SCMR 1739; Supreme Tube Industries (Pvt.) Limited v. Federation of Pakistan and others 2016 PTD 2058; Ittehad Chemicals Limited, Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore through Chairman and another 2005 PTD 2067; Messrs AMZ Spinning and Weaving Mills (Pvt.) Ltd. through Manager v. Appellate Tribunal, Customs Sales Tax and Federal Excise, Karachi 2006 PTD 2821; Messrs Syntronics Limited, Industrial Estate, Hattar v. Additional Collector (ADJ) Customs, CE and Sales Tax Peshawar 2007 PTD 749 and Messrs Dewan Cement Ltd. through Authorized Representative v. Pakistan through Secretary Ministry of Finance, Revenue Division and Ex-officio Chairman, F.B.R., Islamabad and 2 others 2010 PTD 1717 ref.

Coca-Cola Beverages Pakistan Ltd. v. Customs, Excise and Sales Tax Appellate Tribunal and others 2017 PTD 2380 rel.

Imtiaz Rashid Siddiqui, Shehryar Kasuri, Raza Imtiaz Siddiqui, Qadeer Kalyar, M. Hamza Sheikh, Jamshed Alam, Mansoor Usman Awan, Mehmood Ahmed, Rana Muhammad Afzal, Waseem Ahmed Malik, Tariq Rashid, Tariq Rashid vice Shahbaz Butt, Abuzar Hussain, Asif Imran Awan, H.M. Majid Siddiqui, Muhammad Raza Qureshi Mustafa Kamal, Khubaib Ahmad, Qadeer Kalyar, Habib ur Rehman, Khalil ur Rehman and Muhammad Asif for Petitioner.

Chaudhary Ishtiaq Ahmad Khan, Additional Attorney General for Pakistan, Ms. Ambreen Moeen, D.A.G., Dr. Ishtiaq Ahmad Khan, Director (Law) Federal Board of Revenue, Sarfraz Ahmad Cheema, Shahzad Ahmad Cheema, Malik Abdullah Raza, Saad Amir, Kausar Parveen, Shaigan Ijaz Chadhar, Mahmood Ahmad Chaudhary, Muhammad Anwar Khan, Syed Zain-ul-Abidien, Ijaz Mehmood Chaudhary, Falak Sher Khan, Mian Faisal Naseer, Farrukh Ilyas Cheema, Ms. Riaz Begum and Waseem Akbar Malik vice Chaudhry Muhammad Zafar Iqbal, Zafar Iqbal Bhatti, Muhammad Saad Ghazi, Shahid Sarwar Chahil and Chaudhary Muhammad Saleem for Respondents.

2020 P T D 153

[Lahore High Court]

Before Muzamil Akhtar Shabir and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER OF INCOME TAX

Versus

GRAYS LEASING LTD., LAHORE

PTR No.284 of 2004, decided on 17th April, 2019.

(a) Income Tax Ordinance (XXXI of 1979) [Since repealed]---

----Ss.12(19) & 136---Income deemed to accrue or arise in Pakistan---Income deemed on lease of an asset under S.12(19) of the Income Tax Ordinance, 1979----"Lease Key Money"----Double taxation----Scope---Question before High Court was whether "Lease Key Money" received by taxpayer against lease of an asset, was to be deemed as income under S.12(19) of the Income Tax Ordinance, 2001 ---Held, that 'Lease Key Money' was not taxable for reason that leasing companies were already offering to tax the same amount in the year of maturity of a lease by considering it as sale proceeds of a leased asset---'Lease Key Money' was initial deposit that was given to a leasing company on getting an asset on lease, which was retained as security deposit against lease of assets and recorded in the accounts under the head of 'Lease Key Money'---'Lease Key Money', if deemed to be taxable, would mean that the same would be taxed twice, once in the year of receipt as taxed by the Department and then at time of disposal of leased assets, by treating the same as 'Sale Price' of leased asset---Intention of Legislature was to tax amounts / payments which were attributable to leasing and not to moneys received as security deposits, adjustable against sale of assets after end of lease period or refundable to lessee---Reference was answered, accordingly.

(b) Words and phrases---

----"Lease Key Money", an accounting term, definition and nature of---'Lease Key Money' was initial deposit that was given to a leasing company on getting an asset on lease, which was retained as security deposit against lease of assets and recorded in accounts under the head of 'Lease Key Money' --- During lease term, lessor received lease rentals and at time of maturity of lease, an asset was transferred to the lessee against residual value, which was the same, as received at start of lease under the head 'Lease Key Money'---Said residual value / lease key was treated as 'sale proceeds' of the assets and, after deducting the tax written down value from the amount of lease key money, net gain / loss on leased assets was offered for tax.

Mian Yusuf Umer for Applicant-department.

2020 P T D 165

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi, J

QUAID-E-AZAM THERMAL PRIVATE LIMITED through Chief Executive Officer, Lahore

Versus

FEDERAL BOARD OF REVENUE through Chairman, Lahore and others

Writ Petition No.19981 of 2019, heard on 10th April, 2019.

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

----Ss.48 & 7 --- Sales Tax Rules, 2006, R. 71 ---- Constitution of Pakistan, Arts. 10A, 19A & 199---Recovery of arrears of sales tax --- Attachment of Bank Accounts --- Initiation of recovery action ---Mandatory prescribed time period of 30 days before recovery actions --- Procedural fairness --- Scope---Petitioner / taxpayer impugned attachment of its Bank Accounts for recovery of outstanding liabilities under S.48 of the Sales Tax Act, 1990 read with R. 71 of the Sales Tax Rules, 2006 ---- Contention of taxpayer, inter alia, was that mandatory time period of 30 days under R. 71 of the Sales Tax Rules, 2006 was not provided to taxpayer before attachment of Bank Accounts ---Validity--- Under law, it was mandatory for any referring authority to first provide thirty days to such person against whom dues were 'adjudged' to pay the tax amount due and only after expiry of said period, referring authority could deduct amount from any money owing to person from whom such amount was recoverable and which may be at the disposal or in the control of such officer. ----Department could only serve notice under R. 71(2) of Sales Tax Rules, 2006 after the expiry of mandatory period prescribed under said Rule and without observing such mandatory requirements of law, recovery proceedings were not tenable under law ----Determined recoverable amount was to be made known to a taxpayer by service (communication) of assessment or appellate order, as the case may be and description of the said order, date of service and amount recoverable under the same, to reflect in the notices for demand, including notice under the R. 71 of Sales Tax Rules, 2006---Articles 10A & 19A of the Constitution, guaranteed that necessary information be disclosed and a fair opportunity be given to a person being subjected to coercive measures under the relevant provisions of a law----High Court observed that, in the present case, taxpayer should have been given reasonable time to approach a higher forum, which was the Appellate Tribunal and if impugned actions were allowed, remedy of appeal provided before Appellate Tribunal would become redundant ---- Impugned notice and recovery proceedings were declared to be without lawful authority and matter was remanded to assessing officer who was directed to issue fresh notice to taxpayer to pay amount due within reasonable time ---- Constitutional petition was allowed, accordingly.

Sun-Rise Bottling Company (Pvt.) Ltd. through Chief Executive v. Federation of Pakistan and 4 others 2006 PTD 535 and Messrs Huawei Technologies Pakistan (Pvt.) Ltd. v. Commissioner Inland Revenue and others 2016 PTD 1799 rel.

Karachi Shipyard and Engineering Works Ltd., Karachi v. Additional Collector, Customs, Excise and Sales Tax (Adjudication-III), Government of Pakistan, Karachi and 2 others 2006 PTD 2207; Messrs Highnoon Laboratories v. Assistant Collector, Sales Tax and Central Excise and others 2003 PTD 2722; Messrs Paramount Spinning Mills Ltd. v. Customs, Sales Tax and Central Excise Appellate Tribunal and another 2012 SCMR 1860; Punjab Beverages Co. (Pvt.) Ltd. through Senior Finance Manager and others v. Additional Commissioner Inland Revenue and others 2015 PTD 2296 and Messrs Appolo Solar Development Pakistan Ltd., Lahore v. CIR, RTO, Lahore S.T.A. No.228/LB/2017 ref.

(b) Constitution of Pakistan

----Arts. 10A, 19A & 4 ---- Fundamental Rights of Fair Trial, Right to Information and Right of individuals to be dealt with in accordance with law---Nature and scope---Articles 10A & 19A of the Constitution guarantee that necessary information be disclosed and a fair opportunity be given to a person being subjected to coercive measures under relevant provisions of a law ---Under Art. 4 of the Constitution, there existed a right to procedural due process, to be treated fairly at all times, and right to procedural propriety---Right to a fair procedure had been constitutionally guaranteed under Art. 4 of Constitution, and said Article was a heroic and vibrant blend of the principle of natural justice, procedural fairness and procedural propriety----Such right had been boldly recognized by the Constitution to be an immutable right of every citizen or of any other person for the time being in Pakistan.

Aftab Shahban Mirani v. President of Pakistan and others 1998 SCMR 1863; Babar Hussain Shah and another v. Mujeeb Ahmed Khan and another 2012 SCMR 1235; Sarfraz Saleem v. Federation of Pakistan and others PLD 2014 SC 232; Naubahar Ali v. Vice-Chancellor and others 2010 PLC (C.S.) 783; Muhammad Umar v. D.G. Excise and Taxation and others 2011 PLC (C.S.) 384 and Shabbir Ahmed v. Kiran Khursheed and 8 others 2012 CLC 1236 rel.

Ms. Samar Masood Soofi for Petitioner.

Saeed-ur-Rehman Dogar for Respondents.

2020 P T D 209

[Lahore High Court]

Before Muzamil Akhtar Shabir and Jawad Hassan, JJ

COLLECTOR OF CUSTOMS

Versus

CUSTOMS APPELLATE TRIBUNAL BENCH-II, LAHORE and others

Custom Reference No.01 of 2019, decided on 23rd October, 2019.

Customs Act (IV of 1969)---

---- Ss. 2(s), 16, 18, 157(2) & 196--- Imports and Exports (Control) Act (XXXIX of 1950), Ss. 3 & 156(1)(89)--- Smuggling--- Confiscation of vehicles--- Vehicles in question were confiscated by authorities on the allegation that High Speed Diesel (HSD) Oil was being smuggled in them---Customs Appellate Tribunal released the vehicles--- Validity--- Trucks were intercepted by customs authorities on the basis of spy information--- Such detention was converted into seizure and trucks were seized on the charges of violating the provision of S. 2(s) read with Ss.16 & 18 of Customs Act, 1969 and also read with Ss. 3 & 3(1) of Import and Export Control Act, 1950---Customs Appellate Tribunal rightly decided the issues which otherwise were based on findings of facts after detailed discussion, deliberation and interpretation of provisions of law--- High Court declined to interfere in the order passed by Customs Appellate Tribunal as same did not carry any mistake apparent on record---Reference was dismissed in circumstances.

Collector of Customs, Peshawar v. Wali Khan and others 2017 SCMR 585; Collector of Customs, Multan v. Muhammad Tasleem 2002 MLD 296; Suleman v. The State PLD 1962 (W.P) Lah. 11 and Haji Abdul Razzak v. Pakistan through Secretary, Ministry of Finance, Islamabad and another PLD 1974 SC 5 rel.

Tariq Manzoor Sial for Applicant.

2020 P T D 224

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabbir, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs PUNJAB POULTRY FEED (PVT.) LTD.

P.T.R. No.25 of 2004, decided on 15th April, 2019.

Income Tax Ordinance (XLIX of 2001)---

----S.133---Reference to High Court ---- Jurisdiction of High Court under S. 133 of the Income Tax Ordinance, 2001--- Question of law --- Adjudication under S.133 of the Income Tax Ordinance, 2001 --- Scope--- Where question of law raised in a reference under S.133 of Income Tax Ordinance, 1979 had already been settled by High Court in another case, and ratio decidendi of said case was squarely applicable on question of law proposed in a new reference, such reference could be disposed of in terms of the ratio decidendi of the already settled case.

Messrs Pakistan Mobile Communication (Pvt.) Ltd. v. The Commissioner of Income Tax, Companies Zone, Islamabad (Civil Appeals Nos. 1091-1092/2009 and 1111-1127/2008 and 1435-1488/2008 and 229/2011) rel.

Liaquat Ali Chaudhary for Applicant.

M.M. Akram for Respondent.

2020 P T D 232

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs HILAL CHEMICALS

S.T.R. No.19941 of 2019, decided on 4th April, 2019.

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 --- Sales Tax fraud --- Scope---- While denying adjustment of input tax on ground of tax fraud, initial burden lay on Department to establish that invoices had been issued during a period where a supplier for suspended or blacklisted ---- In case invoices were not issued during such period of backlisting, then Department had to show that the cause or reason for the backlisting had some nexus with such invoices --- Such burden may be shifted upon taxpayer claiming adjustment or refund of tax, in cases of tax fraud, in accordance with provisions of S. 2(37) of the Sales Tax Act, 1990 --- Where supplier was blacklisted only subsequently to a transaction, initial burden was to be discharged by the Department.

Commissioner Inland Revenue v. Messrs Ali Hassan Metal Works 2018 PTD 108 and Province of East Pakistan v. MD Mehdi Ali Khan PLD 1959 SC 387 rel.

Saeed-ur-Rahman Dogar for Applicant.

2020 P T D 260

[Lahore High Court]

Before Shahid Jamil Khan and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs GREENVELLY PREMIUM SUPER MARKET (PVT.) LTD.

Income Tax Reference No.11885 of 2019, decided on 28th February, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 132, 131 & 133 ---- Disposal of appeals by the Appellate Tribunal ----Practice and procedure----Nature of jurisdiction of Appellate Tribunal --- Scope----Appellate Tribunal was the last fact-finding forum and was fully equipped with the record and was empowered to determine facts on its own, instead of remanding a matter to a lower forum for determination of facts.

Mirza Waqas Baig for Petitioner.

2020 P T D 269

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

Messrs STANDARD MANUFACTURING COMPANY (PVT.) LIMITED

Versus

COLLECTOR CUSTOMS and others

Customs Reference No.64 of 2016, decided on 14th March, 2019.

Customs Act (IV of 1969)---

----Ss.194B, 194 & 196 ---- General Clauses Act (X of 1897), S.24-A---Procedure of Appellate Tribunal ---- Disposal of appeals by Appellate Tribunal ---- Jurisdiction of High Court under S.196 of the Customs Act, 1969 --- Scope ----Held, where the core issues were not addressed in an order of the Appellate Tribunal, then the same would not be in conformity with provisions of S.24-A of the General Clauses Act, 1897 and such an order was liable to be set aside by High Court while exercising jurisdiction under S. 196 of the Customs Act, 1969.

Commissioner of Income Tax, Companies Zone-II Karachi v. Messrs Sindh Engineering (Pvt.) Limited, Karachi 2002 SCMR 527 = 2002 PTD 419 rel.

Raza Ahmad Cheema for Appellant.

Nouman Hassan Baloch for Respondent.

2020 P T D 274

[Lahore High Court]

Before Jawad Hassan, J

KHALID NAZIR SPINNING MILLS LTD.

Versus

FEDERATION OF PAKISTAN and others

W.P. No.47698 of 2019, decided on 21st August, 2019.

Income Tax Ordinance (XLIX of 2001)---

----S.159---Exemption of lower rate certificate---Scope---Petitioner challenged the levy of income tax amount in its electricity bills---Contention of petitioner was that it was exempted from payment of income tax---Validity---Petitioner had not filed any application to the Commissioner as required under S.159, Income Tax Ordinance, 2001---Word "shall" had been used in S.159, Income Tax Ordinance, 2001 which meant that it was mandatory to issue the certificate if all the requirements of exemption were met by the person on the factual element with record---High Court, in order to advance the cause of justice and to prevent miscarriage of justice, transmitted the petition to the Commissioner Income Tax for decision on the issuance or otherwise of exemption certificate---Petition was disposed of accordingly.

Zia-ur-Rehman v. Syed Ahmed Hussain and others 2014 SCMR 1015; Arslan Poultry (Pvt.) Ltd. Officer Inland Revenue and others 2015 PTD 448; Messrs Cherat Packaging Ltd. Staff Provident Fund and Gratuity, Peshawar v. Federation of Pakistan, through Secretary Finance and Economic Affairs, Revenue Division, Islamabad and 9 others 2016 PTD 2257; Meezan Islamic Funds and others v. D. G. (WHT) FBR and others 2016 PTD 2014; Messrs Pak Saudi Fertilizers Ltd. v. Federation of Pakistan and others 2002 PTD 679; Z.N. Exports (Pvt.) Ltd. v. Collector Sales Tax and others 2003 PTD 1746; Messrs Pearl Continental Hotel, Lahore through Director Finance and another v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and another 2005 PTD 1368; Sun-Rise Bottling Company (Pvt.) Limited v. Federation of Pakistan and 4 others 2006 PTD 535; Karachi Shipyard and Engineering Works Limited, Karachi v. Additional Collector, Customs, Excise and Sales Tax (Adjudication-III), Government of Pakistan, Karachi and 2 others 2006 PTD 2207; Pak Suzuki Motors Co. Ltd. through Senior General Manager (Corporate Planning and Logistics), Karachi v. Collector of Customs through Assistant Collector (Processing), Karachi 2006 PTD 2237 and Mari Petroleum Company Ltd. v. Appellate Tribunal Inland Revenue and others 2016 PTD 2406 ref.

Mian Asghar Ali v. Government of Punjab through Secretary (Colonies) BOR, Lahore and others 2017 SCMR 118 rel.

Ch. Imtiaz Ullah Khan for Petitioners.

Azmat Hayat Khan Lodhi, Assistant Attorney General on Court's call.

Ijaz Mehmood Chaudhry, Advocate/Legal Advisor for Respondent/FBR.

Dr. Ishtiaq Ahmad, Commissioner Inland Revenue, FBR.

2020 P T D 331

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

COMMISSIONER INLAND REVENUE

Versus

RAJA MAZHAR HUSSAIN

I.T.R. No.73287 of 2019, decided on 3rd December, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 82 & 111 --- Convention between the Government of the French Republic and the Government of the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (1994), Art. 4 --- Non-resident person---Non-taxability/chargeability of funds for purchase of property/assets in Pakistan --- Appellate Tribunal held that respondent had centre of vital interest in France by virtue of his personal and economic interests; that respondent had his family, business, Bank account(s) and permanent house in France, and his income was also assessed there; that respondent and his family were French citizens; that the respondent did not come to Pakistan as a routine, and even when he did, he did not stay for long enough to establish himself as a resident of two countries; and that once it was established that the respondent's centre of vital interest was not Pakistan, S. 111 read with S. 82 of the Income Tax Ordinance, 2001 were not applicable to the respondent and were superseded by Art. 4 of the Bilateral Tax Treaty between Pakistan and France ---Held, that deletion of levy of tax had been made by the Appellate Tribunal after detail scrutiny of facts and discussing merits of case by invoking correct legal provisions of Income Tax Ordinance, 2001 and Art. 4 of the Bilateral Tax Treaty between Pakistan and France upon applicable tie-breaker test --- Appellate Tribunal had correctly held that S. 111 of the Income Tax Ordinance, 2001 was not attracted to the case of the respondent --- Reference filed by Inland Revenue authority was dismissed.

2020 P T D 384

[Lahore High Court]

Before Muzamil Akhtar Shabir and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE, FAISALABAD

Versus

Messrs MASHALLAH PAPER BOARD MILLS, FAISALABAD

S.T.R. No.2119 of 2019, decided on 20th February, 2019.

Sales Tax Act (VII of 1990)---

---S. 34A---SRO No. 606(I)/2012, dated: 01-06-2012---Exemption from penalty and default surcharge---Scope---Department assailed extension of concession to the registered person under SRO No. 606(I)/2012, dated: 01-06-2012 on the ground that its benefit could only be given to those taxpayers who had deposited the principal amount after the date of its issuance---Validity---Examination of notification did not support such contention---Only two conditions were required to be satisfied; one that the principal amount was paid by the date mentioned in the notification and that no case, as envisaged in clause (ii) of the notification, was pending---Reference was decided against the department.

Barrister Muhammad Saram Israr for Applicant.

2020 P T D 752

[Lahore High Court (Rawalpindi Bench)]

Before Shamas Mehmood Mirza, J

JAMEEL SWEETS

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.75 of 2020, decided on 9th March, 2020.

(a) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Judicial review of delegated / subordinate legislation---Scrutiny of the Constitutionality of legislation by High Court under Art. 199 of the Constitution---Scope---Delegated legislation beyond powers conferred by parent statute---Principles of judicial review of such legislation---Scope---To determine vires of delegated legislation, High Court had to examine whether such delegated Legislation was beyond power granted by the enabling Legislation; and whether process for formulating such delegated Legislation / Rules prescribed by parent statute was followed, and whether such delegated Legislation consistent with objective of parent statute.

Muhammad Amin and others v. Government of Pakistan 2015 SCMR 630; Khawaja Ahamd Hassan v. Province of Punjab 2015 SCMR 186 and Aziz Ahmad v. Provincial Police Officer PLD 2005 Lah. 185 rel.

(b) Interpretation of statutes ---

----Delegated Legislation---Rules / regulations framed under a statute---Delegated legislation---Nature and object of such legislation---Construction of delegated legislation---Invalidity of delegated legislation---Scope----Provisions of a statute, if they dealt with a subject matter in considerable detail, then scope of delegated legislation correspondingly became limited and if a statute generally dealt with the subject matter, then scope of delegated legislation made under it shall become greater and it was assumed that legislature consciously decided to leave details to be filled out by delegated legislation---Theory underlying principle of delegated legislation was that legislature was only concerned with general principles whereas executive and other authorities authorized to make delegated legislation, addressed matters of administration---Grant of power of legislation included power to enact incidental or ancillary legislation, which power was inherent in Constitution---Presumption of validity existed with regard to delegated legislation and Rules made under statutory mandate ought to be read and interpreted in broad manner which made them consistent with parent statute---Court holding inquiry did not indulge in assessing Policy merits of such Rules or made assessment as to whether Rules would meet objectives set out by parent statute and powers delegated to a Authority for framing Rules generally signified broad discretion reserved for it to make assessment as to what would advance purposes of parent statute and also measures as required to advance such purposes.

Muhammad Fahad Malik v. Pakistan Medical and Dental Council and others PLD 2018 Lah. 75; Morton v. Union Steamship Co. of New Zealand Ltd. (1951) ?? 83; Baxter v. Ah Way (1909) 8 CLR 626; Edward Mills Co., Ltd., Beawar v. State of Ajmer (S) AIR 1955 SC 25 and Vasan-lal Maganbhai v. State of Bombay 1961-1 SCR 341 rel.

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

----Ss.40C, 3(9A), 23, 26 & 50---Sales Tax Rules, 2006, Rr. 150ZA, 150ZB, 150ZC, 150ZD & 150ZE---Constitution of Pakistan, Art. 199---SRO No. 1360(I)/2018 dated 12.11.2018---SRO No.1203(I)/2019 dated 10.10.2019---Sales Tax---Monitoring or tracking of certain registered persons by electronic or other means---Point-of-sale real time monitoring of transactions of retailers---Power of Department to frame / amend Sales Tax Rules, 2006---Petitioners / taxpayers impugned issuance of SRO No. 1360(1)/2018 dated 12.11.2018 and SRO No.1203(I)/2019 dated 10.10.2019 which required installation of Point of Sale at petitioner's retail premises for declaration of real time sales, on grounds, inter alia, that the same went beyond scope of statutory mandate and were unreasonable---Validity---Monitoring system put in place by Department through impugned SRO's was reasonably proportionate to pursuit of the purpose sought by Ss. 3(9A) & 40 of Sales Tax Act, 1990---Said SROs exclusively dealt with class of subjects referred to in Ss. 3(9A) & 40C of Sales Tax Act, 1990 and embraced policy considerations contained therein and said SROs met minimum standard of rational connection to statutory purpose---Sections 3(9A) & 40C of the Sales Tax Act, 1990 granted large discretion to Department to adopt the Rules, and S. 50 of said Act also stipulated that Department may prescribe use of computerized system for carrying out the purposes of Sales Tax Act, 1990---Requirements of impugned SROs did not violate provisions of Ss. 23 & 26 of the Act and obligations cast upon petitioners under said SROs could co-exist with requirements of said sections----Said SROs, being delegated Legislation, could not be invalidated on ground of unreasonableness, and even otherwise, same could not be termed as irrational and unreasonable---Integration of Point of Sale of petitioners with computerized system did not work to their disadvantage when they were under a lawful duty to faithfully report their sales in monthly tax returns---High Court observed that impugned SROs were validly enacted by Department and satisfied their statutory mandate and did not offend any Fundamental Rights of petitioners / taxpayers---Constitutional petition was dismissed, in circumstances.

Muhammad Uneeb Ahmed v. Federation of Pakistan through Secretary Ministry of Science and Technology Islamabad and others 2019 MLD 1347; Shehzada Munawar Javed Khudai and others v. Election Tribunal Multan and others PLD 2018 Lah. 858; Messrs Rashid Silk Mills v. Federation of Pakistan PLD 2019 Lah. 206; Muhammad Fahad Malik v. Pakistan Medical and Dental Council and others PLD 2018 Lah. 75; Messrs Mehran Associate Limited v. The Commissioner of Income Tax Karachi 1993 PTD 69; Inspecting Additional Commissioner of Income Tax and others v. Messrs MICRO PAK (Pvt.) Limited and others 2002 PTD 877; Al-Rai Flour Mills Limited Lahore v. Commissioner of Income Tax/Wealth Tax, Companies Zone-I Lahore 2008 PTD 838; Collector of Sales Tax and Central Excise (West), Karachi and others v. Customs Excise and Sales Tax Appellate Tribunal, Karachi Bench and others 2005 PTD 53 and Messrs Mustafa Impex, Karachi and others v. The Government of Pakistan through Secretary Finance, Islamabad and others PLD 2016 SC 808 ref.

Messrs Rahim Stores and others v. Federation of Pakistan and others Writ Petition No.146 of 2020; Minister for Primary Industries and Energy v. Austral Fisheries Pty Ltd. (1993) 40 FCR 381 and Messrs Mustafa Impex, Karachi and others v. The Government of Pakistan through Secretary Finance, Islamabad and others 2016 PLD 808 rel.

(d) Constitution of Pakistan

----Art. 199---Constitutional jurisdiction of High Court---Judicial review of statutory provisions---Scope---Statute could broadly be challenged if it was in violation of guaranteed Fundamental Rights or on ground that it was beyond capacity of the appropriate Legislature to enact the same---Statutory provisions could not be impugned on the ground of vagueness.

Hafiz Muhammad Idrees for petitioner (in this Petitions Nos.75 of 2020, 149, 150, 214, 333, 462, 463 and 522 of 2020).

Atif Waheed for Petitioners in (W.Ps. Nos. 241, 243, 244 and 245 of 2020).

Khalid Waheed For petitioners (in W.Ps. Nos. 287, 242 and 246 of 2020).

Mirza Saqib Siddeeq for petitioner in (W.P. No. 196 of 2020).

Imran ul Haq and Ch. Naeem-ul-Haq for Petitioners (in W.Ps. Nos. 159, 160, 197, 200, 213, 219, 295, 296, 292, 294, 293, 332, 626 and 674 of 2020).

Basit Iqbal, Advocate for Petitioners (in W.Ps. Nos. 372, 373 and 374 of 2020).

Ch. Muhammad Nazir Umar for Petitioner.

Ms. Ghazala Nazeer Qureshi for petitioner (in W.Ps. Nos. 226 and 236 of 2020).

Adnan Bashir Advocate appearing for Petitioner (in No.328 of 2020).

Muhammad Nasir Khan Advocate for Petitioner (in W.Ps.Nos.162, 163, 164 and 165 of 2020.)

Adnan Haider Randhawa Advocate for Petitioner.

Muhammad Mohsin Nazir Advocate for Petitioner (in Writ Petition No.709 of 2020).

Faraz Fazal Sheikh Advocate for Petitioner (in Writ Petitions Nos.379, 389, 562 and 563 of 2020).

Raja Abid Additional Attorney General for Pakistan.

Malik Ihtasham Saleem, Assistant Attorney General.

Malik Itaat Hussain Awan for respondents Nos.2 to 4 in all Writ Petitions.

Hassan Idrees Mufti and Ms. Ramshaih Kamran for Respondents / FBR

Yousaf Khan, Law Officer, IR Legal FBR (Hq)

Dates of hearing: 11th, 12th, 19th, February, 5th and 9th March, 2020.

----This judgment shall decide the present writ petition as well as other connected writ petitions mentioned in Schedule "A" hereto.

1. This writ petition calls into question the vires of SRO 1360(I)/2018 dated November 12, 2018 (SRO 1360) and SRO No.1203(I)/2019 dated 10.10.2019 (SRO 1203) issued by the Federal Board of Revenue (the Board) through which amendments in Chapter XXIV-AA of Sales Tax Rules, 2006 (the Sales Tax Rules) were made. Some of the writ petitions also call into question the vires of section 2(43A) of the Sales Tax Act, 1990 (the Act).

2. Through SRO 494(I)/2015 dated June 30, 2015 and SRO 1360, Chapter XIV-A and Chapter XXIV-AA were introduced in the Sales Tax Rules whereas SRO 1203 made further amendments in Chapter XXIV-AA. The petitioners are aggrieved of the requirements imposed on them through the afore-mentioned SROs for installation of Point of Sale at their various branches and retail outlets for declaration of real time sales. In particular, the petitioners impugn sub-rules 4(a)(iv), 4(b)(iii) and (iv), (5), (6), (13) and (14) of Rule 150 ZEB of Chapter XIV-AA which deal with issuance of electronic invoices together with other obligations.

3. Learned counsel submits that subsection (3) of section 23 of the Act deals with the issuance of tax invoices from a registered person to another registered person whereas the SRO's in question travel beyond the mandate of section 23 of the Act. Reliance is placed on titled Muhammad Uneeb Ahmed v. Federation of Pakistan through Secretary Ministry of Science and Technology Islamabad and others 2019 MLD 1347, Shehzada Munawar Javed Khudai and others v. Election Tribunal Multan and others PLD 2018 Lahore 858, Messrs Rashid Silk Mills v. Federation of Pakistan PLD 2019 Lahore 206, Muhammad Fahad Malik v. Pakistan Medical and Dental Council and others PLD 2018 Lahore 75. It is contended that the Rules framed through both the impugned SROs are in conflict with the provisions of law, are discriminatory and are in violation of Articles 4, 18 and 25 of Constitution of Islamic Republic of Pakistan, 1973 (the Constitution) and thus not sustainable. The declaration of real time sales is contradictory to section 26 of Act, which require the submission of sales tax returns by 10th day of the following month (tax period). Respondent No. 3 has issued notices for installation of Point of Sale by treating the Petitioner as Tier-I Retailers whereas the Petitioner does not fall under the ambit of Tier-I Retailer as defined in section 2 (43A) of the Act. The definition of Tier-I is also unjustified and discriminatory in nature in as much as it includes a person doing business in a shop measuring one thousand square feet or above who will fall under the ambit of Tier-I Retailer which criterion is irrational. It is submitted that the quantum of business depends on the nature of products rather than the size of business premises. All the categories given in sub-clauses (a) to (d) of section 2(43A) are also irrational. A number of persons involved in similar businesses as the petitioners are not registered with the Sales Tax department and are not paying any tax whatsoever, which puts the petitioners at a disadvantageous position. To compete in the market, the registered persons are unable to add up the sales tax amount to the product prices and pass on the sales tax burden to the end consumers and are therefore paying the sales tax liability out of their pockets. It is a settled principle of law that where there are two possible interpretations of law or any ambiguity, the one which is in favour of taxpayer shall prevail. Reliance is placed on judgments reported as Messrs Mehran Associate Limited v. The Commissioner of Income Tax Karachi 1993 PTD 69 (SC), Inspecting Additional Commissioner of Income Tax and others v. Messrs MICRO PAK (Pvt.) Limited and others 2002 PTD 877(SC) and Al-Rai Flour Mills Limited Lahore v. Commissioner of Income Tax/Wealth Tax, Companies Zone-I Lahore 2008 PTD 838. It is also stated that the Board has no authority to interpret the law. Reliance is placed Collector of Sales Tax and Central Excise (West), Karachi and others v. Customs Excise and Sales Tax Appellate Tribunal, Karachi Bench and others 2005 PTD 53 (K.H.C). After the Eighteenth amendment in the Constitution, it has now been settled that Federal Government cannot delegate its powers to subordinate authorities. Any amendment or SRO is now required to be issued by the Federal Government in terms of the law laid down in Messrs Mustafa Impex, Karachi and others v. The Government of Pakistan through Secretary Finance, Islamabad and others PLD 2016 SC 808.

