ALUMINUM PROCESSING INDUSTRIAL INTERNATIONAL (PVT.) LTD. VS PAKISTAN through Chairman, Central Board of Revenue, Islamabad
2011 PTD 2128
[Sindh High Court]
Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ
Messrs ALUMINUM PROCESSING INDUSTRIAL INTERNATIONAL (PVT.) LTD. through Manager
Versus
PAKISTAN through Chairman, Central Board of Revenue, Islamabad and 2 others
High Court Appeals Nos.445 and 453 of 2003, decided on 01/06/2011.
(a) Sales Tax Act (VII of 1990)---
----Ss. 45A, 45B, 46 & 72---Decision or order passed by an Appellate Authority---Power of Board of Revenue to call for records and satisfy itself as to legality or propriety of such decision or order---Scope---Appellate Authority always worked independently without being influenced by any departmental authority---Proceedings before Appellate Court were always considered to be separate proceedings from normal and routine departmental proceedings---Board while exercising powers under S. 45A of Sales Tax Act, 1990 could not interfere in quasi-judicial proceedings of Appellate Authority or its judicial discretion as same would undermine or influence independence of Appellate Authority---Interference in order/decision of Appellate Authority by Board would amount to disturbing settled issues, where against the department, if having any grievance, could file appeal before Tribunal---Board had no jurisdiction to interfere in proceedings either culminated or pending before an Appellate Authority or Tribunal Principles.
Ch. Sir Muhammad Zafarullah Khan v. The Custodian of Evacuee Property, West Pakistan Karachi PLD 1964 SC 865;' Khan Trading Company, Gujranwala v. Collector of Customs, Excise and Sales Tax (Adjudication), Lahore 2002 CLC 705;. Messrs Flying Board and Paper Products v. Deputy Collector-II Directorate of_ Sales Tax and 3 others 2002 PTD 7; Messrs Muhammad Hussain v. Collector of Custom and 2 others 1991 MLD 1459; (1996) 103 Sales Tax Cases 26; Muhammad Ibrahim v. Group Captain Salehuddin and others 1987 SCMR 218; Iftikhar Hussain Shah and others v. Secretary M/o Defence, Rawalpindi and others 1991 SCMR 2193; AIR 1959 SC 219; PLD 1956 Kar. 178; Malik Jehangir Khan v. Banking Tribunal No.1, Karachi, Division Karachi 2002 CLC 1466; Nazmafk (Pvt.) Ltd. through Chief Executive v. Federation of Pakistan, through Secretary (Revenue Division/F.B.R.) 2009 PTD 1463; Ganga Properties v. Income Tax Officer (1979) 118 ITR 447; Commissioner of Income Tax Orissa v. Dhadi Sahu (1976) 105 ITR 56; Commissioner of Income Tax v. OM Sons (1979) 116 ITR 215; Additional Commissioner of Income Tax Karnataka v. M.Y. Chandigarh (1981) 128 ITR 256; Reckitt Benckiser Pakistan Ltd. v. Federation of Pakistan and others 2009 PTD 642; Commissioner of Income Tax Sukkur Zone v. Messrs Gatron (Industries) Ltd. Quetta 1998 PTD 2769; Assistant Director Intelligence and Investigation Karachi v. Messrs B.R Herman and others PLD 1992 SC 485; Khawaja Auto Cars" Ltd. v. Muhammad Yousuf 1991 SCMR 2223; Abbasia Coop. Bank v. Muhammad Ghaus PLD 1997 SC 3; Anisa Rehman v. P.I.A.C. 1994 SCMR 2232; Pak Land Cement Ltd. Karachi v. Central Board of Revenue 2007 PTD 1524; 2006 PTD 193(SIC); 1999 SCMR 1871 (SIC); Collector of Customs (Export) v. Messrs Chemitex Industries (Pvt.) Ltd. 2000 MLD .836; Central Insurance Company v. C.B.R. 1993 SCMR 1232 and R.A.. Rehman v. Federation of Pakistan 1988 SCMR 691 ref.
