PAKISTAN ORDNANCE FACTORIES (POF) WAH, CANTT. VS COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE ADJUDICATION), ISLAMABAD
2012 P T D 1016
2012 P T D 1016
[Islamabad High Court]
Before Muhammad Anwar Khan Kasi and Shaukat Aziz Siddiqui, JJ
Messrs PAKISTAN ORDNANCE FACTORIES (POF) WAH, CANTT.
versus
COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE ADJUDICATION), ISLAMABAD and others
S.T.R. No.1 of 2007, decided on 14/03/2012.
(a) Sales Tax Act (VII of 1990)---
----Ss.11 & 36(1)---Order-in-original passed on. 25-2-2004 after issuance of show cause on 4-12-2002---Validity---Provision bringing penal consequences must be invoked or exercised within time prescribed by statute itself---Law required passing of such order within 135 days including extended/grace period---Such order had been passed after 448 days of show-cause notice with inordinate delay of 313 days---Extension of time obtained on 20-11-2003 was patently time barred---Authority had not shown any reasonable justification for such delay---Government departments could not be put at higher pedestal in matter of limitation, rather they would be supposed to act within statutory period---Order was barred by limitation in circumstances.
2007 PTD (Trib.) 840; Adil Poplypropylene Products Ltd. and others v. The Federation of Pakistan through Secretary Finance and others 2000 SCMR 1708; 2008 PTD 2025; 2009 PTD 2004; 2010 PTD 1520; 2011 SCMR 1279 and PLD 1974 SC 134 ref.
PLD 2006 SC 209 = 2006 PTD 769 rel.
(b) Interpretation of statutes---
----Fiscal statute---Provision bringing penal consequences, invocation of---Scope---Such provision must be invoked or exercised within time prescribed by statute itself.
(c) Limitation--
----Treatment of Government departments etc., in matter of limitation--Principles stated.
Government departments cannot be put at higher pedestal when it comes to limitation. The executive functionaries, quasi and non-quasi judicial forums/tribunals are supposed to follow the mandate of law and perform their duties, exercise their jurisdiction and execute their authority within the period provided by law.
Inefficiency, slackness, incompetence and inaction on the part of executive functionaries or persons on the helm of affairs by itself is no ground to ignore the command of law of performing any act within the stipulated period.
The exception of unreasonable delay can be evaded, if statute does not prescribe the time period/limit in which act has to be performed.
Hafiz Muhammad Idrees for Petitioner.
Syed Touqeer Bukhari and Raja Karim Akhtar, Inland Revenue Officer Legal-II for Respondents.
Date of hearing: 23rd February, 2012.
JUDGMENT
SHAUKAT AZIZ SIDDIQUI, J.---Through instant Sales Tax Reference, the petitioner/applicant Messrs Pakistan Ordnance Factories, Wah Cantt has sought indulgence of High Court, vested in it under section 47 of Sales Tax Act, 1990, requesting therein to decide the questions of law emanating from Order-in-Original No.2 of 2004, dated 25-2-2004 passed by Collector (Adjudication) Collectorate of Customs, Sales Tax and Central Excise, Rawalpindi and judgment dated 7-3-2007 passed in appeal by the Appellate Tribunal of Customs, Central Excise and Sales Tax, Islamabad.
2. Instant reference was filed before, the Hon'ble Lahore High Court, Rawalpindi Bench, Rawalpindi and vide order dated 18-3-2008 passed by learned Division Bench, out of 10 proposed questions, admitted questions Nos.1, 2 and 9 of law, for hearing and notices were issued. Questions are as under:--
(i) Whether under the law and circumstances of the case, the learned Customs, Central Excise and Sales Tax Appellate Tribunal, Islamabad Bench-II (hereinafter referred to as Appellate Tribunal) was justified in confirming the Order-in-Original No.2 of 2004 passed by the Collector (Adjudication)?
(i) Whether under the law and circumstances of the case the Appellate Tribunal was justified in confirming the levy of Sales Tax on generation of electricity and its self-consumption by the applicant?
