APPELLATE TRIBUNAL INLAND REVENUE, DIVISION BENCH-I,
ISLAMABAD
FEA No.27/IB/2020
(Tax Period July 2015 to June
2016)
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M/s
Zarai Taraqiati Bank Limited, 1-Faisal
Avenue, Islamabad. |
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Appellant |
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Vs |
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Commissioner
Inland Revenue (Zone-II), LTU, Islamabad. |
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Respondent
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Appellant
By: |
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Barrister
Muhammad Abubaker, and
Mr. Qadeer Ahmed, ITP |
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Respondent
By: |
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Mr.
Aamir Ilyas, DR |
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Date
of Hearing: |
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14.12.2021 |
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Date
of Order: |
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03.01.2022 |
M
M Akram, Judicial Member: - The titled appeal has been filed by the
appellant against a FED Order in Appeal No.02/2020 dated 30.10.2020 passed by
the learned Commissioner Inland Revenue (Appeals-I), Islamabad for the tax
period July 2015 to June 2016 on the grounds as set forth in the memos of
appeal.
2. The brief facts of the case are that the
appellant case was selected by the Federal Board of Revenue (FBR) for audit in
terms of section 42B of the Federal Excise Act, 2005 (hereinafter called
“the Act”) for the tax period from July 2015 to June 2016. During
scrutiny of the record, it was observed by the Deputy Commissioner Inland
Revenue (DCIR) that the appellant has not paid Federal Excise Duty in
sales tax mode on banking services as provided under the Act. Accordingly, a
show-cause notice No.111 dated 22.11.2019 was issued confronting the appellant
on the aforementioned discrepancy. The reply filed by the appellant was found
to be unsatisfactory and accordingly the assessing officer held that FED
payable on banking services amounting to Rs.712,134,506/- was recoverable from
the appellant in terms of section 14 along with default surcharge in terms of
section 8 and penalty in terms of section 19 of the Act vide order dated
09.06.2020. Being aggrieved, the appellant preferred the appeal before the
learned CIR(A), Islamabad, who vide order dated 30.10.2020 confirmed the
treatment accorded by the Assessing Officer. Still feeling aggrieved, the
appellant filed the appeal along with the stay application before this Tribunal
on a number of grounds.
3. The case was
heard on 14.12.2021. Learned AR for the appellant submits
that the SCN was issued on 22.11.2019 and the Order-In-Original was passed on
09.06.2020, after the expiry of 120 days as envisaged in Section 14(2) of the
Act, therefore, the order passed after the statutory period, is illegal, void
ab-initio and without jurisdiction. Learned counsel has placed reliance in this
regard on Collector of Sales Tax, Gujranwala, & another Vs M/s Super Asia
Mohammad Din Sons (Pvt.) Ltd, (2017 SCMR 1427). Further submits that the
original order is silent about the extension in time after the expiry of 120
days. Notwithstanding the aforesaid, the AR contended that if the extension was
granted by the concerned Commissioner IR the same was not given with any solid
reasons therefore, contrary to the provision of section 14(2) of the Act. In
support, reliance was placed on 2011 PTD 1185 and (2020) 121 TAX 109(SC).
Further argued that the case of the appellant was selected for audit by the FBR
and therefore, it was incumbent upon the assessing officer to issue the audit
report before issuance of show cause notice under section 14 of the Act.
Reliance was placed on the judgment of this tribunal bearing ITA
No.1289/KB/2019 vide order dated 18.03.2021. He, therefore, pleaded that the
appeal be accepted. On the other hand, learned DR opposed the appeal on
the ground that learned Commissioner (Appeals) has passed a speaking order and
there is no illegality or lacuna in his order. He, therefore, pleaded that the
appeal be dismissed.
4. We have heard the learned representatives
from both sides and have also gone through the orders passed by the authorities
below. To evaluate and verify the submissions of the learned AR for the
appellant, the relevant record was also called for from the department. The
relevant copy of the order sheet was also placed on record. After perusing the
record, we are persuaded with the submissions made on behalf of the appellant.