(b) Jurisdiction---
----Authority dealing with a matter must possess' jurisdiction to deal with same, and if such authority did not have such power, then initiation of entire proceeding would be liable to be quashed for being coram-non-judice and non-est in eyes of law.
Dr. Muhammad Farogh Naseem for Appellants.
Raja Muhammad Iqbal for Respondent.
Date of hearing: 3rd May, 2011.
JUDGMENT
IRFAN SAADAT KHAN, J.---These High Court Appeals have been filed against the consolidated order passed by the learned Single Judge in Suits Nos. 297 of 1999 and 412 of 1999 dated 24-1-2003.
2. Briefly stated the facts of the case are that the appellant in H.C.A. No. 445 of 2003 is a Private Limited Company (hereinafter referred to as the appellant No. 1) engaged in manufacturing and sale of aluminum foil, aluminum paper backed and disposable ,utensils which were supplied to PIA Corporation and other manufacturers. In the High Court Appeal No. 453 of 2003 the appellant is a public limited company (hereinafter referred to as appellant No.2) engaged in the business of manufacturing of cement and was assessed to sales tax on month to month basis.
3. The controversy relating to appellant No.1 pertains to the period 1-1-994 to 30-5-1995. Initially a show-cause notice dated 28-5-1998 was issued by the then Additional Collector, Sales Tax alleging that there had' been short payment of sales tax. Thereafter on 17-6-1998 a corrigendum was issued whereby the liability was substantially reduced by showing a revised amount payable by the appellant. Replies to the show-cause notice, were furnished through letters dated 13-6-1998, 19-6-1998 and 20-6-1998. However the said explanations were not accepted and the Additional Collector vide his Order-in-Original No. 15 of 1998 dated 22-6-1998 assessed a demand of Rs.3,873,425 as principal sales tax, additional tax was worked out at Rs.15,895,998 and penalty at Rs.5,00,000. However the Additional Collector allowed the appellant No.1 to avail the benefit of C.B.R's. Notification No. S.R.O. 575(I)/98 dated 12-6-1998 by making the payment of principal amount by 30-6-1998, in order to take benefit of withdrawal of additional tax/ penalty. The appellant disputed the said order by way of filing an appeal, however concession prescribed under the S.R.O. was availed and the principal amount was paid under protest on 30-6-1998. The said appeal was then heard and was allowed vide Order-in-Appeal No. 758 of 1998. dated 14-12-1998. It is however to be noted that no second appeal was filed by the department against the said order, which attained finality. As per the learned counsel the amount so deposited amounting to Rs.3,873,425 thus by virtue of the order-in-original became refundable to the appellant No. 1.
4. Thereafter the respondent No.2 i.e. the Member (Judicial) issued a show-cause notice dated 9-2-1998 under section 45-A of the Sales Tax Act, 1990 (The Act) informing the appellant that he proposes to reopen the matter. Being aggrieved with the said notice, a Suit No. 297 of 1999 was filed by the appellant No. 1, in which the learned Single Judge after hearing the parties at some length dismissed the same vide order dated 24-1-2003, against which the present High Court Appeal has been filed.
5. Apropos the facts of the appellant No.2 are concerned the Deputy Collector vide his show-cause notice dated 19-11-1995 informed the appellant No.2 through a show-cause notice that as they had failed to pay the sales tax on the advances/part payments, hence they were legally obliged to pay the said amount to the department. The appellant filed their reply dated 18-12-1995, however, the Deputy Collector did not agree with the submissions vide his Order-in-Original No. 21 of 1996 passed an order against the appellant ido.2. Being aggrieved with the said order-in-original the appellant preferred an appeal before the Collector (Appeals) who vide order dated 1-10-1996 set aside the said order-in- original and remanded back the matter !or de novo consideration. When the matter was once again adjudicated upon by the Additional Collector, he this time vide order dated 2-2-1997 held the appellant not to have defaulted in making the payments of sales tax liability and vacated the show-cause notice originally issued by him. It is pertinent to note that no appeal against the said order was preferred by the department, which as per the learned counsel had attained finality. However it was brought to our notice by the learned counsel that papers relating to some erroneous appeal were filed by the department stating that an appeal had been filed before the Collector (Appeals) against the said order-in-original but those appeal documents were subsequently found to be bogus and fictitious. In the meantime the respondent No.2 issued a show-cause notice 16-2-1999 under section 45-A of the Act informing the appellant No.2 to show cause as to why some alleged outstanding dues against them may not be recovered. It was against this show-cause notice that the appellant filed a Suit No. 412 of 1999, which was clubbed with the case of appellant No.1. Both these suits were heard together and were dismissed by the learned Single Judge vide his order dated 24-1-2003. It is against this consolidated order that the present High Court Appeals have been filed and as common grounds have been raised, we propose to dispose of both these Appeals through this consolidated order.