(ix) Whether the Appellate Tribunal was justified in confirming the levy of additional tax and penalty when the applicant had not committed any default?
3. Briefly, the facts gleaning out of instant S.T.R, are that, Assistant Collector (Audit-1) Collectorate of Sales Tax and Central Excise, Rawalpindi, conducted the audit of Messrs Pakistan Ordnance Factories, Wah Cantt for the period from August, 1999 to May, 2001 and observed as under:
(i) Messrs P.O.F supplied Electric Power to its subsidiaries without charging sales tax. As per data provided by Messrs P.O.F for-the period September, 1999 to May, 2001, a total of 207,587,492 units of electric power were supplied to its subsidiaries. The market value of such supplies comes to Rs.978,456,130 by multiplying units supplied with market price, (i.e. Wapda's tariff) provided by Messrs P.O.F Wah as specified under section 2(46)(a)(ii) "in case the supplier and recipient are associated persons and the supply is made for no consideration or for a consideration which is lower than the open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax". Thus, the Sales Tax short deposited comes to Rs.146,768,419 Messrs P.O.F had thus, contravened the provision of sections 2(41), 2(44), 3, 6, 22 and 26 of the Sales Tax Act, 1990.
(ii) Messrs Pakistan Ordnance Factories, Wah Cantt, have failed to issue serially numbered tax invoices at the time of supply. They violated section 23 of the Sales Tax Act, 1990, punishable under section 33 ibid.
(iii) Messrs P.O.F Wah Cantt, failed to provide the data of power generation and the supply for the period 16-8-1999 to 31-8-1999, as tax on electric power was imposed w.e.f. 16-8-1999. Thus, they have violated the provisions of section 25 ibid, punishable under section 23 of the said Act.
4. Accordingly, a Show-Cause Notice C.No.ST/Coll/Adj/21/2002/ 15033-35 dated 14-12-2002 was issued calling upon P.O.F within fifteen days of the issuance of notice as to why they should not pay, Sales Tax of Rs.146,768,419 in terms of sections 11 and 36(1) of the Sales Tax Act, 1990 along with additional tax under Section 34 of the Act ibid and why penal action under Section 33 should not be taken against them for violation of sections 2(41), 2(44), 3, 6, 22, 23, 25, 26 and 38 of the Act, ibid.
5. The gist of replies/comments/stance taken by the petitioner in response to show-cause notice and during qusai-judicial and judicial proceedings, mentioned above is that, POF did no pay sales tax as it is not manufacturer of any taxable goods, under which sales tax is leviable. POFs are engaged in the manufacturing of arms and ammunition supplied to Armed Forces and has been declared as exempted from Excise Duty and Sales Tax; vide judgment C.No.CE/ADJ/10/93/13665, dated 31-10-2002. That vide section 2(41) "taxable supply means a supply of taxable goods made in Pakistan by an importer, manufacturer, wholesaler (including dealer), distributor or retailer other than a supply of goods which is exempted under section I" and includes a supply of goods chargeable to tax at the rate of zero per cent under Section 4 inserted by Finance Act, III of 1998 dated 1-7-1998 whereas taxable goods have been defined in section 2(39). Since POF has been declared to be non-manufacturer of taxable goods, therefore, section 2(46)(a)(ii) is not attracted at all, therefore, POF has not contravened any of the provision of sections mentioned above. So far as the second objection is concerned, tax invoices under section 23 of Sale Tax Act are only to be prepared by a registered person who makes a taxable supply therefore, POF has not violated section 23 of Sales Tax Act. That POF is paying 15% Sales Tax on the import of Electricity from WAPDA for distribution in Estate (residential area).