4. The respondents including the Board have filed their parawise comments in which the stance of the petitioners is controverted. It is submitted that the SRO's in question are a part of the drive of the Board to track and monitor the taxable activities of the registered persons. The Board also relies on section 3(9A) and section 40C of the Act to submit that it had the authority to frame and issue the Sales Tax Rules and the amendments made therein through the impugned SRO.

5. The definition of Tier-I Retailer was introduced in the Act through Finance Act, 2017 which added subsection (43A) of section 2 in the Act. According to the definition, a Tier-I Retailer, amongst others, includes a retailer whose cumulative electricity bill during immediately preceding twelve consecutive months exceeds Twelve Hundred Thousand Rupee or whose shop measures one thousand square feet in area or more or who operates in an air-conditioned shopping mall plaza or center.

6. The system for tracking of taxable activities of certain registered persons was put in place in the Sales Tax Rules by adding Chapter XIV-A through SRO 494(I)/2015 dated 30.06.2015. Subsequently, the Board introduced Chapter XIV-AA in the Rules through SRO 1360 for the purpose of Online Integration of certain supplies made by Leather and Textile Sectors. The second proviso to section 3(9A) of the Act introduced through Finance Act, 2019 stipulated that Tier-I retailers shall integrate their retail outlets with Board's Computerized system for real-time reporting of their sales. In pursuance thereof, certain amendments were made in Chapter XIV-AA by SRO No.1203 whereby, amongst others, Chapter XIV-AA was made applicable to all Tier-I retailers as defined in Section 2(43A) of the Act.

7. The Courts have spelt out a number of grounds for laying a challenge to delegated or subordinate legislation. The following tests have been laid down by the Courts for making a vires determination of the delegated legislation.

(1) Whether the Rules framed are beyond the power granted by the enabling legislation (ultra vires);

(2) Whether the process for formulating the Rules prescribed by the parent statute was followed (procedural ultra vires); and

(3) Are the impugned Rules consistent with the objective of the parent statute.

These tests are also propounded in judgments reported as Muhammad Amin and others v. Government of Pakistan 2015 SCMR 630, Khawaja Ahamd Hassan v. Province of Punjab 2015 SCMR 186 and Aziz Ahmad v. Provincial Police Officer PLD 2005 Lahore 185.

1. It is axiomatic that if the provisions of a statute deal with the subject matter in considerable detail, the scope of delegated legislation shall correspondingly become limited. On the contrary, if the statute generally deals with the subject matter, the scope of delegated legislation made under it shall become greater for it is assumed that the legislature consciously decided to leave the detail to be filled out by delegated legislation [see Muhammad Fahad Malik v. Pakistan Medical and Dental Council and others PLD 2018 Lahore 75 and Morton v. Union Steamship Co. of New Zealand Ltd. (1951) ?? 83]. The need for delegated legislation arises to reduce pressure on parliamentary time and to make provision for rapidly changing or uncertain situations which may or may not be in the contemplation of the Parliament. The theory underlying the principle of delegated legislation is that the Parliament is only concerned with general principles whereas the executive and other authorities authorized to make delegated legislation address and deal with matters of administration and detail. O'Connor J. in the decision in Baxter v. Ah Way (1909) 8 CLR 626 put forward the rationale for making regulations in the following terms:

Now the legislature would be an ineffective instrument for making laws if it only dealt with the circumstances existing at the date of the measure. The aim of all legislatures is to project their minds as far as possible into the future, and to provide in terms as general as possible for all contingencies likely to arise in the application of the law. But it is not possible to provide specifically for all cases, and, therefore, legislation from the very earliest times, and particularly in more modern times, has taken the form of conditional legislation, leaving it to some specified authority to determine the circumstances in which the law shall be applied, or to what its operation shall be extended, or the particular class of persons or goods to which it shall be applied.

It is furthermore settled law that grant of power of legislation includes the power to enact incidental or ancillary legislation which power is inherent in the Constitution. It was observed in Edward Mills Co., Ltd., Beawar v. State of Ajmer, (S) AIR 1955 SC 25" ……. it is a fundamental principle of constitutional law that everything necessary to the exercise of a power is included in the grant of the power. A legislature cannot strip itself of its essential functions and vest the same on an extraneous authority. The primary duty of law making has to be discharged by the legislature itself but delegation may be resorted to as a subsidiary or an ancillary measure." Similarly, in Vasan-lal Maganbhai v. State of Bombay 1961-1 SCR 341, it was held as under:

It is now well established by the decisions of this Court that the power of delegation is a constituent element of the legislative power as a whole, and that in modern times when the legislatures enact laws to meet the challenge of the complex socio-economic problems, they often find it convenient and necessary to delegate subsidiary or ancillary powers to delegates of their choice for carrying out the policy laid down by their Acts.

1. A survey of the judgment would show that the following principles for interpretation of delegated legislation have been laid down. There is a presumption of validity attached to the delegated legislation. The Rules made under a statutory mandate ought to be read and interpreted in a broad manner which makes them consistent to the parent statute. The Court holding the inquiry does not indulge in assessing the policy merits of the Rules or makes assessment as to whether the Rules would meet the objectives set out by the parent statute. The powers delegated to the Authority for framing Rules generally signify broad discretion reserved for it to make assessment as to what will advance the purposes of the parent statute and also the measures required to advance those purposes. It is generally recognized that issues which depend on policy matters involve greater expertise and are thus left to be determined by the delegated agencies. Implicit in this deferential attitude is the acknowledgement that the Courts do not possess policy expertise on such legislation absent the lack of resources to engage in policy analysis for lack of capacity.

2. The petitioners herein are not aggrieved strictly speaking from SRO 1360 as Chapter XXIV-AA which was added in the Rules through the said SRO initially did not deal with Tier-I retailers. Chapter XXIV-AA was made applicable to Tier-I retailers through the amendments made in the said Chapter through SRO 1203 which was issued on 10.10.2109. However, prior to the issuance of SRO 1203, section 3(9A) was brought in the Act through Finance Act, 2019, the second proviso whereof reads as under:

Provided further that from such date, and in such mode and manner, as prescribed by the Board, all Tier-I retailers shall integrate their retail outlets with Board's computerized system for real-time reporting of sales. (Emphasis supplied).

Section 40C(1) of the Act is another relevant provision which is reproduced hereunder:

Monitoring or Tracking by Electronic or other means.---(1) Subject to such conditions, restrictions, and procedures, as it may being fit to impose or specified, the Board may, by notification in the official Gazette, specify any registered person or class of registered persons or any good or class of goods in respect of which monitoring or tracking of production, sales, clearances, stocks or any other related activity may be implemented through electronic or other means as may be prescribed.

SRO 1203 in its preamble made specific reference to section 3(9A) and section 40C of the Act. It is thus evident that the Board pursuant to the powers available to it under sections 3(9A) and 40C(1) of the Act validly issued SRO 1203 requiring the Tier-I retailers to report their real time sales. There is furthermore no allegation that SRO 1360 and SRO 1203 were not issued according to the prescribed procedure.

1. The next determination to be made is whether both the SROs are consistent with the objective of the Act and/or the scope of the statutory mandate under which they were issued by the Board. In considering whether there has been a valid exercise of the rule making power the true nature and purpose of the power must be determined. The scope of the statutory mandate largely depends on the parent statute particularly the enabling provisions that delegate rule making authority which in turn would define the scope of the authority. It is thus imperative to have a close look at section 3(9A) and section 40 of the Act to ascertain the degree to which the legislature has disclosed the intention of dealing with the subjects with which the provisions of Chapter XXIV-AA are concerned. Section 3(9A) mandatorily required all Tier-I retailers to integrate their retail outlets with Board's computerized system for real-time reporting of their sales. Similarly, section 40C empowered the Board to implement the monitoring or tracking of production, sales, clearances, stocks or any other related activity in respect of any registered person or class of registered persons or any good or class of goods through electronic or other means as may be prescribed. This Court after going through the Rules is satisfied that the monitoring system put in place by the Board through the SRO's in question is reasonably proportionate to the pursuit of the purpose sought to be achieved by sections 3(9A) and 40 of the Act. The SROs in question exclusively deal with the class of subjects referred to in sections 3(9A) and 40C of the Act and embrace the policy considerations contained therein. In short, the SROs meet the minimum standard of rational connection to the statutory purpose as contained in sections 3(9A) and 40C of the Act. It is furthermore evident that the framework implemented by the SROs in question was authorized having regard to the purpose and object of sections 3(9A) and 40C of the Act which granted a large discretion to the Board to adopt the Rules. In addition thereto, section 50 of the Act also stipulates that the Board may prescribe the use of computerized system for carrying out the purposes of this Act. It is thus manifest that the SROs by their terms accomplish the legislative intent. Be that as it may, the petitioners did not argue at all on this aspect of the matter thereby admitting that the SRO's in question meet both the objectives test as well as the scope of statutory mandate test.

2. The stated position of the petitioners is that the monitoring scheme introduced in Sales Tax Rules is in violation of section 23 of the Act. In this regard, special reference was made to the various provisions of Rule 150 ZEB. The provisions that the petitioners are aggrieved from require them to install duly accredited electronic fiscal device (EFD) (available on the website of the Board) to ensure that the sale data controller and one Point of Sale of Tier-I retailers are connected together for the purpose of recording their sale or supply from the notified outlets by the said device. The sale invoice of each transaction shall be transmitted to EFD with certain particulars mentioned therein. The copy of the sales tax invoice to be generated by Point of Sale shall be supplied to the customer. The sales and transactions at each notified outlet shall be accommodated in Annex C of the monthly sales tax return to be sent to the Board through EFD. The transactions on each Point of Sale in the notified outlet shall be recorded by CCTV camera and the recording thereof shall be retained for at least one month and shall be provided to the concerned Commissioner if so required by him.

3. According to the petitioners, subsection (3) of section 23 of the Act only required the registered person to issue invoices to another registered person electronically and to the Board subject to such conditions as may be prescribed by the Board. It is accordingly contended that without making necessary amendments in section 23(3) of the Act, the changes made in Chapter XXIV-AA of the Sales Tax Rules are superfluous and have the effect of making sections 23 and 26 redundant. This Court disagrees with the submissions advanced by the petitioners. The purpose of the provisions contained in Chapter XXIV-AA is to monitor and track the sales and transactions of the registered persons through EFD. The stipulation regarding the tax invoice is just a minor part of it. The scope and import of sections 23, 26 and Chapter XXIV-AA are materially different dealing with vastly distinct situations. The petitioners are unnecessarily conflating the two provisions. A tax invoice tendered in terms of section 23 has no similarity with the tax invoice to be issued under Chapter XXIV-AA of the Sales Tax Rules. There was thus no need for modification or amendment of subsection (3) of section 23 of the Act. The mandatory requirements of the SROs in no manner whatsoever violate or intrude upon the provisions of sections 23 and 26 of the Act. In fact, the obligations cast upon the petitioners under the Sales Tax Rules can co-exist with the requirements of sections 23 and 26. It may further be added that the SROs were issued, inter alia, under section 40C of the Act, the objective whereof was to monitor and track the sales, clearance and other related activity of the registered persons or class of registered persons. This purpose is very much evident from the fact that section 40C is placed in the Act soon after sections 40 and 40B which provisions deal with the powers the Board has of searches under warrant and of posting of Inland officers at the premises of the registered persons.

4. The scope of rule-making authority is also determined by the legislative context and other provisions of the parent statute as well as other statutes relating to the same subject-matter. A cursory glance at the provisions of the Act would reflect that the department has been given broad and sweeping powers for access to the premises, stocks, records, accounts etc of a registered person for the purposes of audit, investigation and inquiry and for posting of officers of Inland Revenue to the premises of registered person or class of such persons to monitor production, sale of taxable goods and the stock position. Similar powers are also available to the Board under the Income Tax Ordinance. These powers are in addition to the powers of the Board and the Commissioner to conduct audit of the registered persons. These powers are commensurate with and compliment the conditions imposed by Chapter XXIV-AA requiring Tier-I retailers to integrate their Point of Sale enabling the Board to monitor and track their production, sales, clearances, stocks. The petitioners are registered with the Board and submit their monthly tax returns reflecting their sales. The Board is duty bound to ensure as are the petitioners to reflect accurate sales in the monthly returns for the purposes of payment of sales tax. The integration of the Point of Sale of the petitioners with the Board's computerized system will enable automated scrutiny, analysis and cross-checking of the data by the Board for which the Act grants extensive powers to it, amongst others, through section 50B. It is difficult to see how the integration of Point of Sale of the petitioners with the computerized system of the Board works to their disadvantage when they are under a lawful duty to faithfully report their sales in the monthly tax returns. The fact that the petitioners already submit monthly tax returns under section 26 of the Act is also not a sufficient reason for avoidance by them of the integration of their Point of Sale with the computerized system of the Board under the statutory duty imposed in terms of sections 3(9A), 40C and 50B. It is also evident from section 3(9A) that the integration of Point of Sale is not a temporary or a one-time operation rather it is to operate in perpetuity. The fact that some competitors of the petitioners are not registered with the Board can hardly furnish any lawful justification to them to challenge the SROs in question.

5. It was argued by the petitioners that the Rules violate Articles 4, 18 and 25 of the Constitution. This Court while deciding Writ Petition No.146 of 2020 titled "Messrs Rahim Stores and others v. Federation of Pakistan and others" was asked to decide upon the issue of discrimination that the petitioners therein were allegedly subjected to in view of the issuance of the SRO's in question. While answering the issue in negative, this Court held as follows:

6. The Ordinance and SRO 1203(I)/2019, as noted earlier, did not bring about any change in the existing structure envisaged by the Act for integration of certain taxpayers with the Board's Computerized system rather retailers whose, inter alia, amount of electricity bill touched a certain threshold were included in the definition of Tier-I retailers and certain rules in Chapter XIV-A and XIV-AA were amended. The existing structure of the Act for integration of the operations of retailers and other taxpayers does not violate Article 25 of the Constitution as it carves out a special class of persons and this classification is based on intelligible differentia. Similarly, the rationale for integration of the operations of Tier-I retailers and other taxpayers is apparent from the scheme of the Act which is tied with the endeavor of the Board to monitor and track the taxable activities through electronic devices. The integration system contained in the Rules thus satisfies the criteria laid down in Aziz Ullah Memon's case. It may relevantly be pointed out that the petitioners have not brought under challenge the integration system that was already in place under various provisions of the Act rather what has been challenged is their inclusion in the system through the changes introduced through the Ordinance and SRO 1203(I)/2019, which, amongst others, made amendments in section 2(43A) of the Act and Rule 150ZEA in Chapter XIV-AA.

7. It was also contended that the provisions introduced in the Rules through the SROs are unreasonable and irrational. The ground of unreasonableness as it is traditionally understood is generally not available for laying down a challenge to the delegated legislation. The basis for restricting the ground for reasonableness is that it would tantamount to reviewing the reasonableness of the parent statute itself. Even otherwise, this ground is subsumed in the ground of attack relating to scope of the statutory mandate which casts the test of reasonableness in terms whether the SRO's in question represent a reasonable exercise of the Board's delegated regulatory authority or are inconsistent with the objective of the parent statute. In Minister for Primary Industries and Energy v. Austral Fisheries Pty Ltd. (1993) 40 FCR 381, Lockhart J stated that:

Delegated legislation may be declared to be invalid on the ground of unreasonableness if it leads to manifest arbitrariness, injustice or partiality; but the underlying rationale is that legislation of this offending kind cannot be within the scope of what Parliament intended when authorising the subordinate legislative authority to enact laws. (Emphasis supplied)

In view of the strict standard laid down by the Courts rarely does a delegated legislation is invalidated on the ground of unreasonableness. Be that as it may, the SROs can by no stretch be termed as irrational and unreasonable.

1. It was next contended by some of the learned counsel that by virtue of the law laid down in the case of Messrs Mustafa Impex, Karachi and others v. The Government of Pakistan through Secretary Finance, Islamabad and others PLD 2016 SC 808, the SROs could only be issued by the Federal Government and not by the Board. The petitioners' submission in this regard proceeds upon a misinterpretation of the ratio of that judgment. The appellants in Mustafa Impex had called into question certain Notifications withdrawing exemptions or modifying the rate of payable sales tax on imported goods and what was contended was that the Additional Secretary who issued the same had no authority to do so in view of Article 90 of the Constitution. After elaborate discussion on the constitutional scheme, the Supreme Court came to the conclusion that Federal Government as defined in Article 90 was the sole repository of the executive authority of the Federation which alone can exercise it in the name of the President to the exclusion of everybody else within the corresponding legislative sphere. By virtue of Article 98 of the Constitution, Parliament may by law on the recommendation of the Federal Government, confer the executive functions on officers or authorities subordinate to the Federal Government alone. It was held that if such functions are delegated to any other person or authority (not subordinate to the Federal Government), even under the command of any law or Rules of Business, the same shall be contrary to the scheme of the Constitution and thus ultra vires. In conclusion it was, inter alia, held that section 3 of the Act conferred the jurisdiction, authority and power on the Federal Government to issue the Notifications in question and as such the Additional Secretary could not have issued the same and that ex-post approval granted by the Adviser to the Prime Minister also could not save them. The judgment in Mustafa Impex case is not an authority for the proposition that the Parliament while enacting the Act could not confer the authority on the Board to make Rules. Rule-making is essentially a legislative function. It is now broadly agreed amongst scholars as well as Courts that legislatures have the necessary authority to delegate their legislative function to administrative agencies on the principle that separation of powers does not mean segregation of powers. The opinion in Mustafa Impex case acknowledged and reiterated this principle by holding as follows:

The parliamentary form of government essentially envisages a broad categorization of power but not the erection of rigid walls of separation. The distinction is of great significance jurisprudentially. There are no impassable barriers between the different types of power. There is often an overlapping or blurring of boundaries. The executive also exercises some legislative powers while the judiciary is not entirely devoid of other forms of power including the power to make rules. (Emphasis supplied)

For the purposes of the issue involved herein it needs emphasizing that Federal Government does not figure anywhere in the enabling provisions of the Act which are referenced in the SROs. In the circumstances, the Rules and the SROs were validly enacted by the Board.

1. The petitioners also made a challenge to the definition of Tier-I retailer contained in section 2(43A) of the Act by contending that it was vague and discriminatory in nature. The position of law is well settled that a statute can broadly be challenged if it is in violation of the guaranteed fundamental rights and or that it was beyond the capacity of the appropriate legislature to enact the same. A statutory provision cannot be impugned on the ground of vagueness. The question of discrimination has already been dealt with by this Court in Writ Petition No.146 of 2020. The petitioners have not put forward any valid ground for laying challenge to the vires of section 2(43A) of the Act.

2. It was lastly argued by some of the petitioners that they were manufacturers and do not fall in the definition of Tier-I retailers. This submission cannot be entertained as it is a question of fact and ought to be put forward in response to the notice issued by the respondents.

3. In view of the discussion above, it is declared that the provisions of Sales Tax Rules added through SRO 1360 and SRO 1203 are intra vires the Sales Tax Act, 1990 and satisfy the statutory mandate of sections 3(9A) and 40 thereof and do not offend any of the fundamental rights of the petitioners herein. This writ petition and connected writ petitions fail and are accordingly dismissed.

Schedule "A" (Tax Matters)

| | | | | --- | --- | --- | | Sr.No. | Case Number | Title of the case. | | 1 | W.P.No.389 of 2020 | Messrs Albaraka Bathrooms Solutions v. Federation of Pakistan and others. | | 2 | W.P.No.328 of 2020 | Messrs Chaudhry Traders v. Federation of Pakistan and others. | | 3 | W.P.No.333 of 2020 | Messrs Waseem Autos v. Federation of Pakistan and others. | | 4 | W.P.No.332 of 2020 | Messrs Fazal Tiles and Sanitary Ware Shops v. Federation of Pakistan and others. | | 5 | W.P.No.292 of 2020 | Messrs G.G Bakers and Sweet v. Federation of Pakistan and others. | | 6 | W.P.No.241 of 2020 | Messrs Asad Mubarik Proprietor of Messrs Bread N Butter v. Federation of Pakistan and others. | | 7 | W.P.No.372 of 2020 | Broadway Sweets v. Federation of Pakistan and others. | | 8 | W.P.No.373 of 2020 | Rahat Bakers and Sweets v. Federation of Pakistan and others. | | 9 | W.P.No.379 of 2020 | Messrs Ittefaq Corporation v. Federation of Pakistan and others. | | 10 | W.P.No.463 of 2020 | Mohsin Sons v. Federation of Pakistan and others. | | 11 | W.P.No.484 of 2020 | Messrs Shaheen Chemist v. Federation of Pakistan and others. | | 12 | W.P.No.462 of 2020 | New Mohsin Sons v. Federation of Pakistan and others. | | 13 | W.P.No.295 of 2020 | Messrs Saif Bakers v. Federation of Pakistan and others. | | 14 | W.P.No.296 of 2020 | MCS v. Federation of Pakistan and others. | | 15 | W.P.No.196 of 2020 | The Rahat Bakers v. Federation of Pakistan and others. | | 16 | W.P.No.162 of 2020 | Messrs Pehchan Mall v. Federation of Pakistan and others. | | 17 | W.P.No.160 of 2020 | The BKRY v. Federation of Pakistan and others. | | 18 | W.P.No.159 of 2020 | Young Bakers Sweets and Cafe v. Federation of Pakistan and others. | | 19 | W.P.No.165 of 2020 | Messrs Al-Jannat Mall v. Federation of Pakistan and others. | | 20 | W.P.No.164 of 2020 | Messrs Sadaf Shopping Mall v. Federation of Pakistan and others. | | 21 | W.P.No.150 of 2020 | D Watson Chemist v. Federation of Pakistan and others. | | 22 | W.P.No.149 of 2020 | Farooq Corporation v. Federation of Pakistan and others. | | 23 | W.P.No.440 of 2020 | Atalian Shoes v. Federation of Pakistan and others. | | 24. | W.P.No.212 of 2020 | Asian Mall v. Federation of Pakistan and others. | | 25. | W.P.No.200 of 2020 | Brand City v. Federation of Pakistan and others. | | 26. | W.P.No.197 of 2020 | Al-Faisal Mall v. Federation of Pakistan and others. | | 27. | W.P.No. 287 of 2020 | Messrs Shaheen Chemist and Grocers v. Federation of Pakistan and others. | | 28. | W.P.No. 293 of 2020 | Messrs Ajwa Bakers and Restaurant v. Federation of Pakistan and others. | | 29. | W.P.No. 226 of 2020 | Sheikh Zulfiqar Ali Proprietor Messrs Hamad Cash and Carry v. Federation of Pakistan and others. | | 30. | W.P.No. 219 of 2020 | Moon Shopping Mall v. Federation of Pakistan and others. | | 31. | W.P.No. 214 of 2020 | Lahore Cloth Sale Depot v. Federation of Pakistan and others. | | 32. | W.P.No. 213 of 2020 | Zaman Sons Supper Mall v. Federation of Pakistan and others. | | 33. | W.P.No. 163 of 2020 | Messrs Variety Mall v. Federation of Pakistan, and others. | | 34. | W.P.No. 243 of 2020 | American Dress House v. Federation of Pakistan and others. | | 35. | W.P.No. 242 of 2020 | Messrs Shaheen Chemist v. Federation of Pakistan, and others. | | 36. | W.P.No. 236 of 2020 | Muhammad Masood Proprietor Messrs Saeed Sweets and Bakers v. Federation of Pakistan and others. | | 37. | W.P.No. 246 of 2020 | Sheikh Muhammad Wahab Proprietor of Messrs Shaheen Pharmacy v. Federation of Pakistan and others. | | 38. | W.P.No. 245 of 2020 | Kafiat Ullah Khan Proprietor of Messrs Dyna Trading Company v. Federation of Pakistan and others. | | 39. | W.P.No. 244 of 2020 | Messrs Shakeel Trading Corporation v. Federation of Pakistan and others. | | 40. | W.P.No. 294 of 2020 | Messrs Taj Bakery v. Federation of Pakistan and others. | | 41. | W.P.No. 522 of 2020 | Shamoo Jee v. Federation of Pakistan and others. | | 42. | W.P.No. 562 of 2020 | Messrs Swad International's v. Federation of Pakistan and others. |

2020 P T D 772

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE, FAISALABAD

Versus

Messrs INTERLOOP LIMITED, FAISALABAD

I.T.R. No.256347 of 2018, decided on 17th April, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss.133, 122 & 115---CBR Circular No. 20 of 1992, dated 01-07-1992 FBR Circular No. 5 of 2000, dated 6-3-2000---Persons not required to furnish a return of income---Definite information---Information available in audited accounts---Reference to High Court---Findings of facts---Scope---Assessing officer had allegedly acquired definite information in terms of S.122(8), Income Tax Ordinance, 2001 that the taxpayer had declared local sales which were offered under Final Tax Regime by wrongly availing benefit of Circular No. 20 of 1992 01-07-1992 and Circular No. 5 of 2000, dated 6-3-2000---Appellate Tribunal had given findings of facts that information of sale in the local market was duly available in the audited accounts of taxpayer and the statement so filed was as per audited accounts, thus, case of department did not qualify within the ambit of 'definite information'---Validity---Applicant could not show that the findings were perverse, contrary to record or suffered from any other legal infirmity or impropriety warranting interference in Reference jurisdiction---High Court had to decide reference application in the exercise of its advisory jurisdiction on facts and circumstances founded by the Appellate Tribunal, which was the last fact findings forum---High Court could not change findings of facts arrived at by the Appellate Tribunal---Reference application was decided against the department.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907 ref.

Muhammad Asif Hashmi for Applicant Department.

2020 P T D 782

[Lahore High Court (Multan Bench)]

Before Abid Aziz Sheikh and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs RASHID AND SAQIB TRADING COMPANY

Tax Reference No.06 of 2018, decided on 14th November, 2019.

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

----S. 221---Rectification of mistake---Scope---Department assailed order of Appellate Tribunal whereby rectification application of respondent/assessee was accepted and earlier order passed by Appellate Tribunal was set aside---Validity---Original order passed by Appellate Tribunal showed that it had assessed the matter in detail and after applying its judicial mind had not agreed with the contentions of the respondent/assessee and had found the respondent to be an assessee in default---Said order could not be rectified under S. 221, Income Tax Ordinance, 2001 while considering the same as an error on the face of record---Had the respondent felt aggrieved due to some legal defect in that order, the same could only be challenged before the next higher forum---Impugned order was not sustainable, being beyond the scope of S. 221 of the Income Tax Ordinance, 2001---Reference was allowed.

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

----Ss. 221 & 133---Rectification of mistake---Reference to High Court---Maintainability---Scope---Where rectification application is dismissed by Appellate Tribunal, the Reference application before High Court is not maintainable because the order of the Tribunal on such application does not merge into final order---Where the rectification application is allowed and the original order of the Tribunal is set aside then the said order will become part of the original order and reference application will be maintainable before High Court.

Messrs Hong Kong Chinese Restaurant, Main Boulevard Gulberg, Lahore v. Assistant Commissioner of Income Tax, Circle 6, Lahore and others 2002 PTD 1878 rel.

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

----S.221---Rectification of mistake---Scope---Scope of S.221, Income Tax Ordinance, 2001 is restricted to rectify the mistake apparent from the record---Expression "mistake apparent from the record" as used in S.221 means that "error" or "mistake" is so manifest and clear which if permitted to remain on record may have material effect on the case---Where defect in order has direct nexus with the question of determination of rights of parties and also affects their substantial rights or causes prejudice to their interest, such defect in order is not a mistake apparent on record to be rectified under S.221 but it can only be challenged before higher forum.

Commissioner of Income Tax/Wealth Tax v. Muhammad Naseem Khan 2013 PTD 2005 rel.

Rasheed Ahmad Joiya Legal Advisor, FBR for Petitioner.

2020 P T D 788

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER OF INCOME TAX, LAHORE

Versus

MACHINE CRAFTS (PVT.) LIMITED, LAHORE

P.T.Rs. Nos.33 to 36 of 2004, decided on 16th April, 2019.

Income Tax Ordinance (XLIX of 2001)---

----S.133---Reference to High Court---Scope---Department assailed order of Appellate Tribunal whereby it had upheld the order of first appellate authority who had held the assessment order barred by time by holding that the delay could not be condoned on the ground that the assessing officer was under wrong impression that stay granted by High Court operated beyond six months---Validity---Only substantial legal questions arisen from order passed by Appellate Tribunal could be examined and questions requiring no interpretation of any provision of law, rules or regulations, or its application on undisputed facts of a case, did not constitute a "question of law" to be decided by High Court under the reference jurisdiction---High Court declined to exercise advisory jurisdiction as proposed question was not a "question of law"---Reference application was decided against the department.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907; Commissioner Inland Revenue, Zone-I v. Messrs Industrial Chemicals (Pvt.) Ltd. 2017 PTD 756; Commissioner of Income Tax v. Ghee Corporation of Pakistan (Pvt.) Ltd. 2017 PTD 1167; Commissioner Inland Revenue v. Messrs Adeel Brothers 2017 PTD 1579 and Commissioner Inland Revenue, Zone-II v. Al-Hamad International Container Terminal (Pvt.) Ltd. 2017 PTD 2212 ref.

Ch. Imtiaz Elahi for Applicant-department, along with Dr. Ishtiaq Ahmad Khan, Commissioner Inland Revenue.

2020 P T D 799

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs FORMANITE HOUSING SCHEME, LAHORE

I.T.R. No. 11845 of 2019, decided on 14th March, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111 & 133---Unexplained income or assets---Findings of fact---Scope---Taxpayer's declaration of its income was disputed by the Taxation Officer while placing reliance on the deposits made in the Bank accounts maintained by the taxpayer, on the basis whereof show-cause notice was issued which culminated in passing of assessment order whereby certain additions were made to the income of taxpayer under S. 111(1)(b) of Income Tax Ordinance, 2001---Commissioner Inland Revenue (CIR) (Appeals) deleted the addition so made and the Appellate Tribunal held that the disputed amounts appearing in the account of taxpayer were on account of advances relating to succeeding year, interbank transfer entries/reversal entries and cheques dishonoured---Validity---Department could not show that the findings of the Appellate Tribunal were perverse, contrary to record or suffered from any other legal infirmity or impropriety warranting interference by High Court---High Court had to decide reference application in the exercise of its advisory jurisdiction, on the facts and circumstances founded by Appellate Tribunal, which was the last fact finding forum---High Court could not change findings of facts arrived at by the Appellate Tribunal---High Court declined to exercise advisory jurisdiction as the decision of Appellate Tribunal was based on findings of facts---Reference application was decided against the department.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907 ref.

Saeed ur Rehman Dogar for Applicant Department.

2020 P T D 804

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE, LAHORE

Versus

Messrs SUI NORTHERN GAS PIPELINES LIMITED, LAHORE

S.T.R. No.172 of 2016, decided on 18th March, 2019.

Sales Tax Act (VII of 1990)---

----S.47---Question of fact---Scope---Department assailed order of Appellate Tribunal whereby it had endorsed the findings of Commissioner Inland Revenue (CIR) (Appeals) who had decided the issue on the basis of facts---Validity---Concurrent findings of facts recorded by two appellate fora, unless found to be either perverse or contrary to record, could not be interfered with by the High Court, while examining proposed questions of law---Scope of reference jurisdiction was restricted only to the extent of examining questions of law arising from order passed by Appellate Tribunal and not to decide questions of facts or determine disputed facts---Only substantial legal questions arising from an order passed by Appellate Tribunal could be examined---Question requiring no interpretation of any provision of law, rules or regulations, or its application on undisputed facts of a case, did not constitute a "question of law" to be decided by High Court---High Court declined to exercise advisory jurisdiction as the decision of Appellate Tribunal was based on findings of facts recorded by CIR (Appeals)---Reference application was decided against the department.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907; Commissioner Inland Revenue, Zone-I v. Messrs Industrial Chemicals (Pvt.) Ltd. 2017 PTD 756; Commissioner of Income Tax v. Ghee Corporation of Pakistan (Pvt.) Ltd. 2017 PTD 1167; Commissioner Inland Revenue v. Messrs Adeel Brothers 2017 PTD 1579 and Commissioner Inland Revenue, Zone-II v. Al-Hamad International Container Terminal (Pvt.) Ltd. 2017 PTD 2212 ref.

Sarfraz Ahmad Cheema and Ch. Muhammad Shakeel, Advocate/Legal Advisor for Applicant-Department.

2020 P T D 810

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs IRFAN INDUSTRIES (PVT.) LTD.

S.T.R. No.220 of 2016, decided on 13th March, 2019.

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

----S. 11---Recovery of tax not levied or short levied or erroneously refunded---Limitation---Scope---Question before High Court was whether the Appellate Tribunal had rightly annulled the order-in-original and show-cause notice; the latter having been issued after lapse of statutory period of five years---Validity---Show-cause notice having been issued after the prescribed period was barred by limitation, thus, was without lawful authority and of no legal effect---Order-in-original was also barred by time---Reference was decided against the applicant-department.

