aFEDERAL TAX OMBUDSMAN SECRETARIAT
Regional Office, Lahore
Complaint No.105/LHR/ST(22)200/2012
Dated: 10.02.2012 *
Amjad Farooq
Bata Pakistan Ltd
Batapur G T Road
Lahore
… Complainant
Versus
The Secretary
Revenue Division
Islamabad
… Respondent
Dealing Officer
:
Muhammad Munir Qureshi, Advisor
Authorized Representative
:
Mehmood Arif, Advocate
Departmental Representatives
:
Rafia Ilyas Awan, DCIR
Imran Hayee Khan, DCIR
FINDINGS/RECOMMENDATIONS
This complaint is against assessment order No 05/2012 dated
25.01.2012 to recover Sales Tax amounting to Rs 2,453,450/- on
account of alleged irregular claim for input tax.
2.
The Complainant claimed Rs 2,728,481/- as input tax when the
amount of sales tax payable by supplier by way of output tax was not
credited to government account. The Complainant contends that the
tax demand suffered from several deficiencies and was not tenable in
law. The Show Cause Notice did not specifically refer to Section
8(1)(c)(a) of the Sales Tax Act 1990 (the Act) which was a condition
precedent for charge of tax. Furthermore, the pecuniary limits laid
down for Departmental officers of different ranks/grades as specified
in SRO 555(I)/96 dated 01.07.1996 had not been observed. The
orders were passed by an ACIR for whom the maximum sales tax
____________________
*Date of registration in FTO Sectt.
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105/LHR/ST(22)/200/2012
demand limit was only Rs500,000/- whereas she had adjudged a tax
demand of Rs 2,453,450/-.
3.
When confronted, the Deptt filed a reply contending that the
sales tax demand against the Complainant was adjudged correctly
and adverse inference was rightly drawn because the suppliers had
filed nil returns whereas the Complainant had claimed input tax credit
when no output tax had been credited to government account. As for
non citation of relevant statutory provision in the assessment order,
the Deptt contended that Section 8 of the Act was cited in the Show
Cause Notice and the relevant sub-section, clause and sub clause,
(1)(c)(a), was available in the statute and the fact that it was not
referred to in full in the assessment order made no difference to the
legality of the tax demand adjudged against the Complainant. It was
further contended by Deptt that the adjudication limits for different
Inland Revenue officers specified in SRO 555(I)/1996 were to be
read with Section 11(3) of the Act. However, as sub section (3) of
Section 11 was omitted from the statute vide Finance Ordinance
2000, the SRO thereafter had lost its efficacy.
4.
After hearing both sides, it is observed that non citation of
Section 8(1)(c)(a) of the Act in full in the assessment order, though
certainly a deficiency, cannot be held fatal to the assessment. As
regards the competence of the ACIR to assess sales tax demand in
excess of Rs500,000/-, the cited SRO is very clear that an ACIR
could not do so. The ATIR in STA No.530/LB/2011 and the judgment
cited as 2012 PTD (Trib.) 105 also ruled against the Deptt on this
point. The Hon’ble Federal Tax Ombudsman likewise held in
complaint No.614/LHR/ST(107)/1284/2011 (PolyPack Pvt Ltd). The
Departmental contention that the cited SRO was no longer operative
as Section 11(3) of the Act was omitted vide Finance Ordinance 2000
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105/LHR/ST(22)/200/2012
and the SRO had thereafter lost its statutory position, is also found to
be misconceived as in terms of the provisions of Section 36 of the
Act, which provision finds specific mention in the Show Cause
Notice, the repeal of Section 11(3) of the Act did not deprive the SRO
of its legal foundation. The ACIR, by framing an assessment that
raised sales tax demand in excess of the stipulated pecuniary limit,
did so without jurisdiction and the whole proceedings therefore
become ‘coram non judice.’ It has been held in the case reported as
2006 PTD 219 (Trib.) and 2011 PTD 1943 (Trib.) that “an order
without jurisdiction is a fraud on the law and can never be assumed
to have been passed under the particular statute.”
Findings:
5.
The assessment order No. 05 / 2012 dated 25.01.2012 being
void ab-initio and a nullity in the eye of law amounts to
maladministration as defined under Section 2(3) of FTO Ordinance
2000.
Recommendations:
6.
FBR to direct the Commissioner to –
(i)
invoke revisionary jurisdiction under Section 45A(4) of the
Act and recall Order No.05/2012 dated 25.01.2012, as
per law, within 21 days; and
(ii)
report compliance within 07 days thereafter.
(Dr. Muhammad Shoaib Suddle)
Federal Tax Ombudsman
Dated: 08-05-2012
mmq/my