Messrs PSIC CUTLERY, WAZIRABAD VS COLLECTOR, SALES TAX AND CENTRAL EXCISE, GUJRANWALA, 2005 PTD-LAHORE-HIGH-COURT-LAHORE 2453 (2005)

Sales Tax Act (VII of 1990)---

----S.36---Recovery of evaded tax---Show-cause notice, issuance of---Limitation---Service of show-cause notice for disputed period after three years---Plea of assessee being a Provincial Government Agency was that there was no collusion or a deliberate act on its part to evade tax as no individual would gain from such evasion---Validity---Such plea being convincing, case of assessee would fall under S.36(2) of Sales Tax Act, 1990 and would not be covered by subsection (1) thereof---Demand raised for disputed period was, held, to be barred by limitation.

Saood Nasrullah Cheema for Appellant.

Dr. Sohail Akhtar for Respondents.

ORDER

In this further appeal under section 47 of the Sales Tax Act, 1990 an order of the Customs, Excise and Sales Tax Appellate Tribunal, Lahore, dated 15-4-2004 is assailed on the ground of its having given rise to the following questions of law:--

(a) Whether the Hon'ble Appellate Tribunal is justified by declaring the show-cause notice valid without quoting section 36 and its subsections of Sales Tax Act, 1990?

(b) Whether the Hon'ble Tribunal has considered the provisions of Article 25 of the Constitution of Islamic. Republic of Pakistan, 1973 while vacating the show-cause notice in one case and taking action against the appellant in similar situation?

(c) Whether the learned Appellate Tribunal has followed the judgments of august Supreme Court of Pakistan and High Courts of Pakistan on the same question of law?

2. According to the statement of the case the appellant a project being managed by Punjab Small Industries Corporation on no profit no loss basis was served with a show-cause notice for supplies made by it to the tune of Rs. 4,93,180. In the show-cause notice it was stated that the appellant before its registration with the Sales Tax Department evaded a sum of Rs.381,502 as duty and after its registration in July, 1998 to November, 1998 and then from December, 1998 to June, 1999 made similar evasions of' Rs.40,740 and Rs.20, 843.

3. The Order-in-Original, dated 12-11-2001 recorded by Deputy Collector Customs, Central Excise and Sales Tax, Gujranwala was unsuccessfully challenged before the learned Tribunal. By way of the impugned order learned Tribunal rejected the plea of the appellant that the show-cause notice served upon it pertaining to the period earlier to July, 1998 was barred by limitation as provided in subsection (2) of section 36 (Recovery of tax not levied or short levied or erroneously refunded) of the Sales Tax Act. According to the learned Members of the Tribunal the case of the appellant fell in subsection (1) of section 36 of the Act providing for a period of five years for service of notice of evaded sales tax.

4. After hearing the learned counsel for the parties we will agree that the question No.1 as framed (though not happily) needs to be answered in the negative. In the case in hand it is not disputed that as far the period prior to July, 1998 the show-cause notice was served after three years. The plea that the appellant being a Provincial Government Agency there was no question of collusion or a deliberate act on its part to evade the tax inasmuch as no individual was to gain from such evasion appears convincing. Therefore, we will agree that the case of the appellant falls under subsection (2) providing for a limitation of three yews to serve a show-cause notice. The attempt on the part of the Revenue to treat the case of the appellant to be one covered by subsection (1) of section 36 cannot be approved for the aforesaid reason. The demand raised at Rs.381,502 for the period earlier to July, 1998 was, therefore, barred by limitation. As far the two periods from July, 1998 to, November, 1998 and then December, 1998 to June, 1999 are concerned, the claim of the appellant that it had paid the demanded liability at Rs.40,740 and Rs.20,843 is not disputed by the Department. The demand for the said subsequent tax periods having already been cleared there was no justification for the Department to enforce the levy and in the course to place an embargo on the manufacturing activity of the appellant.

5. In view of our negative reply to question No.1 to the effect that the case of the appellant for the first period was covered by sub-section (2) of section 36 of the Sales Tax Act this appeal is allowed. Rest of the two questions as framed do not need to be answered.

S.A.K./P-82/LAppeal accepted.