ADAM SUGAR MILLS LTD. through Chief Executive VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2007 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2627 (2007)

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

----Ss. 34(1), 33(5) & 2(37)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Default surcharge---Complainant was served with a fresh show-cause notice for the same allegation, same charges and for the same period, which were earlier adjudicated upon up to the level of Appellate Tribunal---Complainant submitted that the matter had already been adjudicated upon and since the show-cause notice involved the same charge and the same period and the Appellate Tribunal had waived off the default surcharge and penalty, the Department was not competent to re-adjudicate the matter as it would amount to violating the Appellate Tribunal's order---Ignoring the complainant's reply and Appellate Tribunal's judgment, Adjudicating Officer passed a fresh Order-in-Original directing the complainant to pay default surcharge and penalty for the period already adjudicated upon by the Appellate Tribunal---Validity---Since the late payment was due to sufficient cause as held by the Appellate Tribunal there was no point 'in issuing a new show-cause notice and deciding the case afresh for the same offence i.e. late payment of tax for the same period---Collectorate should have realized the spirit of the Tribunal's order and restrained from issuing fresh show-cause notice and re-deciding the case for the same offence and the same period which had already been adjudicated upon---Department's action amounted to double jeopardy resulting in punishing the complainant for the same offence which had already been adjudicated upon---Show-cause notice and Order-in-Original were illegal and void---Maladministration was established---Federal Tax Ombudsman recommended that Revenue Division was to direct the competent authority to re-open show-cause notice and the Order-in-Original under S.45A of 'the Sales Tax Act, 1990 and quash them being illegal and void and direct the' Collectorate to implement. Appellate Tribunal's order unless the Collectorate had filed an appeal against the aforesaid order of the Tribunal and had obtained a stay order from the competent Court against operation of Tribunal's judgment.

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

----S. 57---Establishment of Office of Federal Tax. Ombudsman Ordinance (XXXV of 2000), S.9---Correction of clerical errors, etc.---Explanation---Clerical error is an error, which 'relates to office clerk or his work' resulting from `a minor mistake of inadvertence' such as `typing an .incorrect. number, missing transcribing a word, omitting the Appendix from documents' and an arithmetical error or an inadvertent error resulting from, say, a calculation or typing mistake apparent from the record.

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

----S. 57---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Correction of clerical errors, etc.---Issuance of fresh show-cause notice for the same offence for which a notice was issued earlier and :had passed fresh adjudicating order for the same offence i.e. the offence of late payment of tax despite the fact that the Appellate Tribunal had decided the earlier case is favour of complainant---Validity---By no stretch of imagination could one accept the Department's version that the new show-cause notice and the Order -in-Original Were passed on the basis of proceedings drawn under the .provisions of S.57 of the Sales Tax Act, 1990---Even otherwise said section provided that before such correction a notice shall be given to the registered person or to a person affected by such correction whereas the new show-cause notice and the latter adjudicating order did not even mention that the notice was issued and the adjudicating order was passed under the provision of S.57 of the Sales Tax Act, 1990---New show-cause notice, in fact was issued and the resultant Order-in-Original was passed for the same offence i.e. for late payment and for the same period without realizing that the Appellate Tribunal had in its judgment set aside Collector's Order-in-Appeal, which upheld the earlier adjudicating order and accepted the appeal of the complainant.

Muhammad Akbar (Advisor) Dealing Officer.

Mian Abdul Ghaffar for the Complainant.

