Case Law & Legal Digest
Selected judgments and legal authorities, arranged case-by-case for easy reading and publication on the website.
Case Law
P L D 2024 Supreme Court 595
Present: Syed Mansoor Ali Shah, Jamal Khan Mandokhail and Athar Minallah, JJ
Malik ARSHAD HUSSAIN AWAN—Petitioner
Versus
Messrs UNITED BANK LIMITED—Respondent
Civil Petition No. 1393-L of 2020, decided on 22nd February, 2024.
(Against the judgment of Lahore High Court, Lahore, dated 18.06.2020 passed in
F.A.O No. 512 of 2013).
(a) Civil Procedure Code (V of 1908)— —-O.XXXII, R. 15—Mental Health Ordinance (VIII of 2001), Ss. 29 & 32 —Financial
Institutions (Recovery of Finances) Ordinance (XLVI of 2001), S. 7(2)—Suit for recovery
of finance—Defendant of unsound mind—Guardian in the suit, appointment of—Banking
Court, powers of—Banking Court has the power to determine the unsoundness of mind or
mental infirmity of a person on an inquiry under Order XXXII of the C.P.C. based on the
evidence and appoint a guardian for the suit for the limited purpose of representation before
the court of law, without first seeking an appointment of a guardian under the Mental Health
Ordinance, 2001.
Rule 15 of Order XXXII of C.P.C. provides that Rules 1 to 14 of Order XXXII shall
apply to (i) persons adjudged to be of unsound mind and (ii) persons who though not so
adjudged are found by the Court on inquiry, by reason of unsoundness of mind or mental
infirmity, to be incapable of protecting their interests when suing or being sued. The said
Rule, therefore, acknowledges two categories of persons of unsound mind: one who is
already adjudged by a court of competent authority as a person of unsound mind; and the
other, who is not so adjudged but the court itself on inquiry finds that the per son is of
unsound mind. In both cases, the court is to appoint a guardian for the suit for such a person.
In the first category, in view of the provisions of Rule 4(2) of Order XXXII of C.P.C. the
court is to ordinarily appoint the same person as guardian for the suit who has been
appointed the guardian under the Mental Health Ordinance, 2001 (“MHO”); while in the
second, the court may appoint any suitable person who has no interest against the person
of unsound mind. In the second category, the court cannot decline to appoint the guardian
for the suit merely for the reason that the defendant has not been so adjudged under the
MHO by the competent authority.
Where no guardian has been appointed under the MHO, it does not preclude the
Civil Court, or the Banking Court, to proceed and appoint a guardian for the suit under
Order XXXII of C.P.C. so that the interest of a mentally disordered person is protected
before the court of law and also ensures the continuation and efficient conclusion of the
trial. The Banking Court, therefore, has the power to determine the unsoundness of mind
or mental infirmity of a person on an inquiry under Order XXXII of the C.P.C. based on
the evidence and appoint a guardian for the suit for the limited purpose of representati on
before the court of law, without first seeking an appointment of a guardian under the MHO.
(b) Civil Procedure Code (V of 1908)— —-O.XXXII, Rr. 1, 3, 4(2) & 15—Mental Health Ordinance (VIII of 2001), S. 32 —Minor- –Defendant of unsound mind—‘Guardian for the suit’ and ‘Guardian of the person or
property’—Distinction—Concept of next friend or guardian for the suit is to provide proper
representation to a minor or a person with unsound mind during litigation, in order to
protect his interests; therefore, their role is limited to the particular litigation or legal action
for which they are appointed—Guardian for the suit is also called as “Guardian ad Litem”;
the Latin term “ad litem” means “for the lawsuit”—Thus, guardian for the suit is appointed
by a court specifically for the duration of legal proceedings and his role is temporary and
limited to the particular lawsuit or legal matter—This might involve making decisions
about litigation, settlement or other legal strategies—A guardian of the person or property
of a minor or a person of unsound mind, on the other hand, is a person legally appointed to
manage all the affairs of another person—Such a guardian has the authority to make
decisions on behalf of the said person in various aspects of life, including financial,
medical, and personal matters.
Ms. Saba Saeed Sheikh, Advocate Supreme Court and Syed Fayyaz Ahmad Sherazi,
Advocate-on-Record for Petitioner.
Jam Khurshid Ahmed, Advocate Supreme Court for Respondent.
Date of hearing: 22nd February, 2024.
Judgment
SYED MANSOOR ALI SHAH, J.—Brief facts of the case are that the respondent
Bank filed a recovery suit under the Financial Institutions (Recovery of Finances)
Ordinance, 2001 (“FIO”) against the brother and father of the petitioner on 03.01.2011.
While the father of the petitioner contested the suit by filing his application for leave to
defend, the brother of the petitioner was proceeded against ex-parte vide order dated
10.02.2011. Subsequently, the petitioner filed an application under Rules 3 and 15 of Order
XXXII of the Code of Civil Procedure, 1908 (“C.P.C.”) before the Banking Court seeking
his appointment as guardian for the suit of his brother who he asserted was suffering from
mental infirmity and was of unsound mind. The said application was dismissed by the
Banking Court on merits vide order dated 16.09.2013 on the ground that there was no valid
document on the record to establish that the brother of the petitioner was of unsound mind
or suffering from any mental infirmity. Aggrieved of the said order, the petitioner filed an
appeal before the High Court under Section 22 of the FIO, which was dismissed through
judgment dated 18.06.2020 (“impugned judgment”). The High Court maintained that the
petitioner’s brother had to be first adjudged as mentally disordered by the Court of
Protection under the provisions of the (Punjab) Mental Health Ordinance, 2001 1 (“MHO”)
before the petitioner could be entitled to file an application under Order XXXII, C. P.C.,
before the Banking Court. Hence, the instant petition for leave to appeal.
2.
We have heard the learned counsel for the parties and have examined the laws and
the record of the case.
3.
The question involved in the instant petition is whether a Banking Court can appoint
a guardian for the suit, under Rules 3 and 15 of Order XXXII of the C.P.C., for a defendant
who by reason of “unsoundness of mind” or “mental infirmity” is incapable of protecting
his interests, or whether the defendant has to be first adjudged to be a person of unsound
mind and get a guardian appointed under Sections 29 and 32 of the MHO by the Court of
Protection and only then can an application for the appointment of his guardian for the suit
under Order XXXII of the C.P.C. be entertained by a Banking Court?
4.
The instant petition emanates from a suit for recovery filed under the FIO which
prescribes a special mechanism for dealing with recovery of finance by the financial
institutions from the customers and also establishes special courts, i.e., the Banking Courts
for this purpose. Section 4 of the FIO gives its provisions overriding effect over any other
law for the time being in force. Section 7 stipulates the powers of Banking Courts and
grants them all powers vested in a Civil Court under the C.P.C. in the exercise of its civil
jurisdiction. Furthermore, Section 7(2) of the FIO prescribes the Banking Court to follow
the procedure laid out in the CPC in all matters with respect to which the procedure has not
been provided for in the FIO. Therefore, for the procedure as to how a person of unsound
mind or mental infirmity can file or defend a suit filed under the FIO, recourse has to be
made to Rule 15 of Order XXXII of the CPC, which is reproduced hereunder for ready
reference:
Order XXXII
Rule 15. Application of rules to persons of unsound mind. The provisions contained
in rules 1 to 14, so far as they are applicable, shall extend to persons adjudged to be
of unsound mind and to persons who though not so adjudged are found by the Court
on inquiry, by reason of unsoundness of mind or mental infirmity, to be incapable
of protecting their interests when suing or being sued (Underlining is ours)
The above cited Rule 15 of Order XXXII extends the applicability of the procedure given
in Rules 1 to 14 to suits by or against persons of unsound mind. Rules 1 of Order XXXII
provides that every suit by a minor shall be filed through a next friend and where a minor
is the defendant in a suit, Rule 3 mandates the court to appoint his guardian for the suit.
Rule 4(2) states that where a minor has a guardian appointed by a competent authority, such
a guardian shall act as his next friend or be appointed his guardian for the suit, unless the
court for the reasons to be recorded decides otherwise.
5.
Rule 15 provides that Rules 1 to 14 of Order XXXII shall apply to (i) persons
adjudged to be of unsound mind and (ii) persons who though not so adjudged are found by
the Court on inquiry, by reason of unsoundness of mind or mental infirmity, to be incapable
of protecting their interests when suing or being sued. The said Rule, therefore,
acknowledges two categories of persons of unsound mind: one who is already adjudged by
a court of competent authority as a person of unsound mind; and the other, who is not so
adjudged but the court itself on inquiry finds that the person is of unsound mind. In both
cases, the court is to appoint a guardian for the suit for such a person. In the first category,
in view of the provisions of Rule 4(2) the court is to ordinarily appoint the same person as
guardian for the suit who has
been appointed the guardian under the MHO; while in the second, the court may appoint
any suitable person who has no interest against the person of unsound mind. In the second
category, the court cannot decline to appoint the guardian for the suit merely for the reason
that the defendant has not been so adjudged under the MHO by the competent authority.
6.
The mandate and wisdom of Order XXXII of the C.P.C. is to ensure smooth
continuation of proceedings and expeditious trial of suits wherein a minor or a person of
unsound mind sues or is sued. The concept of next friend or guardian for the suit is to
provide proper representation to a minor or a person with unsound mind during l itigation,
in order to protect his interests; therefore, their role is limited to the particular litigation or
legal action for which they are appointed. Guardian for the suit is also called as “Guardian
ad Litem”; the Latin term “ad litem” means “for the lawsuit”. Thus, guardian for the suit is
appointed by a court specifically for the duration of legal proceedings and his role is
temporary and limited to the particular lawsuit or legal matter. This might involve making
decisions about litigation, settlement or other legal strategies. A guardian of the person or
property of a minor or a person of unsound mind, on the other hand, is a person legally
appointed to manage all the affairs of another person. Such a guardian has the authority to
make decisions on behalf of the said person in various aspects of life, including financial,
medical, and personal matters.
7.
Now let us examine the scope and extent of MHO. This law deals with the care and
treatment of mentally disordered persons, management of their property and other related
matters. Under Section 29 of the MHO, whenever a person is possessed of property and is
alleged to be mentally disordered, the Court of Protection may, upon an application by any
of his relatives filed after having obtained consent in writing of the Advocate-General,
direct an inquiry for the purposes of ascertaining whether such person is mentally
disordered and incapable of managing himself, his property and his affairs. In case any
person is found to be mentally disordered and incapable of taking care of himself, the Court
of Protection appoints a guardian under Section 32 of the MHO. A guardian so appointed
under MHO is someone who is legally appointed to take care of and manage the personal
and property interests of a mentally disorered person.
8.
The scope of the MHO is thus different and broader when compared to that of Order
XXXII of the C.P.C. It provides for care and treatment of mentally disordered persons, for
the management of their properties and their affairs and to encoruage community care of
such persons. It is not limited only to representation before court in a suit. While the MHO
does not specifically provide for representation before court while suing or being sued but
it goes without saying that once a guardian is appointed by the Court of Protection he is to
ordinarily act as the next friend and the guardian for the suit for the purposes of Order
XXXII of the C.P.C. (see Rule 4(2) of the said Order). The important thing is that where
no such guardian has been appointed under the MHO, it does not preclude the Civil Court,
or the Banking Court in the present case, to proceed and appoint a guardian for the suit
under Order XXXII, so that the interest of a mentally disordered person is protected before
the court of law and also ensures the continuation and efficient conclusion of the trial. The
Banking Court, therefore, has the power to determine the unsoundness of mind or mental
infirmity of a person on an inquiry under Order XXXII of the C.P.C. based on the evidence
and appoint a guardian for the suit for the limited purpose of representation before the court
of law, without first seeking an appointment of a guardian under the MHO. The High Court
has, therefore, committed a legal error by dismissing the appeal fil ed by the petitioner
holding that the petitioner’s brother had to first adjudged as a person of unsound mind under
the MHO before an application could be moved under Order XXXII before the Banking
Court.
9.
For the above reasons, the instant petition is converted into appeal and allowed by
setting aside the impugned judgment. The matter is remanded to the High Court to decide
the appeal of the petitioner on merits and in accordance with the provisions of Rule 15 of
Order XXXII of the CPC, as expounded above. We are sanguine that the said appeal will
be decided expeditiously.
MWA/A-9/SC
Appeal allowed.
