MESSRS FLYING BOARD AND PAPER PRODUCTS, LAHORE CANTT. VS DEPUTY COLLECTOR-II, GOVERNMENT OF PAKISTAN, DIRECTORATE OF SALES TAX, CUSTOMS HOUSE, LAHORE
2002 P T D 7
[Lahore High Court]
Before Nasim Sikandar, J
Messrs FLYING BOARD AND PAPER PRODUCTS, LAHORE CANTT.
Versus
DEPUTY COLLECTOR-II, GOVERNMENT OF PAKISTAN, DIRECTORATE OF SALES TAX, CUSTOMS HOUSE, LAHORE and 3 others
Amended Writ Petition No. 5203 and Writ Petitions Nos. 5202, 5204 to 5206 of 1999, decided on 28/09/2001.
(a) Sales Tax Act (VII of 1990)---
----S. 45A---Revisional jurisdiction, exercise of ---Preconditions-- Revisional power can be used only in respect of departmental proceedings and those orders which are recorded by officer of sales tax---Order in respect of which revisional jurisdiction is proposed to be exercised must be made by a subordinate officer to the Central Board of Revenue or a Collector as provided by S. 45A(3) of the Sales Tax Act, 1990---Proceedings under S. 45A(1) of Sales Tax Act, 1990, cannot be initiated where an appeal under S.45 or 46 of the Sales Tax Act, 1990, is pending---No such order can be made after expiry of three years or from the date of the original decision or order of the subordinate officer as referred in S. 45A(1) of the Sales Tax Act, 1990.
(b) Sales Tax Act (VII of 1990)---
----Ss. 45 & 45A---Revisional jurisdiction, exercise of---Necessary conditions---Necessary conditions for exercise of such jurisdiction either by Central Board of Revenue or Collector are that order or decision must have been recorded by a `sales tax officer' subordinate to the Central Board of Revenue or the Collector, as the case may be, and such order or decision has been passed in 'departmental proceedings'---Revising Authority can act of its own motion and the primary purpose is to see the legality or propriety of the decision/order in the perspective of the interest of the revenue.
(c) Sales Tax Act (VII of 1990)---
----S. 45A---Revisional power---Nature of jurisdiction---Revisional power and proceedings under S. 45A of Sales Tax Act, 1990, are executive in nature to remedy defaults which are either not appealable or, else no appeal has been filed---Once the assessee or the department takes the matter to any of the three appellate forums i.e. the Collector (Appeals), the Appellate Tribunal or High Court, the revisional power vested under S. 45A stands ousted completely and effectively.
(d) Sales Tax Act (VII of 1990)---
----S. 45A---Revisional, jurisdiction---Subject-matter of Appellate Tribunal---Even if the Collector (Appeals) is accepted to be a `subordinate officer' of sales tax and the proceedings before him to be `departmental proceedings' still order which has been subject-matter of the Tribunal cannot directly or indirectly be touched by the revisional Authority whether the Authority is Central Board of Revenue or Collector of Sales Tax.
(e) Sales Tax Act (VII of 1990)---
----S. 45A---Revisional jurisdiction---Object and scope---Purpose of exercise of revisional jurisdiction is only to ensure that the system works in accordance with law---Once the matter has been taken to the appellate forums, then the executive functionaries must keep their hands off the matter---Only job the functionaries can do is to see that the matter is properly followed up by the department before the appellate forums so that the assessee as well as the Department may have a fair deal.
