VS Zafar Iqbal, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2074 (2006)

2009 PTD (Trib.) 2074

[Income-tax Appellate Tribunal Pakistan]

Before Khalida Yasin, Mian Muhammad Hanif Tahir, Members Judicial and Zafar Iqbal, Member Technical

Sales Tax Appeals Nos. H-26, H-27, H-29, H-101, H-134, H-84, H-132, H-133, H-83, H-275, H-276, H-277, H-278, H-272, H-181, H-193 of 2005, H-160, H-161, H-250, H-159, H-187, H-214 of 2004 and H-106 of 2006; decided on 30/11/2006.

Per Zafar Iqbal, Member Technical, Mian Muhammad Tahir Member Judicial, agreeing--

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

----S. 36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Nineteen appeals out of - twenty three were allowed by the Appellate Tribunal on the short point that orders were barred by limitation---Validity---Order-in-Original had not been framed within the time specified in the proviso to S.36(3) of the Sales Tax Act, 1990 and Collector had also not given any extension of time as envisaged in the said proviso.

Pace International v. Secretary 2006 PTD 340, C.B.R. v. Pace International 2006 PTD 340; SS Oil Mills Ltd. v. Secretary GST 2005 CL 592; CST v. Hilal Tanneries PLD 1976 Lah. 655 and Nagina Silk Mills v. ITO PLD 1963 SC 322 rel.

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

----S. 36(3), proviso---Recovery of tax not levied or short-levied or erroneously refunded---Nature of the provisions, mandatory or directory---Period specified in the proviso to S.36(3) of the Sales Tax Act, 1990 and in analogous provisions of other statutes was mandatory and not directory in nature.

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

----S.36(3), proviso---Recovery of tax not levied or short-levied or erroneously refunded---Vague and defective show-cause notice---Show -cause notices were vague and defective for want of necessary particulars and the same had also not mentioned the subsection of S.36 of the Sales Tax Act, 1990 under which they had been issued.

Assistant Collector Customs v. Khyber Electric Lamps 2001 SCMR 838; Zamindara Paper and Board Mills (Pvt.) Ltd. v. Collector, Customs and Excise 2003 PTD 1257; D.G. Khan Cement Co. Ltd. v. Collector of Customs, Sales Tax and Central Excise 2003 PTD 1797; Atlas Tyre v. Additional Collector (Adjudication) 2003 PTD 1593 and Caltex Oil v. Collector, Central Excise 2005 PTD 480 rel.

Matiari Sugar Mills Ltd. and others v. Federation of Pakistan 2003 PTD 773; Mirpurkhas, Sugar Mills Ltd. and others (i.e. C.P. No. D-123 of 2001; Yousaf A. Mitha v. Aboo Baker PLD 1980 Karachi 492; Khalid Adamjee v. CIT 1983 PTD 246 and Amin Fabrics Ltd. v. CIT 1998 PLC (CS) 694 ref.

(d) Sales Tax Ruling---

----Adjudication before receiving contravention report---Validity---Sales Tax Ruling left no scintilla of doubt that after the same the adjudication officers could not conduct adjudications unless they first receive contravention reports by Executive Collectorates---Such contravention reports could not be issued by officers below the rank of Collector---Contention that such was only an internal procedure and could not be used by assessee/registered person hardly had any merit---Very nature of the text of Sales Tax Ruling so also its publication in the press confirmed that it was not meant only for internal use but other for regulation of jurisdiction.

Province of West Pakistan v. Din Muhammad PLD 1964 SC 21; Collector v. Muhammad Tasleem 2002 MLD 296; Rani v. CWT 1993 PTD 206; 1997 PTD (Trib.) 2209; Mustafa Prestressed Pipes v. CIT 1990 PTD 974; 1988 PTD (Trib.) 760; 1995 PTD (Trib.) 580; B.S. Industries v. Deputy Registrar PLD 1969 Dacca 451; Fayyaz H. Qadri v. Administrator Lahore PLD 1972 Lahore 316; Shahzad Ahmed Corporation v. FOP 2005 PTD 23; Zeb Traders v. FOP 2004 PTD 369; N.P. Water Proof v. FOP 2004 PTD 2952 and Indian and Eastern Newspaper Society v. CIT (1979) 119 ITR 996 ref.

(e) Sales Tax---

----Jurisdiction---Power vested in any authority could only be exercised by that authority, in default whereof, the entire action' would be without jurisdiction, void ab initio and of no legal effect.

Abida Rashid v. Secretary PLD 1995 Kar. 587 rel.

(f) Jurisdiction---

----Exercise of---Mandatory condition---Where the mandatory condition of exercise of jurisdiction by a Court, Tribunal or Authority was not fulfilled, then the entire proceedings would become illegal and all subsequent orders would be without jurisdiction.

Rashid Ahmad v. The State PLD 1972 SC 271 rel.

(g) Administration of justice---

---Method of performance---Where power was given to do a certain thing in a certain way, then that thing must be done in that way or not at all and all other methods of performance not so prescribed were necessarily forbidden.

(h) Sales Tax Ruling---

---After the Sales Tax Ruling all actions initiated by adjudication authorities, without contravention reports, or all actions initiated by adjudication authorities, upon contraventions reports given by officers below the rank of a Collector would be completely coram non judice. And void---Similar would be the outcome of all subsequent orders based upon such unlawful adjudication proceedings which were vacated for yet one more reason by the Appellate Tribunal.

Abida Rashid v. Secretary PLD 1995 Kar. 587; Rashid Ahmad v. The State PLD 1972 SC 271 and Abdul Razzaq v. Muhammad Sharif PLD 1997 Lah. 1 rel.

Province of West Pakistan v. Din Muhammad PLD 1964 SC 21 and Collector v. Muhammad Tasleem 2002 MLD 296 ref.

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

----Ss. 3(1A), 2(25) & 2(47)---Further tax---Conclusions drawn by the Appellate Tribunal from the judgment of Fatima Sugar Mills Ltd. GST 2003 CL 413.

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

----S.3(1A)---Further tax---Supplies to persons liable to be registered---Taxation of---Validity---Supplies were made by the registered persons to or through brokers/dealers, who were liable to be registered under the Sales Tax Act, 1990, as such the supplies of the appellants, which were in issue, did not attract S.3 (1A) of the Sales Tax Act, 1990.

Fatima Sugar Mills Ltd. v. Collector GST 2003 CL 413 rel.

Abdul Razzaq v. Muhammad Sahrif PLD 1997 Lahore 1; Caltex Oil v. Collector, Central Excise 2005 PTD 480; Waqas and Co. v. Customs, Excise and Sales Tax Appellate Tribunal 2003 PTD 2100, Phalia Sugar Mills Ltd. v. Collector Sales Tax Writ Petition No.21776 of 2001, decided by the Lahore High Court on 19-2-2002 and C.A. No.54/2002, dated 7-5-2003 ref.

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

---Ss. 3(1A) & 3(1)---Constitution of Pakistan (1973), Art.25---Further tax---Unverifiable sales---Where the sales for the purposes of S.3(1) of the Sales Tax Act, 1990 had been accepted to be verifiable, the stance of the department to term the same sales to be unverifiable, for the purposes of S.3(1A) of the Sales Tax Act, 1990, will be completely unwarranted, inconsistent and discriminatory and also violative of Art.25 of the Constitution---Payments received on account of sales were predominantly through account payee cheques' i.e. verifiable' parties---Unverifiability of sales could be no ground for their rejection or a warrant to apply S.3(1A) of the Sales Tax Act, 1990.

(l) Sales Tax---

----Market reality---Levy of sales tax---It is a market reality that a purchaser, who buys from a seller, may or may not leave his address or correct address or whereabouts with the seller, and the seller cannot force the purchaser in this regard except choose not to deal with him---In the context of income tax, and while keeping this market reality in the background unverifiability of sales or purchases had been held to be no ground to reject the trading results---Such market reality did not change for the levy of sales tax.

Ayenbee (Pvt.) Ltd. v. ITAT 2002 PTD 407 ref.

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

----S.3(1A)---Further tax---Unverifiability of sales---Levy of further tax--Validity---Statute did not specify unverifiability of sales to be a precondition for imposition of levy of further tax under S.3(1A) of the Sales Tax Act, 1990---Only condition necessary to warrant the application of S.3(1A) of the Sales Tax Act, 1990 was supplies to unregistered persons---Such supplies may or may not be verifiable---One may think of a myriad of situations where although sales may be verifiable, further tax under S.3(1A) of the Sales Tax Act, 1990 would be still leviable---Department in invoking S.3(1A) of the Sales Tax Act, 1990 in view of unverifiability of sales (though factually in these appeals sales are verifiable) had sought to introduce a condition extraneous to the statute, which renders the entire exercise to be a nullity---Unverifiability of sales was neither a condition nor a justification to warrant the application of S.3(1A) of the Sales Tax Act, 1990.

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

----Ss: 73 & 31(1A)---Certain transactions not admissible---Further tax---Unverifiability of sales---Section 73 of the Sales Tax Act, 1990 did not provide that if sales were unverifiable further tax under S.3(1A) of the Sales Tax Act, 1990 should be imposed---Section 73 of the Sales Tax Act, 1990 did not also require the supplies to be verifiable---No input adjustment was being claimed by the appellants in respect of the purchase price received for the final supplies---Application of S.73 of the Sales Tax Act, 1990 in circumstances was incorrectly mooted.

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

----Ss. 2(25) & 19---Registered person---Persons liable to be registered---Person was liable to be registered under the Sales Tax Act, 1990, but not actually registered, was to be construed as `registered person' since under S.2(25) of the Sales Tax Act, 1990 the definition of the term "registered person" included the persons actually registered and those who were liable to be registered---Such interpretation was also quite in line with the express provision contained in S.19 of the Sales Tax Act, 1990 whereby persons who were liable to be registered and not registered were deemed to have been registered from the date they became liable to be registered.

Fatima Sugar Mills Ltd. v. Collector GST 2003 CL 413 rel.

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

----Ss. 19 & 2(25)---Compulsory registration or enrollment---Persons liable to be registered---Supplies made to persons not actually registered, were to be construed as supplies made to registered persons since the purchasers even if not so registered were deemed to be registered under S.19 of the Sales Tax Act, 1990.

(q) Interpretation of statutes---

---Parliamentary debates---Legislation---Object and purpose---Although parliamentary debates may be inadmissible for construing a provision of a statute, "the speech made by the mover of the bill, explaining the reason for introducing the bill can be referred or the, purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted.

Elahi Cotton v. FOP PLD 1997 SC 582 and K.P. Varghese v. ITO (1981) 131 ITR 597(SC) rel.

Govt. of Pakistan v. Muhammad Ashraf PLD 1993 SC 176 and Northern Bottling Co. v. FOP 2004 PTD 2267 ref.

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

---S.3(1A)---Further tax---Section 3(1A) of the Sales Tax Act, 1990 is aimed at penalizing a registered person for dealing with an unregistered person.

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

---S.3(1A)---Further tax---Registered person, making the supplies, can hardly be blamed and then taxed for such default of other person, for which he was not responsible---Provision was unreasonably harsh and unjustly illogical.

(t) Interpretation of statutes---

----Repeal by the amending legislation was remedial .and curative in nature---All curative and remedial amending legislations are retrospective and apply to all pending proceedings, assessments and appeals.

CST v. Kruddsons Ltd. PLD 1974 SC 180; CIT v. Olympia 1987 PTD 739; CIT v. Shahnawaz Ltd. 1993 SCMR 73 and Dawood Cotton Mills v. CIT 2000 PTD 285 rel.

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

----S.3(1A)---Further tax---Repeal of S.3(1A) of the Sales Tax Act, 1990 vide Finance Act, 2004 being remedial and curative, retroactively applies to all the pending adjudications/assessments and appeals, which include the present pending appeals---Section 3(1A) of the Sales Tax Act, 1990 was to be construed as never having existed on the statute book but this was of course only for the purposes of the pending proceedings, assessments and appeals/references---Appeals were allowed by the Appellate Tribunal on this score as well and all the proceedings and orders were vacated on this ground too.

CST v. Kruddsons Ltd. PLD 1974 SC 180; CIT v. Olympia 1987 PTD 739; CIT v. Shahnawaz Ltd. 1993 SCMR 73 and Dawood Cotton Mills v. CIT 2000 PTD 285 rel.

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

---Ss. 34 & 33---Additional tax and penalties---No wilful default---No justification to impose any additional tax and penalty when there was no wilful default or mala fides on behalf of the appellants---Where the entire case was at best a matter of interpretation, penalty and additional tax were remitted by the Appellate Tribunal accordingly.

1990 PTD (Trib.) 1042; (1962) 46 JTR 1; (1974) 94 ITR 1; 1993 PTD (Trib.) 960/964; (1978) 114 ITR 19 and 1993 SCMR 662 ref.

D.G. Khan Cement Co. Ltd. and others v. FOP 2004 SCMR 456; Nestle Milk Pak Ltd. v. Additional Collector Adjudication Multan 2002 PTD (Trib.) 300; CST Faisalabad v. Coca Cola Beverages Pakistan Ltd., Faisalabad 2005 PTD 1984; CST v. Kashif Enterprises Faisalabad 2005 PTD 1978; CST Faisalabad v. Farooq Traders, Jhawarian 2005 PTD 1953; Millat Tractors Ltd., Lahore v. CST Lahore 2003 PTD 1445; and Ghandhara Nissan Diesel Ltd. v. Sales Tax Department and others 2004 PTD 2771 rel.

(w) Sales Tax---

---Show cause notice---Vacation of---Mere error in adding the figures on its own cannot be a ground to vacate the show cause notice.

(x) Sales Tax---

---Burden of proof rests on the alleger.

(y) Sales Tax---

---Double jeopardy---Show-cause 'notice---Demand envisaged in the show cause notice, Order-in-Original was deleted/vacated by the Appellate Tribunal on the ground of double jeopardy as the earlier demand for the same period was more than the demand covered by the present show-cause notice.

(z) Sales Tax---

----Adjustment of tax in the wrong period was to be condoned as no actual loss of revenue had occasioned---Orders of penalty and additional tax were also held to be without justification---Rulings of Central Board of Revenue were in line with the spirit of law and the irregular adjustment was condoned by the Appellate Tribunal and the show cause notice/Order-in-Original to such extent were vacated---Payment made by the appellant in this regard was liable to be refunded.

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

---S.34---Additional tax---Payment in instalments---Payment of additional tax under protext---Validity---Once the Central Board of Revenue had itself provided for payment of instalments of the amount, additional tax would be payable by the appellant and as such there could be no justification of any imposition of additional tax which was ordered by the Appellate Tribunal to be deleted.

Bawany Violine Textile v. CIT (1967) 15 Taxation 191 (Kar.) and CIT v. Sultan Sargodha Textile 1987 PTD 144 rel.

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

----Ss.33 & 73---Offences and penalties---Penalty was imposed by the adjudicating authority on two transactions/audit observations on the grounds that the same information was not produced at the original stage---Validity---Since it had been proved that the payments were made up by `account payee cheques', duly verified by the bank statements, there was no warrant to impose the penalty as no mala fides were attached on part of the appellant---Penalties were remitted by the Appellate Tribunal as the same was confirmed that even at the original stage information had been given by the appellant to the Department.

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

----S.7---S.R.O. 578(I)/98, dated 12-6-1998---Determination of tax liability---Input tax claimed on building material was treated as in violation of S.R.O. 578(I)/98, dated 12-6-1998---Validity---Since the input claim related to the construction items which were required to facilitate the manufacture of goods, which were the subject matter of taxable supplies, there was no violation of S.R.O. 578(I)/98, dated 12-6-1998---Input adjustment was held to be in order.

Sindh Alkalies Ltd. v. Collector of Customs, Sales Tax and Central Excise Appeals, Appeal No.11 of 2002 rel.

C.P. No.1477/99; 1992 PCr.LJ 1520 and Islamabad Tribunal in Appeals Nos.154 and 1555 of 2005, dated 28-11-2005 ref.

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

----S.7---Determination of tax liability---Input adjustment on telephone and electricity were disallowed on the grounds that the same pertained to expenses of Administration Office and not the Factory---Validity---Admittedly, the Administration in Office was situated in the Factory's premises and activities in the said office were part and parcel to the main activity and necessary for making 'the taxable supplies, disallowance was deleted by the Appellate Tribunal as well as additional tax in that regard---Payments made under the relevant head were directed to be refunded.

Sindh Alkalies Ltd. v. Collector of Customs, Sales Tax and Central Excise Appeals, Appeal No.11 of 2002 rel.

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

----S.34---Additional tax---Instalments---No justification to impose additional tax when instalments had been granted by the Central Board of Revenue.

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

----S.3---S.R.O.388(I)/2001, dated 18-6-2001---Scope of tax---Sale of scrap includes sale of iron---Contention of the appellant was that the sale of scrap was covered by normal law and 15% sales tax was payable thereon---Department contended that sales of scrap included sale of iron which carried rate of 20% under S.R.O. 388(I)/2001, dated 18-6-2001---Validity---Contention of the appellant was devoid of force and applying the rate given in the S.R.O.388(I)/2001, dated 18-6-2001, the stance of the department was sustained by the Tribunal---Order-in-Original and consequent demand to that extent were upheld---Demand already paid in that regard was not liable to be refunded.