The Collector of Sales Tax Gujranwala and others v. Messrs Super Asia Mohammad Din and Sons and others 2017 PTD 1756 = PTCL 2017 CL. 736; Collector of Customs, Sales Tax (West), Karachi v. Messrs K&A Industries, Karachi 2006 PTD 537; XEN Shahpur Division v. Collector Sales Tax (Appeals) Collectorate of Customs Federal Excise and Sales Tax, Faisalabad and 2 others 2008 PTD 1973; Messrs Gulistan Textiles Mills Ltd., Karachi v. Collector (Appeals) Customs Sales Tax and Federal Excise, Karachi and another 2010 PTD 251; Messrs Rose Colour Laboratories Nayab No.1 (Pvt.) Ltd. v. Chairman, C.B.R. and others 2003 PTD 1047; Abdul Sattar v. Federation of Pakistan through Secretary, Revenue Division/Chairman, Central Board of Revenue, Islamabad and others 2006 PTD 1171; Pakistan International Airlines Corporation v. Central Board of Revenue, Islamabad and others 1990 CLC 868 and Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and others 2001 SCMR 838 ref.

(b) Limitation---

----Where the law prescribes a period of time for recovery of money, after its lapse, recovery is not enforceable through courts.

Federation of Pakistan through Secretary, Finance, Islamabad and others v. Messrs Ibrahim Textile Mills Ltd. and others 1992 SCMR 1898 rel.

Ch. Shakeel Ahmad, Advocate Vice Sarfraz Ahmad Cheema for Applicant-department.

2020 P T D 821

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs NAEEM BROTHERS

S.T.R. No. 289 of 2016, decided on 18th March, 2019.

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

----Ss. 21(3), 8(1)(ca) & 2(37)---Sales Tax Rules, 2006, R. 12(a)(v)---Tax credit not allowed---Blacklisting and suspension of registration registered person---Tax fraud---Burden of proof---Scope---Registered person was alleged to have received refund of input tax against the sales tax invoices issued by suspended/blacklisted units---Validity---Taxation officer, while invoking the provisions of S. 21(3) of Sales Tax Act, 1990, had to ascertain the fact that the invoices were issued during suspended or blacklisted period and in case invoices were issued prior to blacklisting, the cause or reason for blacklisting had some nexus with the invoices---Bottom line was that tax was not paid or deposited against the invoices---To prove such fact, initial burden was upon the department, however, in accordance with the provisions of S.2(37) of the Sales Tax Act, 1990 such burden could be shifted upon the registered person in cases of tax fraud---Taxation officer had not established that the invoices were either fake or flying or the claimed tax was not deposited in the Government Exchequer---Reference application was decided against the department accordingly.

Commissioner Inland Revenue v. Messrs Ali Hassan Metal Work 2018 PTD 108 foll.

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

----Ss. 21(3) & 8(1)(ca)---Sales Tax Rules, 2006, R.12(a)(v)---Tax credit not allowed---Blacklisting and suspension of registration of registered person---Burden of proof---Scope---Initial burden lies on the department to prove that invoices have been issued during suspended or blacklisted period and in case invoices are not issued during the period of blacklisting, the cause or reason for blacklisting has some nexus with the invoices.

Commissioner Inland Revenue v. Messrs Ali Hassan Metal Work 2018 PTD 108 rel.

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

----Ss. 21(3) & 8(1)(ca)---Tax credit not allowed---Blacklisting and suspension of registration---Scope---Intention of Legislature as discernible from the provisions of S. 21(3) read with S. 8(1)(ca), of the Sales Tax Act, 1990 is that reclaim (refund) or adjustment of input tax (tax credit) should not be allowed for an invoice against which sales tax has not been deposited in Government treasury---Such clog appears to be logical because a tax not deposited in the Exchequer cannot and should not be allowed to be withdrawn or adjusted---Claim of such refund or its adjustment amounts to rob the Exchequer and cheat upon the State---Conversely; to deny adjustment or refund of a tax deposited in the Treasury, if a registered person is entitled under that law, is against the legislative will.

Commissioner Inland Revenue v. Messrs Ali Hassan Metal Work 2018 PTD 108 foll.

Ms. Kausar Parveen, Advocate/Legal Advisor for Applicant-department.

2020 P T D 850

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

DIRECTOR, DIRECTORATE INTELLIGENCE AND INVESTIGATION through Additional Director

Versus

MUHAMMAD AYAZ KHAN

Customs Reference No.24 of 2016, decided on 26th March, 2019.

Customs Act (IV of 1969)---

----Ss.196, 168 & 181---SRO No.499(I)/2009 dated; 13-06-2009---Reference to High Court---Seizure of things liable to confiscation---Prohibition of giving option to pay fine in lieu of confiscated goods---Findings of facts---Scope---Department assailed order of Appellate Tribunal whereby it had released the vehicle of respondent despite the prohibition contained in clause (b) of SRO No.499(I)/2009 dated; 13-06-2009---Validity---Appellate Tribunal had observed that no prima facie direct/adequate evidence was available to prove that the owner of vehicle/respondent was directly involved in smuggling---Vehicle could only be confiscated if it was involved wholly and exclusively in the use of transportation of smuggled goods whereas the facts showed that the vehicle was carrying about 20 passengers who were present in the vehicle and they (passengers) were allowed to leave when the goods and the vehicle was seized---Findings of the Appellate Tribunal that no prima facie direct/adequate evidence was available to prove the owner of vehicle was directly involved in smuggling of goods were findings of fact and the High Court had no jurisdiction to decide and set aside such findings in Reference proceedings---High Court only dealt with "question of law", which had not arisen out of the impugned order---High Court declined to exercise its advisory jurisdiction---Reference application was decided against the department.

Nadeem Mahmood Mian for Applicant/Department.

2020 P T D 873

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs DESCON ENGINEERING LIMITED, LAHORE

I.T.R. No. 10823 of 2019, decided on 7th March, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 133 & 88A [since omitted]---Share profits of company to be added to taxable income---Reference to High Court---Findings of facts---Scope---Department assailed order passed by Appellate Tribunal on the ground that it ignored the provisions of S.88A of Income Tax Ordinance, 2001 while holding that share from Association of Persons (AOP) was not liable to be charged in the hands of taxpayer---Validity---Appellate Tribunal, after appreciating the available record had endorsed the findings given by Commissioner of Inland Revenue (Appeals) whereby he had held that the taxpayer had filed its separate statement of final taxation based on separate audited accounts and that the taxpayer had 70% shares in the total receipts and expenses of AOP and on the basis of IAS-31, which was incorporated in the final accounts of the taxpayer, hence, there was no occasion for any proration as the same was never part of its income tax return---Concurrent findings of facts recorded by two appellate fora under the Income Tax Ordinance, 2001, unless found to be perverse and contrary to record, could not be interfered with by the High Court, while examining questions of law proposed under S. 133 of Income Tax Ordinance, 2001---Scope of Reference jurisdiction was restricted to the extent of examining questions of law arising from order passed by Appellate Tribunal and it did not extend to deciding questions of facts or determination of disputed facts---Only substantial legal questions could be examined, which arose from an order passed by the Appellate Tribunal, whereas questions requiring no interpretation of any provision of law, rules or regulations, or its application on undisputed facts of a case did not constitute a question of law to be decided by High Court---High Court declined to exercise its advisory jurisdiction---Reference application was decided against the applicant department.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907; Commissioner Inland Revenue, Zone-I v. Messrs Industrial Chemicals (Pvt.) Ltd. 2017 PTD 756; Commissioner of Income Tax v. Ghee Corporation of Pakistan (Pvt.) Ltd. 2017 PTD 1167; Commissioner Inland Revenue v. Messrs Adeel Brothers 2017 PTD 1579 and Commissioner Inland Revenue, Zone-II v. Al-Hamad International Container Terminal (Pvt.) Ltd. 2017 PTD 2212 ref.

Muhammad Shahid Usman, Legal Advisor for Applicant-Department.

Through instant Reference Application under Section 133 (1) of the Income Tax Ordinance, 2001 ("the Ordinance of 2001"), following questions of law, asserted to have arisen out of impugned order dated 03.07.2017, passed by learned Appellate Tribunal Inland Revenue, Lahore ("Appellate Tribunal"), have been proposed for our opinion:-

1. Whether on the facts and circumstances of the case, the Appellate Tribunal has not erred in law by upholding the order of Commissioner (Appeals) without adjudicating upon the issues decided by the lower forum?

2. Whether the order of Appellate Tribunal can be termed as a speaking order in terms of Section 24-A of the General Clauses Act, 1897?

3. Whether it was necessary for the learned Appellate Tribunal Inland Revenue to give reasons in support of its decision?

4. Whether the learned Appellate Tribunal Inland Revenue's order needs to be set at naught by following the ratio of Honorable Lahore High Court's order in PTR No.152 of 2014 titled CIR v. Messrs High Noon Lab, Limited?

5. Whether the learned Appellate Tribunal Inland Revenue was justified to hold that share from AOP was not liable to be charged in the hands of taxpayer by ignoring the provisions of erstwhile section 88A of Income Tax Ordinance, 2001?

6. Brief facts of the case are that a Show-Cause Notice was issued under Section 122(5A) read with subsection (9) of the Ordinance of 2001, to respondent-taxpayer to amend the deemed assessment, which culminated in passing of order-in-original dated 25.01.2011. Feeling aggrieved, respondent-taxpayer filed appeal before CIR (Appeals), which was disposed of vide order dated 01.06.2012, after deleting the proration made by Additional Commissioner. Being dissatisfied, applicant-department preferred appeal before learned Appellate Tribunal, which was dismissed vide order dated 03.07.2017. Hence, this Reference Application.

7. Learned counsel for applicant-department submits that learned Appellate Tribunal has totally ignored the provisions of Section 88A of the Ordinance of 2001 while holding that share from AOP was not liable to be charged in the hands of taxpayer, thus, impugned order is absolutely non-speaking in terms of Section 24-A of the General Clauses Act, 1897. In the end, he submits that impugned order is not sustainable in the eye of law.

8. Heard. Available record perused.

9. Perusal of record shows that learned Appellate Tribunal, after appreciating the available record, has endorsed the findings of facts given by CIR (Appeals), whereby it was held that as per detail brought on record through written arguments and as evident from the note Nos.6, 7 and 9 and available un-appropriated profits, respondent-taxpayer had resources other than borrowed capital for the advancement of loan; that in the same situation, which existed for the tax year 2003, learned Appellate Tribunal, in ITA No.14/LB/2009, deleted the addition made under this head; and that in the year 2004, the Additional Commissioner, under Section 122(5A) of the Ordinance ibid, made a similar addition, but same was deleted in appeal by CIR (Appeals) vide order dated 26.10.2010.

10. So far as the taxation of income from operations in Saudi Arabia is concerned, to this extent, CIR (Appeals) observed that the Additional Commissioner should re-examine the issue in the light of tax treaty with Saudi Arabia and if it is exempted in Pakistan, action should be taken under the law and in case, it is found taxable in Pakistan, credit of the tax paid in Saudi Arabia, if any, shall be given under Section 103 as provided in law.

So far as proration of expenses between receipts from FTR and other normal law receipts of the respondent-taxpayer is concerned, it was observed by CIR (Appeals) that respondent-taxpayer filed its separate statement of final taxation, based on separate audited accounts) and that the respondent-taxpayer has 70% shares in the total receipts and expenses of AOP and on the basis of IAS-31, which has been incorporated in the final accounts of the respondent-taxpayer, hence, there is no occasion for any proration as the same was never part of its income tax return. Resultantly, CIR (Appeals) proceeded to delete the proration made by Additional Commissioner, keeping in view the treatment already meted out by applicant-department.

2020 P T D 904

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE, LARGE TAXPAYERS UNIT, LEGAL DIVISION, LAHORE

Versus

EMCO INDUSTRIES LIMITED

P.T.R. No.02 of 2011, decided on 2nd April, 2019.

Income Tax Ordinance (XLIX of 2001)---

----S.133---Reference to High Court---Scope---Only substantial legal questions can be examined which may arise from an order passed by the Appellate Tribunal whereas questions requiring no interpretation of any provision of law, rules or regulations or its application on undisputed facts of a case do not constitute a question of law to be decided by the High Court under its reference jurisdiction.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907; Commissioner Inland Revenue, Zone-I v. Messrs Ltd. Industrial Chemicals (Pvt.) Ltd. 2017 PTD 756; Commissioner of Income Tax v. Ghee Corporation of Pakistan (Pvt.) Ltd. 2017 PTD 1167; Commissioner Inland Revenue v. Messrs Adeel Brothers 2017 PTD 1579 and Commissioner Inland Revenue, Zone-II v. Al-Hamad International Container Terminal (Pvt.) Ltd. 2017 PTD 2212 ref.

Liaqat Ali Chaudhry, Legal Advisor for Applicant-department.

2020 P T D 917

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

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

Versus

Messrs TETRAPAK PAKISTAN LIMITED

S.T.R. No.15967 of 2019 in S.T.A. No.603/LB of 2013, decided on 18th March, 2019.

Sales Tax Act (VII of 1990)---

----Ss.47 & 8(1)(ca)---Tax credit not allowed---Reference to High Court---"Question of law"---Findings of facts---Scope---Applicant assailed order passed by Appellate Tribunal---Appellate Tribunal had observed that order-in-original was based on a defective notice bearing false figures of input tax never claimed by the registered person---High Court observed that only substantial legal questions could be examined, which had arisen from an order passed by Appellate Tribunal, questions requiring no interpretation of any provision of law, rules, regulations, or its application on undisputed facts of a case did not constitute a "question of law" to be decided by High Court under its reference jurisdiction---Reference application was decided against the applicant-department.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907; Commissioner Inland Revenue, Zone-I v. Messrs Industrial Chemicals (Pvt.) Ltd. 2017 PTD 756; Commissioner of Income Tax v. Ghee Corporation of Pakistan (Pvt.) Ltd. 2017 PTD 1167; Commissioner Inland Revenue v. Messrs Adeel Brothers 2017 PTD 1579 and Commissioner Inland Revenue, Zone-II v. Al-Hamad International Container Terminal (Pvt.) Ltd. 2017 PTD 2212 ref.

2020 P T D 925

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi, J

SW SUGAR MILLS LIMITED through Chief Executive

Versus

FEDERAL BOARD OF REVENUE, ISLAMABAD through Chairman and others

W.P. No.254084 of 2018, decided on 5th March, 2019.

Sales Tax Act (VII of 1990)---

----S.11---Constitution of Pakistan, Art. 199---Constitutional petition---Tax fraud---Assessment of sales tax---Civil and criminal proceedings---Stay of criminal proceedings---Scope---Petitioner prayed for quashing of FIR lodged against him---Validity---Pre-trial steps including arrest and detention could not be given effect to unless the tax liability of the taxpayer was determined in accordance with S. 11 of the Sales Tax Act, 1990---Whenever civil and criminal cases involved similar or identical subject-matters, the proceedings before the criminal court were not necessarily required to be stayed---However, where subject-matter of both the proceedings was so closely inter-related that outcome of the civil/tax proceedings might have had a material bearing on the criminal proceedings, safer course in such a situation was to stay the criminal proceedings till the finalization of civil/tax matter---High Court held that the proceedings pending pursuant to the impugned FIR would remain stayed till determination of amount due through adjudication proceedings.

Kashif Zia v. Federation of Pakistan and others W.P. No.34364 of 2015; E.M. Textile Mills and others v. Federal Board of Revenue and others 2017 PTD 1875; Muhammad Saeed and others v. The State and others W.P. No.11106 of 2016; Sh. Muhammad Rafique Goreja and others v. Islamic Republic of Pakistan and others 2006 SCMR 1317; Dr. Ghulam Mustafa v. The State and others 2008 SCMR 76; Rana Shahid Ahmad Khan v. Tanveer Ahmed and others 2011 SCMR 1937; Director-General, Anti-Corruption Establishment, Lahore and others v. Muhammad Akram Khan and others PLD 2013 SC 401; Muhammad Iqbal v. Station House Officer and others 2010 PCr.LJ 357; Muhammad Hassan v. Judge Family Court Bhalwal and another 2008 YLR 1826; Naeem Abbas v. Director General, Federal Investigation Agency (FIA), Islamabad and 7 others 2015 PCr.LJ 1592 and Messrs Advance Business System and others v. FOP and others 2015 PTD 2004 ref.

Taj International (Pvt.) Ltd. and others v. Federal Board of Revenue and others 2014 PTD 1807 and Messrs Firdous Cloth Mills (Pvt.) Limited and others v. Federation of Pakistan and others I.C.A. No.913 of 2015 foll.

Ijaz Ahmad Awan, Mian Asghar Ali, Adnan Qamar Malik and Sultan Ali Awan for Petitioners.

Khawar Ikram Bhatti, Muhammad Imtiaz Elahi, Ch. Muhammad Zafar Iqbal, Sarfraz Ahmad Cheema, Ms. Kausar Parveen, Liaqat Ali Chaudhry, Umair Anwar, Ijaz Ahmad Cheema and Mrs. Amna Parveen, Legal Advisor for Respondents.

Syed Zain-ul-Abideen for Respondent No.3.

2020 P T D 937

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

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

Versus

Messrs GHANI GLASS LIMITED

I.T.R. No.238465 of 2018, decided on 2nd April, 2019.

Income Tax Ordinance (XLIX of 2001)---

----S.221---Rectification of mistake---Scope--- Department assailed order passed by Appellate Tribunal whereby it had re-fixed the case for hearing and adjudication despite the fact that it had already decided the appeal---Validity---Appellate Tribunal had accepted the rectification application while relying on the observations made in 'Messers MFMY Industries Ltd. v. Federation of Pakistan through Ministry of Commerce and others' reported as 2015 SCMR 1550 wherein it was held that maximum time within which the judgment should be pronounced was 120 days, otherwise it would stand weakened in quality and efficiency---However, it did not mean that the judgment announced beyond 120 days became nullity in the eyes of law---Appellate Tribunal had wrongly invoked its jurisdiction by allowing the rectification application on the ground that Appellate Tribunal had announced the order after 117 days---Order passed by Appellate Tribunal being result of misconception of law on the subject, was not sustainable---Reference application was decided in favour of the department.

Messrs MFMY Industries Ltd. v. Federation of Pakistan through Ministry of Commerce and others 2015 SCMR 1550 rel.

Liaquat Ali Chaudhry for Applicant.

2020 P T D 948

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs Z&J HYGIENIC PRODUCTS (PVT.) LTD.

P.T.R. No.182 of 2016, decided on 2nd April, 2019.

Income Tax Ordinance (XLIX of 2001)---

----S.133---General Clauses Act (X of 1897), S. 24-A---Reference to High Court---Reasons for decision---Scope---Department assailed order passed by Appellate Tribunal whereby it had remanded the matter to the Commissioner (Appeals)---Appellate Tribunal had not determined the core issue whether HS Code of diaper was distinct and different from the HS Code of textile articles; and without giving clear finding held that the taxpayer was entitled to zero rating and had decided the matter through the impugned order---Material aspects of the matter were not dilated upon by the Appellate Tribunal, therefore, impugned order was not in confirmity with the provisions of S. 24-A of General Clauses Act, 1897---High Court set aside the impugned order and remanded the matter to the Appellate Tribunal for decision afresh through a speaking order.

Commissioner of Income Tax, Companies Zone-II, Karachi v. Messrs Sindh Engineering (Pvt.) Limited, Karachi 2002 SCMR 527 = 2002 PTD 419 ref.

Ch. Shakeel Ahmad and Sarfraz Ahmad Cheema, Legal Advisor for Applicant.

2020 P T D 962

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

ASHRAF SUGAR MILLS LIMITED

I.T.R. No.15968 of 2019, decided on 18th March, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 133, 174(2) & 60A---Reduction of a taxpayer's claim for deduction---Workers' Welfare Fund---Reference to High Court---Findings of facts---Scope--- Applicant-department assailed the order of Appellate Tribunal wherein it had given findings of facts that the addition made on account of Workers' Profit Participation Fund (WPPF) was wrongly made as provided in S. 60A, Income Tax Ordinance, 2001 which was allowable as the taxpayer had made the payment of WPPF in the next year and that the addition on account of purchases and additions on account of profit and loss expenses were not confronted in the show cause notice---Validity---Findings of facts recorded by Appellate Tribunal, unless found to be either perverse or contrary to record, could not be interfered with by the High Court while examining questions of law---Scope of Reference jurisdiction under the law was restricted to the extent of examining questions of law arising from order passed by Appellate Tribunal and could not decide questions of facts or determine disputed facts---Reference application was decided against the department.

Messrs F.MY. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907; Commissioner Inland Revenue, Zone-I v. Messrs Industrial Chemicals (Pvt.) Ltd. 2017 PTD 756; Commissioner of Income Tax v. Ghee Corporation of Pakistan (Pvt.) Ltd. 2017 PTD 1167; Commissioner Inland Revenue v. Messrs Adeel Brothers 2017 PTD 1579 and Commissioner Inland Revenue, Zone-II v. Al-Hamad International Container Terminal (Pvt.) Ltd. 2017 PTD 2212 ref.

2020 P T D 968

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs MALIK USMAN

I.T.R. No.255487 of 2018, decided on 14th March, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 133 & 111---Unexplained income or assets---Reference to High Court---Findings of facts---Scope---Applicant-department assailed the order of Appellate Tribunal wherein it had given findings of facts that the assessing authority had treated the credit entries appearing in the Bank accounts as business receipts/sales for the tax year; that it had failed to establish that the taxpayer had made any investment or was found to be the owner of money and that it had, without verification and examination of relevant record/balance sheet, hurriedly made the addition on presumption---Department could not show that the findings of facts were perverse, contrary to record or suffered from any other legal infirmity or impropriety warranting interference in Reference jurisdiction---High Court had to decide the reference application in the exercise of its advisory jurisdiction on facts and circumstances founded by the Appellate Tribunal, which was the last fact findings forum---High Court could not change findings of facts arrived at by the Appellate Tribunal---Reference application was decided against the department.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907 ref.

Saeed ur Rehman Dogar for Applicant.

2020 P T D 1001

[Lahore High Court]

Before Asim Hafeez, J

NATIONAL POWER PARKS MANAGEMENT COMPANY (PVT.) LTD.

Versus

FEDERAL BOARD OF REVENUE and others

W.P. No.12283 of 2020, heard on 9th March, 2020.

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

----Ss.147, 137 & 210---Advance tax---Computation of advance tax payable by taxpayer---Estimate of payable advance tax furnished by taxpayer---Rejection by Department of estimate of payable advance tax on basis of documentary evidence---Computation of advance tax in terms of formula provided in S.147 of Income Tax Ordinance, 2001---Nature and object of “advance tax” under Income Tax Ordinance, 2001---Section 147 of Income Tax Ordinance, 2001 was a “deeming provision”---Question before High Court was whether Department had jurisdiction to reject estimate of advance tax furnished by taxpayer under S.147 of Income Tax Ordinance, 2001 by application of provisos to S.147(6) of Income Tax Ordinance, 2001---Held, that officer of Department could in terms of mandate of provisos to S.147(6) of Income Tax Ordinance, 2001 proceed to review documentary evidence furnished by taxpayer as to taxpayer’s liability to pay advance tax and upon being unsatisfied, reject such estimate---Provisos to S.147(6) regulated and controlled procedure provided under said section, and same had to be given full effect as redundancy or surplusage could not be attributed to said provisos---Liability to pay advance tax had to be computed in accordance with S.147(4) of Income Tax Ordinance, 2001, for each quarter of respective tax year, which quarterly computed liability for a tax-year would conjointly constitute an obligation to pay advance tax for such tax-year in terms of S.147(1) of the Ordinance---No escape or avoidance from computation formula prescribed under of S. 147(4) of Income Tax Ordinance, 2001 therefore could be made---Payable advance tax would be treated as tax due under an assessment order and was recoverable under S.137 of Income Tax Ordinance, 2001---Nothing existed in S.147 of Income Tax Ordinance, 2001 which would indicate that same allowed for deferring recovery of due advance tax till final determination of tax liability for a tax year and any such construction of said section threatened the existence of a “deeming provision of law” --- Constitutional petition was dismissed, in circumstances.

Commissioner of Income Tax v. Messrs Habib Sugar Mills Ltd. 1993 PTD 343; Call Tell and another v. Federation of Pakistan and others 2005 PTD 833; Lone Cold Storage, Lahore v. Revenue Officers, Lahore Electric Power Co. and others 2010 PTD 2502; Messrs Lahore Polypropylene Industries (Pvt.) Ltd. and others v. Federation of Pakistan and others 2012 PTD 1003; Fauji Fertilizer Company Ltd. v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 3 others 2018 PTD 719; Commissioner of Income Tax, North Zone (West Pakistan), Lahore v. Crescent Textile Mills Ltd., Lahore 1974 (2) Tax 212; Commissioner of Income Tax, Central Zone ‘B’ v. Messrs Farrokh Chemical Industries 1992 PTD 523; Central Board of Revenue and others v. Chanda Motors 1993 SCMR 39; Messrs Micropak (Pvt.) Ltd., Lahore v. Income Tax Appellate Tribunal, Lahore and 2 others 2001 PTD 1180; Inspecting Additional Commissioner of Income Tax and others v. Messrs Micro Pak (Pvt.) Limited and others 2002 PTD 877; Messrs Engineering Consortium (Pvt.) Limited, Karachi v. I.T.O. Co., Circle Central Zone-C, Karachi 2006 PTD 333; Messrs Riaz Bottlers (Pvt.) Limited, Lahore v. Commissioner of Income Tax, Companies Zone-I, Lahore 2008 PTD 877; B.P. Pakistan Exploration and Production Inc., Karachi v. Additional Commissioner, Inland Revenue-B Enforcement and Collection Division-I, Karachi and another 2011 PTD 647; H.M. Extraction Ghee and Oil Industries (Pvt.) Ltd. v. Federal Board of Revenue 2019 SCMR 1081 = 2019 PTD 1479; Wealth Tax Officer and another v. Shaukat Afzal and 4 others 1993 SCMR 1810; Commissioner of Income Tax, Companies-II and another v. Hamdard Dawakhana (WAQF), Karachi PLD 1992 SC 847 and H.M. Extraction Ghee and Oil Industries (Pvt.) Ltd. and another v. Federal Board of Revenue and another 2019 SCMR 108 ref.

Messrs East and West Steamship Company v. Pakistan, through the Secretary to the Government of Pakistan, Ministry of Commerce, Karachi PLD 1958 SC 41; Muhammadi Steamship Co. Ltd. v. The Commissioner of Income-Tax (Central) Karachi 1966 PTD 664; Messrs Hirjina & Co. (Pakistan) Ltd., Karachi v. Commissioner of Sales Tax Central, Karachi 1971 SCMR 128; State v. Zia-ur-Rehman and others PLD 1973 SC 49; Mehreen Zaib-un Nisa v. Land Commissioner PLD 1975 SC 397; Indus Jute Mills Ltd. v. Federation of Pakistan 2009 PTD 1473 and Commissioner of Inland Revenue v. Messrs PEPCO Pakistan 2015 PTD 863 rel.

Karachi Port Trust, Karachi v. Commissioner Inland Revenue, Karachi 2011 PTD 1996 and Sui Northern Gas Pipelines Limited (SNGPL) v. Federation of Pakistan and others 2017 PTD 1774 distinguished.

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

----Ss.147, 120 & 137---Advance tax---Departmental powers for computation and assessment of “advance tax” liability of taxpayer under S.147 of Income Tax Ordinance, 2001---Interpretation and application of S.147 of Income Tax Ordinance, 2001---Construction of expression “assessment order” in context of S.147 of Income Tax Ordinance, 2001---Scope---Expression “assessment order” used in S.147(7) of Income Tax Ordinance, 2001 had to be construed and interpreted exclusively in context of said section---Any contrary construction of said section or establishing any purported proximity with nature of “assessment order” as envisaged under S.120 of Income Tax Ordinance, 2001 would render provisions of S.147 as redundant, and ineffective, which was unwarranted in absence of any incidence of Legislative incompetence or purported violation of any Fundamental Right---Scheme of collection of advance tax payable, timing of its collection and provisioning of mechanism for effecting recovery thereof, could not be catalogued with realm of chargeability or levy, which distinction was crucial and needed to be acknowledged for survival and harmonious applicability of said S.147---Purpose and object of S.147 of Income Tax Ordinance, 2001 to allow collection of advance tax and effect recovery thereof could be enforced without offending mechanism of levy or chargeability of tax and changing provisional character of advance tax, made recoverable accordingly.

Indus Jute Mills Ltd. v. Federation of Pakistan 2009 PTD 1473 and Commissioner of Inland Revenue v. Messrs PEPCO Pakistan 2015 PTD 863 rel.

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

----Ss.147 & 127---Advance tax---Liability to pay advance tax---Computation of advance tax---Rejection of estimate furnished by taxpayer---Appeal to the Commissioner (Appeals)---Question before High Court was “whether an order made under S.147 of Income Tax Ordinance, 2001 regarding a taxpayers liability to pay advance tax, and computation thereof; was appealable under S.127 of Income Tax Ordinance, 2001”---Held, words “or an order having the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the person” used in S.127 of Income Tax Ordinance, 2001 was meaningful and could not be ignored---Order made under S.147 of Income Tax Ordinance, 2001 wherein deductibility of certain amounts was rejected and / or which enhanced/increased advance tax payments, was appealable under S.127 Income Tax Ordinance, 2001.

Chairman, Central Board of Revenue, Islamabad and 3 others v. Messrs Pak-Saudi Fertilizer Ltd. 2000 PTD 3748 distinguished.

(d) Jurisdiction---

----“Existence of jurisdiction” and “exercise of jurisdiction”---Distinction---Conspicuous distinction existed between “existence of jurisdiction” and “exercise of jurisdiction” as former implied grant or conferment of authority to adjudicate and latter manifested manner of application / execution thereof.

State v. Zia-ur-Rehman and others PLD 1973 SC 49 rel.

Munawar-us-Salam and Shoaib Rashid for Petitioner.

Zahid Javed Butt, Assistant Attorney General.

Muhammad Yahya Johar FBR, with Usman Rathore, DCIR ZONE-VI for Respondents.

Date of hearing: 9th March, 2020.

2020 P T D 1031

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi, J

ALI ENTERPRISES through Proprietor Omair Ali Khan

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Commerce, Cabinet Secretariat, Islamabad and another

Writ Petition No.24269 of 2019 (other connected petitions), decided on 24th April, 2020.

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

----Ss. 14(2)(4), 32, 51(2)(6) & 70---Final Anti-dumping duty---Final determination---National Tariff Commission (NTC)---Petitioner assailed Final Determination of anti-dumping duties on imports of Ployester Filament Yarn---Validity---National Tariff Commission conducted investigation on merits and imposed duties in accordance with law---Individual dumping margin for 11 operating exporters/foreign producers was calculated in terms of S.51(2) of Anti-Dumping Duties Act, 2015, by NTC---In terms of S.51(6) of Anti-Dumping Duties Act, 2015, NTC applied residual Anti-Dumping Duty rates for imports from exporters not known to the Commission at the time of final determination at a rate not exceeding a weight average of individual dumping margins established for exporters and producers examined during investigation, excluding margins established in accordance with S.32 of Anti-Dumping Duties Act, 2015---Petitioner had an alternate remedy available to it under S.70 of Anti-Dumping Duties Act, 2015, whereunder 'an interested party' could prefer an appeal to Anti-Dumping Appellate Tribunal against initiation, preliminary determination or final determination--- Petitioner could not bypass the remedy provided in relevant statute to invoke Constitutional jurisdiction of High Court under Art. 199 of the Constitution---Constitutional petition was dismissed in circumstances.

The Imperial Tobacco Co. of India Ltd. v. The Commissioner of Income-Tax, South Zone, Karachi and another PLD 1958 SC (Pak.) 125; National Bank of Pakistan and 117 others v. SAF Textile Mills Ltd. and another PLD 2014 SC 283; Shahid Pervaiz v. Ejaz Ahmad and others 2017 SCMR 206; Messrs Friends Technical Engineering Association, Muzaffarabad / Rawalpindi through Advisor to the Prime Minister of Azad Jammu and Kashmir and 4 others v. Barrister Syed Iftikhar Ali Gillani and 24 others 2018 CLC 54; Muhammad Saleem Bikiya through Attorney and 14 others v. Pakistan through Secretary Ministry of Commerce and another 2018 PTD 2026; Messrs Aimnaz (Pvt.) Limited v. Federation of Pakistan, through the Secretary, Ministry of Law, Federal Secretariat, Islamabad and 2 others 2018 PTD 1966; Messrs Samuda Chemicals Complex Ltd. v. Federation of Pakistan and others ICA No.58423 of 2019; Supreme Steel Forming (Pvt.) Ltd. and others v. Federation of Pakistan and others W.P. No.29473 of 2019; Messrs Yahya International and others v. Federation of Pakistan and others W.P. No.49427 of 2019; Messrs S.S. International and others v. Federation of Pakistan and others W.P. No.2821 of 2019; Messrs Universal Trading and others v. The FOP and others W.P. No.60431 of 2019; Saleem Enterprises v. Federation of Pakistan and others W.P.No.39536 of 2016; Messrs Haseeb and Co. and others v. Federation of Pakistan and others Civil Appeals Nos.1523 to 1547 of 2017 and Messrs Akbar Tube Industries v. Federation of Pakistan and others W.P. No.258627 of 2018 ref.