(f) Sales Tax Act (VII of 1990)---
----Ss. 45A & 47---Constitution of Pakistan (1973), Art. 199-- Constitutional petition---Levy of sales tax---Exercise of revisional jurisdiction instead of appeal under S.47 of the Sales Tax Act, 1990-- Show-cause notice, issuance of---Dispute was with regard to the adjustments of various sums paid as sales tax---Appeal against the original order was allowed by the Collector in favour of the petitioner whereas the Appellate Tribunal dismissed the appeal filed by the Authorities on the technical ground that the appeal was not filed by a person competent to do so---Central Board of Revenue, after the rejection of appeal by the Appellate Tribunal, took the matter in exercise of powers under S. 45A of the Sales Tax Act, 1990, and issued the show -cause notice in revisional jurisdiction---Validity---Where appeal lay to High Court against order of Appellate Tribunal, the same did not permit directly or indirectly any executive Authority in Department to interfere with a matter .which should properly have been brought to High Court-- Order passed by Central Board of Revenue under S. 45A of the Sales Tax Act, 1990, was without lawful authority and the same was set aside-- Constitutional petition was allowed in circumstances.
Irfan Qadir for Appellant. A. Karim Malik for the Revenue.
Date of hearing: 13th September, 2001.
JUDGMENT
The petitioner Messrs Flying Board and Paper Products a company limited by shares is engaged in manufacture of Board and Paper Products. For the various periods involved they were served with show -cause notices alleging contravention of sections 3, 6, 7 "and 26 of the Sales Tax Act, 1990. Earlier it was found by the department that during these periods the manufacturing units running by the company removed certain quantities of raw material out of factory premises to their sister concerns or other units. The sales tax paid at the time of import/local purchases of various sums was adjusted during these periods. These adjustments, according to the department were not legal inasmuch as the appellant did not consume the raw material in question. It was also found that during these periods the company claimed excess input tax on various sums in respect of imported wood pulp. On usual proceedings by way of separate orders in original the petitioner was found to have violated the aforesaid provisions inasmuch as they had claimed/adjusted input tax without any legal sanctity. Accordingly they were required to pay additional tax and surcharges as also penalties imposed at various sums both with reference to sections 36 and 33 of the Sales Tax Act, 1990.
2. The appeal filed by the petitioner/company under section 45 of the Act succeeded on 26-8-1997. The Collector (Appeals), Lahore after hearing the parties finally observed that raw material on which input tax was availed by the appellant were consumed, in full, in the taxable supplies. Therefore, in his view, the requirement of the law having been met, the impugned order in the original was found unjustified.
3. The appeal filed by the Department through Directorate of Intelligence and Investigation (Customs and Excise) Regional Office, Lahore was rejected by the Lahore Bench of the Customs Excise and Sales Tax Appellate Tribunal on a technical ground. It was noted that notification issued under section 31 of the Sales Tax Act, 1990 did not include the name of the appellant before them, D.G. Intelligence and Investigation. It was also found that the respondent Collector (Appeals) in his comments seriously challenged the authority of the aforesaid Directorate to file an appeal under section 46 of the Act as they could not deem either to be part of the Sales Tax Department nor the Additional Director thereof could be deemed to be a person aggrieved by the appellate decision. The Collector (Appeals) pleaded that power to file an appeal under section 46 of the Sales Tax Act was not conferred on the appellant per Notification No. 299(I)/95, dated 12-4-1995 issued under section 31 of the Sales Tax Act, 1990.
4. The learned Tribunal agreed and the Chairman thereof Mr. Justice (R) Akhtar Hassan through the order, dated 11-7-1998 dismissed the appeal on the ground that it was not filed by a person competent to do so.
5. The learned Member (Technical) though agreed with the result, nevertheless proceeded to opined:----
"I agree., It is, however, open to the Directorate General of Intelligence and Investigation to refer these cases to the Central Board of Revenue, Islamabad in terms of section 45A(1) of Sales Tax Act, 1990 who may satisfy itself as to the legality or propriety of the Orders-in-Appeal passed by the learned Collector (Appeals), Central Zone, Lahore (notified as an officer of Sales Tax under section 30 read with section 2(18) (ibid) and then pass such order as it may think fit because the amount of taxes involved in the matter is more than Rs. 15 million."