6. Dr. Muhammad Farogh Naseem, Advocate appeared on behalf of the appellants and submitted that the show-cause noticed issued by the respondent No.2 were bad in law and without jurisdiction. As per the learned counsel the Central Board of Revenue (Now F.B.R.) has no authority under the provision of section 45-A of the Act to reopen the case of the appellants especially in the circumstances when admittedly no appeals were filed against the order passed by the Collector (Appeals), 'which matter had attained finality. Hence as per the learned counsel reopening the same matters on identical facts, amounts to giving the settled issue a new lease of life which already had attained finality. As per the learned counsel this is abuse of powers by the F.B.R. in the garb of section 45-A, which is not only illegal but also without jurisdiction and uncalled for. He submitted that when the orders-in-original were set aside in orders in appeal the department acted in accordance with the instructions given in the said order in appeal but the present action of reopening the matter under the provision of section 45-A of the Act has totally ruined the previous procedure and the F.B.R. had acted in a totally derogatory manner which lacks legal backing. As per the learned counsel as the order-in-original had merged with the orders-in-appeal, the F.B.R. had no jurisdiction under the law to reopen the same which is totally against the principles of doctrine of merger. He submitted that the above arguments were raised before the learned Single Judge, but he totally failed to appreciate and consider the same.
7. He further submitted that under the provision of section 45-A of the Act the F.B.R. has only the authority to call for the records of departmental proceedings and this power does not extend to matters set at rest in appeals. According to the learned counsel the appellate matters are quasi-judicial in nature and the F.B.R. has no jurisdiction to disturb or to take any action which has the effect to whittle down the appellate orders. He in this regard invited our attention to the provision of section 72 of the Act and argued that the present action of the respondent No.2 has created a conflict between section 45-A and section 72 of the Act which is totally against all norms of the law. He further submitted that under the provision of section 45-A the F.B.R. has only the authority to disturb the orders passed by Officers mentioned as Sales Tax Authority and the Collector (Appeals) being independent authority the F.B.R. had no authority under the law to disturb any order passed by the Collector (Appeals) and the present action, according to the learned counsel, amounts to brushing a side the orders passed by the Collector (Appeals).
8. He further submitted that the present action taken by the F.B.R. amounts to change of opinion as the entire facts were already available with the department and no new fact had been discovered by them hence the action was without legal justification. He further submitted that the learned Single Judge has also failed to appreciate the terms "advances", "credit", "loans" and "bailment" used in Sales of Goods Act and has also not considered the various judgments cited before him. He also stated that in any case the action taken by the F.B.R. under the provision of section 45-A was barred by limitation which aspect has not at all considered by the learned Single Judge. He also submitted that the respondent No.2 has acted with a pre-conceived notion, as it appears that he has not acted with an independent mind rather acted in an arbitrary manner as per the directions given to him by the senior authorities. He further submitted that the action taken under section 45-A also amounts to double taxation which also has not been considered. He also submitted that the learned Single Judge was also not justified in disagreeing with the decision given in the case of Flying Board v. Deputy Collector 2002 PTD 7). He further submitted that the learned Single Judge was not justified in relying upon the provision of section 51 of the Act, which has no bearing on the present cases. In support of his above contentions the learned counsel has relied upon the following judgments.