(b) Interpretation of statute---

----Criteria---Where validity of a statute or provision thereof is questioned and there are two interpretations, one which makes the law valid, is to be preferred over the other, which may render it void--- Criteria before Court for determining vires of a provision of law is that the Court must be able to hold beyond any iota of doubt that violation of Constitutional provisions was so glaring that the legislative provision under challenge could not stand.

State of M.P. v. Rakesh Kohli and another 2013 SCMR 34; Messrs A.F. Ferguson & Co. through Partner and 49 others v. Pakistan through Secretary, Revenue Divisional Chairman, Islamabad and 3 others 2020 PTD 27; Rafaqat Hussain v. Asifa Altaf and others 2019 MLD 194; Messrs Attock Gen Ltd. v. Additional Commissioner (Audit), Large Taxpayer Unit, Islamabad and 3 others 2019 PTD 692 and Badshah Gul Wazir v. Government of Khyber Pakhtunkhwa and others PLD 2014 Pesh. 210 rel.

(c) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court--- Legislative motive--- Principle--- Motive of Legislature in passing a statute or its provision is beyond any scrutiny of Courts, nor can the Courts examine whether the Legislature had applied its mind to the provisions of a statute before passing it--- Propriety, expediency and necessity of law are to be determined by the legislative authority and not by Courts.

Amna Warsi and Ayesha Warsi for Petitioner.

Shafqat Mehmood Chauhan, Abdul Quddus Mughal, Mian Muhammad Athar, Nauman Arshad, Adnan Ahmad Paracha, Rana Muhammad Asif, Aamir Shehzad Jammat, Hammad-ul-Hassan Hanjra, Afsar Raza, Ch. Saeed Ashraf, Anas Gull, M. Akif Tahir, Hafiz Muhammad Arshad, Haji Abdul Sattar and Malik Umar Awan, (in connected petitions).

Ch. Ishtiaq Ahmad Khan, Additional Attorney General, Zahid Sikandar, Assistant Attorney General and Ameer Abbas Ali Khan, Assistant Advocate General on Court's call.

Saifullah Khan and Asad Ahmad Ghani for Respondents.

Ahmad Sheraz and Waqas Amir, for NTC.

2020 P T D 1095

[Lahore High Court]

Before Muhammad Qasim Khan, J

LIN ZHIWEI

Versus

THE STATE and others

Criminal Revision No.36593 of 2019, decided on 13th March, 2020.

(a) Criminal trial---

----Two interpretations of relevant statute--- Principle--- Where two interpretations of statute are possible, then such interpretation has to be adopted which must run in favour of accused.

Province of Punjab through Secretary Punjab Public Prosecution Department and another v. Muhammad Rafique and others PLD 2018 SC 178 and Amad Hussain v. The State PLD 1995 Lah. 250 rel.

(b) Criminal Procedure Code (V of 1898)---

----S.4(o)---"Offence"---Connotation--- Only an act or action which breaks a particular law and requires a particular punishment or doing of an act or action which a penal law forbids to be done or omitting to do what it commands, is called offence and each offence carries its own punishment--- Before attributing an act or action of any person to cover definition of an offence, it is incumbent for the State to put factual position as clear and unambiguous as one can imagine--- Legislature must be loud and clear leaving no doubt that what act or action is an offence.

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

----Ss. 2(s), 16, 32(1), 156(1)(8)(9)(14), 157 & 178---Export Policy Order, 2016, S.17--- Criminal Procedure Code (V of 1898), S. 265-K---"Smuggling"---False statement--- Goods not declared--- During raid some cartoon containing chemical "Ketamine" in powdered form were also among the other goods to be exported---Validity---"End-user-Certificate" was required under appendix-D to Export Policy Order, 2016--- Accused persons submitted the Certificate but it was not mentioned that the exported goods included "Ketamine"--- Such fact could not be denied by accused persons and it was a clear case of concealment of fact, submitting false statement and document electronically which was an offence falling within the ambit of S.32 of Customs Act, 1969--- Whether "Ketamine" was prohibited goods or narcoticbut legal position was that submission of wrong, false or incorrect document (End-User-Certificate), prima facie accused persons were guilty of commission of an offence under Customs Act, 1969---Trial Court had rightly declined to acquit accused persons in exercise of jurisdiction under S.265-K, Cr.P.C.--- Revision was dismissed in circumstances.

Hammad Akbar Wilana for Petitioner (in Criminal Revision No.36593 of 2019).

Khawaja Ahmad Adnan for Petitioner (in Criminal Revision No.36369 of 2019).

2020 P T D 1130

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

Messrs WALI TRADERS

Versus

ASSISTANT COLLECTOR CUSTOMS and others

Customs Appeal No.104 of 2003, heard on 22nd January, 2020.

Customs Act (IV of 1969)---

---S. 181---Option to pay fine in lieu of confiscated goods---Scope---Interpretation of S.181, Customs Act, 1969---Goods imported by appellant were confiscated, however, redeemed on payment of fine equal to 100 per cent of the value, of which appellant was aggrieved---Validity---Section 181, Customs Act, 1969, showed that the officer passing the order of confiscation could give the owner of the goods an option to pay fine in lieu of confiscation and the quantum of fine was left on his discretion---Two provisos were added to S.181 first for specifying goods for which order of redemption could not be given and second for goods imported in violation of prohibitory provisions of Ss.15 & 16 of the Customs Act, 1969 and under which the amount of redemption fine was to be fixed by the Federal Board of Revenue through notification---Section 181, Customs Act, 1969 though was subject to both the provisos, yet the same could be invoked independently, where the transaction was not within the scope of notification issued under the provisos---Fine at 100 per cent could be imposed under S. 181 of Customs Act, 1969, in the light of facts and circumstances of the case---Appellate Tribunal had rightly held that undervaluation of the goods was intentional, which amounted to play fraud upon customs authorities and a willful attempt to cause loss to the National Exchequer---Appeal was dismissed.

Collector, Customs, Central Excise and Sales Tax, Quetta v. Messrs Haji Ahmedullah & Company, Quetta and another PLD 2005 SC 461 ref.

Mian Abdul Salam Sajid for Appellant.

Mrs. Kausar Parveen for Respondents.

2020 P T D 1169

[Lahore High Court (Bahawalpur Bench)]

Before Shahid Jamil Khan and Mujahid Mustaqeem Ahmed, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs SHAMIM OIL (PVT.)

P.T.R. No.01 of 2018, decided on 11th February, 2020.

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

----S. 153A & Cl. 80, Part IV, Second Schedule---Payments to traders and distributors---Exemption from specific provisions---Scope---Provisions of S. 153A of the Income Tax Ordinance, 2001 were inserted through the Finance Act, 2012, effective from 01-07-2012 and under the said provisions, the manufacturers were required to withhold tax at 0.5% from the distributors, dealers and wholesalers---Blanket exemption against S.153A, Income Tax Ordinance, 2001 was however granted by inserting Cl. 80 in Part IV of Second Schedule to the Income Tax Ordinance, 2001---Notices, in the present case, were issued under S. 161 of the Income Tax Ordinance, 2001 for the period from 01-07-2012 to 23-12-2012 against the respondent/manufacturer for not withholding the tax under S.153A of the Income Tax Ordinance, 2001---Orders under S.161, Income Tax Ordinance, 2001 were successfully assailed by the taxpayer before Commissioner (Appeals) and appeal filed by the department was dismissed---Validity---Clause 80 inserted in Part IV of Second Schedule of the Income Tax Ordinance, 2001, provided that 'the provisions of S.153A, Income Tax Ordinance, 2001, shall not apply to any manufacturer till 30th June, 2013'---No starting date was provided in Cl. 80 and it appeared that operation of the provisions was suspended by granting exemption for all the taxpayers till 30th June, 2013---Language of said Cl.80 itself showed its retrospectivity from its inception---Reference application was decided against the department.

(b) Interpretation of statutes---

----Intent of Legislature---Literal interpretation---Scope---Basic principle of interpretation is to know the intent of Legislature---If the intention is reflecting from the language then the tool of literal interpretation is to be adopted.

Hafiz Saleh Muhammad Arif for Applicant with Ms. Attiya Rehman, Additional Commissioner Inland Revenue, RTO, Bahawalpur.

2020 P T D 1186

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

D.G. KHAN CEMENT COMPANY LIMITED through CHIEF FINANCIAL OFFICER and another

Versus

The FEDERATION OF PAKISTAN through SECRETARY REVENUE, ISLAMABAD and 3 others

Intra Court Appeal No.134758 in Writ Petition No. 38612 of 2015, decided on 28th February, 2020.

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

----S.4B---Constitution of Pakistan, Arts. 73, 77, 160 & 25---Super tax for rehabilitation of temporarily displaced persons---Tax to be levied by law only---Nature of "super tax" and distinction of "super tax" from fee/cess---Procedure with respect to Money Bill - Bill not deemed to be a money bill----Specific purpose of tax mentioned in the taxing provision---Constitutional jurisdiction of High Court---Appellants impugned order of High Court in Constitutional petitions whereby their petition impugning vires of S. 4B of Income Tax Ordinance, 2001 whereby levy of "super tax" was imposed, were dismissed----Contention of appellants, inter alia, was that impugned levy was ultra vires the Constitution on multiple grounds, including that same did not fall within definition of a "tax", and such grounds were not properly entertained in the Constitutional petition---Validity---Per S.4B of Income Tax Ordinance of 2001, revenue generated through impugned levy would be used for rehabilitation of temporarily displaced persons and no favour, privilege or advantage was being extended to persons paying said levy --- Impugned tax was not in lieu of certain services being rendered and therefore, in absence of essential element of quid pro quo, impugned levy did not seem to be covered under the term "fee"---Government, in the present case, imposed a "tax" for use on general population significantly large in number and mere mentioning of purpose of "rehabilitation of internally displaced persons" would not detract impugned levy from domain of "tax"--- Incorporation of impugned levy in Income Tax Ordinance, 2001 clearly reflected that Legislature intended to treat same as tax --- Annual Budget Statement duly reflected that impugned levy was meant to meet other expenditure which Federal Government proposed to make from Federal Consolidated Fund and impugned levy also fell within domain of Art.73 of the Constitution and therefore was rightly enacted --- Alleged violation of the Art.160 of Constitution by not including impugned levy in divisible pool could not be made touchstone for declaring the same unconstitutional--High Court observed that while challenging a fiscal statute, element of discrimination could neither be pleaded nor such statutory enactment could be struck down on touchstone of Art. 25 of Constitution, and therefore no defect existed in the impugned levy on said ground---No illegality therefore existed in impugned order---Intra-court appeal was dismissed, in circumstances.

Messrs Lahore Polypropylene Industries (Private) Ltd. and others v. Federation of Pakistan and others 2012 PTD 1003; Durrani Ceramics, Lahore Development Authority through D.G. and others v. Ms. Imrana Tiwana and others 2015 SCMR 1739; Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; Pakistan Flour Mills Association and another v. Government of Sindh and others 2003 SCMR 162; Messrs The Attock Oil Co. Ltd. v. Federation of Pakistan and another 2019 PTD 934; M.P. v. Rakesh Kohli and another 2013 SCMR 34; I.A. Sharwani and others v. Government of Pakistan through Secretary, Finance Division, Islamabad and others 1991 SCMR 1041 and Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340 rel.

Messrs Quetta Textile Mills Limited through Chief Executive v. Province of Sindh through Secretary Excise and Taxation, Karachi and another PLD 2005 Kar. 55; Federation of Pakistan through Secretary Ministry of Petroleum and Natural Resources and another v. Durrani Ceramics and others 2014 SCMR 1630; Workers' Welfare Funds, Ministry of Human Resources Development, Islamabad and others v. East Pakistan Chrome Tannery (Pvt.) Ltd. through G.M. (Finance), Lahore and others PLD 2017 SC 28; Sohail Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance and others PLD 1991 SC 329; Pakistan Industrial Development Corporation v. Pakistan through the Secretary, Ministry of Finance 1992 SCMR 891; Pakcom Limited and others v. Federation of Pakistan and others PLD 2011 SC 44; Pakistan International Freight Forwarders Assn and others v. Province of Sindh and others 2017 PTD 1; Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 6 others PLD 1997 SC 582; Commissioner of Income Tax Bangalore and others v. B.C. Srinivasa Setty and others (1981) 128 ITR 294 and Commissioner, Central Excise and Customs, Kerala v. Messrs Larsen and Toubro Ltd. (2016) 1 SCC 170 ref.

(b) Taxation---

----Principles---"Tax" and "Fee" ---Distinction---Scope--- Both "tax" and "fee" were compulsory exaction of money by public authorities --- Tax, however, was a common burden for raising revenue, which became part of public revenue of State whereas "fee" was exacted for specific purpose and for rendering services or providing privilege to particular individuals or class or community or specific area---For a "levy" to be a "fee", relationship between purpose and the persons from whom "levy" was being exacted was also to be established.

(c) Taxation---

----"Cess", concept of ----"Cess" was levied to develop only a particular service or sector and was introduced to promote a particular scheme which, according to government, needed attention---"Cess" was an imposition more like tax blended with certain attributes of fee since it was imposed for some specified and declared purpose.

Kunwar Ram Nath and others v. The Municipal Board, Pilibhit AIR 1983 SC 930; Messrs Shinde Brothers v. Deputy Commissioner Raichur AIR 1967 SC 1512; Shahtaj Sugar Mills v. Province of Punjab 1998 CLC 1912; Shahtaj Sugar Mills v. Province of Punjab 1998 SCMR 2492; Jindal Stainless Ltd. and others v. State of Haryana and others 2006 (7) SCC 241; M. Chandru v. Member-Secretary, Chennai Metropolitan Development Authority and another 2009 (4) SCC 72 and Mohan Meakin Limited v. State of Himachal Pradesh and others 2009 (3) SCC 157 rel.

(d) Constitution of Pakistan---

----Art.199 & Fourth Sched.---Constitutional jurisdiction of High Court---Adjudication on challenge to vires of fiscal statutory enactment---Power of Legislature to impose tax---Imposition of tax twice on a subject matter --- Striking down a statutory provision---Scope---In absence of any Constitutional or statutory prohibition or restriction on Legislature to again impose tax on same subject matter, the same could not be declared to be void or outside powers of Legislature as Legislature could impose more than one tax on income under Entry 47 of Fourth Schedule to the Constitution---Power to levy taxes was sine qua non for a State insofar as same was essential for purposes of generating financial resources, and utilization of such resources for welfare of people-at-large---Legislature enjoyed plenary power to impose taxes within framework of the Constitution, and such power rested on necessity as it was an essential and inherent attribute of sovereignty and no mala fide could be attributed to Legislature for exercise of said power---Where validity of a statute or provision thereof was questioned and there existed two interpretations, one which made such law valid was to be preferred---Criteria before High Court for determining the vires of a statute was that Court must be able to hold beyond any iota of doubt that violation of Constitutional provisions was so glaring that Legislative provision under challenge could not stand same and without such violation of Constitutional provisions, law made by Legislature could not be declared bad---Propriety, expediency and necessity of a law were to be determined by legislative authority and not by Court---Courts could not sit in judgment over wisdom of Legislature, except on ground of lack of Legislative competence and violation of fundamental rights guaranteed in the Constitution or of any other Constitutional provision.

State of M.P. v. Rakesh Kohli and another 2013 SCMR 34; I.A. Sherwani and others v. Government of Pakistan through Secretary, Finance Division, Islamabad and others 1991 SCMR 1041; Anoud Power Generation Limited and others v. Federation of Pakistan and others PLD 2001 SC 340; ICC Textile Ltd. and others v. Federation of Pakistan and others 2001 PTD 1557; Fauji Foundation and another v. Shamimur Rehman PLD 1983 SC 457; Sui Northern Gas Pipelines v. Deputy Commissioner Inland Revenue and others 2014 PTD 1939 and Badshah Gul Wazir v. Government of Khyber Pakhtunkhwa and others PLD 2014 Pesh. 210 rel.

Imtiaz Rashid Siddiqui, Khawaja Farooq Saeed, Mansoor Usman Awan, Muhammad Ajmal Khan, Asif Hashmi, Shehryar Kasuri, Raza Imtiaz Siddiqui, Muhammad Mohsin Virk, Habib ur Rehman, Shahzad Hassan, Mian Shah Behram Sukhera, Aleem Raza, Mian Azeem Sarwar, Khurram Shehzad Gondal, Shahid Sarwar, Muhammad Amin Goraya, Shahbaz Butt, Khurram Shahbaz Butt, Muhammad Akram Babar, Muhammad Azam Chughtai, Farooq Raza, Rana Muhammad Afzal, Jamshed Alam, Qadeer Ahmad Klayar, Sabeel Tariq Maan, Muhammad Asif, Muhammad Hamza Sheikh, Mian Ashiq Hussain, Syed Shahab Qutab, Mian Tariq Hassan, Khawaja Riaz Hussain, Shahzeen Abdullah, Mohsin Mumtaz, Asghar Laghari, Mian Abdul Ghaffar, Omer Wahab, Noreen Fouzia, Muhammad Azhar Khan Joiya, Abdullah Akhtar Butt, Shahid Sharif, Salman Zaheer Khan, Ali Usman, Hassan Ali, Dania Mukhtar, Shehzad Ata Elahi, Habib-ur-Rehman, Chaudhary Muhammad Ali, Salman Zaheer Khan, Khurram Saleem, Majid Jehangir, Usman Khalil, Rana Muhammad Mehtab, Muhammad Imran Rashid, Sohail Anjum Virk, Javed Abbas Sial, Miss Muqaddas Zohra, Khurram Riaz Kahloon, Farhan Shahzad, Mian Abdul Ghaffar, Muhammad Ahsan Nawaz, Muhammad Talha, Rai Amir Ejaz Kharal and Saadat Ali Saeed for Appellants.

Monim Sultan and Zahid Sikandar, Assistant Attorney Generals for Federation of Pakistan along with Dr. Ishtiaq Ahmad Khan, Director Legal FBR.

Liaquat Ali Chaudhary, Sarfraz Ahmad Cheema, Shahzad Ahmad Cheema, Adeel Shahid Karim, Mrs. Kausar Parveen, Ch. Muhammad Yasin Zahid, Chaudhary Muhammad Zafar Iqbal, Mrs. Riaz Begum, Saad Bin Ghazi, Faraz Anser, Aamer Khan, Falak Sher Khan, Sahar Iqbal, Zafar Iqbal Bhatti, Chaudhary Rehmat Ali, Rana Muhammad Mahtab, Muhammad Saleem Chaudhary, Ijaz Mehmood Chaudhary, Hammad-ul-Hassan Hanjra, Ibrar Ahmad, Syed Zain-ul-Abideen Bukhari, Syed Tasaddaq Murtaza Naqvi, Shahid Sarwar Chahil, Saeed Dogar, Muhammad Yahya Johar and Mubashar A Malik, Advocates / Legal Advisors for respondent department.

2020 P T D 1245

[Lahore High Court]

Before Shakil-ur-Rehman Khan, J

Messrs SALEH INDUSTRIES (PVT.) LTD.

Versus

The FEDERATION OF PAKISTAN and 16 others

Writ Petition No.19821 of 2020, decided on 13th May, 2020.

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

----Ss.70& 72---Constitution of Pakistan, Art.199---Constitutional jurisdiction of High Court ---Alternate remedy---Adequate efficacious remedy----Appellate procedures under the Anti-Dumping Duties Act, 2015----Investigation procedures, preliminary and final determinations under Anti-Dumping Duties Act, 2015---Scope---Petitioner impugned final determination on levy of Anti-Dumping Duties on his consignments and sought direction that the same be quashed---Question before High Court was whether Constitutional petition against order made under Anti-Dumping Duties Act, 2015 was maintainable in view of the fact that petitioner had also filed appeal against impugned order under S.70 of Anti-Dumping Duties Act, 2015---Held, it was not shown that impugned determination fell outside provisions of governing law---Appellate Tribunal under Anti-Dumping Duties Act, 2015 had all powers of civil court and such remedy was therefore efficacious and adequate---High Court held that the remedy of appeal under Anti-Dumping Duties Act, 2015 was efficacious, effective speedy and convenient---Constitutional petition was dismissed, in circumstances.

Chairman, Central Board of Revenue, Islamabad and 3 others v. Messrs Pak-Saudi Fertilizer Ltd. and another 2001 SCMR 777; Messrs Bhimra Textile Mills (Pvt.) Ltd. through Authorized representative v. Oil and Gas Regulatory Authority through Chairman and others 2019 CLC 1247; Rehmatullah alias Rematoli v. Government of Khyber Pakhtunkhwa through Secretary Home and Tribal Affairs Peshawar and others PLD 2018 Pesh. 17; Augere Pakistan (Pvt.) Ltd. through Authorized Attorney v. Province of Sindh through Secretary Ministry of Finance and 4 others 2015 PTD 1340; Bank of Punjab through Group Head of its Special Projects v. Accountability Court No.1, Lahore and 2 others PLD 2014 Lah. 92; Muhammad Akbar v. Muhammad Malik and another PLD 2005 Lah. 1; Rizwan Ullah v. Registrar/President, Cooperative Societies, N.W.F.P., Peshawar and 3 others PLD 2003 Pesh. 203; United Business Lines, S.I.E. Gujranwala and another v. Government of Punjab through Secretary, Local Government Lahore and 5 others PLD 1997 Lah. 456 distinguished.

Indus Trading and Contracting Company v. Collector of Customs (Preventive) Karachi and others 2016 SCMR 842; Dr. Sher Afghan Khan Niazi v. Ali S. Habib and others 2011 SCMR 1813 and Muhammad Abbasi v. S.H.O. Bhara Kahu and 7 others PLD 2010 SC 969 rel.

Muhammad Afzal Awan for Petitioner.

Zahid Sikandar, Assistant Attorney General for Respondent No.1.

Ahmad Sheraz for Respondent No.2.

2020 P T D 1402

[Lahore High Court]

Before Muzamil Akhtar Shabir and Muhammad Sajid Mehmood Sethi, JJ

Messrs ABDUL RAUF BUTT

Versus

The COMMISSIONER OF INLAND REVENUE, LAHORE

S.T.R. No.56 of 2017, decided on 12th March, 2019.

Sales Tax Act (VII of 1990)---

----Ss.21 & 73---Sales Tax Rules, 2006, R. 12---Blacklisting and suspension of registration--- Transactions to be made through Banking channel---Burden of proof---Scope---Registered person was alleged to have adjusted input tax on the invoices issued by blacklisted/suspended units---Appeal filed by registered person before Commissioner Inland Revenue (CIR) (Appeals) was accepted Appeal of department against said order CIR before Appellate Tribunal was accepted---Validity---Supplier units were operating when the transactions were made and provisions of S. 73 of Sales Tax Act, 1990 were duly complied with---Initial burden was on the department to show that invoices were issued during suspended or blacklisted period and in case invoices were issued during period of blacklisting, the cause or reason for blacklisting had some nexus with the invoices---Taxation officer did not establish that said invoices were either fake or flying or the claimed tax was not deposited in the Government Exchequer---Reference application was decided in favour of the applicant.

Commissioner Inland Revenue v. Tariq Poly Pack (Pvt.) Ltd. 2015 PTD 2256 = (2015) 111 TAX 405 ref.

Iftikhar Ahmad Ansari and M.M. Akram for Applicant-taxpayers.

2020 P T D 1464

[Lahore High Court (Multan Bench)]

Before Jawad Hassan, J

RELIANCE COMMODITIES (PRIVATE) LTD.

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.1014 of 2018, decided on 17th March, 2020.

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

----Ss. 4B, 122(5A), 122(9) & 137(1) & Chaps. X & XI---Super tax for rehabilitation of temporarily displaced persons---Scope---Charge/levy of super tax under S.4B of the Income Tax Ordinance, 2001 appeared to be an independent provision---However, subsections (3), (4) & (5) of S.4B needed to be read in consonance with each other along with the other provisions of the Ordinance as specified in those sections---Provisions of the Income Tax Ordinance, 2001 ('the Ordinance') mentioned in S.4B of the Ordinance were applicable while interpreting said section i.e. S. 4B---Section 4B of the Ordinance did not preclude the scope of Ss.122(5A) & 122(9) of the Ordinance as express reference had been made to them in S. 4B.

Following the principles of interpretation, said provisions had to be read in consonance with each other.

Legislature had envisaged application of provisions of assessment and recovery as contained in Chapter X of the Income Tax Ordinance, 2001, ('the Ordinance') i.e. inter alia Sections 120 and 122 of the Ordinance to Section 4B by employing the term "all" in Section 4B subsection (3). Further Section 4B also found specific reference to Section 137(1) of the Ordinance with regard to payment, collection and deposit. Similarly subsection (5) of Section 4B imported the provisions of Parts IV, X, XI and XII of Chap. X and Part 1 of Chap.XI with regard to recovery of super tax and found mention of the following words, "so far as may be, apply to the collection of super tax as these apply to the collection of tax under the Ordinance". Thus, section 4B encapsulated and made direct reference to provisions of the Ordinance suggesting their applicability while interpreting section 4B of the Ordinance.

Maple Leaf Cement Factory v. Additional Commissioner Inland Revenue and others Writ Petition No.10477 of 2017 not agreed with.

Section 4B of the Ordinance did not preclude the scope of sections 122(5A) and 122(9) of the Ordinance as express reference had been made to them in section 4B. Following the principles of interpretation, they had to be read in consonance with each other. Hence the Commissioner (Inland Revenue) could very well invoke and utilize the provisions of section 4B read with sections 122(5A) and 122(9) of the Ordinance. Super tax, by its very nature, related to an additional duty of income tax and such charge had been recognized to exist independent of income tax. Hence, in so far as the charge/levy of super tax was concerned, section 4B appeared to be an independent provision. However, its subsections (3), (4) and (5) needed to be read in consonance with each other along with the other provisions of the Ordinance as specified in those sections.

Pakistan Industrial Development Corporation v. Pakistan through the Secretary, Ministry of Finance 1992 SCMR 891; D.G. Khan Cement Company Limited v. Federal Board of Revenue and others 2018 PTD 287 and D.G. Khan Cement v. Federation of Pakistan and others 2020 Lah. 1066 ref.

(b) Interpretation of statutes---

----Self-executory provision---Scope---Provision in a statute could not be taken to be self-executing if framing of Rules was directed in the said provision. Nestle Pakistan Ltd. and others v. Federal Board of Revenue and others 2017 PTD 686 ref.

(c) Interpretation of statutes---

----Fiscal statute---Survey of case law providing principles of construction and rules of interpretation of fiscal statutes.

Partnership Concern v. The Deputy Collector Central Excise and Sales Tax, Lahore and 3 others PLD 1989 Lah. 337; Messrs Multan Electric Power Co. Limited (MEPCO) through Chief Executive v. Commissioner, Inland Revenue (WHT), Regional Tax Officer, Multan and another 2016 PTD 2567; Pakistan Tobacco Company Ltd. v. Federation of Pakistan and others 2016 PTD 596; Allied Motors Ltd. through Manager Finance v. Commissioner of Income Tax and another 2004 PTD 1173; Commissioner of Income Tax v. Messsrs Kamran Model Factory 2002 PTD 14; Mustafa Prestressed R.C.C. Pipe Works Ltd. Karachi v. Commissioner of Sales Tax Karachi 1990 PTD 974; Hirjana and Co. (Pak) Ltd. Karachi v. Commissioner of Sales Tax, Central Karachi 1971 PTD 200; CIT v. Nagina Talkies (Property) Karachi PLD 1974 Kar. 6 and Commissioner of Income Tax, East Pakistan Dacca v. Messrs Hoosen Kasam Dada Karachi 1960 PTD 574 ref.

(d) Interpretation of statutes---

----Fiscal/taxing statute---Harmonious construction of provisions---Provisions in a taxing statute must be harmoniously reconciled instead of picking out any inconsistency between the different provisions---All provisions of a statute had to be read together and harmonious construction was to be placed on such provisions so that no provision was rendered nugatory.

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

----Ss. 4B, 122(5A), 122(9) & 210---Super tax for rehabilitation of temporarily displaced persons---Delegation of power by Commissioner Inland Revenue to Additional Commissioner Inland Revenue---Power to assess and determine liability for the purposes of super tax under S.4B of the Income Tax Ordinance, 2001 ('the Ordinance), which vested exclusively with the Commissioner Inland Revenue, could be delegated to the Additional Commissioner Inland Revenue for invoking the machinery provisions i.e. S.122(5A) read with S.122(9) of the Ordinance---Conditions for valid delegation of such powers in terms of S.210(1) of the Ordinance stated.

In terms of section 210 of the Income Tax Ordinance, 2001 ('the Ordinance), the Commissioner (Inland Revenue) could delegate his powers and functions. Further section 210 (1A) revealed that the power in terms of section 122(5A) regarding amendment of assessment could not be delegated below the rank of the Additional Commissioner.

Pak Telecom Mobile Ltd. and others v. Federal Board of Revenue through its Chairman, Islamabad and others 2013 PTD 2151 and Messrs Ocean Pakistan Ltd. v. Federal Board of Revenue, Islamabad and others 2012 PTD 1374 ref.

Section 210 of the Ordinance applied to section 4B of the Ordinance as well. In other words, all those sections in the Ordinance which dealt with the powers and responsibilities of the Commissioner, the said powers could very well be delegated by the Commissioner as per the mandate of Section 210 of the Ordinance. Section 4B was indeed part of the Ordinance being one of the sections so the applicability of section 210 to section 4B of the Ordinance could not be excluded.

Pak Telecom Mobile Ltd. and others v. Federal Board of Revenue through its Chairman, Islamabad and others 2013 PTD 2151 ref.

For constituting a valid delegation of powers under section 210(1) of the Ordinance, the following conditions must be satisfied:

(i) The delegation must be in writing;

(ii) The delegation order must specify precisely the powers and functions of the Commissioner Inland Revenue that have been delegated to the delegate; and

(iii) The delegation order must specify the persons in respect to whom the powers and functions of the Commissioner Inland Revenue have been delegated. [p. 1487] Q

Jahangir Khan Tareen v. Federation of Pakistan and others W.P. No.27535 of 2016 ref.

(f) Constitution of Pakistan---

----Art. 199---Show cause notice---Constitutional petition filed against a show cause notice---Maintainability---Mere show cause notice was not an "adverse order"---However, the High Court in exercise of its constitutional jurisdiction could take up writs to challenge a show cause notice if it was found that the show cause notice was totally non est i.e. suffered from want of jurisdiction of the issuing authority or had been issued malafidely i.e. merely to harass the subject---Issuance of a show cause notice was in itself a complete act and decision which could be subject to judicial review if inter alia, the show cause notice was not lawfully issued by the competent authority, or, if the issuance of the show cause notice was ultra vires the relevant law and/or if issuance of the show cause notice was without jurisdiction or with mala fide.

Mughal-e-Azam Banquet Complex through Managing Partner v. Federation of Pakistan through Secretary 2011 PTD 2260; Messrs Siemens Aktiengesellschaft ("Siemens AG") through Authorized Person v. Pakistan through Secretary Revenue Division and 3 others 2016 PTD 1158; Dr. Seema Irfan and others v. Federation of Pakistan PLD 2019 Sindh 519; Khalid Mahmood Ch. v. Government of Punjab 2002 SCMR 805; Karachi Bulk Storage and Terminals (Pvt. Ltd. v. Collector of Central Excise and Land Customs 2011 PTD 2103; Union of India (UOI) and others v. Vicco Laboratories (2007) 13 SCC 270; SBQ Steels Limited v. The Commissioner of Customs, Central Excise and Service Tax, Guntur Commissionerate 2013 (2) ALD 158; State of Uttar Pradesh v. Brahma Datt Sharma (1987) 2 SCC 179; The Special Director and others v. Muhammad Ghulam Ghouse and others AIR 2004 SC 1467; Union of India and others v. Kunisetty Satyanarana and AIR 2007 SC 906; Messrs Kirlosar Computer Service Limited Bangalore v. Union of India and others 1997 (73) ECR 651 (Karnataka); Mari Petroleum Company Limited through General Manager Finance, Islamabad v. Federation of Pakistan through Secretary Revenue, Islamabad and 3 others 2019 PTD 1774; Messrs Attok Gen. Ltd. v. Additional Commissioner (AUDIT), Largetaxpayer Unit, Islamabad and 3 others 2019 MLD 870; Collector of Sales Tax v. Khurshid Spinning Mills Limited and another 2017 PTD 196; Zaver Petroleum Corporation v. Federal Board of Revenue and another 2016 PTD 2332; Chaudhary Sugar Mills Limited v. Chief Commissioner and 2 others 2016 PTD 527; Oil and Gas Development Company Limited v. Federal Board of Revenue and 2 others 2016 PTD 1675; KK Oil and Ghee Mills (Private) Limited v. Federal Board of Revenue and others 2016 PTD 2601; Messrs J.K. Brothers Pakistan (Private) Limited v. The Additional Commissioner Inland Revenue and another 2016 PTD 461; Commissioner of Income Tax v. Eli Lilly Pakistan Limited and others 2009 SCMR 1279; Muslim Commercial Bank Limited v. Deputy Commissioner of Income Tax and others 2004 PTD 1901; Al Ahram Builders (Private) Limited v. Income Tax Tribunal 1993 SCMR 29; Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan Works Division and 2 others PLD 1972 SC 279 and Ocean Pakistan Limited v. Federal Board of Revenue and others 2012 PTD 1374 ref.