2023 S C M R 1856
[Supreme Court of Pakistan]
Present: Umar Ata Bandial, C.J., Syed Mansoor Ali Shah, Athar Minallah
and Syed Hasan Azhar Rizvi, JJ
COMMISSIONER INLAND REVENUE—Petitioner
Versus
Messrs RYK MILLS—Respondent
Civil Petitions Nos. 1842-L and 1843-L of 2022, decided on 11th September, 2022.
(Against the order of Lahore High Court, Lahore dated 31.03.2022, passed in ETRs
Nos. 32241 and 32246 of 2021)
(a) Constitution of Pakistan— —-Arts. 4 & 10A—Show cause notice—Significance and purpose of a show cause notice
stated.
A show cause notice is a formal communication from an authority, informing the
recipient of an alleged violation or non-compliance with a law, and providing them with an
opportunity to respond to the said allegations. It embodies the principle of natural justice,
which requires that parties to a dispute be given a fair hearing before any decision is made
that may affect their rights or interests. The principles of due process and fairness mandate
that the recipient of a show cause notice be given adequate time to respond and present
their case, that they be given access to relevant evidence and information, and that they be
given the opportunity to be heard before any action is taken against them. This ensures that
the decision-maker is not biased, that the decision is based on the facts of the case and the
relevant law, and that the recipient’s rights and interests are protected. Thus, in addition to
the fair hearing principle, there are other principles of natural justice that also apply for the
purposes of issuance of show cause notices, including the principle of impartiality, which
requires that the decision maker be impartial, and the principle of reasons, which requires
that the decision-maker provide reasons for their decision. Therefore, a show cause notice
is an important tool for enforcing the law, and to ensure that the recipient is given a fair
and transparent opportunity to present their case before any adverse order affecting their
rights and interests is passed.
Siemens Engineering v. Union of India AIR 1976 SC 1785 and S.N. Mukherjee v.
Union of India AIR 1990 SC 1984 ref.
The Constitution provides for the right to be treated in accordance with the law and
enshrines the principles of fair trial and due process under Articles 4 and 10A, respectively.
Article 4 of the Constitution provides for the right of citizens to enjoy the protection of law
and to be treated in accordance with law as an inalienable right of every citizen. It further
provides that no action detrimental to life, liberty, body, reputation or property of any
person shall be taken except in accordance with the law and that no person shall be
prevented from or be hindered in doing that which is not prohibited by law. Article 10A
provides for the fundamental right to a fair trial and due process. The issuance of a show
cause notice is an essential element in ensuring the provision of the said rights, as it
provides individuals and organizations with the opportunity to explain their actions and to
respond to allegations of violation or non-compliance with any law before any adverse
action is taken against them. Hence, it follows that when a specific allegation is not put to
the recipient, thereby failing to provide the recipient with the opportunity to respond to the
same, any adjudication on the said allegation would be against the right of due process and
fair trial and therefore, in contravention to Articles 4 and 10A of the Constitution.
A show cause notice can also be viewed as being akin to alternative dispute
resolution (“ADR”) as it provides a pre-litigation opportunity for the recipient to present
their position and show cause. By doing so, the matter can potentially be resolved before it
escalates and requires any adjudication. This not only saves time and resources but also
encourages the efficient resolution of disputes, acting as an effective mode of resolving
disputes outside of the traditional legal framework. Thus, while acting as a means to ensure
due process and fair trial by allowing the recipient to explain their position and respond to
the allegations before any legal action is taken, the issuance of a show cause notice also
acts as a tool to resolve the issue in the pre-litigation stage, similar to the objective of ADR.
(b) Constitution of Pakistan— —-Arts. 4 & 10A—Fresh/supplementary show cause notice, issuance of—Circumstances
in which issuance of a fresh/supplementary show cause notice becomes necessary
highlighted.
In certain cases and to uphold the principles and rights enshrined in Articles 4 and
10A of the Constitution, after the issuance of the initial show cause notice, it may be
necessary to issue a supplementary or a fresh show cause notice if there has been a
significant change in circumstances or if new evidence has come to light. For example, if
the recipient has provided a valid response to the initial show cause notice, but new
information has surfaced suggesting that the alleged violation or non-compliance did occur,
a fresh show cause notice may be required to enable the recipient to respond to the new
allegations and provide further clarification. Similarly, where there has been a significant
change in the circumstances or situation that led to the issuance of the initial show cause
notice, a fresh or supplementary show cause notice may be required to address these
changes; where the original notice was defective or incomplete, a fresh or supplementary
notice would be required to be issued to provide a more detailed or accurate statement of
the issues; and where the original notice does not fully address all of the issues or violations
that need to be addressed, a fresh or supplementary notice should be issued to cover any
outstanding matters. Ultimately, the decision to issue a fresh show cause notice should be
predicated on a thorough and careful evaluation of the facts and circumstances of each case,
guaranteeing that the principles of due process and fair trial are upheld.
(c) Tax— —-Show cause notice—Contents—Scope and purpose of a show cause notice stated.
A show cause notice issued to a taxpayer must contain all the necessary facts and
must specify the alleged actions or inaction by the taxpayer that violated the law, allowing
for a meaningful response from the taxpayer. It is imperative that the taxpayer is confronted
with specific allegations, along with the grounds upon which such allegations are based, in
order to properly respond to the same and to place relevant material on record that would
be necessary for any defence put forth and for any adjudication by the assessing officer in
relation thereto. This is also because once a show cause notice is issued, the original
adjudication on the said show cause notice can only be based on the grounds and allegations
levelled therein. Unless the taxpayer is confronted with the allegations through a show
cause notice, no determination can be made by the assessing officer with regards to the said
allegations as it is beyond the competence of the department to make out a case which the
department had never canvassed and the taxpayer had never been afforded the opportunity
to meet. Hence, unless the allegations, and the grounds on which the said allegations are
based, are not specifically alleged in the show cause notice issued to the taxpayer, the whol e
exercise becomes redundant and unsustainable in law.
Commissioner Inland Revenue v. Pakistan Tobacco Company 2022 SCMR 1251;
Al-Khair Gadoon v. The Appellate Tribunal 2019 SCMR 2018; Raj Bahadur v. Union of
India (1997) 6 SCC 81; New Delhi Television v. Deputy Commissioner of Income Tax AIR
2020 SC 2177; Collector of Central Excise v. H.M.M. Limited 1995 Supp. (3) SCC 322;
Collector Central Excise v. Rahm Din 1987 SCMR 1840; SACI Allied Products v.
Commissioner of Central Excise (2005) 7 SCC 159; Commissioner of Central Excise v.
Ballarpur Industries (2007) 8 SCC 89 and Precision Rubber v. Commissioner of C. Ex.
2016 (334) ELT 577 (SC) ref.
(d) Tax— —-Fresh/supplementary show cause notice, issuance of—Circumstances in which issuance
of a fresh/supplementary show cause notice becomes necessary highlighted.
Where in response to a show cause notice, the taxpayer, in defence, raises
substantial grounds or puts forth substantial factual aspects that are not covered in the initial
show cause notice and, therefore, require further inquiry or verification by the department,
then, after conducting such further inquiry or verification, a fresh or supplementary show
cause notice should be issued to the taxpayer, if it is then so required. No determi nation
can be made with regards to the same unless the taxpayer is afforded the opportunity to
respond to any deficiencies or misrepresentations found in relation thereto by specifically
alleging the same in a fresh or supplementary show cause notice. Hence, instead of
proceeding under the same show cause notice, it is necessary that a fresh or supplementary
show cause notice is issued to the taxpayer in light of the defence so taken. Failure to do
so would not only denote that in light of the grounds or facts raised in the defence put forth
by taxpayer in response to the show cause notice, which were not in the knowledge of the
tax authorities and therefore, were not part of the show cause notice, no further action is
required under the said show cause notice, any adjudication in relation to the same would
also be against the law, rendering the whole exercise redundant. Therefore, as a policy,
such practice must be adopted by the tax authorities in order to prevent wastage of time and
effort, and to curb unnecessary litigation. Not only would this allow a taxpayer to
meaningfully respond to the specific allegations asserted against the taxpayer upon which
the subsequent original adjudication, if any, will be based, as required under the law, it
would also allow many cases to be resolved at the initial stages without the need to proceed
any further and needlessly burden the public exchequer.
Warner Hindustan v. Collector of Central Excise (1999) 6 SCC 762; Precision
Rubber v. Commissioner of C. Ex. 2016 (334) ELT 577 (SC) and Godrej v. Commissioner
of Customs 2002 (143) ELT 16 (SC) ref.
(e) Tax— —-Factual issues—Highest authority for factual determination in tax matters is the
Tribunal.
Commissioner Inland Revenue v. Sargodha Spinning Mills 2022 SCMR 1082 and
Commissioner Inland Revenue v. MCB Bank Limited 2021 PTD 1367 ref.
Saba Saeed, Advocate Supreme Court for Petitioners (through video-link, Lahore)
Shehbaz Butt, Advocate Supreme Court for Respondent (through video -link,
Lahore)
Assisted by: Muhammad Hassan Ali, Law Clerk, Supreme Court of Pakistan.
Date of hearing: 11th November, 2022.
Order
SYED MANSOOR ALI SHAH, J.—The petitioner seeks leave to appeal against
order dated 31.3.2022 whereby the Excise Tax References (“ETRs”) filed by the petitioner
department were dismissed by the High Court.
2.
The brief background of the case is that the petitioner department issued a show
cause notice dated 02.1.2014 to the respondent company with the allegation that the
respondent company had to charge Federal Excise Duty (“FED”) at the rate of 8% on local
supplies of white crystalline sugar but instead it charged 0.5% and as a consequence FED
was short levied. The respondent company filed a written reply dated 11. 1.2014
controverting the said allegation in the show cause notice. However, through the Order -in-
Original dated 27.3.2014 the matter was decided against the respondent company and it
was held that the short levied FED along with surcharge is to be recovered from the
respondent along with penalty (5% of the amount involved). The respondent filed an appeal
before the Commissioner Inland Revenue, Appeal-V, Lahore, which was dismissed vide
order dated 23.11.2020 as barred by time. The respondent company then fi led a rectification
application against the said order, which was also dismissed on 24.12.2020. These orders
were then assailed by the respondent through two appeals filed before the Appellate
Tribunal Inland Revenue, Lahore (“Tribunal”). Vide order dated 28.1.2021, the appeal
against order dated 23.11.2020, whereby the appeal of the respondent had been dismissed
by the Commissioner Inland Revenue, was allowed by the Tribunal and resultantly the
appeal against order dated 24.12.2020 was deemed to have become infructuous. Against
the said order, the petitioner preferred two ETRs before the Lahore High Court under
section 34A of the Federal Excise Act, 2005, raising five questions of law. However, at the
time of hearing before the High Court, only the following two questions were pressed for
determination:
I.
II.
Whether or not learned ATIR granted benefit of SRO 77(I)/2013 [to the] tax payer
in violation of pre-conditions of clauses (b) and (d) of the SRO 77(I)/2013?
Whether the order of learned ATIR is justified and legal as the taxpayer [did] not
provide documents of export whereas, as per law, registered person under sections
17 and 21(a) of the Federal Excise Act, 2005 read with section 22(1)(e) of the Sales
Tax Act, 1990 is bound to provide it for verification as mandated under section 73
of the Sales Tax Act, 1990?
The said ETRs were then decided against the petitioner department by the High Court vide
the impugned order dated 31.3.2022, thus, upholding the decision of the Tribunal.
3.
We have heard the learned counsel for the parties and have examined the record of
the case. At the outset, we have noticed that in the show cause notice dated 02.1.2014 issued
by the petitioner department, the case set out against the respondent company was that it
had charged 0.5% FED on the value of local supplies whereas it should have charged 8%.
No mention was made of SRO No.77(I)/2013 (“SRO”), or any non-compliance thereof, in
the said show cause notice. In response to the said show cause notice, the respondent
company pointed out that it had charged 0.5% FED on the basis of the SRO and therefore
it was not liable to pay 8% FED on local supplies. Under the said SRO relaxation in the
rate of FED is extended to the quantity of the local supply of sugar equivalent to the quantity
exported by the sugar manufacturer. Despite raising the above new factual ground claiming
benefit under the SRO, no fresh or supplementary show cause notice was issued to the
respondent company seeking clarification as to the applicability of the SRO or whether the
respondent company was entitled to the benefit of the SRO. Instead, the original
adjudication by the Deputy Commissioner Inland Revenue proceeded on the basis of the
already issued show cause notice and while deciding the same he addressed the issue of the
SRO and held that two pre-conditions of the said SRO i.e. clauses (b) and (d) had not been
complied with, which provide that the sugar manufacturer has to present proof of the sugar
it has exported and that the benefit of the SRO shall not be admissible in respect of exports
made through land routes to Afghanistan and the Central Asian Republics. These matters
were extraneous to the show cause notice and the case set up by the department against the
respondent company.
