JOYLA SADAT COTTON INDUSTRIES VS COLLECTOR OF CUSTOMS
2008 P T D 981
[Lahore High Court]
Before Syed Hamid Ali Shah and S. Ali Hassan Rizvi, JJ
Messrs JOYLA SADAT COTTON INDUSTRIES
Versus
COLLECTOR OF CUSTOMS
S.T.As. Nos.22 and 23 of 2006, heard on 01/04/2008.
Sales Tax Act (VII of 1990)---
----Ss. 36 & 47---Refund of Sales Tax---Recovery of refunded Sales Tax---Appeal to High Court---On application of assessee, Sales Tax refund was sanctioned in his favour vide original order dated 5-7-2001---Assistant' Collector made a contravention case against the assessee and initiated proceedings after issuing show-cause notice to the assessee---Said show-cause notice was issued on 7-7-2004-Action against assessee, in circumstances, was initiated after lapse of three years and two days---Provisions of S.36(2) of Sales Tax Act, 1990, provided for a show-cause notice to be served within three years of relevant date in cases where the tax had erroneously been refunded---Present matter involved the controversy, which was governed under provisions of S.36(2) of Sales Tax Act, 1990---Such action had to be taken within the period prescribed by law---When a period was provided by special statute, then any proceedings or actions taken under the provisions of special statute, had to be taken within the stipulated period---Reopening the case of assessee after the expiry of prescribed period of limitation was not justified in law.
Commissioner of Income Tax, Companies, Zone-IV, Karachi v. Hakim Ali Zardari 2006 PTD 271; Commissioner of Income Tax, Central Zone, Lahore v. Capt. (Retd.) Gohar Ayub Khan 1995 PTD 1074; Commissioner of Income Tax v. National Refinery Ltd. 2003 PTD 2020; Chanar Sugar Mills Ltd. and others v. Collector (Sales Tax) and others 2005 PTD 2139 and Assistant Collector of Customs AFU, Airport, Lahore v. Messrs Tripple-M (Pvt.) Ltd. 'through Managing Director and 4 others 2006 PTD 769 ref.
Muhammad Anwar for Appellant.
Syed Khalid Javed Bukhari for Respondent.
Muhammad Farooq Custom Inspector.
Date of hearing: 1st April, 2008.
JUDGMENT
SYED HAMID ALI SHAH, J.---Through this common judgment, Sales Tax Reference Nos.22 of 2006 and 23 of 2006 are being disposed of having common questions of law, arising out of the judgment of ITAT.
2. Petitioner (Messrs Joyla Sadat Cotton Industries, Shujabad Road, Jalalpur, Pirwala) applied for sales tax refund, which was allowed through Order-in-Original No.83 of 2001, dated 5-7-2001. During post refund audit scrutiny it was observed by the sales tax auditor that the petitioner has received excessive input tax refund and found the same recoverable from the petitioner. Thus, a show-cause notice No.3036 of 2004, dated 7-7-2004 was issued. Registered persons consumed electricity for making taxable (wholly exempt supplies) and input tax relating to the electricity consumed for making the supplies, which were not exempt supplies (oil cake and oil), was not found admissible for refund, while input tax pertaining to the goods used for making taxable and exempt supplies i.e. cotton lint and cotton seeds, were found to be apportioned. Basing reliance on C.B.R's. Notification, the refund, up to the maximum of 18 units per bale, was held admissible to the petitioner. Excess refund amount of Rs.1,24,230 was held erroneously sanctioned and paid and was recoverable under section 36(2) of the Sales Tax Act, 1990, along with additional tax under section 34 and penalties under section 33(2)(cc) of the Sales Tax Act, 1990.
Petitioner replied to the show-cause notice, but Adjudicating Officer, after hearing the parties, passed consolidated Orders-in-Original Nos.253 and 264 of 2005, dated 30-4-2005 and directed the petitioner to deposit Rs.1,24,230 along with additional tax. Petitioner assailed the orders in appeal before the Collector (Appeals), Customs, Sales Tax and Central Excise, Multan, which was dismissed vide order, dated 30-11-2005. The appeal filed by the petitioner before the Customs, Central Excise and Sales Tax Appellate Tribunal, was disposed of, upholding the decision of the Collector (Appeals) qua apportionment of the input tax, relating to the electricity consumed in the production of taxable and exempt goods only. The Tribunal, however, found no mala fide on the part of the petitioner, in respect of refund claimed and thus, imposition of additional tax, was waived. Hence this reference.