6. In rebuttal the stance taken by the respondent, Collectorate of Sales Tax was that as far as Order-in-Original No.39 of 2002 issued vide ST/Adj/10/93/13665 dated 31-10-2002 is concerned, it endorses sales tax written off by Federal Government on Arms and Ammunition manufactured by POF during the period 7-6-1990 to 12-6-1996 vide Board's C.No.1(51) CEB/90(Pt.) dated 19-9-2002 and no exemption on the supply of generated electrical energy is &ranted in the said judgment. Furthermore, exemption on electrical energy was withdrawn by Federal Government w.e.f. 16-8-1999 vide S.R.O. No.922(I)/99 dated 16-8-1999. Therefore, Messrs POF was required to pay sales tax on supply of electrical energy w.e.f. 16-8-1999. The electrical energy is not exempt under section 13 of the Sales Tax Act, 1990 and a registered person making a taxable supply shall issue a serially numbered tax invoice, as required under section 23 of the said Act but Messrs POF failed to do so. Therefore, as per show-cause notice POFs, Wah Cantt. is required to pay the short paid amount along with penalties and additional tax in terms of sections 33, 34 of the Sales Tax Act, 1990.
7. Messrs POF, Wah Cantt present petitioner also submitted rejoinder to the comments filed by Collectorate of Sales Tax, contents whereof are as under:--
(a) Sales Tax is payable by those organizations who generate electricity for sale, whereas "Generation" of electric power which is made for the "Consumption of persons, who are owning, operating or managing those facilities is not Generation for the purpose of the Act, as defined in Rule 2(h) of Special Procedure for collection of payment of Sales Tax (Electric Powers) Ordinance, 2000, notified vide S.R.O. No.124(I)/2000, dated 15-3-2000. POF being a public sector project and not involved in the sale of electric power, is therefore, exempted from Sales Tax, as electric power which is taxable, not generated by POF. Furthermore, the electric power which is being generated and utilized by Factories, cannot be termed as supply as defined in section 2(33) of the Sales Tax Act, 1990, therefore, Sales Tax on POF cannot be levied.
(b) Although, the exemption on electrical energy was withdrawn w.e.f 16-8-1999. However, since POF is generating electric power for production of Arms and Ammunition, which are exempted from Sales Tax, for the reason that electric power generated is not being provided to consumers because as per definition given in Special Procedure for collection of payment of Sales Tax (Electric Powers) Ordinance, 2000, the factories to whom electric power is being supplied does not come under the terms of consumer.
(c) The Central Board of Revenue (Sales Tax Wing) vide clarification C. No. l (33)-STR/99(Pt), dated 19-6-2001, has clearly laid down that if POF is supplying/producing electricity on commercial basis or to its colonies and for other purposes, other than for making taxable supplies, then they are liable to pay the Sales Tax.
(d) It is admitted that exemption on electric power has been withdrawn w.e.f 16-8-1999, however, electric power for the purpose of Act, is the electric power which is distributed to consumers for sale, therefore, POFs being not covered by that definition is not liable to pay the assessed Sales Tax.
8. After hearing the respective stance of the parties mentioned above, the Collector (Adjudication) Collectorate of customs, Sales Tax and Central Excise vide Order-in-Original No.2, dated 25-2-2004 observed as under:--
"Keeping in view the clarification of the Board, there is no option for the undersigned to hold that the electricity generated by them was liable to sale tax, Messrs POF, Wah are directed to pay Sales Tax amounting to Rs.140,574,137 on generation of 198,772,820 units of electric power in contravention of sections 2(41), 2(44), 3 and 26 of the Sales Tax Act 1990, Messrs POF Wah are directed to pay principal amount of Sales Tax Rs.140,574,137 along with additional tax under section 34 of the Sales Tax Act, 1990 (to be calculated at the time of payment) and a penalty equal to the 3% of the amount involved under section 33(2) of the Sales Tax Act 1990 is also imposed.
As regards the second charge regarding non issuance of serially numbered sales tax invoices, Messrs POF Wah are directed to pay penalty as per section 33(2) of the Sales Tax Act, 1990.
As regards the third charge regarding non maintenance of records of power generation, Messrs POF Wah are directed to pay penalty of five percent of amount of tax involved as per section 33(3)(b) of the Sales Tax Act 1990."
?
9. Being aggrieved of the above order-in-original, Messrs POF Wah, filed Appeal No.59/ST/IB/2004, before Customs, Central Excise and Sales Tax Appellate Tribunal, Islamabad which was decided vide order dated 7-3-2007. The Bench adjudicates upon following two issues emanating from the rival arguments/stance of the parties:
(i) Whether the adjudication is barred by limitation?