4.
Before delving into the matter at hand, we feel it necessary to first underscore the
significance and purpose of a show cause notice. A show cause notice is a formal
communication from an authority, informing the recipient of an alleged violation or non –
compliance with a law, and providing them with an opportunity to respond to the said
allegations. It embodies the principle of natural justice, which requires that parties to a
dispute be given a fair hearing before any decision is made that may affect their rights or
interests. The principles of due process and fairness mandate that the recipient of a show
cause notice be given adequate time to respond and present their case, that they be given
access to relevant evidence and information, and that they be given the opportunity to be
heard before any action is taken against them. This ensures that the decision-maker is not
biased, that the decision is based on the facts of the case and the relevant law, and that the
recipient’s rights and interests are protected. Thus, in addition to the fair hearing principle,
there are other principles of natural justice that also apply for the purposes of issuance of
show cause notices, including the principle of impartiality, which requires that the decision –
maker be impartial, and the principle of reasons, which requires that the decision-maker
provide reasons for their decision.1 Therefore, a show cause notice is an important tool for
enforcing the law, and to ensure that the recipient is given a fair and transparent opportunity
to present their case before any adverse order affecting their rights and interests is passed.
5.
The Constitution2 provides for the right to be treated in accordance with the law and
enshrines the principles of fair trial and due process under Articles 4 and 10A, respectively.
Article 4 of the Constitution provides for the right of citizens to enjoy the protection of law
and to be treated in accordance with law as an inalienable right of every citizen. It further
provides that no action detrimental to life, liberty, body, reputation or property of any
person shall be taken except in accordance with the law and that no person shall be
prevented from or be hindered in doing that which is not prohibited by law. Article 10A
provides for the fundamental right to a fair trial and due process. The issuance of a show
cause notice is an essential element in ensuring the provision of the said rights, as it
provides individuals and organizations with the opportunity to explain their actions and to
respond to allegations of violation or non-compliance with any law before any adverse
action is taken against them. Hence, it follows that when a specific allegation is not put to
the recipient, thereby failing to provide the recipient with the opportunity to respond to the
same, any adjudication on the said allegation would be against the right of due process and
fair trial and therefore, in contravention to Articles 4 and 10A of the Constitution.
6.
As such, in certain cases and to uphold the above principles and rights, after the
issuance of the initial show cause notice, it may be necessary to issue a supplementary or a
fresh show cause notice if there has been a significant change in circumstances or if new
evidence has come to light. For example, if the recipient has provided a valid response to
the initial show cause notice, but new information has surfaced suggesting that the alleged
violation or non-compliance did occur, a fresh show cause notice may be required to enable
the recipient to respond to the new allegations and provide further clarification. Similarly,
where there has been a significant change in the circumstances or situation that led to the
issuance of the initial show cause notice, a fresh or supplementary show cause notice may
be required to address these changes; where the original notice was defective or incomplete,
a fresh or supplementary notice would be required to be issued to provide a more detailed
or accurate statement of the issues; and where the original notice does not fully address all
of the issues or violations that need to be addressed, a fresh or supplementary notice should
be issued to cover any outstanding matters. Ultimately, the decision to issue a fresh show
cause notice should be predicated on a thorough and careful evaluation of the facts and
circumstances of each case, guaranteeing that the principles of due process and fair trial are
upheld.
7.
A show cause notice can also be viewed as being akin to alternative dispute
resolution (“ADR”) as it provides a pre-litigation opportunity for the recipient to present
their position and show cause. By doing so, the matter can potentially be resolved before it
escalates and requires any adjudication. This not only saves time and resources but also
encourages the efficient resolution of disputes, acting as an effective mode of resolving
disputes outside of the traditional legal framework. Thus, while acting as a means to ensure
due process and fair trial by allowing the recipient to explain their position and respond to
the allegations before any legal action is taken, the issuance of a show cause notice also
acts as a tool to resolve the issue in the pre-litigation stage, similar to the objective of ADR.
8.
Coming to the present matter, in our view, non-compliance of the conditions of the
SRO by the respondent company was a distinct and separate allegation which was
necessarily required to be properly alleged in a show cause notice issued by the department
and put to the respondent company.3 A show cause notice issued to a taxpayer must contain
all the necessary facts and must specify the alleged actions or inaction by the taxpayer that
violated the law, allowing for a meaningful response from the taxpayer. 4 It is imperative
that the taxpayer is confronted with specific allegations, along with the grounds upon which
such allegations are based, in order to properly respond to the same and to place relevant
material on record that would be necessary for any defence put forth and for any
adjudication by the assessing officer in relation thereto. This is also because once a show
cause notice is issued, the original adjudication on the said show cause notice can only be
based on the grounds and allegations levelled therein, as pointed out above. 5 Unless the
taxpayer is confronted with the allegations through a show cause notice, no determination
can be made by the assessing officer with regards to the said allegations as it is beyond the
competence of the department to make out a case which the department had never
canvassed and the taxpayer had never been afforded the opportunity to meet. 6 Hence, unless
the allegations, and the grounds on which the said allegations are based, are not specifically
alleged in the show cause notice issued to the taxpayer, the whole exercise becomes
redundant and unsustainable in law.
9.
Therefore, where in response to a show cause notice, the taxpayer, in defence, raises
substantial grounds or puts forth substantial factual aspects that are not covered in the initial
show cause notice and, therefore, require further inquiry or verification by the department,
then, after conducting such further inquiry or verification, a fresh or supplementary show
cause notice should be issued to the taxpayer, if it is then so required. 7 No determination
can be made with regards to the same unless the taxpayer is afforded the opportunity to
respond to any deficiencies or misrepresentations found in relation thereto by specifically
alleging the same in a fresh or supplementary show cause notice. Hence, instead of
proceeding under the same show cause notice, it is necessary that a fresh or supplementary
show cause notice is issued to the taxpayer in light of the defence so taken. Failure to do
so would not only denote that in light of the grounds or facts raised in the defence put forth
by taxpayer in response to the show cause notice, which were not in the knowledge of the
tax authorities and therefore, were not part of the show cause notice, no further action is
required under the said show cause notice, any adjudication in relation to the same would
also be against the law, rendering the whole exercise redundant. Therefore, we feel that as
a policy, such practice must be adopted by the tax authorities in order to prevent wastage
of time and effort, and to curb unnecessary litigation. Not only would this allow a taxpayer
to meaningfully respond to the specific allegations asserted against the taxpayer upon which
the subsequent original adjudication, if any, will be based, as required under the law, it
would also allow many cases to be resolved at the initial stages without the need to proceed
any further and needlessly burden the public exchequer.
10. In the instant case, the show cause notice issued to the respondent had no such
grounds or allegations regarding the applicability of the SRO or fulfillment of the
conditions therein. Even when the respondent asserted in its reply that it had paid the FED
by availing the benefit under the SRO, no fresh or supplementary show cause notice was
issued to the respondent after inquiry by the department as to whether the conditions of the
SRO had been fulfilled by the respondent. The assessing officer, without confronting the
respondent as to the non-fulfilment of the conditions of the SRO, without providing the
respondent with the opportunity to respond to the same and place relevant material on the
record, and hence, without having any material to adjudicate upon this aspect, proceeded
to determine that the respondent had not complied with the conditions of the SRO while
adjudicating upon the same show cause notice already issued to the respondent. Therefore,
the Order-in-Original passed on the matter, being extraneous to the show cause notice, was
wholly without jurisdiction and could not have been sustained.
11. However, since the forums below have discussed the applicability of the SRO,
therefore, to conclusively decide the case at hand, we also wish to dilate upon that aspect
of the matter. It is now settled law that the highest authority for factual determination in
tax matters is the Tribunal.8 In the instant case, the Tribunal was satisfied that exports were
duly made by the respondent company under the SRO and the conditions mentioned therein,
including provision of proof of such exports and that such exports should not have been
made through land routes to Afghanistan and the Central Asian Republics, were duly
complied with by the respondent. The department did not produce any evidence before the
Tribunal to dislodge the fact that the petitioners had complied with the said requ irements
of the SRO. This, even otherwise, could not have been done because it was not the case set
out by the department as there was no such allegation in the show cause notice. The learned
counsel for the petitioner has been unable to refer to any perversity in the reading of the
evidence resulting in the said factual determination made by the Tribunal. Therefore, we
see no reason to interfere in the said findings of the Tribunal which have also been upheld
by the High Court.
12. As far as the contention of the petitioner department as to the appeal filed by the
respondent taxpayer being barred by time is concerned, we have noted that this was also
discussed in detail by the Tribunal and decided in favour of the respondent. The question
relating to limitation was then raised by the department in the ETRs, however, at the time
of arguing the matter before the High Court on 31.3.2022, only two questions were pressed
for determination, which even otherwise did not arise from the show cause notice and are
highlighted above, and the question of limitation was not pressed. In these circumstances,
we are therefore, not inclined to dilate upon the same. 9 Even otherwise, as held above, the
Order-in-Original against which the appeal was filed was not sustainable under the law.
13. In view of the above, we see no reason to interfere in the impugned judgment.
Therefore, leave is refused and these petitions are dismissed.
MWA/C-12/SC
Petitions dismissed.
2022 S C M R 1907
[Supreme Court of Pakistan]
Present: Ijaz ul Ahsan and Sayyed Mazahar Ali Akbar Naqvi, JJ
AZHAR HUSSAN and another—Petitioners
Versus
The STATE and others—Respondents
Jail Petition No. 190 of 2017 and Criminal Petition No. 398 -L of 2017, decided on 16th
August, 2022.
(Against the judgment dated 20.02.2017 passed by the Lahore High Court, Multan
Bench in Murder Reference No. 111/2012 and Criminal Appeal No. 772/2012)
(a) Penal Code (XLV of 1860)— —-S. 302(b)— Qatl-i-amd— Reappraisal of evidence— Prosecution witnesses were
subjected to lengthy cross-examination by the defence but nothing favourable to the
accused or adverse to the prosecution could be produced on record—Ocular account
furnished by the prosecution was reliable, straightforward and confidence inspiring—
Medical evidence available on the record corroborated the ocular account so far as the
nature, time, locale and impact of the injury on the person of the deceased was concerned- –Counsel for the accused could not point out any plausible reason as to why the
complainant would falsely involve the accused in the present case and let off the real
culprit, who had committed murder of his real daughter—Substitution in such like cases
was a rare phenomenon, especially when admittedly there was no previous enmity between
the parties—Conviction of accused under section 302(b), P.P.C was maintained—Petitions
for leave to appeal were dismissed and leave was refused.
(b) Penal Code (XLV of 1860)— —-S. 302(b)— Qatl-i-amd— Prosecution witnesses related to the deceased—Mere
relationship of the prosecution witnesses with the deceased cannot be a ground to discard
the testimony of such witnesses unless previous enmity or ill will is established on the
record to falsely implicate the accused in the case.
(c) Penal Code (XLV of 1860)— —-S. 302(b)—Qatl-i-amd—Minor discrepancies in prosecution case—While appreciating
the evidence, the court must not attach undue importance to minor discrepancies—Such
minor discrepancies which do not shake the salient features of the prosecution case should
be ignored—Accused cannot claim premium of such minor discrepancies— If importance
is given to such insignificant inconsistencies then there would hardly be any conviction.
Allah Bakhsh v. Ahmad Din 1971 SCMR 462 ref.
(d) Penal Code (XLV of 1860)— —-S. 302(b)—Qatl-i-amd—Medical evidence—No blood stained earth at place of
occurrence—Fire shot injury causing gut to come of the belly of the deceased—In such
like injuries when the gut comes out of the belly, it seals the margin of the wound and the
blood falls inside the body cavity instead of oozing outside the body—Non-existence of
blood at the place of occurrence, for such injuries, is easily understandable and does not
shatter the prosecution case.
(e) Penal Code (XLV of 1860)— —-S. 302(b)— Qatl-i-amd— Ocular account—Sole basis for conviction—Where ocular
evidence is found trustworthy and confidence inspiring then the conviction can be solely
based upon it.
(f) Penal Code (XLV of 1860)— —-S. 302(b)— Qatl-i-amd— Reappraisal of evidence—Sentence, reduction in—Death
sentence reduced to life imprisonment—Motive not established—No recovery of weapon
effected—Keeping in view the fact that no recovery was affected and motive had not been
proved, the High Court had rightly taken a lenient view and converted the sentence of death
into imprisonment for life—No further leniency could be shown to the accused—Petitions
for leave to appeal were dismissed and leave was refused.
