ALUMINIUM PROCESSING INDUSTRIES INTERNATIONAL (PVT.) LTD VS FEDERATION OF PAKISTAN
2003 P T D 1411
[Karachi High Court]
Before Amir Hani Muslim, J
Messrs ALUMINIUM PROCESSING INDUSTRIES INTERNATIONAL (PVT.) LTD., through Director and Chairman and another Karachi
Versus
FEDERATION OF PAKISTAN through Chairman, Central Board of Revenue, Islamabad and 2 others
Suits Nos. 297 and 412 of 1999, decided on 24/01/2003.
(a) Civil Procedure Code (V of 1908)---
----O.XIII, R.4---Document can only be marked as "exhibited" if the same is produced by a witness.
(b) Sales Tax Act (VII of 1990)---
---Ss. 45-A, 46, 30 & 51---Specific Relief Act, (I of 1877), Ss. 42, 54 & 55---Suit for declaration and permanent injunction against show-cause notice under S. 45-A, Sales-Tax Act, 1990 issued by the Member, Judicial (C.B.R.) to the plaintiff-- Maintainability---Powers of the Central Board of Revenue and the Collector to call for records ---Scope---Provision of S. 45-A, Sales Tax Act, 1990 is applicable to all the orders passed by the Officers of the Sales Tax either in original or in appeal, and non-filing of appeal by either party would not debar the Board from exercising powers under S. 45-A of Act to examine the legality or, propriety of an order except that during the pendency of the appeal the power, under S. 45-A could not be exercised---Powers under S. 45-A, however, could not be exercised to examine the legality or propriety of an order passed either by the Appellate Tribunal under S.46 or by the High Court---Show-cause notice under S. 45-A Sales Tax Act, 1990 having lawfully been issued by the Member Judicial, Central Board of Revenue and suit being barred under S. 51, Sales Tax Act, 1990, High Court dismissed the suit in circumstances.---[Flying Board and Paper Products v. Deputy Collector-II 2002 PTD 7 dissented from].
Flying Board and Paper Products v. Deputy Collector-II 2002 PTD 7 dissented from.
Abbasiya Cooperative Bank v. Muhammad Ghaus PLD 1997 SC 3; Falaknaz v. Karachi Building Control Authority 2001 YLR 2542: Kassam Haji Abbas Patel v. I.T.O., Contractors Circle 1982-PTD 361; Eduljee Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399; Glaxo Laboratories Limited v. Inspecting Assistant Collector of Income Tax PLD 1492 SC 549; Pakistan Electric Fittings Manufacturing Co. Ltd, v. C.I.T. 2000 PTD 2407; Iftikhar Hussain Shah v. Pakistan 1991 SCMR 2193; Muhammad Ibrahim v. Group Captin Salahuddin 1987 SCMR 218; Central Insurance Co. v. Central Board of Revenue 1993 SCMR 1232; Koohinoor Textile v. Federation of Pakistan 2002 PTD 121; 2002 PTD 128 and Assistant Collector Customs v. Khyber Electric Lamps 2001 SCMR 838 ref.
Dr. Farogh Naseem and Irfan Aziz for Plaintiffs.
Fariduddin for Defendants.
Abdul Mujeeb Prizada alongwith Syed Khalid Shah and Raja M. Iqlial for Defendant (in Suit No.412 of 1999).
Sajjad Ali Shah, Standing Counsel alongwith Anwarul Haq, Collector (Adjudication), Sales Tax and Sirzameen, Senior Auditor, Large Tax Payers Unit for Defendants.
Dates of hearing: 20th to 24th January, 2003.
JUDGMENT
Through this judgment I intend to dispose of Suits Nos. 297 of 1999 and 412 of 1999 as the law points involved in both the proceedings were common. The facts in both the suits are almost common.
2. Brief facts as it appears from the pleading of the parties to Suit No.412 of 1999 are that on l6w2-1999 Plaintiff was issued a show-cause notice by the Member (Judicial), Central Board of Revenue, Karachi, Defendant No.2, in exercise of powers under section 45A of the Sales Tax, 1990 ("the Act"). The plaintiff replied the show-cause notice on 8-3-1999 whereafter they filed the present suit.
3. The background of the case was that on 21-5-1996 the Deputy Collector, Sales Tax, passed an order against the plaintiff holding therein that the plaintiff has failed to discharge its liability of payment of Sales Tax on advances in terms of the instructions of the Defendant No.1 and was directed to make payment of Rs.789.6 Millions within thirty days of the said order. This order was passed by the Deputy Collector-II. Mr. Javed Iqbal Mirza. The plaintiff preferred art appeal before the Collector of Sales Tax (Appeals) Southern Zone, By order, dated 1-10-1996 the Collector (Appeals), Sales Tax, allowed the appeal of the plaintiff and. remanded the matter to the Original Authority for de novo adjudication, inter alia, on the ground that the tax liability of the plaintiff was determined without a work-sheet which was required to be prepared by the detecting agency. The order appealed against was found by the Collector (Appeals) defective as according to him the details of calculations were missing and the order was passed without application of mind.
