Messrs STAR TEXTILE MILLS, FAISALABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2007 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1447 (2006)

Sales Tax Act (VII of 1990)---

----Ss. 45, second proviso & 36(3)---Constitution of Pakistan (1973), Art. 254---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Law, Justice and Human Rights Division's letter No.185/2004/FT-Law, dated 7-5-2004---Power of adjudication---Extension of time limit in exceptional circumstances---Extension was granted by the Central Board of Revenue on the ground that "Parawise comments in respect of the taxpayer's have not yet been submitted by the Collectorate of Sales Tax and Federal Excise"---Validity---Reason given was not related to any fault of the complainant and could not be termed as "exceptional circumstances" within the meaning of second proviso to S.45 of the Sales Tax Act, 1990---Order of Central Board of Revenue for extension of time of suffered from maladministration and could not be the basis for permitting the Collector/officer of Revenue Division to deal with the case and pass the impugned Order-in-Original in relation to show-cause notice in question after the expiry of period of limitation---Decision also suffered from maladministration being superstructure based on an illegal order---Federal Tax Ombudsman recommended Central Board of Revenue to proceed under S.45 of the Sales Tax Act, 1990 reopen the case and cancel the impugned Order-in-Original and may proceed in accordance with law.

Complaint No.805 of 2003, dated 28-5-2005 rel.

Nos. 154 and 155/ST/IB/2005, dated 28-11-2005, Messrs Pangraphies (Pvt.) Ltd., Islamabad Complaint No.904 of .2005 and Complaint No.122 of 2006 distinguished.

Khalid Pervez A.R. for the Complainant.

Muhammad Azam D.C. Sales Tax and D.R. for Respondent.

FINDINGS/DECISION

The complaint under consideration agitated the sole issue of the time-barred status of the Order-in-Original (O.I.O) bearing No.22 of 2006, dated 28-3-2006.

2. The facts, as stated in the complaint, are summarised as follows:---

(a) A show-cause notice (S.C.N.) was issued on 23-4-2005 pointing out a number of violations allegedly committed by and the amount of sales tax recoverable from the Complainant.

(b) A written reply was filed. However, it was not accepted and an O.I.O. referred to above was passed.

(c) It was contended that the O.I.O. was devoid of legality as it was passed after the expiry of time period provided in the first proviso to section 36(3) of Sales Tax Act, 1990 (the Act).

(d)??????? It was pointed out that the Deputy Collector (Adjudication) did not seek extension of time limitation from the Collector as envisaged in second proviso to section 36(3).

(e)??????? Reliance was placed on the case of Messrs Pace International (Complaint No.805/2003, dated 28-5-2005) decided by the Hon'ble F.T.O. which was upheld by the President of Pakistan, vide Law, Justice and Human Rights Division's Letter No.185 of 2004/FTO-Law, dated 7-5-2005. Identical relief was allowed in many other cases by Hon'ble F.T.O. it was submitted.

(f)???????? In the light of the aforesaid facts and circumstances, it was prayed that the O.I.O. under reference be declared without lawful jurisdiction as it was hit by the limitation under the said section 36(3).

(g)??????? The C.B.R. vide its Letter C. No. 6(6)/SIAdj/2005, dated 12-12-2005 extended the time limit upto 31-3-2006 in 59 cases including that of the Complainant in exercise of its powers under section 45 of the Act. It was submitted that the C.B.R. acted beyond its jurisdiction in extending the time period.

3. The Deputy Collector, Collectorate of Sales Tax and Federal Excise, Faisalabad, in his written reply narrated the facts of the case. An audit was conducted for the period from 7 of 2001 to 6 of 2003 and an amount of Rs.75,025 was found recoverable from the Complainant along with additional tax.

4. The dates of issuance of S.C.N. and the passage of the O.I.O. as stated in the complaint were admitted. However, the contention of the Complainant that the O.I.O. was passed beyond the time limitation prescribed under the said section 36(3) was not accepted on the ground that the extension in time was granted by the C.B.R. vide their letter referred to above. Therefore, the provisions of section 36(3) were not attracted, it was argued.

5. A reference was made to Article 254 of the Constitution of Islamic Republic of Pakistan which, according to the respondent, clearly provided that an act shall not be invalid or otherwise ineffective for the only reason that it was not done within the prescribed time.

6. Reliance was placed on the decision of Customs, Excise and Sales Tax Appellate Tribunal, Islamabad Bench, Islamabad bearing Nos.154 and 155/ST/IB/2005, dated 28-11-2005. In the said judgments, the Tribunal held that the provisions of section 36(3) of the Act were only recommendatory.