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

----S.56---Service of order, decisions, etc.---Any show-cause notice without service on the registered person was a nullity in law and any order passed by the Additional Collector in pursuance of the said notice ab initio lacked in jurisdiction and lawful authority---Entire proceedings and the Order-in-Original were held to be nullity in law.

1967 PTD 189 rel.

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

---Ss. 73 & 3(1A)---Certain transactions not admissible-Demand towards violation of S.73 of the Sales Tax Act, 1990 was totally incorrect as in the context of further tax under S.3(1A) of the Sales Tax Act, 1990, S.73 of the Sales Tax Act, 1990 was totally irrelevant.

Per Khalida Yasin (Member Judicial) (Minority view)---

Interpretation of statues---

---Mandatory or directory statute---Principles---No hard and fast rule to determine whether a statute was mandatory or directory---Court was to decide which provision of law was mandatory and which was directory.

Interpretation of statutes---

----Mandatory or directory provisions---Distinction---There is no universal rule by which directory provisions may under all circumstance be distinguished from those which are mandatory.

Interpretation of statutes---

---Mandatory or directive provisions---Language affirmative in form indicates that the statute is supposed to be only directory or permissive while negative language implies a prohibitory, obligatory or mandatory provision.

Interpretation of statutes---

----Mandatory or directory provisions---Principles.

PLD 1974 SC 1341; PLD 2001 SC 4991; PLD 1979 SC(AJ&K); PLD 1978 Kar. 925 and PLD 1961 SC 145 1987 PLC 5931 ref.

State through DAG, Peshawar v. Panda Gul 1993 SCMR 311 rel.

Sales Tax Act (VII of 1990)---

---S.36(3), proviso---Income Tax Ordinance (XXXI of 1979), S.79(4)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Non-adherence of the proviso to S.36(3), Sales Tax Act, 1990---No consequences of non-adherence of the proviso to sub-section (3) of S.36 of the Sales Tax Act, 1990 had been laid down in the Act as compared to the provisions of S.79(4) of the Income Tax Ordinance, 1979---Neither there was anything in S.36 of the Sales Tax Act, 1990 itself or in the other provisions of the Sales Tax Act, 1990 that specify the consequence of nullification of the order of the adjudicating officer for non-compliance therewith, which was generally hallmark of the statutory provisions mandatory in character.

State through DAG, Peshawar v. Panda Gul 1993 SCMR 311 rel.

Customs Act (IV of1969)---

---S.l71---When seizure or arrest is made, reason in writing to be given-Mandatory or directory provisions---Principles--Provisions of S.171 of the Customs Act, 1969 were not mandatory since any consequence of nullification for non-compliance thereof were not given in the said section itself or elsewhere in the Custom Act, 1969 or Sales Tax Act, 1990.

State through DAG, Peshawar v. Panda Gul 1993 SCMR 311 rel.

Sales Tax Act (VII of 1990)---

----S.36(3), proviso---Constitution of Pakistan (1973), Art. 254---Customs Act (IV of 1969), S.194-B(1)---Limitation---Concept of time limit---Discussion in respect of mandatory and directory provisions.

Sales Tax Act (VII of 1990)---

----S.36(3) proviso. Mandatory or directory provisions---Provision of S.36(3) of the Sales Tax Act, 1990 was not mandatory but directory---Appellate Tribunal was not bound to follow the decision of Federal Tax Ombudsman which only deals with maladministration of Revenue Department---Federal Tax Ombudsman was not superior to Appellate Tribunal.

Sales Tax Act (VII of 1990)---

---S.36(3), proviso---Income Tax Ordinance (XXXI of 1979), S.59(4)---Recovery of tax not levied or short-levied or erroneously refunded---Analogy of, S.59(4) of the Income Tax Ordinance, 1979 could not be applied to the provision of subsection (3) of S.36 of the Sales Tax Act, 1990 as no such consequences had been given in S.36 of Sales Tax Act, 1990 in case of passing of adjudication order beyond the prescribed period of 90 days or extended period total being 180 days.

Pace International v. Secretary Revenue Division, Islamabad 2006 PTD 340 and The Commissioner of Sales Tax v. Hilal Tanneries PLD 1976 Lahore Page 655 not fol.

Nagina Silk Mills Lyallpur v. Income Tax Officer PLD 1963 SC 322 ref.

Sales Tax Act (VII of 1990)---

----S.32(2)---Delegation of powers---Under S.32(2) of the Sales Tax Act, 1990 the Collector may delegate its powers to any officers of the Sales Tax subordinate to him---News item in newspaper did not supersede the enactment---Collector could empower the Assistant Collector what was enjoyed by him, therefore, finding that contravention report sent by Assistant Collector was coram non judice and void was not correct.

Assistant Collector Customs v. Khyber Electric Lamps 2001 SCMR 838; Zamindara Paper and Board Mills (Pvt.) Ltd. v. Collector, Customs and Excise 2003 PTD 1257; D.G. Khan Cement Co. Ltd. v. Collector of Customs, Sales Tax and Central Excise 2003 PTD 1797; Atlas Tyre v. Additional Collector (Adjudication) 2003 PTD 1593 and Caltex Oil v. Collector, Central Excise 2005 PTD 480 ref.

Sales Tax (VII of 1990)---

----S.3(1A)---Further tax---Further tax was demanded because the sugar producing registered persons were selling the sugar to the unregistered persons who were' liable to be registered but were not registered, therefore, omission of writing subsection in the show cause notice was nth fatal as no prejudice was caused to the appellant and substantial compliance was made.

C.P. No.702-I of 2003 Collector of Sales Tax & CE Lahore v. Zamindara Paper and Board Mills 1992 PCr.LJ 1520 ref.

Sales Tax Act (VII of 1990)---

----S.3(1A), 23 & 73---Further tax---Tax invoices---Certain transactions not admissible---Appellant had not touched the point of violation of Ss.23 and 73 of the Sales Tax Act, 1990 Which were mentioned in the show cause notice that they had not provided particulars or proof of payment nor provided any proof regarding whether a registered person supplying the goods to another unregistered person liable to be registered, was required to issue Sales Tax invoice giving, the information as prescribed and to receive the sale proceedings in excess of Rs.50,000 through a negotiable instrument under Ss. 23 and 73. of the Sales Tax Act, 1990 respectively---Appellant had failed to prove that Sales Tax invoice as prescribed under S.23 of the Sales Tax Act, 1990 had been issued and the amount of sale proceeds were received through a negotiable instrument---Said persons were to give the names of the buyers and brokers with complete address and any evidence that these persons were actual buyers and their .turnover was higher than the minimum threshold prescribed for registration of these persons under the Sales Tax Act, 1990---Appellant had not charged further tax knowing the legal position in this regard.

Sales Tax Act (VII of 1990)---

----S.7---Determination of tax liability---Input tax adjustment---Electricity consumption---Where electricity consumed was not producing taxable supplies were chargeable to tax and input adjustment was not allowed---Lower forum had rightly disallowed the input adjustment on electricity consumed or non-production of taxable supplies.

Sales Tax Appeal No. 188 of 2005 Collector of Custom v. Sindh Fine Textile Mills decided on 21-11-2006; Appeal No.H-20/2006 in Messrs Salim Textile v. The Collector and Sales Tax Appeal No.K-140/2001, decided on 14-9-2005 rel.

Sales Tax Act (VII of 1990)---

----Ss.73 & 3(1A)---Certain transactions not admissible---Further tax---Scope.

Sales Tax Act (VII of 1990)---

----Ss. 3(1A), 23 & 73---Further tax---Tax invoices---Certain transactions not admissible---Appellant had not provided any tax invoices to prove that they had complied with S.23 of the Sales Tax Act, 1990 nor had not provided any bank statement showing that S.73 of Sales Tax Act, 1990 was complied with therefore, order in original was correct--Held, there was common issue of further Tax along with other issue, that Order-in-Original and show-cause notice was barred by time and without jurisdiction which was decided in favour of department---Further tax was payable in non-compliance of S.23 and S.73 of the Sales Tax Act, 1990.

Sales Tax---

----Limitation---Condonation of delay---No application for condonation had been filed nor even argued that point---Appeal was rejected as barred by time.

Sales Tax Act (VII of 1990)---

----S.3(1A)---Further tax---Retrospective effect---Section 3(1A) of the Sales Tax Act, 1990 had been abolished under the Finance Act, 2004, it could not be given retrospective effect; it will be effective from the date it was notified.

Per Mian Muhammad Hanif Tahir, Member Judicial, agreeing with Zafar Iqbal, Member Technical---Majority view---

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

----S.36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Member . Technical in 19 appeals out of 23 appeals had given his findings that the period specified in the proviso to S.36(3) of the Sales Tax Act, 1990 and in analogous provisions of other statutes were mandatory and not directory in nature---Chart available on the order-in-appeal showed the manner in which the order-in-original had become barred by limitation in this way finding given by the Member Technical was correct in holding that 19 appeals were barred by time.

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

----S.36(3)---Recovery of tax not levied or short-levied or erroneously refunded---Show cause notices were vague and defective as necessary particulars were not given such as non-mentioning of subsection of 36 of the Sales Tax Act, 1990 under which they had been issued.

Assistant Collector Customs v. Khyber Electric Lamps 2001 SCMR 838 and Caltex Oil v. Collector, Central Excise 2005 PTD 480 rel.

(kk) Sales Tax Rulings---

----Executive Collectorates would initially formulate a comprehensive contravention report on the basis of audit observations indicated in the audit reports compiled by Auditor General's office and this report should elaborate the violation, specific section and rules of the Sales Tax Act, 1990 which were not properly followed by the concerned units/persons, thereafter the Sales Tax Collector would submit the contravention report to the Adjudicating Officer, who would then issue show-cause notices to the concerned person within the specific period.

(ll) Sales Tax---

----Conduct of adjudications---Procedure---Adjudication officers could not conduct adjudications unless they first receive contravention reports by the Executive Collectorates and the ruling also showed that such contravention reports could not be issued by the officers below' the rank of a Collector.

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

----Ss. 3(1A) & 2(25)---Further tax---Application of---Section 3(1A) of the Sales Tax Act, 1990 was inapplicable where taxable supplies were made to registered persons---Term registered person, was defined in S.2(25) of the Sales Tax Act, 1990 which means a person registered or liable to be registered under Sales Tax Act, 1990---Any person who was liable to be registered under the Sales Tax Act, 1990, but was actually not registered was to be considered as a registered person---Persons who were liable to be registered under Sales Tax Act, 1990 were mentioned in S.14 of the Sales Tax Act, 1990---Where supplies were made to persons who were not actually registered but otherwise liable to be registered, the said supplies would have to be considered to have been made to registered persons under the Sales Tax Act, 1990 and for such transactions S.3(1A) of the Sales Tax Act, 1990 was totally inapplicable.

Civil Appeals Nos. 307 to 317 of 2001; 2573 to 2584 of 2001, dated 1-3-2006 and K.P. Varghese v. ITO (1981) 131 ITR 597(SC) ref.

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

----S.2(47)---`Wholesaler'---`Dealer'---Term "wholesaler" was defined in S.2(47) of the Sales Tax Act, 1990 which includes a `dealer'.

(oo) Sales Tax---

----Registered taxpayer could not be made responsible for any default of the department in failing to register the unregistered persons.

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

----S.3(1A)---Further tax---Supplies made by the registered persons to or through brokers/dealers, who were liable to be registered under the Sales Tax Act, 1990, did not attract S.3(1A) of the Sales Tax Act, 1990.

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

----Ss. 3(1) & 3(1A)---Constitution of Pakistan (1973), Art. 25---Scope of tax---Further tax---Unverifiability of the sales---Where the sales for the purposes of S.3(1) of the Sales Tax Act, 1990 had been accepted to be verifiable, the unverifiability of such sales for the purposes of S.3(1A) of the Sales Tax Act, 1990 will be completely unwarranted and discriminatory and against Article 25 of the Constitution.

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

----Ss. 73 & 3(1A)---Certain transactions not admissible---Further tax---Section 73 of the Sales Tax Act, 1990 deals with the eligibility to claim input adjustments only where the payments were made through a banking channel, was relevant---Said section did not say that if sales were unverifiable further tax under S.3(1A) of the Sales Tax Act, 1990 should be imposed and S.73 of the Sales Tax Act, 1990 did not require the supplies to be verifiable---Application of S.73 of the Sales Tax Act, 1990 was not correct in circumstances.

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

----Ss. 19 & 3(1A)---Compulsory registration or enrollment---Further tax---Supplies made to the persons not actually registered, were to be construed as supplies made to registered persons as the purchasers even if not so registered, were, deemed to be registered under S. 19 of the Sales Tax Act, 1990.

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

----S.3(1A)---Further fax-Repeal of S.3(1A) of the Sales Tax Act, 1990 was remedial and curative in nature and as such it will apply to all pending proceedings, assessments and appeals.

Muhammad Naseem, Ms. Danish Zubairi and S. Hammad Raza for Appellants.

Nadeem Memon, Assistant Collector for Respondents.

ORDER

This order will dispose of Sales Tax Appeals Nos. 11-159, 11-160, H-161,11-187, H-214 & H-250 of 2004, H-26, H-27, H-29, 11-83, H-84, 11-101, 11-132, H-133, H-134, 11-181, 11-193, H-272, H-275, 11-276, H-277 & H-278 of 2005 and H-106 of 2006, as all these appeals arise out of identical facts and involve common question of law.

However, Appeals Nos. 14-132/05, H-159/04, H-187/04, H-133/05, H-84/05, H-106/06 and H-181/05 have been discussed in para. 16 as these appeals have certain different characters. Out of these appeals, the following appeals have been remanded by the High Court of Sindh, Karachi, for reconsideration since in the earlier round of litigation all the grounds and arguments raised had not been decided by the Tribunal:--

(i) Messrs Al-Noor Sugar Mills Ltd.	H-160/04
(ii) Messrs Al-Noor Sugar Mills Ltd.	H-161/04
(iii) Messrs Al-Noor Sugar Mills Ltd.	11-250/04
(iv) Messrs Shahmurad Sugar Mills Ltd.	H-159/04.
(v) Messrs Shahmurad Sugar Mills Ltd.	H-187/04

2. In all these 23 appeals the facts have been sworn through affidavits. The respondents have not furnished any counter affidavit whatsoever. The appeals were argued a number of times and finally the appeals were argued on 24-8-2006 and orders reserved thereon.

3. The learned counsel appearing for the appellants in 21, appeals (except Messrs Digri Sugar Mills Limited and Messrs Ranipur Sugar Mills Limited) raised the following propositions:--

(a)(i) the orders-in-original in 18 out of 21 appeals are barred by the limitation prescribed under the proviso to section 36(3) of the Sales Tax Act, 1990 (hereafter: the "1990 Act"). It was further submitted that in none of the 18 appeals in question any extension of time was granted by the learned Collector as envisaged in the proviso to section 36(3). The learned counsel has submitted the following chart to establish the manner in which orders-in-original in 18 out of 21 appeals become barred by limitation:---

S. No.	Appellant's Name	Sales Tax Appeal No.	Order- in- Original No.	Dated	Show cause dated	Time barred by proviso to section 36(3)
1.	Messrs Matiari Sugar Mills Ltd.	H-26/2005	08-2004	22-12-2004	09-02-2002	955 days
2.	Messrs Matiari Sugar Mills Ltd.	H-27/2005	01/2005	07-01-2005	09-03-2004	148 days
3.	Messrs Matiari Sugar Mills Ltd.	H-29/2005	03/2005	07-01-2005	06-06-2003	486 days
4.	Messrs Matiari Sugar Mills Ltd.	H-01/2005	10/2005	24-03-2005	06-06-203	563 days
5.	Messrs Matiari Sugar Mills Ltd.	H-134/2005	33/2005	16-03-2005	28-10-204	135 days'
6.	Messrs Al-Noor Sugar Mills Ltd.	H-160/2004	47/2004	31-5-2004	30-12-2003	61 days
7.	Messrs Al-Noor Sugar Mills Ltd.	H-161/2004	47/2004	31-05-2004	13-01-2004	30 days\
8.	Messrs Al-Noor Sugar Mills Ltd.	H-250/2004	84/2004	31-05-2004	24-04-2004	07 days
9.	Messrs Al-Noor Sugar Mills Ltd.	H-84/2005	06/2005	28-04-2005	18-12-2003	406 days
10.	Messrs Al-Noor Sugar Mills Ltd.	H-132/2005	29/2005	22-06-2005	06-06-2003	656 days
11.	Messrs Al-Noor Sugar Mills Ltd.	H-133/2005	09/2004	17-06-2005	10-07-2004,	247 days
12.	Messrs Al-Noor Sugar Mills Ltd.	H-275/2005	111/2005	14-04-2005	07-04-2005	In time
13.	Messrs Shahmurad Sugar Mills Ltd.	H-159/2004	51/2004	31-05-2004	16-03-2004	In time
14.	Messrs Shahmurad Sugar Mills Ltd.	H-187/2004	60/2004	28-06-2004	14-01-2004	65 days
15.	Messrs Shahmurad Sugar Mills Ltd.	H-83/2005	08/2005	30-04-2005	09-03-2004	320 days
16.	Messrs Shahmurad Sugar Mills Ltd.	H-276/2005	111/2005	14-04-2005	07-04-2005	In time
17.	Messrs Shahmurad Sugar Mills Ltd.	H-277/2005	306/2005	10-6-2005	31-07-2004	249 days
18.	Messrs Shahmurad Sugar Mills Ltd.	H-278/2005	307/2005	10-06-2005	31-07-2004	249 days
19.	Messrs Mipur- khas Sugar Mills Ltd.	H-272/2005	13/2002	10-04-2002	23-05-2001	227 days
20.	Messrs Seri Sugar Mills Ltd.	H-181/2005	18/2005	17-06-2005	09-02-2004	403 days
21.	Messrs Seri Sugar Mills Ltd.	H-106/2005	15/2005	23-05-2006	Not served	At least 300 days
.22.	Messrs Digri Sugar Mills Ltd.	H-193/2005	40/2005	27-06-2005	15-05-2001	1457 days
23.	Messrs Ranipur Sugar Mills Ltd.	H-214/2004	60/2004	30-06-2004	28-04-2004	In time

(a) in support of his contention on the touchstone of time bar the learned counsel has placed reliance on Pace International v. Secretary 2006 PTD 340, C.B.R. v. Pace International 2006 PTD 340, SS Oil Mills Ltd.. v. Secretary GST 2005 CL 592, CST v. Hilal Tanneries PLD 1976 Lah. 655 and Nagina Silk Mills v. ITO PLD 1963 SC 322;

(b) the very show cause notices and the orders-in-original are illegal and liable to be annulled because the same are in violation of law as interpreted by the Sindh High Court in the cases of Matiari Sugar Mills Ltd. and others v. Federation of Pakistan reported as 2003 PTD 77 and Mirpurkhas, Sugar Mills Ltd. and others (i.e. C.P. No. D-123 of 2001 and others).

