APPELLATE TRIBUNAL INLAND REVENUE, BENCH-I, ISLAMABAD
STA No.176/PB/2018
(Tax Period July 2013 to December 2016)
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O R D E R
M. M. AKRAM (Judicial Member): The titled appeal has been filed by the appellant/registered person directly before this Tribunal under section 46(1)(b) of the Sales Tax Act, 1990 (“the ACT”) against an Order for Black Listing No.08/2017 dated 09.06.2017 passed by the learned Commissioner Inland Revenue Peshawar Zone, Peshawar on the grounds as set forth in the memo of appeal.
2. Brief facts culled out from the record are that the Directorate of Intelligence & Investigation IR, Peshawar reported to the Commissioner Inland Revenue that inter alia the appellant is prima facie involved in tax fraud as defined in section 2(37) of the Act. The appellant is non-existent on the declared business address, and retail outlet and godown is also not in existence in the area. Further observed that the appellant is also evading sales tax payable of Rs.13,226,095/- on account of further tax and the appellant is maintaining huge stocks without declaration of sales in the sales tax returns. On the aforesaid allegations, tax fraud in terms of section 2(37) was established vide assessment order No.25/2017 dated 15.05.2017, involving sales tax Rs.13,226,095/- on account of further tax along with default surcharge and penalty. Therefore, on the basis of the aforesaid observations, the sales tax registration of the appellant was suspended without issuance of prior show cause notice vide order dated 13.04.2017. Subsequently, a show cause notice dated 17.04.2017 was issued for black listing the sales tax registration of the appellant. The show cause notice was returned back with the remarks that no one exist on the given address. The learned Commissioner IR with the consultation of the Senior Auditors who appeared on behalf of the Directorate of I&I passed an impugned order whereby vide order dated 09.06.2017, the appellant was declared black listed under section 21(2) of the Act read with Rule 12 of the Sales Tax Rules, 2006. Feeling aggrieved of the said order, the appellant preferred an appeal before this Tribunal under section 46(1)(b) of the Act and has assailed the impugned order on number of grounds.
3. This appeal came up for hearing on 22.08.2019. The learned AR of the appellant vehemently contended that the suspension order was passed without prior notice to the appellant. He explained that the Rule 12(i) of Sales Tax Rules, 2006 inter alia provides that sales tax registration of the person be suspended without prior notice. This is a clear violation of Article 10A of the Constitution of Islamic Republic of Pakistan, 1973. After insertion of Article 10A in the Constitution of Pakistan 1973, “fair trial” and “due process” are fundamental rights of every citizen for determination of his civil rights and obligations. He stressed upon that before suspension of the sales tax registration of the appellant, the reasons and proper opportunity of being heard should have been given to the appellant. He further contended that the impugned order was passed inter alia on the basis of alleged evasion of tax to the tune of Rs.13,226,095/- adjudged against the appellant vide order No.25/2017 dated 16.05.2017. He pointed out that this order was challenged by the appellant before the Commissioner Inland Revenue (Appeals) who vide order-in-appeal No.78/2019 dated 16.08.2018 deleted the further tax amounting to Rs.12,925,182/- and set aside the allegation of tax fraud and reduced the penalty from 100% to 5% under section 33(5) of the Act. He further informed that the appellant still feeling aggrieved of the order of the Commissioner IR (Appeals) preferred second appeal before this Tribunal whereby both the order of the lower authorities were vacated vide STA No.175/PB/2018 dated 28.06.2019 and as such presently there is no tax demand against the appellant and as such he prays for acceptance of appeal. To sum up of his arguments, the learned AR submitted that even otherwise the impugned order is illegal and void ab-initio as the same was issued after expiry of 90 days from the date of issuance of show cause notice which is contrary to the provision as contemplated in Rule 12(b)(iii) of the Sales Tax Rules, 2006.
4. On 4. On the other hand, learned DR opposed the appeal on the ground that learned Commissioner IR has passed a speaking order and there is no illegality or lacuna in his order. He, therefore, prays for rejection of appeal.
