2018 P T D (Trib.) 2408
[Inland Revenue Appellate Tribunal]
Before Shahid Masood Manzar, Judicial Member and Mian Saeed Iqbal, Accountant Member
Messrs INTERACTIVE COMMUNICATIONS
The COLLECTOR (APPEALS), SALES TAX AND FEDERAL EXCISE, ISLAMABAD
M.A.(A.G.) S.T.A. No.16/IB of 2017 and S.T.A. No.7/IB of 2009, decided on 12th September, 2017.
Umar Rasheed and Shoaib Ahmed Sheikh for Appellants.
Muhammad Altaf Khan, D.R. for Respondent.
Date of hearing: 13th June, 2017.
SHAHID MASOOD MANZAR (JUDICIAL MEMBER).—The appellant in this case has objected against the impugned order of the learned Collector (Appeals) dated 31.08.2009 upholding the Order-in-Original No.1/2009 dated 12.03.2009, on the following grounds:–
“1. That the order of learned collector of sales tax (appeals) is totally non speaking, bad in law and against the facts and circumstances of the case.
2. That the appellant is an unregistered person since its incorporation and therefore was not liable to charge sales tax and central excise duty.
3. That the appellant being agent of the principal party of the contract Messrs “Asia Sat” was not liable to raise sales tax/central excise duty invoice, charge sales tax/central excise duty and receive payment from the other party of the contract.
4. That the principal parties of the contract M/S “Asia Sat” and M/S PTV have already been burdened with tax liability on same account and recovery of tax twice on same account from the agent is not justified.
5. That on the one hand no default has been committed by the appellant and the other hand the department has failed to establish the default of the appellant under section 2(20)(33)(44) and of section 3 of the Sales Tax Act, 1990.
6. That on the one hand no default has been committed by the appellant and on the other hand the department has failed to establish the default of the appellant under sections 2(23), 3(1)(d), 4, 17 and 18 of the Federal Excise Act, 2005 and sections 2(20) and 3(1) of the repealed Central Excise Act, 1944.
7. That on the one hand no default has been committed by the appellant and the other hand the department has failed to establish default under sections 6 and 22 of the Sales Tax Act, 1990 as alleged by the auditor of sales tax.
8. That the learned Additional Collector of sales tax (Adjudication) failed to allege the case of the appellant under section 36(2) of the Sales Tax Act, 1990 and has failed to establish the default of the appellant under section 36(1) of the Sales Tax Act, 1990 and the learned Collector of sales tax (appeals) have totally failed to appreciate the provisions of law.”
2. The appellant also filed additional grounds vide above captioned miscellaneous application, which are reproduced below:–
“i. That the Additional Collector has acted in flagrant violation of law in issuing a consolidated show-cause notice dated 18-07-2008 of two different and distinct statutes; one under Sales Tax Act, 1990 and the second under Federal Excise Act, 2005, hence, the proceedings initiated under the impugned show-cause notice are without lawful authority.
ii. That Additional Collector has erred in law in issuing impugned show-cause notice beyond the period of limitation stipulated in subsection (1) of Section 36 of the Sales Tax Act, 1990 i.e. on 18-07-2008 which is to be reckoned from the relevant date of payment to the appellant that was 10-01-2003 as the maximum period for initiating proceedings there under is prescribed within five years from the relevant date.
iii. That issuance of impugned show-cause notice dated 18-07-2008 under section 36(1) of the Act is also illegal and void ab-initio on account of failure of the department to establish essential ingredients laid down in the said subsection such as collusion, mala fide, deliberate act, and erroneous refund on the part of present appellant. When viewed in the case law cited as: – 2010 PTD (Trib.) 1759, 1992 SCMR 1898, 2007 PTD 2265 (H.C.).
iv. That issuance of impugned show-cause notice dated 18-07-2008 under section 14(1) of the Federal Excise, Act, 2005 is also barred by time as this Section clearly envisages that the department cannot issue the impugned show-cause notice beyond the period of three years from the relevant date, hence, liable to be knocked down.
v. That issuance of impugned show-cause notice dated supra is also illegal, unlawful and void ab-initio because the same has been issued only to the present appellant whereas two other parties to the agreement have signed the “Digital Video Plat Form Rental Agreement” dated 29-11-2002.
vi. That the impugned show-cause notice dated supra issued by the Additional Collector is also not sustainable in law because the Additional Collector has burdened the taxpayer/appellant with those payments which have not been even paid to the appellant.”
