M.Z. INTERNATIONAL VS The ASSISTANT COMMISSIONER INLAND REVENUE AUDIT-5, 2016 PTD-LAHORE-HIGH-COURT-LAHORE 358 (2015)

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

----Ss. 11(4) & 36(3)---Order-in-original---Nature---Limitation prescribed by Ss. 11(4) & 36(3) of Sales Tax Act, 1990---Delay of 175 days---Effect---Show-cause notice was issued on 11-5-2009 and order-in-original was passed on 31-5-2010---Validity---Law required passing of order-in-original within 120 days excluding extended period---Period prescribed by Ss. 11(4) & 36(3) of Sales Tax Act, 1990 for completion of adjudication proceedings was mandatory and not directory---Order in the present case was passed with inordinate delay of 175 days even after excluding period of 30 days for adjournment taken by taxpayer and period of 60 days for extension granted by Department---Extension of time for adjudication granted by Department on 10-5-2010 was patently time barred as limitation provided in S. 36(3) of Sales Tax Act, 1990 had already expired---Department had not shown any reasonable justification for such delay in adjudication---Order-in-original dated 31-5-2010 was hit by time limitation as provided in Ss.11(4) & 36(3) of Sales Tax Act, 1990---Order-in-Original was set aside---Constitutional petition was allowed, in circumstances.

Messrs Hanif Straw Board Factory through Proprietor v. Additional Collector (Adjudication), Customs, Central Excise and Sales Tax, Gujranwala and others 2008 PTD 578 and Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. through Chief Executive v. Collector of Sales Tax, Gujranwala and another 2008 PTD 60 rel.

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

----S. 36(3)---Order of recovery of tax not levied or short levied---Limitation---Order under S. 36(3) of Sales Tax Act, 1990 must be passed within period prescribed in proviso to S. 36(3) of Sales Tax Act, 1990.

Messrs Meraj Din v. Collector Customs, Excise and Sales Tax (Appeals), Lahore and others 2009 PTD 2004; Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and others 2009 PTD 762; 2009 PTD 1978; Messrs Hanif Straw Board Factory through Proprietor v. Additional Collector (Adjudication), Customs, Central Excise and Sales Tax, Gujranwala and others 2008 PTD 578 and Messrs Pakistan Ordnance Factories (POF) Wah, Cantt v. Collector of Customs, Sales Tax and Central Excise Adjudication), Islamabad and others 2012 PTD 1016 rel.

(c) Limitation---

---Government departments could not be put at higher pedestal in matter of limitation, rather they were supposed to act within statutory period.

(d) Constitution of Pakistan---

----Art. 199---Constitutional jurisdiction of High Court---Scope---Alternate remedy---Effect---When an impugned order suffered from want of jurisdiction and was void ab-initio then writ was competent despite availability of alternate remedies.

Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd and others 2009 SCMR 1279 = 2009 PTD 1392 rel.

M.M. Akram for Petitioner.

Ms. Kausar Parveen for Respondents.

Date of hearing: 3rd September, 2015.

JUDGMENT

MUHAMMAD SAJID MEHMOOD SETHI, J.---This writ petition is directed against the show cause notice ("SCN") dated 11.05.2009 and Order-in-Original No. 04/2010 dated 31.05.2010 passed by respondent No.1/Assistant Commissioner Inland Revenue Audit-05, on the basis of said SCN issued by Deputy Collector (Adjudication).

2.Brief facts, as narrated in this writ petition, are that petitioner is an individual engaged in the business of manufacture / import / export of cutlery items, who claimed the refund amounting to Rs. 222,847/- for the tax period of December 2006 in accordance with the Sales Tax Refund Rules, 2002. The Processing Officer, after verifying the genuineness and admissibility of the refund claimed, issued the Refund Processing Order (RPO) bearing No. 7159 dated 11.05.2007. After lapse of two years, the Deputy Collector (Adjudication) issued the SCN dated 11.05.2009 under Sections 11(2) and 36(1) of the Sales Tax Act, 1990, ("Act") and called upon the petitioner as to why the sales tax refund of Rs.222,847/- besides additional tax and penalty should not be recovered from them which was allegedly issued on the basis of fake invoices. Petitioner filed reply dated 02.07.2009 to the said SCN. After hearing the arguments, the Assistant Collector (Adjudication), proceeded to pass the Order-in-Original No.04/2010 dated 31.05.2010. Through the instant petition, the petitioner has sought the following relief from this Court:--

"Under the facts and in the circumstances of the case, it is, therefore, respectfully prayed that the impugned show cause notice dated 11.05.2009 may graciously be declared void ab-initio, illegal, without jurisdiction and of no legal effect.

It is further prayed that the Order-in-Original No.04/2010 dated 31.05.2010 on the basis of the show cause notice dated 11.05.2009 may also kindly be declared illegal and without jurisdiction.

