APPELLATE
TRIBUNAL INLAND REVENUE, BENCH-I, ISLAMABAD
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M/s Pakistan Institute of Legislative Development & Transparency (PILDAT), Islamabad. |
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Appellant |
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Vs |
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The Commissioner Inland Revenue, Zone-III, RTO, Islamabad. |
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Respondent |
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Appellant by |
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Mr. Mukhtar
Ahmed Gondal, Adv. |
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Respondent by |
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Mr. Shamshad Gul,
DR |
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Date of hearing |
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02.10.2019 |
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Date of order |
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02.10.2019 |
O R D E R
M. M. AKRAM (Judicial Member): The titled appeal has been filed by the appellant/registered person directly as the first appeal before this Tribunal under section 46(1)(b) of the Sales Tax Act, 1990 (“the ACT”) against an Order for compulsory registration bearing C.No.RTO/ST/Comp.Reg/Zone-III(range-I/240) dated 07.06.2016 passed by the learned Inland Revenue Officer, Unit-II, Range-I, Zone-III, Regional Tax Office, Islamabad under section 14(1)(f) read with Rule 6(2) of the Sales Tax Rules, 2006 on the grounds as set forth in the memo of appeal.
2. Brief facts
giving rise to the appeal are that the appellant having NTN No.2753228-3 is
registered as “Company” in the Income Tax Profile and provides services of
human resource, personal development services, market research services, credit
rating services, and also business support services. By virtue of Islamabad Capital
Territory (Tax on Services) Ordinance, 2001 (“the Ordinance”), the appellant is
liable to pay sales tax on such services and is, therefore, liable to be
registered under the Ordinance. The administering law in the instant case is
Islamabad Capital Territory (Tax on Services) Ordinance, 2001 (“the Ordinance”)
on the basis whereof the charge, levy of tax on the services rendered by the
appellant has to be imposed. While defining the scope of sales tax on services
under the Ordinance, it has been laid down under the provisions of subsection
(3) of section 3 that all the provisions of Sales Tax Act, 1990, and rules made
and notifications, orders, and instructions issued thereunder shall mutatis
mutandis inter alia apply to the registration and de-registration. For
ease of reference section 3(3) of the Ordinance is reproduced hereunder:-
“Section 3(3):- All the
provisions of Sales Tax Act, 1990 and rules made and notifications, orders, and
instructions issued thereunder shall mutatis mutandis apply to the collection
and payment of tax under this Ordinance in so far as they relate to:-
(a) manner, time, and mode of payment;
(b) registration and de-registration;
(c) keeping of record and audit;
(d) enforcement and adjudication;
(e) penalties and prosecution; and
(f) all other allied and ancillary matters.” (Emphasis supplied)
The above provisions of law clearly provide that in the matter of registration and de-registration of sales tax on services in the Federal Capital Territory, all the machinery provisions of the Sales Tax Act, 1990 and rules made thereunder shall mutatis mutandis apply. Accordingly, notice for compulsory registration under section 14(1)(f) of the Sales Tax Act, 1990 read with Rule 6(1) of the Sales Tax Rules, 2006 was issued by the Inland Revenue Officer to the appellant on 18.04.2016. In response to the notice, the appellant submitted its reply which was found unsatisfactory by the assessing officer. Resultantly, the Inland Revenue Officer in the exercise of the power allegedly conferred upon him under section 14(1)(f) of the Sales Tax Act, 1990 read with Rule 6(2) of the Sales Tax Rules, 2006 as notified vide SRO 555(I)/2006 dated 05.06.2006 and amended vide SRO 494(I)/2015 dated 30th June, 2015 compulsory registered the appellant vide impugned order dated 7th June, 2016. Felt aggrieved, the appellant preferred an appeal before this Tribunal and has assailed the impugned order on a number of grounds.
3. This case came up for hearing on 02.10.2019. At the very outset, the learned AR of the appellant without touching upon the merits of the case, contended that the show cause notice and in consequence thereof, the order passed by the Inland Revenue Officer suffered from serious legal and jurisdictional infirmities/flaws that go to the root of the case and must be considered and settled first. He explains that the Inland Revenue Officer lacks the powers/jurisdiction which he erroneously exercised in passing the impugned order under section 14(1)(f) of the Sales Tax Act, 1990 read with Rule 6 of the Sales Tax Rules, 2006 as notified vide SRO 555(I)/2006 dated 05.06.2006 and amended vide SRO 494(I)/2015 dated 30th June, 2015. He submits that according to Rule 6(1) of the Sales Tax Rules, 2006 the Commissioner Inland Revenue or any other officer authorized by the Board has the power to issue notice to the person for compulsory registration whereas in the instant case the Board has not authorized the Inland Revenue Officer for such purposes. Hence, the impugned order passed by the Inland Revenue Officer is unsustainable in law and Coram non-judice.
