S.S. OIL MILLS LIMITED, LAHORE VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 553 (2005)

Sales Tax Act (VII of 1990)---

----S. 36(3)-Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Complainant contended that Order-in-Original passed by the Deputy Collector (Adjudication) was without lawful jurisdiction on account of limitation provided under S.36(3) of the Sales Tax Act, 1990 as show-cause notice, dated 4-11-2003 was contested vide reply, dated 17-12-2003 but the case was decided vide Order-in-Original, dated 11-5-2005---Mandatory proviso to S.36(3) of the Sales Tax Act, 1990 provided that Order-in-Original was to . be passed within 135 days of the issuance of show cause---Limitation period expired on 20-3-2004---Adjudication authority failed to observe the time limitation so prescribed and passed the Order -in-Original on 11-6-2005 creating sales tax liability along with additional tax and penalty long after the expiry of the prescribed time limitation---Order was void because it was passed after the time-limit prescribed in S.36(3) of the Sales Tax. Act, 1990---Validity---Show-cause notice was issued on 4-11-2003 and the Order-in-Original creating liabilities was passed on 11-6-2005 (dispatched on 30-6-2005) after a period of one year, seven months and 26 days (computed from the date of dispatch) in violation of the provisions of S.36(3) of the Sales Tax Act, 1990---Order being violative of the provisions of S.36(3) of the Sales Tax Act, 1990 was clearly hit by limitation as provided in law and maladministration was established---Federal Tax Ombudsman recommended that the Revenue Division should direct the competent authority to cancel the Order-in-Original.

Complaint No.805 of 2003 (Messrs Pace International Rawalpindi v. Secretary Revenue Division, Islamabad) and S.R.O. 723(I)/05 rel.

Sales Tax Appeal No.2149/LB of 2002 reversed.

Muhammad Akbar, Advisor, Dealing Officer.

Shahid Pervaiz Jami for the Complainant.

Muhammad Akram Ch. D.C. Central Excise, Sales Tax and Customs, Multan for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHAIKH (FEDERAL TAX OMBUDSMAN).---This complaint of `maladministration' is directed against Order-in-Original No.1002/05 passed by the Deputy Collector (Adjudication)., Multan without lawful jurisdiction on account of time limitation provided under section 36(3) of the Sales Tax Act, 1990. Show-cause notice dated 4-11-2003 was issued by Additional Collector (Adjudication), which was contested by the complainant vide reply dated 17-12-2003 but the case was decided by D.C. (Adjudication) vide O-I-O No.1002/05 dated 11-6-2005 (dispatched on 30-6-2005). According to the mandatory proviso to section 36(3) of Sales Tax Act, 1990, the O-I-O was to be passed within 135 days of the issuance of show-cause notice. The said limitation period expired on 20-3-2004. Contrary to the aforesaid provision, the D.C. (Adjudication) continued the proceedings despite objection by complainant's AR regarding expiry of time limitation. The adjudication authority failed to observe the time-limitation so prescribed and passed the O-I-O on 11-6-2005 (dispatched on 30-6-2005) creating sales tax liability along with additional tax and penalty long after the expiry of the prescribed time limitation. Despatched on 30-6-2005 the O-I-O was received by the complainant after the expiry of amnesty notified vide S.R.O. 520(I)/05 dated 6-6-2005. The passing of the aforesaid O-I-O without jurisdiction long after the expiry of period of limitation prescribed in law amounted to `maladministration'. Earlier, the F.T.O. vide decision in complaint No.805/03 (M/s Pace International Rawalpindi v. Secretary Revenue Division Islamabad) had held that passing of O-I-O after the expiry of time limitation was an act of `maladministration'. The departmental representation against F.T.O's. decision to the President of Pakistan was rejected as per Law and Justice Division's decision No.185/04 F.T.O.-Law dated 7-5-2005. It is pleaded that the impugned O-I-O be declared without lawful jurisdiction and also hit by limitation. The competent authority may also be directed to cancel the O-I-O under section 45A of the Sales Tax Act, 1990.

