APPELLATE TRIBUNAL INLAND REVENUE, DIVISIONAL
BENCH-I,
ISLAMABAD
Old CE No.02/IB/2009
New CE No.57/CE/IB/2009
Old CE No.03/IB/2009
New CE No.58/CE/IB/2009
Old CE No.04/IB/2009
New CE No.58/CE/IB/2009
(Tax
Periods June 1993 to January 1999)
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M/s Pakistan Oilfields Ltd. Rawalpindi |
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Appellant
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VS |
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Commissioner Inland Revenue, LTU, Islamabad |
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Respondent |
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Appellant by |
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Mr.
Abad-Ur-Rehman, Advocate |
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Respondent by |
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Mr.
Imran Shah, DR |
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Date of hearing |
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04.12.2019 |
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Date of order |
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04.12.2019 |
O R D E R
M. M. AKRAM (Judicial Member): The
titled Central Excise Appeals have been filed by the appellant/registered
person against Order in Original No.09/2001 dated 06.02.2002 and Order in
Original Nos.101-102/2001 dated 11.10.2001 passed by the learned Collector of
Customs, Central Excise and Sales Tax (Adjudication), Rawalpindi for the Tax
Periods June 1993 to January 1999 on the grounds as set forth in the memos of
appeals. The facts of the case and questions of law involved in all these
appeals are identical and the same, therefore, all these appeals are being
decided through this consolidated order.
2. The brief facts common to all the appeals
are that in consequence of an audit of the appellant conducted by the Director-General
Revenue Receipt and Audit (DGRRA), it was observed on 14.09.1999 that according
to Ministry of Natural Resources, Islamabad’s Notification No.SRO.1/93 issued
vide PL3(169-A)91-92/1 dated 16.05.1993 read with their clarification issued
vide PL3(465)98 dated 17.09.1998, the rate of Development Surcharge on solvent
oil was enhanced from Rs.0.45 to Rs.1.54 per liter. However, the appellant paid
the Development Surcharge on solvent oil @ Rs.0.45 per liter at the previous
lower rate instead of the enhanced rate of Rs.1.54 per liter during the period
from July 1998 to January 1999. Accordingly a short payment of Rs.2,279,190/-
stated levy was alleged to have been made by the appellant on solvent oil. In
consequence thereof, show cause notice dated 07.10.1999 for the period 1993 to
1998 and two show-cause notices dated 20.12.2000 and 01.01.2002 for the same
period i.e July 1998 to January 1999 were issued to the appellant by the
adjudication officer, for having violated provisions of section 3 and 9 of the
Central Excises Act, 1944 read with rule 9, 10 and 226 of Central Excise Rules,
1944 punishable under Rule 210 of the aforesaid Rules of 1944 read with
provisions of the Petroleum Products (Development Surcharge) Ordinance, 1961 as
well as the Petroleum Products (Development Surcharge) Rules, 1967 along with
SRO 1/93 issued vide PL3(169-A) 91 92/1 dated 16.05.1993 and the clarification
issued vide No.PL3(465)98 dated 17.09.1998. Thereunder, short paid Development
Surcharge along with additional duty and penalty was demanded, by the
respondent excise officials, from the appellant.
3. The appellant defended the show cause
notice proceedings; a detailed and elaborate reply was filed therein. However,
the same resulted in respective order-in-originals, passed by the respondent
Collector (Adjudication); therein the appellant was found to have violated the
cited provisions, and thus, the stated levy with additional duty and a penalty
twice the amount of duty involved, was imposed upon the appellant.
4. The aforesaid orders-in-original were
assailed in the respective appeals before the Customs, Central Excise, and
Sales Tax Appellate Tribunal. The same were heard and decided vide consolidated
judgment dated 17.05.2002 by the Tribunal wherein both the principal amounts of
the levy as well as the additional duty were kept intact; however, the imposed
penalty was reduced to 25% of the duty involved.
5. Felt aggrieved, the appellant preferred an
appeal under section 36-C of the Central Excise Act, 1944 bearing CE appeal
No.74/2002 before the Hon’ble Lahore High Court, Rawalpindi Bench. The said
appeal was decided by the Hon’ble High Court vide order dated 08.04.2009
whereby the case of the appellant was remanded to the Tribunal with certain
directions.