Chaudhary Muhammad Ali for Petitioner.

Malik Zafar Ali Thaheem for FBR.

Mehar Zameer Hussain Sundhal, Deputy Attorney General for Respondents.

2020 P T D 1607

[Lahore High Court]

Before Jawad Hassan, J

SHELL PAKISTAN LIMITED

Versus

PUNJAB through The Secretary Ministry of Finance and others

Writ Petition No.37861 of 2020, decided on 27th August, 2020.

(a) Punjab Sales Tax on Services Act (XLII of 2012)---

----Ss. 63, 64 & 65--- Punjab Sales Tax on Services (Adjudication and Appeals) Rules, 2012, R. 11---Constitution of Pakistan, Arts.199, 4, 10-A, 18 & 37(d)---Petitioner sought a direction to the Commissioner (Appeals) to decide its application within time frame as provided under Ss.63, 64 & 65 of Punjab Sales Tax on Services Act, 2012 and sought an order restraining the authorities from recovering the disputed amount---Validity---Petitioner's appeal, despite lapse of statutory deadline, was not decided by the Commissioner (Appeals), therefore, High Court had to protect the petitioner's rights under Arts. 18, 4 and 10-A of the Constitution as a stop-gap arrangement---Stop-gap arrangement under tax laws was derived from Arts. 199(4) of the Constitution read with Ss. 66, 67 & 68 of the Punjab Sales Tax on Services Act, 2012 coupled with judgments of the Courts passed from time to time---Authorities, while deciding the appeal had to follow the Punjab Sales Tax on Services (Adjudication and Appeals) Rules, 2012, in which R.11 stated that it was the responsibility of the adjudicating officer to protect the legitimate revenue rights of the Government and give genuine relief to the taxpayer consistent with law---Temporary relief was granted to the petitioner---Constitutional petition was disposed of accordingly.

Reliance Commodities (Private) Ltd. v. Federation of Pakistan and others PLD 2020 Lah. 632; Mehram Ali and others v. Federation of Pakistan and others PLD 1998 SC 1445; Messrs Pak Saudi Fertilizers Ltd. v. Federation of Pakistan and others 2002 PTD 679; Z.N. Exports (Pvt.) Ltd. v. Collector Sales Tax and others 2003 PTD 1746; Messrs Pearl Continental Hotel, Lahore through Director Finance and another v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and another 2005 PTD 1368; Sun-Rise Bottling Company (Pvt.) Limited v. Federation of Pakistan and 4 others 2006 PTD 535; Karachi Shipyard and Engineering Works Limited, Karachi v. Additional Collector, Customs, Excise and Sales Tax (Adjudication-III), Government of Pakistan, Karachi and 2 others 2006 PTD 2207; Pak Suzuki Motors Co. Ltd. through Senior General Manager (Corporate Planning and Logistics), Karachi v. Collector of Customs through Assistant Collector (Processing), Karachi 2006 PTD 2237; Mari Petroleum Company Ltd. v. Appellate Tribunal Inland Revenue and others 2016 PTD 2406 and Chairman BoG University of Lahore and others v. Asif Saleem PLD 2019 Lah. 407 ref.

(b) Constitution of Pakistan---

----Art. 199(4)---Constitutional petition---Interim order in tax or revenue matters---Scope---High Court while passing any order in tax or revenue matters has to consider Art. 199(4) of the Constitution which demonstrates that the interim order should not interfere with public works or otherwise harmful to public interest or should have an effect of impeding the assessment or collection of public revenues---Said Article further manifests that the Court shall not make any interim order unless prescribed law officer has been given notice of the application or has had an opportunity of being heard and the Court has to record reasons in writing.

(c) Constitution of Pakistan---

----Arts.199(4) & 10-A---Constitutional jurisdiction---Right to fair trial---Interim order in tax or revenue matters---Scope---Article 10-A of the Constitution provides and protects fundamental right of citizens to have fair trial and due process---Courts are charged with duty to protect those rights including the rights of tax payers and under the doctrine of stop-gap the Courts grant interim relief during the pendency of the matter.

Messrs Pak Saudi Fertilizers Ltd. v. Federation of Pakistan and others 2002 PTD 679; Z.N. Exports (Pvt.) Ltd. v. Collector Sales Tax and others 2003 PTD 1746; Messrs Pearl Continental Hotel, Lahore through Director Finance and another v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and another 2005 PTD 1368; Sun-Rise Bottling Company (Pvt.) Limited v. Federation of Pakistan and 4 others 2006 PTD 535; Karachi Shipyard and Engineering Works Limited, Karachi v. Additional Collector, Customs, Excise and Sales Tax (Adjudication-III), Government of Pakistan, Karachi and 2 others 2006 PTD 2207; Pak Suzuki Motors Co. Ltd. through Senior General Manager (Corporate Planning and Logistics), Karachi v. Collector of Customs through Assistant Collector (Processing), Karachi 2006 PTD 2237 and Mari Petroleum Company Ltd. v. Appellate Tribunal Inland Revenue and others 2016 PTD 2406 ref.

(d) Constitution of Pakistan---

---Arts. 199(4) & 37(d)---Constitutional jurisdiction---Expeditious justice---Interim order in tax or revenue matters---Scope---Under Art.37(d) of the Constitution, the Courts ensure expeditious justice as the same is an obligation on the part of the State---Therefore, Courts invoke doctrine of "stop-gap arrangement" from time to time in tax/revenue matters.

Khwaja Aizaz Ahsan for Petitioner.

Barrister Umair Niazi, Additional Advocate General on Court's Call.

2020 P T D 1641

[Lahore High Court]

Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ

NISHAT MILLS LIMITED

Versus

FEDERATION OF PAKISTAN and others

I.C.A. No.72329 of 2019 (and others connected Appeals), decided on 29th January, 2020.

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

----S. 8---Tax credit not allowed---Scope---Appellants assailed interpretation of S.8(1)(h) and (i) of Sales Tax Act, 1990 as proposed by the department to disallow the adjustment of input tax---Validity---Question whether the goods, input tax of which was claimed, were used for the purpose of taxable supplies, being factual, was required to be determined at first instance through assessment proceedings, on the basis of evidence to be produced by the registered person---Nothing was pleaded before the High Court to show that the statutory remedies were not adequate---Intra-court appeals were disposed of with direction to the Assessing/Adjudicating Officer to interpret S.8(1)(h) and (i) on case to case basis after determining facts of each case.

Coca-Cola Beverages Pakistan Ltd. v. Customs, Excise and Sales Tax Appellate Tribunal and others 2017 PTD 2380 ref.

Attock Cement Pakistan Ltd. v. Collector of Customs, Collectorate of Customs and Central Excise, Quetta and 4 others 1999 PTD 1892 rel.

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

----Ss. 7 & 8---Determination of tax liability---Tax credit not allowed---Scope---Plain reading of Ss. 7 & 8 of Sales Tax Act, 1990 shows that S. 7 entitles a registered person to deduct (adjust) input tax for the purpose of taxable supplies from the output tax---Entitlement to deduct/adjust input tax is subject to the purpose of taxable supplies---Section 8 disentitles reclaim or deductions of input tax paid on the goods used for a purpose other than taxable supplies---Basic principle of deduction is that the input tax paid on goods can be deducted or reclaimed only if such goods are used for the purpose of taxable supplies---Phrase 'any other goods' used in S. 8(1)(b), Sales Tax Act, 1990, creates an exception to the general rule i.e. adjustment or reclaim can be denied, even if the goods were used for the purpose of supplies, if so specified, through notification in official Gazette.

Attock Cement Pakistan Ltd. v. Collector of Customs, Collectorate of Customs and Central Excise, Quetta and 4 others 1999 PTD 1892 rel.

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

---Ss. 8 & 7---Determination of tax liability---Tax credit not allowed---Scope---Reclaim (refund) and deduction (adjustment) of input tax is a right subject to the provisions of S. 8 of Sales Tax Act, 1990 which disallow it, as a general rule, against goods which are not used for the purpose of taxable supplies---Such right, as created by S.7, can be refused or denied even against goods used for the purpose of supply, if so specified in the official Gazette.

(d) Constitution of Pakistan---

---Art. 201---Decision of High Court binding on subordinate courts---Scope---Law laid down by High Court, unless suspended or overruled by Supreme Court, holds the field.

Imtiaz Rashid Siddiqui, Barrister Shehryar Kasuri, Raza Imtiaz Siddiqui, Jamshaid Alam, Sabeel Tariq Mann, and Qadeer Ahmad Kalyar for Appellant (in this and connected appeal (I.C.A. No.72330 of 2019).

Shahbaz Butt, Khurram Shahbaz Butt and Muhammad Ahsan Dogar for Appellant (in ICA No.981 of 2020.)

Waseem Ahmad Malik for Appellants (in I.C.As. Nos.72348 and 73951 of 2019).

Muhammad Raza Qureshi for Appellants (in I.C.As. Nos.73931, 73933, 73935, 73939, 73943 and 73947 of 2019).

Asif Imran Awan for Appellant (in I.C.A. No.74904 of 2019).

Mahmood Ahmad for Appellant (in I.C.A. No.75300 of 2019).

H.M. Majid Siddiqui for Appellants (in I.C.As. Nos. 76141 and 76143 of 2019).

Mustafa Kamal for Appellants (in I.C.As. Nos.76286, 76509, 76510, 76511, 76285, 76287, 76505, 76507, 76508, 77994, 78001 of 2019 and I.C.As. Nos.1120 and 1122 of 2020).

Khubaib Ahmad for Appellants (in I.C.As. Nos.77844 and 77848 of 2019).

Monim Sultan, Assistant Attorney General for Federation of Pakistan. Liaquat Ali Chaudhary, Sarfraz Ahmad Cheema, Ibrar Ahmad, Syed Zain-ul-Abidien Bokhari, Ali Asad Gondal, Saeed-ur-Rehman Dogar, M. Saad Ghazi, Zafar Iqbal Bhatti, Chaudhary Muhammad Zafar Iqbal, Shahid Sarwar Chahal, A.R.A. Minhas and Shahzad Ahmad Cheema, Advocates/Legal Advisors for Respondent Department for Respondents.

Dr. Ishtiaq Ahmad Khan, Director (Law), Federal Board of Revenue.

2020 P T D 1662

[Lahore High Court]

Before Ayesha A. Malik and Jawad Hassan, JJ

COMMISSIONER INLAND REVENUE

Versus

Raja MUHAMMAD RAHEEL

I.T.R. No.73288 of 2019, decided on 3rd December, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 111 & 133---Reference to High Court---Unexplained income or assets---Scope---Department assailed order passed by Appellate Tribunal and submitted that Tribunal was not justified to delete levy of tax under S. 111 of Income Tax Ordinance, 2001---Validity---Appellate Tribunal had deleted the levy of tax after detailed scrutiny of facts and discussing merits of the case by invoking correct legal provisions and had categorically held that S. 111 of Income Tax Ordinance, 2001, was not attracted to the case---Facts were so obvious and clear that the department's point of view appeared to be an un-necessary effort---Deletion of levy was unexceptional---Reference application was decided against the applicant.

2020 P T D 1680

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs LAHORE MEDICAL INSTRUMENTS PRIVATE LIMITED

I.T.R. No.239454 of 2018, decided on 3rd October, 2018.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 133 & 221---Reference to High Court---Rectification of mistake---Scope---Petitioner assailed order passed by Appellate Tribunal whereby his application for rectification was dismissed---Validity---Reference was not maintainable against an order dismissing an application for rectification---Limitation provided under S. 221 of Income Tax Ordinance, 2001 was four years whereas limitation provided for filing reference application before High Court, under S.133, Income Tax Ordinance, 2001, was ninety days---If reference was allowed to be filed out of an order under S.221, Income Tax Ordinance, 2001, it could be misused for extending the period of limitation provided under S.133 of the Income Tax Ordinance, 2001---Yet, a person aggrieved by a change in order under S.132, Income Tax Ordinance, 2001, could not be deprived of the remedy provided under the Statute---Parameters provided by High Court for exercise of jurisdiction under S.133, Income Tax Ordinance, 2001, would apply with full force i.e., if any question of law arose out of the changed order, reference application, Reference would be maintainable---Reference application was decided against the department.

Messrs Hong Kong Chinese Restaurant, Main Boulevard Gulberg, Lahore v. Assistant Commissioner of Income Tax, Circle 6, Lahore and another 2002 PTD 1878 and The Commissioner Inland Revenue v. Tariq Mehmood and others 2015 PTD 120 foll.

2020 P T D 1700

[Lahore High Court]

Before Muzamil Akhtar Shabir and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER OF INLAND REVENUE

Versus

Messrs AKRAM INDUSTRIES LIMITED

P.T.R. No.375 of 2009, decided on 2nd April, 2019.

Income Tax Ordinance (XLIX of 2001)---

----S.133---Income Tax Ordinance (XXXI of 1979) [since repealed], Ss.80CC & 80D---Minimum tax on income of certain companies and registered firms---Reference to High Court---Scope--- Assessment of taxpayer for the assessment year 2001-2002 was finalized, however, it was charged to tax separately under Ss.80D & 80CC of the Income Tax Ordinance, 1979 on local and export sales, respectively---Appeal filed against such treatment was allowed by the Commissioner (Appeals)---Validity---Aggregate of the declared turnover as defined in S.80D, Income Tax Ordinance, 1979 from the sale of goods, rendering, giving or supplying services or benefits or execution of contracts had to be taken into account for determining the minimum tax liability of 0.5% of the turnover---If no tax, for whatever reason, was payable/paid then the amount worked out at the rate of 0.5% of the turnover would be the minimum tax payable---If the tax payable/paid was less than 0.5% of the turnover, then the minimum tax payable would be the difference/balance between the tax payable/paid and 0.5% of the turnover---Proposed question was answered in the affirmative and the reference application was decided against the applicant department.

Commissioner of Income Tax Legal Division, Lahore and others v. Khurshid Ahmad and others 2016 PTD 1393 foll.

Javed Athar and Liaquat Ali Chaudhry for Applicant Department.

2020 P T D 1722

[Lahore High Court]

Before Muzamil Akhtar Shabir and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE, ZONE-I, FAISALABAD

Versus

Messrs SHAHEEN CLOTH PROCESSING MILLS (PVT.) LTD., FAISALABAD

S.T.R. No.192 of 2016, decided on 12th March, 2019.

Sales Tax Act (VII of 1990)---

---Ss.47 & 4---SRO 1125(I)/2011, dated: 31-12-2011---"Zero rating"---Findings of facts---Scope---Applicant-department filed reference application against the order passed by Appellate Tribunal---Respondent placed reliance on an order passed by Division Bench of High Court in 2019 PTD 257 wherein it was held that the taxpayer was in the business of textile, hence was entitled for zero rating of sales tax under SRO 1125(I)/2011, dated: 31-12-2011---Supplies made by taxpayer were of zero rating under the said SRO and the Appellate Tribunal as a matter of fact had held that the buyers of respondent were also active at the time of transactions---Zero rating facility could not be denied to the taxpayer, in circumstances---Findings of the Appellate Tribunal were based on law and were also justified in the circumstances of the case---Department could not distinguish the case from the findings recorded in case referred by the respondent which was applicable to the present proposition on all fours---Reference application was decided against the department.

Commissioner Inland Revenue v. Messrs Nagra Spinning Mills (Pvt.) Ltd. 2019 PTD 257 foll.

Ch. Shakeel Ahmad, Sarfraz Ahmad Cheema/Legal Advisor for Applicant-Department.

2020 P T D 1908

[Lahore High Court (Multan Bench)]

Before Shahid Karim and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs ARFAT OIL INDUSTRIES

I.T.R. No.30 of 2014, decided on 30th January, 2017.\

Income Tax Ordinance (XLIX of 2001)---

----Ss.182, 115 & 133---Penalty for failure to furnish income tax return within period prescribed by law---Computation of penalty on basis of tax payable---Scope---Department impugned order of Appellate Tribunal whereby imposition of penalty on taxpayer under section 182 of Income Tax Ordinance, 2001 was annulled---Validity---Penalty for late filing of income tax return was to be charged on basis of tax payable and taxpayer in the present case, in its return, had claimed refund on amount of tax already paid by taxpayer --- While imposing penalty, therefore, it was to be presumed that no tax was payable hence the taxation officer was not justified in imposition of penalty under S.182(2) of Income Tax Ordinance, 2001---Impugned order was therefore to be upheld---Reference was answered, accordingly.

M. Tariq Rasheed Qamar for Petitioner.

2020 P T D 1977

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE, SARGODHA

Versus

Messrs BHALWAL KINNOW GRADING FACTORY, SARGODHA

I.T.R. No.15634 of 2019, decided on 18th March, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5) & 111(1)---Definite information---Scope---Reference to High Court---Findings of fact---Scope---Department assailed the order passed by Appellate Tribunal whereby it had given the findings of fact that inflated/projected figures for obtaining Bank loan could not be considered as "definite information"---Held; applicant could not show that the impugned findings were perverse, contrary to record or suffered from any other legal infirmity or impropriety warranting interference in reference jurisdiction---High Court had to decide reference application in the exercise of its advisory jurisdiction on facts and circumstances founded by the Appellate Tribunal, which was the last fact finding forum---High Court could not change findings of facts arrived at by the Appellate Tribunal---Reference application was decided against the department.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907 ref.

2020 P T D 1994

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE

Versus

Messrs BRIDGE ENGINEERING COMPANY

S.T.R. No.62 of 2017, decided on 5th March, 2019.

Sales Tax Act (VII of 1990)---

----Ss.21, 8 & 47---Sales Tax Rules, 2006, R.12---Blacklisting and suspension of registration---Tax credit not allowed---Reference to High Court---Findings of facts---Scope---Registered person was alleged to have received refund of input tax against the sales tax invoices issued by suspended/blacklisted units---Appeal filed by registered person before CIR (Appeals) was accepted and that of department before Appellate Tribunal was dismissed---Validity---Appellate Tribunal had given findings of facts that supplier in question was operative during the period when the business/transaction took place---Initial burden was on the department to prove that invoices were issued during suspended or blacklisted period and in case invoices were not issued during period of blacklisting, the cause or reason for blacklisting had some nexus with the invoices---Taxation officer did not establish that said invoices were either fake or flying or the claimed tax was not deposited in the Government Exchequer---Reference application was decided against the applicant department.

Commissioner Inland Revenue v. Messrs Ali Hassan Metal Works 2018 PTD 108 fol.

2020 P T D 2025

[Lahore High Court (Multan Bench)]

Before Shahid Karim and Muzamil Akhtar Shabir, JJ

COMMISSIONER INLAND REVENUE, MULTAN

Versus

Messrs HAFEEZ GHEE AND GENERAL MILLS (PVT.) LTD. MULTAN

S.T.R. No.07 of 2013, decided on 1st February, 2017.

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

----Ss.8B, 8 & 47---Tax Credit not allowed---Adjustment of input tax---Question before High Court was whether taxpayer, which was a composite unit having two manufacturing sections, could claim 100% adjustment of input tax against output tax, when it was only entitled to adjustment---Held, that while taxpayer was entitled to 90% adjustment of input tax, however, since the format of the sales tax return did not have a column / option for 90% adjustment, therefore Appellate Tribunal rightly held that no loss to revenue had been caused by adjustment of 100% input tax instead of 90% input tax, as the remaining amount could be subsequently adjusted---Taxpayer could not be deprived of legitimate right to adjust input tax and Department could only at most claim penalty for lapse in procedure---Reference was answered, accordingly.

Muhammad Tariq Rasheed Qamar and Shahid Iqbal for Petitioner.

2020 P T D 2056

[Lahore High Court (Multan Bench)]

Before Shahid Karim, J

SH. ZAFAR UL ISLAM

Versus

FEDERATION OF PAKISTAN and others

W.P. No.15927 of 2012, decided on 25th January, 2017.

Income Tax Ordinance (XLIX of 2001)---

----Ss.4, 149 & First Sched., Serial Nos.4, 5, 6 of Cl.1-A, Division-1, Part 1 [as amended by Finance Act (XVII of 2012)]---Constitution of Pakistan, Art.199---Constitutional petition---Taxable salary---Rates of tax---Table inserted by Finance Act, 2012, in respect of rates of tax for salaried individuals with particular reference to amount of tax calculated under slabs of income at Serial Nos.5 & 6 of table "B" was ultra vires of the Constitution, and Income Tax Ordinance, 2001.

Imran Ahmad v. Federation of Pakistan and another PLD 2014 Sindh 48 = 2014 PTD 225 fol.

Tanveer Ahmad for Petitioner.

2020 P T D 2076

[Lahore High Court]

Before Muzamil Akhtar Shabir and Muhammad Sajid Mehmood Sethi, JJ

COMMISSIONER INLAND REVENUE, ZONE-II, LAHORE

Versus

IRFAN AHMAD

I.T.R. No.262 of 2016, decided on 2nd April, 2019.

Income Tax Ordinance (XLIX of 2001)---

----Ss.133 & 116---Wealth statement---Imposition of penalty---Reference to High Court---Findings of facts---Scope---Penalty was imposed upon taxpayer on his failure to file wealth statement---Appeal filed by taxpayer before Commissioner Inland Revenue (Appeals) was accepted and that of department before Appellate Tribunal was dismissed---Validity---Appellate Tribunal had recorded findings of facts that due tax amount had already been paid and there was no tax liability, hence, imposition of penalty was not justified---Findings of facts recorded by Appellate Tribunal unless found to be either perverse or contrary to record, could not be interfered with by the High Court, while examining proposed questions of law under Reference Jurisdiction---Scope of reference jurisdiction under the law was restricted only to the extent of examining questions of law arising from order passed by Appellate Tribunal and it did not extend to deciding questions of facts or determination of disputed facts---High Court declined to exercise its advisory jurisdiction---Reference application was decided against the applicant department.

Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax 2014 SCMR 907; Commissioner Inland Revenue, Zone-I v. Messrs Industrial Chemicals (Pvt.) Ltd. 2017 PTD 756; Commissioner of Income Tax v. Ghee Corporation of Pakistan (Pvt.) Ltd. 2017 PTD 1167; Commissioner Inland Revenue v. Messrs Adeel Brothers 2017 PTD 1579 and Commissioner Inland Revenue, Zone-II v. Al-Hamad International Container Terminal (Pvt.) Ltd. 2017 PTD 2212 ref.

Mrs. Foziya Bukhsh, Legal Advisor for Applicant-department, along with Dr. Ishtiaq Ahmad Khan, Commissioner Inland Revenue.

2020 P T D 2095

[Lahore High Court (Rawalpindi Bench)]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

D. WATSON CHEMIST

Versus

FEDERATION OF PAKISTAN and others

Intra Court Appeal No.48 of 2020, heard on 8th September, 2020.

Sales Tax Act (VII of 1990)---

----Ss.2 (43A) & 50A--- Constitution of Pakistan, Arts. 4, 18 & 25---SRO No.1360(I)/2018 dated 12-11-2018----SRO No.1203(I)/2019 dated 10-10-2019---Discrimination---Vires of law---Amendment was introduced in law to file electronic invoices---Taxpayer assailed insertion of S. 2(43A) of Sales Tax Act, 1990, as discriminatory and ultra vires the Constitution---Single Judge of High Court dismissed the petition filed by taxpayer---Validity---Held, in existing age of information technology, when all transactions from sales and purchase to interbank transfer of funds were being done online, introduction of any procedure of filing or report to Federal Board of Revenue electronically had become inevitable and to enforce the same, ample powers were given by S.50-A of Sales Tax Act, 1990--- Any legislation including subordinate legislation could not be declared discriminatory due to intelligible classification for the purposes of levying or collecting tax or for that matter reporting of tax compliance did not offend Fundamental Right guaranteed under Art.25 of the Constitution--- Division Bench of High Court declined to interfere in the judgment passed by Judge of High Court--- Intra Court Appeal was dismissed in circumstances.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 6 others PLD 1997 SC 582 = 1997 PTD 1555 rel.

Hafiz Muhammad Idris for Applicant.

2020 P T D 2111

[Lahore High Court]

Before Shahid Karim, J

D.G. KHAN CEMENT CO. LTD. through Chief Financial Officer and others

Versus

FEDERAL BOARD OF REVENUE through Chairman and 5 others

W.P. No.38666 of 2016, decided on 25th September, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss.174(3) & proviso---Records, information collection and audit---Maintenance of record by taxpayer---Statutorily required time-period for maintenance of such record----Maintenance of record after lapse of statutorily required time for such maintenance----Interpretation of S.174 of Income Tax Ordinance, 2001----Scope----Petitioner taxpayer impugned notice of Department whereby taxpayer was required to produce record / documents beyond the statutorily prescribed time period for maintenance of such record under S.174(3) of Income Tax Ordinance, 2001----Validity----Proviso to S.174(3) of Income Tax Ordinance, 2001 provided clear mandate for taxpayer to maintain record till final decision of any proceedings and not beyond such date and in the present case, petitioner maintained such records till final decision of proceedings against taxpayer, however, subsequent notice for production of record was issued by Department after considerable lapse of time from date of such decision(s)----Section 174 of Income Tax Ordinance, 2001 merely related to maintaining of record and documents and did not prohibit powers conferred by other provisions of said Ordinance such as audit etc.---Section 174 of Income Tax Ordinance, 2001 was an independent section and placed obligation on taxpayer to maintain record for certain period of time and placed corresponding duty on officers of Department to initiate their proceedings within time prescribed therein so that may be able to procure accounts and documents which were necessarily required for any proceedings----Taxpayer could not be burdened with a liability which was not caste by law itself and could not be required to produce record beyond statutory limit---Impugned notice was set aside, with observation that audit proceedings may continue yet Department could not compel the taxpayer to maintain record beyond period of five years as required by S.174(3) of Income Tax Ordinance, 2001----Constitutional petition was allowed, accordingly.

Maple Leaf Cement Factory Ltd. v. Federal Board of Revenue and others 2016 PTD 2074 rel.

Imtiaz Rasheed Siddiqui, Shaharyar Kasuri and M. Haza for Petitioners.

2020 P T D 2144

[Lahore High Court]

Before Jawad Hassan, J

Messrs CRAFTSMAN (PRIVATE) LIMITED

Versus

COLLECTOR OF CUSTOMS and others

Writ Petition No.24833 of 2020, decided on 8th June, 2020.

Customs Act (IV of 1969)---

----Ss.194-A & 195-B---Appeals to Appellate Tribunal---Deposit, pending appeal, of duty demanded or penalty levied---Stop gap measure---Scope---Petitioner filed constitutional petition before High Court contending therein that despite pendency of appeal before Customs Appellate Tribunal the department was adamant to take coercive measures against the petitioner---Validity---High court as a stop gap measure granted temporary relief to the petitioner by directing the Customs Appellate Tribunal to decide the appeal within a period of two months and held that till decision of appeal no coercive measures for recovery of disputed amount would be taken against the petitioner by the department---Constitutional petition was disposed of accordingly.

Messrs Pak Saudi Fertilizers Ltd. v. Federation of Pakistan and others 2002 PTD 679; Z.N. Exports (Pvt.) Ltd. v. Collector Sales Tax and others 2003 PTD 1746; Messrs Pearl Continental Hotel Lahore through Director Finance and another v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and another 2005 PTD 1368; Sun-Rise Bottling Company (Pvt.) Limited v. Federation of Pakistan and 4 others 2006 PTD 535; Karachi Shipyard and Engineering Works Limited, Karachi v. Additional Collector, Customs, Excise and Sales Tax (Adjudication-III), Government of Pakistan, Karachi and 2 others 2006 PTD 2207; Pak Suzuki Motors Co. Ltd through Senior General Manager (Corporate Planning and Logistics), Karachi v. Collector of Customs through Assistant Collector (Processing), Karachi 2006 PTD 2237 and Mari Petroleum Company Ltd. v. Appellate Tribunal Inland Revenue and others 2016 PTD 2406 ref.

Muhammad Akram Nizami for Petitioner.

Ms. Sadia Malik, Assistant Attorney General (on Court's call).

2020 P T D 2160

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabir, JJ

CHIEF COMMISSIONER IR, LTU

Versus

Messrs Ch. SUGAR MILLS and others

I.C.A. No.11618 of 2019, decided on 7th March, 2019.

Sales Tax Act (VII of 1990)---

----S.4(c)---"Zero rating"---Scope---Appellant assailed the validity of order passed by Single Judge whereby S.4(c) of Sales Tax Act, 1990 was declared to be ultra vires and was struck down by relying upon the judgment in 'Mustafa Impex's case' reported as PLD 2016 Supreme Court 808---Contention of appellant was that Cl.(c) of S.4 of Sales Tax Act, 1990, was enacted to validate law or to cure lacuna in view of the judgment in 'Mustafa Impex's case' and that the reasons for declaring the validating provision as ultra vires were against the judgment passed by the Superior Court---High Court issued notice to the respondents (tax-payers).

Messrs Mustafa Impex, Karachi and others v. The Government of Pakistan through, Secretary Finance, Islamabad and others PLD 2016 SC 808 ref.

Ibrar Ahmed for Appellant.

2020 P T D 2187

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE LYALLPUR ZONE, REGIONAL TAX OFFICE, FAISALABAD

Versus

Messrs CERTIFICATION TRENDS, 147-C, PEOPLES COLONY, FAISALABAD

I.T.R. No.27 of 2017, decided on 7th October, 2019.

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

----S.133---Reference to High Court---Scope---Jurisdiction of High Court under S.133 of Income Tax Ordinance, 2001---Nature---Findings of fact---Scope---Findings of fact by Appellate Tribunal could not be displaced by High Court in exercise of advisory jurisdiction under S.133 of Income Tax Ordinance, 2001.

Chaudhary Muhammad Shakeel on behalf of Sarfraz Ahmad Cheema for Applicant.

2020 P T D 2197

[Lahore High Court]

Before Muhammad Sajid Mehmood Sethi and Muzamil Akhtar Shabbir, JJ

MUHAMMAD RIAZ

Versus

COLLECTOR OF CUSTOMS and 2 others

Customs Reference No.18 of 2016, decided on 12th March, 2019.

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

----S.168---General Clauses Act (X of 1897), S. 24-A---Confiscation of vehicle---Tampered chassis number---Failure of department to obtain report from Motor Registration Authority---Reasons for decision---Scope---Vehicle of the applicant was seized by the customs officials on his failure to show valid import documents---Deputy Collector of Customs (Adjudication), although, had required the Motor Registration Authority to provide documents relating to registration of the vehicle but without awaiting its reply had confiscated the vehicle on the report of Forensic Laboratory that the chassis number of the vehicle was tampered with---Validity---Applicant had placed on record copies of the registration documents purportedly obtained from the Motor Registration Authority---Matter was decided in a hasty manner without assigning reasons for not waiting for the reply---Appellate Tribunal had not dilated upon such vital aspect of the case nor had it considered the contention of applicant that S.168(2), Customs Act, 1969 provided, in case of failure to give show cause notice within two months of the seizure, the goods would be returned to the person from whose possession the same were seized---Appellate Tribunal had passed the impugned order in violation of S. 24-A, General Clauses Act, 1897 in as much as it lacked valid lawful reasons---Case was remanded to the Appellate Tribunal for decision afresh---Reference application was disposed of accordingly.

Commissioner of Income Tax, Companies Zone-II, Karachi v. Messrs Sindh Engineering (Pvt.) Limited, Karachi 2002 SCMR 527 = 2002 PTD 419 rel.

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

----S.24-A---Reasons for decision---Scope---Order passed by judicial or quasi-judicial authority has to be supported by lawful reasons.

Muhammad Akram Nizami for Applicant.

Nadeem Mehmood Mian for Respondent.