2. In reply, the respondents have objected to F.T.O's. jurisdiction in terms of the provisions of section 9(2) of the F.T.O. Ordinance, 2000 on the grounds that (i) as the O-I-O passed in the case was appealable. The complainant who had the right to file appeal before Collector of Appeals did not avail the remedy, (ii) the issue involved in the complaint related to determination of liability of tax in respect of which legal remedies of appeal, review and revision were available under the relevant legislation. The show-cause notice was issued on 4-11-2003 multiple hearing opportunities were provided to both the complainant and the department. After obtaining number of adjournments from the adjudication authority, the A.R. of the complainant submitted final written reply to the show-cause notice on 4-5-2005 which was discussed on the next date of hearing i.e. on 11-6-2005. Decision in the case was announced on 11-6-2005 but the O-I-O was issued on 30-6-2005 because it involved drafting, typing and proof reading. The complainant itself was responsible for causing delay in deciding the case. Period of adjudication mentioned in section 36(3) of the Sales Tax Act, 1990 was directory in nature and not mandatory. It was so held by the Customs, Excise and Sales Tax Appellate Tribunal in Sales Tax Appeal No.2149/LB of 2002. The D.C. was competent to adjudicate the case as the C.B.R. had enhanced the powers of Deputy Collector (Adjudication) to decide the cases upto a limit of Rs.5 million vide Notification S.R.O.907(I)/04 dated 8-11-2004. Complainant's contention that the O-I-O dispatched on 30-6-2005 was received by it after expiry of amnesty notified vide S.R.O.520(I)/05 dated 6-6-2005 was not tenable because there was no restriction for availing amnesty during adjudication proceedings. Even otherwise, amnesty was extended upto 31-7-2005 vide S.R.O.723(I)/05 dated 22-7-2005. The complaint may be treated on its merit, without reference to F.T.O's. decision in C.No.805/03, but keeping in view the Appellate Tribunal's judgment in Sales Tax Appeal No.2149/LB of 2002. There was no `maladministration' on the part of the adjudication authority. The complaint, which was devoid of merit, may be dismissed. The complainant may be advised to avail itself of the remedy of appeal against the impugned order.

3. During the hearing, when asked, the A.R. confirmed that the complainant had not filed any appeal against the impugned order before the appellate authority. The D.R. also confirmed this position. The A.R. submitted that he would press only one point: the impugned order was void because it was passed after the time limit prescribed in section 36(3) of the Sales Tax Act, 1990. He also pointed out that although in the written complaint the period of limitation was mentioned as 135 days of the issuance of the show-cause notice the correct position was that during the relevant period of the time limitation prescribed in section 36(3) of the Act was 90 days or 180 days, if extended by another 90 days. The O-I-O was not passed within the prescribed time limitation. He rebutted respondents' contention that the prescribed time limit was directory and not mandatory by stating that F.T.O. gave his findings in complaint No.805/03 on 28-5-2004 and the Presidential order upholding F.T.O's. decision was dated 7-5-2005---both decisions being later in point of time than Tribunal's decision dated 5-3-2003. He further added that the complainant had contested the contents of show-cause notice vide its reply dated 17-12-2003.

4. The D.R. reiterated that the complainant also responsible for delay in adjudication of the case. The adjudication authority had held as many as 26 hearings. In the first place, the complainant filed its written reply to the show-cause notice dated 4-11-2003 on 4-5-2005. Subsequently, the complainant kept on asking for adjournments of the 26 hearings the complainant sought adjournments on as many as 10 occasions. Final hearing was held on 11-6-2005 after which the O-I-O was passed. He further added that for purposes of rendering justice it was necessary to wait for complainant's written reply and to conclude discussion before deciding the case. He cited Appellate Tribunal's judgment in appeal No.2149/LB/02 where the Appellate Tribunal had ruled that the provisions of section 36(3) of the Sales Tax Act, 1990 were not mandatory and the order passed beyond the stipulated time did not make it void. The A.R. stated that it was respondents' responsibility to complete adjudication proceedings within the prescribed time and they could not apportion any blame to the complainant for delay in deciding the case.