(1)Ch. Sir Muhammad Zafarullah Khan v. The Custodian of Evacuee Property, West Pakistan Karachi (PLD 1964 SC 865)
(2)Khan Trading Company, Gujranwala v. Collector of Customs, Excise and Sales Tax (Adjudication), Lahore (2002 CLC. 705)
(3)Messrs Flying Board and Paper Products v. Deputy Collector-II Directorate of Sales Tax and 3 others (2002 PTD 7)
(4)Messrs Muhammad Hussain v. Collector of Custom and 2 others (1991 MLD 1459)
(5)(1996) 103 Sales Tax Cases 26
(6)Muhammad Ibrahim v. Group Captain Salehuddin and others (1987 SCMR 218)
(7)Iftikhar Hussain Shah and others v. Secretary M/o Defence, Rawalpindi and others (1991 SCMR 2193)
(8)AIR 1959 SC 219
(9)Reference under section 12, Sindh Courts Act v. Reference under section 12, Sindh Courts Act (PLD 1956 Karachi 178)
(10)Malik Jehangir Khan v. Banking Tribunal No.1, Karachi, Division Karachi (2002 CLC 1466).
(11)Nazmafk (Pvt.) Ltd. through Chief Executive v. Federation of Pakistan, through Secretary (Revenue Division/F.B.R.) (2009 PTD 1463)
(12)Ganga Properties v. Income Tax Officer [(1979) 118 ITR 4471
(13)Commissioner of Income Tax Orissa v. Dhadi Sahu (1976) 105 ITR 56
(14)Commissioner of Income Tax v. OM Sons (1979) (116 ITR 215)
(15)Additional Commissioner of Income Tax Karnataka v. M. Y. Chandigarh (1981) (128 ITR 256)
(16)Reckitt Benckiser Pakistan Ltd. v. Federation of Pakistan and others (2009 PTD 642)
(17)Commissioner of Income Tax Sukkur Zone v. Messrs Gatron (Industries) Ltd. Quetta (1998 PTD 2769)
(18)Assistant Director Intelligence and Investigation Karachi v. Messrs B. R Herman and others (PLD 1992 SC 485)
(19)Khawaja Auto Cars Ltd. v. Muhammad Yousuf (1991 SCMR 2223)
(20)Abbasia Coop. Bank v. Muhammad Ghaus (PLD 1997 SC 3)
(21)Anisa Rehman v. P.I.A. C. (1994 SCMR 2232)
9. Mr. Raja Muhammad Iqbal, Advocate appeared on behalf of the department and submitted that the issue raised by the learned counsel in the present Appeals has already been decided by a Division Bench of this Court in a judgment reported as Pak Land Cement Limited Karachi v. Central Board of Revenue (2007 PTD 1524). He submitted that the Suits were rightly dismissed by the learned Single Judge as the same were not maintainable and in support thereof relied upon the following decisions:--
(1) 2006 PTD 193 (sic)
(2) 1999 SCMR 1871 (sic)
(3) 2000 MLD 836 (Collector of Customs (Export) v. Messrs Chemitex Industries (Pvt.) Ltd.
The learned counsel supported the order passed by the learned Single Judge and submitted that the learned Judge in his exhaustive order had dilated upon all the issues presently raised by the learned counsel for the appellants and had answered each query in this regard. He submitted that the appellants have come to the court with unclean hands and these Appeals are liable to be dismissed with costs.
10. Dr. Muhammad Farogh Naseem, Advocate in his rebuttal submitted that the facts of the decision given in the case of 2007 PTD 1524 were totally different and reiterated his earlier submissions and stated that both the appeals may be allowed by setting aside the order passed by the learned Single Judge.
11. We have heard both the learned counsel at considerable length and have also perused the law, record and the decisions relied upon by them.
12. It would be in fitness of things if the relevant law is first discussed:-
45A. Powers of the Board and Collector to call for records.---(1) The Board may, of its own motion, call for an examine the record of any departmental proceedings under this Act or the rules made thereunder for the purpose of satisfying itself as to the legality or propriety of any decision or order passed therein by an officer of Sales Tax it may pass such order as it may think fit:
Provided that no order imposing or enhancing any penalty or fine requiring payment of a greater amount of sales tax than the originally levied shall be passed unless the person affected by such order has been given an opportunity of showing cause and of being heard.
