FEDERATION OF PAKISTAN and others VS ATTOCK PETROLEUM LTD., ISLAMABAD, 2007 PTD-SUPREME-COURT 1495 (2006)

(On appeal from the judgment, dated 19-7-2006 passed by Lahore High Court, Rawalpindi Bench in Writ Petition No.3559 of . 2004).

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

----S. 47-A---Customs Act (IV of 1969), S.195-C---Central Excise Act (I of 1944), S.36-D---Alternate Dispute Resolution, scheme of---Object and scope---Such scheme would facilitate settlement of tax dispute without intervention of court through mediation and negotiation---Remedy of Alternate Dispute Resolution would not be available to a person, who in addition to tax liability was facing criminal charge/offence---Reference in criminal case by Central Board of Revenue to Alternate Dispute Resolution Committee would be void ab initio and without jurisdiction---Principles.

The scheme of Alternate Dispute Resolution (ADR) facilitates settlement of tax dispute through negotiation and system of ADR having legal recognition under the Customs Act, 1969, Central Excise Act, 1944 and Sales Tax Act, 1990 is adopted to settle the disputes without the intervention of the court. The centuries old traditional method of settlement of private dispute through negotiation is not only familiar in the modern world, but this voluntary scheme for settlement of tax dispute through mediation and negotiation is an effective method to be followed.

The similar scheme of ADR under section 195-C of the Customs Act, 1969 and section 36-D of the Central Excise Act, 1944 has been provided and C.B.R. in exercise of its powers under the above provisions of law may on an application of an aggrieved person appoint a Committee for the settlement of tax dispute without the intervention of courts and this non-judicial forum of ADR has been introduced in the statutes for amicable and speedy settlement of dispute to avoid the heavy expensive and lengthy process of court. There are various forms of ADR such as mediation, arbitration, conciliation and compromise with or without intervention of court and provisions of the ADR in the above statutes clearly demonstrate that scheme of ADR is not applicable to the case in which in addition to the tax liability an aggrieved person is also facing criminal charge. The careful perusal of these provisions unambiguously shows that ADR Committee has limited jurisdiction to the extent of tax dispute as civil liability and cannot enlarge its jurisdiction to the cases registered under the above statutes involving criminal liability even if the offence allegedly committed by a person is compoundable. For the trial of criminal cases registered under these statutes, an independent forum of Special Court of exclusive jurisdiction has been provided under section 185 of the Customs Act, 1969 read with Prevention of Smuggling Act, 1977, which enjoys the status of Court of Session established under Code of Criminal Procedure, 1898, and notwithstanding the mixed character of a transaction involving civil and criminal liability, remedy of ADR is not at all available in the criminal cases registered under the above statutes. The provisions in these statutes relating to the voluntary scheme of ADR having no overriding effect to other provisions contained therein may be invariably invoceable in each case and in view of the legal position explained hereinbefore it is quite clear that in a transaction in which in addition to the tax liability a person is found to have also committed an offence under the tax statutes, and transaction can be separated for the purpose of Alternate Dispute Resolution in respect of tax liability and consequently, the ADR Committee of C.B.R. is not competent to entertain such dispute of mixed character except in a case in which the offence is compoundable with prior approval and permission of the Federal Government.

The legal position emerging from the relevant provisions under the Customs Act, 1969 read with Central Excise Act, 1944 and Sales Tax Act, 1990 is that the scheme of ADR is not applicable to criminal cases registered under these statutes, and in such cases, the reference sent by the C.B.R. to the ADR Committee would be void ab initio and without jurisdiction.

(b) Customs Act (IV of 1969)---

----S. 195-C--- Alternate Dispute Resolution, scheme of---Object and scope---Such scheme would facilitate settlement of tax dispute without intervention of court through mediation and negotiation---Remedy of Alternate Dispute Resolution would not be available to a person, who in addition to tax liability was facing criminal charge/offence---Reference in criminal case by Central Board of Revenue to Alternate Dispute Resolution Committee would be void ab initio and without jurisdiction--Principles.

(c) Central Excise Act (I of 1944)---

----S. 36-D--- Alternate Dispute Resolution, scheme of---Object and scope---Such scheme would facilitate settlement of tax dispute without intervention of court through mediation and negotiation---Remedy of Alternate Dispute Resolution would not be available to a person, who ill addition to tax liability was facing criminal charge/offence---Reference criminal case by Central Board of Revenue to Alternate Dispute Resolution Committee would be void ab initio and without jurisdiction---Principles.

Raja Muhammad Bashir, Advocate Supreme Court, Mehr Khali Malik, Advocate-on-Record and Mumtaz Ahmad, Member Legal, C.B.R. for Petitioners.

Tariq Aziz, Advocate Supreme Court and Ejaz M. Khan, Advocate-on-Record for Respondent.

Date of hearing: 19th October, 2006.