Any other relief deems fit and appropriate may graciously be granted to the petitioner."

3.Learned counsel for petitioner submits that the SCN was issued on 11.05.2009 and the Order-in-Original was passed on 31.05.2010, i.e. after the expiry of 120 days as envisaged in Section 36(3) of the Act, therefore, the order passed after the statutory period, is without jurisdiction. Learned counsel has placed reliance in this regard on Messrs Super Asia Mohammad Din Sons (Pvt.) Ltd v. The Collector of Sales Tax, Gujranwala, and another 2008 PTD 60 and Messrs Hanif Straw Board Factory through Proprietor v. Additional Collector (Adjudication), Customs, Central Excise and Sales Tax, Gujranwala and others (2008 PTD 578). Further submits that the SCN dated 11.05.2009 issued by Deputy Collector (Adjudication) is void ab-initio, illegal and without jurisdiction, as under section 45 of the Act the Deputy Collector has only the power to adjudicate those cases where the amount of tax involved or the amount erroneously refunded exceeds one million rupees, but does not exceed two and a half million rupees, whereas in the instant case, the amount of sales tax involved is Rs. 222,847/- which is less than the lower limit i.e. one million rupees, the pecuniary jurisdiction of the Deputy Collector envisaged in section 45 for adjudication of the case. Adds that when the basic SCN is void ab-initio, the subsequent Order-in-Original No. 04/2010 dated 31.05.2010 automatically falls to ground.

4.On the other hand, learned legal advisor for respondents submits that the refund claim amounting to Rs.222,847/- sanctioned vide Refund Processing Order No.7159 dated 11.05.2007 was obtained by the petitioner against fake and flying invoices in violation of the provisions of law as well as relevant refund rules. Adds that the SCN dated 11.05.2009 has been issued by the Deputy Collector (Adjudication) in accordance with the relevant provisions of the Act. Further contends that provisions of section 32 of the Act also prescribe delegation of powers. Further contends that the adjudicating authority, under the provisions of Section 74 of the Act sought extension in time limitation for adjudication from the competent authority vide letter No. ST/AC/Adj/Grw/248/09 dated 27.03.2010 and the extension was granted up to 31.05.2010 vide letter No. 4(11)S(L-IDT)10 dated 10.05.2010. Further submits that the instant petition is not maintainable and the judgments quoted by the petitioner are not relevant in the instant petition.

5.I have heard the arguments of learned counsel for the parties and perused the record.

6.Respondent No.1 vide his aforementioned letter dated 27.03.2010, admitted that the time limitation for adjudication of 120 days and further extended period of 60 days, has been expired on 07.12.2009. Detail mentioned in the said letter is reproduced as under:

7.Admittedly, the SCN was issued on 11.05.2009 and the Order-In-Original was passed on 31.05.2010. Law required passing of such order within 120 days excluding extended period but it has been passed with inordinate delay of 175 days even after excluding the period of 30 days for adjournment taken by the petitioner, and period of 60 days for extension granted by the Commissioner. Extension of time limitation for adjudication granted by Federal Board of Revenue on 10.05.2010 was patently time barred as limitation provided in section 36(3) had already expired. Authority has not shown any reasonable justification for such delay in adjudication. The Order-in-Original dated 31.05.2010 is hit by time limitation as provided in sections 11(4) and 36(3) of the Act. It is well settled that the period prescribed by the above provisions for completion of adjudication proceedings is mandatory and not directory. In this regard, reference can be made to the following observations of this Court passed in Messrs Super Asia Muhammad Din Sons (Pvt.) Ltd. through Chief Executive v. Collector of Sales Tax, Gujranwala and another (2008 PTD 60):--

"11. The facts regarding the issue of limitation being properly documented I will not take long to allow this petition for the following reasons:--

(i)The claim of the revenue that the prescribed limitation of 45 days for completion of adjudication proceedings as provided through Finance Ordinance, 2000 and enhanced to 90 days by Finance Act, 2003 is merely directory cannot be accepted. It is settled law that where inaction on the part of a public functionary within the prescribed time is likely to affect the rights of a citizen the prescription of time is deemed directory. However, where a public functionary is empowered to create liability against a citizen only within the prescribed time, it is mandatory. The acceptance of contention of the revenue in that regard will make a provision of law redundant and nugatory. Redundancy or superfluity of an Act of Parliament and a provision of law cannot be readily accepted. All the more so when the prescribed limit is beneficial for the citizen and restricts the executive power to touch the pocket of a tax-payer thereby creating certainty that after its expiry even If there was a good case for creation of liability he will not be dragged in."