5. The arguments of the two sides and record of the case have been considered and examined. According to subsection (3) of section 36 of the Sales Tax Act, 1990, the competent authority after considering the objections of the person served with a notice to show cause under subsection (1) or (2) of section 36 of the Act can determine the amount of tax or charge payable. However, Proviso to section 36(3) reads as under:

"Provided that order under this section shall be made within ninety days of issuance of show-cause notice or within such extended period as the Collector may, for reasons to be recorded in writing, fix, provided that such extended period shall in no case exceed ninety days".

6. Surely the show-cause notice in this case was issued to the complainant on 4-11-2003. Admittedly the O-I-O was passed on 30-6-2005 long after the expiry of initial period of 90 days of the issuance of show-cause notice and even after 180 days, if at all the competent authority had extended the initial period of 90 days by another 90 days, although no evidence was supplied to prove that extension of 90 days was allowed by the competent authority. The impugned order was, therefore, passed after a period of one year, seven months and 26 days (601 days) in clear violation of the proviso to section 36(3) of the Sales Tax Act, 1990.

7. Respondents' contention that the complainant was also responsible for causing delay in deciding the case by delaying submission of its written reply and by not appearing on some hearings or seeking adjournments is not tenable. The provisions of law were quite clear: the adjudication of the case had to be finalized within the prescribed time limitation. The adjudication authority should have abided by it. If the complainant was delaying the proceedings, as alleged by the respondents, the authority could have applied the brakes by refusing extension in time for submission of written reply and disallowing adjournments sought by the complainant so as to enable itself to adhere to the prescribed time limit, within which the case had to be decided, and be on the right side of law.

8. No doubt, the Appellate Tribunal vide decision in appeal No.2149/LB/02 held that the proviso to section 36(3) was directory and not mandatory. However, it was held by the F.T.O. in complaint No.805/03, involving sales tax liability, that "in the instant case show-cause notice was issued on 16-6-2002 and Order-in-Original was passed on 13-5-2003 after about 11 months of the issuance of notice which is clearly hit by time limitation as provided in law. Maladministration is therefore established". The F. T.O., therefore, recommended in that case that the competent authority should cancel the O-I-O. The department represented against the aforesaid F.T.O's. decision before the President of Pakistan. The President was pleased to reject the representation of the department vide order dated 7-5-2005 paragraphs 3 and 4 of which are reproduced below:

3. "The department contends that time limit under section 36(3) ibid was merely directory and not mandatory. The contention does not seem to be valid. Where inaction on the part of a public functionary within the prescribed time is likely to affect the rights of a citizen the prescription of time is deemed directory but where a public functionary is empowered to create liability against a citizen only within the prescribed time it is mandatory. The F.T.O's. decision must be sustained.

4. Accordingly, the President has been pleased to reject the representation of the department".

9. In the present complaint also the show-cause notice was issued on 4-11-2003 and the O-I-O creating liabilities was passed on 11-6-2005 (dispatched on 30-6-2005) after a period of one year, seven months and 26 days (computed from the date of dispatch) in violation of the provisions of section 36(3) of the Sales Tax Act, 1990. The impugned order, being violative of the provisions of the aforesaid section, is clearly hit by time limitation as provided in law. Respondents' objection to F.T.O's. jurisdiction is misconceived as `maladministration' is clearly established. The complainant's A.R. had, therefore, justifiably sought application of F.T.O's. decision as sustained by the Presidential Order referred to above to its case as the issue involved in the complaint has already been settled by F.T.O's decision and Presidential Order referred to above. This complaint is, therefore, allowed the same dispensation as given in F.T.O's. decision in complaint No.805/03 as sustained by Presidential Order dated 7-5-2005. Accordingly, it is recommended that the Revenue Division direct the competent authority to:

(i) Cancel the O-I-O No.1002/05 dated 11-6-2005 (dispatched on 30-6-2005).

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

C.M.A./546/F.T.O.Order accordingly.