CARVAN ENTERPRISES VS CENTRAL BOARD OF REVENUE, 2015 PTD-LAHORE-HIGH-COURT-LAHORE 2639 (2015)

Sales Tax Act (VII of 1990)---

----S. 45A----Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S.32----Constitution of Pakistan, Art.199---Constitutional petition----Power of the Board and Commissioner to call for records ----Finality of recommendations of Federal Tax Ombudsman----Scope----Petitioner's / taxpayer's sales tax refund was sanctioned by the Department whereafter show-cause notice was issued stating that said refund was not admissible; and order-in-original was passed against the petitioner, which was upheld in appeal----Petitioner's complaint against said orders was allowed by Federal Tax Ombudsman and the Federal Tax Ombudsman recommended cancellation of impugned orders---Department, thereafter in exercise of powers under S. 45A of the Sales Tax Act, 1990 reopened the order in appeal and issued show-cause notice to the petitioner ----Contention of petitioner was that no representation under S. 32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 was filed by the Department before the President, and as such, the order of the Federal Tax Ombudsman attained finality and Department cannot now refer matter for de novo consideration---Held, that the Federal Tax Ombudsman never made any recommendation for reopening the petitioner's case for de novo consideration and even the impugned order under S. 45A of the Sales Tax Act, 1990 proceeded on a erroneous premise----Order of the Federal Tax Ombudsman had not been challenged and had attained finality---High Court observed that ex facie, the order under S. 45A of the Sales Tax Act, 1990 did not meet the requirements of the General Clauses Act, 1897 and the principle of audi alteram partem or S.45A of the Sales Tax Act, 1990---Impugned order was set aside and matter was sent to the Department to issue notice to the petitioner taxpayer and hear him in the matter and thereafter pass an appropriate order in accordance with law in light of recommendations of the Federal Tax Ombudsman---Constitutional petition was allowed, accordingly.

Mian Abdul Ghaffar for Petitioner.

Sarfraz Ahmad Cheema for Respondents.

ORDER

IJAZ UL AHSAN, J.---The brief facts of the case are that refund of sales tax was sanctioned by the competent authority against zero rated supply made by the petitioner during the period August, 2000 to September, 2001 through refund sanctioning orders. Subsequently, the petitioner received show cause notice dated 16-9-2004 from respondent No.4 alleging therein that the refund sanctioned by the competent authority was not admissible to the petitioner. The matter was adjudicated by respondent No.4 who vide order dated 30-7-2005 directed the petitioner to pay the said amount along with penalty equal to 100% of the tax involved. The show cause notice was issued on 16-9-2004 and adjudication order was passed on 30-7-2005 by respondent No.4 after the lapse of more than 10 months whereas he was required to decide the same within 90 days in terms of proviso to Section 36(3) of the Sales Tax Act, 1990. Feeling aggrieved of the said order, the petitioner filed an appeal before respondent No.2 but the same was rejected vide order dated 25-2-2006. The appeal was filed before respondent No. 2 on 29-7-2005 and it was decided on 25-2-2006 whereas the same was required to be decided within 90 days in terms of Section 45-B(2) of Sales Tax Act, 1990. The petitioner therefore filed a complaint before the Federal Tax Ombudsman ("FTO") seeking cancellation of order-in-original and order-in-appeal passed by respondents Nos.2 and 4. The complaint was accepted vide order dated 9-5-2006 and it was held that both the aforesaid orders were not legally sustainable. It was, thus, recommended by the FTO that Revenue Division shall direct the competent authority i.e. respondents Nos.2 and 4 to cancel the order-in-original dated 8-6-2005 and order in appeal dated 22-2-2006.

2. No representation under Section 32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 was filed by the department before the President of Pakistan and as such the order of the FTO attained finality. Instead of directing the respondents Nos.2 and 4 to cancel the orders dated 8-6-2005 and 25-5-2006 passed by them, respondent No.1, in exercise of powers conferred upon it under section 45-A of the Sales Tax Act, 1990 re-opened the order-in-appeal dated 25-2-2006 vide order dated 28-7-2006. Respondent No.3 vide letter dated 21-10-2006 directed the petitioner to appear before him for hearing of the case.

3. Learned counsel for the petitioner submits that in terms of Section 45-A of the Sales Tax Act, 1990, the Board may, of its own motion, call and examine the record of any proceedings under the Act or the rules made therein for the purpose of satisfying itself as to the legality and propriety of any decision or order passed therein by an officer of sales tax and it may pass such order as it may deem fit provided that no order imposing or enhancing any penalty or fine requiring payment of a greater amount of sales tax than originally levied amount can be passed unless the person affected by such order has been given an opportunity of showing cause and of being heard. He points out that this process was not followed and the petitioner was never heard. He further submits that respondent No.1 cannot refer the case for de novo consideration to any other officer or authority and that FBR has to pass an order itself after hearing the concerned party. The order dated 28-7-2006 is, therefore, void, illegal, without jurisdiction and of no legal effect. He further maintains that the said order tantamounts to burdening the petitioner with a liability and as such respondent No.1 was not competent to pass such order unless an opportunity of showing cause was given to the petitioner. Further submits that the FTO has directed that order-in-original and order-in-appeal shall be cancelled and there is no recommendation as to the re-opening of the order in appeal.

4. Learned, counsel for the respondent/department, on the other hand, submits that although both the impugned orders were passed after a delay of 10 months, however, the plea that both the orders were time barred is not tenable in view of the fact that it is not a simple case of tax evasion or tax avoidance but it is a case of tax fraud. Further submits that the petitioner is trying to evade his liability merely on technical grounds instead of defending the charges. He further maintains that the FTO recommended to respondent No.1 for cancellation of both the impugned orders. However, it is pertinent to mention that the word "recommendation" is neither directive in nature nor binding on the person who complies with such recommendation. Therefore, he prays for dismissal of this petition.

5. I have heard the learned counsel for both the parties and perused the record.

6. It is apparent from the record that Federal Board of Revenue ("FBR") neither issued notice nor heard the petitioner before passing the impugned order dated 28-7-2006. Section 45A clearly envisages such notice and contemplates an opportunity of being heard. Further, perusal of the order of the FTO shows that the recommendation was made in the following terms:--

"The Revenue Division direct the competent authority to:--

(i) Cancel Order-in-Original No.52/2005 dated 28-6-2005 and order-in-Appeal No.54/2006 dated 25-2-2006.

(ii) Compliance be reported within 30 days of receipt of this order."

The order of the FTO has not been challenged by way of a representation and has attained finality. It is also apparent that the FTO never made any recommendation for reopening of the petitioner's case for de novo consideration as stated in the order dated 28-7-2006. Therefore, even on that score the order proceeds on an erroneous premise.

7. In addition, Ex-facie the order does not meet the basic requirements either of the General Clauses Act, the Principle of Audi Alteram Partem or Section 45A of the Sales Tax Act, 1990. Therefore, the same is not sustainable. It is accordingly set aside. The matter is sent back to the FBR who will issue notice to the petitioner, hear him in the matter and thereafter pass an appropriate order in accordance with law in light of the recommendations made by Federal Tax Ombudsman.

8. This petition is allowed in the aforenoted terms.

KMZ/C-21/LOrder accordingly.