Muteen Alam A.C. Sales Tax for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHAIKH (FEDERAL TAX OMBUDSMAN).---The complainant was served with a show-cause notice, dated 31-1-2006 alleging therein that during audit for the period 7/05, 9/05 and 10/05 the computerized tax profiles and sales tax returns of the complainant were scrutinized, which revealed that the complainant made late payment of sales tax for the aforesaid months and contravened the provisions of law and was liable to deposit default surcharge under section 34(1) and face penalty under section 33(5) of the Sales Tax Act, 1990. The complainant submitted reply to the show-cause notice explaining the circumstances compelling it to make late payment of principal amounts of sales tax. Without considering its submission the Assistant Collector passed Order-in-Original No.38/RYK/06, dated 26-4-2006 directing the complainant to deposit default surcharge of Rs.282509 and a penalty equal to 5 % of the principal amount under section 33(5) of the Act. Aggrieved by the order the complainant filed appeal before Collector of Customs, Sales Tax and Federal Excise (Appeals), which was dismissed by him vide Order-in-Appeal No..388 of 2006, dated 31-8-2006. Dissatisfied with the Order-in-Appeal, the complainant filed appeal before the Customs, Sales Tax and Federal Excise Appellate Tribunal, which accepted its appeal and set aside the Order-in-Appeal vide judgment, dated 31-12-2006. The Collector did not accept Tribunal's judgment and directed the respondent to make recovery of the amounts adjudged against the complainant. If Appellate Tribunal's decision was not acceptable to the department, the department should have sought remedy of appeal under section 47 of the Act. Instead of challenging the appellate order by filing appeal, the complainant was served with a now show-cause notice, dated 24-2-2007 for the same allegation and charge and for .the same period which were earlier adjudicated upon upto the level of Appellate Tribunal. The complainant submitted reply, dated 15-3-2007 to the new show-cause notice pointing out to the Adjudicating Authority that the matter had already been adjudicated by the .respondent, first appeal was dismissed by the Collector (Appeals) but the second appeal was accepted by the Appellate Tribunal. The department was not competent to re-adjudicate the same matter as the judgment passed by the Tribunal was final and binding on -the department. Ignoring the judgment of the Tribunal and the reply given by the complainant' to the new show-cause notice the respondent passed fresh Sales Tax Order-in-Original No.16/BWP/07, dated 14-4-2007 directing the complainant to pay default surcharge and penalty for the period earlier adjudicated upon upto the level of the Tribunal against all norms of justice. Since there was no provision under the Sales Tax Act, 1990 empowering the Tribunal to implement its order or judgment nor was there any provision to file contempt petition for initiating proceedings defiance of its decision, this complaint was being filed because the respondent had committed `maladministration'. The department's, refusal to accept the judgment of the Tribunal which was binding on the department was illegal, void, without lawful authority and contemptuous as well as an act of `maladministration'. The Tribunal had accepted appeal of the complainant on the ground that it was beyond the control of the complainant to pay tax by due date as the clearance of sugar was stopped by the District and Sessions Judge, Honourable Lahore High Court as well as the High Court of Sindh at Karachi. As soon as the case was decided by the Court in favour of the complainant principal amount of sales tax was deposited before issuance of original show-cause notice. The Appellate Tribunal had held in some other-cases that even if sometime non-payment had taken place action could not be taken unless it was established that the same was willful and deliberate and not the result of some procedural lapse. Late payment was due to restraining order passed by the Courts and there was no willful act. The impugned Order-in-Original, dated 14-4-2007 passed by the A.C., Sales Tax, Bahawalpur may be cancelled. The department may be directed to accept and implement the judgment of the Appellate Tribunal, dated 23-12-2006. Acts of the respondents be declared as `maladministration'. Action as deemed fit may be .taken against he respondents for non-acceptance of Tribunal's order. Any other relief deemed fit may be given.

2. In reply, the Collector of Sales Tax, Multan has submitted that there were some clerical and arithmetical errors in show-cause notice, dated 31-1-2006 and Order-in-Original No. 38/RYK/06, dated 24-4-2006 which was based on the contravention Case No.565 of 2005, dated 28-5-2005. The fresh show-cause notice, dated 25-2-2007 and Order-in-Original No.16/BWP/07, dated 14-4-2007 were issued under provisions of section 57 of the Sales Tax Act, 1990 after invoking the provisions of section 2(37) of the Act and making arithmetical corrections which had occurred due to clerical mistakes. The relevant provisions of section 57 of the Act are reproduced as under:---

"Correction of clerical errors, etc.---Clerical or arithmetical errors in any assessment, adjudication, order or decision may, at any time, be corrected by the Officer of Sales Tax who made the assessment or adjudication or passed such order or decision or by his successor in office.

[Provided that before such correction, a notice shall be given to the registered person or to a person affected by such corrections]."

The complainant made short filing for two consecutive months i.e. September, 2005 and October, 2005 and thus committed tax fraud under section 2(37) of the Act and deposited sales tax after due dates. In order, therefore, to recover the default surcharge and the penalty the respondent issued the show-cause notice to safeguard government revenue as per law. The complainant's contention was wrong because the department had not made any reservation about judgment passed by the Appellate Tribunal and did not refuse implementation of Tribunal's judgment of the Appellate Tribunal in any case. The respondents had passed fresh Order -in-Original under the .provisions of law on merit and in good faith. The complaint may be disposed of accordingly and the national exchequer may be saved from revenue loss.