According to the learned counsel despite pendency of the leave to appeal granted by the Honourable Supreme Court and suspension of the orders of the High Court (i.e. in the cases of Matiari and Mirpurkhas Sugar Mills Ltd., just referred), the opinion expressed by the High Court was binding upon the authorities below in view of principles initiated in Yousaf A. Mitha v. Aboo Baker PLD 1980 Karachi 492, Khalid Adamjee v. CIT 1983 PTD 246 and Amin Fabrics Ltd. v. CIT 1998 PLC (CS) 694. It is further contended that the final order' of the Supreme Court in this regard was, dated 1-3-2006 and all the show cause notices and orders-in-original before such date, which were in violation of the orders of the High Court in the cases of Matiari and Mirpurkhas Sugar Mills Ltd., were ipso facto void ab initio;

(c) furthermore, the proceedings pertaining to section 3(1A) were stayed by the Central Board of Revenue (C.B.R.) vide its letter bearing C.No.2(2)SS(Legal)/2001, dated 1-4-2002 till the finalization of the appeals before the Supreme Court. The issuance of show-cause notices and the passing of the orders was an illegal act as the respondent violated the stay granted by the C.B.R., the act also violated section 72 of the 1990 Act and were ab initio devoid of lawful jurisdiction;

(d) after the Sales Tax Ruling of C.B.R. published in the Business Recorded, dated 31-10-2001, no proceedings could be initiated by the Adjudication Collectorate in the absence of contravention reports by the Executive Collectorates. In those appeals where the show-cause notices were initiated after the said Sales Tax Ruling appearing in the Business Recorder, at the behest of the Adjudication Collectorates without a contravention report by the Executive Collectorates, the entire exercise was completely without jurisdiction; and this further meant that all the subsequent orders passed upon the unlawful notices were also completely without jurisdiction;

(e) on the strength of the Sales Tax Ruling appearing in the Business Recorder, dated 31-10-2001, the power to recommend the case for adjudication vested in the Executive Collector alone and any recommendations by an officer below the rank of the Collector ought to have been refused and rejected by the Adjudication Collectorate. The actions initiated by the Adjudication Collectorate upon the recommendations of others below the rank of the Executive Collectors were totally void. On the binding nature of the Sales Tax Ruling, reference is invited to Province of West Pakistan v. Din Muhammad PLD 1964 SC 21 and Collector v, Muhammad Tasleem 2002 MLD 296;

(f) the reports or contravention reports by officers of the Executive Collecotrate (i.e. below the Collectors' rank), recommending initiation of action by the Adjudication Collecorate were illegal, no notices were issued prior to the formulation of the said reports or recommendations. In respect of all the appeals the contravention reports, if any, were never confronted to the appellants. As such the entire exercise is in breach of natural justice and void;

(g) in respect of the actions which were taken upon some audit reports, it is submitted that the appeals were never confronted with the charges. Furthermore, in most of the 'cases no show-cause notice or hearing was given or conducted before the finalization of the audit reports. As such the entire action is also in breach of natural justice;

(h) it was further argued that the entire procedure adopted in the audit, preparation of the contravention reports so also the adjudication proceedings were against the Qanoon-e-Shahadat Order, 1984, which were applicable to such proceedings. In this regard reliance was placed on Rani v. CWT 1993 PTD 206 and 1997 PTD (Trib.) 2209;

(i) the powers of audit available under the 1990 Act are specified in sections 32-A and 32-AA thereof. The first power pertains to audit by a firm of Chartered Accountants/Cost Accountants, however, the same is only subject to the sanction of the C.B.R. The second power of audit is in relation to retailers. It is' submitted that none of the appellants are retailers, hence the power under section 32-AA was not available for the purposes of audit, while no sanction by the C.B.R. was available and in fact no Chartered Accountants/Cost Accountants were appointed under section 32-A for the purposes of conducting the audit. As such all the so-called audits, upon which the show-cause notices and orders-in-original are based, are void ab intio and of no legal effect;

(j) it is further contended by the learned counsel for the appellants that the power of audit envisaged under section 25 of the 1990 Act has also been abused in the present cases. It is submitted that the said section 25 relates to access to records and documents, which could be obtained by an officer of sales tax. Under section 25(2) an officer of sales tax may conduct an audit but only where there is any information or sufficient evidence of tax fraud or evasion of tax, the Collector may authorize an officer not below the rank of Assistant Collector to conduct inquiry/investigation under section 38. Collaterally, under section 25(3) it is an Assistant Collector (Audit) who is empowered to issue audit observations. In the present cases the audit observations/reports having been issued by auditors without any written permission of the Collector were on their very face illegal and rendered all subsequent actions void. Also it is submitted that no audit could have been conducted by an officer below the rank of Assistant Collector under section 25(2), while under section 25(3) the audits could only be performed by the Assistant Collector (Audit), which were not done;

(k) the learned adjudication authorities have relied upon the, audit observations/reports so also contravention reports in a mechanical manner, without any independent application of mind, which renders the entire exercise to be completely without jurisdiction. In this regard the learned counsel has. placed reliance upon Mustafa Prestressed Pipes v. CIT 1990 PTD 974, 1988 PTD (Trib.) 760, 1995 PTD (Trib,) 580, B.S. Industries v. Deputy Registrar PLD 1969 Dacca 451, Fayyaz H. Qadri v. Administrator 'Lahore PLD 1972 Lahore 316, Shahzad Ahmed Corporation v. FOP 2005 PTD 23, Zeb Traders v. FOP, 2004 PTD 369, N.P. Water Proof v. FOP 2004 PTD 2952 and Indian and Eastern Newspaper Society v. CIT (1979) 119 ITR 996;

(l) the very show-cause notices are illegal and without jurisdiction since the same having been issued under section 36 of the 1990 Act are vague for want of necessary particulars. The said show-cause notices also do not mention as to which category of section 36 the cases fall under. Reliance in this regard is placed on Assistant Collector Customs v. Khyber Electric Lamps 2001 SCMR 838; Zamindara Paper and Board Mills (Pvt.) Ltd. v. Collector, Customs and Excise 2003 PTD 1257; D.G. Khan Cement Co. Ltd. v. Collector of Customs, Sales Tax and Central Excise 2003 PTD 1797; Atlas Tyre v. Additional Collector (Adjudication) 2003 PTD 1593 and Caltex Oil v. Collector, Central Excise 2005 PTD 480;

(m) it is also contended that the levy under section 3(1A) is only imposed where supplies are not made to registered persons. The term "registered person" is defined under section 2(25) to mean persons registered or liable to be registered under the 1990 Act. It is submitted that all supplies in the present cases have been made to persons either actually registered or liable to be registered under the 1990 Act, hence all supplies are to be construed as having been made to registered persons, which would thus not attract the levy of section 3(1A). In this respect reliance is placed on Matiari Sugar Mills Ltd. v. FOP 2003 PTD 773, Mirpurkhas Sugar Mills and others v. FOP CP No. D-123 of 2001 and others (unreported), Bilal and Co. v. Appellate Tribunal 2004 PTD 557, Waqas and Co. v. Customs, Excise and Sales Tax Appellate Tribunal 2003 PTD 2100, Phalia Sugar Mills Ltd. v. Collector Sales Tax Writ Petition No.21776 of 2001, decided by the Lahore High Court on 19-2-2002; C.A. No.54/2002, dated 7-5-2003, decided by the Multan Bench of the Lahore High Court and Fatima Sugar Mills Ltd. v. Collector GST 2003 CL 413 and the order of the Honorable Supreme Court in the case of Matiari Sugar Mills Ltd. and others, dated 1-3-2006;

(n) it is not in controversy that sales have been made mostly through cheques:

(i) to verifiable parties;

(ii) and if some parties have not given their detailed addresses the sales have been made through verifiable brokers who are liable to registration under section 2(47) of 1990 Act;

(iii) if the registration had not been obtained by those liable to registration the department ought to have compulsorily registered them under section 19 which was available until the Finance Act, 2004 and ought to have imposed penalties for failure to obtain registration;

(iv) in not registering the purchases compulsorily under the 1990 Act, the department itself is at fault and the appellants who have paid their full tax liability are being made escape goats for no fault of their own;

(o) the approach of the department is inconsistent. The sales have been accepted for the purposes of section 3(1A) of the 1990 Act and parties found verifiable. However, these very sales and the parties are questioned as unverifiable in the context of section 3(1A);

(p) the appellants have not collected any tax and passed on the burden to the end consumers .in relation to the tax under section 3(1A) since genuinely they did not believe to be so liable. The belief on the part of the appellants is further supported by the very many orders passed by the various High Courts in their respective benches in Karachi, Lahore and Peshawar. Even the Honorable Supreme Court while passing the order, dated 1-3-2006 did not give any finding on the interpretation of section 3(1A). As such any attempt to collect tax from the appellants would be confiscatory and expropriatory in nature. In this regard reliance is placed upon Govt. of Pakistan v. Muhammad Ashraf PLD 1993 SC 176, Elahi Cotton v. FOP PLD 1997 SC 582 and Northern Bottling Co. v. FOP 2004 PTD 2267;

(q) the appellant stated that the` amendment made in the Sales Tax Act, 1990 with the Finance Act, 2004 whereby section 3(1A) of the 1990 Act has been removed from the statute book. The nature of the provision as amended has been highlighted by the Finance Minister in his budget speech which reads as under:--

"(127) Abolishing further tax of 3%----In order to remove a major trade distorting measure, it is proposed to abolish further tax, as it was an important factor in giving rise to "flying invoices' which subsequently contributed to inadmissible refund payments. Though, this levy contributes approximately Rs.9 billion annually its removal will encourage growth in textiles, steel, chemical, cement, beverage and a wide range of consumer items which would be freed from this additional burden. Moreover, it will directly contribute in reducing inadmissible refund claims and payments."

Sugar is a commodity for use of common man including children and there was a great hue and cry on section 3(1A) of the 1990 Act. In the words of the Finance Minister, reproduced above, the repealing amendment is absolutely remedial in nature. Accordingly, the amendment will apply to all the proceedings in the assessments and/or appeals which were pending at the time of the repeal. It is submitted that the legal principle of remedial and curative legislation has been approved by the authoritative judgments and legal treatises in particular in CST v. Kruddsons Ltd. PLD 1974 SC 180, CIT V. Olympia 1987 PTD 739, CIT v. Shahnawaz Ltd. 1993 SCMR 73 and Dawood Cotton Mills v. CIT 2000 PTD 285;

(r) it was next submitted that all the appeals are supported by affidavits and in none of the cases any counter affidavit has been filed by the respondents. The facts submitted by the appellants are therefore not capable of being held in dispute. Reliance in this respect is placed on 1990 PTD (Trib.) 1042, (1962) 46 ITR 1, (1974) 94 ITR 1, 1993 PTD (Trib.) 960/964, (1978) 114 ITR 19 and 1993 SCMR 662;

(s) penalty and additional tax have been proposed without any reasons or proof of independent mens rea. There are no mala fides, wilful or contumacious default. No penalty or additional tax could be imposed on the recommendation of an auditor or Assistant Collector on any alleged default. The matter being of interpretation, no penalty/additional tax can be levied. Reliance is placed on D.G. Khan Cement Co. Ltd. and others v. FOP 2004 SCMR 456, Nestle Milk Pak Ltd. v. Additional Collector Adjudication Multan 2002 PTD (Trib.) 300, CST Faisalabad v. Coca Cola Beverages Pakistan Ltd., Faisalabad 2005 PTD 1984, CST v. Kashif Enterprises, Faisalabad 2005 PTD 1978, CST Faisalabad v. Farooq Traders, Jhawarian 2005 PTD 1953, Millat Tractors Ltd., Lahore v. CST Lahore 2003 PTD 1445, Ghandhara Nissan Diesel Ltd. v. Sales Tax Department and others 2004 PTD 2771.

4. Ms. Danish Zubairi, Advocate, arguing the appeal of Messrs Digri Sugar Mills Ltd., adopted the detailed arguments of Mr. Muhammad Naseem, Advocate as listed above and further submitted as under:

(a) that in the appeal addressed by her the order-in-original was barred by statutory limitation;

(b) that even after the amendment of section 2(25) of the 1990 Act in 2002 a purchaser who is liable to registration would not cease to remain a "registered person".

5. Mr. Nadeem Memon, Assistant Collector arguing as departmental representative submitted as under:--

(a) the limitation prescribed in the proviso to section 36(3) of 1990 Act was not mandatory but directory in nature;

(b) the C.B.R.'s restrictions in imposing a ban on framing order-in-originals seems to have expired when in the year, 2002 there was an amendment in section 2(25) of 1990 Act in the definition of "registered person";

(c) the press note of the C.B.R. appearing in the Business Recorder, dated 31-10-2001 was restricted for departmental use and the appellants could not employ the said orders as notification for jurisdiction. Besides, there was no embargo restricting the Assistant Collectors from making a reference to the adjudication authority;

(d) the auditors had exercised authority under section 25 of the 1990 Act and reference to section 32A or 32AA is not relevant. The power to audit was not restricted to retailers. It was also not necessary to obtain Collector's permission since it was a routine audit;

(e) the show-cause notices, were correctly and properly issued under section 36 of the 1990 Act;

(f) the departmental representative denied that there ,was any violation of the Qanun-e-Shahadat Order, 1984 or any lack of application of mind on the part of the adjudication authority;

(g) it was also contended that sections 2(25) and 3(1A) have been correctly interpreted. The learned departmental representative referred to the judgment of the Supreme Court of Pakistan contained in Civil Appeals Nos. 307 to 317 of 2001 and 2573 to 2584 of 2001, dated 1-3-2006, whereby the judgments in writ petitions of the Karachi High Court were set aside;

(h) it is also contended that the direct purchasers or brokers were bearing no registration certificates, thus they had to be treated as unregistered purchasers. And in that there was nothing wrong in the treatment given by authorities below It is also submitted that there is no inconsistency in disputing parties in respect of tax under section 3(1A) while these had been accepted for section 3(1) of 1990 Act;

(i) whether the amendment in 2004 by way of withdrawal of section 3(1A) from the statute book was "remedial and curative" has to be decided by the Tribunal and Superior Courts. The adjudication authorities only invoked the same since in the year concerned it was available in the 1990 Act;

(j) it was submitted that the department's reply is submitted on the basis of record and filing of a counter-affidavit was not necessary;

(k) it was also submitted that since the default was there, the provisions of penalty and additional tax have been correctly invoked.

6. Rival parties have been heard and case records perused. The contention of the learned counsel for the appellants that the impugned orders are barred by limitation carries great force. The orders/judgments cited by the learned counsel which appeared in Para. 3(a)(ii) above are direct authorities on the point. In the present appeals, 19 out of 23 appeals can be allowed on the short point that the impugned orders are barred by limitation. The impugned orders-in-original have not been framed within the time specified in the proviso to section 36(3) of 1990 Act. Also admittedly the Collector has not given any extension of time as envisaged in the said proviso. The orders relied upon by the learned counsel of the appellants are authored by the learned Federal Tax Ombudsman, the President of Pakistan, so also the Lahore High Court and the Honorable Supreme Court. Respectfully these decisions have held that the period specified in the proviso to section 36(3) of the 1990 Act and in analogous provisions of other statutes are mandatory and not directory in nature.