4. On the contrary, the learned DR appeared on behalf of the department contends that the appeal filed by the appellant is not maintainable on the ground that the impugned order was passed by the Inland Revenue Officer therefore, the appeal lies before the Commissioner Inland Revenue (Appeals) under section 45B of the Sales Tax Act, 1990. He, therefore, prays for the rejection of the appeal.
5. We have anxiously weighed the arguments put forth by both the rival parties before us and perused the available record. To resolve the controversy between the parties, two questions arise, first as to whether the appeal filed by the appellant is maintainable under the law and the second as to whether the Inland Revenue Officer has the jurisdiction under the law to pass the impugned order under section 14 of the Sales Tax Act, 1990 read with Rule 6 of the Sales Tax Rules, 2006?
As far as the first question is concerned, the submissions made by the learned DR are flawed and not tenable. The impugned order was admittedly passed under section 14(1)(f) read with read with Rule 6(2) of the Sales Tax Rules, 2006 as notified vide SRO 555(I)/2006 dated 05.06.2006 and amended vide SRO 494(I)/2015 dated 30th June, 2015. Section 45B of the Sales Tax Act, 1990 provides the right of appeal to any person, aggrieved by any decision or order passed under sections 10, 11, 25, 36(Omitted), or 66 by an Officer of Inland Revenue whereas in the instant case, admittedly the impugned order was passed by the Officer of Inland Revenue under section 14 read with Rule 6 of the Sales Tax Rules, 2006 which does not find mention in section 45B of the Sales Tax Act, 1990. Therefore, the appellant has rightly preferred the appeal under section 46(1)(b) of the Sales Tax Act, 1990 before this Tribunal against the order passed under section 14, and as such the objection raised by the learned DR is overruled.
6. Now we turn to the second question i.e. whether the Inland Revenue Officer has the
jurisdiction under the law to pass the impugned order under section 14 of the
Sales Tax Act, 1990 read with Rule 6 of the Sales Tax Rules, 2006? To answer this question, it
would be expedient to first reproduce hereunder the relevant provisions of the
Act and the Rules made thereunder which will have an impact to resolve the
controversy in the instant appeal which are section 14 of the Sales Tax Act,
1990 and Rule 6 of the Sales Tax Rules, 2006 as notified vide SRO 555(I)/2006
dated 05.06.2006 and amended vide SRO 494(I)/2015 dated 30th June,
2015: -
“Section 14 Registration:- (1) Every person engaged in making
taxable supplies in Pakistan, including zero-rated supplies, in the course or
furtherance of any taxable activity carried on by him, falling in any of the
following categories, if not already registered, is required to be registered
under this Act, namely: -
(a) ……………………………….;
(b) ……………………………….;
(c) ……………………………….;
(d) ………………………………;
(e) ……………………………….; and
(f) a person who is required, under any other
Federal law or Provincial Law, to be registered for the purpose of any duty or
tax collected or paid as if it were a
levy of sales tax to be collected under the Act;
(2)…………………………………..
(3) The registration under this Act shall be regulated in such manner as the Board may, by notification in the Official Gazette, prescribe.
Rule 6. Compulsory registration: - (1) If a person, who is required to be registered under the Act, does not apply for registration and the Commissioner Inland Revenue or any other officer, as may be authorized by the Board, after such inquiry as deemed appropriate, is satisfied that such person is required to be registered, he shall issue notice to such person in the form set out in Form STR-6.
(2) In case the Commissioner receives a written reply from the said person within the time specified in the notice under sub-rule(1), contesting his liability to be registered, the Commissioner shall grant such person opportunity of personal hearing, if so desired by the person, and shall thereafter pass an order whether or not such person is liable to be registered compulsorily. Copy of the said order shall invariably be provided to that person. Where the Commissioner passes the order for compulsory registration, he shall cause the said person to be registered through a computerized system.
(3) Where the person to whom a notice is given under sub-rule(1), does not respond within the time specified in the notice, the Commissioner shall cause to compulsorily register the said person through the computerized system under intimation to the said person through courier service.
(4) A person registered compulsorily under sub-rule (2) or (3) is required to comply with all the provisions of the Act and rules made thereunder from the date of compulsory registration, and in case of failure to do so, the Commissioner Inland Revenue having jurisdiction may issue a notice under section 25 of the Act for production of records or documents and appearance in person to assess the amount of sales tax payable under section 11 of the Act, and take any other action as required under the law against such person:
Provided that if it is subsequently established that a person was not liable to be registered but was wrongly registered under this rule due to inadvertence, error, or misconstruction, the Commissioner shall cause to cancel his registration through the computerized system. In case of such cancellation of registration, such person shall not be liable to pay any tax, default surcharge, or penalty under the Act or rules made thereunder, subject to the conditions, limitations, and restrictions prescribed under section 3B of the Act.” (Emphasis supplied)
It can be seen from the
combined reading of the above provisions of law which clearly provides that
every person engaged in making taxable supply including zero-rating supply in
the course or furtherance of any taxable activity, if already not registered,
is required to be registered in any of the specified categories enumerated in
section 14. Sub-section (3) of section 14 provides that the sales tax
registration shall be regulated through rules notified by the Board (FBR). The
Board in the exercise of the power conferred inter alia by the said subsection,
prescribed the rules known as Sales Tax Rules, 2006. Chapter-1 of the said
rules prescribes the procedure for registration, compulsory registration, and
de-registration. Rule 6 of the said rules specifically prescribed the procedure
for compulsory registration to any person.