4. By order, dated 2-2-1997 the same Officer (Mr. Javed Iqbal Mirza) who was subsequently promoted as Additional Collector-i heard the matter on remand and found that the Sales Tax for the period from 1991 to 1954 was paid by the plaintiff as per Sales Tax General Order and the show-cause notice issued previously on the basis of which the proceedings were initiated against the plaintiff was discharged. The Department did not prefer any appeal against this order of the Additional Collector-I.
5. On 19-10-1998 the Additional Collector-II addressed a letter to the plaintiff calling upon them to submit their comments in regard to a complaint which was received by the Defendant No. 1 pursuant to which the Defendant No.1 had constituted a Committee to hold an inquiry into the facts as to whether the Plaintiff had evaded their liability of payment of Sales Tax for the same period which was already adjudicated upon by the Additional Collector. On 27-10-1998 the plaintiff replied to the letter of the Additional Collector-II stating therein that the proposed inquiry would be contrary to law. Thereafter the show-cause notice, dated 16-2-1999 was issued which too after being replied by the plaintiff has been impugned in this suit.
6. As regard the facts in Suit No.297 of 1999 are concerned, in these proceedings the plaintiff, which was an Aluminum Processing Industries, was assessed Sales Tax relating to the period from 1-1-1994 to 30-5-1995. This sales tax was assessed by the Assistant Collector, Sales Tax (West), Karachi and was finally adjudicated upon by the Additional Collector. Sales Tax, West Karachi. Initially, the plaintiff in the suit was issued show-cause notice on 29-5-1998 on the ground that the taxable goods of Rs.2,63,11,260, which they had supplied to PIAC during the period from 1994-95, were not shown in sales tax record and a huge amount of sales tax was concealed. It was further alleged that a huge quantity of extra sale was also unaccounted for which was worked out to Rs.2,72,91,402.98 and the sales tax involving at 12.5% was also alleged to have been evaded.
7. On 22-6-1998 a corrigendum to the show-cause notice was issued wherein the sales tax worked out was found to be Rs.29,16,989 and the additional sales tax and surcharge upto May, 1998, was worked out at Rs.2,06,90,431. The show-cause notice was replied contents of which were examined by the Additional Collector-I who passed the order-in-original in 1998 and the plaintiff was asked to pay Sales Tax of Rs.38,73,425 towards sales with additional tax of Rs.1,58,95,998 under section 34 of the Act and a penalty of Rs.500,000. In the said order, however, the plaintiff was permitted to avail the benefits/concessions provided under S.R.O. 575(I)/98, dated 12-6-1998. Plaintiff preferred an appeal before the Collector Sales Tax (Appeals).
8. The plaintiff during the pendency of the appeal had made payment of Rs.38,73,425, which was the demand raised against the plaintiff and opted to avail the benefits and concessions granted by the referred S.R.O.
9. By order, dated 14-12-1998 the Appeal of the Plaintiff was allowed by the Collector Sales Tax (Appeals), against which the Department did not prefer any further Appeal. Subsequently, on 8-2-1999, the Defendant No.2 in exercise of powers under section 45A of the Act issued notice to the Plaintiff, calling upon them to Shaw-cause why an amount of Rs.3,80,69,946 alongwith additional tax and- surcharge should not be recovered from them. The show-cause notice provided the Plaintiff to submit their reply within seven days. The Plaintiff after filing reply to the show-cause notice appears to have filed the present suit impugning the said show-cause notice and praying for the refund of the amount which the Plaintiff has deposited before the appellate forum during the pendency of the Appeal.
10. The Defendants have filed Written Statement in both the Suits disputing the contents of the Plaints, challenging, inter alia, the maintainability of the Suits.
11. On 24-8-1999 the Counsel for the Plaintiff and Mr. S. Tariq Ali, learned Standing Counsel for the Defendants, had made a joint statement that they will not lead oral evidence in the matter and they consented to rely upon the documentary evidence already available on record. Since both the suit were tagged together, this Court on 24-8-1999 framed the following issues:--
(i) Whether the suit is maintainable?
(ii) Whether the impugned show-cause notice, dated 28-5-1999 is lawful? and
(iii) What should the decree be?
12. The parties also consented to the admission of the documents filed by both the counsels along pleadings, therefore, they proposed these documents to be marked as "Exhibits . However, no document leas been marked as "exhibit". Even otherwise, the procedure adopted was foreign to the provisions of Qanun-e-Shahadat as a document can only be, marked as "Exhibit" if it is produced by a witness. 'Therefore, before hearing the arguments I had called upon Dr. Farogh Naseem, learnedly counsel for the plaintiff, to satisfy how a document could be exhibited without it being producing by a witness. He submitted that this portion of the order he would not press as he did not have any plausible explanation and requested that the matter be heard on the basis of the documents which documents he would not claim as exhibits. With the consent of the parties. I had heard the arguments of all the counsel.