7. Apart from the limitation issue, the show-cause notices in question are not in keeping with the principles enunciated by the Honorable Supreme Court in the, case of Khyber Lamps (2001. SCMR 838) which view has been reinforced by the Supreme Court in the case of Caltex Oil (2005 PTD 480). In the present case the show-cause notices are vague and defective for want of necessary particulars. The show-cause notices do not mention the subsection of section 36 under which they have been issued. There is no allegation of collusion and deliberate act either. Various authorities cited by learned counsel for the appellants and appearing in Para. 2(1) are relevant here.

8. The objection of the learned counsel for the appellants on the score that the Sales Tax Ruling published in the Business Recorder, dated 31-10-2001 has been violated, also carries great force. In order to appreciate this argument it will be imperative to underscore the said Sales Tax Ruling which is reproduced as follows:--

"....The Central Board of Revenue (C.B.R.) has curtailed the discretionary powers of the Collectors of Adjudication by restraining them not to directly issue show-cause notices to the taxpayers on the basis of audit reports.

The Collectorates of Adjudication would only issue such notices after receiving contravention reports from the tax collectors pertaining to violations committed by taxpayers or tax officials as per audit reports.

The sales tax department has notified this decision through a ruling issued here on Tuesday.

According to the new procedure, the Executive Collectorates would initially formulate a comprehensive contravention report on the basis of audit observations indicated in the audit reports compiled by Auditor General's office. This report should clearly elaborate the violation and specific section and rules of Sales Tax Act, 1990, which were not properly followed by the concerned person. The Collector of sales tax would submit the contravention report to the Adjudicating Officer, who would then issue show cause notices to the relevant person within the specific time period.

Presently, the adjudicating authorities were unclear about the issuance of show-cause notices on the irregularities pointed out in the audit reports.

The C.B.R. has directed all collectors of sales tax to submit the contravention reports to the concerned Collectorate of Adjudication for the issuance of notices to particular audit paras.

The tax authorities were of the view that the audit reports give a general perception of the irregularities, which should be processed by the Executive Collectorates before initiating any legal action against the taxpayers."

9. The above Sales Tax Ruling leaves no scintilla of doubt that after the same the adjudication officers cannot conduct adjudications unless they first receive contravention reports by Executive Collectorates. Also it is pretty clear from the wordings of the Sales Tax Ruling that such contravention reports cannot be issued by officers below the rank of a Collector. The argument of the learned departmental representative that this is only an internal procedure and cannot be used by assesses/registered persons hardly has any merit. The very nature of the text of the Sales Tax Ruling so also its publication in the press confirms that it is not meant only for internal use but other for regulation of jurisdiction. In Abida Rashid v. Secretary PLD 1995 Karachi 587, it was held that the power vested in any authority can only be exercised by that authority, in default whereof, the entire action would be without jurisdiction, void ab initio and of no legal effect. In Rashid Ahmad v. The State PLD 1972 SC 271, it was held that where the mandatory condition of exercise of jurisdiction by a Court, Tribunal or Authority was not fulfilled, then the entire, proceedings would become illegal and all subsequent orders would be without jurisdiction. This was a case where the sanction for prosecution was not granted by the prescribed authority and it was held that all subsequent actions including cognizance by the Judge were without jurisdiction. On this score the entire action and the series of orders were annulled. Equally in Abdul Razzaq v. Muhammad Sharif PLD 1997 Lahore 1, it has been held that where power is given to do a certain thing in a certain way, 'then that thing must be done in that way or not at all and all .other methods of performance not so prescribed are necessarily forbidden. The series of authorities just referred on the point sufficiently clinch issue. The Sales Tax Ruling, which is published in the Business Recorded, dated 31-10-2001, has not been factually disputed by the learned departmental representative. It is not the case of the department that such a Sales Tax Ruling does not exist. In the wake of such a factual position we have no other option but to apply the series of binding precedents as cited above which would mean that after the said Sales Tax Ruling all actions initiated by adjudication authorities, without contravention reports, or all actions initiated by the adjudication authorities, upon contraventions reports given by officers below the rank of a Collector would be completely coram non judice and void. Similar would be the out come of all subsequent orders based upon such unlawful adjudication proceedings which are thus vacated for yet one more reason.

10. On merits also the department seems to have no case since the entire issue is not fully covered by a decision of the Full Bench of this Tribunal which is reported as Fatima Sugar Mills Ltd. v. Collector Sales Tax GST 2003 CL 413. Before discussing the judgment of the Full Bench of this Tribunal it will be pertinent to briefly narrate the background of the controversy. Some of the petitioners, who are, appellants here, had called into question the constitutionality/vires of section 3(1A) of 1990 Act before the Sindh High Court at Karachi. When the matter was being -argued, the petitioners before the Sindh High Court dropped the plea of vires of the legislation and sought an inter pretation from the Sindh High Court with regards the applicability of section 3(1A). The Sindh High Court in its judgment which is reported as Matiari Sugar Mills Ltd. v. FOP 2003 PTD 773 offered certain interpretation. The judgment in the case Matiari Sugar Mills Ltd. and others was followed by another Bench of the Sindh High Court i.e. in the cases of Mirpurkhas Sugar Mills Ltd. and others i.e. CP D-123/2001 -and others. Against both the orders i.e., Matiari Sugar Mills Ltd. and others and Mirpurkhas Sugar Mills Ltd., and others the respondents preferred Civil Petitions for leave to appeal before the learned apex Court. The Supreme Court while granting leave to appeal suspended the operation of the impugned orders of the High Court. It is important to point to that while granting leave to appeal the main issue before the apex Court was non-availing of alternate remedies. When the appeals before the Supreme Court were still pending, the Full Bench of this Tribunal was called upon to interpret section 3(1A) of the 1990 Act in the Fatima Sugar Mills Ltd., case (cited supra). In the Fatima Sugar Mills Ltd., case this Tribunal took cognizance of the judgments of the Sindh High Court so also the leave granting orders by the Honorable Supreme Court. However, the Tribunal interpreted the relevant sections, which are mooted herein, irrespective of the opinion expressed by the Sindh High Court. In the said Fatima Sugar Mills Ltd., case the conclusions reached by this Tribunal are underscored as follows:--

(a) section 3(1a) was inapplicable where taxable supplies were made to registered persons;

(b) the term "registered person" was defined in section 2(25) of the 1990 Act to mean a person registered or liable to be registered under the Act;

(c) therefore any person who was liable to be registered under the Act, but was actually not registered, was to be considered as a registered person. And those persons who were liable to be registered under the 1990 Act, were mentioned in section 14;

(d) therefore where supplies were made to persons who were not actually registered but otherwise liable to be registered, the said supplies would have to be considered to have been made to registered persons under the Act and for such transactions section 3(1A) was totally inapplicable;

(e) as regards supplies made to wholesalers it was also observed that the term "wholesaler" was defined in section 2(47) of 1990 Act, which included a dealer. The relevant observations in this regard in the Fatima Sugar Mills case (cited supra) are reproduced herein below:--

"(15). A perusal of the above would show that as per section 2(47) a wholesaler includes a dealer and, inter alia, means any person who carries on the lousiness of wholesale, supply or distribution of; foods, directly or indirectly by wholesale for cash, deferred payment or for commission, as such where supplies are made to or through dealers/brokers who charge commission, the said transaction would fall within the eventuality defined by section 2(47) i.e. being a wholesale transaction. Section 14(iv) of the 1990 Act enlist wholesalers, dealers and distributors to be persons who are liable to be registered under the Act. Thus a wholesaler, dealer, and distributor to or through whom supplies are made directly/ indirectly or through commission would constitute to be a person liable to be registered and would fall within the scope of a "registered person" as defined in section 2(25) of the 1990 Act.

For such transactions section 3(1A) of would not be applicable, being supplies made to registered persons."

(f) on further analysis it was also held that the amendments made to section 2(25) of 1990 Act in 2002 also did not make any difference to the above interpretation;

(g) it was also pointed out that the department should not be complacent and should try its level best to broaden the tax base and register the unregistered persons. It is important that the registered taxpayer could not be made responsible for any default of the department in failing to register the unregistered persons.

11. The above judgment of the Full Bench of the Tribunal i.e. in Fatima Sugar Mills case, is fully applicable to the present appeals. The supplies in the present case are made by the registered persons to or through brokers/dealers, who are liable to be registered under the Act. As such the supplies of the appellants, which are in issue, do not attract section 3(1A). The department's stance in respect of unverifiability of the sales is equally misconceived. Firstly, the dealers in the present case i.e. the brokers, to whom or through whom the present supplies have been made are fully verifiable; and secondly, where the sales for the purposes of section 3(1) have been accepted to be verifiable, the stance of the department to term the same sales to be unverifiable, for the purposes of section 3(1A), will be completely unwarranted, inconsistent and discriminatory and also violative of Article 25 of the Constitution. In the present appeals the payments received on account of sales are predominantly through account payee cheques i.e. verifiable parties. In any event unverifiabilty of sales can be no ground for their rejection or a warrant to apply section 3(1A). The reasons for this are very simply. It is a market reality that a purchaser, who buys from a seller, may or may not leave this address or correct address or whereabouts with the seller, and the seller cannot force the purchaser in this regard except choose not to deal within him. In the context of income tax, and while keeping this market reality in the backdrop, unverifiablity of sales or purchases has been held to be no ground to reject the trading results (see Ayenbee (Pvt.) Ltd. v. ITAT 2002 PTD 407). This market reality does not change for the levy of sales Tax Now coming to section 3(1A), suffice would it be to state that the statute does not specify unverifiability of sales to be a precondition for imposition of the levy of further tax under section 3(1A). In fact, the only condition necessary to warrant the application of section 3(1A) is supplies to unregistered persons. Such M supplies may or may not be verifiable. One may think of a myriad of situations where although sales may be verifiable, further tax under section 3(1A) would be still leviable. Thus the respondents in invoking section 3(1A) in view of the alleged unverifiability of sales (though factually in these appeals sales are verifiable as discussed above) has sought to introduce a condition extraneous to the statute, which renders the entire exercise to be a nullity. In other words, unverifiability of sales is neither a condition nor a justification to warrant the application of section 3(1A).

12. It is not out of context to state here that section 73 of the 1990 Act, which deals with the eligibility to claim input adjustments only 'where payments are made through a crossed banking instrument, is hardly relevant here. Section 73 does not say that if sales are unverifiable further tax under section 3(1A) should be imposed. In fact the said section 73 does not also require the supplies to be verifiable. No input adjustment is being claimed by the appellants in respect of the purchase price received for the final supplies, hence the application of section 73 in the present circumstances is incorrectly mooted.

13. There is yet another aspect of the matter. Prior to the Finance Act, 2003, section 19 of the 1990 Act, provided for compulsory registration. In the said section it was clearly provided that where a person who was required to be registered under the Act did not seek registration, the Collector would compulsory register such person and the said person would be deemed to be registered from the date he became liable for registration. As discussed above, in the Fatima Sugar Mills case it was, inter alia, held that a person was liable to be registered under the Act, but no actually registered, was to be construed as a registered person since under section 2(25) the definition of the term "registered person" included the persons actually registered and those who were liable to be registered. This interpretation is also quite in line with the express provision contained in section 19 (before its omission by the Finance Act, 2004) whereby persons who were liable to be registered and not registered were deemed to have been registered from the date they become liable to be registered. Thus in the preset appeals this is another reason for coming to the conclusion that the supplies made by the appellants to the persons not actually registered, were to be construed as supplies made to registered persons since the purchasers even if not so registered were deemed to be registered under section 19 of the 1990, Act.

14. It seems that the matter has been fully rectified and remedied by the legislature itself. The Finance Act, 2004 has removed section 3(1A) from the statute book. It seems that this repeal is not an amendment simpliciter. The then Honorable Finance Minister in his budget speech has found section 3(1A) imposing further tax, to be "major trade distorting measure". It was also observed by the Honorable Finance Minister that such a provision contributed to flying invoices and inadmissible refunds. Collaterally, in the budget speech it was also observed that the repeal of this section/provision will encourage growth in various areas and would remove the additional burden. We cannot ignore these far-reaching observations made by the Honorable Finance Minister. Budget speeches are reckoned to be an aid in interpreting statutes and an accepted mode for discovering the intention of the legislature. In K.P. Varghese v. ITO (1981) 131 ITR 597(SC), the Indian Supreme Court held that although parliamentary debates may be inadmissible for construing a provision of a statute, "the speech made by the mover of the bill, explaining the reason for introducing the bill can be referred for the purposes of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation was enacted". Our own Supreme Court in Ellahi Cotton v. FOP PLD 1997 SC 582 at p.932 referred to the budget speech made by the Finance Minister in order to ascertain the true intention and import of the legislation in question. Even otherwise the section is aimed at penalizing a registered person for dealing with an unregistered person. The fraud is not on the part of a registered person but the same lies with either the department for not bringing into the net the unregistered person or the unregistered person itself for not volunteering to register. The registered person, making the supplies, can hardly be blamed and then taxed for this default of other person, for which he is not responsible. Thus the provision was unreasonably harsh and unjustly illogical. Furthermore, the entire litigation in respect of section 3(1A) has considerably abounded and the legislator has now set at rest the entire controversy by repealing the provision itself. Thus in our minds there is no doubt that this repeal by the amending legislation was remedial and curative in nature. Indeed all curative and remedial amending legislations are retrospective and apply to all pending proceedings, assessments and appeals. This principle is fully borne out from the judgments reported as CST v. Krudsons PLD 1974 SC 180, CIT v. Olympia 1987 PTD 739, which was confirmed by the apex Court in CIT v. Shahnawaz Ltd. 1993 SCMR 73 and Dawood Cotton Mills v. CIT 2000 PTD 285. Thus we hold that the repeal of section 3(1A) vide the Finance Act, 2004 being remedial and curative, retrospective applies to all the pending adjudications/assessment and appeals, which include the present pending appeals. Section 3(1A) is thus to be construed as never having existed on the statute book but this is of course only for the purposes of the pending proceedings, assessments and appeals/references as held by the Supreme Court in the case of CIT v. Shahnawaz Ltd. 193 SCMR 73. The appeals are thus allowed on this score as well and hence all the proceedings and orders are vacated on this ground too.

15. Lastly, there is also no justification to impose any additional tax and penalty as there is no wilful default or mala fides on behalf of the appellants. The entire case is at best a matter of interpretation. Accordingly, penalty and additional tax are also hereby remitted.

16. This now brings us to the individual aspects in the eight appeals having different character:-

(i) Appeal No.H-132/05 Messrs Al-Noor Sugar Mills Ltd.

(a) In this appeal vide show-cause notice, dated 6-6-2003, the respondents claimed an outstanding payment of further tax to the tune of Rs.30,805,230. On the face this seems incorrect since an addition of various figures of month-wise further tax, as-claimed in the show-cause notice, confirm that the total outstanding so claimed in the show-cause notice towards further tax would be Rs.26,294,095 and not Rs.3,805,230. Be that as it may, a mere error in adding the figures on its own cannot be a ground to vacate the show-cause notice and we shall treat the amount so claimed in the show-cause notice to be Rs.26,294,095. However, in the impugned Order-in-Original No.29 of 2005, it has been admitted that the period from December, 2000 to October, 2001 was already covered by the earlier Orders-in-Original bearing Nos. 7 and 19 of 2003. The learned adjudication authority has raised a demand of Rs.17,59,983 as being the difference of the figures claimed in the present show-cause notice and the amounts claimed under the earlier Orders- in-Original Nos. 7 and 19 of 2003, cumulatively being Rs.29,045,257. Vide an application for rectification, dated 12-7-2005, addressed to the adjudication authority, the appellant questioned this figure/demand of Rs.17,59,973 on the grounds that firstly no basis thereof or of the figures mentioned in the show-cause notice, dated 6-6-2003 had been revealed and secondly because since the earlier demand of further tax (covered by Orders-in-Original Nos. 7 and 19/2003) was more than. the demand that was being raised for the same period through the instant Order-in-Original i.e. No.29 of 2005, there was no rationale in claiming the difference in between the earlier and the present demands.

(b) Before us the same arguments have been repeated i.e. raising of the demand for the same period is double jeopardy and the department has not been able to point out and show that the value of supplies and further tax shown in the instant show-cause notice, dated 6-6-2003 are over and above the transactions covered by Orders-in-Original Nos. 7 and 19 of 2003. It is needless to state that the burden of proof rests on the alleger, which is the department in this case. In the absence of such proof and also in view of the fact that the earlier demand for the same period was more than the demand covered by the present show-cause notice, Order-in-Original No.29 of 2005 and the y demand envisaged therein cannot stand, which are thus deleted/ vacated on the argument of double jeopardy/so also the very many legal and jurisdictional objections discussed above in the main body of the order.

