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S.T.A. No.42/LB of 2007, decided on 4th June, 2008.

----Ss.36(3), 2(27), 3, 4, 6, 22 & 26---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Show-cause notice was issued on the ground that sales tax was paid on whole sale cash price instead of retail price printed on carton and alleged that short amount paid was recoverable along with additional tax---Taxpayer contended that order passed was barred by time as it should have been passed within 45 days and if that period was to be extended it could be for 45 days and further 90 days with some cogent reasons but the show-cause notice was issued on 30-8-2001 and adjudicating order had been passed on 30-6-2005, which was beyond the limitation prescribed under the law--Validity---At the relevant time adjudication order was to be passed within 45 days which was extendable for another 90 days on some cogent reasons but order had been passed with the delay of about four years---No evidence was produced regarding the default that it was deliberate either before the Appellate Tribunal or before the lower forum---Inordinate delay had not been occasioned due to any default of the taxpayer---Provisions of S.36(3) of the Sales Tax Act, 1990 were mandatory in nature and not directory---Record showed that show-cause notice was issued on 30-8-2001 and the adjudication order was passed on 30-6-2005 which showed that it was beyond the stipulated limitation prescribed under the law---Adjudication order as well as the order-in-appeal were not sustainable in law---On the question of limitation, appeal was accepted and the order was set aside by the Appellate Tribunal. Assistant Collector of Customs v. Khyber Electric Lamps Mfg. Co. Peshawar 2001 SCMR 838 rel. Messrs Shafique Book Centre, Rahim Yar Khan v. Collector (Appeal), Multan A, Sales Tax Appeal No.1603/LB of 2003 and Collector of Sales Tax and other v. Messrs Super Asia Muhammad Din and Sons and Messrs Hanif Straw Board of Factory and others (sic) ref.

----S. 36(1)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation of five years---Appellant contended that to avail benefit of provision of S.36(1) of the Sales Tax Act, 1990 i.e. five years limitation for issuance of show-cause notice, it was necessary to impute certain allegations of deliberate tax fraud, erroneous refund and collusion---None of these allegations were detailed in the show-cause notice which rendered it illegal and barred by tine---Validity---According to appellant show-cause notice had been issued under S.36(2) of the Sales Tax Act, 1990 which described the limitation as three years and the show-cause notice had been issued beyond the limitation---From bare reading of show-cause notice, it could be inferred that the sales tax had been short levied and this act was deliberate---It need not be specifically mentioned in the show-cruise notice that act was deliberate to bring this in the ambit of S.36(1) of the Sales Tax Act, 1990. 2003 PTD 1797 and 2005 PTD 1378 distinguished.

----S.36(2)---Recovery of tax not levied or short-levied or erroneously refunded---Contents of show-cause notice---Appellant contended that the contents of the show-cause notice were defective and ambiguous as the particulars of the parties which traded with the appellant had not been given therein, the details of the goods traded had not been mentioned and section of law under which he had been charged had not been given---Validity---Bare reading of show-cause notice revealed that the amount of alleged short levied amount had been given--Was not necessary to give the particulars of the parties as the invoices also showed the nature of the goods traded---Show-cause notice did not suffer from any infirmity in circumstances. 2007 PTD 2265 ref.

----S.36(2)---Recovery of tax not levied or short levied or erroneously refunded---Non-mentioning of relevant provisions of law---Effect of---Instead of taking into consideration technicalities, the Court looks into the matter with different angles namely as to whether substantial compliance had been made or if any of the sub-rule had been omitted then what prejudice was likely to cause to the party to whom the show-cause notice was given viewing the matter from this angle---No prejudice shall be caused to appellant because the substantial compliance of the relevant rules had been made. Collector of Sales Tax and Central Excise, Lahore v. Zamindara Paper and Board Mills and others C.P. No.702-L of 2003 ref. Waseem Ahmad for Appellant. Sultan Mahmood for Respondent.