The following fundamental questions emerge from the record and the grounds,
arguments advanced by both the parties for our consideration to resolve the
controversy between the parties: -
i. Whether under the facts and in the circumstances of the
case, the Commissioner Inland Revenue could extend the period of limitation particularly
when the initial period of 120 days contemplated in the first proviso to
subsection (2) of section 14 of the Act had already been expired?
ii. Whether it
is mandatory on the part of the Commissioner Inland Revenue to give a reason in
writing and fix the date while extending the time for passing the order under
section 14 of the Federal Excise Act, 2005?
iii. Whether the Commissioner Inland Revenue under the first proviso to
subsection (2) of section 14 of the Federal Excise Act, 2005 can extend the
period without giving notice to the affected parties?
Before
giving the answers to the above questions, it would be beneficial to first reproduce
hereunder the relevant provisions of law which is section 14 of the Federal
Excise Act, 2005: -
14.
Recovery of unpaid duty or erroneously refunded duty or arrears of duty,
etc.—(1)………………
(2) The
Officer of Inland Revenue, empowered in this behalf, shall after considering
the objections of the person served with a notice to show cause under
sub-section (1), determine the amount of duty payable by him and such person
shall pay the amount so determined along with default surcharge and penalty as
specified by such officer under the provisions of this Act:
Provided
that an order under this section shall be made within one hundred and twenty
days of issuance of show cause notice or within such extended period as the
Commissioner may, for reasons to be recorded in writing, fix, provided
that such extended period shall in no case exceed sixty days:
Provided
further that any period during which the proceedings are adjourned on account
of a stay order or Alternative Dispute Resolution proceedings or the time taken
through adjournment by the petitioner not exceeding thirty days shall be
excluded from the computation of the periods specified in the first proviso.”
5. Now we come to question No. (i),
admittedly, in the instant case, the show cause notice was issued by the learned
DCIR on 22.11.2019 under section 14 of the Act and the order was
passed on 09.06.2020; however, undisputedly, the statutory limit
to pass an order expired on 11.04.2020. The statutory limitation
is calculated hereunder for convenience: -
|
Description |
Days |
Ending
date |
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The statutory
limit for decision. |
120 days |
21.03.2020 |
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Total
adjournment sought by the appellant. |
Add:21
days |
11.04.2020 |
As stated above, the record was called for from the department
which reveals that the learned DCIR vide order sheet entry dated 21.05.2020
requested to the Commissioner IR for extension in time as limitation had already
expired on 11.04.2020. The extract of the order sheet entry is reproduced
hereunder: -
“17. The case was selected for audit u/s 42B of the
Federal Excise Act, 2005 for the tax year 2016. The Show Cause Notice was
issued by my predecessor officer under section 14 of the Federal Excise Act,
2005 on 22.11.2019; however, the statutory limit to issue the order expired on
11.04.2020. The statutory limit is calculated below for convenience: -
|
Description |
Days |
Ending date |
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Statutory limit for decision. |
120 days |
21.03.2020 |
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Total adjournment sought by the
appellant. |
Add:21 days |
11.04.2020 |
18. The case cannot be concluded as it is
barred by time as on 11.04.2020 and the undersigned assumed the jurisdiction
over this case 15.05.2020. It is requested to allow the undersigned an
extension in time for up to 60 days (starting from 11.04.2020 up to 10.06.2020)
in order to conclude the case at the earliest.
Deputy
Commissioner-IR, Unit-07
21.05.2020
Additional
Commissioner-IR, Range-IV
19. May be allowed.
CIR(LTU)
20. As proposed para 18/N approved.
21. Please call an explanation of the officer
having jurisdiction between 22.11.2019 till 11.04.2020 and put up with your
comments as to the failure to conclude the case.”
A reading of the first proviso to subsection (2)
of section 14 of the Act will go to show that an application under it for the
extension of limitation can be made only before the expiry of 120 days. The
prayer for extension of time for making of an order by the assessing officer is
unsustainable in law as the office of the assessing officer had become functus
officio after the expiry of the statutory time. Reliance is placed on the
judgment titled Akbar Ali Vs Bagh Din and others, (1985
SCMR 1198). Thus, an extension of the time
limitation for adjudication granted by the CIR on 21.05.2020 was patently time-barred
as the limitation provided in section 14(2) had already expired. The DCIR has
not shown any reasonable cause/justification for such delay in adjudication.