(c) Apart from further tax there is also an issue with regards irregular adjustment of sales tax and additional tax thereon. On this account the appellant has paid Rs.7,70,339 along with additional tax of Rs.1,46,550. The issue here is that the appellant had claimed adjustment between input and output tax in the wrong months. The C.B.R. vide Sales Tax General Order No.2 of 2004, dated 27-5-2004 and C.B.R. letter/Sales Tax Ruling C.No. 1(115)STJ/2004, dated 4-12-2004 has already resolved the matter by providing that any adjustment of tax in the wrong period is to be condoned as no actual loss of revenue has occasioned. In these guidelines orders of penalty and additional tax are also held to be without justification. These rulings of the C.B.R. are in line with the spirit of law and hence the irregular adjustment is hereby condoned and the show cause notice/orders-in-original to this extent are also hereby vacated. Any payment made by the appellant in this regard is also liable to be refunded.

(d) The appellant has claimed that the C.B.R. vide its letter C.No.3/4-STB/2001, dated 20-11-2001 has allowed the appellant to pay sales tax in installments. Despite this an additional tax of Rs.3,08,334 has been paid by the appellant under pretext. It seems that once the C.B.R. has itself provided for payment of installments of the amount vide its letter, dated 20-11-2001, additional tax would be payable by the appellant and as such there could be no justification of any imposition of additional tax which is ordered to be deleted (See Bawany Violine Textile v. CIT (1967) 15 Taxation 91 (Kar.) and CIT v. Sultan Sargodha Textile 1987 PTD 144. Any amount paid by the appellant by way of additional tax is liable to be refunded.

(ii) Appeal No.H-159/2004-Messrs Shahmurad Sugar Mills Ltd.

(a) Apart from further tax, in this appeal, an objection was raised with regard to certain payments having not been made through account payee cheques on the touchstone of section 73 of the 1990 Act. Before the Adjudicating Authority, admittedly, the appellant has shown copies of bank statements which confirm that the payments were made through account payee cheques. Also earlier to the adjudication vide letter, dated 3-9-2002 the appellant had provided the details of the bank statements to the Assistant Collector, Audit Division, Hyderabad, a copy of which is available at page 35 of the appeal paper book. Despite this, the learned adjudicating authority was pleased to impose penalty of Rs.10,000 each on the two transactions/audit observations on grounds that the same information was not produced at the original stage.

(b) Having considered the case, since now admittedly it has been proved that the payments in question were made up by the account payee cheques, duly verified by the bank statements there is no warrant to impose the penalty as no mala fides are attached on part of the appellant. The penalties are thus remitted. Furthermore, the letter, dated 3-9-2002 issued by the appellant to the Assistant Collector, Audit Division, Hyderabad has not been denied by the respondents. This confirms that even at the original stage information had been given by the appellant to the respondent.

(iii) Appeal No.H-187/2004-Messrs Shahmurad Sugar Mills Ltd.

(a) Apart from further tax, the registered person has claimed alleged input tax of Rs.60,947 on building materials which as per show-cause notice was in violation of S.R.O. 578(I)/98, dated 12-6-1998. As per the appellant since the input claim relates to the construction items which are to facilitate required the manufacture of goods, which are the subject matter of taxable supplies, there is no violation of S.R.O. 578(I)/98. This interpretation was offered by the Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench in Appeal No.11 of 2002 in the case of Sindh Alkalies Ltd. v. Collector of Customs, Sales Tax and Central Excise Appeals, where it was held as under:--

"...In the era of frequent power failures and load shedding, industries can be saved from devastating consequences by ensuring uninterrupted manufacture of goods only through provisions of generating sets and everything imperative for its smooth and efficient running i.e. fuel, grease, lubricants etc. Besides, combining of factors of production is not confined to plant and machinery but also provision of...."

Following the Sindh Alkalies case the input adjustment is held to be in order.

(b) The appellant has also questioned the payment made by it under protest to the tune of Rs.738,669 along with additional tax on account of irregular adjustment in the wrong period. This issue has already been decided by us in Sales Tax Appeal No.H-132 of 2005 in the case of Messrs Al-Noor Sugar Mills Limited. The same order is repeated herein and the appeal allowed in the same terms.

(c) Input adjustment on telephone 'and electricity to the tune of Rs.114,485 and Rs.4,336 were disallowed on ground that the same pertained to expenses of the Admn. Office and not the Factory. Admittedly the Admn. Office is situated in the Factory's premises and it is the contention of the learned counsel for the appellant that the activities in the Admn. Office are apart and parcel to the main activity and necessary for making the taxable supplies. We fully agree with the learned counsel for the appellant that the activities in the Admn. Office are part and parcel to the main activity and necessary for making the taxable supplies. We fully agree with the learned counsel for the appellant and on this score also the judgment of Sindh Alkalis Limited (cited supra) is fully applicable. The disallowance in thus deleted so also the payment of additional tax of Rs.88,651 and Rs.597 in this regard. In view of the deletion of the demand payments made under this head are directed to be refunded.

(d) Rs.464,560 is additional tax paid by the appellant certain short payments in August, 2001 for which C.B.R. has already granted installments in terms of its letter, dated 20-11-2001. Once again this issue has already been discussed and the appeal on this score has been allowed in the case of Messrs Al-Noor Sugar Mills Limited i.e. Sales Tax Appeal No.H-132/2005 supra. This appeal is also allowed in the same terms and thus there is no justification to impose additional tax when installments have been granted by the C.B.R. Coming to the issue with regard to the imposition of penalty for non-production of the record, the appellant has disputed the department's stance, stating that the record was duly submitted.

(e) The contention 'of the appellant has been that it has already provided the complete record both before the auditors and the adjudication officer which can be seen from the appellant's letter, dated 7-4-2004, which till date has not been disputed by the auditors, adjudication officer or the respondent. The appellant's contention is found to be correct. Also no mala fides are attached as the record at same stage has been produced. The penalty is deleted.

(iv) Appeal No.H-133/2005 Messrs Al-Noor Sugar Mills Ltd.

Apart from the common issues, decided by the above consolidated order, some of the distinct issues pertaining to the present appeal, as raised by the appellant are as follows:--

(a) it is stated by the learned counsel for the appellant that the figure of Rs.2,83,42,861, alleged in the show-cause notice so also in the impugned Order-in. -Original No.9 Of 2004 is absolutely incorrect since the same is based on double jeopardy and also by over stating the figures. A detailed application for rectification, dated 12-7-2005 was submitted and earlier detailed replies to the show-cause notices were submitted by the appellant through letters, dated 21-7-2004 and 24-5-2005 all of which have fallen upon deaf ears. The learned counsel has submitted that Rs.19,159,623, allegedly pertaining to further tax for the period July and August, 2002 have already been covered by Order-in-Original No.9 of 0204, dated 31-1-2004 (the subject matter of Appeal No.H-44/2004, which had been disposed of by this Tribunal) and Order-in-Original No.84 of 2004 (the subject matter of Appeal No.H-250/2004). After having perused the record, the contention is found to be correct. The department has not been able to show as to why and how they have repeated the figures, which are subject-matter of other orders-in-original.

(b) Furthermore it is stated that on account of further tax Rs.60,000 on the sale of sugar for March, 2003 and Rs.1,659,476 on account of sale of MDF board for the period July to December, 2002 have been over stated. Detailed calculations in this regard are shown in the application for rectification, dated 12-7-2005. This is a simple calculation exercise, which confirms that the said figures are overstated and the contention of the appellant is correct.

(c) The above is obviously only meant to correct the record and when the entire liability of further tax is vacated through the consolidated order, no liability in this regard is recoverable from the appellant.

(d) Rs.48,225 has been collected from the appellant on account of sale of scrap. The contention of the appellant is that the sale of scrap is covered by normal law and hence 15% sales tax payable thereon. On the contrary the contention of the department is that F the sale of scrap includes sale of iron which carries rate of Rs.20% under S.R.O.388(I)/2001, dated 18-6-2001. The contention of the appellant is devoid of force and applying the rate given in the S.R.O., the stance of the department sustained.

Hence the Order-in-Original and the consequent demand to this extent are upheld. The demand already paid in this regard is thus not liable to be refunded.

(e) The issues with regards the demand of Rs.20,100 and additional tax Rs.1,231 already paid by the appellant with regards to input adjustment on building material under S.R.O. 578(I)/98, dated 12-6-1998 is already covered by judgment in the Sindh Alkalis case. This issue .has been allowed in Appeal No.187 of 2004 discussed above, as such the appeal on the score is allowed.

(v) Appeal No.H-84/2005-Messrs Al-Noor Sugar Mills Ltd.

Apart from the common issues, decided by the above consolidated order, some of the distinct issues pertaining to the present appeal, as raised by the appellant are as follows:--

(a) The department had raised objections that Rs.45,00,124 on account of purchases by the appellant and Rs.1,90,75,306 on account of sales by the appellant have not been made through banking channel. As such an objection is raised with regards section 73 of the 1990 Act. As regards the amount of sales of R.1,90,75,306 further tax of Rs.572,259 is threatened to be imposed.

(b) The objection is absolutely unfounded since the auditor vide his letter, dated 10-4-2004, available at page 64 of the paper book of the appeal has confirmed that the appellant has shown the proof of the above amount having been transacted through the banking channel. Furthermore, at para.18 of the order sheet of the adjudication officer, this fact has been reconfirmed and it has been stated that the charge levelled on this account may be dropped. Despite the above, the department is still threatening recoveries, on the score. This is unfortunate that the department is seeking to initiate recoveries on the charge which it had been itself ordered to be dropped.

(vi) Appeal No.H-106/2006- Messrs Seri Sugar Mills Ltd.

Apart from the common issues, decided by the above consolidated order, some of -the distinct issues pertaining to the present appeal, as raised by the Appellant are as follows:--

(a) In this case the appellant had not been served with the show-cause notice and the order-in-original. The knowledge of the show-cause notice and the Order-in-Original came when a recovery notice dated 12-5-2006 was received and in response Mr. Muhammad Naseem, Advocate inspected the record at Hyderabad and submitted a challan of Rs.500 requesting for a copy of the show-cause notice reply given if any and the copy of Order-in-Original. However the Assistant Collector issued a copy Order-in-Original only on 25-5-2006 and thereupon the instant appeal was filed on 31-5-2006. This is the case of a limited company and the payment of tax is demanded from the company. Monthly returns are filed by the Managing Director. The power of attorney submitted to the authorities is for the Principal Officer/Chief Executive of the company. The principal place of business is at Karachi. The show-cause notice and the Order-in-Original were not served accordingly under section 56 of the 1990 Act, as further laid down in section, 27 of the General Clauses Act, 1897 and also as per directions of the Ministry of Law through Registered A/D on the Principal Officer of the company at the principal place of business. There is not acknowledgement of the service and there is no authority given to any other person to receive notices. None of the facts above have been denied by the respondent who have failed to show that the show-cause notice and Order-in-Original were delivered to persons duly authorized. The notice appears to have been mislaid and probably delivered to some unauthorized person. Other notices claimed in order are also not served. In earlier years also the service of notice was not proper. Complaints about the service of notice had already been lodged with the Collector Adjudication, Additional Collector Adjudication as well as Deputy Collector of Sales Tax, Hyderabad but to seems that no notice thereto has been taken. Any show-cause notice without service on the registered person is a nullity in law and any order passed by the Additional Collector in pursuance of the said notice ab initio lacks in jurisdiction and lawful authority. The entire proceedings and the Order-in-Original are therefore a nullity in law. If there is any authority needed for this proposition reference is invited to 1967 PTD 189.

(b) The limitation had thus to count w.e:f. the date on which Order- in-Original has been served i.e. dated 23-5-2006 as stated above. The appeal has been filed on 31-5-2006 is thus held to be well in time and allowed on the reasons mentioned in the consolidated order, supra.

(c) Furthermore, the demand of Rs.1,01,13,938 alleged towards violation of section 73 is totally incorrect. We have already observed supra that in the context of further tax under section 3(1A) of 1990 Act, section 73 of the said 1990 Act is totally irrelevant.

(vii) Appeal No.H-181/2005-Messrs Seri Sugar Mills Ltd.

Apart from the common issues, decided by the above consolidated order, some of the distinct issues pertaining to the present appeal, as raised by the appellant are as follows:--

(a) It is submitted that while the audit was ordered to be undertaken for the period 1st July, 2001 to June, 2002 the audit observations have been made for the period July, 2002 to April, 2003 which are beyond the scope and authority of the jurisdiction for audit. It is beyond the assurance of C.B.R. The additions proposed for the period beyond June, 2002 are thus liable to cancellation on this count also.

(b) The addition on account of alleged inadmissible input tax input tax adjustment of Rs.25,004 and levy of penalty is not lawful. This issue is covered in Appeal No.H-132/2005, following the same the addition is deleted.

(c) The demand of alleged inadmissible input tax of Rs.29,03,457 under section 73 is totally irrelevant as held in Appeal No.H-106/2006 and thus ordered to be deleted.

(d) The coercive collection of Rs.4,62,754 in respect of alleged blacklisted company is not lawful and ought to be refunded as no basis therefore has been shown.

17. Having said that, all these appeals are allowed in above terms and impugned orders are set aside.

(Sd.)

(Zafar Iqbal)

Member Technical

I am in complete disagreement on the findings of my learned Member (Technical-I) on all the issues except 3(1A) in Fatima's case in the above cited 23 appeals which he had taken them collectively and had allowed the appeals.

2. On the very outset the observation of Member (Technical-I) that facts have been sworn by Affidavits is not correct. There is only one affidavit on record in support of Appeal No.84/05 Al-Noor Sugar Mills Ltd. v. Collector of Sales Tax, Hyderabad, the rest do not have it.

3. The first point raised by the advocate for the appellant was that Order-in-Original in 18 out of 23 appeals were barred by limitation under the proviso to section 36(3) of the Sales Tax Act and in none of the appeals extension of time was granted by the Collector.

4. The appellant in the body of the appeals has taken the objections that in passing the order-in-original, despite the fact, that C. B. R's. No.2(2)/98 (legal) 2001, dated 1st April, 2002 directing to hold the proceeding till decision of apex Court, the respondent was bound to obey and failure to obey is an unlawful exercise lacking jurisdiction.

5. In grounds of appeals, one of the ground is, that Order-in-Original is passed without jurisdiction as the respondents were required to obey and observed the order of the C.B.R. under section 72 of the Sales Tax Act, 1990 and to hold their proceeding.

6. Under section 72, Sales Tax Act, 1990 officers of the Sales Tax were to follow the Board's order, instructions and directions of the Board.

7. In his oral as well as written arguments, he had taken objection that order-in-original is barred by limitation in terms of section 36(3) and 36(2) of the Sales Tax Act, 1990. Then he had taken "U" turn and took the objections that the Central Board of Revenue had stayed the proceedings till the judgment of the Supreme Court of Pakistan and that these orders were binding on all the authorities under section 72 of the Sales Tax Act, 1990. To his proposition that Order-in-Original was barred by time under the proviso to section 36(3) of the Sales Tax Act, 1990, had relied upon the order passed by the Federal Ombudsman Regional Office, Karachi. It was held in the said "authority that the impugned order being violative of the proviso to section 36(3) is clearly hit by time limitation, as proceedings in other law and the respondent's objection about Federal Tax Ombudsman jurisdiction is misconceived as mal administration is clearly established". The learned advocate had contended that the order of Ombudsman was sustained by the Presidential Order, hence he prayed that the Order-in-Original is time barred as per section 36(3) of the Act, therefore, it be set aside.

8. When arguments were being heard I. had asked the learned advocate to provide me the Presidential Order but so far he did not do so.

9. The appellant's advocate in reply to show-cause notice had stated that assessee is not liable to pay further tax since he had made sales to persons who are liable to be registered which position was settled in C.P. No.1477 of 1999 and as many as 70 others cases on this subject. The department had gone against the said order before the Supreme Court of Pakistan. The Honourable Supreme Court has stayed the operation of the Order-in-Original in respect of claim of the refund.

10. The Supreme Court's interim order of stay does not authorize the Collector to pass an order against the rationale of High Court's judgment so the present exercise is without jurisdiction overlooking and bypassing the judgment of Supreme Court.

11. The learned representative of the respondent on the other hand had argued that the Order-in-Original is tenable under Article 254 of the Constitution of Islamic Republic of Pakistan, 1973 and had placed a copy of the judgment of the Honourable Supreme Court 1992 PCr.LJ 1520 passed by three Honourable Justices in which it has been held that appeal was decided after to days beyond 30 days of it presentation to the Supreme Appeal Court and judgment of this Court, is not invalid in any way in view of Article 254 of the Constitution of Islamic Republic of Pakistan, 1973. He also relied upon the decision of Islamabad Tribunal in Appeals Nos. 154 and 1555 of 2005, dated 28-11-2005.

