MESSRS INDUSTRIAL ENGINEERING LTD., KARACHI VS THE ASSISTANT COLLECTOR, CENTRAL EXCISE AND LAND CUSTOMS,
CITY CIRCLE, KARACHI
1991 P T D 562
[Karachi High Court]
Before Saleem Akhtar and Imam Ali G. Kazi, JJ
Messrs INDUSTRIAL ENGINEERING LTD., KARACHI
versus
THE ASSISTANT COLLECTOR, CENTRAL EXCISE AND LAND CUSTOMS,
CITY CIRCLE, KARACHI
Constitutional Petition No.D-724 of 1985, decided on 09/05/1990.
(a) Sales Tax Act (III of 1951)---
----Ss. 5(2) & 3(4), proviso ---C.B.R. Sales Tax Circular No.7 of 1981---C.B.R. Sales Tax Circular No.2 of 1982---Scope and powers of officials of Customs and Central Excise Department appointed as Sales Tax Officers---Exercise and extent of powers by Customs Authorities as Sales Tax Officers was dependent upon the directions issued by Central Board of Revenue.
(b) Sales Tax Act (III of 1951)---
----S. 28---Central Excise Rules, 1944, R.10---Assessment of sales tax-- Reopening---Assistant Collector, Central Excise and Land Customs acting as Sales Tax Officer could only reopen assessment of sales tax by issuing a notice under S. 28 of the Sales Tax Act, 1951 but could not reopen assessment of sales tax by issuing a show-cause notice under R.10, Central Excise Rules, 1944-- Where no notice under S.28 of the Sales Tax Act had been issued or notice issued was barred by time, Assistant Collector Central Excise and Land Customs exercising powers as Sales Tax Officer had no jurisdiction to reopen the assessment.
Messrs Choudhri Wire Rope Industries Ltd. v. Sales Tax Officer, Special Circle-I, Lahore 1988 SCMR 1934 ref.
(c) Sales Tax Act (III of 1951)---
----S. 28---Constitution of Pakistan (1973), Art. 199---Constitutional petition-- Maintainability---Where acti6n in a matter under fiscal statute was without jurisdiction, assessee could, without resorting to statutory remedy available to him challenge same by way of Constitutional petition.
Eduljee Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399; Usmania Glass Sheet Factory Ltd. v. Sales Tax Officer PLD 1971 SC 205; Premier Cloth Mills Ltd. v. Sales Tax Officer 1972 SCMR 257; Jeson International (Pvt.) Ltd. v. Income Tax Officer and others 1989 PTD 1141; Bhambhore Ceramic Industries Ltd. v. Income Tax Officer C.P. No.D-447 of 1988; N.V. Philips Cleoilam Peufabricken v. Income Tax Officer and another 1990 PTD 389 and Republic Motor Ltd. v. Income Tax Officer, Karachi 1990 PTD 889 ref.
Iqbal Naeem Pasha for Petitioner.
Nazar Akbar for Respondent.
Date of hearing: 9th May, 1990.
JUDGMENT
SALEEM AKHTAR, J.---The petitioner's sales tax assessments for the assessment years 1976-77, 1977-78 and 1978-79 were completed under section 10(3) of the Sales Tax Act, 1951 by the Sales Tax Officer on 24th May, 1980, 20th June, 1980 and 30th June, 1980 respectively. The respondent, who is Assistant Collector of Central Excise & Land Customs Karachi was authorised exercise powers of the Sales Tax Officer under the Sales Tax Circular No.2, dated 1st July, 1981. By his order dated 13th July, 1985 he held that the sales made by the petitioner during the afore-stated three assessment years have been incorrectly exempted by the Sales Tax Officer and were liable to sales tax at 20%. He created a demand against the petitioner amounting to Rs.1,28,908. The petitioner filed appeals before the Collector (Appeals), Central Excise & Land Customs, Southern Zone, Karachi, which were allowed as the demand was created without issuing any show cause notice to the petitioner. The Collector remanded the case for de novo proceedings after service of notice. In pursuance of this order, the respondent issued a show-cause notice, dated 24th October, 1985 under rule 10 of the Central Excise Rules, 1944 read with section 3(4) of Sales Tax Act, 1951. It enumerated that during the aforestated three assessment years exemptions were wrongly granted and thus petitioner was liable to pay Rs.1,28,908, as sales tax. Year-wise details of such exempted sales were also provided. The petitioner was, therefore, called upon to show cause within 10 days of the receipt of notice and appear on the date of hearing for this purpose. The petitioner immediately filed this petition challenging the validity of the notice and the jurisdiction of the respondent to issue
Name of Productsuch a notice.