3. Learned counsel for the petitioner has vehemently argued that the impugned orders passed by the respondents are not legally sustainable as various Fora in the Hierarchy of Federal Board of Revenue, have ignored the question of limitation and provisions of section 36(2) of the Sales Tax Act, 1990 have been misinterpreted. Learned counsel has supported this contention by referring to the cases of "Commissioner of Income Tax, Companies, Zone-IV, Karachi v. Hakim Ali Zardari" 2006 PTD 271, "Commissioner of Income Tax, Central Zone, Lahore v. Capt. (Retd.) Gohar Ayub Khan" 1995 PTD 1074, "Commissioner of Income Tax v. National Refinery Ltd." 2003 PTD 2020, "Chanar Sugar Mills Ltd. and others v. Collector (Sales Tax) and others" 2005 PTD 2139 and "Assistant Collector of Customs AFU, Airport, Lahore v. Messrs Tripple-M (Pvt.) Ltd. through Managing Director and 4 others" 2006 PTD 769. Learned counsel has further submitted that show-cause notice was issued on 7-7-2004 while order-in-original was .passed on 5-3-2005. The period prescribed for passing the order-in-original, is ninety days from the date of show-cause notice and order-in-original passed, after the lapse of prescribed period, has no sanctity. Learned counsel has submitted that the case of refund, of the petitioner, pertains to the period from October, 2000 to April, 2001 and from November, 2001 to February, 2002. C.B.R's. instructions, as contained in Notification C No.1(3)/STR/2001, dated 18-2-2003 are not applicable to the case in hands.
4. Learned counsel for the revenue fully supported the impugned judgments and orders. He has submitted that case of the petitioner, falls under the provisions of section 45-A and section 36, which are not applicable to the case in hands. While referring to section 8 of the Sales Tax Act, 1990, it was contended that the petitioner was not entitled to refund or his claim of input tax, paid on the goods used or to be used for any purpose other than for the manufacture or production of taxable goods or for taxable supplies. He added that electricity consumed in the project of the petitioner, for making supplies like oil cake and cotton seeds oil, in the oil mill, was not admissible for refund, under the apportionment of input tax.
5. Heard learned counsel for the parties and record perused.
6. Order-in-Original No. 831 of 2001 was passed whereby sales tax refund amounting to Rs.2,99,287 was sanctioned to the petitioner vide order, dated 5-7-2001. Assistant Collector made a contravention case, against the petitioner and initiated proceedings, after issuing show-cause notice to the petitioner. The show cause was issued on 7-7-2004. Admittedly, the action against the petitioner was initiated, after the lapse of three years and two days. The provisions of section 36(2) of the Sales Tax Act, 1990, provide for a show-cause notice to be served within three years of the relevant date, in cases where the tax has erroneously been refunded. The show-cause notice, in the case in hands, was issued two days after the lapse of statutory period petitioner has agitated the matter before the Tribunal that Assistant Collector, Sales Tax (Audit) was not justified to re-open past and closed transactions and his contentions were recorded by the Tribunal at Sr. No.9 in para.3 of the impugned judgment. Learned Tribunal, while treating the issue of limitation, has failed to pass a speaking order. It cannot be ascertained from para. 9 of the impugned judgment that learned Tribunal has applied section 45-A or section 36(2) of the Sales Tax Act, 1990 to the case in hands. Section 36 is specific and covers those cases, wherein, by reasons of inadvertence, error or mis-construction, any tax has not been charged or levied or short-levied or has erroneously been refunded, show-cause notice can be served for payment of the amount specified in the notice regarding short-levy, erroneously charged or erroneously refunded. It has specifically been provided in subsection (2) that show-cause notice has to be served, within three years. The impugned action, under section 45-A, pertains to the departmental proceedings, calling in question the legality and propriety of any decision or order, by an Officer of the Sales Tax. The power to call for record, under section 45-A, vests with the Board, Collector or Collector (Adjudication). The period during which, the provisions of section 45-A can be invoked, is five years from the date of original order or decision.
7. To resolve the controversy in hands, it is to be seen as to which provision of law is applicable to the instant case. The impugned action, in the instant case, has been initiated by the Assistant Collector, Sales Tax (Audit), Multan. The impugned notice was issued by him and Order -in-Original Nos.253 and 264 of 2005, reflect that action against the petitioner was initiated invoking the provisions of section 36(2) of the Sales Tax Act, 1990, as is reflected from para.4 of order, dated 5-3-2005. Additionally, Officer of the Sales Tax, empowered in this respect, can take an action under section 36(2), while the proceedings under section 45-A can only be initiated by the Board, Collector or Collector (Adjudication). The impugned action had been taken by the Assistant Collector, therefore, it cannot be assumed that proceedings, against the petitioner, were commenced by invoking the provisions of section 36 of the Sales Tax Act, 1990. We, therefore, observe that instant matter involves the controversy, which is governed under the provisions of section 36(2) of the Sales Tax Act, 1990. Such action has to be taken within the period, prescribed by law. When a period is provided by a special statute, then any proceedings or actions taken under the provisions of special statute, has to be taken within the stipulated period. Re-opening the case of the petitioner, after the prescribed period of limitation, is not justified. The phrase "shall be served with a notice, within three years of the relevant date" conveys the intention of the legislature that show-cause notice and issuance of the same, within three years, is a mandatory requirement for an action under section 36(2) of the Act of 1990. The term `shall' used in subsection (2) ibid., makes the compliance of provision of law mandatory and there is no escape to it.
8. For what has been discussed above, we have no hesitation to answer questions Nos.2 and 3 in negative and declare that provisions of section 36, are applicable to the case in hands and provisions of subsection (3) are mandatory. In view of our findings on questions Nos.2 and 3, the other questions framed in this reference application, do not require any answer.
H.B.T./J-24/LOrder accordingly.