13. On the question of maintainability of the suit and the bar contained in section 51 of the Act, Dr. Farogh Naseem, learned counsel for the plaintiff, argued that this bar of jurisdiction would not be extended to the cases which are covered by the exceptions enunciated in the case of Abbasiya Cooperative Bank v. Muhammad Ghaus, reported in PLD 1997 SC 3 where their Lordships of the Honourable Supreme Court had held that jurisdiction of civil Courts are not barred and these Courts are competent to try suits of civil nature if action impugned is on the ground of ouster of jurisdiction and or action is mala fide or without lawful authority or against the cannons of natural justice. The conditions referred to hereinabove if found in the pleadings would not attract the barring clause of section 51 of the Act. According to Dr. Farogh Naseem in the present proceedings the impugned show-cause notices sought to be quashed were issued by the defendant No.2 in colourful exercise of the powers under section 45A of the Act. The Notices, ex facie, were mala fide and through such Notices the defendant No.2 cannot re-open the assessment as the order of the Collector Sales Tax (Appeals), in Suit No.297 of 1999 against which the Department did not prefer any Appeal had attained finality whereas in Suit No.412 of 1999 the order passed by the Additional Collector on original side was also not appealed against and the revisional powers were not available with the Defendant No.2 to re-open the cases of the plaintiffs and examine the legality and or propriety of such orders. In support of his arguments he has relied upon the case of Falaknaz v. Karachi Building Control Authority reported in 2001 YLR 2542, which is a judgment of a learned Single Judge of this Court.
14. Dr. Farogh Naseem further submitted that there are two kinds of situation, firstly, when the show-cause notice was issued by an officer which has the power but has exceeded his authority and in such an event the show-cause notice could not be challenged before Civil Court and the aggrieved party should wait for the decision of such an officer and in the other situation if a notice is issued by a functionary which, ex facie, is without jurisdiction and or such a notice was tainted with colourful exercise of the power and an ultimate order based on such a notice passed would also be illegal then in such a situation the suit of the nature would lie. According to Dr. Farogh Naseem in present proceedings notice under section 45A of the 'Act was without jurisdiction and the defendant No.2 in law did not have powers to examine the legality and propriety of the orders referred to hereinabove. He had relied upon the case of Kassarn Haji Abbas Patel v. I.T.O. Contractors Circle, reported in 1982 PTD 361 and the case of Eduljee Dinshaw Ltd. v. Income Tax Officer; reported in PLD 1994 SC 399. He submitted that their lordships in the Supreme Court have held that a show-cause notice issued without jurisdiction can be quashed without asking the party to appear before the authority if it was established that the notice was without jurisdiction. He has referred to the case of Eduljee (supra) wherein their lordships have quashed the notice under section 65 of the Income Tax Ordinance, 1979. According to Dr. Farogh Naseem, the provisions of section 138 read with section 66A of the Income Tax Ordinance, 1979, are analogous to the provisions of section 45A of the Act, He submitted that provisions of section 195 of the Customs Act are also analogous to the provisions of section 45A of the Act. According to Dr. Farogh Naseem, the provisions of section 66-A of the Income Tax Ordinance warrant interference if there is an error of jurisdiction and similarly the provisions of section 45A of the Act warrant interference in revisional jurisdiction only when, there is legality or propriety of the decision sought to be examined is erroneous. He submitted that section 45A of the Act is para materia to section 66-A of the Income Tax Ordinance as both these provisions give revisional jurisdiction to the authorities to examine legality or propriety of any order or decision, if such order was passed erroneously. According to the learned counsel there were no errors on the face of the record, which could authorize the Defendant No.2 to examine these orders under section 45A of the Act.
15. The second point, which has been urged by Dr. Farogh Naseem, was that both the orders ought to be revised by the Defendant, No. 2 were against the dictum of the Honourable Supreme Court and is hit by the "doctrine of merger". He has relied upon the case of Glaxo Laboratories Limited v. Inspecting Assistant Collector of Income Tax, reported in PLD 1992 SC 549, in support of his contention. In this case, their lordships has held that the order of Income Tax Officer merged into order of the Tribunal, therefore, I.A.C. did not have jurisdiction to initiate action under section 66-A of the Income Tax Ordinance to re open the matter. Their lordships further observed that principles of res judicata would not only apply as it is governed by the provisions of 66-A but it lays down the boundaries and parameters of exercise of jurisdiction under it. Dr. Farogh Naseem, however, conceded that the case in hand was distinguishable on facts but the principles of law laid down by the Honourable Supreme Court fully applies to the present proceedings. According to Dr. Farogh Naseem the original order of the functionary merged into the final order in Suit No.297 of 1999 and, therefore, the powers under section 45A of the Act were not available with the defendant No.2. He submitted that as regard to the facts of Suit No.412 of 1999 the order on remand was passed in appeal and, therefore, once on remand the liability of the plaintiff was diminished such order being an "appeal effect order" and doctrine of merger to such an order would even apply. He also relied upon the case of Pakistan Electric Fittings Manufacturing Co. Ltd. v. CIT reported in 2000 PTD 2407 at 2415 and 2416. According to him if certain orders are passed in consequence of the order in Appeal by the remanding authority then principles of merger would apply. Dr. Farogh Naseem submitted that principle of merger will operate till the ultimate order or the forum decides it.