In M/s Meraj Din v. Collector Customs, Excise and Sales Tax (Appeals), Lahore and others (2009 PTD 2004), and Messrs Tanveer Weaving Mills v. Deputy Collector Sales Tax and others (2009 PTD 762), this Court has held that the order under section 36(3) of the Sales Tax Act, 1990 must be passed within the period prescribed in proviso to section 36(3) of the Act. Similar observations, regarding limitation provided in law in terms of section 11(4) of the Act, have been made in another case reported as 2009 PTD 1978 (H.C. Lah.). Reliance, in this regard, can be placed on the judgment passed by this Court in Messrs Hanif Straw Board Factory through Proprietor v. Additional Collector (Adjudication), Customs, Central Excise and Sales Tax, Gujranwala and others (2008 PTD 578) and judgment passed by the Hon'ble Islamabad High Court in Messrs Pakistan Ordnance Factories (POF) Wah, Cantt v. Collector of Customs, Sales Tax and Central Excise Adjudication), Islamabad and others (2012 PTD 1016), judgment dated 12.03.2013 passed by the Hon'ble Supreme Court of Pakistan in C. P. No. 925 of 2012 in the case of Commissioner Inland Revenue (Zone-III) LTU Islamabad v. Messrs POF, Wah Cantt. and another. In the case of Messrs Hanif Straw Board Factory supra, learned Division Bench of this Court held as under:--

"6. Be that as it may in this case the illegalities are so apparent that one cannot agree with the learned counsel for the respondents with respect to the status of show-cause notice vis-a-vis subsequent proceeding continued on the basis of the same. In this case the important factor is that the proceedings were continued and finalized beyond prescribed limit of 45 days which alone is enough to decide the issue. In this regard we are supported by the Writ Petition No.13331 of 2006 which among other things hold that the above provision regarding limitation is mandatory and not directory, hence its application on the subject case is without any doubt.

7. The notice was issued on 19-6-2000 while limitation to complete an assessment on the basis of a show-cause notice under section 36 and S.11 for (Recovery of tax not levied or short levied or erroneously refunded) and for assessment was 45 days. In this case the date of notice was 19-6-2000 and order was finalized on 30-10-2000, hence we have no hesitation in holding that the decision was time-barred and the same is set aside."

8.It is also well settled that Government departments cannot be put at higher pedestal in matter of limitation, rather they are supposed to act within statutory period. In this regard, learned Division Bench of the Hon'ble Islamabad High Court has made the following observations in the case of Messrs Pakistan Ordnance Factories (POF) supra:--

"13. An important aspect of the matter is that above section falls in Chapter-VII of the Act ibid, which relates to OFFENCES AND PENALTIES. Any provision which brings penal consequences is required to be invoked or exercised within the limit prescribed by the Statute itself. This is an admitted fact that impugned order-in-original was passed with a delay of 313 days and no reasonable justification has been shown, on the contrary, it demonstrate that authorities proceeded in the matter in a mechanical fashion. It is well settled law, with the mandate of dictums of the Court of Apex that Govt. department cannot be put at higher pedestal, when it come to limitation. The executive functionaries, quasi and non-quasi judicial forums/tribunals are supposed to follow the mandate of law and perform their duties, exercise their jurisdiction and execute their authority within the period provided by law."

9.Learned legal advisor for the respondents has argued that instant writ petition is not maintainable as the petitioner has another adequate, alternate and efficacious remedy available under the law. Suffice it to say that when the impugned order suffers from want of jurisdiction and is void ab-initio, then the writ is competent despite availability of alternate remedies. Reliance in this regard can be placed on Messrs Tanveer Weaving Mills supra and Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd and others 2009 SCMR 1279 = 2009 PTD 1392. In Messrs Tanveer Weaving Mills supra, this Court has held as under:--

"5. It is true that this Court generally does not entertain writ petitions in the case where alternate remedy is available. However, the alternate remedy has to be adequate and efficacious. In the present case, the issue involved is invocation of a proper jurisdiction after expiry of the period provided through proviso to section 36(3) of the Sales Tax Act, 1990.

6. In fact this Court has already in a number of writ jurisdictions have exercised its jurisdiction under such circumstances. The reliance can be placed to the decision in the case of "Super Asia v. The Additional Collector and others" Writ Petition No. 16270 of 2000. This judgment has now been followed in number of other writ petitions, hence, no exception would be required.

7. The facts of the case being very clear and the order-in-original having been finalized after the expiry of one year of the issuance of the show-cause notice was totally without jurisdiction. The same, therefore, is set aside and the writ petition is accordingly disposed of."

I, therefore, overrule the objection of maintainability of petition raised by learned legal advisor for the respondents and hold the constitutional petition to be maintainable.

10.In view of the aforesaid, this petition is allowed and the impugned SCN dated 11.05.2009 and Order-in-Original No.04/2010 dated 31.05.2010 are held to be illegal, void and without lawful authority.

RR/M-307/LPetition accepted.