7. Referring to the decision of the Hon'ble F.T.O. in Complaint

No.805 of 2003 referred to above, it was stated that the facts of the instant case were different. However, the differences were not elaborated.

8. It was prayed that as no maladministration was committed, the complaint was devoid of inert and be rejected.

9. Both A.R. and D.R. attended and the case was heard. The A.R., besides reiterating the points raised in the written complaint, pointed out that the C.B.R. while extending the time limit under section 45 of the Act gave the following reason:

"Parawise comments in respect of the taxpayers have not yet been submitted by the Collectorate of Sales Tax and Federal Excise, Faisalabad."

10. The reason given did not relate to any fault of the Complainant. Besides, it could not be termed as "exceptional circumstances" within the meaning of second proviso to section 45 of the Act. He pointed out following acts of maladministration on the part of the respondent:--

(a)??????? The C.B.R., while extending the time limitation, failed to prove that the exceptional circumstances existed which could justify the said extension.

(b)??????? The D.C. (Adjudication), Faisalabad, committed maladministration when he failed to seek extension of another 90 days from the Collector as provided by the proviso to the said section 36(3). It was a serious lapse because the two officers were sitting in the same building and the extension could be obtained without any effort or loss of time, it was argued.

(c)??????? The extension from the C.B.R., if required, ought to have been sought before the expiry of 180 days. The letter seeking extension from C.B.R., was written on 5-12-2005 i.e. after approximately 225 days of the issuance of the S.C.N. By then the limitation provided by the said section 36(3) ibid had already expired. The C.B.R. without taking into account this important fact, granted extension, thereby committing mal?administration.

11. The D.R. brought on record a decision by the Hon'ble President of Pakistan vide Law, Justice and Human Rights Division's Letter No.185/2004/FT)-Law, dated 7-5-2004 passed in the case of Complaint No.904/2005 Messrs Pangraphies (Pvt.) Ltd., Islamabad. In this case, the Hon'ble F.T.O. had held that the extension of time allowed by the C.B.R. under section 45 of the Act was granted without any justification as no "exceptional circumstances" existed in that case. This finding did not find favour with the Hon'ble President of Pakistan and it was rejected in the following words:--

"It appears that the Collector made order after obtaining extension of time from the C.B.R. In the FTO's opinion the grant of extension by the C.B.R. was not based on reasonable grounds. Whether the grant of extension by the C.B.R. was based on reasonable grounds or not the Collector who made the order on the basis of the extension could not question the C.B.R.'s decision. Thus so far as the Collector's order was concerned he did not commit any act which amounted to maladministration".

12. The second point the D.R. raised was in respect of decision taken by the Hon'ble F.T.O. in Complaint No.122 of 2006. The case pertained to the extension granted by the C.B.R. under section 179(4) of the Customs Act, 1969. The standpoint of the D.R. was that the provisions of the said section were identical to those of section 45 of the Act. Therefore, on the ratio of that decision, the extension granted in the instant case should also be accepted.

13. I have carefully gone through the decision of the Hon'ble President of Pakistan on a representation made against the decision in Complaint No.904 of 2005 relied upon by the D.R., as reproduced in paragraph 11 supra. It may be observed here that every case has its own peculiar facts and circumstances, which has to be decided keeping them in view. It appears that when the case was placed before the Hon'ble President of Pakistan for decision, as the decision shows, it was not brought to his notice that the C.B.R., which is another name of the Revenue Division, was as much within the purview of the jurisdiction of the F.T.O. as any other functionary or officer subordinate to it, within the meaning of section 9(1) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, which deals with the jurisdiction, functions and powers of the F.T.O. Accordingly, the honourable F.T.O. can "investigate any allegation of maladministration on the part of the Revenue Division....". Therefore, it is evident that the case was not placed before the Hon'ble President in its true perspective, for it is based on the assumption or impression as if the C.B.R. was not subject to jurisdiction of the F.T.O. and no decision could be made adverse to the direction or decision of the C.B.R. This office is empowered to examine any decision of the C.B.R. and if it is found to have suffered from maladministration, pass decision and make appropriate recommendations with regard thereto. Since the order of the Collector was based on the decision of the C.B.R. of extension of time had suffered from maladministration could very well be examined and decided by the FTO. In the instant case it is found that the same falls within the mischief of the term "Maladministration" as defined in the F.T.O. Ordinance. Any order or decision based on maladministration passed by the subordinate officer of the Revenue Division could also legally be declared to have suffered from maladministration in the same manner as was the order of the C.B.R. on which it was based. It is a firmly settled law that any superstructure based on illegal or void order has no legs to stand and has to fall on the ground along with the order on which it was based.