Ms. Saba Saeed Sheikh, Advocate Supreme Court for Petitioner (in Jail Petition No.
190 of 2017 via video link Lahore).
Sikandar Javed, Advocate Supreme Court for Petitioner (in Criminal Petition No.
398-L of 2017, via video link Lahore).
Nemo for the State.
Date of hearing: 16th August, 2022.
Judgment
SAYYED MAZAHAR ALI AKBAR NAQVI, J.—Petitioner Azhar Hussain along
with two co-accused was tried by the learned Additional Sessions Judge, Jatoi, District
Muzaffargarh pursuant to a case registered vide FIR No. 731/2010 dated 05. 10.2010 under
sections 302/34, P.P.C. at Police Station Jatoi for committing murder of Mst. Sajda Bibi,
daughter of the complainant. The learned Trial Court vide its judgment dated 17.11.2012
while acquitting co-accused, convicted petitioner Azhar Hussain under section 302(b),
P.P.C. and sentenced him to death. He was also directed to pay compensation amounting
to Rs.100,000/- to the legal heirs of the deceased or in default whereof to further suffer six
months’ SI. In appeal the learned High Court while maintaining the conviction of the
petitioner under section 302(b), P.P.C., altered the sentence of death into imprisonment for
life. The amount of compensation and the sentence in default whereof was maintained.
Benefit of section 382-B, Cr.P.C. was also extended to the petitioner/convict. Being
aggrieved by the impugned judgment, the petitioner/convict filed Jail Petition No. 190/2017
whereas the complainant has filed Criminal Petition No. 398 -L/2017 before this Court
seeking enhancement of the sentence of the petitioner/convict.
2.
under:-
3.
The prosecution story as given in the judgment of the learned Trial Court reads as
“2. The brief facts of the prosecution case are that on 05.10.2010, the complainant
of this case namely Haji Ghaus Bakhsh appeared before the police and got recorded
his statement Exh.P.E. contending therein that today at morning time he
(complainant) along with his wife Mst. Ashraf and children was cultivating
vegetable near his house while his daughter namely Mst. Sajda aged 16/17 years
was present in the house. At about 7.30 a.m. he heard hue and cry and rushed
towards his house and saw that two unknown persons were coming out form his
Havaili. He reached in the house and saw that his daughter Mst. Sajda had grappled
with accused Azhar Hussain. When he (complainant) reached near, the accused
Azhar Hussain made fire with his pistol which hit in the belly of Sajda Bibi who fell
on the ground. In the meanwhile PWs namely Mukhtiar Hussain and Muhammad
Siddique reached at the spot and they tried to catch accused Azhar Hussain but
accused gave threats while raising his pistol but PW namely Mukhtiar Hussain
chased the accused Azhar Hussain and caught hold him in the cotton crop near the
house and they grappled with each others. The accused Azhar Hussain fled away
while leaving his Qamiz, Shalwar along with broken Azarband, pair of shoe and
identity card before they reached there. His daughter succumbed to the injuries. On
these facts and circumstances, the above mentioned case was registered.”
After completion of the investigation, report under section 173, Cr.P.C. was
submitted before the Trial Court. The prosecution in order to prove its case produced nine
witnesses. In his statement recorded under section 342, Cr.P.C, the petitioner /convict
pleaded his innocence and refuted all the allegations levelled against him. However, he did
not make his statement on oath under section 340(2), Cr.P.C. in disproof of allegations
levelled against him. He also did not produce any evidence in his d efence.
4.
Learned counsel for the petitioner/convict contended that there are glaring
contradictions and dishonest improvements in the statements of the eye -witnesses, which
have escaped the notice of the learned courts below. Contends that the prosecution
witnesses are interested and related, therefore, their evidence has lost its sanctity and the
conviction cannot be based upon it. Contends that the prosecution case is based on whims
and surmises and it has to prove its case without any shadow of doubt but it has miserably
failed to do so. Contends that the prosecution has not been able to prove motive as alleged,
which causes serious dent in the prosecution case. Contends that there was no blood stained
earth at the place of occurrence, which shows that the occurrence took place somewhere
else. Lastly contends that the impugned judgment is based on misreading and non -reading
of the evidence, therefore, the same may be set at naught.
5.
On the other hand, learned counsel for the complainant submitted that the learned
High Court has converted the sentence of death of the petitioner on the grounds, which are
not tenable in law. Contends that to sustain conviction of an accused on a capital charge,
unrebutted ocular evidence alone is sufficient. Lastly contends that the ocular account is
supported by the medical evidence, therefore, the petitioner/convict does not deserve any
leniency by this Court, rather his sentence may be enhanced.
6.
We have heard learned counsel for the parties at some length and have perused the
evidence available on the record with their able assistance.
The ocular account in this case has been furnished by Ghous Bakhsh, complainant
(PW-3) and Mukhtiar Hussain (PW-6). These prosecution witnesses were subjected to
lengthy cross-examination by the defence but nothing favourable to the petitioner/convict
or adverse to the prosecution could be brought on record. Both these PWs remained
consistent on each and every material point inasmuch as they made deposition exactly
according to the circumstances happened in this case, therefore, it can safely be concluded
that the ocular account furnished by the prosecution is reliable, straightforward and
confidence inspiring. The medical evidence available on the record corroborates the ocular
account so far as the nature, time, locale and impact of the injury on the person of the
deceased is concerned. As far as the question that the complainant was father of the
deceased, therefore, his testimony cannot be believed to sustain conviction of the
petitioner/convict is concerned, this Court has time and again held that mere relationship
of the prosecution witnesses with the deceased cannot be a ground to discard the testimony
of such witnesses unless previous enmity or ill will is established on the record to falsely
implicate the accused in the case. Learned counsel for the petitioner/convict could not point
out any plausible reason as to why the complainant has falsely involved the
petitioner/convict in the present case and let off the real culprit, who has committed murder
of his real daughter. Substitution in such like cases is a rare phenomenon. The complainant
would not prefer to spare the real culprit who murdered his daughter and falsely involve
the petitioner without any rhyme or reason especially when admittedly there was no
previous enmity between the parties. During the course of proceedings, the learned counsel
contended that there are material discrepancies and contradictions in the statements of the
eye-witnesses but on our specific query she could not point out any major contradiction,
which could shatter the case of the prosecution. While appreciating the evidence, the court
must not attach undue importance to minor discrepancies and such minor discrepancies
which do not shake the salient features of the prosecution case should be ignored. The
accused cannot claim premium of such minor discrepancies. If importance be given to such
insignificant inconsistencies then there would hardly be any conviction. Reliance is placed
on Allah Bakhsh v. Ahmad Din (1971 SCMR 462). Learned counsel for the petitioner had
argued that there was no blood stained earth at the place of occurrence, which shows that
the occurrence took place somewhere else and just to bring the case within the prosecution
version, the place of occurrence was mentioned at the complainant’s house. However, this
argument of the learned counsel is misconceived. The postmortem examination clearly
suggests that gut was coming out of the only injury sustained by the decea sed. The learned
Trial Court has rightly observed that in such like injuries when the gut comes out of the
belly, it seals the margin of the wound and the blood falls inside the body cavity instead of
oozing outside the body. Dr. Samreen Rasheed, (PW-2) who had conducted postmortem
examination had observed that the peritoneum was injured interiorly at the level of
umbilicus and the abdominal cavity was full of blood; the small intestines were perforated,
therefore, non-existence of blood at the place of occurrence is easily understandable and
does not shatter the prosecution case. The petitioner had taken defence plea that he had
friendly relations with the deceased and when he was seen by the complainant’s son with
the deceased sitting in the cotton crop, he ran away and later heard that the deceased has
been murdered. However, he could not substantiate his plea by placing on record cogent
evidence. It seems he has concocted a false story just to save his skin. However, this stance
of the petitioner extends support to the prosecution case that he was followed by Mukhtiar
Hussain (PW-6) till the cotton crop where confrontation took place and his identity card
along with other belongings were left by him in the field. It was one of the arguments of
the learned counsel that the investigating Officer did not properly investigate the case, the
investigation remained incomplete and the challan was not properly sent. However, on our
specific query, learned counsel admitted that neither any attempt was made by the defence
to get the Investigating Officer declared hostile nor did they file private complaint nor even
the Investigating Officer was cross-examined on this aspect of the matter. Therefore,
raising this argument at this stage is of no avail to the petitioner. The prosecution had not
disclosed the motive, which resulted in the commission of the offence but since there was
no enmity between the parties, therefore, the complainant did not narrate any motive in the
crime report. So far as recovery is concerned, admittedly neither the weapon of offence was
recovered from the petitioner nor any empty was collected from place of occurrence.
However, we may observe that where ocular evidence is found trustworthy and confidence
inspiring then the conviction can be solely based upon it. In these circumstances, there is
sufficient evidence available to sustain the conviction of the petitioner/convict. So far as
the quantum of punishment is concerned, keeping in view the fact that no recovery was
affected and motive has not been proved, the learned High Court has rightly taken a lenient
view and converted the sentence of death into imprisonment for life. No further leniency
can be shown to the petitioner/convict. The impugned judgment is well reasoned, proceeds
on correct principles of law on the subject and does not call for interference by this Court.
7.
For what has been discussed above, we do not find any merit in these petitions,
which are dismissed and leave to appeal is refused.
MWA/A-33/SC
Petitions dismissed.
2023 P T D 1528
[Lahore High Court]
Before Shahid Jamil Khan and Muhammad Sajid Mehmood Sethi, JJ
COMMISSIONER INLAND REVENUE, ZONE-I, REGIONAL TAX OFFICE,
FAISALABAD
Versus
Messrs AHMAD STRAW BOARD PRIVATE LIMITED, FAISALABAD
S.T.R. No.155 of 2015, heard on 21st September, 2022.
Sales Tax Act (VII of 1990)— —-Ss. 11, 36 & 47—Reference—Wrong provision of law—Effect—Show-cause notice
was set aside by Customs Appellate Tribunal for mentioning of S.11(3) instead of S.36 of
Sales Tax Act, 1990—Validity—Merely because show-cause notices were labelled under
S.11(3) instead of S.36 of Sales Tax Act, 1990, was not such a defect or vagueness to
undergo test of judicial scrutiny—Such omission did not cause any prejudice to respondent-
taxpayers and the same could not be declared invalid under the law—Main issues raised by
parties were not decided by Customs Appellate Tribunal, therefore, High Court in reference
jurisdiction was deprived of the views of the Tribunal, as Reference Application was to be
decided on the basis of facts determined by Appellate Tribunal—High Court set aside order
in question and matter was remanded to Customs Appellate Tribunal for decision afresh
after providing opportunity of being heard to both the parties—Reference was allowed
accordingly.
Collector of Sales Tax and Central Excise, Lahore v. Zamindara Paper and Board
Mills and others 2008 SCMR 615; Commissioner of Income Tax, Karachi v. Abdul Ghani
2007 PTD 967 and Commissioner of Income Tax, Peshawar v. Messrs Islamic Investment
Bank Ltd. 2016 SCMR 816 rel.
Ms. Saba Saeed Sheikh, Legal Advisor for Applicant.
Abuzar Hussain for Respondent.
Date of hearing: 21st September, 2022.
Judgment
MUHAMMAD SAJID MEHMOOD SETHI, J.—This consolidated judgment
shall decide instant Reference Application, along with following connected cases, as
common questions of law and facts are involved in these cases:-
1.
STR No.156 of 2015 titled Commissioner Inland Revenue, Faisalabad v. M/s Kamal
Limited, Faisalabad.
2.
3.
2.
STR No.157 of 2015 titled Commissioner Inland Revenue, Faisalabad v. M/s Kamal
Limited, Faisalabad.
STR No.160 of 2015 titled Commissioner Inland Revenue, Faisalabad v. M/s Habib
Haseeb Spinning Mills Private Limited, Faisalabad.
Through these Reference Applications under section 47 of the Sales Tax Act, 1990
(“the Act of 1990”), following common question of law, asserted to have arisen out of
orders passed by learned Appellate Tribunal Inland Revenue Lahore Bench, Lahore
(“Appellate Tribunal”), has been proposed for our opinion:-
“Whether on the facts and circumstances of the case, the amendment in section 11
of the Sales Tax Act, 1990, made vide Finance Act, 2012, is procedural in nature
and applies to all the pending adjudications?”
3.