(ii) Whether tax tan be levied on self-consumption of electricity by POF?
10. The tribunal held that, time limit prescribed for adjudication of cases is not mandatory rather directory and by placing their reliance on judgment reported as 2007 PTD (Trio.) 840 not entertained the objection No.1 of learned consultant for the appellants.
11. While deciding the issue No.2, the learned Tribunal while placing reliance on judgment titled as Adil Polypropylene Products Limited and others v. The Federation of Pakistan through Secretary Finance and others (2000 SCMR 1708) observed as under:
"It is clear from the above illuminating judgment that the exemption of one product, which is exempt or non-taxable, does not exclude the production of another product from the ambit of taxable activity of goods. We are therefore, of the firm view that the ratio of the above case is squarely applicable to the facts and circumstances of the appeal under adjudication before us and we have no option but follow the settled ratio decidendi of the above judgment of the Honourable Supreme Court of Pakistan.
The learned consultant has argued at the bar on minor and curable defects of the show-cause notice issued to the appellants. In this case the onus of proof was on the appellant that there was no in-house out by the revenue in the written material dated 24-3-2006 as referred to above. They never informed this Tribunal the position which is contrary to the stand taken by the revenue and failed to discharge their burden as to the quantum of usage of electricity on commercial basis or using the same for the purpose of manufacture/production of taxable goods or exempt goods.
In the light of above discussion, we do not wish to disturb the order of Collector (Adjudication).
Learned counsel for petitioner submitted that show-cause notice in terms of sections 11 and 36(1) of the Sales Tax Act, 1990 was issued on 4-12-2002 whereas order in original was passed on 25-2-2004 whereas under the law it should have been passed within 135 days A which included even the extended/grace period but impugned order-in? original was passed after 448 days of show-cause notice, with an inordinate delay of 313 days. Learned counsel, further submits that even extension obtained on 20-11-2003 was patently time barred. Learned counsel for petitioner in support of his contention placed reliance on 2008 PTD 2025, 2009 PTD 2004, 2010 PTD 1520 and 2011 SCMR 1279.
12. Conversely, learned counsel for respondent submitted that limit of show cause is 6 years, no prejudice has been caused to the petitioner even if order is passed beyond the stipulated period. Learned counsel invited our attention to Article 254 of the Constitution of Islamic Republic of Pakistan and also placed reliance on PLD 2006 SC 209 = 2006 PTD 769 and PLD 1974 SC 134.
We have heard, the learned counsel and perused the documents annexed with the reference. Before answering the questions, we find it appropriate to bring the extract of section 36 from the statute of Sales Tax, Act 1990 which is as under:--
"36. Recovery of tax not levied or short-levied or erroneously refunded.---(1) Where by reason of some collusion or a deliberate act any tax or charge has not been levied or made or has been short-levied or has been erroneously refunded, the person liable to pay any amount of tax or charge or the amount of refund erroneously made shall be served with a notice within five, years of the relevant date, requiring him to show cause for payment of the amount specified in the notice.
(2) Where, by reason of any inadvertence, error or misconstruction, any tax or charge has not been levied or made or has been shor-levied or has been erroneously refunded, the person liable to pay the amount of tax or charge or the amount of refund erroneously made shall be served with a notice within three years of the relevant date, requiring him to show cause for payment of the amount specified in the notice:
Provided that, where a tax or charge has not been levied under this subsection, the amount of tax shall be recovered as tax fraction of the value of supply.
(3) The officer of (Inland Revenue) empowered in this behalf shall, after considering the objections of the person served with a notice to show under subsection (1) or subsection (2), determine the amount of tax or charge payable by him and such person shall pay the amount so determined.
[Provided that order under this section shall be made within (one hundred and twenty) days of issuance of show-cause notice or within such extended period as the Commissioner may, for reasons to be recorded in writing, fix provided that such extended period shall in no case exceed (sixty) days.