The Order-in-Original dated 09.06.2020 is hit by time limitation as provided in
section 14(2) of the Act. It is well settled that the period prescribed by the
above provisions for completion of adjudication proceedings is mandatory and
not a directory. Reliance may be placed on the judgment titled Collector
of Sales Tax, Gujranwala, & another Vs M/s Super Asia Mohammad Din Sons
(Pvt.) Ltd, (2017 SCMR 1427).
Further, a somewhat similar question No. (i)
was posed before the Hon’ble Lahore High Court, Lahore in the case titled M/s
M. Z. International Vs The Assistant Commissioner Inland Revenue Audit- 05,
& another, (2016 PTD 358) wherein it was observed that: -
“7. Admittedly, the SCN was issued on 11.05.2009 and the
Order-In-Original was passed on 31.05.2010. Law required passing of such order
within 120 days excluding extended period but it has been passed with an inordinate
delay of 175 days even after excluding the period of 30 days for adjournment
taken by the petitioner, and period of 60 days for extension granted by the
Commissioner. Extension of time limitation for adjudication granted by
Federal Board of Revenue on 10.05.2010 was patently time-barred as the limitation
provided in section 36(3) had already expired. Authority has not shown
any reasonable justification for such delay in adjudication. The
Order-in-Original dated 31.05.2010 is hit by time limitation as provided in
sections 11(4) and 36(3) of the Act. It is well settled that the period
prescribed by the above provisions for completion of adjudication proceedings
is mandatory and not a directory. In this regard, reference can be made to the
following observations of this Court passed in M/s Super Asia Muhammad Din Sons
(Pvt.) Ltd. through Chief Executive v. Collector of Sales Tax, Gujranwala and
another (2008 PTD 60) ……………….”
The first proviso to sub-section (2) of section 14 of the Act
prescribes that “an order under this section shall be made within one
hundred and twenty days of issuance of the show cause notice or within such
extended period as the Commissioner may for reasons to be recorded in writing
fix provided that such extended period shall in no case exceed sixty days.” In the case under reference, a show-cause
notice was issued on 22.11.2019 and the Officer of Inland Revenue was legally
bound to pass the assessment order within 120 days from the date of issuance of
show-cause notice or till such extended time as permissible under the law. On
perusal of the record, it reveals that the assessing officer had failed to
comply with the provisions of section 14(2) of the Act while passing the
impugned assessment order. It has been held by the Honourable Courts in the
judgments titled M/s Tanveer Weaving Mills Vs Deputy Collector Sales
Tax and 4 others, (2009 PTD 762) and M/s Meraj Din Vs
Collector Customs, Excise and Sales Tax(Appeals) and 2 others, (2009
PTD 2004) that any order passed beyond the period specified is “totally without
jurisdiction”. Since in the case under reference, the impugned order was passed
on 09.06.2020, it was obviously barred by time. Thus, the answer to question
No. (i) is in the negative against the department.
6. As far as question No. (ii) is concerned,
the Hon’ble Apex Court in the case titled Collector of Customs, Lahore
Vs M/s Shafiq Traders and another, (2011 PTD 1185) and Abbasi
Enterprises Unilever Distributor, Haripur and another Vs Collector of Sales Tax
and Federal Excise, Peshawar and others, (2020) 121 TAX 109(SC) has
observed that the Collector must give reasons while extending the period. The
relevant provisions of the Customs Act, 1969 and the Sales Tax Act, 1990 are pari
materia to the provisions of the Federal Excise Act, 2005 reproduced above.
Therefore, the law laid down in the aforesaid judgments is squarely applicable
to this case as well. In the instant case, the learned CIR had extended the
limitation for sixty days without giving any cogent reasons and thus, the order
is contrary to the statutory provisions and the law laid down by the Apex Court
in the foregoing judgments. The said requirement is
meant to ensure fairness and transparency in the exercise of statutory
discretion by the CIR which suffers from opacity and therefore
unreasonableness. This is because the expiry of the limitation period accrues a
vested right in favour of the registered person. It is also noted that the first
proviso to section 14(2) ibid neither specifically envisages nor provides
guidance, criteria, or parameters for extending the statutory limitation. Consequently,
on the facts of the present case, we are not inclined to interpret the said
provision as authorising the unchecked extending of a statutory limitation
period and consequential legal rights created by it. Reliance may also be
placed on the recent judgment of the Hon’ble Supreme Court of Pakistan titled Federal
Board of Revenue through its Chairman and others Vs Abdul Ghani and another,
(2021 PTCL 254).