Precise allegation in all these cases is that respondent-taxpayers claimed / received
inadmissible refund / input tax adjustment against the invoices of blacklisted units, without
any physical transfer of goods, thus, demands of sales tax along with default surcharge and
penalty were raised by Assistant Commissioner Inland Revenue. Feeling aggrieved,
respondent-taxpayers filed appeals before Commissioner Inland Revenue (Appeals), which
were partly allowed. In further appeals, learned Appellate Tribunal observed that Show-
Cause Notices ought to have been issued under Section 36 of the Act of 1990 instead of
Section 11(3) as latter was introduced in statute book vide Finance Act, 2012 and the
matters were relating to the years 2008, 2009, 2010, 2011 and March, 2012 and proceeded
to vacate the orders of Taxation Officer.
4.
Learned Legal Advisor for applicant-department submits that amendment in Section
11 of the Act of 1990 is procedural in nature and applies to all pending cases, hence,
impugned orders are unsustainable in the eye of law.
5.
Contrarily, learned counsel for the respondent-taxpayers submits that Section 11(3)
was not given retrospective effect, thus, was not applicable in these cases. He adds that
since Show-Cause Notices are illegal, the assumption of jurisdiction and superstructure
built thereon also do not have sanctity and, thus, liable to be annulled.
6.
We have heard the arguments of learned counsel for the parties at length and perused
the record with their able assistance.
7.
The Sales Tax Act, 1990 came into force on 01.11.1990 through notification dated
28.10.1990, issued under subsection (3) of section 1, in order to consolidate and amend the
law relating to the levy of a tax on the sale, importation, exportation, production,
manufacture or consumption of goods. The said tax is called sales tax. At the time of
promulgation of said Act, there were two distinct provisions relating to adjudication of
cases i.e. section 11 and section 36. Section 36 was omitted vide the Finance Act, 2012 and
the provisions thereof were inserted in section 11 as subsections (3) and (4). The legislature,
therefore, consolidated the provisions relating to adjudication by substituting section 11.
Section 11, in its present form, reads as under:-
“11. Assessment of Tax and Recovery of Tax not levied or short levied or
erroneously refunded.- (1) Where a person who is required to file a tax return fails
to file the return for a tax period by the due date or pays an amount which, for some
miscalculation is less than the amount of tax actually payable, an officer of Inland
Revenue shall, after a notice to show-cause to such person, make an order for
assessment of tax, including imposition of penalty and default surcharge in
accordance with sections 33 and 34: Provided that where a person required to file a
tax return files the return after the due date and pays the amount of tax payable i n
accordance with the tax return along with default surcharge and penalty, the notice
to show cause and the order of assessment shall abate.
(2) Where a person has not paid the tax due on supplies made by him or has made
short payment or has claimed input tax credit or refund which is not admissible
under this Act for reasons other than those specified in subsection (1), an officer of
Inland Revenue shall after a notice to show-cause to such person, make an order for
assessment of tax actually payable by that person or determine the amount of tax
credit or tax refund which he has unlawfully claimed and shall impose a penalty and
charge default surcharge in accordance with sections 33 and 34.
(3) Where by reason of some collusion or deliberate act any tax or charge has not
been levied or made or has been short levied or has been erroneously refunded, the
person liable to pay any amount of tax or charge or the amount of fund erroneously
made shall be served with the notice requiring him to show-cause for payment of
the amount specified in the notice.
(4) Where, by reason of any inadvertence, error or misconstruction any tax or charge
has not been levied or made or has been short-levied or has been erroneously
refunded, the person liable to the amount of tax or charge or the amount of refund
erroneously made shall be served with a notice requiring him to show-cause for
payment of the amount specified in the notice; Provided that, where a tax or charge
has not been levied under this subsection the amount of tax shall be recovered as
tax fraction of the value of supply;
……..
(5) No order under this section shall be made by an officer of Inland Revenue unless
a notice to show-cause is given within five years, of the end of the financial year in
which the relevant date falls, to the person in default specifying the grounds on
which it is intended to proceed against him and the officer of Sales Tax shall take
into consideration the representation made by such person and provide him with an
opportunity of being heard:”
Subsection (1) of section 11 is attracted when a person who is required to file a tax return,
fails to file the return for a tax period by the due date, or pays an amount which, because
of some miscalculation, is less than the amount of tax actually paid. It is obvious from the
language of the said provision that it contemplates a situation which does not involve a
dispute regarding the actual amount payable as tax by the registered person. Likewise,
subsection (2) envisages a situation where a person has not paid the tax due on supplies
made by him, or has made short payment or has claimed input tax credit or a refund which
is not admissible under the Act of 1990 for reasons other than those specified in subsection
(1). The language clearly shows that subsection (2) also envisages eventualities which do
not involve the short levy or non-levy of tax i.e. the tax due is not disputed. Whereas,
subsections (3) and (4) deal with situation relating to a tax or change not having bee n ‘levied
or made’, or having been ‘short levied’ or erroneously refunded. However, subsection (3) is
attracted where lapse is allegedly due to some collusion or deliberate and subsection (4)
applies where default is due to inadvertence, error or misconception. These subsections are
actually section 36, since omitted, with the only difference in that where the recovery of
sales tax relates to cases of inadvertent / non-willful default, the time limitation of three
years has been enhanced to five years, thus, the time limitation for assessment and recovery
of sales tax due is being generalized to five years irrespective of the nature of default.
Limitation to initiate proceedings in matters involving allegations of inadvertence, error or
misconstruction was three years as per Section 36(2) of the Act of 1990, which is now five
years in substituted section 11 and the situation is covered under subsection 11(4).
7.
Show-Cause Notices in these cases were issued under Section 11(3) of the Act of
1990, which are analogous to Section 36(1), and not a single word including limitation is
changed as both sections provide limitation of 5 -years. We have gone through the contents
of Show-Cause Notices, the same are self-explanatory, contain the detailed facts,
allegations with supporting material and specifically intimate the respondent-taxpayers that
if they do not respond to it adverse action might be taken against them. The grounds and
reasons are explicitly set out. Omission to mention in the show-cause notice the specific
provision which is alleged to have been contravened is not fatal and does not ipso facto
make it void. Instead of taking into consideration technicalities, the Court should look into
the matter from different angles. It should also see whether substantial compliance has been
made and the omission, if any, has caused any prejudice to the taxpayer. We are of the view
that merely because the show-cause notices were labelled under section 11(3) instead of
Section 36, is not such defect of vagueness to undergo the test of judicial scrutiny and this
omission has also not caused any prejudice to respondent-taxpayers, thus, the same cannot
be declared invalid under the law. Furthermore, there was no question of retrospective
application of section 11(3) of the Act of 1990. Reference can be made to Collector of Sales
Tax and Central Excise, Lahore v. Zamindara Paper and Board Mills and others (2008
SCMRR 615), Commissioner of Income Tax, Karachi v. Abdul Ghani (2007 PTD 967) and
Commissioner of Income Tax, Peshawar v. Messrs Islamic Investment Bank Ltd. (2016
SCMR 816).
8.
In view of the above, it is manifestly clear that learned Appellate Tribunal has
misunderstood the factual as well as legal planes of the matter, which has rendered the
impugned orders unsustainable in law. The proposed question is also not couched in proper
manner, which is formulated as under:-
Whether in the facts and circumstances of the case, learned Appellate Tribunal was
justified to annul the show cause notice as well as orders of authorities below on
merely mentioning of section 11(3) instead of section 36, especially when no
prejudice has been caused to respondent-taxpayers?
9.
As a sequel to above discussion, our answer to the proposed question is in negative
i.e. in favour of applicant-department and against respondent-taxpayers.
10. It is clear from the above, the main issues raised by parties have not been decided
by learned Appellate Tribunal, therefore, this Court in reference jurisdiction is deprived of
the views of the Appellate Tribunal, as this Court has to decide Reference Application on
the basis of facts determined by Appellate Tribunal. Resultantly, the impugned orders, in
all cases, are set aside, and the matters are remanded back to learned Appellate Tribunal
for decision afresh after providing opportunity of being heard, to both the parties.
These Reference Applications are disposed of.
11. Office shall send a copy of this order under seal of the Court to learned Appellate
Tribunal as per section 47(5) of the Sales Tax Act, 1990.
MH/C-37/L
Case remanded.
2023 C L C 582
[Lahore]
Before Ch. Muhammad Masood Jahangir, J
MUHAMMAD RAMZAN —- Petitioner
Versus
HAQ NAWAZ (DECEASED) through L.Rs. and others —- Respondents
Civil Revision No.1908 of 2012, heard on 30th April, 2021.
Arbitration Act (X of 1940)— —-Ss.17 & 30—Civil Procedure Code (V of 1908), S.115—- Award making rule of Court- –Principle—Non-filing of objections—Effect — Concurrent findings of facts by two Courts
below—Revisional jurisdiction of High Court—Scope—Petitioner was aggrieved of not
making award as rule of Court by Trial Court as well as Lower Appellate Court Plea
raised by petitioner was that when objections were never preferred for annulment of award,
the Courts below were bound to make the same rule of the Court—Validity When
previous litigation before Court of law stood already culminated in favour of , it could not
be believed by a prudent mind that he would have agreed for referring the same ispute for
resolution through arbitration—Petitioner failed to prove construction or execution of
reference deed—Power vested in Court to make an Award rule of Court was judicial and
not ministerial—Absence of objections to an Award did not absolve the Court of its
responsibility to scrutinize it
High Court declined to interfere in judgments passed by two
Courts below, as the same did not suffer from any jurisdictional defect nor any of the
exceptions detailed under S.115, C.P.C. were attracted— Scope of exercise of revisional
jurisdiction was narrower and restricted only to the extent of correcting errors of law as
well as facts, if were found to have been committed by subordinate Court in discharge of
its judicial functions Revision was dismissed in circumstances.
Messrs Awan Industries Ltd. v. The Executive Engineer, Lined Channel Division
1992 SCMR 65; Muhammad Tayab v. Akbar Hussain 1995 SCMR 73 and Qutubuddin
Khan v. Chief Mill Wala Dredging Co. (Pvt.) Limited 2014 SCMR 1268 rel.
Ch. Muhammad Amin Javed for Petitioner.
Ms. Saba Saeed Sheikh for Respondent No.1.
Tahir Mehmood Mughal, Mian Shahzad Siraj Chaby and Naila Farheen Rana for
Respondents Nos.2 and 3.
Date of hearing: 30th April, 2021.
Judgment
CH. MUHAMMAD MASOOD JAHANGIR, J.—-After having lost his case
before the two Courts below via judgments dated 30.11.2010 and 26.05.2012 respectively,
this Civil Revision was preferred about nine years ago for setting aside of said concurrent
findings and making Award dated 02.11.2005 rule of the Court.
2.
The condensed facts to better understand the litigation in hand were that subject
land 75 Kanals and 4 marlas (described in Para 1 of this petition) vested to State and under
a Scheme, initially it solely allotted to late Haq Nawaz/ respondent No.1 (survived by
respondents 1-a to 1-i) and then its proprietary rights were awarded to him as well. Haq
Nawaz had also two other brothers viz Shahadat Ali (father of present petitioner) and Nazar
Hussain (father of proforma respondent No.3). The petitioner on 01.12.2005 preferred
application under sections 14/17 of the Arbitration Act, 1940 asserting that qua area
referred herein-above, some litigation inter se the parties was underway before the Civil
Courts, Toba Tek Singh, that for its resolution the parties proposed to appoint Rai Ghulam
Rasool/respondent No.2 to act as Arbitrator latter’s asking, the petitioner, respondent No.1
and respondent No.3 through execution of independent Arbitration References referred the
dispute to respondent No.2 for its culmination in said capacity, that at four occasions, the
Arbitrator heard the parties, and that after the withdrawal of the cases from the Court, the
Arbitrator finally pronounced the Award dated 02.11.2005, which was required to be
blessed with decree to make it rule of the Court. The proforma respondent No.3 though
conceded the application, yet Haq Nawaz respondent No.1 via written reply seriously
contested the lis while pleading that father of the petitioner along with his other brother
(father of proforma respondent No.3) had earlier instituted the suit qua subject area, which
finally was dismissed on 21.02.1994, that subsequently another suit was filed as well and
when application for its rejection was tabled, the same was unconditionally withdrawn on
07.03.2006, that when the litigation had already been culminated in favour of respondent
No.1, there was no fun for the appointment of the Arbitrator. The crux of his defence was
that neither he had ever agreed to appoint the Arbitrator, nor Agreement for referring
alleged dispute for its resolution was executed by him, rather a forged/fictitious reference
deed (Exh.A2) was planted to manoeuvre the collusive Award.