2020 P T D 1060

[Peshawar High Court (Mingora Bench)]

Before Syed Arshad Ali and Wiqar Ahmad, JJ

Messrs IKRAM ULLAH ASSOCICATES, through Director and 8 others

Versus

GOVERNMENT OF KHYBER PAKHTUNKHWA through Chief Secretary at Secretariat Peshawar and 17 others

Writ Petitions Nos.886-M, 991-M, 696-M, 1366-M of 2019 and 291-M of 2020, decided on 3rd March, 2020.

Income Tax Ordinance (XLIX of 2001)---

----S.159---Constitution of Pakistan, Art.246(d)---Income tax, exemption from---Applicability---Petitioners were permanent residents of erstwhile Provincially Administered Tribal Areas (PATA) and they were aggrieved of deduction of advance income tax by Provincial Government from their work bills and they were asked to seek exemption certificates from income tax authorities--- Validity--- Profit and gain/income of petitioners was from the construction business which was completely located with the territorial limits of erstwhile PATA which was immune from payment of income tax--- Petitioners were not required to obtain exemption certificate under S.159 of Income Tax Ordinance, 2001, from income tax authorities / Federal Board of Revenue--- Provincial Government had no authority to collect income tax from payment to petitioners in respect of their work which they were executing with the territorial limits of erstwhile PATA---Constitutional petition was allowed accordingly.

Pakistan through Chairman FBR and others v. Hazrat Hussain and others 2018 SCMR 939; Commissioner Income Tax, Peshawar v. Messrs Gul Cooking Oil and Vegetable Ghee (Pvt.) Ltd. 2008 PTD 169; Messrs Taj Packages Company (Pvt.) Ltd. Through Manager v. The Government of Pakistan through Federal Secretary Finance and Revenue Division and 6 others 2016 PTD 203 and Messrs Abid Foundry through authorized representative and another v. Pakistan through Federal Secretary, Finance and Revenue Division, Islamabad and 5 others 2019 PTD 1652 ref.

Hazrat Rehman, Abdul Halim Khan, Shams-ul-Hadi, Syed Abdul Haq and Rahimullah Chitrali for Petitioners.

Nasim Gul, Assistant Attorney General and Wilayat Ali Khan, A.A.G. for the Official Respondents.

Mukhtar Ahmad Maneri for Respondent/Revenue Department along with Siraj Muhammad Inland Revenue Officer, RTO, Peshawar.

2020 P T D 1943

[Peshawar High Court]

Before Lal Jan Khattak and Syed Muhammad Attique Shah, JJ

COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE, PESHAWAR

Versus

MUHAMMAD MASHHOOD and others

Customs Reference No.82-P of 2019, decided on 29th April, 2020.

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

----Ss.156(1)(89)(90), 164, 168, 187 & 196---Imports and Exports (Control) Act (XXXIX of 1950), S.3(3)--- Foreign Exchange Regulation Act (VII of 1947), S.8(2)---"Smuggling"---Burden to prove---Acquittal from criminal charge---Heavy quantity of gold and foreign currency recovered from respondents was seized by Customs Authorities as they could not give any proof of import---Plea raised by accused persons was that they had been acquitted of the charge of smuggling from criminal Court---Validity---Held, there was no evidence / material available on record which could show legal import and lawful possession of seized goods---Accused persons could not discharge their burden of proof as provided by law---Accused were bound to have discharged the burden of proof regarding legal import and lawful possession of seized goods under Ss.156(89) & 187 of Customs Act, 1969 and S.3(3) of Imports and Exports (Control) Act, 1950 read with S.8(2) of Foreign Exchange Regulation Act, 1947---Mere acquittal of accused persons by Criminal Court did not absolve them from their bounden duty to discharge burden of proof regarding legal import and lawful possession of seized goods---High Court, in exercise of Reference jurisdiction, set aside judgment passed by Customs Appellate Tribunal as acquittal of accused persons had no effect on departmental proceedings---Reference was allowed in circumstances.

Abdul Rauf Khan's case 1980 SCMR 114; Sikandar A. Karim's case 1995 SCMR 38; Government of Pakistan through Secretary Customs v. Mahmood Ahmad Qureshi and another 2002 SCMR 1527 and Adam v. Collector of Customs Karachi PLD 1969 SC 446 rel.

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

----S.2(s)(a) & (b)---"Smuggling"---Scope---Crossing of boarders---Scope---Term smuggling is not only confined to goods bring into and take out of Pakistan in breach of any prohibition or restriction for the time being in force but evasion of payment of customs duties or taxes leviable thereupon have also been covered by the definition of smuggling.

Collector of Customs, Peshawar v. Wali Khan and others 2017 SCMR 585 rel.

Abdur Rauf Rohaila for Petitioner.

Qazi Jawad Ehsan Ullah Qureshi for Respondents.

2020 P T D 2063

[Peshawar High Court]

Before Waqar Ahmad Seth, CJ and Abdul Shakoor, J

Messrs SHAM WEDDING HALL

Versus

GOVERNMENT OF KHYBER PAKHTUNKHWA through Chief Secretary and 5 others

Writ Petition No.5503-P of 2019, decided on 7th November, 2019.

Sales Tax---

----Notice for payment of sales tax by Provincial Revenue Authority---Non-availability of Appellate Tribunal---Effect---Petitioner seeking direction for restraining authorities from recovery of sales tax till functioning of Appellate Tribunal---Validity---Proper remedy was available to the petitioner to challenge impugned notice by filing an appeal before Appellate Tribunal---Said Tribunal was not available and due to default of government petitioner could not be left remediless---Authorities were restrained from proceedings with any recovery from the petitioner in the case till the functioning of Appellate Tribunal and taking up the subject matter---High Court directed the Government for completion of constitution of Appellate Tribunal within one month and if same was not completed within that period than Registrar of High Court was directed to file contempt petition against concerned official for initiation of contempt proceedings---Constitutional petition was disposed of accordingly.

Aman Ullah for Petitioner.

Mian Naveed Gul Kakakhel for Respondents.

2020 P T D 2136

[Peshawar High Court]

Before Waqar Ahmad Seth, CJ and Syed Arshad Ali, J

YASIN KHAN through Attorney

Versus

The COLLECTOR OF CUSTOMS MCC, CUSTOMS HOUSE PESHAWAR and 4 others

Writ Petition No.6294-P of 2018, decided on 1st September, 2020.

(a) Interpretation of statutes---

----Fiscal law---Departure from general rule---Principle---In a taxing statute, as in any other statute, there is no reason to depart from general rule that word used in a statute must first be given their ordinary and natural meaning; it is only when such ordinary meaning does not make sense then resort can be made to discovering other appropriate meanings.

Pakistan Textile Mills Owner's Association Karachi and 2 others v. Administrator of Karachi and 2 others PLD 1963 SC 137; Collector of Customs (Preventive) and 2 others v. Muhammad Mehfooz PLD 1991 SC 630 and Messrs Islamabad Electric Supply Company Limited v. Deputy Commissioner Inland Revenue, Audit-II, LTU, Islamabad and others 2016 PTD 2685 rel.

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

----Ss.25-A, 30(a), 30-A & 82---Term 'manifest'---Scope--- Duties and taxes---Applicability---Petitioner imported vehicle in question under Personal Baggage Scheme and after assessment he had paid all duties and taxes---Authorities at the time of release of vehicle directed petitioner to also pay enhanced Federal Excise Duty---Validity---If goods were cleared through Customs Computerized System then it was the rate of taxes and duties applicable on the date of payment of taxes and duties as envisaged by S.30-A of Customs Act, 1969---When goods were cleared in the manner other than Customs Computerized System then it was rate of duty and taxes payable on the date when Goods Declaration was manifested---Goods Declaration was manifested on 16-8-2017, whereas Federal Excise Duty was enhanced from 10% to 20% through Finance Act, 2018---Such enhanced rate of duty was not applicable to the case of petitioner---Authorities had properly evaluated taxes and duties against imported vehicle of petitioner on 31-10-2018 wherein Federal Excise Duty at the rate of 10% was assessed against vehicle of petitioner--- Enhanced Federal Excise Duty at the rate of 20% was not applicable to vehicle of petitioner--- High Court set aside demand of authorities for enhanced Federal Excise Duty as the same was illegal and without lawful authority---Constitutional petition was allowed accordingly.

Amir Bilal for Petitioner.

Taufeeq Ahmad Qureshi, DAG and Jehanzeb Mahsud for Respondents.

2020 P T D 2151

[Peshawar High Court]

Before Ikramullah Khan and Syed Arshad Ali, JJ

COMMISSIONER INLAND REVENUE, PESHAWAR ZONE, REGIONAL TAX OFFICE, PESHAWAR

Versus

Syed ADNAN SHAH and another

W.P. No.6292-P of 2019, decided on 10th September, 2020.

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

----Ss.131 & 132---Decision of appeal---Limitation---Income tax authorities were aggrieved of delay in decision of appeal by Appellate Tribunal Inland Revenue---Validity---Period provided in proviso to S.131 of Income Tax Ordinance, 2001, was mandatory keeping in view the time line provided in S.132 of Income Tax Ordinance, 2001, for adjudication of main appeal as 180 days---Appellate Tribunal Inland Revenue was under statutory obligation to adhere to said time line unless there was a good reason for delay in disposal of appeal---High Court set aside extension in interim relief as the same was without lawful authority---Constitutional petition by department was allowed accordingly.

Muhammad Akram v. DCO, Rahim Yar Khan and others 2017 SCMR 56; Dowell Schlumberger (Wastern) SA v. FOP and others 2016 PTD 1702; Commissioner Inland Revenue v. PESCO 2019 PTD 2228 and Shalimar Recording and Broadcasting Company v. The Commissioner Inland Revenue 2019 PTD 2082 ref.

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

----S.132---Appeal---Recovery---At least one independent forum outside the regime of department was to determine tax dispute between department and tax payer; Until the same has not been finally determined by independent forum, then ordinarily, no recovery is to be made from taxpayer.

Commodities Private Ltd. v. Federation of Pakistan and others PLD 2020 Lah. 632 and Mari Petroleum Company Ltd. v. Appellate Tribunal Inland Revenue and others 2016 PTD 2406 rel.

Rahman Ullah for Petitioner.

Respondent No.1 in person.

Saeed ul Haq for Respondent No.2.

2020 P T D 594

[Balochistan High Court]

Before Jamal Khan Mandokhail, CJ and Abdullah Baloch, J

Messrs SHABAN STEEL INDUSTRY through Authorized Attorney and others

Versus

FEDERATION OF PAKISTAN through Secretary Federal Board of Revenue and others

Constitution Petitions Nos. 1117 to 1120 of 2019, decided on 21st November, 2019.

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

----S. 27-A---Import of re-rollable scrap---Recycling---Mutilating and scraping of serviceable goods---Object, purpose and scope---Purpose of mutilating and scrapping of serviceable goods is to convert them into unserviceable condition---Permitting mutilation and scrapping of imported goods, which are ordinarily used for more than one purpose so as to render them unfit for one or more of such purposes--- Where any goods are so mutilated, they are deemed to have been imported in mutilated form that is why lawmaker did not impose a condition of mutilation and scrapping of old, new, used or unused goods---To describe a particular good as old or new, is very difficult therefore, that might be also one of reason that lawmakers did not limit mutilation and scrapping of goods, only to old and used ones--- Insertion of S.27-A in Customs Act, 1969 was with a purpose to restrict import of serviceable goods in garb of scrap---High Court observed that if intention of lawmakers was to permit mutilation and scrapping of only old and used goods, it should have been specifically mentioned in Customs Act, 1969--- Since after mutilation and scrapping nature of serviceable goods changes into unserviceable goods, therefore, lawmakers did not feel necessity of using words 'new, old, used or unused'.

(b) Interpretation of statutes---

----Laws and rules---Preference---Law is something that has been passed through legislative process--- By contrast, Rule is something that has been created by executive, by exercising power conferred upon them by law--- Law carries more weight which prevails, as such, Rules should not be in conflict, in contrast or in contravention of any provision of an Act nor should Rules change its nature--- When law prescribes a thing to be done in a particular manner it should be done accordingly.

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

----S.27-A---Customs Rules, 2001, R.592---Release of imported goods---Scrap material, condition of---Petitioners were importers of re-rollable scrap and were aggrieved of seizure of their imported products by customs authorities---Plea raised by customs authorities was that imported goods were prime quality goods and not scrap material---Validity---By adding words 'old and used items' in R. 592 of Customs Rules, 2001 as a condition for mutilation and scrapping, executive exceeded their authority, which was an illegality---Words 'old, used, new and unused' incorporated in R.592 of Customs Rules, 2001, were contrary to theme of S. 27-A of Customs Act, 1969--- Extra words used in Customs Rules, 2001 and in letter changed nature of S.27-A of Customs Act, 1969 which could not be done--- Insertion of such words in Customs Rules, 2001 and letter was illogical because after mutilation and scrapping, nature and status of goods altogether changed, therefore, no purpose was served to impose a condition and same could not be enforced---Since there was no condition of old and new goods in S. 27-A of Customs Act, 1969 for purpose of their mutilation and scrapping, therefore, declaring goods of petitioners as prime quality and seizing them was contrary to S. 27-A of Customs Act, 1969 which was an illegality---Mutilated and scrapped goods were allowed to be imported, provided that said goods fulfilled test of Import Policy---High Court directed customs authorities to release goods so imported by petitioners if same did not contravene provision of Customs Act, 1969, Customs Rules, 2001, Import Policy or Directions of Federal Board of Revenue---Constitutional petition was allowed accordingly.

Barrister Asad Khan and Sanaullah Ababaki for Petitioners.

Syed Ikhlaq Shah and Ghulam Mustafa Buzdar, DAGs along with Chaudhry Zulfiqar, Chief Collector Customs, Raza Collector Appraisement Customs, Dr. Iftikhar, Collector Preventive Customs and Jameel Baloch, Additional Collector Customs for Respondents.

2020 P T D 1821

[Balochistan High Court]

Before Muhammad Kamran Khan Mulakhail and Abdul Hameed Baloch, JJ

The COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE, QUETTA

Versus

FAZAL MUHAMMAD and others

Customs Reference No.52 of 2018, decided on 31st March, 2020.

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

----S.196---Reference---High Court, jurisdiction of---Principle---While exercising reference jurisdiction under S.196 of Customs Act, 1969, High Court has to examine and decide only such questions of law, which may arise from the order passed by Customs Appellate Tribunal---High Court is not supposed to enter into disputed questions of facts, unless such findings are found to be perverse or contrary to record---Customs Appellate Tribunal is final fact finding forum as provided under the law.

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

----Ss.156(1)(8)(89) & 196---Foreign Exchange Regulation Act (VII of 1947), Ss.2(5), 15 & 16---Foreign Exchange Manual 2002, Chapter XVIII---Notifications SRO No.566(I)/2005 dated 6-6-2005---SRO No.499(I)/2009 dated 13-6-2009---State Bank of Pakistan Notification No.1/2015 dated 1-6-2015---Reference---Factual controversy---Defective investigation---Dispute was with regard of recovery of foreign exchange from respondent at the airport when he was going abroad---Validity---Investigation officer was responsible to investigate the matter according to law---Investigation officer did not call those persons who submitted their affidavits stating that the total foreign currency did not only belonged to the respondent rather each of them had contribution of 10000 Dollars--- Respondent produced eight receipts of foreign currency before adjudicating officer, which showed that each of the four deponents purchased 10000 Dollars---Investigation officer verified the receipts from foreign exchange dealer---Under Notification No.1/2015 dated 1-6-2015, issued by State Bank of Pakistan, a person was authorized to take out foreign exchange from Pakistan---No requirement existed for foreign exchange to be less than US$ 10000/- or equivalent thereof---High Court while exercising jurisdiction under S.196 of Customs Act, 1969, was not free to embark upon an unfettered inquiry into factual aspects which had been properly considered and decided by the Tribunal---Reference was dismissed in circumstances.

Collector Customs Karachi v. Messrs Haji Ismail Co. and others 2015 SCMR 1383 = 2015 PTD 2642 rel.

Akhtlaq Ahmed Shah and Tahir Iqbal Khattak, Assistant Attorneys General for Petitioner.

Mazhar Ali Khan for Respondent No.1.

2020 P T D (Trib.) 89

[Sindh Revenue Board]

Before Justice (R) Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik Technical Member

Messrs AL-RIAZ CHEMICALS

Versus

The COMMISSIONER (APPEALS), SRB and another

Appeals Nos.AT-83, 85, 86, 87, 88, 100, 101 and 102 of 2018, decided on 27th February, 2019.

Sindh Sales Tax on Services Act (XIV of 2011)---

----Ss.2(51A)(79)(96), 3, 9 & 24-B---Appeal---Compulsory registration of company---Penalty---Quantum---Appellant was an Indenter against whom order of compulsory registration under S.24-B of Sindh Sales Tax on Services Act, 2011 was passed and penalty for a sum of Rs.100,000/- was also imposed upon him---Appellate Authority maintained order-in-original passed by authorities---Validity---Appellant was a resident person and was providing and rendering service of Indenter within Province---Appellant having failed to get registration, it was rightly registered compulsorily under S.24-B of Sindh Sales Tax on Services Act, 2011---When two types of penalties were provided under law, Assessing Officer was duty-bound to justify imposing of maximum penalty---Two types of penalties were provided to cater different situations but it was not mentioned as to under which situation lesser penalty could be imposed and under what situation maximum penalty could be imposed---Both order-in-original and order-in-appeal to the extent of imposing maximum/higher penalty of Rs.100,000/- suffered from legal infirmities and were not tenable under law---High Court set aside penalty imposed in order-in-original by Assessing Officer---Appeal was allowed accordingly.

Pakistan Freight Forwarders Association v. SRB 2017 PTD 1; CAA v. SRB 2013 PTD 2048 and SRB v. CAA 2017 SCMR 1344 ref.

Mohammad Yousuf for Appellant.

Ms. Shumaila Yar Muhammad, AC-SRB for Respondents.

2020 P T D (Trib.) 121

[Sindh Revenue Board]

Before Justice (R) Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik Technical Member

ASSISTANT COMMISSIONER, SRB KARACHI

Versus

Messrs DAEWOO PAKISTAN EXPRESS BUS SERVICES LIMITED

Appeal No.AT-57 of 2018, decided on 30th April, 2019.

Sindh Sales Tax on Services Act (XIV of 2011)---

----Ss.2(46), 23, 43, 44, 52 & Second Schedule, Tariff Heading 98.02---Payment of tax, responsibility of---Advertisement services---Sindh Revenue Board was aggrieved of order passed by appellate authority regarding collection of services sales tax---Validity--Assessing Officer in order-in-original did not determine specific Tariff Heading in Second Schedule to Sindh Sales Tax on Services Act, 2011 under which services in question fell---Determination of Specific Tariff Heading was essential for levying tax---Mere mentioning of main Tariff Heading 98.02 in order-in-original was not sufficient and was against listing of specific taxable services---Shifting of responsibility of depositing Sindh Sales Tax on Services Act, 2011 on provider of taxable service of advertisement in Sindh without backing of any law and rules was an illegality on part of forums below---Responsibility of payment of tax fixed by withholding rules upon recipients of advertising services in Province of Sindh could not be shifted upon service provider of advertisement services at whims of assessing officer---High Court, in exercise of appellate jurisdiction, set aside order-in-appeal as same was neither proper nor in accordance with law and withholding rules and was not sustainable under law---Case was remanded to appellate authority for decision afresh.

Citibank NA v. Commissioner Inland Revenue and another 2014 PTD 284 ref.

Irfan Waheed, AC-SRB for Appellant.

Khurram Shahbaz Butt for Respondent.

2020 P T D (Trib.) 141

[Sindh Revenue Board]

Before Justice (R) Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik Technical Member

ASSISTANT COMMISSIONER, SRB, KARACHI

Versus

Messrs FALCON-I (PVT.) LTD.

Appeal No.AT-76 of 2018, decided on 6th May, 2019.

Sindh Sales Tax on Services Act (XIV of 2011)---

----S.43 & Table Sr.Nos.3, 11, 13 & 15---Default in payment of tax---Penalty imposition of---Procedure---Assessing Officer imposed penalties for delay in payment of tax in order-in-original passed against taxpayers---Appellate authority set aside penalties imposed by assessing officer---Validity---Imposing of penalties in case of committing default in payment of tax or late filing of returns was not automatic and some determination with regard to element of mens rea was required---No independent determination at all was on record in such regard and Assessing Officer had taken for granted that to pay penalty was necessary consequence or corollary of non-payment of sales tax on non-filing of return within stipulated period---Imposing of penalties was quasi-criminal and presence of mens rea was mandatory---High Court declined to interfere in order-in-appeal as appellate authority had rightly waived penalties which were imposed by Assessing Officer without any just cause---Appeal was dismissed in circumstances.

WAK Limited v. Custom, Central Excise and Land Customs 2018 PTD 253 and Collector Central Excise and Land Customs v. Rahim Din 1987 SCMR 1840 ref.

Dy. Collector Central Excise and Sales Tax v. ICI Pak. Ltd. Lahore 2006 SCMR 626; Commissioner Income Tax v. Habib Bank Limited 2007 PTD 901 and Pakistan through Secretary Ministry of Finance v. Hard Castle Waud (Pakistan) PLD 1967 SC 1 rel.

Vickey Dhingra, AC and Javed Ali, AC-SRB for Appellant.

S.M. Rehan, Chartered Accountant and Ahsan Iqbal, ITP for Respondent.

2020 P T D (Trib.) 156

[Sindh Revenue Board]

Before Justice (R) Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik, Technical Member

Messrs SYSTECH ENGINEERING SOLUTIONS (PVT.) LIMITED

Versus

ASSISTANT COMMISSIONER SRB and another

Appeal No.AT-12 of 2019, decided on 29th March, 2019.

Sindh Sales Tax on Services Act (XIV of 2011)---

----Ss. 43 (Serials Nos. 2, 3 & 12 of Table) & 59(5)--- Non-payment of tax--- Penalty, imposition of--- Principle--- Taxpayer was aggrieved of penalties imposed by assessing officer for default in payment of tax and order-in-original was maintained by Commissioner (Appeals)--- For calculating penalty it was mandatory to provide default amount of each month (total tax for period) and then to calculate penalty--- Assessing officer did not provide default amount of each month without which penalty could not be calculated/worked out--- Penalty could not be imposed without first establishing mens rea and mala fide on part of taxpayer--- Assessing officer failed to establish mens rea and mala fide on part of taxpayer which was necessary ingredient for imposing penalty--- Commissioner (Appeals) by not noticing illegalities committed by assessing officer did not properly exercise jurisdiction vested in him---Tribunal observed that instead of dismissing appeal for non-prosecution, Commissioner (Appeals) should have decided the same on merits--- Appellate Tribunal Sindh Revenue Board condoned delay in fling of appeal and set aside penalties imposed by assessing officer--- Appeal was allowed in circumstances.

SLINGSHOT v. AC Order-in-Appeal No. 92/16 and Messrs Fumicon v. AC-SRB Appeal No. 47/2018 ref.

Pakistan through Secretary Ministry of Finance and others v. Hard Castle Waud PLD 1967 SC 1; Commissioner Income Tax v. Habib Bank Limited 2007 PTD 901 and D.G. Khan Cement v. Federation of Pakistan 2004 SCMR 456 rel.

Adnan Siddiqui and Ms. Sidratul Muntaha for Appellant.

Liaqat Ali Bajeer, AC SRB for Respondent.

2020 P T D (Trib.) 348

[Sindh Revenue Board]

Before Justice (R) Nadeem Azhar Siddiqi, Chairman and Agha Kafeel Barik Member Technical

Messrs PAKISTAN INTERNATIONAL BULK TERMINAL (PVT.) LTD. KARACHI

Versus

ASSISTANT COMMISSIONER, SRB, KARACHI

Appeal No.AT-10 of 2019, decided on 13th May, 2019.

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

---- Ss. 15A, 23, 43, 44 & 47--- Sindh Sales Tax on Services Rules, 2011, Rr. 21, 22 & 22A--- Input tax credit adjustment, denial of--- Mens rea, proof of--- Retrospective effect--- Taxpayer was terminal operator and his request for input tax credit adjustment for tax periods in question was denied by order-in-original--- Taxpayer assailed order-in-appeal which maintained order-in-original on grounds that change in law could not be retrospectively implemented--- Validity--- Provisions of S. 15A of Sindh Sales Tax on Services Act, 2011 dealt with denial of input tax adjustment and effected right of taxpayers to claim input tax adjustment and was a substantive provision of law which could not be applied retrospectively in absence of clear intendment of Legislature--- Tax periods involved, in the present case, were from May, 2016 to November, 2016 and returns of May and June, 2016 were filed before insertion of S.15A of Sindh Sales Tax on Services Act, 2011 therefore, same had no application on returns of May and June, 2016--- Input tax, if any, claimed, could not be rejected by invoking S.15A of Sindh Sales Tax on Services Act, 2011--- Taxpayer could only claim adjustment of input tax when output tax was declared in month of May, 2017--- Without declaring output tax, input tax could not be adjusted--- Input tax claim of taxpayer was rejected in advance without waiting for taxpayer to declare output tax for purpose of adjustment of input tax--- Burden was upon department to prove mens rea and burden to rebut same would shift upon taxpayer when department had established presence of mens rea and that adjustment of input tax was mala fide, contumacious and with intention to evade tax but nothing was available in order-in-original in such regard--- Appellate Tribunal Sindh Revenue Board set aside order-in-original and order-in-appeal--- Appeal was allowed in circumstances.

Pakistan International Freight Forwarders Association v. Province of Sindh 2017 PTD 1; Pakistan through Secretary, Ministry of Finance v. Hard Castle Waud PLD 1967 SC 1; Deputy Collector, Central Excise and Sales Tax v. ICI Pakistan Limited 2006 SCMR 626; Commissioner Income Tax v. Habib Bank Limited 2007 PTD 901; Gharibwal Cement Limited v. Income Tax Appellate Tribunal 2005 PTD 1 and Saleem Haji Rehmatullah Dada v. Commissioner of Income Tax, Companies-V. 2003 PTD 593 ref.

Mohammad Yousuf and Nisar ul Haq, Chartered Accountant for Appellant.

Awais Raza, AC-SRB and Imran Ali, AC-SRB for Respondent.

2020 P T D (Trib.) 444

[Sindh Revenue Board]

Before Agha Kafeel Barik,Technical Member and Justice (R) Nadeem Azhar Siddiqi, Chairman

Messrs ASSISTANT COMMISSIONER, SRB, KARACHI

Versus

Messrs GUL TRADERS, KARACHI

Appeal No. AT-68 of 2018, decided on 25th April, 2019.

(a) Interpretation of statutes---

----Amendment in law--- Retrospective effect--- Pendency of proceedings--- Substantive and procedural laws--- Applicability--- Substantive law is that, which defines rights of parties, while procedural law determines remedies--- Law of procedure may be defined as that branch of law which governs process of litigation--- Limitation of passing of order comes within ambit of procedural law--- When law is changed/altered during pendency of proceeding, substantive right of parties are to be decided according to law as it existed at time when action was initiated unless legislature has made its intention clear that amendment will apply retrospectively--- Exception to rule is that law beneficial to subject and procedural law can be applied retrospectively.

Assistant Commissioner v. Optimus Capital 2017 PTD 1725 rel.

(b) Limitation---

---- Applicability on pending proceedings--- Limitation is generally known as procedural law and amendment relating to limitation can be applied to pending proceedings.

The Commissioner of Income Tax, Central Zone B, Karachi v. Messrs Asbestos Cement Industries Limited Karachi 1993 SCMR 1276; S.M. Junaid v. President of Pakistan PLD 1981 SC 12 and The Taxation Officer, Deputy Commissioner, Income Tax, Lahore v. Rupafil Limited 2018 SCMR 1131 rel.

(c) Sindh Sales Tax On Services Act (XII of 2011)---

---- Ss. 23(3) [as amended through Finance Act (XXIV of 2017) dated 14-07-2017], 43 Table Serial Nos. 2, 3 & Second Schedule Tariff Heading 9809.0000---Sales tax, exemption of--- Amendment in limitation--- Applicability--- Retrospective effect--- Taxpayer was aggrieved of order-in-original and challenged the same on grounds of limitation which was accepted by Commissioner (Appeals)--- Validity--- At time of passing of amendment, proceedings were pending before authorities and amendment was applicable to pending proceedings--- Time for passing order-in-original was 180 days and not 120 days therefore, order-in-original passed on 172nd day was properly passed--- Appellate Tribunal Inland Revenue set aside order-in-appeal as same was not proper--- Appellate Tribunal Inland Revenue remanded case to Commissioner (Appeals) to decide same on merits after adequately hearing both parties--- Appeal was allowed accordingly.

Commissioner Inland Revenue v. Ms. Ambreen Fawad T.R. No.51/2011; Commissioner Income Tax Peshawar v. Messrs Islamic Investment Bank C.A. No. 1086 of 2009 (2016 SCMR 816); I.T. v. Messrs Cafe Student, Karachi 2016 PTD 1072; Messrs Arrows Advertising v. C.I.R. Zone II, Lahore 2016 PTD Tribunal 189; 2017 PTD 1053; 2016 PTD 358; 2015 PTD Tribunal 319; 2015 PTD Tribunal 1422; 2017 PTD Tribunal 2108; 2018 PTD Tribunal 527 and 2017 PTD Tribunal 1911 ref.

Sardar Sher Bahadur Khan v. Election Commission PLD 2018 SC 97; Additional Commissioner IR v. Messrs Eden Builders 2018 SCMR 991; Bestway Cement v. Additional Commissioner IR 2018 PTD 977 and PLD 2016 SC 872 distinguished.

Bakht Ali, AC SRB for Appellant.

Hamid Ali Memon for Respondent.

2020 P T D (Trib.) 481

[Sindh Revenue Board]

Before Justice (R)Nadeem Azhar Siddiqi, Charman and Agha Kafeel Barik, Technical Member

Messrs AL-KHALID AGENCIES FOR WASTE MANAGEMENT and another

Versus

ASSISTANT COMMISSIONER, SINDH REVENUE BOARD, KARACHI and another

Appeals Nos.AT-75 and AT-97 of 2018, decided on 21st January, 2019.

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

----Ss.3 & 43, Second Sched.---Taxable service---Janitorial services---Maintenance and cleaning services---Lifting and transportation of solid waste---Penalty---Mens rea of taxpayer---Failure to deposit the amount of tax due---Making false statement---Tax fraud---Scope---Appellant, being a provider of janitorial services, was burdened with services tax, default surcharge and penalty---Commissioner (Appeals) while dismissing the appeal, declared the appellant to be a maintenance and cleaning service provider---Validity---Job of appellant comprised of lifting, transportation and disposal of all types of garbage/solid waste from different areas to landfill sites and not to provide janitorial , maintenance or cleaning services---Taxable service, as per S. 3 of Sindh Sales Tax on Services Act, 2011, was a service listed in the Second Schedule of the Act---Lifting and transportation of garbage from one place to the other was not listed in the Second Schedule as a specific service---Commissioner (Appeals) had erroneously held that 'specialized cleaning services' duly covered the economic activities was performed by the appellant---Commissioner (Appeals) by enlarging the scope of definition of 'maintenance or cleaning' could not include lifting and transportation of garbage into the same---Penalty and default surcharge could be imposed by revenue department where any person had committed or caused to commit tax fraud and department through convincing evidence established that the same had been done knowingly, dishonestly or fraudulently and without lawful excuse---Orders passed by forums below were set aside---Appeal filed by tax payer was allowed and that of department was dismissed.

Messrs Pakistan Television Corporation v. Commissioner Inland Revenue (Legal) LTU Islamabad, Civil Appeal No. 1509/2016 and Al-Hilal Motors Stores v. Collector, Sales Tax and Central Excise (East) 2004 PTD 868 rel.

Pakistan v. Hard Castle Waud PLD 1967 SC 1 and Commissioner Inland Revenue v. Habib Bank Limited 2007 PTD 901 ref.

(b) Words and phrases---

----Janitor---Meaning.

Feroze Sons Concise English to English and Urdu Dictionary ref.

(c) Words and phrases---

----Janitorial services---Meaning.

Aga Faquir Mohammad for Appellant.

Irfan Ahmad Sohu, AC-SRB for Respondent.

2020 P T D 18

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Munib Akhtar and Yahya Afridi, JJ

Messrs AL-KHAIR GADOON LTD.

Versus

The APPELLATE TRIBUNAL and others

Civil Appeals Nos. 1660 and 1661 of 2014, decided on 21st January, 2019.