For the foregoing reasons, the answer
to question No. (ii) is in the affirmative, in favour of the appellant.
7. As far as question No. (iii) is concerned, undisputedly, a show-cause notice dated 22.11.2019 was issued upon the appellant which
is the subject matter of this appeal. Before we deal with the question, it will
be necessary to deal with section 14 of the Act. Section 14 of the Act will
trigger when a person has not levied or paid any duty or
has short levied or short paid such duty or where any amount of duty has been
refunded erroneously, such person shall be served with a notice requiring him
to show cause for payment of such duty provided that such notice shall be
issued within five years from the relevant date. The expression “relevant date”
has been defined in the explanation given under the said section which says
that the relevant date means the date on which the payment of duty was due
under subsection (3) and in the case where any amount of duty has been
erroneously refunded, the date of its refund. Similarly, subsection (2) provides that the assessing officer after
considering the objections of the person served with a notice to show cause
determines the amount of duty payable by him along with default surcharge and
penalty. However, an order under this section has to be passed within one
hundred and twenty days from the date of issuance of show cause notice or
within such extended period as the Commissioner may for reasons to be recorded
in writing fix provided such extended period shall in no case exceed sixty
days. Further, the second proviso to subsection (2) of section 14 provides that
any period during which the proceedings are adjourned on account of a stay
order or Alternative Dispute Resolution proceedings or the time taken through
adjournment by the person not exceeding thirty days shall be excluded from the computation
of the period specified in the first proviso to subsection (2) of section 14. It Is not disputed that the show cause notice was issued within the
statutory period of five years from the relevant date. The relevant provision
of Section 14 is reproduced in para 4 above.
We have already stated that the show cause notice was given on the 22nd
November, 2019, and admittedly, the statutory period of limitation for passing
the order had expired on 11th April 2020 (which includes the
adjournment taken by the Taxpayer/Appellant of 21 days). The assessing officer
applied for an extension in time before the Commissioner Inland Revenue under the
first proviso to subsection (2) of section 14 on 21.05.2020 after the expiry of
the limitation with the following observations: -
“The case
cannot be concluded as it is barred by time as on 11.04.2020 and the
undersigned assumed the jurisdiction over this case 15.05.2020. It is requested
to allow the undersigned an extension in time for up to 60 days (starting from
11.04.2020 up to 10.06.2020) in order to conclude the case at the earliest.”
The aforesaid application was accepted
by the CIR on the same date without giving any justifiable reasons and without
any opportunity of being heard having been given to the appellant. The
appellant, therefore, got no chance to resist the application for extension and
to show that no sufficient cause had been shown and that therefore, no order of
extension was justified or should be granted.
8. We have noted that the first
point relates to the extension in time for passing the order under the first
proviso to Sub-section (2) of Section 14 of the Act. From a plain reading of
Sub-section (2), it appears that an order has to be passed within 120 days or till such extended time as permissible under the law by the
Commissioner Inland Revenue. If no such extension is issued by the Commissioner
Inland Revenue, then upon the expiry of 120 days from the date of the show-cause
notice, the person served with show-cause notice, acquires the vested right in
its favour. The period of sixty days may on sufficient cause being shown, be
extended by the Commissioner Inland Revenue. The learned CIR in the
instant case extended the time for sixty days after the expiry of the statutory
period of 120 days. Before us, fortunately, both parties agreed that the
maximum period for which the order can be made is one eighty days from the date
of issuance of show cause notice. The contest between them was as to whether the
extension in time can be made without any reasonable cause by the Commissioner
Inland Revenue and whether the extension has to be made after the expiry of the
initial period of 120 days. As per
record, the actual order for extension was made nearly a month afterward from
the date of expiry of the original limitation of 120 days. By such extension,
the vested right was being taken away. So, we have two things to consider
Firstly, a vested right was being taken away and secondly, an order can be made
under the first proviso to Sub-section (2) only if there was "sufficient
cause" shown for such extension. If the Commissioner Inland Revenue has to
consider whether the cause shown was sufficient or not, and especially as it
affected a vested right, he was necessarily called upon to deal with the
question, with a judicial approach, in the sense that he would have to hear the
pros and cons from all parties affected and then come to a decision as to
whether the cause shown was "sufficient" to warrant the taking away
of a vested right. In our opinion under such circumstances, a determination
requires a judicial approach, and cannot be done ex-parte. 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 passing the order 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 a 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."