6. Thereupon, taking clue from the aforesaid note added by the learned Member (Technical) the Member Sales Tax, Board of Revenue appears to have taken up the matter in exercise of his powers under section 45A. A show-cause notice was served upon the appellant on 30-1-1999 and after usual proceedings finally an order was passed on 10-5-2000. For various reasons detailed therein by the Member Sales Tax, C.B.R. it was concluded that "Order-in-Appeal No. 346-797, dated 26-8-1997 passed by the Collector of Customs, Central Excise and Sales Tax (Appeals), Central Zone, Lahore under section 45 of the Act is improper, without lawful authority and misconceived. Thus the same is hereby set aside under section 45A ibid".
7. The petitioner/company had in fact challenged the issuance of the aforesaid notice, dated 30-1-1999. However, during the pendency of this petition and on the interpretation of the Member that the order of this Court, dated 24-3-1999 restraining him from passing of final order, lapsed after six months, he proceeded to frame the order. That order was also challenged by way of amending the petition.
8. Heard the learned counsel for the parties. Both have mostly touched the merits of, the case. The contention of the petitioner-company is that it was entitled to make input adjustments while the contention of the Revenue is that the petitioner has been playing fraud upon the Revenue.
9. After hearing the parties, I am of the view that the impugned order of the Member (Sales Tax) purported to have been passed in his revisional jurisdiction under section 45A needs to be set at naught on the short ground of lack of competency. It will be seen that the Collector of Sales .Tax under subsection (4) and the Board under subsection (I) of section 45A can call for and examine record of any "departmental proceedings" for their satisfaction as to the legality or propriety of any decision or order passed therein by an, "Officer of Sales Tax". Sub section (2) of section 45A clearly gives an indication that such a power cannot be exercised with, regard to a case where an appeal under section 45 or section 46 is pending. If the revisional jurisdiction cannot be exercised in respect of a matter which is sub judice before either the Collector (Appeals) or the Tribunal then the case obviously cannot be touched when an appeal had in fact been heard and decided by both the forums i.e. Collector (Appeals) and the Tribunal.
10. The Sales Tax Act, 1990 gives a complete structure of appellate proceedings right up to appeal to this Court under section 47. In the scheme of the Act under section 45, any decision/order recorded by an Officer of the Sales Tax below the rank of a Collector is liable to be challenged before the Collector (Appeals) both by the department as well as any aggrieved person. Then under section 46 of the Act any person including Sales Tax Department aggrieved by any decision/order passed by-Collector (Sales Tax) or by the Collector (Appeals) is entitled to approach the Tribunal. Finally an appeal lies to this Court under section 47 in respect of any question of law arising out of an order rendered by the Tribunal under section 46.
11. Side by side with the appellate structure the Act confers a power on Collector of Sales Tax as well as C. B. R. to satisfy itself of the legality or propriety of any decision or order passed by an Officer of Sales Tax. The revisional power so conferred is necessarily confined to "departmental proceedings" and the orders recorded therein by an "Officer of Sales Tax". The proceedings in first appeal before the Collector (Appeals) under section 45 are not at all departmental proceedings nor the Collector (Appeals) is "an officer of the sales tax" while hearing an appeal for the purpose of provisions of section 45A of the Act.
12. The scope of revisional jurisdiction of the C.B.R. as well as the Collector under section 45A is subject to a number of conditions. The revisional power can be used only in respect of departmental proceeding and those orders which are recorded by an Officer of Sales Tax. The order in respect of which revisional jurisdiction is proposed to be exercised must be made by a "subordinate officer" to the Board or Collector as suggested by subsection (3) of section 45A. Further that proceedings under subsection (1) of section 45A cannot be initiated when an appeal under section 45 or section 46 is pending. Lastly no such order can be made under that section after expiry of three years or from the date of the original decision or order of subordinate officer referred to in subsection (1).