(On appeal against the judgment dated 16.05.2012 of the Islamabad High Court, Islamabad passed in Tax Appeals Nos. 7 and 8 of 2005)

(a) Taxation---

----Notice for recovery of tax---Incorrect provision of law mentioned in the notice---Effect---Quoting of wrong provisions of law in a show cause notice would not necessarily vitiate the entire process initiated thereunder---In deciding the legal validity of the show cause notice, it was important to first see whether the recipient/assessee of the said notice had been put to any prejudice in preparing and putting up its defence to the allegations made therein; and whether the issuer of the notice had the authority to issue the same, provided the notice had all the necessary facts leading to the alleged acts or omission of the recipient constituting the stated contravention of provisions of law, and thus, to be meaningfully responded by the assessee.

Collector of Sales Tax and CE, Lahore v. Zamindara Paper and Board Mills and others 2007 PTD 1804; Olas Khan v. Chairman NAB PLD 2018 SC 40; Jane Margrete William v. Abdul Hamid Mian 1994 SCMR 1555; Pakistan Fisheries Ltd. v. United Bank Ltd. PLD 1993 SC 109 and Safia Bibi v. Aisha Bibi 1982 SCMR 494 ref.

(b) Central Excises Act (I of 1944)---

----Ss. 4(1), 4(2) & 35---Show cause notice mentioning incorrect provision of law---Mix question of law and facts---Appellate Tribunal, jurisdiction of---Scope---Question as to whether the challenge to the notice made by the appellant-tax payer before the Appellate Tribunal, which had not yet been decided by the Tribunal, should be decided by the Supreme Court, or be left to be decided first by the Appellate Tribunal, where it was originally agitated---Held, that the matter should be remanded to the Appellate Tribunal; firstly, for the reason that the said crucial determination would require considering of mixed questions of law and facts, which could best be undertaken by the Appellate Tribunal; secondly, any finding by the Supreme Court or even by the High Court on the said challenge to the very legality of the notices, would surely prejudice the appellant-tax payer by denying it a forum of redressal under the Central Excises Act, 1944; and thirdly and finally, another fundamental issue, raised by the appellant in response to the notices, as to whether the excisable goods questioned in the notices were manufactured prior to a particular date, when excise duty was imposed thereon, and if so, to what legal effect, also required a definite finding, and the Appellate Tribunal, being the last forum for adjudicating such mixed question of fact and law, would be also carried out to meet the ends of justice---Present appeals were deemed to be pending before the Appellate Tribunal.

Saood Nasrullah Cheema, Advocate Supreme Court for Appellant (in both cases).

Dr. Farhat Zafar, Advocate Supreme Court for Respondents (in both cases).

2020 P T D 147

[Supreme Court of Pakistan]

Present: Sh. Azmat Saeed, Mushir Alam, Umar Ata Bandial, Qazi Faez Isa and Munib Akhtar, JJ

ABBASI ENTERPRISES UNILEVER DISTRIBUTOR, HARIPUR and another

Versus

COLLECTOR OF SALES TAX AND FEDERAL EXCISE, PESHAWAR and others

Civil Appeal No. 733 of 2010, decided on 3rd April, 2019.

(On appeal from the judgment dated 28.7.2008 passed by the Islamabad High court in Tax Reference No. 5 of 2008)

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

----Ss. 11 & 36(3)--- Leave to appeal was granted by Supreme Court as leave had already been granted in similar matters raising various issues with regard to proper interpretation and application of S. 36(3) of Sales Tax Act, 1990 and also corresponding provisions in S. 11 of Sales Tax Act, 1990.

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

----S. 36(3) & Proviso---Extended period for issuance of show-cause notice---Scope---Precedent---Applicability---Taxpayer was aggrieved of show cause notice issued by authorities beyond period specified in law---Plea raised by authorities was that order of extension was made on 24-09-2010 whereas judgment in case titled 'Collector of Sales Tax Gujranwala v. Super Asia Muhammad Din and Sons and others' reported as 2017 SCMR 1427 was not applicable as it was given on 31.03.2017 and was not applicable to former---Validity---Supreme Court disapproved the plea raised by authorities---Law declared by Supreme Court as to proper interpretation and application of first proviso to S. 36(3) of Sales Tax Act, 1990 applied fully to the order of extension under consideration---Order of Collector was invalid and inoperative in law and as there was no lawful extension of time---Supreme Court observed that order-in-original should have been made by Additional Collector within 90 days of 13.06.2005, i.e., by 12.09.2005---Notice was issued beyond date and it was invalid and non est in law, therefore, same had to be quashed and forums of appeal including High Court in tax reference erred materially in failing to do so---Supreme Court quashed order-in-original and set aside judgment passed by High Court as well as decisions of departmental forums below---Appeal was allowed.

Collector of Sales Tax Gujranwala v. Super Asia Muhammad Din and Sons and others 2017 SCMR 1427 fol.

Farhat Nawaz Lodhi, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellants.

Riaz Hussain Azam, Advocate Supreme Court, M.S. Khattak, Advocate-on-Record, Mohyuddin Ismail, Commissioner I.R., RTO and Qasim Raza, Chief Legal, FBR for Respondents.

2020 P T D 278

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Ijaz ul Ahsan and Munib Akhtar, JJ

COMMISSIONER OF INCOME TAX (LEGAL) REGIONAL TAX OFFICER, PESHAWAR

Versus

SAFEER JAN

Civil Appeal No. 1127 of 2011, decided on 5th November, 2019.

(Against judgment dated 26.05.2009 passed by the Peshawar High Court, Peshawar in T.R. No. 85 of 2007)

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 12(18)---Income chargeable to tax---Scope---Partnership firm---Gift deeds---Whether gift amounts received by one partner from other partners in the firm/AOP (Association of persons) could be added by the tax officer under S. 12(18) of the erstwhile Income Tax Ordinance, 1979 ('the Ordinance')---Held, that plain reading of S.12(18) of the Ordinance showed that the said provision was attracted when loans, advances and gifts were received in cash---In the present case, however, admittedly, no cash exchanged hands---Members of the partnership firm/AOP had only authorized the respondent-partner to withdraw a certain amount from their share in the AOP; as such no cash had been paid or received, which fact had clearly been mentioned in the gift deeds executed between the partners---Transaction was ex facie reflected in book entries made in the records of the AOP---Further, the language of the gift deeds was clear that the amount gifted was liable to be withdrawn by the donee (respondent) from the share of donors in the AOP, which further lent support to the finding that only a right was given to the respondent to withdraw the amounts in question from time to time from the share of the donors in the AOP and that no transaction which could be interpreted as immediate and actual transfer of funds had taken place---Provisions of S. 12(18) of the Ordinance were not attracted in the present case---Appeal was dismissed.

Rehman Ullah, Advocate Supreme Court for Appellant.

Syed Mudassar Ameer, Advocate Supreme Court for Respondent.

2020 P T D 336

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Faisal Arab and Ijaz ul Ahsan, JJ

Messrs PAK GULF CONSTRUCTION COMPANY (PVT.) LTD., ISLAMABAD

Versus

FEDERATION OF PAKISTAN through Secretary Finance, Ministry of Finance, Islamabad and others

Civil Petition No. 3224 of 2019, decided on 29th October, 2019.

(Against the judgment dated 03.06.2019 passed by the Islamabad High Court, Islamabad in Writ Petition No. 271 of 2018)

Capital Value Tax Rules, 1990---

----R. 4--- Finance Act (V of 1989), S. 7(4)--- In house sale/purchase/transfer of immoveable property at offices of private real estate developers/companies---Capital Value Tax (CVT), payment of---Collecting authority---Scope---Petitioner, a private limited company, was engaged in the business of constructing and selling units/flats/apartments through sale agreements---Petitioner received a notice from the tax authorities alleging that it had transferred various properties/flats/apartments to its customers, therefore, a specified sum was payable by it as Capital Value Tax (CVT)---Pleas raised by the petitioner were that the tax authorities had no jurisdiction to declare the petitioner as a collecting authority being attesting and transferring authority, and that the petitioner being a private limited company was not an attesting/transferring authority and was not under any legal obligation to collect and pay any CVT---Held, that S. 7(4) of the Finance Act, 1989 provided that CVT was required to be collected by the person responsible for registering or attesting the transfer of the asset in respect of which the tax was payable at the time of registering or attesting the transfer---Asset included immoveable property and structures thereon---Liability to pay was on the purchaser at the time when the transfer in her/his/its name took place and the responsibility to collect the same was on the person/authority, registering or attesting such transfer---Authority to collect CVT vested with the registration authority namely, the Registrar of Documents, however, during recent years with the development of co-operative housing societies and statutory authorities engaged in the business of development and sale of real estate, a methodology of transferring immovable property had evolved, whereby properties were transferred privately without involving the Registrar of Documents---Such private transfers were designed to avoid transactional costs, taxes and duties which in turn led to higher turnover of such properties for investment purposes---Such societies, statutory authorities and even limited liability companies (such as the petitioner) adopted various modes of undertaking such transfers including issuance of transfer letters, allotment letters, agreements to sell and other similar documents which did not require registration---Consequently, despite multiple sale transactions where immovable property may change hands variously by way of such sale transactions, the exchequer did not receive any amount by way of Stamp Duty, Registration Fee and CVT---In the present case, the petitioner had admitted that it entered into agreements to sell with buyers, received the full sale consideration and issued documents evidencing such transaction---On the basis of the said transaction the buyer was put into possession of the immovable property by the petitioner whereafter the buyer had the option to apply to the relevant Development Authority, which was the regulatory authority for specified areas of the city and inter alia maintained the records of the properties within its jurisdiction, to enter the name of such buyer in its records for regulatory purposes---Relevant Development Authority did not register or attest the agreement to sell---Methodology adopted by the petitioner was, in all material terms the same as a co-operative societies which had been obligated to collect CVT at the time of transfer of properties amongst the members---Sale, purchase, transfer and other similar transactions were undertaken between the petitioner-company which was the owner of the immovable assets and buyer in whose favour the transfer took place, therefore, it was only logical that the petitioner should be obligated to collect CVT from the purchaser and deposit it with the Federal Government---Totality of the transaction had the effect of transfer of the property in favour of a buyer and as such brought the petitioner within the purview of S. 7(4) of the Finance Act, 1989 read with R. 4 of the Capital Value Tax Rules, 1990---Consequently, if the petitioner had failed to collect CVT from the person/entity liable to pay the same, being the registering agency and or attesting authority it was obligated to pay the same to the Federal Government---Petition for leave to appeal was dismissed accordingly and leave was refused.

Hafiz M. Idrees, Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Petitioner.

Baber Bilal, Advocate Supreme Court for Respondents.

2020 P T D 382

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Faisal Arab and Ijaz ul Ahsan, JJ

Messrs ZAK RE-ROLLING MILLS (PVT.) LTD.

Versus

APPELLATE TRIBUNAL INLAND REVENUE and others

Civil Petition No. 2727 of 2019, decided on 17th October, 2019.

(Against judgment dated 11.04.2019 of Islamabad High Court, Islamabad passed in STR No. 25 of 2017)

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

----S. 3(1A) [as existed prior to 01-07-2017]---Sales Tax Special Procedures Rules, 2007, R. 58H---Steel-melter/Re-rolling mill---Taxable supplies made to unregistered persons---Levy of further sales tax under S. 3(1A) of Sales Tax Act, 1990---Permissibility---Payment of sales tax under a specific assessing procedure envisaged in R. 58H of the Sales Tax Special Procedures Rules, 2007, did not exempt or save the tax-payer from levy of further tax under S. 3(1A) of the Sales Tax Act, 1990.

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

----S. 47---Constitution of Pakistan, Art. 185(3)---Petition for leave to appeal before the Supreme Court---Pleas/arguments raised---Scope---Petitioner raised pleas/points before the Supreme Court which were not raised in the Reference application before the High Court nor were noted in the impugned judgment of the High Court---Such pleas were at best untested second thoughts---Under Art. 185(3) of the Constitution, the Supreme Court dealt with (only) questions of law that had been urged before the forum below.

M. Naeem Qazi, Advocate Supreme Court for Petitioner.

Babar Bilal, Advocate Supreme Court for Respondents.

2020 P T D 429

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Ijaz ul Ahsan and Munib Akhtar, JJ

CHIEF COMMISSIONER INLAND REVENUE REGIONAL (RTO) PESHAWAR

Versus

PAPER WORLD (PVT.) LTD. AMANGARH, NOWSHERA

Civil Appeals Nos. 2440-2441 of 2016, decided on 1st October, 2019.

(On appeal from the Order dated 26.02.2015 passed by the Peshawar High Court, Peshawar in C.R. No. 79-P and C.M. 36 of 2010 and F.E.R. No. 80 of 2010)

Sales Tax Act (VII of 1990)---

----S. 40A [as it then was in the year 2004]---Evasion of sales tax---Search without warrant---Raid and search at a premises other than the business or manufacturing premises or registered office of tax payer---Legality---Statement recorded for purposes of subsection (1) of S. 40A of the Sales Tax Act, 1990 ('the Act') was in substantial compliance with the requirements thereof---Matters such as serial number or office order, or name of informer were not, as such, required by the provision to be set out under the said statement---Fact that the raid was conducted within one day of the receipt of information served only to show that there was urgency in the matter, and not as wrongly concluded by the High Court that there was sufficient time to obtain a warrant from the concerned Magistrate in terms of S. 40 of the Act---Record recovered from the raid was indeed that of the respondent-tax payer, and related to its business matters and was supportive of the case sought to be made against it, i.e., of clandestine removal of goods and evasion of tax---Respondent never explained as to why such record was found at a premises that the respondent itself claimed was "abandoned and vacant", i.e., at other than its place of business or manufacture or registered office, or any other place where it could be reasonably expected or plausibly explained that the record could be maintained---In such circumstances, where the tax department was operating on the basis of a secret tip-off, the concerned officer could reasonably conclude that the record and material might be removed at any moment---Hence, the ingredients for invoking S. 40A of the Act existed in the facts and circumstances of the present case---Appeal filed by tax department was allowed accordingly.

Collector of Sales Tax and Central Excise and another v. Mega Tech (Pvt.) Ltd. 2005 SCMR 1166 distinguished.

Ghulam Shoaib Jally, Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Appellant.

Tariq Khan Hoti, Advocate Supreme Court for Respondent.

2020 P T D 523

[Supreme Court of Pakistan]

Present: Umar Ata Bandial and Ijaz ul Ahsan, JJ

NOOR MUHAMMAD

Versus

CUSTOMS APPELLATE TRIBUNAL, PESHAWAR BENCH through Chairman and others

Civil Petition No. 3855 of 2019, decided on 29th November, 2019.

(Against the judgment dated 18.09.2019 passed by the Peshawar High Court, Peshawar in Custom Reference No. 600-P of 2017)

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

----Ss. 156(1)(89), 193 & 194-A---Smuggled vehicle with tampered chassis number---Seizure and confiscation by Customs authorities---Forensic Science Laboratory (FSL), report of---Plea of petitioner (owner of vehicle) that there were two contradictory reports of Forensic Science Laboratory on record, therefore, in the matter of confiscation of his vehicle the fora below should have adopted a more lenient view---Held, that petitioner had ample opportunities to take up all his defences during proceedings before the Deputy Collector (Adjudication), Collector of Customs (Appeals) as well as the Customs Appellate Tribunal, however, before all fora below he failed to rebut the report of the FSL that chassis number of the vehicle had been tampered with---Further the question of two contradictory reports of FSL had been raised as an afterthought in view of the fact that it was never raised before the lower fora---Petition for leave to appeal was dismissed and leave was refused.

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

----S. 196---Limitation Act (IX of 1908), S. 5---Reference to High Court---Barred by eleven months---Condonation of delay---Grounds---Illness of special attorney---Not plausible or convincing ground---After dismissal of his appeal before the Appellate Tribunal, the petitioner waited for eleven months to file the Customs Reference before the High Court, which was hopelessly barred by time---Application for condonation of delay stated that the entire process was followed up by a special attorney of the petitioner---Said special attorney was allegedly a chronic patient of some disease and was therefore unable to file the Reference within time---Petitioner was unable to explain plausibly why he did not pursue the matter himself and why was he not following up the same---Plea/explanation that petitioner was not available and his special attorney was unwell were neither convincing nor plausible and did not constitute sufficient grounds for condonation of delay for about eleven months---Petition for leave to appeal was dismissed and leave was refused.

Arbab Shabbir Ahmed, Advocate Supreme Court for Petitioner.

Nemo for Respondents.

2020 P T D 549

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Maqbool Baqar and Faisal Arab, JJ

COMMISSIONER INLAND REVENUE (ZONE-I) LTU, KARACHI

Versus

Messrs LINDE PAK LTD., KARACHI

Civil Appeal No. 837 of 2011, decided on 25th September, 2019.

(Against Order dated 21.04.2011 of the High Court of Sindh, Karachi passed in I.T.R. No. 171 of 2003).

(a) Words and phrases---

----'Instrument'---Definition and meaning.

The term 'instrument' has been defined in its ordinary sense, as a written legal document that defines rights, duties, entitlements or liabilities, such as statute, contract, will, promissory note or share certificate and with reference to commercial law, the terms has been defined there as an unconditional promise or order to pay a fixed amount of money or other fixed charges described in the promise or order esp., commercial paper or security, or any other writing that evidences a right to the payment of the money.

Black's Law Dictionary, 10th Edition ref.

(b) Words and phrases---

---'Agreement'---Definition and meaning.

An 'agreement' is a manifestation of mutual assent by two or more persons, and as 'the parties actual bargain founded in their language, or by implication from other circumstances'. It is an act in law whereby two or more persons declare their consent as to any act or thing to be done or forborne by some or one of those persons for the use of the others and other of them, which should reflect the meeting of minds of the contracting parties.

Whereas agreements, manifest the mutual consent of the parties thereto, and embody their actual bargain in respect of any act or thing to be done or forborne, it is a mutual document, containing reciprocal promises and obligations, executed by and between the parties to the bargain. It could be either a bilateral and/a multilateral document. The profound distinction between these two kinds of documents are well pronounced. The two patently belong to distinct and different species of documents.

Black's Law Dictionary, 10th Edition ref.

(c) Words and phrases---

----'Bond'---Definition and meaning.

A 'bond' has been described as a "document containing confession of a debt", as a "written promise to pay money", or to do some act if certain circumstances occur, or a certain time elapse. There is no distinction between bonds and 'certificates of indebtedness' which conforms to all the characteristics of bonds.

Black's Law Dictionary, 10th Edition ref.

(d) Words and phrases---

----'Certificate'---Definition.

The word 'certificate' has been defined as a written declaration, official or formal of some fact.

Chamber's English Dictionary ref.

(e) Words and phrases---

----'Debenture'---Definition and meaning.

The term 'Debenture' whose origin lies in the latin word debenture, meaning, 'there are due', has been described as an instrument acknowledging a debt secured only by a general credit and financial reputation of the corporate issuer, not by a lien on corporate assets.

Black's Law Dictionary, 10th Edition ref.

(f) Words and phrases---

----'Security'---Definition and meaning.

The term 'security' has been defined there as a collateral, given or pledged to guarantee the fulfilment of an obligation, esp, the assurance that a credit will be repaid (usu, with interest) any money or credit extended to a debtor.

(g) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----S. 50(7D)---Finance/loan agreement---Mark-up accrued---Deduction of advance tax---Word "instrument of any kind" used in S. 50(7D) of the Income Tax Ordinance, 1979---Interpretation---Ejusdem generic, principle of---Tax department found that the respondent-company had not deducted and paid tax on the mark-up accrued in terms of a finance/loan agreement executed between the respondent-company and a consortium of financial institutions and commercial banks, in respect of a long term finance granted by the said consortium to the respondent-company ("the finance/loan agreement---Tax department contended that the respondent-company, in terms of the finance/loan agreement, was obliged to deduct income tax on the markup accrued in respect of the finance granted in terms of the finance/loan agreement, as mandated by S. 50(7D) of the Income Tax Ordinance, 1979 ("the Ordinance")---Held, that S. 50(7D) of the Income Tax Ordinance, 1979 provided that " Any person responsible for making any payment by way of profit or interest on bonds, certificates, debentures, securities or instruments of any kind issued by any banking company ... shall deduct advance tax, at the time of making such payment …."---Term 'instrument of any kind', could not, in the context of the S. 50(7D) of the Ordinance be construed in its wider sense, so as to include an 'agreement', or for that matter a finance/loan agreement within its fold as it would be violative of the rule of construction known as ejusdem generis, meaning, 'the same kind or class'---General words could not be read in isolation, their colour and their contents were to be derived from their context and surroundings---Addition of the phrase 'of any kind', to the word `instrument' also was of no avail to the tax department as such purported supplementation could not detach the word 'instrument' from the string of the 'specifics' preceding it---Respondent-company could not, therefore, be held liable under S. 50(7D) of the Ordinance, for not deducting income tax in relation to the finance/loan agreement---Appeal was dismissed accordingly.

A.G. v. Brown [1920] 1 KB 773 ref.

(h) Ejusdem generis, principle of---

----Meaning---Ejusdem generis meant 'the same kind or class', which required that when a general word or phrase followed a list of specifics the former would be interpreted to include only the items of the same class as those listed---Where a word of wider meaning was included in a string of genus describing terms of narrower meaning, the ejusdem generis principle would operate to restrict the meaning of the wider word, so as to keep it within the genus---Ejusdem generis rule was founded upon the idea that if legislature intended a general word to be used in an unrestricted sense, the particular clauses would not have been mentioned.

Bennion "Statutory Interpretation" 1984 Edn. P-536; Manghild (SS) v. Mclntyre Bros & Co. (1920) 2 KB 321, 331; Att. Gen. v. Seccombe (1911) 2 KB 688; Scale v. Pickering (1828) 2 Bing 448 and Bourne v. Norwich Crematorium Ltd. [1967] 1WLR 691, 696 ref.

Irfan Mir Halepota, Advocate Supreme Court for Appellant.

Shahid Hamid, Senior Advocate Supreme Court for Respondent.

2020 P T D 769

[Supreme Court of Pakistan]

Present: Maqbool Baqar, Munib Akhter and Qazi Muhammad Amin Ahmed, JJ

COMMISSIONER INLAND REVENUE, (LEGAL), ISLAMABAD

Versus

Messrs WI-TRIBE PAKISTAN LTD., ISLAMABAD

Civil Petitions Nos. 3317 and 3318 of 2018, decided on 22nd January, 2020.

(Against judgment dated 21.5.2018 passed by the Islamabad High Court, Islamabad in FERA Nos. 11 and 13 of 2015)

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

----S. 3 & Third Sched., Table II, S. No. 2---Federal Excise Duty---Internet service---Transmission of voice content through the internet---Exempted from Federal Excise Duty---All telecommunication facilities availed through the internet were exempted from Federal Excise Duty irrespective of their nature---Internet services/facilities were wholly exempted from Federal Excise Duty---Nothing extraneous could be read into the relevant entry in the Federal Excise Act, 2005 to qualify or restrict such exemption.

(b) Interpretation of statutes---

----Fiscal statute---Fiscal provision of a statute had to be construed liberally in favour of the tax payer.

Dr. Farhat Zafar, Advocate Supreme Court and Ch. Akhter Ali, Advocate-on-Record for Petitioner.

Ayyaz Shaukat, Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Respondent.

2020 P T D 785

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Maqbool Baqar and Faisal Arab, JJ

COMMISSIONER OF INCOME TAX (LEGAL) RTO, ABBOTTABAD

Versus

Messrs ED-ZUBLIN AG GERMANY and another

Civil Appeals Nos. 56 to 63 of 2010, decided on 26th September, 2019.

(Against order dated 25.06.2009 of the High Court of Peshawar, Peshawar passed in Review Petitions Nos. 1 to 8 of 2008)

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

----S. 133---Review petition filed against (tax) Reference decided by the High Court---Power of High Court to convert review petition into an application for correction of clerical error---Scope---In the exercise of its Reference jurisdiction under S. 133 of the Income Tax Ordinance, 2001, the High Court was not vested with jurisdiction to review its own orders---However, in the present case, in the review petition the appellant-tax department merely sought correction about the date of receipt of the Tribunal's order---Relief prayed by the appellant was for the correction of a clerical error, namely, the stamping of the wrong date of receipt of the order of the Tribunal by the mail clerk---Review petition by the appellant may have been treated by the High Court as an application for rectification for the correction of a clerical error---Supreme Court observed that conversion from a review petition to a rectification application ought to have been granted by the High Court in the exercise of its inherent jurisdiction to correct an obvious clerical error.

Muhammad Akram v. DCO Rahim Yar Khan 2017 SCMR 56 ref.

(b) Constitution of Pakistan---

----Arts. 184, 185, 188 & 199---Conversion of one type of proceedings into another---No fetters or bar could be placed on the High Court and or the Supreme Court to convert and treat one type of proceedings into another type.

Muhammad Akram v. DCO Rahim Yar Khan 2017 SCMR 56 and Sher Alam Khan v. Abdul Munim PLD 2018 SC 449 ref.

Babar Bilal, Advocate Supreme Court, Habib Qureshi, Advocate Supreme Court and Naeem Hassan, Secy. (Litigation), FBR for Appellant (in all cases).

M. Munir Paracha, Advocate Supreme Court for Respondents (in C.As. Nos. 56-59 of 2010).

Nemo for Respondents (in C.As. Nos. 60 - 63 of 2010).

2020 P T D 802

[Supreme Court of Pakistan]

Present: Maqbool Baqar and Qazi Muhammad Amin Ahmed, JJ

Messrs ELITE ESTATE (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN through Secretary and others

Civil Petition No. 2168 of 2019, decided on 13th January, 2020.

(Against the judgment dated 17.1.2019 of the Islamabad High Court, Islamabad passed in W.P. No. 671 of 2017)

Income Tax Ordinance (XLIX of 2001)---

----S. 152---Convention for Avoidance of Double Taxation between Pakistan and Egypt, 1995, Arts. 7 & 12.2---Payment for consultancy/technical services provided by foreign non-resident company---Exemption from deduction of withholding tax---In terms of the consultancy agreement executed between the parties, the foreign company was to provide services of professional architects, urban/town planners and engineering consultant for development of infrastructure in Pakistan---Article 12.2 of the Convention for Avoidance of Double Taxation between Pakistan and Egypt, 1995 ('the Convention') provided that fee for technical services was to be taxed in the contracting State in which they arose and in accordance with the laws of that State---Tax payable in the present case was in respect of the consultancy services and not on any business profits, thus, tax-payer could not rely on Art. 7 of the Convention to avoid deduction of withholding tax---Request of the tax-payer for exemption from deduction of withholding tax in respect of the consultancy fee paid or to be paid by it to the foreign company was rightly rejected---Petition was dismissed.

Shahzad Butt, Advocate Supreme Court for Petitioner.

Babar Bilal, Advocate Supreme Court for Respondents.

2020 P T D 814

[Supreme Court of Pakistan]

Present: Maqbool Baqar and Sajjad Ali Shah, JJ

COLLECTOR OF CUSTOMS, APPRAISEMENT (WEST) and others

Versus

Messrs MAROSH and others

Civil Petitions Nos. 841-K, 992-K to 1050-K of 2018, decided on 20th February, 2020.

(Against judgment dated 23.4.2018 of the High Court of Sindh, Karachi passed in C.Ps. Nos. D-7357, 7803, 7816, 8546, 8432, 8167, 8516, 8705, 8135, 8025, 7918, 8246, 8617, 8619, 8245, 8266, 8572, 7515, 7418, 8468, 3007, 7991, 7769 of 2017. 759, 2255, 646, 8882, 8373, 438, 301, 1433, 2357, 2451, 3022, 2439, 1355, 1365, 2617, 2644, 2848, 484, 612, 1703, 743, 676, 09, 1116, 2114, 123, 566, 911, 2180, 1508, 706, 1509, 1216, 1140, 1863 and 1700, 2081 of 2018).

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

----Ss. 18(1) & 18(3)---'Customs duty' and 'regulatory duty'---Distinction---Customs duty was distinct and separate from regulatory duty---Other factors notwithstanding there was no restriction on the government's power to impose regulatory duty on certain goods even when said goods were exempt from customs duty.

Collector of Customs and others v. Ravi Spinning Ltd. and others 1999 SCMR 412 and Indus Trading and Contracting Company v. Collector of Customs (Preventive) Karachi and others 2016 SCMR 842 ref.

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

----S. 18---'Customs duty'---Statutory Regulatory Order (SRO), interpretation of---Language, tone and tenor of the SRO itself would indicate whether the intention therein was to merely exempt the imposition of customs duty, or also to preclude the imposition of future levies.

Collector of Customs and others v. Ravi Spinning Ltd. and others 1999 SCMR 412 and Government of Pakistan and others v. Saif Textile Mills 2003 PTD 335 ref.

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

----Ss. 18(1) & 18(3)---'Customs duty'---Statutory Regulatory Order (SRO), interpretation of --- 'SRO' in question provided that exemptions granted under the said SRO extended to "the whole of customs duties in excess of the rates specified", which meant the benefits accrued under the pertained not only to the imposition of customs duties but also to the imposition of regulatory duties---Petitions were dismissed.

(d) Interpretation of statutes---

----Implied repeal, doctrine of---Scope and meaning---In its traditional formulation, implied repeal doctrine was understood to be a very narrow doctrine that reconciled older and newer enactments by minimally paring back older law where there was no plausible understanding of the laws that could avoid the inconsistency---Courts applied the doctrine of implied repeal rarely because it was limited to reconciling laws that were so "plainly repugnant" to one another that they were incapable of coexisting---Even when faced with plainly incompatible enactments, the doctrine allowed for only the most modest displacement of the earlier law---Onus of establishing the conditions of implied repeal laid on the party asserting that a previous law had been impliedly repealed.

Dr. Foster's case (1614) 77 Eng. Rep. 1222, 1232 (K.B.); Interpretation and application of statutory and constitutional Law 123-24 (New York, John S. Voorhies 1857); Share Gold v. Tanner (2002 76 ALRJ 808); Saraswati v. The Queen 1991 172 CLR 1 and Tanveer Hussain v. Divisional Superintendent Railways PLD 2006 SC 249 ref.

Kafil Ahmed Abbasi, Advocate Supreme Court and Amanat Khan, Dy. Collector (Customs) for Petitioners.

Nemo for Respondents.

2020 P T D 832

[Supreme Court of Pakistan]

Present: Maqbool Baqar, Munib Akhtar and Qazi Muhammad Amin Ahmed, JJ

COLLECTOR OF CUSTOMS, ISLAMABAD

Versus

Messrs ASKARI CEMENT (PVT.) LTD. and others

Civil Petitions Nos. 1882 and 1883 of 2016, decided on 22nd January, 2020.

(Against judgment dated 09.3.2016 passed by the Islamabad High Court, Islamabad passed in Custom Appeals Nos. 13 and 20 of 2003)

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

----S. 18---Dispute relating to classification of imported goods or determination of PCT Heading, resolution of---Resolution of a dispute regarding determination of a PCT Heading involved mixed question of law and facts, and thus exclusively fell within the domain of the customs hierarchy, as envisaged by the Customs Act, 1969---Scheme of the said Act did not envisage any role of the erstwhile Central Board of Revenue (now Federal Board of Revenue) in resolving any dispute relating to the classification of the goods.

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

----Ss. 193 & 223---Officers of customs to follow Board's orders, etc.---Scope---Direction as envisaged by S. 223 of the Customs Act, 1969 could be given in matters falling within the range of the administrative power so long as the field was not occupied by any statutory provision or a rule---Where customs authorities exercises quasi-judicial function, it was not bound by the instructions and directions or orders of the Board which tended to interfere with its judicial discretion---Customs authorities had to make their own decision on the basis of the facts and circumstances and the law applicable to the case---While exercising quasi-judicial functions the appropriate officers of customs were not subject to the administrative control of the Board by means of orders, instructions or directions.

Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232 ref.

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

----S. 223--- Customs General Orders--- Scope---Such orders were only aids to Customs Officers in order to understand and interpret the Customs Act, 1969; they could not override or modify the law.

Dr. Farhat Zafar, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Petitioner.

Sajid Ijaz Hotiano, Advocate Supreme Court and Mehmood A. Sheikh, Advocate-on-Record for Respondents.

2020 P T D 973

[Supreme Court of Pakistan]

Present: Maqbool Baqar, Yahya Afridi and Qazi Muhammad Amin Ahmed, JJ

COLLECTOR OF CUSTOMS

Versus

Messrs BYCO PETROLEUM PAKISTAN and others

Civil Appeals Nos. 1019 to 1021 of 2019, decided on 13th February, 2020.

(Against the judgment dated 02.08.2018 of the High Court of Balochistan, Quetta passed in Customs References Nos. 16, 17 and 18 of 2017)

Customs Act (IV of 1969)---

----S. 19---Tug boats for offloading oil tankers imported for a temporary period of three years---Not exempted from customs duties---S.R.O. 678(I)/2004 issued by the Government of Pakistan, under S. 19 of the Customs Act, 1969, which exempted various machinery, equipment, vessels imported temporarily from payment of customs duty did not cover Tug boats---Tug boats were distinct kind of boats and had been assigned a distinct and separate code heading in the Pakistan Customs Tariff, being PCT Code No. 8904.0000.