.---(1). This appeal is directed against the Order-in-Appeal No.1 of 2007, dated 12-1-2007 passed by the Collector, Customs, Sales Tax and Federal Excise (Appeals), Lahore (here-in-after referred to as respondent No.2). 2. Brief facts of the case as reported by the staff of Collectorate of Sales Tax and Central Excise (Audit Div.), Lahore are that during audit of Messrs Syed Bhai Lighting Ferozepur Road, Lahore for the year 97-98, it was observed that respondent paid sales tax on whole sale cash price instead of retail price printed on carton (consumer price minus sales tax) on the supply of bulbs and tubs lights. Resultantly an amount of sales tax amounting to Rs. 22,31,505 was short paid. It was alleged that the respondent has violated sections 2(27), 3, 4, 6, 22, 26 of the Sales Tax Act, 1990 and evaded amount of sales tax amounting to Rs.22,31,505 which is recoverable from them along with additional tax. 3. On the basis of above narrated facts Messrs Syed Bhai Lighting were charged with the contravention of above mentioned provisions of the Sales Tax Act, "1990 and were called upon to show cause as to why evaded amount of sales tax amounting to Rs.22,31,505 should not be recovered from them along with additional tax under section 34 ibid and penalty under section 33 ibid.. 4. Vide adjudication order, dated 30-6-2005, the Deputy Collector (Adjudication) held as under:--

"I have gone through facts of the case, record available in the file, verbal and written submission of both parries it has been observed that respondent has not shown any interest to guide the adjudicating authority to reach on a conclusion. He was handed over a copy of audit observation and auditor of the department also explained him the whole case. Respondent was advised to furnish sales tax record pertaining to financial years, 1997 and 1998. So, that the figures could be reconciled. Be he failed to do so. As the respondent is of the view that they have paid sales tax on retail price while prosecuting claims. They have paid sales tax but on whole sales cash price. It is difficult to reach on a conclusion in the absence of any documentary evidence. This needs reconciliation in consultation with the field formation. The respondent is directed to furnish Sales Tax record/Central Excise record to the field formation for reconciliation. IF the result is in accordance with the version of the respondent, then the alleged liability need not be pressed into service. Conversely, the liability worked out in the show-cause notice will have to be discharged." 5. Aggrieved of the same, the present appellant filed an appeal before respondent No.2 who vide order, dated 12-1-2007 upheld the decision of the adjudicating officer and dismissed the appeal. Aggrieved of the same, this appeal has been preferred. The grounds urged are as under:--

"That the impugned show-cause notice is barred by time; that the recovery of short levied amount of tax, if any, could have been made within 3 years of the relevant date as has been defined in section 36 of the Act; that it had been alleged through the impugned notice that the tax was not paid in the year, 1997-98, whereas the show-cause notice was issued in the year, 2001, hence, the same was hit by limitation; that it has been invariably held by the superior Courts that demand cannot be held valid in cases which are barred by time;

(I) that the impugned show-cause notice is barred by time; that the recovery of short levied amount of tax, if any, could have been made within 3 years of the relevant date as has been defined in section 36 of the Act; that it had been alleged through the impugned notice that the tax was not paid in the year, 1997-98, whereas the show-cause notice was issued in the year, 2001, hence, the same was hit by limitation; that it has been invariably held by the Superior Courts that demand cannot be held valid in cases which are bared by time;

(II) that this aspect has been ignored by the respondent No.2 and has avoided to give any findings on this point which has made the impugned order nullity in the eyes of law;

(III) that the impugned order-in-original is patently illegal and void ab initio as being an adjudicating authority, the respondent No.3 was not competent to remand the case back to the auditors; that the appellant had been placed at the mercy of the prosecution whereas the learned respondent No.3 was required to call for the evidence from the prosecution and should have decided the case viz. she was required to either confirm the charges or vacate the show-cause notice; that impugned order had been passed in total disregard of the ratio laid down Superior Courts; that in its judgment titled "Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Additional Collector of" Sales Tax, Gujranwala", it has been held by Lahore High Court, Lahore that:--

"There is no provision either in the Sales Tax Act, 1990, or for that matter in any other taxing statute in Pakistan which enables or empowers and original authority to remand the matter further still a lower official functionary.";

(IV) that the Order-in-Appeal is also unlawful as the respondent No.2 has not dilated upon this issue and has not given his judgment on this aspect; that he has avoided to given any order an this point;

(V) that the show-cause notice was also defective and void ab initio; that the show-cause notice issued without specifying the provisions of law and reasons for evasion of sales tax is invalid;