16. The third leg of arguments of Dr. Farogh Naseem was that section 45A of the Act was a revisional power. According to him, if a party has failed to file an appeal such party is precluded from availing the remedy by way of revision. He has drawn my attention to the provisions of sections 19 and 20 of the Displaced Persons Compensation and Rehabilitation Act, 1958. Section 19 of-the Act provides filing of an appeal whereas section 20 provides revision. Dr. Farogh Naseem has submitted that these two sections are paramateria to sections 45 and 45A of the Act. He submitted that their lordships in the Supreme Court in the case of. Muhammad Ibrahim v. Group Captain Salahuddin, reported in 1987 SCMR 218 had interpreted the scope of sections 19 and 20 of the Act 1958 and had held that if a party fails to avail remedy of an appeal then such a party cannot by allowed to seek the remedy by way of revision. He has also relied upon the case of Iftikhar Hussain Shah v. Pakistan, reported in 1991 SCMR 2193 at 2202, which reaffirmed the view, which their lordship has taken in the case of Muhammad Ibrahim (supra). He submitted that since the Department did not prefer an appeal against the orders passed by an officer of the Sales Tax, therefore, exercise of jurisdiction under section 45A of the Act was not available to the Board and or Defendant No.2. He while elaborating his contentions submitted that in the case of Central Insurance Co. v. Central Board of Revenue, reported in 1993 SCMR 1232 their lordships in the Supreme Court while interpreting the provisions of section 138 of the Income Tax Ordinance had held that such revisional powers would not apply in the aforesaid circumstances.
17. While arguing the scope of section 45A of the Act, Dr. Farogh Naseem relied upon the case of Flying Board and Paper Products v. Deputy Collector-II reported in 2002 PTD 7, a judgment of a learned Single Judge of the Lahore High Court wherein the learned Judge has held that the revisional powers under section. 45A could only be exercised in respect of departmental proceedings and those orders which are recorded by the Officers of Sales Tax who are subordinate to the C.B.R. or a Collector in terms of section 45A(iii) of the Act. His lordship while interpreting sections 45 and 45A of the Act had held that once the assessee or the department takes the matter to any of the three appellate forums i.e. the Collector Sales Tax (Appeal), the Appellate Tribunal or High Court the revisional power vested under section 45A stands busted completely and effectively. His lordship has further has held that even if- the order sought to be examined by the C.B.R. is an order of the Collector Sales Tax (Appeals) the revisional jurisdiction of the C.B.R. would not extend to cover the orders of such officer in exercise of revisional jurisdiction. It was further observed in the judgment that the scope of revisional jurisdiction of the C.B.R. as well as the Collector under section 45A is subject to certain conditions. According to the learned Judge the purpose of exercise of revisional jurisdiction by a functionary higher in departmental hierarchy is only to seek that system works in accordance, with law. Once a matter has been taken to any of the Appellate 'forums referred to hereinabove then executive functionaries must keep their hands off the matter.
18. It, was next argued by Dr. Farogh Naseem that the Collector Sales Tax (Adjudication) was introduced in place of Collector Sales Tax (Appeals) through amendment brought in by the Ordinance of VII of 2001 amending section 30(b) of the Act. He submitted that Collector Sales Tax (Adjudication) has 'the powers under section 45 to assess/charge and levy additional tax including penalty. By Finance Ordinance 2002 section 45B was introduced which provided that the order of the Adjudicating Officer was to be appealed against before the Collector Sales Tax (Appeals) and second appeal would lie to the Appellate Tribunal and third appeal to this Court. Previously, the Ordinance XXI of 2000 had provided two appeals whereas the Finance Ordinance, 2002 provided three appeals. According to Dr. Farogh Naseem that the orders which are sought, to be examined by the defendant No.2 under section 45A were not passed by the Officer of the Sales Tax as defined under section 30 of the Act. He submitted that in the show-cause notice which are impugned in these proceedings the orders sought to be examined have been passed by the Collector Sales Tax (Appeals) and he has now been substituted by Ordinance XXI of 2000 as Collector Sales Tax (Adjudication) though by Finance Ordinance 2002 the section 45B of the Act revives the Collector Sales Tax (Appeals) as one of the appellate forums.
19. Dr. Farogh Naseem further submitted that provisions of assessment or reassessment of the Act are machinery sections and collect tax only. According to him the provisions of section 45A of the Act was a provision of reassessment and it cannot be termed as charging section whereas the other is a machinery section which enables the authorities to collect the tax. He relied upon the case of Koohinoor Textile v. Federation of Pakistan, reported in 2002 PTD 121 and 128 while making his submissions that the term machinery provision has been interpreted by a Division Bench of this Court which held that such provisions are retrospective. He submitted that the amendments brought in the Act whereby sections 30, 45 and 45A of the Act were amended at times and such amendments retrospective in nature.
20. Dr. Farogh Naseem also submitted that the allegations in the show-cause notice are based on conjectures and the Defendant No.2 in law cannot re-open the issue of assessment unless he has concrete material before him. He submitted that the "doctrine of concept of change of opinion" as propounded in the case of Eduljee Dinshaw Ltd. v. Income 'Tax. Officer reported in PLD 1990 SC 399 fully applies to the present case in as much as that the show-cause notice has been issued by the defendant No.2 to examine the legality and propriety of the Orders on the same facts -and there was no new material available with the Revisional Authority to interfere with the orders of these officers. Dr. Farogh Naseem in support of his submission has relied upon a number of judgments in support of this proposition to which there is no cavil. He, submitted that the incumbent under section 45A of the Act can only ask for the record of any departmental proceedings. The word "record", according to him, means "existing record". The impugned show-cause notices do not confine itself to the record but were issued on the basis of news reports which could hardly be a ground to exercise jurisdiction under section 45A of the Act. He has also relied upon the case of the Assistant Collector Customs v. Khyber Electric Lamps; reported in 2001 SCMR 838 wherein their Lordships in Supreme Court had quashed show-cause notice issued by the Customs Authority under section 32 of the Customs Act holding therein that if the authorities have not taken appropriate steps to initiate proceedings within stipulated time such lapse cannot be cured by exercising jurisdiction under section 32 of the Customs Act.