In the counter-affidavit, the respondent has pleaded that the petition is premature as the remedy provided under the Central Excises and Salt Act, 1944 has not been availed. It was pleaded that the Central Excises and Salt Act has been made applicable for levy and collection of sales tax as if it were a duty of excise leviable under section 3 of the Central Excises and Salt Act, 1944 and, therefore, no exception can be taken to the procedure adopted by the respondent.
There is no dispute that the notice was not issued under section 28 of the Sales Tax Act nor there is any cavil that the respondent was exercising power as Sales Tax Officer under the Central Excises and Salt Act, 1944. To correctly appreciate the exercise of such power one has to refer to section 5(2) of the Sales Tax Act which empowers the Central Board of Revenue to appoint Customs authorities to exercise powers of the Sales Tax Authorities under the Sales Tax Act. In exercise of such power the Central Board of Revenue had issued Sales Tax Circular No.7 of 1981. It may further be pointed out that the levy- and collection of Sales Tax by such officer is regulated by proviso to subsection (4) of section 3 of the Sales Tax Act, which reads as follows:-
"Provided that, in case of goods mentioned in clause (a) of subsection (Sales Tax Circular No. 7 of 1981 has been superseded by Notification No. S.R.O 729(I)/88 dated 25-8-1988.), the tax shall, where the Board so directs, be levied and collected as if it were a duty of excise leviable under section 3 of the Central Excises and Salt Act, 1944 (I of 1944), and all the provisions of the said Act and the rules ale thereunder shall, so far as may be and with the necessary modifications, apply notwithstanding the provisions of this Act."
Section 3 of the Sales Tax Act is the charging section. According to this proviso where the Central Board of Revenue so directs the Sales Tax on all goods produced or manufactured in Pakistan can be levied and collected as if it were levied under section 3 of the Central Excises and Salt Act, 1944 by such officers of the Central Excise Department, who are empowered to do so. On such direction being issued the provisions of Central Excises and Salt Act, 1944 with necessary modifications shall be applied by the authorised officers. If such direction is issued by the Central Board of Revenue, the Assistant Collector of Central Excise and Land Customs can act as a Sales Tax Officer and for levy and recovery could exercise all powers and jurisdictions conferred under the Excises and Salt Act, 1944 with modification, if necessary. Such exercise of powers is dependent upon the direction of the Central Board of Revenue and the authorised officer would be empowered to exercise so much of the power as he has been vested by the order or circular. In this regard the Central Board of Revenue had issued Circular No.2 of 1982, which reads as follows:--
"Subject: Collection of Sales Tax Leviable on Goods Produced or Manufactured in Pakistan.
In exercise of the powers conferred by the proviso to subsection (4) of section 3 of the Sales Tax Act, 1951 (III of 1951), and in supersession of Sales Tax Circular No.6 of 1981, dated the 25th June, 1981, the Central Board of Revenue is pleased to direct that sales tax leviable on all goods produced or manufactured in Pakistan shall be collected as if it were a duty of excise leviable under section 3 of the Central Excises and Salt Act, 1944 (I of 1944), and all the provisions of the said Act and the rules made thereunder shall, so far as may be and with the necessary modifications, apply notwithstanding the provisions of the Salt's Tact Act, 1951."
This Circular clearly provides for collection of sales tax leviable on all goods produced or manufactured in Pakistan, in the same manner as the duty of excise leviable under section 3 of the Central Excises and Salt Act, 1944 and rules made thereunder. Therefore, the only power given to the respondent was to collect Sales Tax levied as duty of excise. In order to collect such Sales Tax, the respondent was to exercise all powers conferred on him by the Central Excises and Salt Act and he could exercise and proceed in the manner as provided by the said Act and without resorting to the procedure provided for recovery by the Sales Tax Act.
Mr. Nazar Akbar, learned counsel for the respondent has contended that by virtue of this Circular the respondent was competent to press in service the provisions of Central Excises and Salt Act, 1944 for purposes of levy and collection. As explained above, the exercise of powers by respondent is limited by the directions given by the Central Board of Revenue. The directions quoted above restricted it to collection and not to the levy of the sales tax. Therefore, the contention raised by the learned counsel for the respondent has no force. Mr. Nazar Akbar, learned counsel for the respondent also referred to a letter of C.B.R. No.12/5-CEB/81, dated 1st February, 1984 in which explanation regarding Circular No.7 of 1981 of power vested under the Sales Tax Act has peen given. This does not improve the case of the respondents as it only explains n hat the powers conferred for reopening of assessment, recovery and refund can be exercised by the respondent.