12. The learned colleague had relied upon the honourable authorities mentioned in para.3(ii) of his judgment. They are (1) 2006 PTD 340 Messrs Pace International v. Secretary Revenue Division, Islamabad (2) 2005 CL 592 (sic), S.S. Oil Mills Limited v. Secretary GST and (3) PLD 1976 Lahore 655, the Commissioner of Sales Tax, Lahore v. Messrs Hilal Tanneries, Lahore. While giving findings he had also relied upon the order of Federal Tax Ombudsman in Complaint No.958-L/05 pace Int. v. C.B.R./Sales Tax without considering whether Appellate Tribunal was bound to follow it.

13. I have gone through the judgment of Islamabad Tribunal in Appeal No.154 and 155 of 2005 very carefully. It has enlightened me to the aspect when the statute is mandatory or directory. I have selectively picked paras from the judgment and reproduce it because I am in complete agreement with the whole judgment.

14. There are no hard and fast Rules to determine whether a statute is mandatory or directory. It is for the Courts to decide which provision of the law is mandatory and which is directory. Volumes of books have been written on interpretation of the statutes.

15. The book titled as Sutherland Statutory Constriuction 5th Edition (Read with 2000 Cumulative Supplement) by Norman J. Singer, based on American case laws lays down the distinction between mandatory and directory statutes as under:--

"There is an important distinction between directory and mandatory statutes. The violation of a directory statute is attended with a no consequences, since there is a permissive element. The failure to comply with the requirements of a mandatory statute either invalidates the transaction or subjects the non-complier to the consequences stated in the statute.

16. There is no universal rule by which directory provisions may under all circumstances be distinguished from those which are mandatory.

17. On occasion, some Courts have said that language affirmative in form indicates that the statute is supposed to be only directory or permissive while negative language implies a prohibitory, obligatory or mandatory provision.

18. Generally those directions which do not go to the essence of the issue at hand but which deal merely with procedures are not commonly considered mandatory. Likewise, if the act is performed but not in the time or in the precise manner directed by the statute, the provisions will not be considered mandatory if the purpose of the statute has been substantially complied with and no substantial rights have been jeopardized. In the light, it has been held relating to a tax statute that while filing is mandatory, the time for filing is directory".

19. The directory character of a statute may likewise be indicated by its purpose and the manner in which its purpose is expressed. Thus, it has been said "where" words are affirmative and relate to the manner in which the power or jurisdiction vested in a public officer or body is to be exercised and not to the limits of the power or jurisdiction itself, they may an often have been construed as directory oily.

...Likewise, where the time, or manner of performing the action directed by the statute is not essential to its purpose, provisions in regard to time or method are generally interpreted as directory only.

20. Mr. M. Mahmood in his book titled as a "Canons of Construction and Interpretation of Statutes", third edition, 2005 has extensively cited case laws on directory provisions. The principles laid down in some of the case laws relevant to the case in hand are reproduced below:--

"A statutes is understood to be directory when it contains matter merely of direction, but not when those directions are followed up by an express provision that, in default of following them, the facts shall be null and void. To put it differently, if the Act is directory, its disobedience does not entail any invalidity, if the Act is mandatory disobedience entails serious legal consequences amounting to the invalidity of the act done disobedience to the provision" (PLD 1974 SC 1341)"

21. "Statute is understood to be directory when it contains matters merely of directions but not when those directions are followed up by an express provision that in default of following them the acts shall be null and void. If the provision is mandatory, disobedience entails serious legal consequences amounting to the invalidity of the act done in disobedience to the provision" (PLD 2001 SC 4991).

22. "A statute which requires certain things to be done but does not prescribe any result to follow or penalty (PLD 1978 SC (AJ & K)) or consequences (PLD 1978 Kar.925) if they are not done, should be held directory" (PLD 1961 SC 145 + 1987 PLC 5931).

23. Some of the principles, based on case laws, laid down in the book for determination whether the enactment is mandatory or directory as follows:--

"Consequences of disobedience stated, "Provision would be mandatory if non-observance of statutory provision is visited by consequent invalidity it would be directory if no such consequence ensue from non-observance of statutory rule. Judicial decisions have made a distinction between those provisions under which certain steps are required to be taken by law and those under which certain things are absolutely prohibited by law. Ordinarily where consequences of failure to comply with a direction are not stated, the direction is directory and not mandatory".

24. Use of word "shall". "The use of the expression '"shall" or "may" in an enactment, is not always a sure guide to ascertaining whether the Legislature intended it to be directory or mandatory, unless the scheme of the Act, the purpose with which it was enacted, the end which it sought to be achieved and the possible consequences of doing or failing to do an act within the prescribed time are taken into consideration.

25. Mandatory provision of a statute, must be obeyed in letter and spirit. Any breach of mandatory provision results in nullification of act. Judicial decisions have made a distinction between those provisions under which certain steps are required to be taken by law and those under which certain things are absolutely prohibited by law. The former are directory in nature and their contravention does not vitiate the proceeding unless prejudice has been caused thereby. But the latter are mandatory and their non-compliance results in the total vitiation of the subsequent proceedings regardless of any prejudice having been caused which in such cases is presumed to have occurred. Where a provision is absolute having a obligatory force, it carries an implied nullification for its disobedience, but where it is merely directory, its non-compliance may not be fatal unless the complaining party is able to show that the non-compliance has worked to its prejudice.

26. "Where the prescription of any Act relates to the performance of a duty by a public officer the breach of such prescription, when it does not cause any real injustice, does not invalidate the act done under the Act and therefore such prescriptions are merely directory. Mandatory or absolute provisions must be obeyed strictly. Directory provisions may be complied with substantially".

27. After having gone through the judgment of Islamabad Tribunal and after hearing the arguments advanced by both the parties with reference to the proviso to subsection (3) of section 36 of the Act and having considered the case-law, I am inclined to support the view point of the department. The reason being that no consequences of non-adherence of the proviso to subsection (3) of section 36 of the Act have been laid down in the Act as compared to the provisions of section 79(4) of the erstwhile Income Tax Ordinance, 1979. Neither there is anything m in section 36 itself nor in the other provisions of the Act that specify the m consequence of nullification of the order of the adjudicating officer for non-compliance therewith, which is generally hallmark of the statutory provisions mandatory in character. In arriving at this conclusion I also gain support from-the decision of Honourable Supreme Court of Pakistan in the case of State through DAG, Peshawar v. Panda Gul reported as 1993 SCMR 311. In the reported case the issue before the august Court was whether the provisions of section 171 of the Custom Act, 1969 are mandatory or not and the august Court held that these were not mandatory since any consequence of nullification for non-compliance thereof were not given in the said section itself or elsewhere in the Custom Act, 1969 or Sales Tax Act. Secondly, the concept of time limit is also incorporated in Article 254 of 1973 Constitution but according to this Article if any act or thing required by the Constitution to be done within the given period is not done within the time limit, the doing of the act or thing after expiry of the given time limit shall not become invalid or ineffective by reason only that it was not done within the prescribed time limit. On the analogy of Article 254 of the Constitution, Islamabad Tribunal has consistently held that the time limit prescribed .in the proviso to subsection (3) of section 36 of the Act is not mandatory but is a directory proviso. In the case of Messrs Innovative Trading Co. Messrs Falcon Corporation, Messrs Moon Enterprise and Messrs Bull Agencies the Tribunal has held as under:--

28. "So far the question of tie limit is concerned, the delay is notorious not only in our country but also all over the world, including advanced countries having all modern techniques and aid, and all those, who are charged with the duty of administration of justice are making frantic efforts, to tackle this problem. In our country, the Legislature has thought proper, to prescribed time limit for the decision of cases at the original, appellate and provisional stages by introducing similar provisions in many procedural laws. This concept of time limit was incorporated even in Article 254 of our 1973 Constitution but while so doing, its framers played down the consequences of its non-observance by providing therein, the non-observance of such limit, would not render the act (for time limit is specified) illegal. No doubt, there is no such relaxation in the proviso to section 194-B(1) of the Customs Act, 1969 prescribing time limit for the decision of the appeals by the Tribunal but while interpreting any such provision in the ordinary law like the said act, we have to keep in view the principle incorporated in Article 254 ibid and by the process of analogical deduction we have to mitigate the rigours drastic consequence on non-compliance of time limit. Therefore, the word "shall" as used in the proviso, in our considered opinion, is directory (and not mandatory), enjoining the Tribunal to make efforts for the decision of appeals within the prescribed time limit and we do make such efforts but due to heavy intake of fresh appeal and enormity of the pending ones before various Benches of the Tribunal, it is not possible to observe time limit so prescribed".

29. "Thirdly, the Honourable F.T.O. has to take cognizance of mal administration of Revenue Division or a tax employee thereof and is not the appellate forum of appeal against the decision of the Tribunal within the meaning of section 47 of the Act. It, therefore, follows that unless the decision of the Tribunal is set aside by a competent appellate forum or struck down by the superior Courts in their writ jurisdiction, the same shall prevail and remain effective. The learned counsel for appellants has not been able to show me any decision of the superior Courts holding a contrary view than the one taken by the Tribunal with reference to the proviso to subsection (3) of section 36 of the Act. This means that the earlier decision of the Tribunal have to be followed to maintain consistency and equity".

30. In view of the above quoted paras. from the decision of Islamabad Bench, I am explicitly clear in my mind that provision of section 36(3) is not mandatory but directory and Appellate Tribunal is P not bound to follow the decision of Federal Tax Ombudsman as it only P deals with mal administration of Revenue Department and is not superior to Appellate Tribunal.

31. The, learned advocate of appellant argued that President had endorsed the said order of Ombudsman does not carry weight because the President had recently commuted the Death Sentence of British National does not mean that all Criminals against whom death sentence has been passed will be commuted.

32. It was amazing to note that appellant in all of his appeals had taken the objection that why the Order-in-Original was passed despite the fact that C.B.R.'s Letter No.2(2)/98(legal)/2001, dated 1-4-2001 had clarified to hold the proceedings till decision of apex Court which the respondent was bound to obey.

33. The advocate for the appellant in the same breath cannot take objection to the passing of the Order-in-Original in presence of stay and C.B.R.'s letter and thereafter praying that it is barred under proviso to section 36(3) of the Act. It is unethical. He cannot play on both sides of the fence.

34. In deciding the issue of time limitation, learned Member (Technical-I) had relied upon three authorities mentioned in para.3 of the Judgment: The First being 2006 PTD 340 Pace International 4. Secretary Revenue Division, Islamabad. This judgment is of Federal Tax Ombudsman in which it has been held assessment of tax made beyond 45 days of issuance of show-cause notice or extended time is time barred.

35. The office of Federal Tax Ombudsman is not superior to Appellate Tribunal therefore I am not bound to follow it.

36. The next authority relied upon is PLD 1976 Lahore page 655. The Commissioner of Sales Tax v. Hall Tanneries. In this honourable authority it was held that assessment made beyond the period of limitation by a month and twenty days was barred by limitation.

37. The Honourable High Court had relied upon the judgment of the Honourable Supreme Court PLD 1963 SC page 322 in Nagina Silk Mills Lyallpur v. Income Tax Officer:--

"(C) Income Tax Act (XI of 1922), S.34(2) read with-S.2(17)---Limitation for assessment of income escaping assessment---Four "years"---"Year"---"Year" from 1-4-1958 to 30-6-1959, of fifteen months---New definition of "year" as given in section 2(17) incorporated in Act by Finance Ordinance (XXV of 1960), section 6(1)(b) and deemed to have been added from 1-4-1959---Assessment made on 29-6-1959, for year 1954-1955, held to have been made without jurisdiction---Set aside by certiorari".

38. The honourable authority of Supreme Court is on income tax. The consequences of not passing the assessment order within the prescribed period is given in section 59(4) of the Income Tax Ordinance, 1979, therefore, the honourable Supreme Court had held as above. The analogy of section 59(4) of the Income Tax Ordinance, 1979 cannot be applied to the provision of subsection 3 of section 36 of the Sales Tax Act, 1990 as no such consequences have been given in section 36 in case of passing of adjudication order beyond the prescribed period of 90 days or extended period total being 180 days.

39. The honourable authority of Supreme Appellate Court 1992 PCr.LJ. 1520 has superseded honourable authorities relied upon by my learned colleague, therefore, I am bound to follow the latest authority it is as such my findings that Orders-in-Original are not barred by limitation.

40. The next point raised by the advocate for the appellant was that show-cause notice was not in keeping with the principles enunciated by the Honourable Supreme Court in case of Khyber Lamps 2001 SCMR page 238 which view has been reinforced by Supreme Court in Caltex Oil (2005 PTD 580). The learned advocate had stated that show cause notice does not mention the subsection of section 36, therefore, it is invalid and all the subsequent proceedings taken were futile. His further objection that C.B.R. had curtailed the discretionary powers of the Collectors of Adjudication by restraining them not to issue show-cause notice, directly, to the tax payers as per Audit Report and that they would issue show-cause notice only after receiving contravention report from the Collector as per audit report and draw the attention of the Tribunal to the news item in "Business Recorder".

41. The representative of the department had argued that work is distributed amongst the officers of Sales Tax and Assistant Collector prepares the contravention report and sends the same to Collector Adjudication.

42. The representative of the department had argued that Collector had delegated its powers to their subordinates and it is the Assistant Collector who enjoys their powers in preparing contravention report to be sent to the Collector Adjudication.

43. Section 32 of the Sales Tax Act, 1990 deals with the delegation of powers. Under section 32(2) the Collector may delegate his powers to any officer of the Sales Tax subordinate to him.

44. The news item in "Business Recorder" does not supersede the enactment. The Collector can empower the Assistant Collector what is enjoyed by him, therefore, the contention of the appellant and finding of my colleague that contravention report sent by Assistant Collector was coram non-judice and void is not correct.

45. Under section 25 of subsection (1) any officer of Sales Tax can have access to the record of a person.

46. Under subsection (3), the Assistant Collector shall issue audit observation to registered person who may submit his point of view within 15 days.

47. Under subsection (4), if no reply is received, he shall issue audit report.

48. The learned Member (Technical-I) had ruled that the respondent had not issued any audit observation in these appeals is not correct because in most of the cases audit observation was sent. Deputy Collector Audit Management Cell vide his letter, dated 6-9-2006 had sent the photocopies of audit observation along with the chart of Appeals in which they had also received the reply from the registered person and which letter had been initialed by Member (Technical-I) meaning thereby that he had seen them.

49. The show-cause notice issued in the appeals demanded further tax. Further tax was demanded because the sugar producing registered persons were selling the sugar to the unregistered persons who were liable to be registered but were not registered, therefore, omission of writing subsection in the show-cause notice is not fatal as no prejudice was caused to the appellant and substantial compliance was made. Reliance is placed on the judgment passed in C.P. No.702-L of 2003 by Honourable Supreme Court. Collector of Sales Tax and CE Lahore v. Zamindara Paper and Board Mills. This authority was supplied to me by learned Consultant Mr. Sardar Jawaid. In this authority the issue before the Honourable Supreme Court was---

"Whether the show-cause notice can be scrapped only for the reason that the relevant sub-rule was not mentioned therein, whereas the contents of the SCN clearly indicated that substantial compliance had been made as far specific allegation of mala fides is concerned"

The Honourable Supreme Court had held

"In our considered opinion the substantial compliance has been made by making reference of the rules to identify the period of time during which tax has been allegedly evaded. Therefore, merely for the reason that sub-rules 2 and 3 of Rule 10 of the Central Excise Rules, 1944 have not been mentioned, it would not have been proper to declare the notice illegal. In view of the matter, the judgment of the High Court is, not sustainable. It is to be noted that instead of taking into consideration technicalities, the Court looks into the matter from different angles namely as to whether substantial. compliance has been made or if any of the sub-rule has been omitted then what prejudice is likely to cause to the party to whom show-cause notice is given".

50. On merits, the department has very strong case. The learned colleague had given the conclusion deduced by him in the Fatima Sugar Mills Limited on interpretation of section 3(1A) of Sales Tax Act, 1990. I do agree with the conclusion arrived at in Fatima's case but what about the non-compliance of sections 23 and 73 of the Act by these registered Sugar Mills. I reproduce sections 23 and 73 of the Act.

Section 23 Tax Invoices.---(1) A registered person making a taxable. supply shall issue a serially numbered tax invoice at the time of supply of goods containing the following particulars, namely:--

(a) name, address and registration number of the suppliers,

(b) name (address and registration number) of the recipient;

(c) date of issue of the invoice;

(d) description and quantity of goods;

(e) value exclusive of tax;

(f) amount of sales tax; and

(ff) ***

(g) value inclusive of tax:

Provided that the Board may, by notification in the official Gazette, specify such modified invoices (* * *) for different persons or classes of persons:

Provided further that no more than one tax invoice shall be issued for a taxable supply]

[(2) No person other than a registered person or a person paying [* * * ] retail tax shall issue an invoice under this section].

[(3) A registered person making. a taxable supply may, subject to such conditions, restrictions and limitations as the Board may, by notification in the official Gazette, specify, issue invoices to another registered person electronically and to the Board as well as to the Collector, as may be specified].