Further
in the judgment titled The University of Dacca through its
Vice-Chancellor and the Registrar, University of Dacca v. Zakir Ahmed, (PLD 1965 Supreme
Court 90) wherein it was observed that: -
“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 a factual investigation into the facts which would result
in consequences affecting the person, property, or other rights 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.”
Thus, the authorities or bodies which
are given jurisdiction by statutory provisions to deal with the rights of
citizens may be required by the relevant statute to act judicially in dealing
with the matters entrusted to them. It may be done expressly or by implication.
An obligation to act judicially may be inferred from the scheme of the relevant
statute and its material provisions. In such a case, the authority or body must
act in accordance with the principles of natural justice before exercising its
jurisdiction and its power. Power to determine questions affecting the rights
of citizens implies a limitation that the power should be exercised in
conformity with the principles of natural justice. Notwithstanding the
aforesaid, even if the Commissioner’s function, under the first proviso to
subsection (2) of section 14 ibid were to be treated as an administrative
function, his authority being to determine the question affecting the rights of
the citizen, there was an implied duty to act judicially.
In A. K. Kraipak
& Ors. Etc vs Union Of India & Ors, (A.I.R.
1970 S.C. 150) the Supreme Court of India observed
that the dividing line
between an administrative power and a quasi-judicial power is quite thin and is
being gradually obliterated. For determining whether a power is an
administrative power or a quasi-judicial power one has to look to the nature of
the power conferred, the person or persons on whom it is conferred, the
framework of the law conferring that power, the consequences ensuing from the
exercise of that power and the manner in which that power is expected to be
exercised. Under our Constitution, the rule of law pervades over the entire
field of administration. Every organ of the State under our Constitution is
regulated and controlled by the rule of law. In a welfare State like ours, it
is inevitable that the jurisdiction of the administrative bodies is increasing
at a rapid rate. The concept of rule of law would lose its vitality if the
instrumentalities of the State are not charged with the duty of discharging
their functions in a fair and just manner. The requirement of acting judicially
in essence is nothing but a requirement to act justly and fairly and not
arbitrarily or capriciously. The procedures which are considered inherent in
the exercise of a judicial power are merely those which facilitate if not
ensure a just and fair decision. In recent years the concept of quasi-judicial
power has been undergoing a radical change. What was considered as an
administrative power some years back is now being considered as a
quasi-judicial power.
9. In
our opinion, the above principle fully applies to the facts of this case. As
long as the initial period of passing the order (120 days from the date of
issuance of show cause notice) has not expired, it might be one thing but quite
a different set of circumstances arise when the period has expired and the vested
right accrued in favour of the appellant. If anyone takes away the right then
it can only do that for a "sufficient cause". How can the officer
concerned decide as to whether a "sufficient cause" has been shown,
so as to divest a vested right unless he heard the parties affected? Therefore,
we are of the considered opinion that before passing the order for extension in
time under the first proviso to subsection (2) of section 14 of the Act, the
affected parties must be given an opportunity of being heard and thereafter
pass a speaking order. Therefore, the answer to question No. (iii) is in the
negative against the department.
10. For
what has been discussed above, the appeal of the appellant is accepted and the
orders passed by the lower authorities are annulled. Let this order be
sent to the learned Chairman and Member Legal, Federal
Board of Revenue, Islamabad for the purposes of issuing instructions to all
officers adjudicating applications for extension in time under the relevant
provisions of the Federal Excise Act, 2005 and Sales Tax Act, 1990 to comply
with the above said provisions of law and their mandatory nature. They should
also be made aware of serious consequences in case the said provisions are not
strictly adhered to. In the instant case, we have observed that due to non-adherence
of the statutory provisions of law highlighted above by the lower authorities,
the Government Exchequer has suffered a loss of Rs.712,134,506/-.
11. This order consists of (13) pages and each page bears my
signature.
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Sd/-
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Sd/- |
CERTIFICATE
U/S 5 OF THE LAW REPORT ACT
This case is fit for reporting
as it settles the principles highlighted above.
(M. M. AKRAM)
JUDICIAL
MEMBER
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