3. Firstly, we have gone through the grounds/additional grounds raised supra as well as perused the case law. It is a settled law and there is no cavil to this proposition that the legal contentions/ submissions/ grounds can be raised at any stage of proceedings before any forum/ Court even before Hon’ble Supreme Court. Since, the grounds raised supra are purely legal in its character and go to the root of the orders, therefore, these are admitted for hearing in view of the Judgments rendered by the Hon’ble Supreme Court as well as by the Hon’ble Higher Courts in re: 2006 SCMR 1519, PLD 1965 SC 690, 1997 PTD 1555 (S.C.), 1999 PTD (Trib.) 401, 1976 PTD 56 (LHC), 1999 PTD (Trib.) 705 and 2009 PTD (Trib.) 1136.
4. As regards ground No.1 supra it was vehemently contended by the learned counsel for the appellant that issuance of a combined show-cause notice dated 18-07-2008 by the Additional Collector of two different and distinct statutes; 1st under Sales Tax Act, 1990 and the 2nd under Federal Excise Act, 2005 are without lawful jurisdiction. Reason being that the Sales Tax Act deals with application of Sales Tax and governs around on its own procedure, hierarchy, adjudication of orders thereunder, its limitations, offences and penalties, etc. Likewise the Federal Excise Act, 2005 has its own dimensions such as its own as hierarchy, procedure levy of Federal Excise Duty, and passing of orders thereunder, its limitations, penalties etc. Actually, it was mandatory on the part of adjudicating authority to issue separate and independent show-cause notice or the other notices under each one of the statute and to adjudicate the matters under that law. Thus, proceedings under two different statutes cannot be clubbed/initiated by issuing a combined notice which renders the entire proceedings initiated as illegal and unlawful and the orders passed under the garb of a combined show-cause notice cannot sustain in the eye of law. It is a good settled law that if the superstructure is built on a wrong foundation that is bound to dash to ground. In the present case not only combined show-cause notice was issued but a combined order was passed, thus, those are to be declared unlawful and having no legal effect.
5. Next contention of the learned counsel is that since, the impugned show-cause notice was issued beyond the period of limitation stipulated in subsection (1) of Section 36 of the Sales Tax Act, 1990, therefore, issuance of show-cause notice and passing of order-in-original are ab-initio void illegal. Further submitted that issuance of show-cause notice dated 18-07-2008 in terms of Section 36(1) of the Sales Tax Act, 1990, is not sustainable in law as the Department has miserably failed to establish essential ingredients laid down for invocation of proceedings under the said subsection. Thus, not only issuance of show-cause notice but also the order-in-original passed thereunder is not tenable in law. The other argument of the learned counsel is that initiation of proceedings under section 14(1) of the Federal Excise Act, 2005 by mentioning in the combined show-cause notice dated 18-07-2008, is also hit by limitation of time so provided therein. Thus, the proceedings initiated under section 14(1) of the Federal Excise Act, 2005 are liable to be struck down. Also contended that issuance of impugned show-cause notice dated 18-07-2008 is also illegal, unlawful and void ab-initio because the same has been issued to one party only namely Interactive Communication (Pvt.) Limited (the IAC) the present appellant whereas two other parties were also signatory to the “Digital Video Platform Rental Agreement” dated 29-11-2002. It was, accordingly, prayed that the impugned show-cause notice and consequently the order passed on the basis of such show-cause notice may kindly be declared to have been issued without lawful authority being ab-initio void illegal and, as such, are not sustainable in law and warrants cancellation thereof.