5. We have heard both the parties and perused the relevant record. The submissions of the learned AR of the appellant have substance. After insertion of Article 10A in the Constitution of Pakistan 1973, “fair trial” and “due process” are fundamental rights of every citizen for determination of his civil rights and obligations. Before suspension of the sales tax registration of the appellant the reason should be confronted and be given an opportunity of being heard. Reliance may be placed on in a recent judgment Sarfraz Saleem vs. Federation of Pakistan and others (PLD 2014 SC 232) has held: -
"4……every person, for determination of his civil rights and obligations or in any criminal charge against him shall be entitled to fair trial and due process."
In another case Babar Hussain Shah and another vs. Mujeeb Ahmed Khan and another (2012 SCMR 1235), the Hon'ble Court has highlighted the import of Article 10A in the words;
"11... concept of fair trial and due process has always been the golden principles of administration of justice but after incorporation of Article 10-A in the Constitution of the Islamic Republic of Pakistan, 1973 vide 18th Amendment, it has become more important that due process should be adopted for conducting a fair trial and order passed in violation of due process might be considered to be void.."
This particular issue came before the Hon’ble High Court in the case titled as “M/s Imran Ali Lubricants Vs Federation of Pakistan etc” (2018 PTD 1042) wherein the rule 12 of the Sales Tax Rules, 2006 to the extent that it provides for suspension of registration of a registered person without prior notice was held to be declared ultra vires the Constitution as well as the main enactment and was struck down in the following manner:-
“19. Besides, it is an immutable principle that in all proceedings whether judicial or administrative, the principles of natural justice have to be observed if the proceedings might result in consequences affecting the person or property or other right of the parties concerned. Therefore, where a person is empowered to take decisions after factual investigation into the facts which would result in consequences affecting the person, property or other right of any other person, then the courts have inclined generally to imply that the power so given is coupled with a duty to act in accordance with the principles of natural justice and fairness. [The University of Dacca through its Vice-Chancellor and the Registrar, University of Dacca v. Zakir Ahmed (PLD 1965 Supreme Court 90)].
20. Undoubtedly the power of suspension of registration without prior notice is unlawful and impinges upon the rights of the petitioners to be treated in accordance with law and to be afforded due process of law.”(Emphasis supplied)”
The ratio decided by the Hon’ble High Court in above judgment, is now upheld by the Division Bench of the Hon'ble High Court vide its order dated 14.03.2019, in ICA No.255820 of 2018.The other contention of the learned AR that the appellant was black listed on the basis of the Assessment Order No.25/2017 involving alleged evasion of sales tax amounting to Rs.13,226,095/-had ultimately set aside by this Tribunal vide STA No.175/PB/2018 dated 28.06.2019 is also found correct and at present there is no tax demand existed against them. The last submission of the appellant that the impugned order was issued after expiry of 90 days from the date of issuance of show cause notice is also tenable. The Rule 12(b)(iii) of the Sales Tax Rules, 2006 clearly provides that the order of black listing shall be issued within ninety days of the issuance of the notice of hearing. In case, the order of black listing is not issued within this time period the suspension of registered person shall become void ab-initio. In the instant case the record prima facie shows that the show cause notice for black listing the sales tax registration of the appellant was issued on 17.04.2017 and the impugned order of black listing was issued on 24.08.2017 after expiry of ninety days from the date of notice which is contrary to the provision of the Rule 12(b)(iii) ibid. The relevant Rule 12(b)(iii) is reproduced hereunder for ease of reference:-
“Blacklisting: -
- ………………
- ……………..
- the order of blacklisting shall be issued within ninety days of the issuance of the notice of hearing. In case, the order of blacklisting is not issued within this time period the suspension of registered person shall become void ab-initio;” (Emphasis supplied)
6. For the foregoing reasons, the appeal of the appellant is accepted and the impugned order is set aside with the direction to the respondent to restore the sales tax registration number of the appellant forthwith in its original status i.e List of Active Taxpayer.
7. Appeal is disposed of in above terms. This order consists of (05) pages and each page bears my signature.
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