Main issue in the present case was whether the Tug boats imported by the respondents fell within the category of various machinery, equipment, vessels etc which were allowed to be imported temporarily without payment of customs duty etc, as enumerated in SRO 678(I)/2004 ('SRO 678') issued by the Government of Pakistan, under section 19 of the Customs Act, 1969. Sub-clause (vii) of Clause (5) of the SRO 678 provided that all petroleum sector companies, corporations and organizations etc. shall be entitled to import certain machinery, vessels, etc. on temporary basis without payment of customs duties. vessels mentioned in the said sub-clause is a "drilling and seismic (on shore or off shore) vessels" and not a Tug boat. Description of the specific vessel mentioned in SRO 678 did not embrace all kinds of vessels and certainly not Tug boats.

The category, purpose, function and classification of Tug boats, or a pusher craft, that were used to push deep sea vessels to the port, were altogether different from "drilling and seismic (on shore and off shore) vessels", which as manifest from their description, were used for the purpose of the drilling and for functions relating to seismology. The PCT Code No. 8904.0000 pertaining to Tug boats and pusher craft did not cover "drilling and seismic (on shore and off shore) vessels, and therefore there could be absolutely no confusion that Tug boats and "drilling and seismic (on shore and off shore) vessels", were two different things, with different codes, purposes and functions.

Tug boats imported by the respondents were not entitled to any exemption from customs duties.

Raja Muhammad Iqbal, Advocate Supreme Court and Ch. M. Javed, C.L. for Appellant.

Waqir Azim, Advocate Supreme Court for Respondents.

2020 P T D 1140

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Faisal Arab and Qazi Muhammad Amin Ahmed, JJ

FEDERAL BOARD OF REVENUE through Chairman, Islamabad and others

Versus

Messrs WAZIR ALI & COMPANY and others

Civil Appeal No. 1460 of 2013 and Civil Petition No. 133 of 2012, decided on 9th March, 2020.

(On appeal against the judgments dated 13.03.2013 and 01.12.2011 passed by the High Court of Sindh Karachi in C.P. No. D-3336 of 2011 and Islamabad High Court, Islamabad in W.P. No.2895 of 2011)

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

----Ss. 4(1), 4A, 74, 114, 115 & Second Sched., Pt. III, Cl. 11---Federal Board of Revenue (FBR) Circular No.11 of 2011 dated 12.9.2011---Government of Pakistan (Revenue Division) S.R.O. No.977(I)/2011 dated 19.10.2011---Surcharge on income tax levied under S. 4A of the Income Tax Ordinance, 2001 [inserted through Income Tax (Amendment) Ordinance (IV of 2011)]---Scope---For the purpose of computing surcharge under S. 4A of the 2001 Ordinance, the entire income tax liability of the tax year 2011 was to be taken into consideration which was then to be proportionately allocated to the 3½ months period and on that figure of proportionate tax liability surcharge was to be calculated.

Federal Board of Revenue (FBR) issued Circular No.11 of 2011 dated 12-09-2011, which stated that the liability of surcharge under section 4A of the Income Tax Ordinance, 2001 (the 2001 Ordinance) was confined to a period of 3½ months (16.03.2011 to 30.06.2011) and the tax liability of the tax year 2011 was to be proportionately allocated to the 3-1/2 month period. This Circular was then followed by the Federal Government's Notification SRO 977(I)/2011 dated 19-10-2011 whereby in exercise of the power conferred by subsection (2) of section 53 of the 2001 Ordinance, Clause (11) was added in Part III of the Second Schedule which read that 'The amount of surcharge payable on the income tax liability for the tax year 2011 under section 4A shall be computed on the proportionate amount of income tax liability for three and a half months.' Respondents (taxpayers) challenged the FBR Circular 12-09-2011 on the grounds that the surcharge could only be computed on that tax liability that exclusively pertained to the income derived in the 3½ months period; that for the purpose of computing surcharge, all payments of advance income tax made at the import stage in the entire tax year 2011 should not be taken into consideration proportionately for the purposes of determining surcharge for the 3½ months period and the advance income tax paid in the said 3½ months period only could have been considered.

Held, that section 4A of the 2001 Ordinance, started with the phrase 'Subject to this Ordinance', which clearly pointed out that it did not have any overriding effect, hence, it could not be in derogation of any provision of the 2001 Ordinance. The whole of the 2001 Ordinance envisaged that the income tax liability was to be determined on the basis of taxable income that was derived or legally presumed to have been derived in a whole tax year and not any part of it. Therefore, even for the purpose of computing surcharge under section 4A of the 2001 Ordinance, the entire income tax liability of the tax year 2011 was to be taken into consideration which was then to be proportionately allocated to the 3½ months period and on that figure of proportionate tax liability surcharge was to be calculated. This was so as no provision of the 2001 Ordinance allowed splitting of a tax year into two periods for the purposes of determining two separate taxable incomes of the same tax year and then on the income of one such period tax liability was to be computed. If that was done, it would be in derogation of the provisions of the 2001 Ordinance itself, more specifically sections 4(1), 74, 114 and 115 of the 2001 Ordinance.

Section 4(1) of the 2001 Ordinance, clearly provided that income tax liability was to be determined for the entire period of a tax year not any part of it and tax year was specifically defined in section 74 of the 2001 Ordinance which meant a period of twelve months.

Even in cases where payment of advance tax becomes a person's final tax liability and he was required to file only a statement of income under section 115 of the 2001 Ordinance, that statement too had to be with regard to the tax year and not any part of it. Whatever method of computing taxable income was applicable to a person, either at the rates specified in the Schedule to the 2001 Ordinance or the advance tax deductions becoming his final tax liability, one thing was certain that income tax liability was determined on the actual or presumptive income of the whole tax year. Therefore, in cases where advance tax deduction made on the basis of value of goods imported by a person was considered to be his final tax liability, the legally presumed taxable income of such a person would be the total value of goods imported in a given tax year.

Whole basis for computing surcharge even for 3-1/2 months period should be the income tax liability that was determined for the entire tax year, 2011 and then such tax liability was to be proportionately allocated for the 3-1/2 months period for the purposes of computing surcharge without determining two separate taxable incomes of the same tax year and then working out tax liability of 3-1/2 months separately for the purposes of computing surcharge. In other words, there could not be separate determination of taxable income for 8-1/2 months period (from 1st July to 15th March) for which accounting was to be separately done and then a separate accounting was done for the remaining 3-1/2 months period (from 16th March to 30th June) and on the basis of taxable income emerging for the 3-1/2 months period, income tax liability was computed and on that surcharge payable under section 4A of the 2001 Ordinance was calculated. Petition for leave to appeal was converted into appeal and allowed.

(b) Constitution of Pakistan---

----Art. 185(3)---Limitation Act (IX of 1908), S. 5---Petition for leave to appeal time barred---When a common question of law was decided in one case, another case involving the same point that was time barred was liable to be heard on merits.

Mehreen Zaibun Nisa and others v. Land Commissioner, Multan and others PLD 1975 SC 397 and Province of Punjab v. Muhammad Tayyab 1989 SCMR 1621 ref.

Abdul Hameed, Advocate Supreme Court for Appellants/ Petitioners (in C.A. 1460/2013).

Babar Bilal, Advocate Supreme Court for Appellants/Petitioners (in C.P. 133/2012).

Masood Akhtar, Chief Legal Officer, FBR.

Nemo for Respondent No. 1 (in C.A. 1460/2013).

Respondents Nos. 2 to 4 (in C.A. 1460/2013) Ex parte.

M. Raheel Kamran Sh, Advocate Supreme Court for Respondents Nos. 1 to 13 (in C.P. 133/2012).

2020 P T D 1157

[Supreme Court of Pakistan]

Present: Manzoor Ahmad Malik, Syed Mansoor Ali Shah and Amin-ud-Din Khan, JJ

HAMID ASHRAF (LATE) through L.Rs. and others

Versus

COMMISSIONER INLAND REVENUE, LAHORE

Civil Petitions Nos. 283-L to 286-L of 2018, heard on 5th March, 2020.

(On appeal from the order of Lahore High Court, Lahore dated 21.11.2017 passed in Income Tax References Nos. 304 to 307 of 2014)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 171 (Explanation) & 171(2)(c)---Tax refund---Due date---Additional payment or compensation for delayed refund---For the purposes of compensation, tax refund became due from the date of the refund order and not from the date of deemed assessment under S. 120 of the Income Tax Ordinance, 2001.

Explanation to section 171 of the Income Tax Ordinance, 2001 ('the Ordinance') provided that for the purposes of compensation, tax refund becomes due from the date of the refund order and not from the date of deemed assessment under section 120. In other words, the mechanism of refund under the Ordinance, worked on the basis of a refund order passed on an application for refund filed by tax payer and duly scrutinized by the Commissioner and was not payable simply on the basis of the deemed assessment under section 120. The scheme of refund provided under the statute overrode the deeming provision of section 120. Deemed assessment under section 120 was, therefore, not a substitute for a refund order. It appeared, as if the return of tax or refund by the Exchequer to a taxpayer required scrutiny by the Commissioner and could not be deemed to be an amount outstanding in favour of the taxpayer. The taxpayer was free to apply for refund under section 170, immediately after the filing of the tax return or the deemed assessment. Section 170 provided a fast-tracked mechanism for refund as it specified time for the passing of a refund order and the remedy of appeal in case of failure to pass any such order. Other than this fast-track refund mechanism there was no scheme of automatic refund on the basis of the deemed assessment as was made amply clear by the Explanation to section 171 of the Ordinance.

Explanation to section 171 of the Ordinance enjoyed retrospective effect because its purpose was "removal of doubt" besides supplying necessary statutory "clarification." However, the retrospective operation of the Explanation shall not affect past and closed transactions where the benefit of refund and compensation had already been extended to the taxpayer on the basis of deemed assessment under section 120.

In the present case, the applications for refund filed by the petitioner-taxpayer under section 170 were taken up by Assistant Commissioner Inland Revenue in the year 2010 and initially rejected. After remand of the matter by Commissioner Inland Revenue (CIR) (Appeals), the Deputy Commissioner Inland Revenue (DCIT) passed refund order on 22-03-2013. The matter remained under litigation between the department and the taxpayer, and refund order was passed on 23-03-2013, rather than 15-02-2011, when the CIR (Appeals) simply remanded the matter to the DCIT to decide the same afresh. Therefore, the date of refund order passed by DCIT i.e., 22-03-2013 would be the date when the refund became due as per section 171(2)(c) [instead of section 171(2)(a)] of the Ordinance.

Shahbaz Butt, Advocate Supreme Court along with Iqbal Hashmi, Advocate Supreme Court for Petitioners (in all cases).

Mian Yousaf Umer, Advocate Supreme Court along with Imtiaz A. Shaukhat, Advocate-on-Record for Respondent (in all cases).

2020 P T D 1355

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Faisal Arab and Yahya Afridi, JJ

COLLECTOR OF CUSTOM FBR and another

Versus

Messrs FITTER PAKISTAN (PVT.) LTD.

Civil Appeals Nos. 1077 and 1078 of 2011, decided on 25th February, 2020.

(On appeal against the judgments dated 21.09.2010 and 26.7.2010 passed by the High Court of Sindh, Karachi in C.Ps. Nos. D-1547 of 2009 and D-252 of 2009)

Interpretation of statutes---

----Taxing statute---Provision providing for exemption from taxation---Scope---Assessee/taxpayer must bring his case within the terms of the exemption, which were to be read strictly because the exemption operated as an exception from the general rule regarding the burden of taxes--- Exemptions were an exception to the general liability imposed by a tax, therefore when an exempting provision was susceptible to two interpretations, the one going against the tax payer was preferred.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652 and Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs Circle Sheikhupura and others PLD 1988 SC 370 ref.

Raja Muhammad Iqbal, Advocate Supreme Court for Appellants (in both cases).

Qadir Hussain Sayed, Senior Advocate Supreme Court for Respondent No. 1 (in both cases).

Ex parte for Respondent No. 2.

2020 P T D 1383

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Faisal Arab and Yahya Afridi, JJ

COMMISSIONER INLAND REVENUE LEGAL DIVISION, RTO III KARACHI

Versus

YASMEEN BANO and 3 others

Civil Appeals Nos. 656 to 659 of 2011, decided on 24th February, 2020.

(On appeal from the judgment/order dated 24.12.2010 of the High Court of Sindh, Karachi passed in W.T.R.As. Nos. 27 to 30 of 1998)

(a) Wealth Tax Act (XV of 1963)---

----Ss. 25(1) & 25(2) [since omitted]---Power of Commissioner to revise orders of subordinate authorities---Limitation period---Scope---Whether in the absence of a limitation period prescribed under S. 25(2) of the Wealth Tax Act, 1963 ('the Act') the said omission could be supplied with reference to the limitation period under S. 25(1) of the Act---Held, that S. 25(1) of the Act provided a revisional remedy to the assessee for obtaining an order that was not prejudicial to his interest---Prescribed limitation period for invoking said remedy was one year---On the other hand, S. 25(2) of the Act (since omitted) conferred a suo motu power on the Commissioner to revise orders in the interest of the revenue for which no limitation period was prescribed in the Act---Thus, Ss. 25(1) & 25(2) of the Act served different purposes---Purpose of S. 25(2) was to protect the interest of the revenue and to prevent wealth from escaping assessment---Same purpose was also served by Ss. 17A & 17B of the Act, and the limitation period for both said sections was four years---In particular S. 17B , which was almost a verbatim copy of S. 25(2) provided for the exercise of suo motu revisional power by the Inspecting Additional Commissioner to protect the interest of the revenue---Section 25(2) was only omitted from the Act in the year 1992 after S. 17B was inserted into the Act---Section 17B was then the successor to S. 25(2), therefore, it was only logical that the limitation period governing section 17B, i.e. four years, should also govern S. 25(2) of the Act.

(b) Interpretation of statutes---

----Limitation period---Statute not providing any limitation period---When a statute was silent about limitation, a reasonable time limit was to be supplied by the Court---In carrying out such exercise, no general standards could be set out, and such time was and shall be dependant again on the purpose of the law to be achieved by an act or function to be performed.

Federal Land Commission through Chairman v. Rais Habib Ahmed and others PLD 2011 SC 842 ref.

Riaz Hussain Azam, Advocate Supreme Court along with Mansoor Akhtar, Chief Legal for Appellant.

M. Saleem Thepdawala, Advocate Supreme Court for Respondents (in C.As. Nos. 656-657 of 2011).

2020 P T D 1390

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Faisal Arab and Qazi Muhammad Amin Ahmed, JJ

COMMISSIONER INLAND REVENUE (ZONE-I), KARACHI

Versus

Messrs FAISAL BANK LIMITED

Civil Appeals Nos. 573 and 574 of 2013, decided on 9th March, 2020.

(On appeal from the judgment/order dated 06.12.2012 of the High Court of Sindh, Karachi passed in ITR Nos. 517 and 518 of 2010)

Income Tax Ordinance (XLIX of 2001)---

----S. 29---Income Tax Ordinance (XXXI of 1979) [since repealed[, S. 23(1)(x)---Bad debts---Writing off---Circumstances when debts claimed by an assessee may reasonably be believed as irrecoverable and therefore be classified as bad debts---Reasonableness test---Scope---Held, that it was not a matter of discretion for the assessee to decide what a bad debt was; rather the assessee had to establish reasonable grounds showing that having taken the requisite lawful steps for recovery of the outstanding debts, the same were not recoverable in the foreseeable future---Classification of a bad debt was not left to the discretion of the taxpayer; it must be demonstrated by the securities and the bona fide measures taken by the taxpayer to secure repayment of the outstanding debt---If in a subsequent tax year recovery of a bad debt was effected then the same was taxable as income.

Commissioner of Income Tax v. National Bank of Pakistan, Karachi PLD 1976 Kar. 1025 ref.

Commissioner of Income Tax (Legal), Islamabad v. Askari Commercial Bank Limited, Rawalpindi 2018 PTD 1089 distinguished.

Dr. Farhat Zafar, Advocate Supreme Court and Masood Akhtar, Chief Legal (FBR) for Appellant.

Ijaz Ahmed Zahid, Advocate Supreme Court for Respondent.

2020 P T D 1398

[Supreme Court of Pakistan]

Present: Umar Ata Bandial, Faisal Arab and Qazi Muhammad Amin Ahmed, JJ

CHAKLALA CANTONMENT BOARD, RAWALPINDI through Executive Officer

Versus

AHMAD KAMAL NASIR and others

Civil Appeals Nos.136 of 2011, 504 to 506 of 2013 and 28 of 2014, decided on 12th March, 2020.

(Against the judgments dated 30-11-2010, 29-01-2013 and 12.09.2013 of the Lahore High Court, Rawalpindi Bench, Rawalpindi and Peshawar High Court, Abbottabad Bench, Abbottabad passed in W.Ps. Nos.1525/2009, 275/2009, 610/2008, 544/2008 and 163-A/2008).

Cantonments Act (II of 1924)---

----S. 60---Stamp Act (II of 1899), S. 27-A---Sale of immoveable property located in Cantonment Board---Transfer of immoveable property tax ('TIP Tax'), assessment of---Whether for purposes of 'TIP Tax', the Cantonment Board had authority to determine value of property, without recourse to valuation tables notified by District Collector---Held, that S.60 of the Cantonments Act, 1924 did not provide any authorization allowing Cantonment Board to unilaterally determine the value of the immovable property that was transacted by a sale deed---For such purpose an authorization in terms similar to S.27-A of the Stamp Act, 1899 would be necessary because desired determination involved placing a financial burden on an assessee and affected the quantum of the tax chargeable from him---Cantonment Boards were unable to show the legal mechanism providing the procedure, basis and criteria on which the Cantonment Boards purportedly fixed the market value of the property under sale for the purpose of assessing TIP Tax---Process of valuation of immoveable property undertaken by the Cantonment Board was dependent upon its whim or surmise---More importantly, the Cantonment Board purported to charge TIP Tax on the basis of a value fixed higher than the value of the immovable property under sale that was fixed by the respective District Collectors for the collection of provincial stamp duty, registration fee and Federal Capital Value Tax---Supreme Court observed that without express sanction of the law, the Cantonment Boards, that were statutory bodies, were assuming a sale value of immovable property which was divergent from its common/single sale value accepted by both the Provincial and the Federal authorities in respect of the same transaction; that such lack of coordination between the Cantonment Boards and the Provincial and Federal authorities created public inconvenience apart from demonstrating executive disorder---Appeals filed by Cantonment Boards were dismissed.

Sh. Waqar-ul-Haq, Advocate Supreme Court, Mehmood A. Sheikh, Advocate-on-Record and Syed Rifaqat Hussain Shah, Advocate-on-Record for Appellants (in C.As. Nos.136/2011 and 504 to 506/2013).

Agha Muhammad Ali, Advocate Supreme Court and Syed Rifaqat Hussain Shah, Advocate-on-Record for Appellants (in C.A. No.28 of 2014).

Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in C.A. No.136 of 2011).

Nemo for Respondents (in C.As. Nos.504/2013 and 28/2014).

Ex parte: (In C.As. Nos. 505 and 506/2013).

2020 P T D 1657

[Supreme Court of Pakistan]

Present: Manzoor Ahmad Malik, Syed Mansoor Ali Shah and Qazi Muhammad Amin Ahmed, JJ

COMMISSIONER OF INLAND REVENUE, LEGAL DIVISION, LAHORE and others

Versus

Messrs RAFEH LIMITED

Civil Petitions Nos. 310-L to 314-L of 2017, 741-L, 742-L, 752-L, 782-L to 784-L of 2019, 979-L of 2019, 2557-L of 2018, 3119-L of 2017, 3747-L of 2019 and 3749-L of 2019, decided on 15th July, 2020.

(On appeals from the orders of Lahore High Court, Lahore dated 14.12.2016, passed in PTR Nos.414 to 418 of 2010, dated 19.09.2017 in PTR No.174 of 2009, dated 31.10.2016 in PTR No.147 / 2007, dated 23.11.2016 in PTR No.311/2008, dated 06.12.2016 in PTR Nos. 450 and 451 of 2012, dated 23.11.2016 in PTR No. 425 of 2012, dated 23.11.2016 in I.T.As. Nos. 01, 02, 03 of 2001, dated 12.09.2018 in PTR No.282/2004, dated 12.06.2018 in PTR No.281 of 2004, dated 12.09.2018 in PTR No. 194 of 2007).

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

----S.133(1)---Tax Reference/Application filed before the High Court under S.133(1) of the Income Tax Ordinance, 2001---Nature and scope---Application under S.133(1) of the Income Tax Ordinance, 2001, also referred to as a "Tax Reference", was in effect an appeal and it must be construed as such---Misimpression and confusion that a Tax Reference invoked advisory jurisdiction of the High Court and therefore the High Court was bound to answer the question of law brought before it was a misconception and should be dispelled.

Messrs Squibb Pakistan Pvt. Ltd. and another v. Commissioner of Income Tax and another 2017 SCMR 1006 ref.

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

----S. 133(1)---Limitation Act (IX of 1908), First Sched. Art. 168---Tax Reference/Application filed before the High Court under S.133(1) of the Income Tax Ordinance, 2001 ('the Ordinance')---Dismissal for non-prosecution---Application for restoration of the Tax Reference / Application, limitation for---Since Reference/Application under S.133(1) of the Ordinance was in effect an appeal, Art. 168 of the First Schedule of the Limitation Act, 1908 was fully applicable and provided 30 days as the period of limitation for readmission or restoration of an appeal dismissed for want of prosecution.

Messrs Squibb Pakistan Pvt. Ltd. and another v. Commissioner of Income Tax and another 2017 SCMR 1006 ref.

Sajid Ijaz Hotian, Advocate Supreme Court for Petitioners (in C.Ps. Nos.310-L to 314-L of 2017).

Imtiaz A. Shaukat, Advocate-on-Record and Ibrar Ahmad, Advocate Supreme Court for Petitioners (in C.P. No.3119-L of 2017).

Imtiaz A. Shaukat, Advocate-on-Record and Mian Yousaf Umar, Advocate Supreme Court for Petitioners (in C.Ps. Nos.2557-L of 2018, 9797-L of 2019, 741, 742, 752, 782 to 784-L of 2019).

Ch. Muhammad Zafar Iqbal, Advocate Supreme Court for Petitioner (in C.Ps. Nos. 3747 and 3749-L of 2019).

Amir Umer Khan, Advocate Supreme Court for Respondents (in C.Ps. Nos.741, 742-L, 782 and 783-L of 2019).

M. Iqbal Hashmi, Advocate Supreme Court (in C.Ps. Nos.3749-L of 2019 and 782 to 784-L of 2019).

2020 P T D 1790

[Supreme Court of Pakistan]

Present: Umar Ata Bandial and Munib Akhtar, JJ

The COMMISSIONER INLAND REVENUE, ZONE-III, RTO-II, LAHORE

Versus

Messrs HAMZA NASIR WIRE and others

Civil Petition No. 398-L of 2018 along with Civil Petitions Nos. 584-L, 671-L to 675-L, 774-L, 775-L, 812-L, 815-L, 911-L, 912-L, 913-L, 919-L, 984-L, 985-L, 1005-L, 1148-L, 1684-L, 1688-L TO 1690-L, 1729-L, 1796-L, 1812-L, 1821-L to 1827-L, 1850-L to 1854-L, 1859-L, 1860-L, 1878-L, 1887-L, 2038-L, 2085-L, 2086-L, 2090-L, 2091-L, 2129-L and 3480 of 2018, decided on 20th November, 2018.

(On appeal from the judgments/orders passed by Lahore High Court, Lahore dated: 08.12.2017 passed in W.Ps. Nos.37295 of 2016, 77996, 113697, 92863, 104518 of 2017, 29.03.2018 passed in W.P. No.187666 of 2018, 19.04.2018 passed in I.C.As. Nos.192176, 192180, 192217, 183611 of 2018, 11.05.2018 passed in W.Ps. Nos.201969, 205022 of 2018, 11.06.2018 passed in W.Ps. Nos.212424, 218052, 215434 of 2018, 12.06.2018 passed in W.P. No.217297 of 2018, 13.12.2018 passed in W.Ps. Nos.89391, 97850 of 2017, 18.12.2017 passed in W.P. No.121977 of 2017, 22.12.2017 passed in W.P. No. 28023, 21680, 96042, 97089, 97184 of 2017, 22.09.2017 passed in W.P. No. 34945 of 2017, 13.02.2018 passed in W.P. No.158509 of 2018 27.02.2018 passed in W.P. 123944 of 2017, 152517, 152606, 166893 of 2018, 01.03.2018 passed in W.Ps Nos.21606 of 2012, 12.03.2018 passed in W.P. No.122208 of 2018, 19.04.2018 passed in I.C.As. Nos.183611, 192187, 192191, 201079 of 2018, 07.06.2018 passed in I.C.As. Nos.218132, 218135, 218129 of 2018, 11.06.2018 passed in I.C.As. Nos.218125, 218127, 217617 of 2018, 25.06.2018 passed in I.C.As. Nos.218128, 218134, 218137, 218131 of 2018, 26.06.2018 passed in I.C.A. No.220510 of 2018, 28.06.2018 passed in I.C.As. Nos.222208, 222316 of 2018)

Sales Tax Act (VII of 1990)---

----Ss. 11(3), 30(1), 30(3) & 31---Non-payment or short payment of sales tax---Commissioner Inland Revenue ('CIR') authorizing his subordinate Officers of Inland Revenue ("OIRs") to exercise their powers and perform their functions as conferred by the Sales Tax Act, 1990 ("Act") and its subordinate Rules---Legality---Show-cause notices issued to taxpayers for non-payment or short payment of sales tax by 'OIRs' namely, Deputy Commissioners of Inland Revenue ("DCIRs") and Assistant Commissioners of Inland Revenue ("ACIRs")---Legality---Plain reading of Ss. 2(18), 30 & 31 of the Act, made it clear that all OIRs appointed by the Federal Board of Revenue (FBR) could only exercise the powers and discharge the duties vested in them by the Act; these included the powers and duties of their subordinate officers---Accordingly, after designating the posts of OIRs including the respective delineation of their territorial and personal jurisdiction by the FBR and the CIRs, the appointed OIRs performed and exercised the functions, powers or duties vested in them by the Act---Neither the FBR nor the CIR had authority under the Act to select or limit the functions, powers and duties that may be exercised by their subordinate OIRs---All OIRs of different grades appointed under S. 30(1) of the Act possessed the power to issue show cause notices under S. 11 of the Act---Exercise of such powers by the OIRs formed a part of their functions under the Act---Consequently, the impugned show-cause notices were issued by the OIRs competently under S.11(3) in aid of proceedings commenced for recovery of tax.

Show-cause notices were issued to the respondent-taxpayers under Section 11(3) of the Sales Tax Act, 1990 ("Act") by Officers of Inland Revenue ("OIRs"), namely, Deputy Commissioners of Inland Revenue ("DCIRs") and Assistant Commissioners of Inland Revenue ("ACIRs"). The notices alleged non-payment or short payment of sales tax by the respondent-taxpayers during the tax periods mentioned therein. Federal Board of Revenue ("FBR") vide notification dated 21.07.2016 ("Notification-I") appointed eight Commissioners of Inland Revenue ("CIRs") heading different Zones functioning under the Corporate Regional Tax Office, to exercise powers and perform functions as conferred under the Act and the Rules made thereunder. Rather than exercising such powers themselves, inter alia, the Commissioner of Inland Revenue, Zone-III, RTO-II ("CIR"), vide notification dated 01-08-2016 ("Notification-II") authorised his subordinate OIRs, to exercise their powers and perform their functions as conferred by the Act and its subordinate Rules in relation to specified cases or classes of cases of tax payers falling within their territorial jurisdictions. By way of impugned judgment the High Court held that "Notification-II" by the CIR delegated the powers that had been assigned to him by the FBR vide "Notification-I". Such delegation by the CIR under the subsequent "Notification-II" to the OIRs constituted sub-delegation without the sanction of law. Therefore, in the presence of "Notification-I" whereunder the CIR was himself a delegate of the FBR, the further delegation of powers and functions by the CIR through "Notification-II" in favour of his nominated subordinate OIRs was unlawful and void. This rendered the latter "Notification-II" issued by the CIR and the impugned show cause notices issued by the OIRs (DCIRs and ACIRs) to be of no legal effect.

From a close reading of section 30 of the Act, it became clear that the said provision vested the FBR with the exclusive power to appoint OIRs while also conferring a concurrent power on the FBR and CIRs to delineate the territorial (area) and personal (persons or classes of persons) jurisdiction of OIRs. Such powers were granted to the FBR by virtue of section 30(1) of the Act and to the CIRs by section 30(3) of the same. Primary purpose of section 30 of the Act was to ensure a smooth and efficient working of the OIRs operating under the Act. It did not vest the FBR or the CIRs with any authority to confer functions and powers on the OIRs as they deemed fit.

Plain reading of sections 2(18), 30 and 31 of the Act, made it clear that all OIRs appointed by the FBR could only exercise the powers and discharge the duties vested in them by the Act. These included the powers and duties of their sub-ordinate officers. Accordingly, after designating the posts of OIRs including the respective delineation of their territorial and personal jurisdiction by the FBR and the CIRs, the appointed OIRs performed and exercised the functions, powers or duties vested in them by the Act. Neither the FBR nor the CIR had authority under the Act to select or limit the functions, powers and duties that may be exercised by their sub-ordinate OIRs.

All OIRs of different grades appointed under section 30(1) of the Act possessed the power to issue show cause notices under section 11 of the Act. Consequently, the impugned show cause notices were issued by the OIRs competently under section 11(3) in aid of proceedings commenced for recovery of tax.

In the impugned judgment of the High Court it had wrongly been assumed that simply because the FBR in exercise of its authority under Section 30(1) of the Act had assigned territorial and personal jurisdiction to CIRs for the exercise of their functions and powers under the Act, the latter were prevented from exercising their statutory power under Section 30(3) of the Act. The impugned judgment did not give any reasons for such a reading of section 30(1) and (3) of the Act. In fact, on a perusal of section 30(3) it became clear that the said provision operated independently of section 30(1) of the Act. Nowhere does section 30(3) restrain the CIRs from delineating the territorial and personal jurisdiction of their subordinate OIRs. The conferment of power under section 30(3) on the CIRs was meant to efficiently organise the team of officers subordinate to them.

By disallowing distribution of functions by the CIR, the impugned judgment expected all such functions to be performed by the CIR himself. Apart from rendering the subordinate OIRs redundant, the other immediate consequence of the impugned judgment was that the CIR was disabled from exercising his administrative and supervisory functions under the Act.

The impugned judgment incorrectly assumed that by specifying the limits of the territorial and personal jurisdiction of CIRs in "Notification-I", the FBR had assigned its own powers and functions to the CIRs. The distribution and assignment of functions was undertaken by the FBR in the exercise of its statutory power under section 30(1) of the Act which provision did not contemplate the delegation of any of the FBR's own powers.

The FBR did not derive its power of assessment or recovery of tax from section 11 of the Act. Equally, the Act did not provide for the delegation of FBR's powers to CIRs nor did Notification-I expressly or impliedly delegate any powers of the FBR to the CIRs. As there had not been any delegation of its powers by FBR to CIRs, therefore, the finding of sub-delegation in the impugned judgment was merely an illusion.

In the present case since there could not have been any delegation of the power of issuance of show cause notice in relation to assessment and recovery of tax by the FBR, which was actually conferred upon the OIRs by section 11 of the Act, it was plain that the exercise of such powers by the OIRs formed a part of their functions under the Act. Accordingly, the view that "Notification-I" was the only source of vesting of powers in OIRs was incorrect. Such view overlooked the effect of section 31 of the Act and the proper meaning of the term 'functions' used in section 30(2A) to (3) of the Act. Petitions for leave to appeal were converted into appeals and allowed and impugned judgment of the High Court was set-aside.

Ibrar Ahmed, Advocate Supreme Court, Sarfraz Ahmed Cheema, Advocate Supreme Court, Ch. Muhammad Zafar Iqbal, Advocate Supreme Court, Mrs. Kausar Parveen, Advocate Supreme Court, Dr. Tariq Masood, Member Legal FBR and Dr. Ishtiaq Ahmad, Director Legal for Petitioner.

M. Ajmal Khan, Advocate Supreme Court for Respondents (in C.Ps. Nos. 671-L, 672-L, 675-L and 815-L of 2018).

Syed Rifaqat Hussain Shah, Advocate-on-Record for Respondents (in C.Ps. No. 3480 of 2018).

Imtiaz Rashid Siddiqui, Advocate Supreme Court and Shehryar Kasuri, Advocate Supreme Court for Respondents (in C.P. No. 2091-L of 2018).