HANIF STRAW BOARD FACTORY through Proprietor VS ADDITIONAL COLLECTOR (ADJUDICATION), CUSTOMS, CENTRAL EXCISE AND SALES TAX, GUJRANWALA, 2008 PTD-LAHORE-HIGH-COURT-LAHORE 578 (2007)

Sales Tax Act (VII of 1990)---

----Ss.11, 36 & 47---Reference to High Court---Default in payment of Sales Tax---Assessee was issued show-cause notice wherein it was pointed out that it had defaulted in payment of taxes---Said show-cause notice, however, lacked bifurcation of amount for the various years---Assessee challenged the show-cause notice on the grounds that; it was time-barred; that department had further committed default by passing an order beyond prescribed limit under law; and that the Tribunal had failed to appreciate that the amount short paid belonged to other assessee, who had another unit in the premises and was willing to pay the same---Claims of assessee were ignored and amount was considered as defaulted and embargo in terms of stoppage of clearance of goods from business premises was placed---Claim of assessee continued to be the same namely that apparent direction in the show-cause notice for earlier two years was time-barred besides notice was late by four years---Since the amount was not bifurcated even at the subsequent stage, Additional Collector's action to correct the illegality was not proper---Original show-cause notice having remained unlawful, no superstructure could be built on a notice which was illegal and void on the face of it---Department having made the order beyond a period of 45 days prescribed by law, the entire proceedings had become time-barred, which had to be set aside---Illegalities were so apparent that one could not agree with the counsel for department with respect to the status of show-cause notice---Decision being time-barred was set aside and reference application was disposed of accordingly.

Waqar Azim for Appellant.

Afzaal Ahmad Hashmi for Respondent.

Date of hearing: 18th December, 2007.

JUDGMENT

KHAWAJA FAROOQ SAEED, J.---This judgment will dispose of S.T.R No.68 of 2006 and S.T.R No.13 of 2007.

2. The assessee/petitioner was issued show-cause notice on 19-6-2000, which among other things pointed out that the petitioner had defaulted payment of taxes payable under Sales Tax Act which up till February, 2000 is short by Rs.34,74,610. This letter however lacked bifurcation of the amount for the various years. The petitioner challenged the show-cause notice inter alia on the basis of following arguments:--

(1) That the notice was time-barred having been issued after 8 years, hence, limitation had expired by that time.

(2) That the Department of Sales Tax had further committed default by passing an order beyond prescribed limit under law for passing the order after show-cause notice.

(3) That learned Tribunal failed to appreciate that the amount short paid belong to Mr. Muhammad Hussain who had another unit in the premises and was willing to pay the same.

3. These claims of the petitioner were ignored and in its order dated 19-5-2001 the amount was considered as defaulted and an embargo in terms of stoppage of clearance of goods from business premises was placed. The learned Assistant Collector while placing embargo and the Additional Collector Customs, while hearing appeal totally ignored petitioner's reply and the order was confirmed on the basis of following findings:--

"I have gone through the case record and observed that the unit has been short paying its liability since November, 1997 till February, 2000, details of which are enclosed with this order-in -original. In view of the acceptance of short payment by the unit, charges levelled in the show-cause notice stand established. I therefore order the respondents to pay the short paid amount of Sales Tax amounting to Rs.3,474,610 along with additional tax which will continue recurring till the date of deposit. A penalty of Rs.104,240 is also imposed under section 33 (2) cc of the said Act.

4. In the above findings the First Appellate Authority has held that the payment made by the petitioner was short since November, 1997 till February, 2000. In further appeal before the Sales Tax Tribunal the petitioner came up with earlier arguments with an additional one that first appellate authority had no right to change the period of default from 1992 to 2000 to 1997 to 2000. This difference in the observation is apparent in. Assistant Collector and in Additional Collector's observations. The same was, however, not appreciated by learned Tribunal. The observation of learned Tribunal was that the petitioner was properly served with show-cause notice and that the default was right detected as well as confirmed by Additional Collector (Adjudication). Furthermore that on the date of order the limitation to issue show-cause notice for recovery of short levied amount was three years whereas show-cause notice was issued in 2000 for 1992-2000. Before us the petitioner has raised following four questions on the basis of aforementioned arguments:--

(a) Whether in the facts and circumstances of the case the Tribunal was justified to hold that the show-cause notice was not barred by time?

(b) Whether in the facts and circumstances of the case the learned Tribunal was justified to ignore the prescribed limitation of 45 days under sections 11 and 36 of the Sales Tax Act 1990?

(c) Whether in the facts and circumstances of the case the learned Tribunal was justified to uphold the levy of penalty in the absence of any mala fide on the part of the applicant?

(d) Whether in the facts and circumstances of the case the learned Tribunal was justified to hold that the total amount can be recovered from the applicant in spite of the fact that another person namely Muhammad Hussain owe the liability in writing?

5. The petitioner as well as respondents both have been heard, record perused. Learned counsel for the respondents before us claims that assessee was properly served with a notice to show cause besides bifurcation was also done separately and was conveyed through the clerk who had brought the books for inspection. He also re-emphasized that the petitioner having consented for the payment of recovery through instalments, now cannot challenge the action through this petition. The claim of the petitioner remains that the apparent direction in the show-cause' notice for earlier two years is time-barred besides notice was late by four years in respect of 1992 and 3,2 and 1 year respectively for 1993,1994 and 1995. Since the amount was not bifurcated even at the subsequent stage, the Additional Collector's action to correct the illegality was not proper. The original show-cause notice remains unlawful and by changing the period of 1992 to 2000 into 1997 to 2000 the implied impression has been given that the period in original notice was incorrect. Since it is a settled principle of law that no superstructure can be built on a notice which is illegal and void on the face of it one need not go into further discussion. It was added that the matter does not end here. The department having made the order, beyond a period of 45 days prescribed by law, the entire proceedings become time-barred and therefore, should on set aside.

6. Be that as it may in this case the illegalities are so apparent that one cannot agree with the learned counsel for the respondents with respect to the status of show-cause notice vis-a-vis subsequent proceeding continued on the basis of the same. In this case the important factor is that the proceedings were continued and finalized beyond prescribed limit of 45 days which alone is enough to decide the issue. In this regard we are supported by the Writ Petition No.13331 of 2006 which among other things hold that the above provision regarding limitation is mandatory and not directory, hence its application on the subject case is without any doubt.

7. The notice was issued on 19-6-2000 while limitation to complete an assessment on the basis of a show-cause notice under section 36 and S.11 for (Recovery of tax not levied or short levied or erroneously refunded) and for assessment was 45 days. In this case the date of notice was 19-6-2000 and order was finalized on 30-10-2000, hence we have no hesitation in holding that the decision was time-barred and the same is set aside. As a result the assessee's four questions are answered in the following manners:--

(a) Positive.

(b) Negative.

(c) Negative.

(d) The question does not arise out of the order before us and it is more a question of fact and is not a question of law hence needs no reply.

8. As a result impugned order obviously is set aside and the reference application is accordingly disposed of.

H.B.T./H-39/LOrder accordingly.