JUDGMENT

IFTIKHAR MUHAMMAD CHAUDHRY, CJ.--- This petition for leave to appeal has been directed against the judgment dated 19-7-2006 passed by Lahore High Court, Rawalpindi Bench, in a writ petition.

2. Precisely stating the facts of the case are that Attock Petroleum claimed refund on duty draw back of the petroleum products and custom authorities having conducted the factual inquiry regarding the export of the petroleum, found that refund claim was fake which was made without actual export of petroleum products. In consequence thereto, two separate criminal cases were got registered against the respondents vide F.I.Rs. Nos.27 dated 22-5-2004 and 41, dated 5-6-2004 under various provisions of the Customs Act, 1969. It so happened that pending investigation of these criminal cases, respondent moved an application to the C.B.R. for settlement of the dispute to the extent of sales tax through Alternate Dispute Resolution (ADR) and Central Board of Revenue vide order, dated 11-10-2004 referred the matter to the ADR Committee C.B.R. constituted under section 47-A of Sales Tax Act, 1990 read with section 195-C of the Customs Act, 1969 and section 36-D of Central Excise Act, 1944. This Committee however, vide letter, dated 11-11-2004, reproduced hereunder informed the respondent about its inability to entertain the dispute.

"To

Mr. Shoaib A. Malik, Chief Executive,

Attock Petroleum Limited, 6, Faisal Avenue, F-7/1,

Islamabad.

Subject: Application for constitution of alternate dispute resolution committee under section 47-A of the Sales Tax Act; 1990 in the case of Messrs Attock Petroleum Limited Islamabad.

I am directed to refer to your Applications No. Nil dated 12-7-2004 and 1'-10-2004 on the subject noted above and to say that an Alternate Dispute Resolution Committee under section 47-A of the Sales Tax Act, 1990 was constituted by the Board in your case vide order of even number dated 11-10-2004. However, the Committee so appointed has unanimously opined that since the matter involves criminal investigations which are pending in pursuance of F.I.Rs: registered against the relevant parties including the applicant, the Alternate Dispute Resolution Committee is not the proper forum for resolution of the dispute.

Keeping in view the above, the Board regrets its inability to take further action in the case. You are advised to pursue the same with the relevant quarters, where the investigations are pending.

(Sd.) (Nawab Khan), Secretary (ST-Judl.)

Phone No.9204043."

3. The respondent being aggrieved of the refusal of ADR Committee to entertain the dispute, filed a writ petition in the Lahore High Court, Rawalpindi Bench, wherein it was urged that the dispute in respect of sales tax for the purpose of ADR, would squarely fall within the ambit of section 47-A of the Sales Tax Act, 1990. The learned Judge in the High Court seized of the matter, having dilated on the question of jurisdiction of ADR Committee allowed the writ petition, vide impugned judgment with observation that ADR Committee having declined to interfere in the matter without hearing Attock Petroleum proceeded in violation of principle of natural justice and thereby directed the ADR Committee of C.B.R. to entertain the reference for settlement of the dispute.

4. Learned counsel for the petitioners, without disputing the jurisdiction of ADR Committee constituted under section 47-A of the Sales Tax Act, 1990 read with section 195-C of Customs Act, 1969 and section 36-D of Central Excise Act, 1944, to entertain the tax dispute has contended that in a case in which in addition to the evasion of Customs or Central Excise Duty and sales tax, an offence was also committed under the above statutes, the dispute to the extent of sales tax, cannot be separated for the purpose of ADR through bifurcation of the transaction into parts. In net shell, learned counsel argued that Alternate Dispute Resolution Committee constituted by the C.B.R. under the above referred provision of law may not have the jurisdiction to entertain the tax dispute in a matter in which an aggrieved person is also facing criminal charge. Learned Member (Legal) C.B.R. present in Court having endorsed the above view stated that forum of ADR has been provided under the above referred tax statutes exclusively for decision of tax dispute as civil liability and the ADR Committee has no jurisdiction to entertain tax dispute arising out of the criminal cases registered thereunder.

5. Learned counsel for the respondent-caveator on the other hand, without disputing the legal proposition that the tax dispute involving criminal liability cannot be referred by the ADR Committee has submitted that the dispute in respect of sales tax being purely of civil nature, could conveniently be referred to the C.B.R. to the ADR Committee under section 47-A of the Sales Tax Act, 1990.

