2013 P T D (Trib.) 566
[Inland Revenue Appellate Tribunal of Pakistan]
Before Jawaid Masood Tahir Bhatti, Chairperson and Sohail Afzal, Accountant Member
Messrs ISHTIAQ STEEL INDUSTRY, LAHORE
C.I.R., R.T.O., LAHORE
S.T.A. No.1171/LB of 2012, decided on 14th December, 2012.
2010 PTD 1631; GST 2004 CL 546; 1987 SCMR 1844 and 2001 SCMR 838 ref.
GST 2004 CL 280; (1959) 37 ITR 288; PLD 1997 Kar. 370 and 1994 PTD 927 rel.
Zaheer-ud-Din Babar for Appellant.
Ch. Jaffar Nawaz, D.R. for Respondent.
Date of hearing: 14th December, 2012.
Through the titled appeal, the taxpayer has challenged the impugned order dated 7-11-2012 passed by the learned CIR(Appeals-III), Lahore, on the following grounds:–
(i) That the learned Commissioner Inland Revenue Appeals Lahore filed to bona fide conduct of the appellant, who deposited the principal amount under the amnesty of S.R.O. 648(I)/2011 dated 25-6-2011. The act of the respondent for not considering the payment made under amnesty given by the Federal Government tantamount to abuse of power a glare attempt to challenge the writ of the Government tantamount to abuse of power and a glare attempt to challenge the writ of the Government, whereas the respondent is duty bound to obey the orders of the Federal Government/Board. His remarks are incorrect, illegal and baseless.
(ii) That the learned Commissioner Inland Revenue Appeals Lahore was wrong in not deleting the illegal penalty of Rs.160,182 being 5% under section 19(1) and fine of Rs.16,018,210 being the five times of the duty involved under section 19(3)(c) of the Federal Excise Act, 2005 and respondent illegally, in clear violation of the order of the Honorable Appellate Tribunal Inland Revenue dated 13-1-2012. His remarks are incorrect, illegal and baseless.
(iii) That the learned Commissioner Inland Revenue Appeals Lahore was wrong in not accepting the plea of the appellant that the tax fraud was not confronted in the show cause notice dated 3-5-2011 which is clear violation of the decision of Superior Courts as clearly pointed out by the Honorable Appellate Tribunal Inland Revenue in its order dated 13-1-2012. Even otherwise the Federal Excise Act, 2005 has not defined the term tax fraud. His remarks are incorrect, illegal and baseless.
2. This is the second round of appeal before this Tribunal as during the first round this Tribunal vide order dated 13-1-2012 in STA No.745/LB of 2011 has remanded the case to the Taxation Officer to determine whether the claimed amnesty is available to the appellant or not? Briefly stated, the facts of the case are that the appellant is an association of persons (AOP) engaged in the business of manufacturing and sale of mild steel products and is registered with the sales tax department and filing the sales tax returns regularly under the Sales Tax Act, 1990. The appellant is producing the steel products and is paying sales tax under Special Procedure Rule, 2007 issued under S.R.O. 678(I)/2007 dated 6-7-2007. According to special procedure of sales tax, the sales tax liability has been fixed on the basis of electricity units consumed on electricity bills. The appellant has adopted the special procedure and paying sales tax on monthly basis on electricity bills.
3. Through Finance Bill, 2007, the Federal Board of Revenue has levied the special excise duty (SED) @ 1% by inserting section 3A in the Federal Excise Act, 2005 and issued S.R.O. 655(I)/2007 dated 29-6-2007 with certain exceptions/exemptions in the table. The Special Excise Duty was chargeable on goods produced by the manufacturer on certain prescribed goods. The Pakistan Steel Re-Rolling Mills Association has informed all its members to discharge the sales tax liability under the sales tax special procedure and pay SED on procurement of raw materials and will charge and collects SED from their respective buyers. The appellant paid the special excise duty on procurement of raw material and consequently charge SED to its supplies.
