HAMZA NASIR WIRE VS FEDERATION OF PAKISTAN
2018 P T D 1071
[Lahore High Court]
Before Shahid Karim, J
Messrs HAMZA NASIR WIRE
Versus
FEDERATION OF PAKISTAN and others
Writ Petitions Nos. 37295 of 2016, 113697, 62531, 62526, 62348, 62557, 62392, 77996, 7163, 104518, 92863, 62554, 105986 and 62562 of 2017, heard on 08/12/2017.
Sales Tax Act (VII of 1990)---
----Ss. 11, 30 & 31---Notice of recovery---Power to issue---Scope---Taxpayers had assailed notices issued by Deputy Commissioner Inland Revenue---Plea raised by petitioners was that power to issue such notices was only conferred upon Chief Commissioner and Commissioner Inland Revenue---Validity---Federal Board of Revenue had issued notification by which it expressed its clear intention to confer on Commissioner the functions to be exercised in respect of certain persons or classes of persons of such areas as specified in that notification---Tenor of two notifications in question showed that Federal Board of Revenue intended of Chief Commissioner and Commissioner of Inland Revenue to perform all administrative functions and coordination as given in Column-4 of the Table in the notifications---To such extent, Commissioner s power to confer such functions on officers subordinate to him stood taken away and his power to do so in respect of subject matter of two notifications in question was curtailed---High Court set aside the show cause notices issued to petitioners---Constitution petition was allowed in circumstances.
Zaver Petroleum Corporation Limited through Director, Islamabad v. Federal Board of Revenue through Chairman FBR, Islamabad and another 2016 PTD 2332 fol.
Muhammad Ajmal Khan, Muhammad Azhar Khan Joiya, Mian Abdul Ghaffar, Mudassar Shuja ud Din, Malik Umer Riaz, Ali Husnain, Zulfiqar/Ali, Muhammad Shabbir Hussain, Bilal Bashir, Muhammad Shabbir, Usman Ali Bhoon and Malik Ahsan Mehmood for Appellants.
Sarfraz Ahmad Cheema, Muhammad Asif Hashmi, Muhammad Asif and Rana Muhammad Mehtab for Respondents
Muhammad Ismail Deputy Commissioner, RTO Sialkot.
JUDGMENT
SHAHID KARIM, J.---This judgment will decide the instant petition and a number of connected petitions W.P Nos. 113697, 62531, 62526, 62348, 62557, 62392, 77996, 7163, 104518, 92863, 62554, 105986 and 62562 of 2017, which raise a common question of law. The petitioners have been variously issued show-cause notice by officer of Inland Revenue of different designations. It is the case of the petitioners that by virtue of a notification dated 21.07.2016 (in some of the petitions) the jurisdiction and functions of the Chief Commissioner and Commissioner Inland Revenue of Regional Tax Office-II have been defined and delineated and show-cause notice under Section 11 of the Sales Tax Act, 1990 ("the Act, 1990") can only be issued by the Commissioner Inland Revenue of the respective Zones of Regional Tax Office-II, Lahore and no other officer has the power or the jurisdiction to issue the show-cause notice. This is the limited question which engages this Court in the instant petitions. In connected petitions a similar notification were relied upon which is dated 01.03.2011 and by which jurisdiction of the Commissioner Inland Revenue, large taxpayer units have been spelt out and their functions have been determined by the Federal Board of Revenue (FBR). In these petitions, too, the petitioners claim the jurisdiction to vest in the Commissioner and no other officer and on this basis allege that the show-cause notices are ultra vires and incompetent.
2.The respondents do not take cavil to the proposition that the notifications have indeed been issued by the FBR by which functions have been conferred on the Commissioner Inland Revenue in respect of the cases or classes of cases, persons or classes of persons (corporate and non corporate) in respect of whom the Commissioners will exercise their powers and jurisdiction conferred by the Act, 1990.
