PUNJAB BEVERAGES CO. (PVT.) LTD. VS FEDERAL BOARD OF REVENUE, 2018 PTD-LAHORE-HIGH-COURT-LAHORE 1251 (2017)

Sales Tax Act (VII of 1990)---

---- Ss. 11, 30 & 31--- Notice of recovery--- Power to issue--- Taxpayers had assailed notices issued by Deputy Commissioner Inland Revenue--- Plea raised by petitioners was that no such power was conferred upon Deputy Commissioner Inland Revenue to issue such notices---Validity--- Federal Board of Revenue intended such powers to be exercised by Commissioners of Inland Revenue to exclusion of all other officers of Inland Revenue and such intent of Federal Board of Revenue could not be set at naught by respective Commissioners Inland Revenue by further delegating such powers--- Notification in question did not confer power to delegate on Commissioner's concern and also did not convey impression that act was being performed in delegated exercise of power--- High Court set aside show-cause notices issued to petitioners by authorities as matter had already been settled in an earlier judgment--- Constitutional petition was allowed in circumstances.

Zaver Petroleum Corporate (Pvt.) Limited v. Federal Board of Revenue 2016 PTD 2332; Oil and Gas Development Company v. Federal Board of Revenue 2016 PTD 1675; Government of Pakistan v. Hashwani Hotel PLD 1990 SC 68; Lt. Col. Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty PLD 1961 SC 119 and Messrs Hamza Nasir Wire v. Federation of Pakistan and others 2018 PTD 1071 ref.

Zaver Petroleum Corporation Ltd. through Director, Islamabad v. Federal Board of Revenue Chairman FBR, Islamabad and another 2016 PTD 2332 fol.

Muhammad Ajmal Khan, Mudassar Shuja ud Din, Waseem Ahmed Malik, Sameer Saeed Ahmed and Farid Adil Ch. for Petitioner.

Sarfraz Ahmed Cheema, Muhammad Asif Hashmi, Liaqat Ali Ch. and Muhammad Asif Ahmed for Respondents.

Law Law FBR: Ishtiaq Ahmed.

ORDER

SHAMAS MEHMOOD MIRZA, J.---This order shall decide the following writ petitions on account of common question of law being involved in said petitions.

2.Challenge to the authority of the Deputy Commissioner Inland Revenue has been made to issue show-cause notice under section 11 of the Sales Tax Act, 1990 (the Act). Mr. Muhammad Ajmal Khan Advocate leading the arguments on behalf of the petitioners referred to section 2(18) of the Act which defines "Officer Inland Revenue" to mean an officer appointed under section 30. It was submitted that under section 30, the Board is vested with the power to assign jurisdiction on any Officer of the Inland Revenue as mentioned therein in regard to any area, person or class of person. In terms of section 31 of the Act, an Officer of the Inland Revenue appointed under section 30 shall exercise such powers and discharge such duties as are conferred or imposed under the Act. The Deputy Commissioner Inland Revenue, by the terms of section 30(3), are subordinate to Commissioner Inland Revenue and are liable to perform their functions as the Commissioner Inland Revenue may direct. Section 32 merely grants unto the Board or the Chief Commissioner the power to delegate their administrative powers with the approval of Board subject to such limitations and conditions as specified therein to any Deputy Commissioner Inland Revenue. It was thus contended that the Deputy Commissioner Inland Revenue was not conferred any powers to issue show-cause notice under section 11 of the Act. It was furthermore submitted that certain jurisdiction orders were passed by the Board delegating the power to issue notices under section 11 to the Commissioner Inland Revenue who further delegated the said powers to the Deputy Commissioner Inland Revenue, which is not permissible under the law. In support of their contentions, the learned counsel for the petitioners relied upon the judgments reported as Zaver Petroleum Corporate (Pvt.) Limited v. Federal Board of Revenue 2016 PTD 2332 and Oil and Gas Development Company v. Federal Board of Revenue 2016 PTD 1675.

3.Learned counsel for the respondents placed reliance upon section 30(3) of the Act to state that the Commissioner Inland Revenue was competent to delegate its functions, inter alia, to the Deputy Commissioner Inland Revenue. It was thus contended that the jurisdiction orders were lawfully passed. It was furthermore stated that sections 30, 31 and 32 pertains to machinery provisions which are to be liberally construed. It was also the case of the respondents that while interpreting taxing statute, words are to be taken in their literal meaning. Reliance in this regard is placed on the judgments reported as Government of Pakistan v. Hashwani Hotel PLD 1990 SC 68 and Lt. Col. Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty PLD 1961 SC 119.

4.Arguments heard and record perused.

5.It may be pointed out that initially a set of writ petitions was reserved for orders on 22.09.2017. However, subsequently a number of writ petitions were filed on the same subject matter whereupon a request was made by Mr. Sarfraz Ahmad Cheema, the learned Advocate for the respondents to hear further arguments. Be that as it may, during the course of arguments, this Court was informed that a learned Single Judge of this Court has already allowed Writ Petition No. 37259 of 2016 titled "Messrs Hamza Nasir, Wire v. Federation of Pakistan and others" (now reported as 2018 PTD 1071) on 08.12.2017 on the same issue which was involved in this and connected writ petitions. The copy of order dated 08.12.2017 has been made available to this Court which shows that by relying upon the judgment reported as Zaver Petroleum Corporation Limited through Director Islamabad v. Federal Board of Revenue through Chairman FBR, Islamabad and another 2016 PTD 2332, the issue has been decided in favour of the petitioners by holding as follows:--

"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 Commissioner 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."

6.The reasoning of the learned Judge is as follows:--

"7. .. 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 . 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 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 .. 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 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 officers subordinate to him and that too in respect of such persons or classes of persons as he may direct

8 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 . 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 no convey an impression that the act is being performed in the delegated exercise of powers."

7.This Court has gone through the said order and is in respectful agreement with the reasoning of the learned Single Judge in setting aside the show-cause notices issued to the petitioners. Since the issue raised in this writ petition and connected writ petitions has already been decided by a learned Single Judge of this Court as stated above, this Court is bound to follow the said order. In the circumstances, this writ petition and connected writ petitions are allowed on the same terms as mentioned in order dated 08.12.2017 passed in Writ Petition No. 37295 of 2016. Consequently, the show-cause notices impugned in this writ petition and connected writ petitions are set aside.

MH/P-7/L Petition allowed.