21. In reply to the arguments of Dr. Farogh Naseem the learned Standing. Counsel has submitted that the order in appeal is a decision and is covered under section 45A of the Act. According to him defendant No.2 was fully competent to issue the impugned show-cause notice and once it is established that the powers exercised under section 45A are lawful and this Court would not examine the legality or propriety of the orders sought to be revived through section 45A of the Act.
22. Mr. Fariduddin learned counsel for defendants No.1 and 2 in Suit No.297 of 1999 had submitted that section 3 of the Central Board of Revenue Act, 1924 (IV of 1924) authorized the Defendant No.1 to frame rules to regulate the transaction of business by the C.B.R. In exercise of powers under section 3 the Government of Pakistan on 21-9-1967 framed Rules which rules are called as Central Board of Revenue Rules, 1967.
Under Rule 3(i) of the said Rules the Chairman, C.B.R., authorized the defendant No.2 to exercise powers under section 45A of the Act. He submitted that the plaintiff could hardly object to the jurisdiction exercised by the defendant No.2 in view of the legal position and the notices were lawfully issued by the defendant No.2. He further submitted that the suit is liable to be dismissed as the Plaint does not disclose any cause of action.
23. Mr. Abdul Mujeeb Prizada, Advocate for defendants Nos.2 and 3 in Suit No.412 of 1999, has submitted that section 45A of the Act has been legislated to keep checks and balances. If such an exercise of power is taken away then nothing would be left with the C.B.R. to remedy the faults committed by the subordinates. He submitted that the plaintiff in these proceedings had not challenged the vires of section 45A and in fact both these plaintiffs had submitted their reply to the impugned show cause notice before the defendant No.2 and the matter was posted for hearing. The plaintiff in haste after filing the reply instead of appearing before the defendant No.2 had chosen to file these suits which are premature. The defendant No.2 had not passed any order pursuant to the show-cause notices which are impugned in these proceedings. He submitted that these proceedings are hit by section 51 of the Act, which bars the jurisdiction of this Court. He submitted that the powers under section 45A of the Act would not extend to only those orders which are passed by any other authority other than the officer of the Sales Tax defined under section 30 of the Act. The merits of the show-cause notice, according to him could not be examined by this Court unless the plaintiff could show that the very show-cause notice has been issued by the defendant No.2 without lawful authority. According to Mr. Mujeeb Pirzada, the plaintiff have failed to establish any ground which could fall within the exceptions as enunciated by the Honourable Supreme Court in the case of Abbasia Cooperative Bank v. Muhammad Ghaus reported n PLD 1997 SC 3 and, therefore, the bar of section 51 would be attracted in these proceedings.
24. I have heard the learned counsel for the parties and have perused the record. The findings on Issue No.1 are dependent upon the finding of Issue No.2, therefore, I will take Issue No.2 first before discussing the Issue No.1. The entire case of the plaintiff devolves upon interpretation of sections 2(18) 30,45,45A,46 and 47 of the Act. Since the date of enactment of the Act, these provisions were amended at times.
25. Section 2(18) defines "Officer of Sales Tax" means an officer appointed under section 30.
26. For the purpose of relevance, section 30 of the Act prior to its amendment in the Finance Act, 1996, (IX of 1996) read; under:--
"(30) Appointment of Officers.---For the purposes of this Act, the Board may, by Notification in the official Gazette, appoint, in relation to any area, any case or class of cases specified in the Notification, any person to be;
(a) a Collector of Sales Tax;
(b) a Collector of Sales Tax (Appeals);
(c) a Deputy Collector of Sales Tax;
(d) an Assistant Collector of Sales Tax;
(e) a Superintendent of Sales Tax; or
(f) an officer of Sales Tax with any other designation."
27. By a further amendment introduced as Sales Tax (Amendment) Ordinance, 2001 (VII of 2001), brought in on 7-2-2001, the word "Appeals" was substituted by the word "Adjudication" in section 30(b) against the expression a Collector of Sales Tax, however rest of the provisions of section 30 from (a) to (f) remained un-amended.
28. Section 45 prior to the amendment by the Finance Act, 1996 (I of 1996), reads as under:--
"(45) Appeals.-(1) Any person including the Sales Tax Department aggrieved by any decision or order made under this Act by an officer of Sales Tax lower in rank than a Collector may, within thirty days of the date of communication of such decision or order, appeal to the Collector (Appeals):
Provided that an appeal preferred' after the expiry of thirty days may be admitted by the Collector (Appeals) if he is satisfied that the appellant has sufficient cause for not preferring the appeal within that period.