(2) No proceeding under subsection (1) shall be initiated in a case where an appeal under section 45B or section 46 is pending".
(3) No order shall be made under this section after the expiry of five years from the date of original decision or order of sub-ordinate officer referred to in subsection (1).
(4) The Collector may exercise the powers conferred on the Board by subsection (1) in respect of any case decided by an officer sub-ordinate to him".
13. The reading of the above section clearly envisage that Board has the authority to call for the records and to satisfy itself to the legality and propriety of any decision or order passed by an officer of the Sales Tax. It is a trite proposition of law that an Appellate Authority always work independently without being influenced by any authority meaning thereby that an Appellate Authority always give its decision independently. The proceedings before an Appellate Authority are considered to be appellate proceedings and are always considered to be separate proceedings from the normal and routine departmental proceedings. It is quite evident from the reading of section 45A that in subsection (2) it has categorically been mentioned that "No proceedings under subsection (1) shall be initiated in a case wherein an Appeal under section 45B or section 46 is pending". Meaning thereby that the law makers were fully conscious of the facts that Board while exercising the powers under section 45A should not be given the, authority to interfere in the quasi judicial proceedings of an Appellate authority. Section 72 of the Act clearly stipulates as under:--
"72. Officers of sales tax to follow Board's orders, etc. ---All officers of sales tax and other persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Board:
Provided that no such orders, instructions or directions shall be given so as to interfere with the discretion of officers of sales tax in the exercise of their quasi-judicial functions."
14. If the above provisions of law are read in juxtaposition, it would reveal that the Board has clearly been marked not to interfere in the quasi-judicial proceedings of an Appellate Authority as this could undermine or influence the independence of an Appellate" Authority. In our considered view the present reopening of the matter by the Board would not only amount to giving a new lease of life to the concluded matters, which authority in our view it does not possess, but also would amount to disturbing the issues which had already attained finality and in respect of which the department had shown no grievance. Had the department any grievance it would have filed appeals against the said orders passed by the Collector (Appeals) and the Collector of Adjudication. Though the Board has the authority to reopen a matter and call for records to satisfy itself to the legality and propriety in respect of any decision or order passed by an Officer of Sales Tax Department, but in our considered view the Board had no authority under the law to call for the records and to satisfy itself to the legality and propriety of any decision or order passed by an Appellate authority.
15. It is a settled proposition of law that the authority dealing with a matter must possess the jurisdiction to deal with the same and if such authority does not have that power the initiation of entire proceedings are liable to the quashed being coram-non-judice and non-est in the eyes of the law. Reference in this regard may be made to the case of Messrs B.R. Herman wherein the Hon'ble Apex Court has observed as under:-
"Where Customs Authorities exercise a quasi-judicial function, it is not bound by the instructions and directions or orders of the Central Board of Revenue which interfere with its judicial discretion---Authorities have to make their own decision on the basis of the facts and circumstances and the law applicable to the case.
Section 223 of the Customs Act provides that all officers of Customs and other persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Board. However, there is proviso which excludes the applicability of this provision to case where such instructions will interfere with the discretion of the Appropriate Officers of customs in the exercise of their quasi-judicial functions. Thus, in all those cases in which Customs Authority exercises a quasi-judicial function, it is not bound by the instructions and directions or orders of the Board which interfere with its judicial discretion. It has to make its awn decision on the basis of the facts and circumstances and the law applicable to the case."
16. The above observations of the Hon'ble Apex Court will fortify our view that the Board has no jurisdiction to interfere in the judicial discretion of the Appellate Authority. If the above principle is applied to the present cases it would be seen that the Board in the garb of section 45A of the Act wants to interfere with an appellate order, which had attained finality, by reopening the same by exercising its revisional jurisdiction which authority in our considered view it does not possess. Had the intention of the law makers was to give the Board the authority to revise the appellate order subsection (2) of section 45A of the Act and proviso to section 72 would not have found mentioned in the present Act, which in our considered view clearly imposes embargo on the powers of the Board not to interfere in the quasi judicial functions of an Appellate Authorities.