3.
Having faced with serious disagreement through pleadings, the issues were
materialized, evidence in pros and cons received from the respective parties and as a result
of its appreciation, the learned two Courts below concurrently dismissed the application as
well as appeal of the petitioner through judgments already referred in para 1 ante, thus this
petition.
4.
Arguments heard, record perused with the able assistance of the worthy counsel for
the contesting parties.
5.
The bottom line per pleadings of the parties was; whether Rai Ghulam
Rasool/respondent No.2 had ever been appointed as Arbitrator by Haq Nawaz/respondent
No.1 via execution of Agreement dated 30.11.2003 (Exh.A2). As this fact was positively
asserted by the petitioner, therefore, under law, the basic onus probandi was upon the latter
to prove that Exh.A2 was genuinely and legally executed by respondent No.1 to refer the
dispute o the Arbitrator. This basic and disputed document (Exh.A2) pertaining to future
liability/obligation was allegedly executed after promulgation of Qanun-e-Shahadat Order,
1984, thus sine qua non to be constructed per spirit of Sub-Article (2) of Article 17, which
for better appreciation is reproduced as under:-
“(2) Unless otherwise provided in any law relating to enforcement of Hudood or
any special law,
(a) in matters pertaining to financial or future obligations, if reduced to writing, the
instrument, shall be attested by two men, or one man and two women, so that one
may remind the other, if necessary and evidence shall be led accordingly; and
(b) in all other matters, the Court may accept, or act on, the testimony of one man or
one woman or such other evidence as the circumstances of the case may warrant.”
The mode of proving such document is provided in Article 79 of the Order ibid,
which reads as below:-
“79. Proof of execution of document required by law to be attested. If a document
is required by law to be attested, it shall not be used as evidence until two attesting
witnesses (at) least have been called for the purpose of proving its execution, if there
be two attesting witnesses alive, and subject to the process of the Court and capable
of giving evidence:
Provided that it shall not be necessary to call an attesting witness in proof of the
execution of any document, not being a will, which has been registered in
accordance with the provision of the Registration Act, 1908, (XVI of 1908) unless
its execution by the person by whom it purports to have been executed is specifically
denied.”
Keeping these provisions ahead, when Exh.A2 consulted, it apprised that although names
of Muhammad Nawaz as well as Falak Sher being marginal witnesses were reflected
therein, but surprisingly the former alone signed it, whereas the latter never put his
signatures/thumb-impressions thereupon in such capacity, thus forced to infer that Falak
Sher might not be available at that point of time. As far as emphasis of Ch. Muhammad
Amin Javed, ASC, worthy counsel for the petitioner while referring case law reported as
Muhammad Rafiq v. Muhammad Zahur Nasir and others (PLD 1956 (W.P.) Lahore 354)
and Karachi Co-operative Housing Societies Union Ltd. v. Safia Bai and 12 others (PLD
1970 Karachi 379) that there is no law requiring in formal manner of drawing up Arbitration
Agreement is concerned, suffice it to say that no doubt per section 2 of the Arbitration Act,
1940, the ‘Arbitration Agreement’ is defined that there must be an agreement, that is to say,
the parties must be ad idem and such document must be in written form, but there is no
necessity that it should be a formal agreement, or that the terms should be contained therein.
Indeed, the object of said provision is just to gather the intention of the parties to agree in
writing to submit present or future differences to arbitration. The provision ibid definitely
does not deal with the construction or proof of Arbitration Agreement, rather after the
enunciation of Order, 1984, the Articles reproduced hereinabove deal with said features,
therefore, submission of learned counsel for the petitioner being offensive to the prevailing
law is repelled. The next argument of worthy counsel for the petitioner that his client
produced both of the marginal witnesses viz Muhammad Nawaz and Falak Sher (AW1 and
AW3) to prove due execution of Exh.A2, therefore, requirement of Article 79 of the Order
ibid was duly accomplished, is not well founded. Mere endorsing name of the witness over
the document is not enough to declare that it was duly attested. The term attested is difined
in section 3 the Transfer of Property Act, 1882 to the following effect:-
“3. Interpretation clause. “attested”, in relation to an instrument, means and shall be
deemed always to have meant attested by two or more witnesses each of whom has
seen the executant sign or affix his mark to the instrument, or has seen some other
person sign the instrument in the presence and by the direction of the executant, or
has received from the executant a personal acknowledgment of his signature of mark
or of the signature of such other person, and each of whom has signed the instrument
in the presence of the executant; but it shall not be necessary that more than one of
such witnesses shall have been present at the same time, and no particular form of
attestation shall be necessary.’
Therefore, for a marginal/attesting witness of the document, his signature is exigent
requirement. In absence thereof, it could not be claimed that Exh.A2 was duly attested,
what to talk that same could be taken as evidence.
6.
The other ground to disbelieve the veracity of Exh.A2 was that it is not only routine,
rather obligatory that the Stamp Vendor while issuing stamp paper makes an endorsement
at its back and procures signature or thumb-impressions of the person to whom it is being
released, but thumb-impression of respondent No.1 thereunder is not available. Anyhow, it
was an admitted position that respondent No.1 was an illiterate person, who only could
thumb-mark a document. The Exh.A2 itself is reflective of the said fact, because there
appears thumb mark of respondent No.1 at the end of its writing. On the other hand certified
copy of his Register pertaining to relevant entry (Exh.D 1) regarding issuance of stamp
paper (Exh.A2) tendered by the Stamp Vendor (AW5) during his cross-examination
contained signatures of respondent No.1, instead of thumb impression, which was sufficient
to make it doubtful. The dubiety further enriched when despite availability, the original
Register of stamp vending was not brought before the Court, rather intentionally withheld
compelling the Court to draw hostile inference that if produced, the same might have not
supported the stance of the petitioner.
7.
No doubt, the petitioner during trial proceedings made an application for the
comparison of disputed thumb-impression of Haq Nawaz over Exh.A2, which was declined
by the learned Civil Court vide order dated 15.06.2010 for the reason that after examinat ion
of affirmative/direct evidence, it was made at a belated stage. The assertion of learned
counsel for the petitioner that such move was bona fidely initiated as Exh.A2 was an
authentic document, is not on-target for the counts; firstly that the adversary ultimately also
endorsed the said request, rather Khurshid Ahmad son of Haq Nawaz (RW1) in his cross –
examination expressly showed his willingness for the said drill work; and secondly that the
opinion of Expert is always taken as weak type of evidence, which neither can be given
preference over the direct evidence nor treated as its substitute. Such like opinion simply
can only be taken as explanatory or confirmatory factor to the available direct evidence.
8.
The other feature, which created doubt in the stance of petitioner is that per his own
pleadings, the latter’s case was sub judice before the Civil Court when Arbitrator was
appointed. In such situation, the best course for him was either to require the Court already
seized of the said litigation for referring the dispute to respondent No.2/Arbitrator, or at
least while withdrawing the suit, it could be disclosed that parties for amicable settlement
through their written references had chosen Arbitrator for resolving the ongoing dispute,
but no such recourse adopted. Moreover, nothing was brought on record to prove that when
Exh.A2 was scribed, any lis was pending before the Civil Court, rather it was surprising to
note that after about two years of the execution of Exh.A2 (scribed on 30.11.2003), t he
petitioner along with his other brother also instituted declaratory Suit No.1727 on
18.10.2005 qua subject area against respondent No.1 before Civil Court T.T. Singh,
whereas much prior thereto, the Arbitrator had allegedly been appointed and purported
proceedings were being carried out by him. Obviously, had there been arbitration
proceeding in progress, then there was no need for the institution of said suit, which was
again simply withdrawn on 07.03.2006, even after the pronouncement of the purported
Award dated 02.11.2005, but without mentioning that matter stood already culminated
outside of the Court through the intervention of Arbitrator.
9.
There is yet another terrible aspect, which was duly exposed by Haq
Nawaz/respondent No.1 that earlier his two brothers viz fathers of petitioner and pro forma
respondent No.3 instituted declaratory suit in 1989, qua area in dispute claiming 2/3rd share
therein, but after complete trial, it was dismissed on 21.02.1994. Throughout pendency of
present litigation, the said judgment was neither challenged nor expressly denied. In such
situation, when the litigation before Court of law stood already culminated in favour of
respondent No.1, it could not be believed by a prudent man that he would have agreed for
referring the same dispute for its resolution through arbitration. Thus from whatever angle,
the available material consulted, it established that neither construction nor execution of
Exh.A2 was duly proved.
10. As far as emphasis of worthy counsel for the petitioner that respondent No.1 never
preferred objections for the annulment of Award, therefore, Courts below were bound to
make the same rule of the Court is concerned, suffice it to say that this controversy has
already been resolved by the august Supreme Court through judgments reported as Messrs
Awan Industries Ltd. v. The Executive Engineer Lined Channel Division (1992 SCMR 65),
Muhammad Tayab v. Akbar Hussain (1995 SCMR 73) and Qutubuddin Khan v. Chief Mill
Wala Dredging Co. (Pvt.) Limited (2014 SCMR 1268), wherein it has already been
observed that the powers vested in the Court to make an Award rule of the Court are judicial
and not ministerial and in absence of objections to an Award does not absolve the Court of
its responsibility to scrutinize it.
11. The learned Courts below took keen interest in deciding the main issue, whose
unanimous impugned judgments are neither found to be tainted with mis-reading/non-
reading of available material nor suffering from some jurisdictional defect to call for
interference by attracting any of the exceptions detailed under section 115 of the Code,
1908, the scope whereof is narrower and restricted only to the extent of correcting errors
of law as well as facts, if are found to have been committed by the subordinate Courts in
the discharge of its judicial functions, which is not the case here. Resultantly, for the
foregoing reasons, the instant civil revision is dismissed with cost of Rs.100,000/ -(Rupees
one lac only).
MH/M-
88/L
Revision dismissed.
2022 P T D 678
[Lahore High Court]
Before Jawad Hassan and Muzamil Akhtar Shabir, JJ
COLLECTOR OF CUSTOMS, MODEL CUSTOMS COLLECTORATE, MULTAN
Versus
AMAN ULLAH KHAN
Customs Reference No.47412 of 2021, decided on 27th September, 2021.
Customs Act (IV of 1969)— —-Ss.2(k), 17, 187 & 196—Qanun-e-Shahadat (10 of 1984), Arts. 117 & 120—Smuggled
goods—Proof—Onus to prove—Factual controversy—Documents, non-verification of—
Customs Authorities seized bitumen of foreign origin from warehouse of respondent on the
plea of smuggled / non-duty paid—Customs Appellate Tribunal allowed appeal filed by
respondent and goods were ordered to be restored—Validity—Documents produced by
respondent about local purchase and corresponding Sales Tax Returns which were official
documents were relied upon by Customs Appellate Tribunal—Such documents shifted
burden upon Customs Authorities to show that the same were not genuine—Documents
were not got verified from relevant quarters by Customs Authorities to reach conclusion
whether the same were genuine or not and whether the same related to the goods in question
or not—Burden that shifted upon Customs Authorities on production of documents by
respondent in terms of S.187 of Customs Act, 1969, to substantiate the goods was non-duty
paid had not been properly discharged—Findings of fact about genuineness of documents
and lawful possession of goods were not shown to be against record—High Court could
not interfere in findings of fact about genuineness of receipts relied upon by Customs
Appellate Tribunal as no question of law had arisen that required determination by High
Court—High Court answered the question in negative as Customs Authorities could not
establish that respondent had produced bogus record— Reference was dismissed in
circumstances.
Muhammad Gul v. Member Judicial, Customs Appellate Tribunal, Karachi and
another 2013 PTD 765; Messrs Ittehad Textile Industries (Pvt.) Ltd. v. Collector of Sales
Tax and Central Excise, Faisalabad and 2 others 2007 PTD 663; Pakistan Match Industries
(Pvt.) Ltd. v. Assistant Collector, Sales Tax and Central Excise Mardan 2019 SCMR 906;
Army Welfare Trust (Nizampur Cement Project), Rawalpindi and another v. Collector of
Sales Tax (Now Commissioner Inland Revenue, Peshawar) 2017 SCMR 9 and Messrs
F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax and another 2014 SCMR 907
rel.
Ms. Saba Saeed Sheikh for Applicant.
Raza Ahmed Cheema for Respondent.