4. The office of the Assistant Commissioner Inland Revenue Enforcement and Collection Unit, RTO, Lahore (I.I&P) vide letter dated 21-6-2010 required the sales tax record maintained under section 22 of the Sales Tax Act, 1990 and the appellant submitted the record before the Assistant Commissioner Inland Revenue accordingly. The I.I&P issued detection report dated 9-7-2010 alleging that the appellant has charged and collected SED of Rs.8,212,931 on their supplies but failed to deposit the same in the national exchequer. On the basis of detection report the Deputy Commissioner Inland Revenue issued show cause notice dated 3-5-2011 to the appellant to pay the SED at Rs.8,212,931 along with default surcharge without mentioning any penalty. It is submitted by the learned AR for the appellant that in other cases of steel sectors, the Assessing Officer has only charged the default surcharged after the adjustment of special excise duty paid on import and local purchases and no penalty was charged. In this respect, the photocopy of detection report of Messrs Sufi Steel Industries (Pvt.) Ltd., has been placed before this Bench. It is stated by the learned AR that according to Article 25 of the constitution of Pakistan, all citizens are equal and the learned Commissioner Inland Revenue Appeals as well as Assessing Officer have clearly violated the provisions of Article 25 of Constitution of Pakistan.
5. It is also contended by the learned AR that according to various decisions of Superior Courts in case of the basis/reasons not mentioned in the show cause notice orders passed on the basis of other grounds of show cause notice were held to be ab initio illegal and void as no demand can be raised on the basis of illegal notice. Reliance in this behalf is being placed on following case-laws:–
2010 PTD 1631, GST 2004 CL 546, 1987 SCMR 1844 and 2001 SCMR 838.
6. It is contended by the AR that the Assessing Officer has admitted in his order-in-original dated 30-3-2012 at Page No.5 that the registered person has provided all the documents regarding adjustment of input of SED amounting to Rs.5,009,289 i.e. purchase register, purchase invoice, bill of entries and payment proof under section 73 of the Sales Tax Act, 1990 and paid the balance amount of Rs.3,203,642 by availing amnesty scheme issued vide Notification No. S.R.O. 648(I)/20011 dated 25-6-2011. It is urged by the AR that this Tribunal in its order dated 13-1-2012 has held that if the appellant has deposited the principal amount of SED collected at relevant time and claims benefits of amnesty issued vide S.R.O. 648(I)/2011 dated 25-6-2011 there was no tax fraud on the part of the appellant. The relevant extract of the order dated 13-1-2012 is reproduced as under:–
“After perusal of record and orders below, we agree with the contention of learned counsel for the appellant that no fraud was alleged or confronted by the department in the show cause notice.”
7. It is contended by the AR that the SED was levied under S.R.O. 655(I)/2007 dated 29-6-2007 giving exclusion on certain items. The products of the registered person were also made exempt from SED by amendment in the above said notification by issuance of S.R.O. 715(I)/2008 dated 3-7-2008 according to which steel ingots and billets and mild steel products were also made exempt from SED w.e.f. 29-6-2007. In preview of S.R.O. 715(I)/2008, the appellant was not required to collect SED from its customer and directed by FBR through notification. Whereas the appellant has collected SED and Later on paid the SED to the national exchequer and there is a gain to the government instead of any revenue loss. The relevant extract of S.R.O. 715(I)/ is reproduced as under:–
In the table after S.No.38, in the column (1) and the entries relating there to in columns (2) and (3). The following new serial number and the entries relating thereto shall be added and shall be deemed to have been so added on 29-6-2007 namely:–
Steel ingots and billets and Mild Steel products
72.06. 72.07. 72.13 excluding Headings 72141010 72141092
7214.3010 and 7214.3090 72.13 Excluding headings 7213.2010 7213.2090 and 72.10
8. It is argued by the AR that the taxpayer has made the payment of SED by availing amnesty under S.R.O. 648(I)/2011 dated 25-6-2011. The relevant extract of this S.R.O. is reproduced as under:–
“The Federal Government is pleased to exempt whole of the amount of default surcharge and penalties payable by a person against whom an amount of sales tax or federal excise duty is outstanding on account of any audit observation, audit report, show cause notice or any adjudication order or who has failed to pay any amount of sales tax or federal excise duty or claimed inadmissible input tax credit, adjustment, refund, drawback or rebate due to any reason. Subject to the condition that the outstanding principal amount of sales tax or federal excise duty is paid by 30th June, 2011.”
