SHAMIMUDDIN AHMED VS FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, 2018 PTD-KARACHI-HIGH-COURT-SINDH 2112 (2018)

Sales Tax Act (VII of 1990)---

----Ss. 11(3), 11(2) & 3---Recovery of sales tax---Assessment of tax and recovery of tax not levied or short-levied or erroneously refunded---Taxpayer impugned issuance of show-cause notice under Ss. 11(2) & 11(3) of the Sales Tax Act, 1990 on the ground inter alia, that the proposed assessment by Department of the sales tax liability of taxpayer was based on considerations which were contrary to law---Validity---Impugned notice provided the taxpayer opportunity to explain the position and the Department had not suspended sales tax registration and no lawful cause of action appeared to have accrued to the tax payer---High Court disposed of the Constitutional petition with direction to the Department to examine the matter in the light of law and judgments of superior courts within a period of four weeks.

PTCL 2000 CL 50; 2004 PTD 868 and 2001 PTD 2097 = 2001 SCMR 1376 ref.

Zain A. Jatoi along with Ms. Ayesha Munawar and Kelashs for Petitioners.

Ameer Bux Metlo for Respondents.

Mir Hussain Abbasi, Asst. Attorney General.

ORDER

1&2. Learned Counsel for the Petitioner has filed an urgent application along with application under Order XXXIX, Rules 1 and 2, C.P.C. being C.M.A. No.16616/2018, on the grounds that during pendency of instant petition, Respondents have issued a show-cause notice to the Petitioner under Section 11(2) & (3) of the Sales Tax Act, 1990 wherein, according to learned Counsel for Petitioner, the Petitioner has been confronted with the proposed assessment, which is contrary to law and the judgment of the superior Courts. It has been further contended by learned Counsel for Petitioner that when this petition was filed, the Petitioner was issued a demand letter available at page 23 as Annexures 'E', however, without any assessment in terms of Section 11(2) and (3) of the Sales Tax Act, 1990 whereas, no opportunity whatsoever was provided to the Petitioner before creating such demand by the Respondents who threatened the Petitioner for suspension of his Sales Tax Registration and coercive action for recovery of illegal demand. According to learned Counsel, now the Respondents intend to make assessment of the Petitioner's Sales Tax liability on extraneous consideration and contrary to the settled legal position. It has been prayed by learned Counsel for Petitioner that the Respondents may be restrained from passing any adverse order against the Petitioner pursuant to show-cause notice issued in this regard under Section 11(2) and (3) of the Sales Tax Act, 1990. Learned Counsel for Petitioner has referred to para 1(ii) of the reply dated 25.4.2018 submitted by the Petitioner, and submits that Respondents have already been informed that the Bank Accounts' credit entries being treated as taxable supply and/or taxable activity by the Respondents, is contrary to law and the judgment of superior Courts in the cases reported as PTCL 2000 CL 50, 2004 PTD 868 and 2001 PTD 2097 = 2001 SCMR 1376 however, according to learned counsel, respondents are not inclined to accept such settled legal position.

Conversely, learned Counsel for Respondents submits that Respondents are not pressing the demand as reflected in Annexure 'E' at page 23, on the contrary, a proper show-cause notice in terms of Section 11(2) and (3) of the Sales Tax Act, 1990 has been issued, whereby, the Petitioner has been provided an opportunity to explain its position. It has further been stated by the learned Counsel, that no adverse order would be passed against the Petitioner unless, the Petitioner is provided a reasonable opportunity of being heard, whereas, all legal objections which have been raised through instant petition as well as in the reply submitted by the Petitioner as referred to hereinabove shall be considered strictly in accordance with law, and thereafter appropriate order will be passed. It has further been stated by learned Counsel for Respondents that the apprehension of the Petitioner that Sales Tax Registration of the Petitioner will be suspended without adopting legal course, is also incorrect and misconceived as the Respondents have not issued any show-cause notice to the Petitioner to this effect. It has, however, been submitted that in case, the respondents are in possession of material which may suggest that the Petitioner has violated the terms of Sales Tax Act, 1990, a proper show-cause notice will be issued under Section 21 of the Sales Tax Act, 1990 before taking any adverse action against the Petitioner, including suspension or blacklisting of Sales Tax Registration.

After hearing both learned Counsel for the parties at some length and keeping in view the facts and circumstances of the case, we are of the opinion that no lawful cause of action appears to have been accrued to the Petitioner particularly, when the Respondents do not intend to enforce the demand available at page 23 as Annexure 'E', whereas, a show-cause notice has already been issued under Section 11(2) and (3) of the Sales Tax Act, 1990 whereby, Petitioner has been provided an opportunity to explain his position. Moreover, Respondents have neither suspended the Sales Tax Registration of the Petitioner nor they do intend to suspend the Sales Tax Registration of the Petitioner without adopting legal course as stated by learned Counsel for Respondents. As regards submission of the Petitioner relating to fate of Bank Accounts' credit entries which, according to learned Counsel for Petitioner, are being treated as taxable supply and/or taxable activity in violation of law and the judgment of the superior Courts as referred to hereinabove the Respondents are directed to examine this aspect of the matter, keeping in view the relevant provision of law and the judgment of the superior Courts to this effect, if any, and shall ensure that appropriate treatment shall be given to such entries, keeping in view the judgments of superior Courts on the subject controversy and shall pass appropriate order after providing an opportunity of being heard. It is expected that such exercise will be completed within a period of four weeks from the date of this order. No adverse action shall be taken against the Petitioner including suspension of Sales Tax Registration or blacklisting of Petitioner's Sales Tax Registration except in accordance with law.

Petition stands disposed of in the above terms along with all listed applications.

KMZ/S-67/Sindh Order accordingly.