Order
MUZAMIL AKHTAR SHABIR, J.—-Through this Customs Reference under
Section 196 of the Customs Act, 1969, the applicant has called in question judgment dated
03.05.2021 passed by Customs Appellate Tribunal, Bench-II, Lahore (‘Appellate
Tribunal’), in Custom Appeal No. 155/LB/2020 and inter alia has raised the following legal
question for our opinion:
“a. Whether the learned Customs Appellate Tribunal has got jurisdiction to pass an
order against the record available with it?
b. Whether the learned Customs Appellate Tribunal has erred in law by verifying
the bogus record produced by the owner?”
2.
Brief facts of the case are that the staff of the detecting agency recovered foreign
origin allegedly smuggled/non-duty paid bitumen from a warehouse /godown located at
near Khear Chowk, Kot Rab Nawaz, Southern Bypass, Multan. The said goods were
detained under Section 2 (k) read with Section 17 of the Customs Act, 1969 and were seized
on 26.11.2020 under Section 168 of the Act. The adjudication process culminated into
passing of Order-in-Original No. 162/2021 dated 19.03.2020, whereby the said foreign
origin goods were confiscated. The appeal filed by the respondent there-against was
allowed by the Appellate Tribunal on 03.05.2021 and the goods were ordered to be released
unconditionally to their owner(s).
3.
Learned counsel for the applicant-department states that the Appellate Tribunal had
not appreciated that the respondent had produced fake receipts and sales tax invoices in
support of claim and the same could not be relied upon by the said Tribunal to allow the
appeal filed by the respondent.
4.
On the other hand, learned counsel for the respondent has defended the impugned
judgment.
5.
Presently, the applicant-department seeks setting-aside of judgment dated
03.05.2021 for unconditional release of bitumen by claiming that the respondent had
produced its bogus receipts, whereas learned counsel for the respondent denies the same
and states that receipts were genuine and rightly relied upon by the Appellate Tribunal, and
at this stage the said findings of fact could not be interfered with by this Court. Before the
Custom authorities and the Appellate Tribunal, the respondent claimed that supplies of
bitumen subject matter of this Reference had been made to him by the importer of said
goods/items in furtherance of business through sales tax invoices, which were duly
reflected in the sales tax returns of the respondent and also available with the FBR’s system
relating to filing of Sales Tax Return. The Collector Customs had observed that all the
documents are managed and have been prepared as an after-thought and the seized bitumen
is not covered under the produced documents and on the said basis passed order for outright
confiscation of said goods/items and imposed personal penalty of Rs.500,000/ – on
owner/tenant of the godown, however, perusal of the said order shows that nothing was
observed or shown from the record as to how the said conclusion was reached by the
Collector and which test has been applied rather it appears that minor discrepancies in
documents were made basis of reaching the said conclusion. Thereafter on appeal, the
Appellate Tribunal by taking into consideration the documents produced by the respondent
reached the conclusion that it was a case of local supplies and the respondent by producing
proper documents had reasonably discharged onus of proof in terms of Section 187 of the
Act to show that the recovered bitumen was in his lawful possession and set-aside the order
of confiscation. The relevant portion of the impugned order is reproduced below:
“We have considered the contentions of the parties available on record. The areas
relating to the impugned goods being duty paid and the circumstances are discussed
as follows. The department has initially failed to substantiate the contention that the
goods were non-duty paid. The supplies had been made by the importer in
furtherance of business through proper sales tax invoices. It is a case of local
supplies. There is a documentary evidence manifesting proper trail available
regarding the said supplies and their link to imports. The evidence consists of the
Sales Tax invoices 20.02.2021, 19.03.2021 and 20.04.2021 of M/s. Amanullah duly
reflected in the Sales Tax Returns available in the FBR’s system related to Sales Tax
filing. The appellant has, thus, reasonably discharged onus of proof in terms of
section 187 of the Act. In the circumstances the opinion of confiscation of the goods
and imposition of penalty under the impugned order is unlawful and unfair.
In view of the foregoing position, we set aside the impugned Order-in-Original No.
162/2021 dated 19.03.2021 and accept the instant appeal. The goods are allowed
unconditional release to their owner(s).”
Now the said finding of release of bitumen on the basis of genuineness of documents is
under challenge before this Court. On the one side, the respondent is relying upon receipts
and sales tax invoices stated to be documents of ownership and lawful possession of
bitumen mentioned above and on the other respondent is denying the genuineness and
relevance of said documents.
Similar situation relating to genuineness of documents produced by the holder of
goods came up for determination before the Sindh High Court relating to a vehicle in case
titled as Muhammad Gul v. Member Judicial, Customs Appellate Tribunal, Karachi and
another (2013 PTD 765), wherein a vehicle registered with the Motor Vehicle Registration
Authority was seized by the Customs authorities by treating the same as smuggled vehicle
but the owner produced registration book with other documents tha t were verified by the
Motor Vehicle Registration Authority and the Customs authorities failed to ascertain
whether import documents produced by the importer were fake or irrelevant or whether
registration of such vehicle was in accordance with law or not and resultantly, it was held
that authority had failed to discharge burden of proof, which shifted on them in terms of
Section 187 of the Customs Act, 1969, on production of such documents by the owner and
by accepting the Reference, the order of confiscation was set-aside.
In the present case also documents produced by the respondent about local purchase
and corresponding Sale Tax Returns which are official documents that have also been relied
upon by the Appellate Tribunal shifted the burden upon customs authorities to show that
the same were not genuine. The said documents have not been got verified from relevant
quarters by the Customs authorities to reach conclusion whether the same are genuine or
not and whether the same related to the afore-referred bitumen or not, thus the burden that
shifted upon the Customs authorities on production of said documents by respondent in
terms of Section 187 of the Customs Act, to substantiate the said bitumen was non-duty
paid has not been properly discharged, hence, the said findings of fact about genuineness
of documents and lawful possession of bitumen are not shown to be against the record.
6.
Moreover, this Court cannot interfere in the findings of fact about genuineness of
receipts relied upon by the Appellate Tribunal as no question of law arises in the given
circumstances of the case that requires determination by this Court for the reason that in
judgment passed by this Court reported as 2007 PTD 663 (Messrs Ittehad Textile Industries
(Pvt.) Ltd. v. Collector of Sales Tax and Central Excise, Faisalabad and 2 others), it is held
as under:-
“Whether in the facts of the case, a disputed invoice is genuine or fake is a question
of fact. Before us the learned counsel has not disputed the validity or propriety of
any test applied by the applicant-department to establish the genuineness of the
invoices tendered by the respondent. Resultantly, in the present case where the
applicant department disputes the genuineness of the tendered invoices the question
raised is one of the fact and no legal issue arises for our determination.”
7.
Perusal of the afore-referred judgment passed by this Court shows that the question
of genuineness of receipts or documents produced before the Appellate Tribunal can be
determined by the said Tribunal, and unless it is apparent from the record that
documents/receipts were not genuine, this Court would not enter into inquiry to determine
the genuineness of the said documents as the same amounts to recording of findings of fact,
which is normally beyond advisory jurisdiction of this Court, especially in the
circumstances when the Appellate Tribunal is the last forum for recording findings of fact
in such like matters and its determination of factual aspect of the matter is fina l. The
applicant has not been able to show that the Appellate Tribunal had passed an order against
the record available with it, therefore, the proposed question at Sr. No.(a.) above does not
arise from the impugned judgment and is not required to be answered in the given
circumstances of the case.
8.
It is pertinent to note here that this Court in its jurisdiction under Reference is only
to confine itself to the questions of law and does not decide the controversy of fact to
interfere in the orders passed by the Appellate Tribunal. Reliance in this regard is placed
on 2019 SCMR 906 (Pakistan Match Industries (Pvt.) Ltd. v. Assistant Collector, Sales Tax
and Central Excise Mardan), 2017 SCMR 9 (Army Welfare Trust (Nizampur Cement
Project), Rawalpindi and another v. Collector of Sales Tax (Now/Commissioner Inland
Revenue, Peshawar) and 2014 SCMR 907 (Messrs F.M.Y. Industries Ltd. v. Deputy
Commissioner Income Tax and another). In the present case, in view of the findings of fact
recorded by the Appellate Tribunal after due appreciation of record that attempt to smuggle
was not made out and the fact that the applicant-department has not established that
respondent had produced bogus record, the proposed question at Sr.No (b.) is answered in
the negative.
9.
For what has been discussed above, this Reference being devoid of any merit is
decided against the applicant-department and is dismissed.
10. Office shall send a copy of this order under seal of the Court to learned Tribunal as
per Section 196(5) of the Customs Act, 1969.
MH/C-2/L
Reference dismissed.
2022 P T D 893
[Lahore High Court]
Before Shahid Jamil Khan and Asim Hafeez, JJ
COMMISSIONER INLAND REVENUE, ZONE-VII, REGIONAL TAX
OFFICE-II, LAHORE
Versus
Messrs TECHLOGIX PAKISTAN (PVT.) LTD.
P.T.R. No.200 of 2013, heard on 9th November, 2021.
(a) Income Tax Ordinance (XLIX of 2001)— —-Ss.113(3)(b), 133(1), 153(6) & first proviso—Payments for goods and
services—Maximum tax—Scope— Dispute was with regard to applicability of
proviso added to S.153(6) of Income Tax Ordinance, 2001—Appellate Tribunal
Inland Revenue set aside orders passed by two forums below—Validity—
Turnover, in terms of re-enacted S.113(3)(b) of Income Tax Ordinance, 2001,
meant gross fees for rendering of services other than those covered by final
discharge of tax liability, for which tax was separately paid or payable—Insertion
of third proviso, in the wake of re-enacted S.113 of Income Tax Ordinance, 2001,
was unnecessary—With insertion of sub-clause (iii) to second proviso, tax
deducted on transactions covered under S.153(1)(b) of Income Tax Ordinance,
2001, was out of the ambit of Final Tax Regime (FTR) and was classified as
income under Normal Tax Regime (NTR)— Exclusion from ambit of FTR
otherwise brought income under NTR, which was liable to minimum tax,
provided conditions in S.113 of Income Tax Ordinance, 2001 were met—No
express or implied repeal of first proviso to S.153 of Income Tax Ordinance, 2001,
which exclusively dealt with the companies and third proviso to sub-clause (iii)
to second proviso covered person(s), except the companies—Reference was
disposed of accordingly.
(b) Interpretation of statutes— —-Harmonious/conjoint reading—Effect—Such reading is imperative, to avoid
redundancy or superfluousness.
(c) Interpretation of statutes— —-Circulars / instructions—Status—Circulars / instructions issued cannot be
construed or extended status superior to text of the law.
Imran Rasool for Applicant.
Respondent by:
Sarfaraz Ahmad Cheema, Liaquat Ali Chaudhry, M. Shahid Usman, M.
Naeem Munawar, Raja Sikandar Khan, Saba Saeed and Salman Zaheer Khan for
applicant(s) department in connected reference applications.
Momin Sultan, Assistant Attorney-General.
Shahbaz Butt, Khurram Shahbaz Butt, Muhammad Ahsan, M. Usman Zia
and Asad Abbas Raza for taxpayer.
Zohaib Ali Sindhu, Javed Akhtar, Asad Hussain, Azeem Ullah Virk, Ch.
Qamar Zaman, Zahid Atiq, Malik Nadir Ali Sherazi, Muhammad Nouman Shams
Qazi and Ch. Zeshan Afzaal Hashmi for taxpayers in the connected applications.
Date of hearing: 9th November, 2021.
Judgment
ASIM HAFEEZ, J.—-Instant reference application assails order dated
06.03.2013 of learned Appellate Tribunal Inland Revenue, Lahore (‘Appellate
Tribunal’), whereby taxpayer’s appeal was allowed, and concurrent orders of the
authorities were annulled.
Connected reference applications and variously filed Constitutional
Petitions raise and involve identical legal issues and are heard along, details
whereof are ITR No.1295/20, ITR No.1296/20, PTR No.201/13, ITR No.29/2016,
ITR No.28/2016, PTR Nos.87 and 88 of 2014, ITR No.91/2015, ITR No.306/2015,
ITR No.305/2015 and ITR No.92/2015, W.P. No.6343/2013, W.P. No.17834 /
2012 W.P.No.17835/2012, W.P.No.27650/2012 and W.Ps. Nos.34375 and 34315
of 2017.
2. Fundamentally, the controversy raised calls for determination of the scope
and effect of the proviso, added while inserting sub-clause (iii) to the second
proviso to subsection (6) of section 153 of the Income Tax Ordinance, 2001 – sub-
clause (iii) and proviso were inserted through Finance Act, 2009. Department’s
interpretation is that subsequently added proviso – often called as ‘third proviso’
during the hearing – had substituted first proviso to subsection (6) of section 153.