9. is contended by the AR that according to S.R.O. 648 no mount of default surcharge and penalties will be charged if the principal amount has been paid by June 30, 2011 even if audit report or show cause notice or any adjudication order has been adjudicated against the taxpayer. It is submitted that according to various decisions of Superior Court no amount of penalty will be charged against the assessee if the output tax has been paid by the assessee. Reliance has been placed on the following case-law.
GST 2004 CL 280
The appellants were found to have violated provisions of sections 2(9), 3, 6, 26 and 34 of the Sales Tax Act, 1990 for non-filing of return (January, February and March 2000) and non-deposit of sales tax into government exchequer, collected from their customers. After issuance of show cause notice and considering the reply of appellant, order-in-original was passed whereby sales tax, as detailed in show cause notice, was ordered to be deposited. Appeal under section 46 of the Sales Tax Act was filed against order-in-original. Main thrust of appeal was that the cash liquidity did not permit the appellant to deposit sales tax hence there was no willful default. It was also claimed that on the similar issue, the Collector had already adjudicated and thus the impugned order of Additional Collector was without jurisdiction, wavier of additional tax and penalty was prayed for by citing that principal levy of sales tax had been paid, on the other side, revenue insisted that non-furnishing of returns was clear evidence of intention of the appellant for non-depositing the huge sales tax demand. Appeal was accepted only to the extent of penalty under section 33 and direction for calculating the additional tax at rates prevailing at the time.
Further reliance is being place on the following case-laws:–
(1959) 37 ITR 288 Supreme Court of India
PLD 1995 Kar. 370
1994 PTD 927
“It is well settled law that suspicion, doubts, suppositions and imaginations cannot take place of legal proof. The Income Tax Officer cannot make an assessment without reference to any reliable material and evidence. Assessment based on mere conjectures, surmises, suppositions and imaginations is invalid and unsustainable in law.”
On the other hand the learned D.R. is supported the impugned orders of the officers below.
10. Both the parties have been heard, relevant available record perused and the case-law cited at the bar has been considered. After perusal of record and orders of ACIR and CIR (Appeals), we have found that in this case no fraud was alleged or confronted by the department in the show cause notice or in the subsequent proceedings. Even otherwise the Government of Pakistan vide S.R.O. 648(I)/2011 dated 25-6-2011 has exempted whole of the amount of default surcharge penalties payable. The extract of the said S.R.O. are reproduced hereunder:–
“the Federal Government is pleased to exempt whole of the amount of default surcharge and penalties payable by a person against whom an amount of sales tax or federal excise duty is outstanding on account of any audit observation, audit report, show cause notice or any adjudication order, or who has failed to pay any amount of sales tax or federal excise duty or claimed inadmissible input tax credit, adjustment refund, drawback or rebate due to any reason, subject to the condition that the outstanding principal amount of sales tax or federal excise duty is paid by 30th June, 2011.”
11. Furthermore, this Tribunal vide its order dated 13-1-2012 has remanded the case to the assessing authority with the direction to determine whether the claim amnesty is available to the appellant or not. Perusal of the record, reveals that the Assessing Officer himself on Page-5 of his order-in-original dated 30-3-2012 had admitted that the registered person has provided all the documents regarding adjustment of input of SED amounting to Rs.5,009,289 i.e. purchase register, purchase invoice, bill of entries and payment proof under section 73 of the Sales Tax Act, 1990 and paid the balance amount of Rs.3,203,642 by availing amnesty scheme issued vide Notification No.S.R.O. 648(I)/2011 dated 25-6-2011. By allowing credit of tax paid under the amnesty scheme, the Assessing Officer himself admitted the availability of amnesty scheme to the taxpayer. This Tribunal has already admitted in his order that “no fraud was alleged or confronted by the department in show cause notice”.
12. In view of the above, we are inclined to hold that the levy of default surcharge under section 8, penalty under section 19(1) and fine under section 19(3)(c) are not attracted in the case. Therefore, the impugned order is hereby cancelled being not maintainable in the eye of law. The order of the learned CIR(A) is accordingly vacated.
13. Appeal of the taxpayer succeeds in the above manner.
CMA/7/Tax(Trib.) Appeal accepted.