3. During the hearing, on a question, the AR submitted that the complainant had not filed any appeal against the Order-in-Original, dated 14-4-2007. Instead, it filed this complaint of `maladministration'. He reiterated the arguments advanced in the written complaint, emphasizing that despite the fact that the Tribunal had accepted complainant's appeal vide its judgment, dated 23-12-2006, the respondent issued another show-cause notice for the same period and the same charges and decided the case afresh without reference to the earlier show-cause notice, the only difference, being in the amounts of default surcharge. The second Order-in-Original did not even cover the arguments advanced by the complainant and failed to discuss and give findings on complainant's contention that the case had already been decided and accepted by the Appellate Tribunal. He argued that the comments filed by the respondents were highly .questionable. The contention that the show-cause notice and the Order-in-Original were issued for correction of clerical and arithmetical mistakes under section 57 of the Act was totally baseless. Neither the show-cause notice nor the Original-in-Order shows that they were issued under the provisions, of the aforesaid section. This argument was nothing but an afterthought. The respondents could not amend an order, which was set aside by the Tribunal.

4. The DR submitted that the new show-cause notice was issued because the first one contained clerical mistakes and to invoke section 2(37) (tax fraud) of the Act because the complainant had short filed returns for two consecutive months namely month of 9/05 and 10/05. It had, therefore, committed fraud as defined under section 2(37) of the Act. Asked why the amount of surcharge was enhanced in the second set of show-cause notice and the Order-in-Original the DR submitted that surcharge in the case of non-submission of returns for the two consecutive months was required to be calculated at the rate of 2% and penalty in such cases was also higher under section 33(13) of the Act. Asked why Tribunal's order was not implemented he submitted that the Tribunal's order was implemented as the file from which wrong show-cause notice was issued and the Order-in-Original was passed was closed. Fresh proceedings were initiated. He admitted that the show-cause notice as well as the Order-in-Original covered the same period alleging failure to submit returns by due dates. The AR argued that the respondents had made `untrue statements' before this Court. Had the, respondents implemented Tribunal's order then the amounts covered under Tribunal's order should have been reduced or worked off while deciding the case afresh.

5. The arguments of the two sides and records of the case have been considered and examined. The complainant was issued a show -cause notice, dated 31-1-2006 alleging that as it had made late payment of sales tax for the months of 7/05, 9/05 and 10/OS it was liable to deposit default surcharge of Rs.282509 under section 34(1) and to imposition of penalty under section 33(5) of the Act for contravening the provisions of law. The Assistant Collector (Adjudication) passed Original-in-Original No.38/RYK/2006, dated 26-4-2006 and directed the complainant to deposit the aforementioned amount of default surcharge together with penalty equal to 5 % of the principal amount under section 33(5) of the Act. Aggrieved by the aforesaid Order-in-Original, the complainant filed appeal before Collector (Appeals) who dismissed it. The complainant then filed appeal before the Appellate Tribunal who accepted its appeal and set aside the order passed by the lower forum vide its judgment, dated 23-12-2006. The complainant contends that the respondents did not accept the judgment of the Tribunal nor did they seek remedy of appeal against Tribunal's decision. Instead, the complainant was again served with a fresh show-cause notice, -dated 24-2-2007 for the same allegation, same charges and for the same period, which was earlier adjudicated upon upto the level of the Appellate Tribunal. The complainant submitted reply to the new show-cause notice, dated 24-2-2004 informing the A.C. (Adjudication) that the matter had already been adjudicated upon and since the show-cause notice involved the same charge and the same period and the Tribunal had waived off the default surcharge and penalty imposed in order, dated 26-4-2006 she was not competent to re-adjudicate the matter as it would amount to violating the Appellate Tribunal's order. Ignoring the complainant's reply and the Tribunal's judgment, the A.C. (Adjudication) against all norms of justice passed a fresh Order-in-Original- No.16/BWP/07, dated 14-4-2007 directing the complainant to pay default surcharge and penalty for the period already adjudicated upon by the Tribunal.