6. The case came up for hearing on
04.12.2012 for compliance with the order dated 08.04.2009 passed by the Hon’ble
High Court. At the very outset, the learned AR has invited our intention to the
issue in hand on the legal plain. He has contended that proceedings initiated
on the basis of the audit report made by the DGRRA are illegal, void ab-initio,
and without jurisdiction. He argued that the aforesaid agency is neither part
of the Sales Tax and Central Excise Department nor has got any authority to
conduct an audit of the registered person. In this regard, the learned AR
referred to the judgment reported as PTCL
2010 CL 363. Further contends that it is settled principle law that where
the basic act is illegal, the entire superstructure raised thereon
automatically falls to the ground. Reliance was placed on the judgment reported
as PLD 2008 SC 663. He submits that
in all the instant appeals, the show-cause notices issued by the assessing
officer are hopelessly time-barred as in the said notices it was alleged that
the appellant short paid the development surcharge, and therefore, the case of
the appellant squarely falls in sub-rule (1) of rule 10 of the Central Excise
Rules, 1944 which provides one-year limitation of the relevant date. Reliance
was placed on 2016 PTD 1188. The AR
has also pointed out that notwithstanding the afore, the show cause notices issued
inter alia in terms of provisions of Rule 10 of the Central Excises Rules,
1944, in the absence of any mention of the relevant sub-rule thereof, has to be
treated as one under Rule 10(1) of the mentioned Rules. Thus the show causes
notices, viz short paid development surcharge for the periods were time-barred.
By relying upon the judgment reported as PLD
2013 Lahore 634 the learned AR further explains that all the show cause
notices are vague, these notices do not specify the sub-rule of rule 10 in
which the case of the appellant falls. On merit, he argued that the development
surcharge is levied under The Petroleum Products (Development Surcharge)
Ordinance, 1961. According to section 3 of the said Ordinance at the relevant
time, the development surcharge was levied on the refinery and company. The
expression “company” was defined in sub-section (1) of section 2 of the
Ordinance according to which company means a company specified in the Second
Schedule. The AR contends that the appellant was added in the Second Schedule
to the Ordinance, 1961 vide SRO 469(I)/87 dated 07.06.1987 and since then it has
been paying the levy at the rates applicable to it. However, in the
notifications SROs 273(I)/96, 274(I)/96, and 275(I)/96 which pertains to
enhancement of rate, there is no mention of the name of the appellant. Thus,
the appellant was not obliged to pay a development surcharge at the enhanced
rate under the law. Resultantly, the question of levy of additional surcharge
on late payment of development surcharge does not arise. According to the learned
AR, even otherwise the additional surcharge levied through the impugned order
is illegal and void ab-initio as the Ordinance, 1961 does not levy additional
surcharge in case, the due development surcharge is not paid within the
prescribed time.
7. On the other hand, the learned DR has
supported the order of the assessing officer. He contends that the appellant
had deliberately did not pay the development surcharge on the enhanced rate,
submitted false and incorrect information to the department, therefore, the
case of the appellant squarely falls under sub-rule (2) and (3) of rule 10 of
Central Excise Rules, 1944 which provides that short levied amount can be
recovered within three and ten years respectively. Thus, the assessing officer
has passed speaking orders in accordance with law and there is no infirmity in
the impugned orders. He, therefore, prays for the dismissal of appeals.
8. Valuable arguments of the learned counsel
for the parties were heard and the available record was considered with their
able assistance. The submissions made by the learned AR of the appellant have
substance. The proceedings initiated by the assessing officer on the basis of
the audit report of DGRRA are illegal and void ab-initio. In this regard, reference
may be made to the judgment of the Customs, Excise, and Sales Tax Tribunal
reported as PTCL 2007 CL 366, and subsequently, it was affirmed by the Hon’ble
Peshawar High Court titled as Collector of Sales Tax & Central
Excise, Peshawar Vs M/s Makk Beverages (Pvt.) Ltd (PTCL 2010 CL 393).
The operative part of the said judgment is as under:-
“It becomes clear from the perusal of above
notification that the President of Pakistan has required the Auditor General of
Pakistan to audit the receipt of Federal Government and not the record of the
private enterprise/industrial units licensed/registered under the Sales
Tax/Central Excise Laws. Thus the whole exercise conducted by the DRRA in this
particular case is quorum-non-judice.”