(2) The Collector (Appeals) may, after making such further inquiry as may be necessary and after giving the appellant an opportunity of being heard, pass such order as he thinks fit, remanding, confirming, altering or annulling the decision or order appealed against.
(3) Any person desirous of appealing under subsection (1) against any decision or order relating to any tax demanding or any penalty levied under the Act shall, before filing the appeal, deposit the tax demanded or the penalty levied or both the tax and penalty.
29. Section 45, however, after amendment by the Finance Ordinance, 2000 (XXI of 2000) reads as follows:--
"(45) Appeals.-(1) Any person including the Sales Tax Department aggrieved by any decision or order made under this Act by an Officer of Sales Tax below in rank than a Collector may, within thirty days of the date of communication of such decision or order, appeal to the Collector of Sales Tax (Appeals):
Provided that an appeal preferred after the expiry of thirty days may be admitted by the Collector of Sales Tax (Appeals) if he is satisfied that the appellant has sufficient cause for not preferring the appeal within the specified period:
Provided further that the appeal shall be accompanied by a fee of five hundred rupees to be paid in such manner as the Board may prescribe:
(2) The Collector of Sales Tax (Appeals) may, after giving both parties to the appeal an opportunity of being heard, pass such order as he thinks fit, confirming, varying, altering, setting aside or annulling the decision or order appealed against:
Provided that the Collector of Sales Tax (Appeals) may also confirm, vary, alter, set aside or annul the penalty imposed under this Act for reasons to be recorded in writing.
(2a) In deciding an appeal, the Collector of Sales Tax (Appeals) may make such further inquiry as may be necessary but h^ shall not remand the case to an officer who made the order for deciding it afresh.
(3) Any person desirous of filing an appeal under subsection (1) against any decision or order relating to any tax demanded or any penalty imposed under the Act shall, before filing the appeal, deposit the tax demanded and the penalty imposed:
Provided that, where in any case, the Appellate Authority is of the opinion that the deposit of tax demanded or the penalty imposed is likely to cause undue hardship to the appellant it may dispense with such deposit subject to such conditions as it may deem fit to impose:
Provided further that in any particular case, the Collector of Sales Tax (Appeals) may direct that the pending decision of the appeal, the tax demanded or penalty imposed shall be paid by the appellant is suitable installment spreading over a period not exceeding six months from the date of such directions."
30. Section 45 of the Act was further amended by Finance Ordinance 2000 (XXI of 2000) in the following manner:--
"(45) Power of Adjudication.---In cases involving assessment of tax, charging of additional tax, imposition of penalty and recovery of amount, erroneously refunded under this Act or the rules made thereunder, the jurisdiction and powers of adjudication of the Sales Tax Officers shall be as follows:--
| (i) Collector | Cases falling under sub-section (2) of section 11 and section 36 of the Act without any restriction as to the amount of tax involved or amount erroneously refunded. |
| (ii) Additional Collector | Cases falling under subsection (2) of section 11 and section 36 of the Act provided that the amount of tax involved or the amount erroneously refunded does not exceed ten million rupees. |
| (iii) Deputy Collector | (a) Cases falling under subsection (1) of section 11. |
| | (b) Cases falling under subsection (2) of section 11 and section 36 of the Act provided that the amount of tax involved or the amount erroneously refunded does not exceed two and a half million rupees. |
| (iv) An officer of sales tax with any other Designation. | Such cases as may be notified by the Board. |
Provided that the Board may, by notification in the official Gazette, vary the jurisdiction and powers of any Officer of Sales Tax or a class of officers of Sales Tax.
Provided further that the Board shall have powers to regulate the system of adjudication including transfer of cases and extension of time limit in exceptional circumstances.
Explanation.-For the purpose of this section, tax means the principal amount of sales tax other than tax or additional tax and in a case where only further tax, whether or not with additional tax, is involved, the amount of further tax and in all other cases additional tax."
31. Section 45A of the Act, reproduced below however, has not undergone any material change except that the word "three years" was substituted as "five years" in subsection (3) and additionally the subsection (2) of 45A introduced the word section 45B or section 46.
"45A. Powers of the Board and Collector to call for records.-(1) The Board may, of its own motion, call for and examine the record of any departmental proceedings under this Act of the rules made thereunder for the purpose of satisfying itself as to the legality or propriety of any decision or order passed therein by an Officer of Sales Tax, it may pass such orders as it may think fit:
Provided that no order imposing or enhancing any penalty or fine requiring payment of a greater amount of sales tax than the originally levied shall be passed unless the person affected by such order has been given an opportunity of showing cause and of being heard.
(2) No proceeding under subsection, (1) shall be initiated in a case where an appeal under section 45B of section 46 is pending.
(3) No order shall be made under this section after the expiry of five years from the date of original decision or order of the sub ordinate officer referred in subsection (1).
(4) The Collector may exercise the powers conferred on the Board by subsection (1) in respect of any case decided' by an officer subordinate to him."