[Provided further that any period during which the proceedings are adjourned on account of a stay order or Alternative Dispute Resolution Proceedings or the time taken through adjournment by the petitioner not exceeding thirty days shall beexcluded from the computation of the periods specified in the first proviso]
(4) For the purpose of this section, the expression "relevant date" means --
(a) the time of payment of tax or charge as provided under section 6; and
(b) in a case where tax or charge has been erroneously refunded, the date of its refund.
13. An important aspect of the matter is that above section falls in Chapter-VII of the Act ibid, which relates to OFFENCES AND PENALTIES. Any provision which brings penal consequences is required to be invoked or exercised within the limit prescribed by the Statute itself. This is an admitted fact that impugned order-in-original was passed with a delay of 313 days and no reasonable justification has been shown, on the contrary, it demonstrate that authorities proceeded in the matter in a mechanical fashion. It is well settled law, with the mandate of dictums of the Court of Apex that Govt. department cannot be put at higher pedestal, when it come to limitation. The executive functionaries, quasi and non-quasi judicial forums/tribunals are supposed to follow the mandate of law and perform their duties, exercise their jurisdiction and execute their authority within the period provided by law.
14. As learned counsel for respondent took refuge under Article 254 of Constitution, therefore, we are reproducing the said article which reads as under:--
"254. Failure to comply with requirement as to time does not render an act invalid. When any act or thing is required by the Constitution to be done within a particular period and it is not done within that period, the doing of the act or thing shall not be invalid or otherwise ineffective by reason only that it was not done within that period."
The plain reading of above article negates the contention of learned counsel for respondent, as above command does not relate to issue brought before this court. The Sales Tax Act, 1990 on the basis of which show-cause notice was issued, it self demands that in pursuance ofnotice, order-in-original must be passed within the period prescribed by section 36(3) of Act ibid. The judgments relied by learned counsel for petitioner provided strength to our opinion, more particularly Hon'ble Supreme Court in case of Collector of Customs (Preventive), Karachi v. Pakistan State Oil, Karachi. The august Supreme Court while dilating upon the question of issuance of show-cause notice, under section 32(3) of Customs Act, 1969 has observed as under:--
'"It has been observed with grave concern that in a few cases, notices were issued after 44 and 38 months instead of six months for the reasons best known to the Customs Authorities. In our view such an inordinate delay cannot be ignored where a specific period of six months has been provided under section 32(3) of the Customs Act and thus the factum of delay being a mandatory requirement of law has rightly been considered by the learned Division Bench."
15. As far as judgment relied by the learned counsel for respondent i.e. PLD 2006 SC 209 = 2006 PTD 769, is concerned, 'to our estimation, this judgment also supports the contention of petitioner. For convenience sake, operative part is reproduced herein below:---
"No order can be scraped or annulled or set aside, only on the ground that the same has been passed with un-reasonable delay.-The observations of the learned Single Judge of the High Court that the order-in-original dated 26-9-1992 passed by the appellant was not within a reasonable time from the date of the issuance of notice dated 10-7-1989, the same are neither here nor there. No order can be scraped or annulled or set aside, only on the ground that the same has been passed with un-reasonable delay. There is no such concept attached to the judicial and quasi-judicial proceedings, unless provided in the statute" (emphasis is our).
16. The exception of un-reasonable delay can be evaded if statute does not prescribe the time period/limit in which act has to be performed. The Hon'ble Supreme Court through different authoritative pronouncements has held time and again that inefficiency, slackness, incompetence and inaction on the part of executive functionaries or persons on the helm of affairs by itself is no ground to ignore the command of law of performing any act within the stipulated period, therefore, we answer the question No.1 in negative by holding that Appellate Tribunal was not justified in confirming 'the Order-in-Original No.2 of 2004 passed by the Collector (Adjudication).
17. Since we have answered the question No.1 relating to time limit, do not find it appropriate to answer the remaining questions, as same are regarding the facts, which need not be answered as the answer to Question No.1 goes to the root of the controversy.
S.A.K./63/Isl??????????????????????????????????????????????????????????????????????????? Answer in the negative.