51. Section 73.---Certain transactions not admissible,--

(1) Notwithstanding anything contained in this Act or any other law for the time being in force, payment of the amount for a transaction exceeding value of fifty thousand rupees, excluding payment against a utility bill, shall be made by a crossed cheque drawn on a bank or by cross bank draft or cross pay order or any other cross banking instruments showing transfer of the amount of the sales tax invoice in favour of the supplier from the business bank account of the buyer:

Provided that online transfer of payment from the business account of buyer to the business account of supplier as well as payments through credit card shall be treated as transactions through the banking channel, subject to the condition that such transactions are verifiable from the bank statements of the respective buyer and the supplier].

(2) The buyer shall not be entitled to claim input tax credit, adjustment or deduction, or refund, repayment or draw-back or zero-rating of tax under this act if payment for the amount is made otherwise than in manner prescribed in subsection (1), provided that payment in case of a transaction on credit is so transferred within one hundred and eighty days of issuance of the tax invoice.

(3) The amount transferred in terms of this section shall be deposited in the business bank account of the supplier, otherwise the supplier shall not be entitled to claim input tax credit, adjustment or deduction, or refund, repayment or draw-back or zero-rating of tax under this Act.

52. The appellants were given opportunity to prove that they had complied the law when the matters were heard on 15-5-2006 and reserved for orders in some cases. I had hand written detailed diary on 15-5-2006 in Appeal No.159 of 2004, and got it typed in the rest of the appeals that Advocate for the appellant had not touched the point of violation of sections 23 and 73 of the Sales Tax Act which is mentioned in the show-cause notices that they had not provided particulars or proof of payment. He was asked to take each case separately and argued them, referring to the allegations made in the show-cause notices. But it appears that he had not paid any heed to the compliance of the diary and was so sure, that again, when these matters came up for hearing on 24-8-2006, he did not touch them nor provided any proof regarding whether a registered person supplying the goods to another unregistered person liable to be registered, is required to issue Sales Tax invoice giving, the information as prescribed and to receive the sale proceeds in excess of Rs.50,000 through a negotiable instrument under sections 23 and 73 of the Act respectively. The appellants have failed to prove that Sales Tax invoice as prescribed under section 23 of the Act had been issued and the amount of sale proceeds was received through a negotiable instrument. They were to give the names of the buyers and brokers with, complete address and any evidence that these persons were actual buyers and their turnover was higher than the minimum threshold prescribed for registration of these persons under the Sales Tax Act, 1990: The appellants had not charged further tax knowing the legal position in this regard. In some cases they have partly paid and in some they deliberately not paid and now I am going to take these appeals.

53. First I will take these 5 appeals which were remanded by the Honourable High Court. They are:--

(1) Al-Noor Sugar Mills No.H-160/2004.

(2) Al-Noor Sugar Mills No.H-161/2004.

(3) Al-Noor Sugar Mills No.H-250/2004.

(4) Shamurad Sugar Mills No.159/2004.

(5) Shamurad Sugar Mills No.187/2004.

54. These Appeals were heard by Member (Technical-I) as Member of Bench-III and he had passed the order "No doubt that except the adjudication proceedings under section 72, guidelines issued by Board are binding on the subordinate Authorities. Furthermore where a question of law is sub judice before the apex Court initiation of proceedings against the appellant was not justified. It would therefore be in the fitness of things to defer the matter till an authoritative pronouncement is made by apex Court. The impugned orders were set-aside and the matter was remanded to carry necessary investigation and decide the important issues according to law. But now my learned colleague had given different opinion that Orders-in-Original are barred by section 36(3) of the Act. However, I will take them now.

Sales Tax Appeal No.160/2004, Messrs Al-Nobr Sugar Mills Limited v. Collector of Sales Tax and Central Excise, Hyderabad.

55. The allegation levelled against the appellant on merit was that on scrutiny of the record for the month of November, 2003 registered person had short paid the amount of further tax in violation of provision of the Sales Tax Act.

56. Since this was a case of simple short payment of further tax and in view of my findings on the main issues the appellant is liable to pay the demand of the Adjudicating Authority .

Sales Tax Appeal No.161.of 2004 Messrs Al-Noor Sugar Mills v. Collector of Sales Tax and Central Excise, Hyderabad.

57. In the show-cause notice, dated 10-7-2004 allegation is the same, that for the month of October, 2003 the appellant has made supplies to unregistered person has short paid the amount of further tax of Rs.3.092 million, therefore, violated the provision of sections 34 and 33(2)(a) of the Act.

This was also a case of short payment of further tax' and in view of my finding on the main issues the appellant is liable to pay further tax as demanded by Adjudicating Authority.

Sales Tax Appeal No.250 of 2004. Al-Noor Sugar Mills v. Collector of Sales Tax and Central Excise, Hyderabad.

58. In show-cause notice, dated 10-7-2004, the allegation is the appellant has failed to pay further tax from July, 2002 to August; 2002 as supplies were made to the unregistered persons. Same finding as in Appeals Nos.160 and 161 of 2004.

Sales Tax Appeal No.159 of 2004 Shahmurad Sugar Mills Ltd. v. Collector Sales Tax and Central Excise, Hyderabad.

59. In this appeal allegations levelled against the appellant were three-fold.

(i) The appellant had claimed input tax Rs.250.121 but failed to provide the proof of payment required under section 73 of the Sales Tax Act, 1990, therefore, it was disallowed.

(ii) The appellant had made supplies of molasses to registered person of Rs.1399976 involving Sales Tax of Rs.209,966 million but failed to provide proof of payment as required under section 73 of the Sales Tax Act, 1990.

(iii) The appellant has supplied sugar to unregistered persons without paying further tax of Rs.5,650,178 violating section 3(1A) of the Act.

60. As I have mentioned earlier that I had written detailed diary that advocate for the appellant to argue each appeal on merits and provide proof but the learned advocate had not complied the orders. The initial burden to prove mode of payment lay on the appellant. It was also for the appellant to prove that he had made Sales Tax invoice under section 23 of the Act but no proof was provided to the Tribunal, therefore, I see no error committed by the lower forum and Order.-in-Original is maintained.

61. In appeal No.187 of 2004 there were 9 following allegations levelled against the appellant in the show-cause notice, dated 14-1-2001:--

(i) Inadmissible Input on Electrical Appliances.

(ii) Further tax on Molasses.

(iii) Further Tax on Sugar.

(iv) Inadmissible Input Tax Adjustment.

(v) Inadmissible Input Tax on Electricity Office Meters.

(vi) Inadmissible Input Tax on Telephone Bills.

(vii) Further Tax on Scrape Sales.

(viii) Additional Tax on Shot payment.

(ix) Non-production of Sales Tax Record under section 25.

62. In this appeal, the appellant had already paid the input tax which was inadmissible and was adjusted by the appellant.

63. There are various authorities of the Appellate Tribunal of Karachi Bench on the pint that where electricity consumed is not v producing taxable supplies are chargeable to tax and input adjustment is v not allowed. One of it is given by my colleague in Sales Tax Appeal No.188 of 2005 Collector of Custom v. Sindh Fine Textile 'Mills delivered on 21-11-2006 wherein it has held that electricity consumed in Labour Colony is not liable for input adjustment.

64. Bench-II in Appeal No. H-20/2006 Messrs Salim Textile v. The Collector had held that consumption of electricity in Labour hostel cannot be related to the taxable product therefore had dis-allowed input adjustment.

65. There is yet another judgment of this Bench in Sales Tax :: Appeal No.K-140/2001, dated 14-9-2005 that supplies made to employee for internal use is taxable and not allowed to input adjustment.

66. Therefore I am of the opinion that the lower forum had rightly w dis-allowed the input adjustment on electricity consumed for non- w production of taxable supplies.

67. Even in this case, I had got it typed the diary, dated 15-5-2006 to argue on the allegation levelled in the show-cause notice and to produce record in respect of sections 23 and 73 of the- Sales Tax Act, 1990 but he had taken very lightly and did not provide any so therefore I am inclined to believe that the Order-in-Original has merit.

68. Now I will take 8 appeals which according to my learned colleague had different characteristics.

Appeal No.132 of 2005 (Messrs Al-Noor Sugar Mills Ltd V. Collector Sales Tax and Central Excise, Hyderabad.

69. In the show-cause notice, dated 6-6-2003, the allegations levelled against the appellant are that Messrs Al-Noor Sugar Mills had supplied sugar for the period from July, 2000 to June, 2001 and from July, 2001 to June, 2002 and found the following irregularities:--

Month	Value of Supplies.	'Further Tax (Not charged)
12/2000	82616828	1239252
01/2001	61697746	925467
02/2001	41294692	619416
03/2001	67358522	1010378
04/2001	79013863	1185210
05/2001	132252444	1983782
06/2001	67654417	1014812
07/2001	87164805	2614944
08/2001	175978893	5279363
09/2001	153505132	4605155
10/2001	227092976	5812789

70. The registered person had supplied sugar, MFD Board, Iron Scrape, Sand Dust and Strips to unregistered person from the month of December, 2000 to October, 2001 without paying further tax of Rs.30805230 under section 3(1A) of the Sales Tax Act, 1990.

71. The appellant was also charged a short payment of sales tax of Rs.1,400002 during the month of August, 2001.

72. The allegation of wrong adjustment of input tax was also levelled against the payments which are as follows:--

Invoice No.	Date of Invoice	Month of Adjustment	Value	Input Tax
0353215	14-4-2000	July 2000	147312	22096
1350691	-	October 2000	128155	19223
4738	31-7-2000	August, 2000	253330	38000
38364	4-5-2000	August, 2000	135036.	20255
8364	4-5-2000	August, 2000	135036	20255
5634	23-5-2000	August, 2000	134745	20211
38364	22-5-2000	August, 2000	135036	20235
38364	23-5-2000	August, 2000	13506	20211
38364	22-5-2000	August, 2000	135036	20255
38364	22-5-2000	August, 2000	135326	20298
38364	20-5-2000	August, 2000	134745	20211
38364	20-5-2000	August, 2000	134745	20211
34466	14-4-2000	August, 2000	122760	18414
34466	14-4-2000	August, 2000	122760	18414
34466	14-4-2000	August, 2000	122760	18414
38364	22-4-2000	August, 2000	122496	18374
38364	- 22-4-2000	August, 2000	122496	18374
38364 .	24-4-2000	August, 2000	123200	18480
2230	15-8-2000	August, 2000	516300	34120
	27-5-2000	August, 2000	196963	131399
4843	31-8-2000	August, 2000	158735	38810
4931	20-9-2000	October 2000	252625	37891
5901	22-9-2000	March, 2001	294137	44121
5504	31-3-2000	April, 2001	313345	47002
5609	30-4-2000	May, 2001	308415	46262
5609	30-4-2000	May, 2001	308415	46262
Total			4752439	770339

73. Therefore, tax of Rs.20805030 was payable by the appellant under section 36 of the Sales Tax Act, 1990 and liable to penal action under section 33 of the Sales Tax Act, 1990.

74. Before the Adjudicating Authority auditor had appeared and stated that the respondent had deposited a sum of Rs.770339 along with additional tax under the amnesty scheme. The further tax of Rs.1759873 will be paid after the decision of the Honourable Supreme Court of Pakistan. The issue of demand of Sales Tax has been settled in the light of the amnesty scheme S.R.O. No.247(i)/2004, dated 5-5-2004 and that wrong paid amount of Rs.770339 along with additional tax has already been paid in the amnesty scheme.

75. The Collector had held that the remaining amount of Rs.1759973 is recoverable along with additional tax and penalty which is linked up with the decision of Honourable Supreme Court of Pakistan. The 2nd issue regarding alleged payment of Sales Tax the registered person has already deposited. The 3rd issue that registered person had wrongly adjusted the further tax of Rs.7,70,339 has already been deposited along with 25% of additional tax amounting to Rs.1,46,550 in amnesty scheme which is confirmed by the department. Thus the remaining that Rs.17,59,973 has been disallowed by my learned colleague holding that there was no rational in claiming difference in between earlier and the present demand.

76. In the show-cause notice the total amount payable towards further tax given was Rs.30805230 but when added it turned out to be Rs.26294095 which is a mistake in adding the figures. It is true that the Adjudicating Authority has admitted in the impugned Order-in-Original No. 29 of 2005, that the period from December, 2000 to October, 2001 was already covered in the earlier Orders-in-Original No.7 of 2003 and 19/2003. The appellant vide application, dated 12-7-2005 had addressed the Collector Adjudication to rectify the mistake and had also stated that the total amount of further tax as per month-wise statement in the show cause notice is less than the amount of further tax already adjudicated (i.e. Rs. 290452671), therefore, had prayed to rectify the mistake and alleged demand of further tax amounting to Rs.1759973 be deleted.

77. This was a very fair prayer which should have been accepted by the Collector of Adjudication and the demand of Rs.1759973 is set aside.

78. However, the prayer of the appellant regarding refund of tax and additional tax paid in amnesty scheme and in instalments under Central Board of Revenue, order under protest is concerned; the appellant has not filed any such document/application to elucidate that it was paying under protest. It is only in this appeal that the appellant had taken this ground which is an afterthought and which cannot be granted as the appellant had voluntarily enjoyed the amnesty scheme and also made payment in instalments. The Order-in-Original is modified accordingly.

Sales Tax Appeal No.13 of 2005 (Al-Noor Sugar Mills v. Collector of Sales Tax and Central Excise, Hyderabad).

79. In the show-cause notice, dated 10-7-2004 the allegation is that registered person had supplied sugar, MDR Board, Sanding Dust, Waster Strip and MS scrape to different unregistered persons without charging further tax amounting to Rs.2834286.

80. The Adjudicating Authority had after hearing the parties ordered that appellant is liable to pay further tax amounting to Rs.283342861 along with additional sales tax computable under section 34 at the time of payment under section 36(1) of the Act and a penalty of Rs.5,000 or 3% of the tax involved whichever is higher. This order has been challenged before this Tribunal on various common grounds. The relevant objection has of the appellant is that Rs.19159623 Pertaining to further tax for the period of July and August, 2002 has already been covered by Order-in-Original No.9/2004, dated 31-1-2004, therefore, appellant cannot be charged twice.

81. It was further stated that on account of further tax of Rs.60,000 on the sale of sugar for March, 2003 and Rs.165476 on account of sale of MDF board for the period July to December, 2002 has been over stated. The detail of which was shown in the application for rectification, dated 12-7-2005.

82. There is an application for rectification, dated 12-7-2005 on record in which it is stated that the appellant had already paid further tax for the period of July and August, 2002 so it had to be excluded and that Rs.28342861 mentioned in Order-in-Original No.19 of 2004 is not correct. The alleged further tax of 3% over stated for the month of March, 2003 on sale of sugar amounting to Rs.60,000 and Rs.1659476 on account of MDF board from July to December, 2002 has been over stated.

83. I do agree with the objections raised in the appeal as well as in the application for rectification that appellant had already charged further tax for the period July, 2002 to August, 2002 have been covered in order-in-original No.9 of 2004, therefore, I am going to deduct this amount of further tax for the period July and August, 2002 from the total amount of Rs.23231057 mentioned in the show-cause notice. The total further tax amounting to Rs.5961942 is payable by the appellant in the sale of sugar to unregistered person liable to be registered.

84. As regards written objections of the appellant for the sale of sugar for the month of March, 2003 and on account of sale of MDF board for the period of July to December, 2002 have been over-stated does not appeal me for the reasons that they have not filed any invoice or document to show that they had been over-stated. In fact no oral arguments had taken place on the merits of the case and we Members are deciding on the written objections raised in the appeal.

85. Therefore, I. would add further tax at 3% for the period from September, 2002 to May, 2003 which comes to Rs.5961992 as regards sugar. For MDF board further tax at 3% from September, 2002 to December, 2002 comes to Rs.3104160. Further tax on Sanding Dust, Waste Strip and MS scrape was also added and total comes to Rs.90,70,408. In view of my findings on the commons issues of Order- in-Original and show-cause notice not being time barred, and the Order -in-Original I modified accordingly. Appeal partly allowed.

Appeal No.159 of 2004 Shamurad Sugar Mills v. Collector of Sales Tax and Central Excise, Hyderabad.

86. This appeal I had already taken up with the appeals which were remanded by the Honourable High Court. However, my learned colleague in his findings of this appeal have stated that the appellant have stated that this appeal is "touch stone" on section 73 of the Act and that the appellant had supplied the details of the bank statement to the Assistant Collector Audit Division, Hyderabad. The copy of which is available at page 35 of the paper book. On page 35 of the paper book there s only a letter written by the appellant that they are sending a copy of bank statement but there is no copy of bank statement in the file. On 15-5-2006 there is my hand written diary requiring the appellant to furnish the proof of sections 73 and 23 of the Sales Tax Act, 1990 but it appears that appellant has not complied the Court order and had only argued in 21 cases only on law points as such my findings already given in `remanded Appeal'.

Appeal No.187 of 2004 Shamurad Sugar Mills v. Collector of Sales Tax and Central Excise, Hyderabad.

87. My learned colleague had taken this appeal No.187 of 2004 amongst the appeals having different characteristics and which I had taken this appeal amongst the appeal which were remanded by the Honourable High Court, therefore, I need not repeat my findings.

Appeal No.84 of 2005 Al-Noor Sugar Mills v. Collector of Sales and Central Excise, Hyderabad.

