(a) Sales Tax Act (VII of 1990)---

----S. 36---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Show-cause notice---Contention that show-cause notice under S.36 of the Sales Tax Act, 1990 should be for each separate month i.e. each tax period, was not supported by the language of S.36 of the Sales Tax Act, 1990.

(b) Sales Tax Act (VII of 1990)---

----S. 36 & Sixth Sched., S. No. 44---S.R.O. 987 (I) (99), dated 30-8-1999---Establishment of Office of

Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Recovery of tax not levied or short-levied or erroneously refunded---Show-cause notice for recovery of tax without indication of amount of alleged supplies, rate of sales tax charged or any other kind of detail showing as to how the figure of tax had been arrived at---Validity---Show-cause notice was mainly a reproduction of a report of the Audit Officer of the Directorate of Revenue Receipts Audit merely .showing the figure of sales tax as recoverable from the complainant/assessee---No indication was found in the show-cause notice as to how this figure had been arrived at and even the amount of supplies on which the sales tax had been worked out was not shown---Without disclosing the basis for the sales tax figure, the show-cause notice remained vague, invalid and attracted the jurisdiction of Federal Tax Ombudsman---Section 36 of the Sales Tax Act, 1990 regulates the proceedings initiated and taken for violation of Sales Tax Act, 1990 which may result in recovery and penalty, therefore, it was necessary that it should be followed strictly---Federal Tax Ombudsman recommended that the show-cause notice, dated 23-10-2002 be withdrawn, if a show-cause notice was to be issued again it should inter alia indicate the ingredients of subsection of section 36 under which it is issued and it should also give the basis for any amount of sales tax which is considered to be recoverable from the complainant/assessee.

Complaint No. 1250 of 2001; Complaint No. 1702 of 2002 and Complaint No. 1435 of 2002 ref.

Assistant Collector of Customs v. Khyber Electric Lamps 2001 SCMR 838 rel.

(c) Interpretation of statutes---

---Where any action is initiated under any provision of law it should be done in the same manner as prescribed by law.

(d) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 2(3)---Maladministration---Notice contrary to law-.-Once it was determined that the notice was contrary to law it was hit by maladministration and further proceedings on the basis of such defective notice will be an exercise in futility causing harassment to the taxpayer.

Ashraf Hashmi, A.R. for the Complainant.

Sarmad Qureshi, Deputy Collector Sales Tax (Adjudication), Faisalabad for Respondent.

FINDINGS/DECISION

This is a complaint relating to a show-cause notice, dated 23-10-2002 issued by the Additional Collector Sales Tax (Adjudication), Faisalabad on the basis of an audit report and which requires the complainant to show-cause why sales tax amounting to Rs.3,720,060 be not recovered from them alongwith additional tax and why penal action should also, not be taken under the Sales Tax Act. The main points in the complaint are as follows:--

(i)The period indicated in the notice is "2000-2001 upto 2/2002". The period indicated in the notice is, however, not a tax period as defined in section 2(43) of the Sales Tax Act where it has been defined to mean a period of one month or such other period as may be notified by the Federal Government. The notice is thus illegal and vague.

(ii)The show-cause notice only indicates the amount of Rs.3,720,060 and gives no indication of the amount of alleged supplies, the rate of sales tax charged of any other kind of detail to show how the figure of Rs.3,720,060 has been arrived at.

(iii)In fact the complainant manufactures and supplies textile plant and machinery which is exempt under S.R.O. 987(I)(99), dated 30-8-1999 read with S. No.44 of the Sixth Schedule to the Sales Tax Act.

It has been prayed that the show-cause notice be declared as vague, void and of no legal effect and it may be directed to be withdrawn.

2. The respondent's reply consists of the comments of the Additional Collector (Adjudication), Faisalabad and its main points are as follows:--

(i)The Adjudication Authorities are authorised by law to adjudicate cases submitted by the executive authority. These cases have to be decided within the statutory time limit prescribed by law. No complaint thus lies before the Federal Tax Ombudsman regarding material particulars of a case pending before the competent Adjudicating Authority.

(ii)The period mentioned in the show-cause notice refers to the taxable activity of the complainant during that period. The tax period as defined in the Sales Tax Act means the minimum period of one month but there is no bar on the audit authorities for conducting audit for a period more a than one tax period. However, the period "2000-2001 upto 2/2002" is a typographical error and may be read as "7/2002" to 2/2002" for which a corrigendum, dated 25-1-2003 has been issued.