3.However, in the first of the sets of cases, the reliance has been placed on an order dated 8.9.2016 issued by the Commissioner Inland Revenue, Zone-III, Regional Tax Officer-II, Lahore by which in the purported exercise of powers under subsection (3) of section 30 of the Act, 1999, the Commissioner Inland Revenue has directed that the officers of Inland Revenue specified in column II of the Table-1 shall exercise the powers and perform the functions mentioned in Table-II below in respect of persons or classes of persons given therein. A similar notification was issued on 28.7.2014 by the Commissioner large taxpayer unit to confer jurisdiction of certain cases for exercise of powers and perform functions specified in the said order of officers of Inland Revenue mentioned in column IV/V. In short, the respondents relied upon orders of different dates issued by the respective Commissioners of Inland Revenue to confer and delegate functions and powers on officers of Inland Revenue subordinate to him to exercise the powers conferred upon them by the Act, 1990. It is the case of the respondents that those powers include the power to issue a show-cause notice under section 11 of the Act, 1990 which has been called in question in the instant petitions and, therefore, the show-cause notices are legal and valid and have a proper provenance in law. For facility, the recitals of the notifications dated 21.07.2016 (Notification-I) and 08.09.2016 (Notification-II) are reproduced as under:--
NOTIFICATION-I
"In exercise of the powers conferred under Section 209 of Income Tax Ordinance, 2001, section 30 and section 31 of the Sales Tax Act, 1990, section 29 of the Federal Excise Act, 2005 and in super session of all earlier orders or notifications of the Board in respect of jurisdiction, the Federal Board of Revenue is pleased to direct that:--
i.The Chief Commissioner RTO-II, Lahore, shall exercise the powers and perform functions under Income Tax Ordinance, 2001, the Sales Tax Act, 1990, the Federal Excise Act, 2005, section 7 of Finance Act, 1989 (V of 1989), Wealth Tax Act, 1963 (Repealed) read with section 3 of the Finance Act, 2003 (I of 2003), and Workers Welfare Fund Ordinance, 1971, in respect of the persons or classes of persons or cases or classes of cases as mentioned in column (4) of notification; and shall perform all administrative functions and coordination with Federal Board of Revenue, and
ii.The Commissioner of Inland Revenue specified in column (2), shall exercise the powers and functions, as specified in column (3), in respect of the persons or classes of persons or cases or classes of cases as specified in column (4) of the Table below:--
2.This notification shall take effect from August 10, 2016."
NOTIFICATION-II
"In pursuance of Federal Board of Revenue's notification bearing No. 57(2) Jurisdiction/2016 dated 21st July, 2016 and in exercise of the powers conferred under subsection (1) of section 210 of Income Tax Ordinance, 2001, subsection (3) of section 30 of the Sales Tax Act, 1990, subsection (1B) of section 29 of the Federal Excise Act, 2005, the Commissioner Inland Revenue, Zone-III, Regional Tax Office-II, Lahore is pleased to direct that the Officers of Inland Revenue specified in column (2) of the Table-I below, shall exercise the powers and perform the functions mentioned in Table-II below, in respect of the persons of classes of persons of areas (excluding cases or classes of cases or persons or classes of persons of areas assigned to any other office of Inland Revenue, Regional Tax Office-II, Lahore), as specified in column (4) of the Table-I below.
2.The following further amendments are made in the jurisdiction order issued by this office vide letter No. 01/III dated 01-08-2016. The revised jurisdiction order shall take effect from 08.08.2016.
3.By virtue of amendment quoted supra, the scheme of jurisdiction has been re-designed by abolishing of Unit-10 and Unit-11 of Zone-III, RTO-II, Lahore.
4.The cases and classes of cases already falling within the territorial jurisdiction of unit-10 (defunct) and unit-11 (defunct) referred to above has been assigned to Unit-07, Zone-III, RTO-II, Lahore."
(As adumbrated similar notifications have been issued in the second set of cases and need not be reproduced fully).
4.It can be seen that the FBR by its Notification-I, directed that inter alia the Commissioner Inland Revenue shall exercise the powers and functions as specified in column (3) in respect of persons or classes of persons or cases or classes of cases as specified in column (4) of the Table below. However, by the order dated 08.09.2016 the Commissioner Inland Revenue, RTO-II, Lahore, by the exercise of his powers purportedly conferred under subsection (3) of section 30 of the Act, 1990, directed the officers of Inland Revenue subordinate to him to exercise the powers and perform the functions mentioned in Table-II in the order in respect of persons or classes of persons of areas as specified in column 4 of Table I. The learned counsel for the petitioners contends that the issuance of the show-cause notices is out with the authorities of the officers who has issued these notices since the power to perform those functions has already been conferred on the Commissioner Inland Revenue by the FBR and no further delegation of that power can be made by the Commissioners so as to stultify the intent of the FBR.
5.Mr. Sarfraz Ahmad Cheema, Advocate for respondents (in some petitions) referred to the various provisions of the Act, 1990 and contended that powers indeed flow from section 31 and what is being done by the Commissioners is merely bifurcation to regulate different functions. According to him there was no bar on them to do so.