6. The scheme of Alternate Dispute Resolution facilitates settlement of tax disputes through negotiation and system of ADR having legal recognition under the Customs Act, 1969, Central Excise Act, 1944 and 'Sales Tax Act, 1990 is adopted to settle the disputes without the intervention of the court. The centuries old traditional method of settlement of private dispute through negotiation is not only familiar in the modern world, but this voluntary scheme for settlement of tax dispute through mediation and negotiation is an effective method to be followed. Section 47-A of the Sales Tax Act, 1990, introducing this scheme is read as under:--

47-A. Alternate dispute resolution.--- (1) Notwithstanding any other provision of this Act, or the rules made thereunder, any registered person aggrieved in connection with any matter of sales tax in respect of the following, namely:--

(a)??????? the liability of tax against the registered person, or admissibility of refunds, as the case may be;

(b)??????? the extent of waiver of additional tax and penalty;

(c)??????? the quantum of input tax admissible in terms of subsection (3) of? section 7;

(d)??????? any other specific relief required to resolve the dispute;

may apply to the Central Board of Revenue for the appointment of a committee for the resolution of any hardship or dispute mentioned in detail in the application.

(2) ?????? The Central Board of Revenue, after examination of the

application of an aggrieved person, shall appoint a committee consisting of an officer of central excise and two persons from notified panel of Chartered or Cost Accountants, Advocates, representatives of trade bodies or associations, or any other reputable taxpayers for the resolution of the dispute.

(3)??????? The committee constituted under subsection (2) shall examine the issue and may, if it deems necessary, conduct inquiry, seek expert opinion, direct any officer of central excise or any other person to conduct an audit and make recommendations in respect of the resolution of dispute as it may deem fit.

(4)??????? The Board may, on the recommendation of the Committee, pass such order, as it may deem appropriate.

(5)??????? The aggrieved person may make the payment of central excise duty and other taxes as determined by the Board in its order under subsection (4) and all decisions, orders and judgments made or passed shall stand modified to that extent and all proceedings under this Act or the rules made thereunder by any Authority shall abate:

??????????? Provided that, in case the matter is already sub judice before any Authority or Tribunal or the Court, an agreement made between the aggrieved person and the Board in the light of recommendations of the Committee shall be submitted before that Authority, Tribunal or the Court for consideration and order as deemed appropriate.

(6)??????? In case the registered person is not satisfied with the orders of the Board, he may file an appeal with the appropriate Authority, Tribunal or Court under the relevant provisions of this Act within a period of sixty days of the order passed by the Board under this section has been communicated to the registered person.

(7)??????? The Board may, by notification in the notification Gazette, make rules for carrying out the purposes of this section."

7. The similar scheme of ADR under section 195-C of the Customs Act, 1969 and section- 36-D of the Central Excise Act, 1944 has been provided and C.B.R. in exercise of its powers under the above provisions of law may' on an application of an aggrieved person appoint a Committee for the settlement of tax dispute without the intervention of courts and this non-judicial forum of ADR has been introduced in the statutes for amicable and speedy settlement of dispute to avoid the heavy expensive and lengthy process of court. There are various forms of ADR such as mediation, arbitration, conciliation and compromise with or without intervention of court and provisions of the ADR in the above statutes clearly demonstrate that scheme of ADR is not applicable to the case in which in addition to the tax liability an aggrieved person is also facing criminal charge. The careful perusal of these provisions unambiguously shows that ADR Committee has limited jurisdiction to the extent of tax dispute as civil liability and cannot enlarge its jurisdiction to the cases registered under the above statutes involving criminal liability even if the offence allegedly committed by a person is compoundable. This may be pointed out that for trial of criminal cases registered under these statutes, an independent forum of Special Court of exclusive jurisdiction has been provided under section 185 of the Customs Act, 1969 read with Prevention of Smuggling Act, 1977, which enjoys the status of Court of Session established under Code of Criminal Procedure, 1898, and notwithstanding the mixed character of a transaction involving civil and criminal liability, remedy of ADR is not at all available in the criminal cases registered under the above statutes. The provisions in these statutes relating to the voluntary scheme of ADR having no overriding effect to other provisions contained therein may not be invariably invoceable in each case and in view of the legal position explained hereinbefore it is quite clear that in a transaction in which in addition to the tax liability a person is found to have also committed an offence under the tax statutes, and transaction can be separated for the purpose of Alternate Dispute Resolution in respect of tax liability and consequently, the ADR Committee of C.B.R. is not competent to entertain such dispute of mixed character except in case in which the offence is compoundable with prior approval and permission of the Federal Government.

???????????

8. In consequence to the above discussion and the legal position emerging from the relevant provisions under the Customs Act, 1969 read with Central Excise Act, 1944 and Sales Tax Act, 1990 we hold that scheme of ADR is not applicable to the criminal cases registered under these statutes, and the reference sent by the C.B.R. to the ADR Committee in the present case was void ab initio and without jurisdiction. The result is that the judgment under challenge, having been not passed by the High Court in proper exercise of constitutional jurisdiction, is null and void in the eyes of law.

9. For the reasons given above, we convert this petition into an appeal and having set aside the judgment of the High Court, allow the appeal with no order as to costs.

S.A.K./F-5/SC??????????????????????????????????????????????????????????????????????????????????????????????? Appeal accepted.