(iii)The show-cause notice is not vague because it particularly mentions that the complainant had made supplies without issuing sales tax invoices while the sales were declared in the returns. This is also proved by a letter written by the complainant to the Assistant Collector, Sales Tax stating that he could not produce sales and purchase registers and did not issue sales tax invoices.

(iv)The complainant has failed to explain what maladministration has been committed through the mere issue of the show-cause notice:

(v)On the one hand, the complainant had duly submitted a reply to the show-cause notice while the same issue has also been taken up before the Federal Tax Ombudsman.

It has been prayed that the practice of filing complaints in cases pending before the Adjudicating Authorities be discouraged and the present complaint be dismissed.

3. The representatives of the two sides were heard and it was pointed-out by the AR of the complainant that the matter of jurisdiction has already been decided in Complaint No.1250 of 2001 and in Complaint No.1702 of 2002 the show-cause notice issued by the Adjudicating Authority was held to be invalid although it was further observed in the said findings that a fresh notice could be issued if otherwise permissible under the law. It was thus contended that there was no substance in the respondent's preliminary objection. It was also reiterated that a show-cause notice should be for each tax period (of one month) and that the show-cause notice remained vague when it did not specify the relevant tax period(s) during which the supplies stated by attracting sales tax were made. It was also stated that there was no provision for issuance of a "corrigendum" to the show-cause notice and that irt fact a fresh show-cause notice should have been issued. It was also contended that the complainant's- letter enclosed with the respondent's reply was a forged document which was also evident from the fact that the show-cause notice did not contain any reference to it. It was thus reiterated that the show-cause notice be ordered to be withdrawn and, if necessary, a fresh show-cause notice be issued in accordance with law. It has been further pointed out that even if the notice is to be issued under section 36(2) and n6tt under section 36(1) of the Sates Tax Act there would be time for issuance of 'such a notice till October, 2003. The respondent's representative, on the other hand, maintained that the show-cause notice issued by the Deputy Collector (Adjudication) was quite valid and instead of approaching the Federal Tax Ombudsman the complainant should have pleaded its case before the Adjudicating Authority.

4. The contentions of the two sides have been considered and as regards the complainant's contention that the show-cause notice under section 36 should be for each separate month i.e. each tar period, the same is not supported by the language of section 36. On the other hand a bare perusal of the show-cause notice, dated 23-10-2002 shows that it is mainly a reproduction of a report of the Audit Officer of the Directorate of `Revenue Receipts Audit merely showing the sales tax of Rs.3,720,060. as recoverable from the complainant. There is no indication in the show-cause notice as to how this figure has been arrived at and even the amount of supplies on which the sales tax has been worked out is not shown. It is obvious, that without disclosing the basis for the sales tax figure, the show-cause notice remains vague and therefore, invalid thereby attracting the jurisdiction of the Federal Tax Ombudsman: It is pertinent to note that in Assistant Collector of Customs v. Khyber Electric Lamps 2001 PTD 838 the Supreme Court of Pakistan has held that the notice should contain the ingredients of the provision of law that the non payment or short levy of Tax was due to collusion or deliberate act or by reason of any inadvertence, error or misconstruction. Unless these requirements are met, the notice will be defective, contrary to law and illegal. Therefore, all proceedings in pursuance of such notice will also be void and illegal.

5. So far question of jurisdiction is concerned it has been thoroughly discussed in Complaint No.1435 of 2002 and following the same it is overruled. Where any action is initiated under any provision of law it should be done in the same manner as prescribed by law. Once it is determined that the notice is contrary to law it is hit by maladministration and further proceedings on the basis of such defective notice will be an exercise in futility causing harassment to the tax payer. Section 36 regulates the proceedings initiated and taken for violation of Sales Tax Act which may result in recovery and penalty therefore, it is necessary that it (section 36) should be followed strictly.

6. In the light of the above it is recommended that;--

(i)The show-cause notice, dated 23-10-2002 be withdrawn

(ii)If a show-cause notice is to be issued again it should inter-alia indicate the ingredients of subsection of section 36 under which it is issued and it should also give the basis for any amount of sales tax which is considered to be recoverable from the complainant.

(iii)Compliance in respect of (i) above be reported within 30 days.

C.M.A./841/FTOOrder accordingly