6.The relevancy of the provisions of the Act, 1990 will have to be alluded to- in order to resolve the controversy in these petitions. For this purpose, sections 30, 31 and 32 are the relevant provisions, which are reproduced below:--
30. Appointment of Authorities.---(1) For the purposes of this Act, the Board may, appoint in relation to any area, person or class of persons, any person to be--
(a) a Chief Commissioner of Inland Revenue;
(b) a Commissioner of Inland Revenue;
(c) a Commissioner of Inland Revenue (Appeals);
(d) an Additional Commissioner of Inland Revenue;
(e) a Deputy Commissioner of Inland Revenue;
(ea) District Taxation Officer Inland Revenue;
(f) an Assistant Commissioner of Inland Revenue;
(fa) Assistant Director Audit Inland Revenue;
(g) an Inland Revenue Officer;
(h) a Superintendent Inland Revenue;
(i) an Inland Revenue Auditor Officer
[ ..];
[(ia) an inspector Inland Revenue; and]
(j) an officer of Inland Revenue with any other designation.
(2) The Chief Commissioner Inland Revenue and Commissioner Inland Revenue (Appeals) shall be sub-ordinate to the Board and Commissioner Inland Revenue shall be sub-ordinate to the Chief Commissioner Inland Revenue.
(2A) The Chief Commissioners Inland Revenue shall perform their functions in respect of such persons or classes of persons or such areas as the Board may direct.
(2B) The Commissioners Inland Revenue shall perform their functions in respect of such persons or classes of persons or such areas as the Chief Commissioner, to whom they are sub-ordinate, may direct,
(3) Additional Commissioner Inland Revenue, Deputy Commissioners Inland Revenue District Taxation Officer Inland Revenue Assistant Commissioner Inland Revenue, Assistant Director Audit Inland Revenue, Superintendent Inland Revenue, Inland Revenue Audit Officer, Inland Revenue Officer, Inspector Inland Revenue], and officer of Inland Revenue with any other designation shall be subordinate to the Commissioner Inland Revenue and shall perform their functions in respect of such persons or classes of persons or such areas as the Commissioners, to whom they are sub-ordinate, may direct.
(4) Deputy Commissioner Inland Revenue, District Taxation Officer Inland Revenue, Assistant Commissioner Inland Revenue, Assistant Director Audit Inland Revenue, Superintendent Inland Revenue, Inland Revenue Audit Officer, Inland Revenue Officer, Inspector Inland Revenue Officer an officer of Inland Revenue with any other designation shall be sub-ordinate to the Additional Commissioner Inland Revenue.
31. Powers.--An officer of Inland Revenue ] appointed under section 30 shall exercise such powers and discharge such duties as are conferred or imposed on him under this Act; and he shall also be competent to exercise all powers and discharge all duties conferred or imposed upon any officer subordinate to him:
Provided that, notwithstanding anything contained in this Act or the rules, the Board may, by general or special order, impose such limitations or conditions on the exercise of such powers and discharge of such duties as it deems fit.
32. Delegation of powers.---(1) The Board or the Chief Commissioner, with the approval of the Board, may, by an order and subject to such limitations or conditions as may be specified therein, empower by name or designation---
(a)any Additional Commissioner Inland Revenue or Deputy Commissioner Inland Revenue to exercise any of the powers of a Commissioner Inland Revenue under this Act; and
(b)any Deputy Commissioner Inland Revenue or Assistant Commissioner Inland Revenue to exercise any of the powers of an Additional Commissioner Inland Revenue under this Act;
(c)any Assistant Commissioner Inland Revenue to exercise any of the powers of a Deputy Commissioner Inland Revenue under this Act; and
(d)any other officer of Inland Revenue to exercise any of the powers of an Assistant Commissioner Inland Revenue under this Act.