(VI) that the show-cause notice had to specify the reasons(s) for non-levy or short levy of tax and should also specify the provisions of the statute which arc invoked by the adjudicating officer for recovery of short levied amount of tax; that in the impugned show-cause notice, neither the provisions of section 11 nor those of section 36 have been specified which provide "assessment of tax" and "recovery of tax not levied or short levied or erroneously refunded" respectively; that assessment of tax and order of recovery of tax without invoking the provisions of sections 11 and 36 of the Act respectively has rendered the impugned show-cause notice nullity in the eyes of law; that any order passed in pursuance of an invalid show-cause notice is patently illegal and without lawful authority and is liable to be set aside; reliance is placed on a judgment of Appellate Tribunal, Bench-II, Lahore in Sales Tax Appeal No.1603/LB of 2003 titled Messrs Shafique Book Centre, Rahim Yar Khan v. Collector (Appeals), Multan; that in the said judgment, the learned Tribunal has been pleased to hold that a perusal of the show-cause notice reveals that the learned adjudicating officer has not invoked the provisions of sections 11 and 36 of the Sales Tax Act, 1990". This is sufficient ground to accept the appeal and set-aside the impugned order, so we while placing reliance in the judgment 2001 SCMR 838 titled Assistant Collector of Customs v. Khyber Electric Lamps, accept the appeal and set-aside the order-in-original";

(VII) the Supreme Court of Pakistan in case titled "Assistant Collector of Customs, Dryport Peshawar v. Messrs Khyber Electric Lamps Mfg. Co. Peshawar" reported at 2001 SCMR 838 has held "if specific particulars are not stated in the notice, the notice would be vague and would not be in accordance with law";

(VIII) that the Honourable Supreme Court of Pakistan in the case of Assistant Collector of Customs, and others v. Messrs Khyber Electric Lamps and others reported at 2001 SCMR 838 was pleased to pronounce the law in the matter of similar show-cause notices prescribed under section 32 of the Customs Act, 1969; that it was held by the apex Court that since show cause notices under subsections (2) and (3) of section 32 of the Act are two distinct and separate types of notices and different ground and different period of service of notice in each subsection have been prescribedif such specific particulars are not stated in the notice, the notice would be vague and would not be in consonance with the requirements or subsections (2) and (3) of section 32 of the Act;

(IX) notwithstanding the fact that the impugned show-cause notice is invalid, defective and void ab initio and the impugned order passed in pursuance of an invalid showcause notice is also nullity in the eyes of law; that the show-cause notice as well as the orders suffer from factual infirmities; that the appellant has never paid sales tax on whole sale cash price;

(X) that the show-cause notice as well as orders are vague, void ab initio, illegal as the appellant had totally denied the charge of" having paid sales tax on whole sale cash price; that the appellant is a manufacturer of electrical fittings and had been paying sales tax in accordance with law---on value of supply OR retail price whichever was applicable to the respective goods; that in spite of repealed requests of the appellant, the department had not provided any evidence to the extent:--

(i) What were the goods on which allegedly sales tax had been short paid

(ii) What should have been the retail price in the opinion of Auditors"

(iii) How the auditors have calculated the retail price

(iv) Where is the evidence of retail price

(v) Calculation sheet of Rs.22,31,505

That the respondent No.2 had also ignored this aspect and has not dilated upon this issue in the proceedings before him;

(XI) that the learned respondent No.3 had passed order-in-original without confronting the evidence which was the basis of the alleged allegations making the order-in-original nullity in the eyes of law; that the respondent No.2 has also ignored to call for the information/material from the department in support of the allegations and has not taken into account the submissions of the appellant;

(XII) that the respondent No.3 has discussed irrelevant things in his order which were neither included in the memo. of appeal nor were ever discussed during the hearing; that the appellant has never contended that order-in-original was barred by time in terms of section 36(3) of the Act rather it has been invariably contended that show-cause notice was barred by time." 6. Parawise comments were filed by the respondent on 7-4-2007 in which it was submitted as follows:--

"(1) Audit was conducted for the period 1997-98 by the Revenue Receipt Audit, and audit observation was issued on 15-5-1999 accordingly a contravention report was issued on 22-11-1999 followed by show-cause notice, dated 30-8-2001;

(i) Needs no comments.