17. Hence in our opinion once a matter is dilated upon by the Collector (Appeals) the jurisdiction of the Board to exercise its revisional powers under section 45A of the Act is ousted as it is only the Tribunal which had the jurisdiction to decide the legality and propriety of any decision passed by the Collector (Appeals). The Board in our view becomes functus-officio the moment an appeal is filed and the same is pending under sections 45B and 46 of the Act as clearly envisaged in subsection (2) of section 45A of the Act. Thus in our view even if Collector (Appeals) is considered to be an officer of the Sales Tax department the proceedings culminated by the said Collector (Appeals) could by no stretch of imagination be considered to be departmental proceedings and the Board had no authority under the law to inter fere in those quasi judicial proceedings. Reference in this regard may be made to the decision of the Hon'ble Apex Court in the case of Central Insurance Company v. C.B.R. (1993 SCMR 1232) wherein, while defining the powers of the C.B.R. it was held as under: -
"We may point out that the Central Board of Revenue cannot issue any administrative direction of the nature which may interfere with the judicial or quasi-judicial functions entrusted to the various functionaries under the statute."
18. Reference in this regard may also be made to the decision given by the Hon'ble Supreme Court of Pakistan R.A. Rehman v. Federation of Pakistan (1988 SCMR 691) wherein the Hon'ble Apex Court observed as under:--
"The enacting part of the provisions of section 223 makes it obligatory upon the officers of Customs to observe and follow the orders, instructions and directions issued by the Board of Revenue. However, the proviso restricts the powers of Board of Revenue so that no such orders, instructions or directions can be given which in any way interfere with the discretion of the Appropriate Officers of Customs in the exercise of their quasi-judicial functions. "
19. We would like to state here that in the case of Khan Trading Company Justice Jawwad S. Khawaja (as he then was) sitting singly in Lahore High Court observed as under:--
"14. It is clear from the aforesaid statutory provision that only such decision or order can be assailed in appeal under clause (a) of subsection (1) of section 194-A of the Customs Act which has been passed by an officer of Customs functioning as an Adjudicating Authority. The decision of the Collector (Adjudication) to issue the impugned notice has been made by him in purported exercise of revisional powers and not as an Adjudicating Authority. It is clear that the Additional Collector (Adjudicating) while passing the order-in-original, dated 2-5-2001 acted as an Adjudicating Authority. The issuance of the impugned notice, in view of above discussion, cannot be termed as a decision of the Collector (Adjudication) functioning as in Adjudicating Authority. It is, therefore, not a decision which can be assailed before the Appellate Tribunal under clause (a) of subsection (1) of section 19-A of the Customs Act. In the circumstances, I find that this petition is maintainable because the law does not provide an alternate remedy to the petitioner against the decision of the Collector (Adjudication) to issue the impugned show-cause notice.
(15) The conclusion in the preceding paragraph also strengthens the opinion expressed earlier in this judgment that the term "Collector of Customs" used in section 195 of the Customs Act, does not include a Collector acting as an Adjudicating Authority. This is so because any construction of the law to the contrary would result in the odd situation where an aggrieved person such as the petitioner, who has obtained relief from the Additional Collector (Adjudication) would stand deprived of its remedy before the Appellate Tribunal against an adverse revisional order passed by the Collector (Adjudication) because the revisional order, not being an adjudication, would fall outside the scope of clause (a) of subsection (1) of section 194-A of the Customs Act. "
20. In the tight of above decisions, we have come to the conclusion that the Board has no authority to interfere under the provision of section 45A of the Act, in the proceedings which had already been either culminated or pending before an appellate authority or the Tribunal, as this would amount to interfering in the quasi-judicial functions of that authority. We, therefore allow both these High Court Appeals and set aside the order passed by the learned Single Judge dated 24-1-2003.
S.A.K./A-79/KAppeals accepted.