[(2)***]
(3)The officer to whom any powers are delegated under this section shall not further delegate such powers. "
7.Section 32 relates to delegation of powers of the Board or the Chief Commissioner by an order and subject to such limitations or conditions as may be specified therein. This provision is not of any assistance in the controversy in hand. Of crucial importance is section 31 which clearly mentions that an officer of Inland Revenue appointed under Section 30 shall exercise said power and discharge such duties as are conferred or imposed on him under the Act and that he shall also be competent to exercise all powers and discharge all duties conferred or imposed upon any officer subordinate to him. Therefore, it is very clear that the law intends for an officer of Inland Revenue to exercise only those powers and discharge such duties as are conferred or imposed under the provisions of the Act and none other. Thus the source of the powers of an officer of Inland Revenue flows from the various provisions of the Act, 1990 and have been conferred by the Parliament. It flows indubitably that neither FBR nor the Chief Commissioner or the Commissioner can confer any power on an officer of Inland Revenue which is not so conferred upon him by the letter of the law. This mandate of the law is at the heart of the provisions of the Act, 1990 and must be taken as the foundational principle in the resolution of any dispute regarding matters of construction of powers of an officer of Inland Revenue. What is conferred by section 30 on either FBR, the Chief Commissioner or the Commissioner is merely the power to prescribe the functions to be performed by them. For example, subsection (2A) of section 30 gives the power to the Board to direct that the Chief Commissioners Inland Revenue shall perform their functions in respect of such persons or classes of persons of such areas as the Board may direct. Therefore, what is being conferred on the Board is merely the power to delineate and prescribe the respective functions to be performed by the Chief Commissioners and that too in respect of certain category of persons or classes of persons and no more. Similarly, the Chief Commissioners have been conferred the power to direct the respective Commissioners of Inland Revenue to perform their functions in respect of such persons or classes of persons of such area as the Chief Commissioner may prescribe. The distinction that is being drawn here is of crucial and pivotal importance. By reading section 31 and section 30 together, the ineluctable conclusion is that the powers to be exercised by an officer of Inland Revenue is prescribed by law and cannot be conferred by the Board or the Chief Commissioner. However, for administrative purposes, the Board, Chief Commissioner or Inland Revenue or the Commissioners of Inland Revenue may prescribe and direct certain functions to be performed by officers subordinate to them in a certain manner and in respect of such persons or classes of persons of such areas as they may choose to prescribe. Therefore, the power is merely administrative and reserved for exigencies of functions of the various administrative zones set up by FBR for its convenience. The power that was exercised by the Commissioners which is now being used as delegated power by the various officers of Inland Revenue to issue the impugned show-cause notices, has been derived through subsection (3) of section 30 of the Act, 1990 which has been brought forth above. However, subsection (3) does not, by any stretch of imagination, confer on the Commissioner a power to delegate to an Officer subordinate to him such power at his whim that he deems fit to do so under the circumstances. Those powers can only be conferred by law and not by the Commissioner Inland Revenue and the only authority that vests in the Commissioner Inland Revenue is to bifurcate the functions to be performed by offices subordinate to him and that too in respect of such persons or classes of persons as he may direct. I agree with the contentions raised by the learned counsel for the respondents that this is a primary administrative responsibility cast on the Board, Chief Commissioner and the Commissioner, for unless this authority is so conferred on these bodies and officers, chaos will reign and administratively it will be impossible to control the exercise of powers by an officer of Inland Revenue. This can be illustrated by a reference to section 11 itself which merely mentions that an officer of Inland Revenue may serve a show-cause notice on any person who has fallen foul of the various acts mentioned in section. The office of Inland Revenue includes a wide array of officers mentioned in section 30 and unless the power is conferred on the Board, the Chief Commissioner or the Commissioners to mark out and assign the functions of the officers subordinate to them, there will be complete uncertainty with regard to the powers to be exercised by the respective officers of Inland Revenue. It is precisely for this purpose that subsection (2A) to subsection (4) of section 30 have conferred administrative powers on the Board, Chief Commissioner and the Commissioners Inland Revenue to settle the various functions performed by offices of Inland Revenue subordinate to them. However, this does not include conferring on those officers the powers which are not so conferred by law.