32. Section 45B was inserted by the Finance Ordinance, 2002 (XXVII of 2002) which was promulgated on 15-6-2002, which reads as under:--
45B. Appeals.-(1) Any person, including the Sales Tax Department, aggrieved by any decision or order passed under sections 11, 36 or 45, by an Officer of Sales Tax below in rank to Additional Collector may, within thirty days of the date of receipt of such decision or order, prefer appeal to the Collector of Sales Tax (Appeals):
Provided that an appeal preferred after the expiry of thirty days may be admitted by the Collector of Sales Tax (Appeals) if he is satisfied that the appellant has sufficient cause for not preferring the appeal within the specified period:
Provided further that the appeal shall be accompanied by a fee of one thousand rupees to, be paid in such manner as the Board may prescribe.
(2) The Collector of Sales Tax (Appeals) tray, after giving both parties to the appeal an opportunity of being heard, passed such order as he thinks fit, confirming, varying, altering, setting aside or annulling the decision or order appealed against.
(3) In deciding in appeal, the Collector of Sales Tax (Appeals) may make such further inquiry as may be necessary provided that he shall not remand the case for de novo consideration.
(4) Any person desirous of preferring an appeal under subsection (1) against any decision or order relating to any tax demanded or any penalty imposed under this Act shall; before presenting the appeal, deposit the tax demanded and the penalty imposed under such decision or order:
Provided that, where in any case, the Collector of Sales Tax (Appeals) is 'satisfied that the deposit of tax, demanded or the penalty as aforesaid is likely to cause undue hardship to the appellant, he may dispense with such deposit subject to such conditions or restrictions he may deem fit to impose:
Provided further that in any particular case, the Collector of Sales Tax (Appeals) may direct that pending decision of the appeal, the tax demanded or penalty imposed shall be paid by the appellant in suitable installments spreading over a period not exceeding six months from the date of such directions."
33. Section 46 relates to filing of appeal before the Appellate Tribunal whereas section 47 relates to filing of appeal to this Court.
34. In addition to this, the word "Board" used in section 45A has been defined under section 2(4) of the Act which means the "Central Board of Revenue" constituted under the Central Board of Revenue Act, 1924 (IV of 1924). The Defendant No.1 in exercise of powers conferred by section 3 of the Central Board of Revenue Act, 1924, had framed the Rules called "Central Board of Revenue Rules, 1967." These Rules have been framed to regulate the transaction of business by the Central Board of Revenue and in exercise of such Rule the Board had issued a Notification on 24-9-1998, as Sales Tax General Order No.7 of 1998 which read: as follows whereby the Defendant No.2 was authorized to exercise powers under section 45A of the Act.
"'SALES TAX GENERAL ORDER No.7 OF 1998, DATED 24TH SEPTEMBER, 1998
SUBJECT:EXERCISE OF C.B.R.'S POWERS UNDER SECTION 45A OF THE SALES TAX ACT, 1990.
In exercise of tire powers conferred by rule 5(1) of the Central Board of Revenue Rules, 1967, the Chairman is pleased to allocate the business of the Board under section 45A of the Sales Tax Act, 1990 to the Member (Judicial), C.B.R., Custom House Building, Karachi.
2. Ail Collectors, Collector (Appeals) and Additional Collectors Incharge of Sales Tax shall invariably endorse a copy of their order-in-original and order-in-appeal to the said Member (Judicial) for his information."
35. The Board further by a Notification of 15-6-2002 issued under section 30 of the Act, had appointed the officers notified therein to hear the appeals against the orders' of the officers below the rank of Additional Collectors. This Notification spells out the Collector Sales Tax (Adjudication) as the officer authorized to hear appeals and while exercising such authority was for all intents and purposes was the Collector Sales Tax (Appeals).
36. The aforesaid reproduction in regard to different provisions of the Act was necessary act understand the real controversy between the parties.
37. Without touching the merits of the case, I will confine myself to the only issue as to whether the Notices impugned in these proceedings were lawfully issued by the Defendant No.2. Admittedly, section 45A authorizes the Board, which in turn has authorized the defendant No.2 to call for and examine the record in respect of any proceedings under the Act or the Rules made thereunder for the purposes of satisfying itself as to the legality or propriety of any decision or order passed by any Officer of the Sales Tax with two exceptions (1) these powers are available to be exercised initially within three years and now by virtue of the amendment brought in subsection (3) of section 45A within five years from the date of original decision or order of the subordinate officer; and (2) such powers could not be exercised during the pendency of any appeal as provided under sections 45B or 46, as the case may be.
38. The expression "an Officer of the Sales Tax" used under section 45A has been defined under section 2(18) of the Act which spells out that Officer of Sales Tax would mean an officer notified under section 30 of the Act by the Board in the official Gazette and is appointed in relation to any area, any case or class of cases specified in the Notification and such person would include the officers mentioned in sub-clauses (a) to (g) of section 30. From the plain reading of section 30 a Collector of Sales Tax (Appeals) falls within the definition of Officer of Sales Tax. The orders sought to be examined by the Defendant No. 2, in exercise of powers under section 45A, were passed by the Collector Sales Tax (Appeals) on 11-12-11998 in Suit. No. 297 of 1999 and the other orders in Suit No.412 of 1999 were passed by the Additional Collector-I on 2-2-1997, on rewind from Collector Sales Tax (Appeals). The show-cause notices were issued within three years of the passing both the orders.
