S.T.A. No. 2754/LB of 2001, decided on 1st March, 2002 VS S.T.A. No. 2754/LB of 2001, decided on 1st March, 2002, 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2496 (2002)

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.36‑‑‑Recovery of tax not levied or short levied or erroneously refunded‑‑‑Show‑cause notice‑‑‑Limitation‑‑‑Provision of S.36 of the Sales Tax Act, 1990 as it existed at' the relevant time, provided that show‑cause notice could be issued within 5 years from 1‑1‑1991 which ended on 1‑1-1996 for the relevant period from 1‑10‑1991 to 30‑11‑1992‑‑‑Show‑cause notice having been issued on 16‑5‑1999, was barred by time as the same had been issued three years, four months and fifteen days after the prescribed time limit and the result was that like in the suit for recovery of money after lapse of time prescribed by law of limitation, the intended recovery had become unenforceable.

(b) Sales Tax---

‑‑‑‑Question of limitation and jurisdiction‑‑‑Cognizance by Court‑‑ Contention that since the plea of delay in issuing the show‑cause notice had not been taken in the grounds of appeal, therefore, the same could not be raised during arguments was without any merit because the question of limitation and jurisdiction were the important aspects of the case which every officer, Tribunal or Court dealing with the matter had to consider itself although the .same had not been raised in pleadings or urged in arguments.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.34‑‑‑Additional tax‑‑‑Show‑cause notice based on incorrect fact‑‑ Demand of arrears and additional tax‑‑‑Validity‑‑‑Show‑cause notice carried misstatement to the effect that it was mentioned that sale tax was payable by the assessee alongwith additional tax and penalty and the order also directed the assessee to pay on account of short paid amount of sales tax alongwith additional tax and penalty‑‑‑Admitted factual position was against the facts mentioned in the show‑cause notice and similarly the determination of an amount against the assessee as arrears on account of sales tax was incorrect because the assessee had already deposited the entire amount of sales tax‑‑‑Show‑cause notice having been issued on incorrect facts, could not be said to be a legal notice and consequently the order raising demand of arrears of sales tax was patently illegal.

Naeem Akhtar Sheikh for Appellant.

Tariq Imran, D.R, with Riasat Ali, Senior Auditor for Respondent.

Date of hearing : 26th February, 2002.

JUDGMENT

ABDUL QAYYUM, MEMBER (JUDICIAL). ‑‑‑This appeal is directed against the Sales Tax Order‑in‑original No.221 of 2001 dated 26‑9‑2001 (dispatched on 2‑10‑2001) passed by the learned Additional Collector (Ajudication), Lahore.

2. The facts leading to this appeal are very brief and simple.

3. For the relevant period from 1‑10‑1991 on 30‑11‑1992, the then learned Assistant Collector, Sheikhupura Division, vide letter, dated 6‑1‑1993 fixed sales tax of the appellant on‑capacity basis in terms of S.R.O. 972 and 973(I)/91 dated 29‑9‑1991 @ Rs.8,721 per month which was worked out Rs.1,22,094 but since the appellant had already paid an amount of Rs.43,490, therefore, it was asked to pay the balance amount of Rs.78,604 immediately which the appellant paid through Cheque No.DH‑061027, dated 1‑1‑1993 and this amount was credited through the State Bank of Pakistan, Lahore on 14‑3‑1993.

4. The Assistant Director, Revenue Receipts Audit, Lahore on 25‑6‑1994 recorded an audit observation No.16 to the effect that since the balance amount of sales tax i.e. Rs.78,604 was deposited late, therefore, the appellant was liable to pay additional tax amounting to Rs.1,83,428 which may be recovered under intimation to the audit. On the basis of this audit observation a contravention case was prepared and the learned Adjudicating Officer issued a show‑cause notice dated 15‑5‑1999 requiring the appellant to explain its position within 10 days as to why the short paid amount of sales tax of Rs.1,83,42 of recovered from it alongwith the additional tax and penalty.

5. The appellant resisted the show‑cause notice but the learned Adjudicating Officer through the impugned order directed the appellant to pay Rs.1,83,428 as the short paid amount of sales tax alongwith additional tax and penalty of Rs.10,000. Hence, this appeal.

6. Learned counsel for the appellant submitted that the show -cause notice dated 15‑5‑1999 in respect of the period from 1‑10‑1991 to 30‑11‑1992 was hopelessly barred by time and that the impugned order having been passed on the basis of a time‑barred notice was without jurisdiction and thus nullity in the eye of law. He also contended that the show‑cause notice being based on incorrect facts was illegal inasmuch as it raised an allegation that an amount of Rs.1,83,428 was payable on account of sales tax although the entire amount of Rs. 1,22,094 payable on that account had already been paid and that the impugned order determining the amount of Rs.1,83,82$ payable as short paid amount of sales tax was, therefore, invalid as the same was contrary to admitted facts on record. It was further submitted that late payment of the sales tax was not the result of any deleberate act on part of the appellant and that it was not wilful either. According to the learned counsel, it was not a case in which the appellant could be asked to pay any additional tax or penalty.