8.The question however arises as to how the Notification-I and the orders issued by the various Commissioners Inland Revenue are to be reconciled. I have no doubt in my mind that if the Notification-I was not in the field and had not been issued by the FBR, the Commissioner Inland Revenue was perfectly within his right to exercise the powers conferred by subsection (3) to prescribe the functions to be performed by officers of Inland Revenue subordinate to him in respect of such persons or classes of persons or of such areas as the Commissioners would direct. However, the fact remains that FBR has now issue a notification by which it has expressed its clear intent to confer on the Commissioners the functions to be exercised in respect of certain persons or classes of persons of such areas as specified in that notification. The tenor of Notification-I and Notification-II also shows that FBR intended for the Chief Commissioners and Commissioners of Inland Revenue to perform all administrative functions and coordination as given in the Column-4 of the Table in those notifications. Therefore to that extent the Commissioner's power to confer those functions on officers subordinate to him stood taken away and his power to do so in respect of the subject matter of Notification-I and Notification-II has been curtailed. This effectively means that in respect of the persons or classes of persons or cases or classes of cases as specified in Notification-I only the Commissioner of Inland Revenue mentioned in these Notifications will exercise the power and those functions cannot be delegated by those Commissioners of Inland Revenue. This is the most appropriate purposive interpretation which could be placed upon a holistic consideration of the Notifications I & II and the orders made by the Commissioners Inland Revenue. Unless this is done it will be tantamount to undermining the authority and the intent of the FBR and will throw into complete disarray the hierarchycal structure of the FBR. This is also evident from the use of the term "shall" in the Notification-I by which it has been specifically stated that the Commissioners of Inland Revenue shall exercise the powers and functions as specified in column 3 of Notification-I. It is reiterated that if the Notifications I had not been issued by FBR, there was no impediment in the way of the Commissioner Inland Revenue to prescribe functions to be performed by officers of Inland Revenue subordinate to him in case subsection (3) of section 30 of the Act, 1990. However, since a notification indeed has been issued by FBR for the exercise of powers under Section 30 of the Act, the ineluctable conclusion is that FBR intended those powers to be exercised by the Commissioners of Inland Revenue to the exclusion of all other officers of Inland Revenue and that intent of FBR cannot be set at naught by the respective Commissioners Inland Revenue by further delegating those powers. More importantly, the Notification-I did not confer a power to delegate on the Commissioners concerned and although the Notification-II refers to the Notification-I, it does not convey an impression that the act is being performed in the delegated exercise of powers.
9.A similar question arose before the Islamabad High Court in a case titled Zaver Petroleum Corporation Limited through Director, Islamabad v. Federal Board of Revenue through Chairman FBR, Islamabad and another (2016 PTD 2332), which dilated upon the issue involved in these petitions and concluded as follows:--
"17. It is, therefore, obvious from the above definitions that the three expressions are distinct and separate. The power or jurisdiction conferred on an officer of Inland Revenue precedes the performance of functions. The conferment of power or jurisdiction is a precondition for the performance of functions. By no stretch of the imagination does subsection (3) of section 30 empower the Commissioner to confer power or jurisdiction. However, a Commissioner pursuant to subsection (3) can assign persons or areas in respect of the officers specified therein for the purpose of the performance of functions with regard to the scope of the power and jurisdiction already conferred on such officers. Such officers, in order to perform their respective functions, have to be vested with power or jurisdiction. In the instant case the learned counsel appearing on behalf of the Department have not been able to show any provision of the Act of 1990 which empowers the Commissioner to issue the order dated 23-01-2014 and further delegate the powers and jurisdiction conferred upon him or her by the Board pursuant to the order dated 21-01-2014. The reliance of the Commissioners on the notification dated 01.07.2010 is misplaced as the same does not confer the power of adjudication under section 11 of the Act of 1990.
18. It is settled law that a delegate cannot further delegate its powers unless expressly authorized under the law. It is also settled law that in order to enable a person to delegate the powers or functions, there must be an authority, expressed or implied, to delegate. When power is conferred on a particular person, then that person alone has to exercise the powers and cannot transfer its exercise to another person. The august Supreme Court in the case titled 'Muhammad Ashraf Tiwana and others v. Pakistan and others' [2013 SCMR 1159] while examining the power of appointment of Commissioners vested in the Federal Government under the Securities and Exchange Commission of Pakistan Act, 1997, observed and held that it was well settled law that a statutory delegate could not sub-delegate his or her powers...
19. In the light of the above, the order dated 23-01-2014 issued by the Commissioner Inland Revenue was without lawful authority and jurisdiction. The Board had expressly conferred the power of adjudication under the Act of 1990 on the Commissioner vide order dated 21-01-2014. The latter had no authority or jurisdiction to further delegate the power and jurisdiction of adjudication conferred by the Board vide order dated 21-01-2014. It is settled law that if the basic order is void, then any superstructure built thereon is also illegal and liable to fall. The Inland Revenue Officer was, therefore, not vested with power nor had the jurisdiction to issue a show-cause notice under section 11 of the Act of 1990. The Commissioner alone was vested with power and jurisdiction under section 11 of the Act of 1990, pursuant to the Board's order dated 21-01-2014."
10.I have no reason to disagree with the judgment rendered by the Islamabad High Court and for my own reasons given above concur with that judgment.
11.In view of the above, these petitions are allowed. The impugned show-cause notices are hereby set aside. It is made clear that fresh show-cause notices by the Commissioners Inland Revenue as conferred by Notification-I and Notification dated 01.03.2011 may be issued if the Commissioners so deem fit under the circumstances.
MH/H-3/L Order accordingly.