(ii) Deputy Collector (Adjudication) has not remanded back the case to the auditor, the appellant was directed to provide the records for reconciliation.

(iii) The order-in-original by the Collector (Appeal) is lawful and based on the facts of the case.

(iv) The show-cause notice is lawful and issued within the provision of law.

(v) The record show that the appellant deals in the manufacture and supply of bulb and tube lights falling under the Third Schedule and liable to sales tax on retail price. Contrary to this appellant has paid sales tax on tubes and bulbs on wholesale price instead of retail price which resulted into short payment of Rs.22,31,505 as evident from the calculation sheet made by the auditor of the Revenue Receipt Audit.

(vi) Needs no comments.

(vii) Needs no comments.

(viii) The show-cause notice issued as well as the order-in-original are based on facts.

(ix) On this issue already explained in para.5.

(x) Needs no comments.

(xi) Collector, Customs, Sales Tax and Federal Excise (Appeals), Lahore decided the case as per law and is based on the facts." 7. The learned counsel for the appellant has vehemently agitated that firstly the show-cause notice, dated 30-8-2001 is defective secondly it was bared by time and thirdly the adjudication order has been passed with an inordinate delay and, therefore, was not tenable under the law. As regards first point it was submitted that the amount to be charged was not given in the show-cause notice, the particulars of the parties with which the appellant had traded were not shown in the show-cause notice and above all the details of the goods have not been given and section invoked has not been described in the show-cause notice. To support his arguments, he relied on 2007 PTD 2265 and PTCL 2008 CL 126. 8. The second point urged by him was the question of limitation. It was advocated that the show-cause notice itself was barred by time under section 36(1) of the Sales Tax Act, 1990. The limitation was five years whereas under section 36(2) limitation was three years. The avail benefit of provision of section 36(1), it was necessary to impute certain allegations of deliberate tax fraud, erroneous refund and collusion but none of these allegation have been detailed in the show-cause notice which render it illegal and barred by time. To support his contention reliance was placed on 2003 PTD 1797 and 2005 PTD 1378. Thirdly, it was submitted that the adjudicating order passed by the Deputy Collector (Adjudication) was hopelessly barred by time. As per law, it should have been passed within 45 days and if that period was to be extended it could be for 45 and further 90 days with some cogent reasons but in the instant case the show-cause notice was issued on 30-8-2001 and the adjudicating order has been passed on 30-6-2005, which is beyond the limitation prescribed under the law. To support his contention reliance was placed on judgment passed by the Hon"ble Lahore High Court in re: Collector of Sales Tax and others v. Messrs Super Asia Muhammad Din and Sons and Messrs Hanif Straw Board Factory and others (sic). 9. Conversely Mr. Sultan Mahmood, Advocate appearing on behalf of the respondent maintained that the show-cause notice was not ambiguous. Its bare reading makes it abundantly clear that misdeclaration has been made by the appellant and the provisions under section 36(1) of the Sales Tax Act, 1990 were attracted. It was pointed out that the amount of evaded tax has been stated in the show-cause notice and it was not necessary to give the particulars of the invoices in the show-cause notice. He relied on a reported case C.P. No. 702-L of 2003 in re: Collector of Sales Tax and Central Excise, Lahore v. Zamindara Paper and Board Mills and others wherein it was held by the apex Court that it is not necessary to define provisions of law to be incorporated in the show-cause notice. It was observed that "instead of taking into consideration technicalities, the Court looks into the matter with different angles namely as to whether substantial compliance has been made or if any of the sub-rule has been omitted then what prejudice is likely to cause to the party to whom the show-cause notice is given. 10. The learned counsel for the respondent also asserted that the show-cause notice was not barred by time. He maintained that as there was mis-declaration, therefore, the provisions of section 36(1) were attracted which was for five years and thus show cause notice has been issued within time. 11. It was canvassed by the learned counsel for the respondent that the provisions laid down under section 36(3) of the Sales Tax Act, 1990 are not mandatory but directory in nature. He maintained that an appeal against the order passed by the Hon"ble Lahore High Court in this respect has been filed before the august apex Court. 12. We have heard the learned counsel for the parties and perused the available record with their assistance and our findings are as follows. 