Mr. Iqbal Naeem Pasha, learned counsel for the petitioner has contended that the respondent did not have any jurisdiction to issue notice under rule 10 of the Central Excise Rules, 1944 for reopening the assessment. As the power conferred on respondent was only for collection and not for assessment or levy of tax such a procedure could not have been adopted by him. He was, however, by virtue of Sales Tax Circular No.7 of 1981, dated 1-7-1981 issued under section 5 of the Sales Tax Act competent to issue notice under section 28 of the Sales Tax Act for the purposes of reopening the case. This procedure has not been adopted. However, even if the impugned show-cause notice be treated as notice under section 28 of the Sales Tax Act, the learned counsel for the petitioner contended that even such notice after expiry of three years from date of E assessment sought to be reopened could not have been issued and it would be without jurisdiction. The contention seems to be correct because notice under, section 28 of Sales Tax Act for reopening the assessment is issued within three years of the date of the assessment which is sought to be reopened. Admittedly, the action was initiated by the respondent after a period of three years and perhaps being aware of this difficulty instead of referring to section 28, he has invoked rule 10 of the Excise and Salt Rules, where no such limitation is provided. Therefore, considering the case from any angle i.e. under rule 10 or section 28, the respondent did not have the jurisdiction or was competent to issue notice for reopening the assessment of the petitioner.
Mr. Nazar Akbar, learned counsel for the respondent contended that the petition is premature as the petitioner without resorting to remedy available under the statute has filed this petition. In this regard the learned counsel has referred to M/s. Choudhri Wire Rope Industries Ltd. v. Sales Tax Officer, Special Circle-I, Lahore 1988 S C M R 1934 = 1988 P T D 962. In this case a notice under section 28 of the Sales Tax Act was issued within time but it was challenged on the ground that on the basis of change of opinion the Sales Tax Officer could not reopen the assessment. It was observed "prima facie we are not satisfied that this is a case of mere change of mind or opinion on the part of the Sales Tax Officer". The notice issued by the Sales Tax Officer does not seem to have been challenged on any other ground, namely, want of jurisdiction or bar of limitation and in this background the Hon'ble Supreme Court observed that the petition was premature and was rightly dismissed by the High Court.
Mr. Iqbal Naeem Pasha, learned counsel for the petitioner has contended that this judgment is distinguishable as there the notice under section 28 had been issued but in the present case notice has been issued under rule 10 which is void ab initio. We have noted that there are series of decisions of our superior Courts that if any action particularly in fiscal matters is without jurisdiction, the assessee can without resorting to statutory remedy available under law challenge by way of Constitutional Petition. Reference can be made to Edu1jee Dinshaw Ltd. v. Income Tax Officer P L D 1990 SC 399 (see also 1990 P T D 155) where notice under section 65 of the Income Tax Ordinance was set aside as without jurisdiction and the plea as raised by the respondent was repelled. Reference is also made to Usmania Glass Sheet Factory Ltd. v. Sales Tax Officer P L D 1971 SC 205 (see also 1966 P T D 461), Premier Cloth Mills Ltd. v. Sales Tax Officer 1972 S C M R 257, Jeson International (Pvt.) Ltd. v. Income Tax Officer and others 1989 P T D 1141 and unreported decisions of our Court in C.P. No.D-447 of 1988 Bhambhore Ceramic Industries Ltd. v. Income Tax Officer (C.P. No. 372 of 1987), N.V. Philips Cleoilam Peufabricken v. Income Tax Officer and another 1990 P T D 389 (C.P.No. D-710 of 1987), Republic Motor Ltd. v. Income Tax Officer, Karachi 1990 P T D 889. Therefore, consensus of authorities is that if the impugned action is without jurisdiction it can be challenged by riling Constitutional Petition and without resorting to the remedy available under the statute. Reopening of Sales Tax assessment is dependent upon issuance of a notice under section 28 of the Sales Tax Act. Where no notice has been issued or notice issued is barred by time, the Sales Tax Officer cannot have jurisdiction to reopen the case. In these circumstances the petitioner was not bound to avail the statutory remedy.
We, therefore, declare that the show-cause notice dated 24-10-1985 and action initiated in pursuance thereof are without lawful authority and of no legal effect. The parties shall bear their own costs.
M.BA./I-156/KPetition accepted.