6. On the other hand, the learned DR vehemently opposed the contentions raised by the learned AR for the reasons recorded in the orders passed by the lower authorities by contending that the impugned show-cause notice was legally issued consequent upon which it has been rightly ordered by the Additional collector for payment of Sales Tax and Federal Excise Duty. Thus, the order passed by the lower authorities may be upheld.
7. We have given anxious thought to the averments advanced by the rival parties, perused the facts of the case in its entirety and the case law cited at the bar by the learned counsel for the appellant. Before adjudicating the legal grounds, we would like to mention here that the learned DR’s contention that the above titled Sales Tax Appeal of the appellant has already been decided by the Honorable Appellate Tribunal vide order S.T.A. No.7/IB/2009 dated 17-02-2011, does not hold good because that order has been recalled by the Bench vide M.A (R) S.T.As. Nos.03 and 21/IB/2015 dated 31-05-2016. Hence, rejected. While the other contentions of the Learned D.R are the repetition of the reasons put forth in the impugned orders.
8. Coming to the contention whether issuance of combined show-cause notice dated 18-07-2008 is hit by limitation provided in Section 36(1) of the Sales Tax Act, 1990 and Section 14(1) of the Federal Excise Act, 2005, we have noted that the subsection (1) of Section 36 of Sales Tax Act, 1990 has clearly stipulated period of five years for issuance of show cause notice from the relevant date of payment. As per record, show cause notice was issued on 18-07-2008 while the relevant date of payment, as per annexure ‘A’, was 10-01-2003 which has to be reckoned from the relevant date of payment, the last date of issuance of show cause notice fell on 10-01-2008 instead of 18-07-2008. Evidently the show-cause notice dated 18-07-2008 was patently issued beyond the period specified in Section 36(1) of the Sales Tax Act, 1990. There are quite a number of judgments of different Fora on this point whereby it is held that if the show-cause notice was not issued within the limit of time provided in Section 36(1) of the Act, 1990, the show-cause notice and the order-in-original passed thereunder have been declared to have been passed without lawful authority. Support in this regard was sought from the case law cited as:- 2001 SCMR 838, 2012 PTD (Trib.) 1040, (Relevant Page-1049) H, 2013 PTD (Trib.) 2130, 2007-PTD-2265 (LHC), 2013 PTD (Trib.) 420, 2011-PTD (Trib.) 677, 2011 PTD (Trib.) 866, 2008 PTD 1973 (LHC), 2009 PTD (Trib.) 1263 and 2010 PTD (Trib.) 1759.
One of the cited judgment, in re: 2007-PTD-2265, the honorable Lahore High Court Lahore, while dealing the question of limitation and terms of Section 36 of the Sales Tax Act, 1990, has held as under:–
“For proceeding against a person under the provision of Section 36 ibid, the show cause notice has to mandatorily specify the reason(s) for the alleged non levy, short levy or erroneous refund of the sales tax or charge. And the notice has to be served within the period of limitation prescribed in the applicable subsection in reference to the reason(s) prescribed in each part of Section 36. Under subsection (I) thereof, a show cause notice can be served “within five years of relevant date” if non levy, short levy or erroneous refund of sales tax or charge is the result of the reasons of “some collusion or deliberate act”. Subsection (2) of Section 36 is invokable when “inadvertence, error or misconstruction,” cause such non levy, short levy, or erroneous refund and the show cause thereunder is served “within three years of the relevant date”.
1. Validity of the show-cause notice was fundamental to the assumption of jurisdiction by the Revenue Authority to pass the impugned orders. And that the show cause notice and the impugned orders have herein been held to be patently devoid of jurisdiction and the lawful authority. The appellant, therefore, in our opinion, could legitimately agitate the basic jurisdictional question(s) even in this further appeal. The rule had so been laid in the case of “Haji Abdullah Khan and others v. Nisar Muhammad Khan and others (PLD 1965 SC 690)”.