7. The learned D.R. has resisted the appeal and has urged that objection regarding the notice being barred by time not having been averred in the grounds of appeal could not be raised during arguments He however, confirmed the factual position that the appellant had already deposited an amount of Rs.43,490 and paid the balance amount of Rs.78,604 when he was asked by the learned Assistant Collector on 6‑1‑1993 to pay the same. He also confirmed this fact that the controversy between the parties now did not relate to any arrears of sales tax but was in respect of the amount of Rs.1,83,824 which was calculated by the Assistant Director, Revenue Receipts Audit, Lahore through audit observation No. 16 dated 25‑6‑1994 to be due from the appellant on account of additional tax. He also confirmed that show cause notice was issued on 15‑5‑1999.

8. Learned counsel for the appellant placed on record photocopy of letter dated 6‑1‑1993 issued by the then learned Assistant Collector, Sheikhupura Division and photocopy of challan showing payment of an amount of Rs.78,604 through Cheque dated 11‑1‑1993 which was credited on 14‑3‑1993.

9. The learned D.R. brought on record photocopy of said report No. 16 dated 25‑6‑1994 and photocopy of show‑cause notice dated 15‑5‑1999.

10. We have considered the arguments and have also gone through the record. Admittedly the appellant was to pay an amount of Rs.1,22,094 as sales tax from 1‑10‑1991 on 31‑11‑1992 @ Rs.8,721 per month on ,capacity basis in view of S.R.O. No.972 and 973(I) dated 29‑9‑1991. Out of this amount of Rs.1,22,094, the appellant had already paid Rs.43,490 and about the balance amount of Rs.78,604 the appellant was asked vide letter dated 6‑1‑1993 to pay the same immediately which was paid through, Cheque No.DH‑061027 dated 11‑1‑1993 and this amount was duly credited through the State Bank of Pakistan, Lahore 14‑3‑1993. After this payment, admittedly there were no arrears against the appellant on account of sales tax. It was on pointation by the learned Assistant Director Revenue Receipts Audit, Lahore through observation No.16 dated 25‑6‑1994 that a contravention case for payment of additional tax amounting to Rs.1,83,478 was prepared and show‑cause notice was issued on 16‑5‑1999 under section 36 of the Sales Tax Act, 1990 as it existed at the relevant time, the show cause could be issued within 5 years from. 1‑1‑1991, which period of 5 years ended on 1‑1‑1996. The show‑cause notice having been issued on 16‑5‑1999 is hopelessly barred by time as the same has been issued three years, four months and fifteen days after the prescribed time limit and the result is that like in the suit for recovery of .money after lapse of time prescribed by law of limitation, the intended recovery has become unenforceable. (1992 SCMR 1998). The contention of the learned D.R. that since the plea of delay in issuing the show‑cause notice has not been urged in the grounds of appeal, therefore, the same could not be raised during arguments is totally without any merit because the question of limitation and jurisdiction are the important aspects of the case which every officer, Tribunal or Court dealing with the matter has to consider itself although the same has not been raised in pleadings or urged in advance.

11. The audit report clearly mentioned that the entire amount of sales tax was paid. It was also stated than since the principal amount due was not paid within time, therefore, it attracted levy of additional tax under section 34 of the Sales Tax Act, 1990 and that this amount of additional tax payable by the appellant was Rs.183,428. Surprisingly the show‑cause notice dated 15‑5‑1999 carried misstatement to the effect that it was mentioned that sales tax amounting to Rs.183,428 was payable the appellant alongwith additional tax and penalty. Still more surprisingly the impugned order also directed the appellant to pay Rs.1,83,428 on account of short paid amount of sales tax alongwith additional tax and penalty of Rs.10,000. The admitted factual position as stated above is against the facts mentioned in the show‑cause notice and similarly the determination of an amount of Rs.1,83,428 against the appellant as arrears on account of sales tax is incorrect because admittedly the appellant had already deposited the entire amount of sales tax of Rs.43,490 earlier to letter dated 6‑1‑1993 and Rs.78,604 after this letter. The show‑cause notice being passed on incorrect facts cannot be held to be a legal notice and consequently the impugned order raising demand of Rs.1,83,428 as arrears of sales is also patently illegal.

12. The result of the above discussion is that the impugned order is set aside and the appeal is accepted.

C.M.A./304/.Tax(Trib.)

Appeal accepted.