6. A perusal of the two show-cause notices shows that the allegation in each one of them was that the complainant had made late payment of sales tax for the months of 7/05, 9/05 and 10/05. The two show-cause notices incorporate the same principal amounts of sales tax `due dates' by which the payment of tax had to be made as well as the `deposit dates'. However, the aforesaid notices indicate difference in the amounts of default surcharge with the amount of default surcharge shown in the first .show-cause notice, dated 31-1-2006 being less than the amounts of default surcharge incorporated in show-cause notice, dated 24-2-2007. When questioned about the basis on which the amounts of surcharge -were enhanced in the latter show-cause notice, the DR submitted that the amounts were enhanced because the complainant had not paid sales tax for two consecutive months i.e. 9/05 and 10/05 and that the surcharge in such case was to be levied 2%. When asked as to why a new show-cause notice was issued to the complainant for the same offense i.e. for late payment and for the same period, which had already been adjudicated .upon he, submitted that the new show-cause notice, dated 24-2-2007 was issued and the fresh Order-in-Original, dated 14-4-2007 was passed in order to rectify clerical and arithmetical errors in the earlier show-cause notice and the Order-in-Original under the provisions of section 57 of the Sales Tax Act, 1990, which permits such rectification. He argued that since the complainant had committed tax fraud, section 2(37) of the Act was invoked in the fresh show-cause notice.

7. A perusal of both show-cause notice, dated 24-2-2007 and the Order-in-Original, dated 14-4-2007 will show that neither the show-cause notice nor the Order-in-original invoked section 57 of the Act with a view to rectifying clerical and arithmetical errors. There is practically no mention in the aforesaid show-cause notice and the Order-in-Original of proceedings under the provisions of section 57 of the Act nor of respondents' intention to rectify clerical and arithmetical errors. Even otherwise a clerical error is an error, which `relates to office clerk or his work' resulting from `a minor mistake of inadvertence' such as `typing an incorrect number, missing transcribing a word, omitting the Appendix from documents' and an arithmetical error is an inadvertent error resulting from, say, a .calculation or typing mistake apparent from the record. In the present case the respondent has issued a fresh show-cause notice for the same offence for which a notice was issued earlier and has passed fresh adjudicating order for the same offence i.e. the offence of late payment of tax despite the fact that the Appellate Tribunal had decided the earlier case in favour of the complainant. By no stretch of imagination can one accept the respondents' version that the news show-cause notice and the new Order-in-Original were passed on the basis of proceedings drawn under the provisions of section 57 of the Act. Even otherwise this section provided that before such correction a notice shall be given to the registered person or to a person affected by a suchcorrection whereas the new show-cause notice and the later adjudicating order did not even mention that the notice was issued and the adjudicating order was passed under the provisions of section 57 of the Act. As a matter of fact the new show-cause notice was issued and the resultant. Order-in-Original was passed for the same offence i.e. for late payment and for the same period without realizing that the. Appellate Tribunal had in its judgment, dated 23-12-2006 set aside Collector's Order-in-Appeal No. 31-8-2006, which upheld the earlier adjudicating order, dated 26-4-2006 and accepted the appeal of the complainant with the following observations:--

Meaning thereby the stoppage of the clearance of the sugar vide order, dated 19-4-2005 passed by learned Civil Judge was an admitted position and it is not on the record as to how long stay order, dated 19-4-2005 was extended. "... Meaning thereby there was solid hindrance in the way of the appellants to collect the cash amount and it .looks as if the elate payment of the sales tax was due to sufficient cause. In such circumstances the additional tax and penalty should not be imposed therefore Order-in-Appeal cannot sustain in the eye of law. As a result of it, Order-in-Appeal, dated 31-8-2006 is set aside and this appeal is hereby accepted".

Since the late payment was due to sufficient cause as held by the Tribunal there was no point in issuing a new show-cause notice and deciding the case afresh vide Order-in-Original, dated 14-4-2007 for the same offence i.e. late payment of tax for the same- period. The Collectorate should have realized the spirit of the Tribunal's order and restrained from issuing fresh show-cause notice and re-deciding the case for the same offence and 'the same period, which had already been adjudicated upon. The respondents' action amounts to double jeopardy resulting in punishing the complainant for the same offence, which had already been adjudicated upon. The show-cause notice, dated 24-2-2007 and the O-I-O 14-4-2007 passed in the case are illegal and void. `Maladministration' is established. Accordingly, it is recommended that the Revenue Division direct the competent authority to:--

(i) Re-open show-cause notice, dated 24-2-2007 and the Order-in-Original, dated 14-4-2007 under section 45A of the Sales Tax Act, 1990 and quash them being illegal and void and direct the Collectorate to implement Appellate Tribunal's order; dated 23-12-2006 unless the Collectorate has filed an appeal against the aforesaid order of the Tribunal and holds a stay order from the competent Court against operation of Tribunal's judgment.

(ii) Compliance be reported within 30 days of the receipt of this order.

C.M.A./121/FTOOrder accordingly.