2. As the show cause notice and all proceedings and orders based thereupon have been held to be without jurisdiction, other question do not need to be dealt with as per the principles laid down in the case of “Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and others” (2001 SCMR 838).”
9. We have also weighed the legal repercussion from another angle. The question arises as to whether the essential ingredients envisaged in under section 36(1) of the Sales Tax Act, 1990 for issuance of show cause notice are mandatory. There is no cavil to this proposition that subsection (1) of Section 36 of the Sales Tax Act, 1990 has specifically enumerated that a show cause notice has to mandatorily specify the reasons of “some collusion or a deliberate act” for the alleged non levy, short levy or erroneous refund of the sales tax or the charge. But it is not ascertainable from the grounds and the reasons advanced in the impugned show cause notice that the appellant knowingly and deliberately had not made the payment of sales tax. Perusal of impugned show cause notice clearly spells out that the requirements laid down by Section 36 were not met and the Department did not allege that the offending acts were deliberate or there stood a collusion. Even the allegations are not specific and no evidence whatsoever to support the same was gathered or provided to the appellant. If we go through the impugned show-cause notice it is abundantly clear therefrom that the show-cause notice is completely silent that the registered person has made a collusion with the departmental officials or the act of non-payment of sales tax was deliberate. Prior to issuance of show cause notice, it was mandatory on the part of the Additional Collector to establish mensrea against the registered person in the show cause notice. The wordings of the show-cause notice do not remotely suggest that the registered person’s act was deliberate.
Actually the onus squarely shifts on the shoulders of the Department to pinpoint collusion or deliberate act to the appellant. Even the expression “collusion” or “deliberate act” in the show cause notice to strengthen has to allegations levied therein. By now, it is a settled principle of law that in absence of or without accomplishing prerequisites of the show-cause notice and supply of reasons in clear and explicit words to ascertain that case of the appellant falls in Section 36(1) of the Sales Tax Act, 1990, issuance of show-cause notice have no legal consequences or legs to stand upon and, thus, failure of the authorities issuing show cause notice to disclose such grounds or reasons renders the impugned notice ab-initio void illegal and could not stand to the test of Judicial scrutiny. Since, the department has assumed jurisdiction under section 36(1) of the Sales Tax Act, 1990 without establishing specific charges, which is fundamental requirement of law, therefore, issuance of show-cause notice under section 36(1) of the Sales Tax Act, 1990, is not maintainable in law. Moreover, show-cause notice is a fundamental document which is to comprehensively describe the case made out against the taxpayer by making reference to the evidence collected in support of the same which determines the offence attracted in a particular case. Rather that is not a casual correspondence or a tool or license to commence roving enquiry in to the affairs of the taxpayer based on assumption and speculation but is a document that carries definitive legal and factual position of the department against the taxpayer. Support in this regard is sought from the case law reported as:- 2007 PTD 2265 (LHC), 2013 PTD 1536 (LHC), 2012 PTD (Trib.) 1040, 2013 PTD (Trib.) 2130, 2012 PTD (Trib.) 350, 2008 PTD 1032 (FTO), 2011 PTD (Trib.) 866, 2009 PTD (Trib.) 1263, 2014 PTD (Trib.) 375, 2010 PTD (Trib.) 1759, 2016 PTD (Trib.) 485 and 2017 PTD (Trib.) 70.
Out of the cases referred supra, we have also come across a case law of the Honorable Lahore High Court, Lahore in Re:- 2013 PTD 1536 (LHC) in which it is held as under:–
“Para-16. The above meanings clearly establish that for it to be a “deliberate act” the taxpayer must have a pre- meditated or pre-arrange plan to evade tax. The evidence must show and establish a calculated stratagem or a game plan behind the transaction period tailored for the specific purpose of evading tax. While “Collusion” requires that there must be more than one person scheming to Defraud or there must be a conspiracy of a fraudulent act resulting in evasion of tax. On the whole, unless there is a deliberate design or an agreement between persons to defraud the tax department and the same is clearly and perspicuously laid out in the show cause notice, mere mentioning of Section 36(1) or mentioning the words “Deliberate act” or “collusion” in the show cause notice will not vest the tax department with the jurisdiction to invoke 36 (1) of the Act. The legal enforceability and the jurisdictional validity of a show-cause notice stems from the content i.e. the facts supported by tangible evidence referred to in the show-cause notice and not from cosmetic show causing of the statutory provisions or statutory key words “collusion” or “deliberate Act” in the show cause notice.”