13. Before adverting to the respective contentions of the parties, we are constrained to observe that the adjudication order passed by the Deputy Collector (Adjudication) is not proper and in accordance with law. The order itself is non-speaking and does not. conform to the legal norms in this regard. The adjudicating officer has merely observed that it is difficulty to reach on a conclusion in the absence of any documentary evidence. This needs reconciliation in consultation with the field formation. The respondent is directed to furnish Sales Tax record/Central Excise record to the field formation for reconciliation. If the result is in accordance with the version of the respondent, then alleged liability need not to he pressed into service. Conversely, the liability worked out in the show-cause notice will have to be discharged. 14. The mere perusal of this adjudication order shows that no order in definite terms stating any liability on the appellant has been made. We wonder on what grounds that appeal was tiled before the Collector (Appeals) and he also did not consider the vires of the adjudication order in this regard. However, the respondent No.2 on the basis of arguments advanced by the appellant before him and on that score dismissed the appeal. Before us, the first point agitated is that the contents of the show-cause notice, dated 30-8-2001 are defective and ambiguous. It was alleged that the particulars of the parties which traded with the appellant have not been given therein and the details of the goods traded have not been mentioned. Besides this, the section of law under which he has been charged not been given. 15. The bare reading of the show-cause notice reveals that the amount of the alleged short levied amount has been given. It was not necessary to give the particulars of the parties as the invoices also show the nature of the goods traded. In this regard, we consider that the show-cause notice does not suffer from any infirmity. As regards to the non-mentioning of the relevant provisions of law, we feel it was not so damaging. It has been held by the apex Court of Pakistan in C.P. No.702-L of 2003 that it is to be noted that instead of taking into consideration technicalities, the Court looks into the matter with different angles namely as to whether substantial compliance has been made or if any of the sub-rule has been omitted then what prejudice is likely to cause to the party to whom the show-cause notice is given viewing the matter from this angle". In the instant case we are of the opinion that no prejudice shall be cause to the respondents because the substantial compliance of the relevant rules has been made. 16. The next point agitated by the counsel of the appellant is that the show-cause notice was barred by time. According to him the show-cause notice has been issued under section 36(2) of the Sales Tax Act, 1990 which describes the limitation as three years and the show-cause notice has been issued beyond the limitation. We don"t find ourselves in agreement with these arguments. From the bare reading of the show cause notice, it can be inferred that the sales tax has been short levied and this act was deliberate. It need not to he specifically mentioned in the show-cause notice that act was deliberate to bring this in the ambit of section 36(1) of the Sales Tax Act, .1990. The dictum laid down under 2003 PTD 1797 and 2005 PTD 1378 is not attracted in the circumstances of the present case. 17. The learned counsel for the appellant has heavily relied on the judgment of the Hon"ble High Court in re: Messrs Al-Khyber Electric Lamps to assert that the adjudication order was passed beyond the limitation prescribed under the law. At the relevant time the adjudication order was to be passed within 45 days which was extendable for another 90 days on some cogent reasons but in the instant case this order has been passed with the delay of about four years. The learned counsel for the respondent has maintained that this delay was deliberate due to the default on the part of the appellant but no substantial evidence in this regard was produced either before us or before the lower forum. In the absence of that, we are not convinced that this inordinate delay of about four years had occasioned due to any default of the appellant. The dictum laid down in judgment by Hon"ble Mr. Justice Nasim Sikandar is in re: Messrs Super Asia is clear in this respect that the provisions of section 36(3) of the Sales Tax Act, 1990 are mandatory in nature and not directory. The contentions of the learned counsel for the respondent that the appeal has been filed against this judgment is of no avail as no stay order against the judgment has been passed by the Hon"ble Supreme Court of Pakistan so far. As is evident from the record, the show-cause notice was issued on 30-8-2001 and the adjudication order was passed on 30-6-2005 which shows that it was beyond the stipulated limitation prescribed under the law, therefore, on that score the adjudication order as well as the order-in-appeal are not sustainable in law. Thus on this question of limitation, the appeal filed by the appellant is accepted and the impugned order is set-aside. C.M.A./55/Tax(Trib.) Appeal accepted.

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