And taxpayer’s assertion is that third proviso had separate existence, without
offending the scope and applicability of first proviso.
3. Third proviso declares that tax deducted under sub-clause (b) of subsection
(1) of section 153 of the Ordinance, 2001 [Section 153 (1)(b)] – relating to
rendering of or providing of services – shall be minimum tax.
4.
Upon examining variously proposed questions of law, raised in the context
of circumstances specific to each case, we consider it appropriate to articulate the
controversy and frame elementary questions, encapsulating legal issues,
commonly involved in these reference applications and constitutional petitions.
Re-settled questions of law are reproduced as,
(i)
Whether the third proviso to subsection (6) of section 153 of the Income
Tax Ordinance, 2001 – inserted through Finance Act, 2009 – would be
construed to except out or limit the effect of first proviso to subsection (6)
of section 153 of the Income Tax Ordinance, 2001?
(ii) Whether the first proviso to subsection (6) of section 153 of the Income
Tax Ordinance, 2001 and the third proviso to subsection (6) of section 153
of the Income Tax Ordinance, 2001 – inserted through Finance Act, 2009 –
are mutually exclusive or inconsistent to the extent of repugnancy, and if
so, whether proviso latter in time shall prevail, attracting the principle of
implied repeal?
(iii)
Whether the Circulars, variously, issued by the FBR, expressing
conflicting explanations / opinions would influence the textual
interpretation of first and third proviso(s) to subsection (6) of section 153
of the Income Tax Ordinance, 2001?
5.
Learned counsel representing the department, in variously filed reference
applications, submit that third proviso, added through Finance Act, 2009, had, in
fact and law, effaced classification between the corporate and non-corporate
sector(s), for the purposes of transactions coming within the ambit of Section
153(1)(b) of the Ordinance. And upon insertion of third proviso, the tax deducted
on the transactions relating to the rendering of or providing of services, in terms
of Section 153(1)(b) of the Ordinance, shall form part of determination of volume
of turnover, liable to minimum tax. Adds that a distinct class of taxpayer, created
through first proviso to subsection (6) of section 153 of the Ordinance, 2001 (‘first
proviso’) – comprising of the companies – stood invalidated / repealed. Submits
that clarification of the third proviso by the Federal Board of Revenue (FBR)
through Circular No.6 of 2009 was retracted, and FBR lately clarified the position
through subsequent instrument, i.e., Instruction No.1(25) WHT/2009 dated
26.04.2011, whereof tax deducted in lieu of rendering or providing of services
shall form part of computation of minimum tax, both for the corporate and non-
corporate sectors. Hence, no benefit of Circular No.6 dated 18.08.2009 could be
claimed by the taxpayer(s).
6.
Conversely, learned counsel for the respondent(s) / taxpayers defended the
exclusivity of the first proviso, despite insertion of third proviso. Adds that
exclusion of the corporate sector, envisaged by the first proviso, would remain
valid and effective and deduction of tax by the companies shall not be construed
as final tax, in the context of transactions under reference, otherwise treated as
final tax in terms of subsection (6) of section 153 of the Ordinance, 2001. Further
submits that implied repeal of first proviso was neither intended by the legislature
nor same could be inferred, upon inserting third proviso, which construction, if
implemented, would render first proviso superfluous / redundant. Argued that
first and third proviso(s) cater for different classes of taxpayers, which distinction
should be maintained while employing time tested interpretative principle of
harmonious construction of conflicting provisions of law – first and third provisos
in the case at hand.
7. Submissions heard.
8.
At the outset, it is clarified that amendments brought through the Finance
Act, 2011 to Section 153 of the Ordinance, are not relevant for the purposes of
adjudicating upon the present controversy – covering the Tax years 2010 and 2011.
Pivotal issue is whether third proviso has invalidated the existence, effect, and
applicability of the first proviso. Before proceeding to decide the questions raised,
it is expedient to reproduce relevant clauses of Section 153 of the Ordinance, as
appearing in the statute book at the relevant Tax years.
“153. Payments for goods and services. – (1) Every prescribed person
making a payment in full or part including a payment by way of advance
to a resident person or permanent establishment in Pakistan of a non-
resident person-
(a) for the sale of goods;
(b) for the rendering of or providing of services;
(c) on the execution of a contract, other than a contract for the sale of
goods or the rendering of or providing of services, shall, at the time of
making the payment, deduct tax from the gross amount payable at the rate
specified in Division III of Part III of the First Schedule.
(1A) Every exporter or an export house making a payment in full or part
including a payment by way of advance to a resident person or permanent
establishment in Pakistan of a non-resident person for the rendering of or
providing of services of stitching, dying, printing, embroidery, washing,
sizing and weaving, shall at the time of making the payment, deduct tax
from the gross amount payable at the rate specified in Division IV of Part
III of the First Schedule.
(2)
[ ]
(4)
(5)
(a)
(i)
(ii)
(iii)
(b)
(ba)
(bb)
(c)
(d)
[ ]
“153(6) The tax deducted under this section shall be a final tax on the
income of a resident person arising from transactions referred subsection
(1) or (1A):
Provided that subsection (6) shall not apply to companies in respect of
transactions referred to in clause (b) of subsection (1);
Provided further that this subsection shall not apply to payments received
on account of-
(i)
advertisement services, by owners of newspapers and magazine;
(ii) sale of goods and execution of contracts by a public company listed on a
registered stock exchange in Pakistan and;
(iii)
the rendering of or providing of services referred to in sub-clause (b) of
subsection (1)
Provided that tax deducted under sub-clause (b) of subsection (1) of
section 153 shall be minimum tax”.
[Emphasis supplied]
9.
Legislative intent is explicit. In terms of subsection (6) of section 153 of
the Ordinance, 2001, tax deducted on the income of the resident person, regarding
the transactions, referred under subsection (1) or (1A) of Section 153 of the
Ordinance, 2001, shall be the final tax. First proviso to subsection (6) of section
153 of the Ordinance, 2001 – added through Finance Act, 2006 – provided that
subsection (6) would not apply to the companies in respect of transactions,
referred to in clause (b) of subsection (1) of section 153 of the Ordinance, 2001.
Second proviso has its own relevance, which was added through the
Finance Act, 2007, whereby payments received on account of transactions
identified in sub-clauses (i) and (ii) were excluded from the applicability of
subsection (6) of Section 153.
10. There is no dispute that before insertion of sub-clause (iii) and third
proviso – both added through the Finance Act, 2009 tax deducted on the
transactions by the persons, except the companies, relating to rendering of or
providing of services, referred in sub-clause (b) of subsection (1), was treated as
final tax. The third proviso declared that tax deducted under sub-clause (b) of
subsection (1) of section 153 shall be minimum tax.
11. Now we come to the elementary issues, whether the first proviso per se
stood repealed or rendered ineffective upon insertion of third proviso and whether
tax deducted with respect to the transactions under sub-clause (b) of subsection
(1) of Section 153 shall be considered as part of the turnover, liable to minimum
tax – both corporate and non-corporate sectors. The controversy at hand cannot
be resolved without examining the cause and effect of re-enacted Section 113 of
the Ordinance, 2001 – inserted through the Finance Act, 2009, particularly the
definition of expression ‘turnover’ in terms of subsection (3) of section 113, ibid.
It is expedient to reproduce relevant portions of Section 113 of the Ordinance
hereunder,
Section 113 (1)…………
“113 (3) turnover means,
(a) the gross receipts, exclusive of Sales Tax and Federal Excise duty or any
trade discounts shown on invoices, or bills, derived from the sale of goods,
and also excluding any amount taken as deemed income and is assessed as
final discharge of the tax liability for which tax is already paid or payable;
(b) the gross fees for the rendering of services for giving benefits including
commissions; except covered by final discharge of tax liability for which
tax is separately paid or payable;
(c) the gross receipts from the execution of contracts; except covered by final
discharge of tax liability for which tax is separately paid or payable; and
(d) the company’s share of the amounts stated above of any association of
persons of which the company is a member.”
[Emphasis Supplied]
12. It is the case of the department that taxpayer, a private limited company,
renders computer programming services, which services were covered under
clause (b) of subsection (1) of Section 153, hence, tax deducted on the
transactions shall be the minimum tax, while banking upon so-called third proviso.
13. Before dilating upon the questions, it is essential to ascertain the mischief
sought to be addressed by insertion of sub-clause (iii) to second proviso and the
third proviso. The re-enactment of section 113 of the Ordinance has its own
relevance, in the context of the controversy. Applicability of subsection (6) of
Section 153 of the Ordinance was denied to the companies in terms of first
proviso, suggesting that tax deducted by the companies relating to the
transactions under sub-clause (b) of subsection (1) of section 153 of the
Ordinance shall not be treated as final tax – clearly indicating that such deduction
was treated as part of the normal tax regime, instead of Final tax regime (FTR).
It is pertinent to mention that minimum tax is not a tax per se, in its own class,
but prescribe minimum amount of tax payable, subject to the conditions, by the
prescribed person, when normal income could not be taxed otherwise. Section
113 of the Ordinance provided mechanism for computation of minimum tax,
determinable in terms of the volume of turnover, limits whereof are prescribed.
Interestingly, the turnover, in terms of clause (b) of subsection (3) of re-enacted
section 113 of the Ordinance, means gross fees for rendering of services other
than those covered by final discharge of tax liability, for which tax is separately
paid or payable.
14. Now we attend the controversy, i.e., incidence of insertion of sub-clause
(iii) to the second proviso and the third proviso. To contextualize controversy, it
is iterated that before insertion of sub-clause (iii) to the second proviso, deduction
of tax relating to transactions under sub-clause (b) of subsection (1) of section
153 of the Ordinance, 2001 by the persons, other than companies, was treated as
final tax. And without sub-clause (iii) to second proviso tax deducted by non-
corporate sector, relating to the providing of services, could not be classified as
income under Normal Tax Regime (NTR). This is the precise mischief intended
to be addressed by inserting sub-clause (iii) and proviso thereto, and purpose
whereof was to change the regime/classification of tax, from final to normal.
15. Therefore, the submission that third proviso had the effect of repealing
first proviso, effecting that tax deducted by the companies, relating to the
transactions covered under sub-clause (b) of subsection (1) of section 153 of the
Ordinance, comes under the minimum tax regime is misconceived and result of
overlooking the effect of re-enacted section 113 of the Ordinance, 2001 –
Arguments raised may assume some relevance in the context of the then Section
113, before being omitted by Finance Act, 2008.
16. It appears that insertion of third proviso, in the wake of re-enacted section
113 of the Ordinance, 2001 is unnecessary. With insertion of sub-clause (iii) to
second proviso, the tax deducted on transactions covered under sub-clause (b) of
subsection (1) of section 153 of the Ordinance, 2001 goes out of the ambit of FTR,
hence, classified as income under NTR. Therefore, exclusion from the ambit of
FTR would otherwise bring income under NTR, which would be liable to
minimum tax, provided the conditions in section 113 of the Ordinance, 2001 are
met. In view of the above, no case of express or implied repeal of first proviso
was made out, which exclusively deals with the companies and third proviso to
sub-clause (iii) to second proviso covers person(s), except the companies. It is a
misconception to relate to or construe the third proviso as repealing first proviso,
both are mutually exclusive and co-exist harmoniously – dealing with two
different and distinct classes of persons. Therefore, harmonious / conjoint reading
of first and third provisos is imperative, to avoid redundancy or superfluousness,
when both provisos could survive independently – in the context of relevant Tax
years.
17. Another submission by counsels representing department that no benefit
regarding construction of third proviso was available in the wake of subsequent
instructions by FBR – in supersession of instructions contained in Circular No.6 – is meaningless as far as interpretation of the law – involving rights claimed by
the taxpayers – is concerned. Circulars / Instructions issued cannot be construed
or extended status superior to the text of the law. The scope of the circulars /
instructions need not be discussed any further.
18. In view of aforesaid, questions are answered as follows.
(i)
Question is answered in the negative.
(ii) Question is answered in the affirmative, declaring that, at relevant time,
first and third proviso(s) to subsection (6) of section 153 of the Ordinance
are mutually exclusive and co-exist in harmony – catering to a separate
class of taxpayers and there is no incidence of repugnancy between first
and third proviso(s) of subsection (6) of section 153 of the Ordinance.
(iii) Question is answered in the negative.
19. Reference applications are disposed of in terms of the answers expressed
to the re-settled questions.
20. Office shall send a copy of this order, under seal of the Court, to learned
Appellate Tribunal, in terms of subsection (5) of section 133 of the Ordinance,
2001.
MH/C-13/L
accordingly.