From perusal of the impugned show cause notice, it is evident therefrom that the department could not establish collusion or deliberate act on the part of the appellant that such non levy, short levy or erroneous refund has been caused by the reason of some collusion or a deliberate act in terms of subsection (1) of Section 36 of the Sales Tax Act, 1990. All the more reason that as per Clause 3 of the Tri Party Agreement, executed between the parties, dated 29th November, 2002, all the payments made by PTV to Asia sat and IAC shall be net and made free and clear of and without deduction or withholding for any and all fees, taxes, charges. Levies, import and export duties, usages or spectrum fees which may be asserted by any local, state, or national governmental entity or bank as a result of the service fees payments by PTV. Thus, in this backdrop question of collusion or a deliberate act for not charging any tax etc. does not arise.
10. On perusal of the impugned show-cause notice dated 18-07-2008, we are of the considered view that Section 36(1) of the Sales Tax Act, 1990, does not circumscribe the facts and circumstances of the present case. At best, the case of the appellant falls under section 36(2) of the Sales Tax Act, 1990, as the conditions precedent therein existed in the present case. Nevertheless, the Notice under section 36(2) of the Act could only be issued within a period of 3 years of the relevant date. Even the impugned show-cause notice is also barred by time thereunder.
11. We have also gone through the Section 14(1) of the Federal Excise Act, 2005, and we find force in the contention that issuance of combined show cause notice dated 18-7-2008 in terms of Section 14(1) of Federal Excise Act, 2005 is barred by limit of time provided therein. Section 14(1) of Federal Excise Act, 2005 has laid down period of three years for issuance of show-cause notice from the relevant date meaning thereby that the show cause notice cannot be issued beyond the period of three years. It is significant to state here that subsection (1) of Section 14 of Federal Excise Act, 2005 was substituted by Finance Act, 2011 dated June 30, 2011 whereby period of five years has been provided for issuance of show cause notice from the relevant date. Prior to this substitution, period of three years was provided for issuance of show-cause notice from the relevant date which period is relevant in the present case. Coming to the facts of the case relevant date of payment is 10-01-2003 whereas show-cause notice was issued on 18-07-2008. When viewed in this perspective, the show-cause notice under section 14(1) of the Federal Excise Act, 2005 could be issued by 10-01-2006. Meaning thereby that was issued much beyond the relevant date. Resultantly, we can safely conclude that issuance of show-cause notice on 18-07-2008 was hopelessly barred by time and passing of order thereupon are not tenable in law being issued in absence of any lawful authority.
12. What has been discussed above, and respectfully following the ratio and the principle decidendi in the referred cases we have come to an inescapable conclusion that issuance of combined notice under section 36(1) of the Sales Tax Act, 1990 and under section 14(1) of the Federal Excise Act, 2005 dated 18-07-2008 was beyond the period of limitations provided thereunder. Moreover the adjudicating officer could not fasten blame of deliberate act or collusion of the appellant to design between persons to defraud on the part of appellant that such non levy, short levy or erroneous refund was caused by some deliberate design.
13. Resultantly, the Appeal Collector’s order dated 31-08-2009 stands vacated and that of the Additional Collector dated 12-03-2009 is hereby cancelled.
14. Since, we have adjudicated the present appeal on legal premises; therefore, merits of the case are not touched upon.
The appeal as well as miscellaneous application for additional grounds are disposed off in the manner as indicated above.
HBT/52/Tax(Trib.) Appeal accepted.