According to sub-rule (1) of rule 6, the Commissioner Inland Revenue or
any other officer authorized by the Board has the power to issue notice to such
person who has not applied for registration in the form set out in the Form
STR-6. The whole reading of rule 6 of Sales Tax Rules, 2006 makes it clear that
only the Commissioner Inland Revenue has conferred the power to pass an order
of compulsory registration. In the instant case, the Inland Revenue Officer has
passed the order of compulsory registration against the appellant which is
contrary to the said rule and the scheme of the Act. Even in the instant case, the
Board has not authorized the Inland Revenue Officer for such purposes. This
fact was confronted to the learned DR but he could not give any plausible
explanation or any proof of authorization by the Board. For argument sake, if
it is presumed that the Board has authorized the Inland Revenue Officer even
then the bare reading of entire rule 6 makes it abundantly clear that only the
Commissioner Inland Revenue has the power to compulsory registered any person
who is required to be registered under the Act but he does not apply for
registration. Further when provisions of section 14 of the Act and rule 6 are read
together with the provisions of section 46(1)(b) of the Act which provides the
right of appeal to the aggrieved person against whom the compulsory
registration order is passed, further clarify the position that the order has
to be passed by the Commissioner Inland Revenue only and not by any other
officer below the rank of Commissioner otherwise the aggrieved person would be
the remedy less if the order is passed by the officer who is below the rank of
Commissioner Inland Revenue. Certainly, this would not be the intention of the
legislature. Therefore, under the scheme of the Act, the Commissioner Inland
Revenue has the only jurisdiction to pass an order for compulsory registration.
For ease of reference, the relevant provision of section 46 of the Act is
reproduced hereunder: -
“Section 46. Appeals to Appellate Tribunal:- (1) Any person including an officer of Inland Revenue not below the rank of an Additional Commissioner, aggrieved by any order passed by-
(a) ……………………….,
(b) the Commissioner
of Inland Revenue through adjudication or under any of the provisions of
this Act or rules made thereunder,
(c) …………………………..
may, within sixty days of the receipt of such decision or order, prefer an appeal to the Appellate Tribunal.”
It is now well-settled law that in order to arrive at the correct conclusion a scheme of law is to be examined in its totality. Reference may be made on the judgment titled as M/s Bilz (Pvt.) Ltd Vs DCIR, Multan, and another 2002 PTD 1(SC). It is also well-settled law that when the law requires an act to be done in a particular manner, it had to be done in that manner alone. Reliance is placed on 2002 PTD 877(SC).
7. For
the foregoing reasons, the mode and manner of the exercise of jurisdiction by
the Inland Revenue Officer do not meet the prescribed statutory criteria and as
such the entire exercise of the Inland Revenue Officer is patently in violation
of rule 6 of the Sales Tax Rules, 2006 and the scheme of law. It is trite law
that all the statutes are to be applied fairly and justly, the public
functionaries are under a constitutional mandate to be just and fair. The
assumption of jurisdiction under section 14(1)(f) of the Act read with rule 6
of the Sales Tax Rules, 2006 by the Inland Revenue Officer is indeed incomplete
negation thereto. It is an immutable principle of law that defective assumption/exercise
of jurisdiction by the authorities are incurable. Reliance may be placed on Director
General Intelligence and Investigation FBR Vs Sher Andaz and 20 Others (2010 SCMR 1746), Director
General Intelligence and Investigation and others Vs M/s AL-Faiz Industries
(Pvt.) Limited and others PTCL 2008 CL 337(S.C) and Collector,
Sahiwal and 2 others Vs Muhammad Akhtar (1971
SCMR 681). In all these judgments it was held by the Hon’ble Supreme court of
Pakistan that: -
i. Where
essential feature of assumption of jurisdiction is contravened or forum
exercises power not vested in it, or exceed authority beyond the limit
prescribed by law the judgment is rendered Coram non-judice and inoperative
(2002 SCMR 122 ).
ii. If a mandatory condition for the exercise of jurisdiction before the Court, Tribunal, or Authority is not fulfilled, then the entire proceedings which follow become illegal and suffer from want of jurisdiction. Any order passed in continuation of these proceedings in appeal or revisions equally suffer from illegality and are without jurisdiction (2008 SCMR 240)”
8. For what has been stated above, the appeal of the appellant is accepted and the impugned order passed by the Inland Revenue Officer is hereby annulled.
9. This order consists of (08) pages and each page bears my signature.
Sd/-
(M. M. AKRAM)
JUDICIAL
MEMBER
Sd/-
(NADIR MUMTAZ WARRAICH)
ACCOUNTANT MEMBER
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