39. Under section 30 of the Act as stood prior to the Amendment through Sales Tax (Amendment) Ordinance (Ordinance VII of 2001) the Board was empowered to notify arty person to be a Collector of Sales Tax (Appeals) in relation to any area. It was only through an Amendment referred to hereinabove the expression "Collector Sales Tax (Appeals)" was substituted by the expression "Collector Sales Tax (Adjudication)."
40. At, the same time an order passed under tire. Act by any officer below the rank, of a Collector could be questioned in Appeal before the Collector of Sales Tax (Appeals)'. An Officer of the Sales Tax has been defined to mean any officer appointed under section 30 and section 45A enabled the Board to exercise and examine the legality or propriety of any order of such Officer of the Sales Tax. Evidently, therefore, an appeal against the original order was rightly preferred by the plaintiff before the Collector Sales Tax (Appeals) in 1998 and the other appeal in 1997 and the appellate order or the original order on remand are subject to show-cause notices in exercise of revisional jurisdiction by the Board under section 45A.
41. The expression "Collector of Sales Tax (Appeals)" has substituted the expression "Collector of Sales Tax (Adjudication)" in section 30 through Ordinance VII of 2001. The notices issued to the plaintiff in 1999 were perfectly in accordance with the law as operating on the date when these notices were issued and it could trot be urged that these notices were issued without jurisdiction. The amendment purporting to abolish the office of "Collector Sales Tax (Appeals)" was also of no consequence because the amending Ordinance does not stipulate abatement of proceedings already initiated and once again through amendment made by Finance Ordinance, 2002, the appellate powers of the Collector Sales Tax (Appeals) were restored and in addition to such amendment the Board has also notified the Collector Sales Tax (Adjudication) as Collector Sales Tax (Appeals) authorizing them to decide in appeal any order of their subordinate other than the Additional Collector (Adjudication). Therefore, it cannot be even urged at this point of time that the Board has no Jurisdiction to examine the validity or propriety of an order passed by the Collector Sales (Appeals).
42. Under section 30 of the Act the Board had the rower to notify appointments of persons to various positions including the Collector of Sales Tax (Adjudication). Under section 45 the Collector Sales Tax (Appeals) was required to exercise appellate powers against orders passed by the officers below the rank of the Collector. On introduction of the amendment by the Amending Ordinance of 2001, a Sales Tax Tribunal was constituted under section 45B, which could exercise appellate powers. Such powers were therefore, withdrawn from Collector Sales Tax (Appeals) and the Collectors were only left to exercise original powers of adjudication: However in 2002 by Amendment in 45B the appellate powers were conferred upon the collectors and the office of Collector of Sales Tax (Appeals) was reconstituted while the remaining powers remained with the Tribunal. The Collectors Sales Tax (Adjudication) were given those appellate powers under Notification 15-6-2002 issued by the Board which mentions the appointment of such officers under section 30. In this background there is no ambiguity in regard to exercise of powers by the Collector Sales Tax (Appeals) and the show-cause notice issued by Defendant No.2 in exercise of powers under section 45A is lawful as it covers both the orders sought to be examined.
43. I have also gone through the judgment-of Lahore High Court in the case of Flying Board and Paper Products v. Deputy Collector-II reported in 2002 PTD 7. With profound respect I do not agree with the findings of the learned Judge-in particular that the powers under section 45A are executive in nature. It appears that the learned Judge has not taken note of section 30 of the Act which defines the expression "Officer of the Sales Tax" and the powers exercisable under section 45A could extend only to these officers and would not extend to the orders of any other forum like the Appellate Tribunal or this Court. Further, in view of what I have discussed hereinabove, section 45A is applicable to all the orders passed by the Officers of the Sales Tax either in original or in appeal, and non-filing of appeal by either party would not debar the Board from exercising powers under section 45A of the Act to examine the legality or propriety of an order except that during the pendency or the appeal the powers under section 45A could not be exercised. However, the powers under section 45A could not be exercised to examine the legality or propriety of an order passed either by the Appellate Tribunal under section 46 or by this Court.
44. In regard to other proposition of law and the cases cited by the learned counsel of the plaintiff, it has no nexus to the controversy. I, therefore, hold the show-cause notices- were lawfully issued by the Defendant No.2 and, therefore, suits are barred under section 51, which reads as under:--
"51. Bar of suits, prosecution and other legal proceedings.-(1) No suit shall be brought in any Civil Court to set aside or modify any order passed, any assessment made, any tax levied any penalty imposed or collection of any tax made under this Act.
(2) No suit, prosecution or other legal proceeding shall lie against the Federal Government or against any public servant in respect of any order passed in good faith under this Act."
45. Since I have already decided Issue No.2 against the plaintiff, the issue of maintainability of suit shall also go against the plaintiff as the suit is barred under section 51 of the Act. The case-law cited by Dr. Farogh Naseem on different proposition of law, I believe have no application once the Issue No.2 has been answered against plaintiff. I have avoided touching merits of the case and the Board shall examine the legality as well as propriety of the orders by affording the opportunity of hearing to the plaintiff in terms of section 45A of the Act whereafter the Board may pass appropriate reasoned orders in accordance with law. These were reasons on the basis of which I had dismissed the two suits by my short order; dated 24-1-2003.
M.B.A./A-430/K Suits dismissed.