13. The orders recorded under section 45A, it will further be seen, are divisible in two parts. In one category are the orders of C.B.R. and in the second are those which are recorded by the Collector, while the revisional order of C.B.R. under section 45A is intended to be final, an order under that section by the Collector is appealable before the Tribunal under section 46. Although the order passed by the Board of Revenue under section 45A is not subject to appeal before the Tribunal under section 46, the fact remains that the Tribunal is the final authority on appellate side as far the facts of a case are concerned. Under subsection (4) of section 46 the Tribunal can pass any such order in relation to the matter before it as it thinks fit.
14. From a collective study of section 45 (Appeals) section 45A (Powers of the Board and Collector to call for records) following is the picture that emerges. It is that for exercise of revisional jurisdiction either by the Board or the Collector at least three conditions must be answered. These are, firstly, that an order or decision must have been recorded by a "Sales Tax Officer" "subordinate" to the C.B.R. or the, Collector, as the case may be, and that such order or decision was passed in "departmental proceedings". The revising authority can act of its own motion and the primary purpose is to see the legality or propriety of the decision/order in the perspective of the interest of the Revenue. In the case in hand, as noted earlier, none of the three conditions were answered. The Collector (Appeals) while working as such was neither a Sales Tax Officer nor an Officer subordinate either to the Collector on executive side or the Central Board of Revenue. The proceedings before him were not "departmental proceedings" either. Further that on the doctrine of merger the order of the Collector (Appeals) stood emerged in the order of the Tribunal though the appeal filed by the department was rejected on a technical ground. In that situation, the only way open for the department was to approach this Court under section 47. It appears that the Department was encouraged by the note added by the learned Member (Technical) while agreeing with Chairman of the Tribunal that the appeal was not filed by a competent person. Before embarking upon the exercise they overlooked the basic fact that revisional powers and proceedings under section 45A are necessarily executive in nature to remedy defaults which are either not appealable or else no appeal was filed in their respect. Once the assessee or the department takes the matter to any of the three appellate forums, the Collector (Appeals), the Tribunal or this Court, the revisional power vested under section 45 stands ousted completely and effectively. Also while recording the impugned order the learned Member, C.B.R., again overcooked the fact that by reversing the order in original he was also impliedly setting aside not only the order of Collector (Appeals) but also that of the Tribunal. The passing of such an order is clearly not warranted either under section 45A or any other provision of Sales Tax Act. Even if for arguments sake the Collector (Appeals) is accepted to be a "subordinate Officer" of Sales Tax and the proceedings before him to be "departmental proceedings" still an order which has been subject-matte of the Tribunal could not directly or indirectly be touched by the revisional authority whether it was C.B.R. or Collector of Sales Tax. To interpret otherwise or in the manner in which the Revenue is doing it will not only be against the basic purpose of the provisions providing for appeal to the Tribunal, an extra-departmental judicial forum, but also to this Court. Further, such an interpretation will damage the confidence of the assessee in the first as well as second appellate forum. That cans hardly be allowed. The purpose of exercise of revisional jurisdiction by functionary higher in departmental hierarchy is only to seek that system works in accordance with law. It is repeated that once a matter has been taken to the Appellate forums then the executive functionaries must keep their hand off the matter. The only job they can do is to see that the matter is properly followed up by the Department before the appellate forums so that the assessee as well as the Department may have a fair deal.
15. Since an appeal lies to this Court against the order of the Tribunal, it will not permit directly or indirectly any executive authority in the department to interfere with a matter which should properly have been brought to this Court. The Member, C.B.R. while acting o revisional side deliberately attempted to give it a colour that he was touching only the order of the Collector (Appeals) as a subordinate Officer and was not in any manner touching the order of the Tribunal. That attempt was too obvious to remain unnoticed.
16. Therefore, I will hold that the impugned order recorded by Member, C.B.R. under section 45A of the Act, dated 7-7-2000 issued/announced on 10-5-2000 was without lawful authority. It shall bi set at naught accordingly.
17. Petition accepted.
18. This judgment will also dispose of Writ Petitions Nos. 5204, 5205 and 5206 of 1999.
Q.M.H./M.A.K./F-67/L Petition allowed.