It is
pertinent to mention here that the revenue department filed an appeal before
the Hon’ble Supreme Court of Pakistan against the said decision of the Hon’ble
High Court which was also dismissed vide Civil Petition No.1580 of 2008 dated
13.04.2010. Since the proceedings are void ab-initio, the superstructure built
thereon also falls to the ground. Reliance may be placed on the judgment titled
as Moulana
Atta Ur RehmanVs Al-Hajj Sardar Umer Farooq and others (PLD 2008 SC 663)
wherein it was held that:-
“In the same string
are the cases reported as Rehmatullah and others v. Saleh Khan and others (2007
SCMR 729), Punjab Workers' Welfare Board Government of Punjab and Human
Resources Department, Lahore v. Mehr Din (2007 SCMR 13), Muhammad Tariq Khan v
Khawaja Muhammad Jawad Asami (2007 SCMR 818) and All Pakistan Newspapers
Society v. Federation of Pakistan and others (PLD 2004 SC 600). The learned
High Court has not appreciated the law laid down in the above-reported cases. It is well settled that when the basic
order is without lawful authority and void ab initio, then the entire
superstructure raised thereon falls to the ground automatically as held in
Yousaf Ali v. Muhammad Aslam Zia (PLD 1958 SC 104)”. (Emphasis
supplied)
9. Let us now come to the determination of
the issue of limitation as provided in rule 10 of the Central Excise Rules,
1944. For convenience the rule 10 of the Central Excise Rules, 1944 is
reproduced hereunder:-
“10.
Recovery of duty short-levied or erroneously refunded etc.---(1) Whereby
reasons of any inadvertence, error or misconstruction, any duty or charge has not been levied or
has been short levied or has been erroneously refunded, the person liable to
pay any amount on that account shall be served with a notice within one year of the relevant date by
an officer, not below the rank of Superintendent requiring him to show cause
why he should not pay the amount specified in the notice.
(2) Where by reason of any mis-declaration, false information, or collusion, any duty or charge
has not been levied or has been short levied or has been erroneously refunded,
the person liable to pay any amount on the account shall be served with a
notice within three years of the
relevant date by the competent adjudicating authority, requiring him to
show cause why he should not pay the amount specified in the notice and be
penalized under the law and rules.
(3) Where by reason of any false
document, counterfeit seal
or impression, fraud or other heinous offense any duty or
charge has not been levied or has been short levied or has been erroneously
refunded, the person liable to pay any amount on that account shall be served
with a notice within ten years of the
relevant date by the competent adjudicating authority, requiring him to
show cause why he should not pay the amount specified in the notice and be penalized
under the rules.” (Emphasis supplied)
The plain reading of the above-mentioned rule expressly
contemplates the three different periods of limitation, catering to three
different eventualities, which may arise for the department to demand the levy
of central excise duty payable by a person under the enabling provisions of the
Act and the Rules made thereunder. As per sub-rule (1) of rule 10, the
limitation of one year is provided for the issuance of notice of the relevant
date if there is any inadvertence, error, or misconstruction committed by a
registered person. Under sub-rule (2) for non-levy, short levy or erroneous
refund, specific allegations of any mis-declaration, false information or
collusion between the registered person and the Custom, Central Excise Staff
has to be leveled with proper particulars in the show-cause notice which has to
be served within three years of the relevant date. Similarly under sub-rule (3)
if a non-levy, short levy, or erroneous refund is done due to false document,
counterfeit seal or impression, fraud, or any other heinous offence then
show-cause notice to the registered person has to be served within ten years of
the relevant date.
Keeping in view the aforesaid provisions of rule 10 of the Central
Excise Rules, 1944, the contents of all the show cause notices have been
examined, it is noted that it did not expressly describe the disputed action of
the appellant to be based on misdeclaration or false information or collusion
or a false document or a counterfeit seal or impression or fraud or any other
heinous offence. In fact, in all the notices, it was simply observed without
any allegation on the part of the appellant that it had paid short development
surcharge at the reduced rate of Rs.0.45 per liter instead of an enhanced rate
of Rs.1.54 per liter during the period under consideration. However, by now the
law has been settled that merely stating the provision of the law, without any
justification for the same in the body of the notice, would not qualify the
said notice to be invoked under the stated provision of the law. The entire
notice has to be read to determine under which provision of law the same has
been served by the Revenue. In fact, the Revenue had to expressly explain, why
the said notice was being served at a belated stage, so as to bring the same
within the purview of the relevant provisions of the Rules. In similar
circumstances, the Apex Court in Khyber Electric Lamps’ case (2001 SCMR
838), has clearly dilated upon the requirements of a valid legal
show-cause notice to be precise and clear in its content to bring it within the
legal provision under which it was being issued, in terms that: -
“It has not been alleged in the
show-cause notices that the respondents knowingly or have reasons to believe
that documents which were false in any material particular, were filed. It is
necessary under subsection (1)of section 32 of the Act to show that the
declarant had the knowledge or had the reason to believe that declaration or
statement made by him was untrue/false and
in absence of such allegation notice would be vague and would not be in
accordance with the law. Similarly, notice under subsection (2) of section 32
of the Act must contain the allegation of collusiveness, and notice under
subsection (3) of section 32 of the Act should speak of inadvertence, error, or
misconstruction, and without such allegations, the notices would be defective
and against law. It may be mentioned that the respondents after the survey
had been issued Final certificates certifying that they were manufacturers of
Electric Bulbs and the quantities of raw material required for their products
were worked out. In the Survey report, the ‘Base Cap’ and ‘Filaments’ were
shown as raw material and the duties thereon as such were paid on their import.