14. Now I proceed to examine whether the decision of extension of time of C.B.R. in this case is valid and did not suffer from maladministration. The reason C.B.R. gave has been reproduced in para.9 supra. This reason cannot be construed to qualify for the term "exceptional circumstances" by any stretch of imagination. It only reflects the inefficiency and inaptitude on the part of Faisalabad Collectorate. It may be mentioned that extension was sought after 225 days of the issuance of show-cause notice. By this time, the limitation provided by section 36(3) of the Sales Tax Act, 1990 had already expired. The power to extend time vested in the C.B.R. is neither absolute nor uncontrolled. On the contrary, it has been made subject to parameters provided by law i.e. existence of exceptional circumstances. Law has provided this criterion to avoid exercise of such power by the C.B.R. arbitrarily or whimsically to provide safeguards against undue harassment to taxpayers. Since the law has fixed the limitation period for decision of the case in respect of a particular show-cause notice and extension could be made in exceptional circumstances, therefore, unless those exceptional circumstances are brought on record on the basis of which the C.B.R. extended the time, its decision could safely be held to have suffered from illegality and maladministration. In this case, the Revenue Division has failed to give any cogent reason for giving, extension of time after the expiry of such a long time, or that it applied its mind in deciding whether the circumstances existed in which this delay took place on the part of the officer of the Revenue Division in not deciding the case and if so, those constitute exceptional circumstances to justify extension of time. The decision of the C.B.R. in this case in the absence of any such reasons about existence of exceptional circumstances, therefore, was not only illegal but also suffers from arbitrariness adversely affecting the rights of the taxpayers to treat the proceedings to have come to an end on the expiry of the period of limitation so far as the said show-cause notice is concerned.

15. It was argued on behalf of the DR that this office is debarred under section 9(2)(b) of the F.T.O. Ordinance, 2000 to interpret the law, therefore, should refrain itself from examining the question of extension of time granted by the C.B.R. I am afraid, the argument is plainly unsound as it proceeds upon the erroneous assumption as if it is a case of interpretation of law whereas it is simply a ease of application of clear and unambiguous terms of law to the facts of the present case established on record. It is the obligation of every Court or the authority dealing with a case to apply law whatever becomes applicable to the facts established on record, therefore, the objection is hereby overruled.

16. The argument of the respondent on Article 254 of the Constitution of Islamic Republic of Pakistan 1973 is discussed and disposed of as follows. For facility of reference, this article is reproduced in extenso.

ARTICLE 254

"Failure to comply with requirement as to time does not render an act invalid,--When any act or thing is required by the Constitution to be done within a particular period and it is not done within that period, the doing of the act or thing shall not be invalid or otherwise ineffective by reason only that it is was not done within that period".

A bare reading of the Article makes it clear that it is applicable only to those acts which are required to be done under the Constitution itself within specified time prescribed in the Constitution. The objection raised by the respondent in this regard is overruled.

17. The judgments of the Tribunal are not binding on this forum. It is noted with surprise that the Tribunal had discussed the decision in the case of Messrs Pace International (Complaint No.805 of 2003, dated 28th May, 2004) and its confirmation by the honourable President of Pakistan, yet they decided otherwise. It may be emphasized here that the President, as the highest forum under' F.T.O. Ordinance, gave the decision against the representation of the Respondent, Therefore, his findings are mandatory in nature and the relevant provision is binding on all the functionaries of the Government as well as this forum.

18. It may be mentioned here that in the cases decided in the recent past, the recommendations which are ultimately made by the F.T.O. in such-like cases are that the C.B.R. should act under section 45 of the Act, reopen the case and cancel the impugned O.I.O. and may proceed further in accordance with law. The present proceedings so far as the show-cause notice in question are concerned, if held to have come to an end, there was no bar to issue fresh notice and decide the case within the period of limitation in case extension is justifiably given and within the extended time, pass fresh order in relation to the period preceding such notice permissible under the law.

19. For the foregoing reasons, the order of the. C.B.R. for extension of time is hereby held to have suffered from maladministration and could not be the basis for permitting the Collector/officer of the Revenue Division to deal with the case and pass the impugned O.I.O. in relation to show-cause notice in question after the expiry of period of limitation, therefore, the said decision also suffers from maladministration being superstructure based on an illegal order.

It is, therefore, recommended:--

(a)??????? That the C.B.R. to proceed under section 45 of the Sales Tax Act, 1990, reopen the case and cancel the impugned O.I.O., dated 28-3-2006; and

(b)??????? May proceed in accordance with law as observed above.

(c)??????? The compliance shall be reported within 45 days.

C.M. A./164/FTO??????????????????????????????????????????????????????????????????????????????? Order accordingl