88. The allegations levelled in the show-cause notice, dated 10-8-2004 against the appellant are that they have failed to deposit further tax on supplies made to unregistered person in violation of section 3(1A) of the Sales Tax Act, 1990. That the registered person has failed to produce the proof of payment for the purchase of Rs.50,000 as required under section 73 hence adjustment of input tantamounting to Rs.4500124 is inadmissible. The registered person has failed to produce the proof of payment for the sale of sugar of Sukkur Beverage Limited valuing at Rs.19075306 as required under section.73, therefore, tax at 3% amounting to Rs.572259 is recoverable under section 36 along with additional tax under section 34 apart from penal action under section 73 of the Act. As such amount of Rs.2,00,05,409 is recoverable under section 33(7) for violation of section 3(1A), 11, 26 and 73 of the Sales Tax Act, 1990.

89. In the diary, dated 15-5-2006 which is in my hand writing and in which I have mentioned the above stated three allegations and had asked the Advocate of the appellant to take each case separately and argue the same and the matter was put off to 24-8-2006 on which date the learned Advocate had argued appeals on point of law and did not touch on merits, nor produced any bank statement of sale invoices to prove the appeal in his favour, but my learned colleague had given his decision that the department's objection that the account of sale has not been made through banking channel is unfounded since the auditor vide his letter, dated 10-4-2004 available on page No.64 of the paper book of the appeal, confirms that the transaction through banking channel had taken place.

90. I do not agree with him on his opinion because on page No.64 there is plain paper with writing which says "received proof of payment under section 73 in respect of Messrs Al-Noor Sugar Mills, Shahpur Jahania and receipt proof of Sukkur Beverage for the period November, 2001 to June, 2002. There is a signature underneath and a date 10-4-2004. This is not a letter, nor there is any documents annexed with it to prove that appellant had given the proof of payment under section 73. There is no bank statement attached with it nor there is any name or seal of the Auditor who had received this, therefore, it cannot be taken as evidence according to Qanun-e-Shashadat Order.

91. The appellant could have furnished proof when the undersigned had asked them to argue on merits and had specifically mentioned section 73 in the diary and which order was not complied. Since no proof has been produced before the Tribunal nor before the Adjudicating Authority I do not find any merit in this appeal and is dismissed.

Appeal No.106/2006 Messrs Seri Sugar Mills Limited v. Collector of Sales Tax and Central Excise, Hyderabad.

92. This appeal could not be part of this judgment for reason that on 12-6-2006 this appeal was taken up and the diary which is in my own handwriting, says that there is note that appeal is barred by time by 9 months and 15 days and that respondent was directed to produce the evidence that they had sent the order in original to the appellant and case was adjourned to 24-8-2006. On 24-8-20006 this appeal was never heard on this point, therefore, it will be re-heard.

Appeal No. 181 of 2005 (Messrs Seri Sugar Mills Limited v. Collector of Sales Tax and Central Excise, Hyderabad.

93. The allegations levelled against the appellant in the show-cause notice, dated 9-2-2004 are that during the audit of taxable activities for the period from July, 2001 to June, 2003 irregularities have been pointed out by the Sales Tax Audit Team. The registered person had to pay further tax of supplies made to un-registered person which is violation of section 3(1A) of the Sales Tax Act, 1990.

94. It was alleged that during the period under audit the registered person had adjusted input tax of Rs.25004 in violation of provision of section 7 of the Sales Tax Act, 1990 which amount is recoverable along with additional tax. The 3rd allegation is that the appellant had failed to produce the proof of payment as required under section 73 of the Sales Tax Act, 1990 for purchases and supplies of above Rs.50,000, therefore, input tax amounting to Rs.2903457 adjusted is not admissible under the provision of section 73 of the Act. The 4th allegation was that the registered person has supplied 274 Metric Tons of Sugar valuing Rs.5378966 to Messrs Al-Nusrat Traders, L Block, North Nazimabad, Karachi 15% of sales tax of Rs.806815 was deposited unpaid amount of further tax of Rs.161370 along with additional tax as per audit observation issued is recoverable.

95. The Order-in-Original showed that the appellant had not appeared before the Adjudicating Authority , therefore, the Adjudicating Authority had passed the order that amount of further tax of Rs.10257964 is payable for the months of July, 2002 and February, 2003 and is recoverable under section 3(1)(a) of the Sales Tax Act, 1990 along with additional tax under section 34 of the Act. The 2nd allegation was that the appellant had, paid the principal amount but the Adjudicating Authority had ordered to pay additional tax and penalty 3% of the tax involved under section 3(2)(cc) of the Sales Tax Act, 1990.

96. The third allegation was that the registered person had failed to produce proof of payment as required under section 73 of the Sales Tax Act, 1990 for purchases and supplies of above 50,000, therefore, input tax amounting to Rs.2903457 adjusted by them is inadmissible, therefore, it was ordered to recover the same along with the additional tax under section 34 of the Sales Tax Act, 1990 and imposition of penalty of 3% amount of tax involved under section 32(2)(cc) for violation of sections 7, 8 and 73 of the Act. The purchases/supplies of Al-Nusrat Traders, Karachi was declared false and fraud tax invoices by the Collectorate of Sales Tax and-Central Excise, Karachi vide letter, dated 5-6-2003 3% further tax amounting to Rs.462754 deposited along with additional tax. A penalty of 3% on tax involved was also imposed under section 33(2)(cc) of the Act for not paying 3% further tax in time.

97. The audit report is on record and as per Special Audit Programme issued by Assistant Collector Audit vide letter, dated 10-6-2003 audit team visited Seri Sugar Mill, Tando Muhammad Khan on 3-7-2003 got into contact Muhammad Yousuf Godown Manager with reference to Messrs Al-Nusrat Traders, North Nazimabad, Karachi holding Sales Tax Registration No. 11-22-9999-771-19. On the basis of this audit report, dated 3-7-2003 the show-cause notice was given. I have checked the whole file there is no indication as observed by my learned colleague that auditors were ordered to undertake the period from July, 2001 to June, 2002, therefore,' his decision that passing of order-in- original beyond the period July, 2002 to April, 2003 is beyond the scope and authority of the jurisdiction for the audit, therefore, liable to cancellation cannot be accepted.

98. In the body of the appeal the appellant has stated that the show-cause notice was replied requesting not to pass any order under section 3(1A) of the Sales Tax Act, 1990 which is pending before the apex Court. The amount of Rs.25;004 reported by the Auditors as input tax claimed has been rightly claimed and adjusted, copies of bank statement were supplied and further tax on supplies made to Al-Nusrat Traders were deposited under protest. It was claimed that the Adjudicating Authority without giving any notice of hearing had observed that further tax of Rs. 10257964 was recoverable under section 3(1A) of the Sales Tax Act, 1990. He had further ordered for the payment of Rs.2903457 for violation of the term of section 73 of the Sales Tax Act, 1990 along with additional tax under section 34 for inadmissible adjustment or input tax and imposition of penalty 3% 103. The other grounds taken by the appellant were that Order-in-Original was barred by limitation and show cause notice does not spell out the subsection and the C.B.R.'s letter and the order of the Honourable Supreme Court staying the order of the Honourable High Court were not followed and had prayed to set-aside the Order-in-Original.

99. It appears from the facts and grounds of appeal that appellant had not taken plea that the auditors were asked to audit the period from July, 2001 to June, 2002 nor did the advocate argued this point, therefore, I am afraid decision cannot be given on the pints not raised by the appellant. I have already given my findings on the common issues which have been raised in this appeal, therefore, I need not repeat. The appellant had not provided any tax invoices to prove that they had complied the section 23 of the Act nor had provided any bank statement showing that section 73 was complied, therefore, in my opinion Order-in-Original is correct.

100. In the following appeals there were common issues of Further Tax along with other issues, that Order-in-Original and show-cause notice are barred by time and without jurisdiction which I have decided in favour of the department, therefore, further tax is payable in non-compliance of section 23 and 73 of the Sales Tax Act, 1990.

(1) Sales Lax Appeal No.159 of 2004 (Messrs Shahmurad Sugar Mills v. Collector of Sales Tax and Central Excise, Hyderabad).

(2) Sales Tax Appeal No.214 of 2004 (Messrs Ranipur Sugar Mills Limited v. Collector Sales Tax and Central Excise, Hyderabad).

(3) Sales Tax Appeal No.77 of 2005 (Messrs Matiari Sugar Mills Limited v. Collector Sales Tax and Central Excise, Hyderabad).

(4) Sales Tax Appeal No.29 of 2005 (Messrs Matiari Sugar Mills Limited v. Collector Sales Tax and Central Excise, Hyderabad).

(5) Sales Tax Appeal No.83 of 2005 (Messrs Shah Murad Sugar Mills Limited v. Collector Sales Tax and Central Excise, Hyderabad).

(6) Sales Tax Appeal No.193 of 2005 (Messrs Digri Sugar Mills Limited v. Collector of Customs and Central Excise, Hyderabad).

(7) Sales Tax Appeal No.272 of 2005 (Messrs of Sales Tax and Central Excise, Hyderabad).

(8) Sales Tax Appeal No.275 of 2005 (Messrs Al-Noor Sugar Mills Limited v. Collector of Sales Tax and. Central Excise, Hyderabad).

(9) Sales Tax Appeal No. 276 of 2005 (Messrs Shah Murad Sugar Mills v. Collector of Customs and Central Excise, Hyderabad).

(10) Sales Tax Appeal No.277 of 2005 (Messrs Shah Murad Sugar Mills Limited v. Collector Sales Tax and Central Excise, Hyderabad).

(11) Sales Tax Appeal No.278 of 2005 (Messrs Shah Murad Sugar Mills Limited v. Collector of Sales Tax and Central Excise of Hyderabad).

101. Appeal No.26 of 2005 is barred by time by 12 days. No application for condonation has been filed nor argued this point, therefore, is rejected as barred by time.

102. Section 3(1A) has been abolished under the Finance Act, 2004, it cannot be given retrospective effect. It will be effective from the date it was notified.

103. The Appeals Nos.132/2005 and 133/2005 are partly allowed and Orders-in-Original are modified accordingly. The rest of the appeals are dismissed on merits. Appeal No. 26 of 2005 is rejected as barred by time by 12 days. Appeal No.106 of 2006 will be re-heard on point of limitation as per diary 12-6-2006.

(Sd.)

KHALIDA YASIN

MEMBER (JUDICIAL-I)

MIAN MUHAMMAD HANIF TAHIR, (JUDICIAL MEMBER.)--These appeals are entrusted to me, by the learned Chairman in order to give third opinion as the learned Member Technical and learned Member Judicial have differed with each other on all the issues except 3(1A) in Fatima Sugar Mills Ltd. The learned Member Technical in 19 appeals out of 23 appeals has given his findings that the period specified in the proviso to section 36(3) of the Sales Tax Act, 1990 and in analogous provisions of other statutes are mandatory and not directory in nature. The chart available at pages 4 and 5 of the order-in -appeal shows the manner in which the orders-in-original have become barred by limitation and in this way the finding given by the learned Member Technical is correct in holding that 19 appeals are barred by time. The show-cause notices in question are not in accordance with the principles enunciated by the Hon'ble Supreme Court of Pakistan in the case of Khyber Lamps 2001 SCMR 238 and Caltex Oil 2005 PTD 580, so in the light of the said-reported judgments, the show-cause notices are vague and defective as necessary particulars were not given such as non-mentioning of subsection of section 36 under which they have been issued. I have gone through the various authorities cited by the learned counsel for the appellants and I am on this point also in full agreement with the learned Member Technical.

2. The next objection is regarding the Sales Tax Ruling published in the Business Recorder, dated 31-10-2001, according to this procedure, the Executive Collectorate would initially formulate a comprehensive contravention report on the basis of audit observations indicated in the audit reports complied by Auditor General's office and this report should clearly elaborate the violation, specific section and rules of the Sales Tax Act, 1990 which were not properly followed by the concerned Dints/persons. Thereafter the Sales Tax Collector would submit the contravention report to the adjudicating officer, who would then issue show-cause notices to the concerned person within the specified period. In the present cases, the concerned authorities were not cleared about the .issuances of the show-cause notices to a particular audit paras. From the perusal of the above said ruling, it transpired that the adjudication officers cannot conduct adjudications unless they first receive contravention reports by the Executive Collectorates and the ruling also shows that such contravention reports cannot be issued by the officers below the rank of a Collector. On this point the departmental representative version that this is only an internal procedure and cannot be used by the assessees/registered persons is not correct and if this very nature of the text of the ruling is only for internal use why the same was published in the press for public at large. The learned Member Technical has also referred various authorities on the subject in the judgment, so in my mind further discussion on this topic is not necessary.

3. On the merits of the case, my learned brother referred the judgment of the Full Bench of this Tribunal in the case of Fatima Sugar Mills Ltd. v. Collector Sales Tax GST 2003 CL 413. According to the said judgment section 3(1A) was inapplicable where taxable supplies were made to registered persons; the terms registered person, was defined in section 2(25) of the Sales Tax Act, 1990 means a person registered or liable to be registered under the Act; therefore, any person who was liable to be registered under the Act, but was actually not registered, was to be considered as a registered person. And those persons who were liable to be registered under the Sales Tax Act, 1990 were mentioned in section 14; therefore, where supplies were made to persons who were not actually registered but otherwise liable to be registered, the said supplies would have to be considered to have been made to registered persons under the Act and for such transactions section 3(1A) was totally inapplicable; as regards supplies made to wholesalers it was also observed that the term "wholesaler" was defined in section 2(47) of the Sales Tax Act, 1990 which includes a dealer. On further analysis by the Full Bench, it was also held that the amendments made on section 2(25) of the Sales Tax Act, 1990 in the year, 2002 did not make any difference to the interpretation made in page 20 of the order-in-appeal authored by my learned brother Member Technical. It was also pointed out that the department should not be complacent and should try its level best to broaden the tax base and register the unregistered persons. It is important that the registered taxpayer could not be made responsible for any default of, the department in failing to register the unregistered persons.

4. The Full Bench judgment of the Tribunal in Fatima Sugar Mills case is fully applicable to the present appeals. The supplies in the present case are, made by the registered persons to or through brokers/dealers, who are liable to be registered under the Act and as such the supplies of the appellants, which are in issue do not attract section 3(1A) of the Sales Tax Act, 1990. The departmental stance in respect of un verifiability of the sales is misconceived; firstly the dealers in the present case i.e. the brokers to whom or through whom the present supplies have been made are fully verifiable and secondly where the sales for the purposes of section 3(1) have been accepted to be verifiable, the stance of the department for the purposes of section 3(1A) will be completely unwarranted, and discriminatory and against the Article 25 of the Constitution.

5. Section 73 of the Sales Tax Act, 1990, which deals with the eligibility to claim input adjustments only where the payments are made through a banking channel, is hardly relevant. The said section does not say that if sales are unverifiable further tax under section 3(1A) should be imposed and section 73 does not require the supplies to be verifiable. The application of section 73 ibid is not correct in the present circumstances.

6. Section 19 of the Sales Tax Act, 1990 prior to the Finance Act, 2004, provided for compulsory registration and in this section it was clearly provided that were a person who was required to be registered under the Act did not seek registration, the Collector would compulsory register such person and the said person would be deemed to be registered from the date he became liable for registration. On this aspect the detail discussion was made in the Fatima Sugar Mills case, so it is not necessary to repeat the same. The conclusion is that the supplies made by the appellants to the persons not actually registered, were to be construed as supplies made to registered persons as the purchasers even if not so registered, were, deemed to be registered under section 19 ibid.

7. I am fully in agreement with the findings given by my learned brother Member Technical on the implication of section 3(1A) of the Sales Tax Act, 1990. The issue is discussed .in detail in the light of the judgments of the superior Courts of the country and allowed the appeals of the appellants holding that all the proceedings and orders are vacated and there is no justification to impose any additional tax and penalty as there is no willfull default or mala fide on the part of the appellants.

8. There was also a violation of section 72 of the Sales Tax Act, 1990, by the adjudicating officer as stated in detail at page 6 of' the orders of learned Member Technical.

9. Section 3(1A) was removed from the Sales Tax Act, 1990, through Finance Act, 2004, the Hon'ble Finance Minister in his speech found section 3(1A) imposing further tax to be major trade distorting measures as discussed in detail at page 24 of the orders of the learned Member Technical.

10. I fully agree with the orders of the learned Member Technical that the repeal of section 3(1A) was remedial and curative in nature as such it will apply to all pending proceedings, assessments and appeals as per reported case-law stated by the learned Member Technical at page 26 of his order.

11. Regarding the seven appeals bearing Nos.H-132/2005, H-159/2004, H-187/2004, H-133/2005, H-84/2005, H-106/2006 and H-181/2005, each having different character, my learned brother made a detailed discussion on every different character, my learned brother made a detailed discussion on every aspects of the appeal, therefore, it is not necessary, to repeat the same.

The result of the above said discussion is that all the appeals are allowed, the impugned orders, show-cause notices and other proceedings are set aside.

C.M.A./91/Tax(Trib.)Appeal accepted.