From the Survey report and the Final Certificates, it appears that the Customs
Staff itself either collusively or inadvertently short levied the duty for
which specific notice under the relevant subsection of section 32 of the Act had
to be served on the importer within the specified time but it failed to
issue/serve any such show-cause notice in accordance with the law in Appeals
Nos.1358 and 1359 of 1997, therefore, in absence of statutory notice, demand
notices dated 25.7.1995 and 26.7.1995 were without lawful authority and thus,
of no legal effect. Similarly, show cause notices dated 16.7.1997 and 23.8.1995
in Appeals Nos. 1560 and 1361 of 1997 have been held to be vague and not in
conformity with the law, therefore, the same has no legal effect.
5. It was urged by the appellants that the learned High Court after
finding the notices to be defective and not in accordance with law should have
remanded the cases to the Customs Authorities for proceeding in accordance with
the law, but we do not find any substance in this contention as the period
prescribed by law for service of notices has already expired and it would be a
futile exercise in remanding the cases to the Customs Authorities. In the case
of Federation of Pakistan v. Messrs Ibrahim Textile Mills (1992 SCMR
1898), it has been ruled that in case of short levied duties on account of
inadvertence, error, or misconstruction, section 32(3) of the Act provides that
for recovery notice shall be served within six months, if that is not done,
like a suit for recovery of money after a lapse of the time prescribed by the law
of limitation, the recovery becomes unenforceable.”(Emphasis
provided)
The
above judgment was subsequently followed in a number of cases titled D.G
Khan Cement Company Ltd vs Collector of Customs, Sales Tax and Central Excise,
Multan (2003 PTD 1797), Caltex Oil (Pakistan) Ltd vs Collector,
Central Excise and Sales Tax, and others (2005 PTD 480), Collector
of Central Excise and Sales Tax, Lahore vs Zamindara Paper and Board Mills and
others (2007 PTD 1804), M/s Inam Packages, Lahore Vs Appellate
Tribunal Customs, Central Excise and Sales Tax, Lahore (2007 PTD
2265), Caretex Vs Collector Sales Tax and Federal Excise and others (PLD
2013 Lahore 634) and Collector of Sales Tax and Federal Excise
Vs M/s Army Welfare Trust (2016 PTD 1188).
By
following the ratio decided by the Hon’ble Supreme Court of Pakistan and High
Courts in the cases cited supra, all the show cause notices issued to the
appellant are vague and barred by time. The disputed action could be agitated
by the revenue department within a period of one year under sub-rule (1) of
rule 10 of the Central Excise Rules, 1944. The provisions of sub-rule (2) and
(3) of rule 10 ibid are not applicable to the facts and circumstances of the
present case.
10. For the foregoing
reasons, the mode and manner of the exercise of jurisdiction by the Assessing
Officer do not meet the prescribed statutory criteria and as such the entire
exercise of the assessing officer is patently in violation of rule 10 of the Central
Excise Rules, 1944 and the law lay down by the Apex Court. 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 rule 10 of the Central Excise Rules, 1944 by the assessing
officer is indeed incomplete negation thereto. It is an immutable principle of
law that defective assumption/exercise of jurisdiction
by the authorities is 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)”
Since we have decided the appeals on the legal issues,
therefore, there is no need to dilate upon the other grounds of appeals which
relate to the merit of the case.
11. For what has
been stated above, the appeals of the appellant are accepted and the impugned
orders passed by the Assessing Officer are hereby annulled.
12. This order
consists of (08) pages and each page bears my signature.
Sd/-
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(M.M. AKRAM) JUDICIAL MEMBER |
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Sd/- (NADIR MUMTAZ WARRAICH) ACCOUNTANT
MEMBER |
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