Summary: Sales Tax Act (VII of 1990)--- ----S. 25(2)---Access to record, documents etc.---Audit, conducting of---Condition of "once a year"---"Year"---Scope---Department filed reference against the order of Appellate Tribunal Inland Revenue which had declared that audit, covering period from July 2016 to December 2017 - spreading over eighteen months, was beyond the jurisdiction of the Officer of Inland Revenue and contrary to the mandate of subsection (2) of S. 25 of the Sales Tax Act, 1990---Validity---In terms of subsection (2) of S. 25 of the Sales Tax Act, 1990 ('the Act 1990'), audit may be conducted but once in a year---However, no identification / explanation was given in the order of the Appellate Tribunal that how the expression 'year' was construed or interpreted ; whether the expression 'year' was construed to mean a 'Calendar Year' or a 'Financial Year'---If it was construed as 'Calendar Year' then period of audit from 07/2016 to 12/2016 was within last six months of 'Calendar Year, i.e., 2016 ; and the period of audit from 01/2017 to 12/2017 could be treated as full one 'Calendar Year', i.e., 2017---And if expression 'year' was construed as 'Financial Year' then period from 07/2016 to 06/2017 could be treated as one 'Financial Year' and period of audit from 07/2017 to 12/2017 be treated as first six months of contempreneous 'Financial Year'---Factual determination, in said context, was missing and this conundrum could be addressed by ascertaining actual intent of the department, inferrable from the record, or upon examining past practice, conventionally adopted, relevant to the context---Even otherwise, Appellate Tribunal patently erred in exercise of jurisdiction in rejecting the audit in entirety, instead of determining the period of validity, in the context of time-limitations prescribed under subsection (2) of S. 25 of the Act, 1990---Even otherwise, under sales tax regime tax period means a period of one month, or such period as notified accordingly---Expression 'year' was not defined in the Act 1990---Evidently, matter required re-determination and it was deemed appropriate to remand the matter to the Appellate Tribunal, which shall decide the appeal of the registered person / respondent afresh, in the light of answer to the question recorded---Sales Tax Reference, filed by the Department , was disposed of accordingly. Faisalabad Electric Supply Company Ltd. (FESCO) v. Federation of Pakistan through Secretary, Finance, Islamabad and others 2019 PTD 1780 distinguished. Muhammad Suleman Bhatti for Applicant/department. Inayat-ur-Rehman and Sahid Hussain Mitroo for Respondent.

Summary: Background: The applicant, the Commissioner of Inland Revenue, sought to determine the legality of a multi-year audit conducted by Inland Revenue officers, which was annulled by the Appellate Tribunal Inland Revenue. The Tribunal had ruled that the audit, spanning July 2016 to December 2017, violated the one-year audit restriction outlined in Section 25(2) of the Sales Tax Act, 1990. This section states that the Inland Revenue officer may conduct an audit only once per year. -----Issues: 1- Does Section 25(2) of the Sales Tax Act, 1990 permit Inland Revenue to conduct an audit covering more than one year? -----2- How should the term “year” under Section 25(2) be interpreted: as a calendar year, financial year, or a period of 12 months? -----Holding / Reasoning / Outcome The court held that Section 25(2) allows an audit once within a 12-month period, whether that is interpreted as a financial year or calendar year. The court found that the Appellate Tribunal erred by annulling the entire audit rather than interpreting the appropriate period for the audit. Furthermore, the court emphasized that factual determination on the interpretation of “year” (calendar or financial) should be guided by the department’s intent, conventionally adopted practices, or evidence from the record. The court remanded the matter back to the Appellate Tribunal for re-determination, instructing it to decide in light of the court’s interpretation of Section 25(2) regarding the period limitation on audits. -----Citations / Precedents Faisalabad Electric Supply Company Ltd. (FESCO) vs. Federation of Pakistan through Secretary, Finance, Islamabad and others (2019 PTD 1780)

Summary: Sales Tax Act (VII of 1990)--- ----Ss. 2(47) & 2(28)---Sales Tax Rules, 2006, Chapt-1, R.4---Income Tax Ordinance (XLIX of 2001), Ss. 236G & 236H [inserted through Finance Act, 2013] & Sched. I, Pt. IV, Div. XIV---"Whole-seller" and "retailer"---Scope---Treating a person as "retailer" merely on account of non-registration as "wholesaler"---Sugar Mill (being a manufacturer) was served (in year 2015) with Show-Cause Notice relating tax-year to 2014 ('the notice') on the basis of the then newly inserted Ss. 236G & 236H, with the allegations that it failed to collect tax on sales made to its wholesalers / retailers ('recipients') at the rate of 0.5% of the gross amount of sales---Notice culminated into order-in-original, concluding that sales made to unregistered persons are to be treated as supply to retailer , which findings were maintained by the Appellate Tribunal Inland Revenue---Applicant / Sugar Mill assailed findings/orders passed by two fora contending that a person could only be treated as wholesaler if he had been authorized to act as an agent for sale and that unregistered persons/buyers must be treated as retailers and cannot be treated as wholesalers---Validity---Various recipients (the 'recipients') of supplies of the applicant were treated as "retailer" on account of failure to register as "wholesaler"---The requirement to register as "wholesaler" or "retailer" depending upon their particular activity was separately given in Chapt. I of the Sales Tax Rules, 2006 ('Rules')---Two forums below, relying on the provisions of Ss. 2(47) & 2(28) of the Sales Tax Act, 1990, as well as R. 4 of the Sales Tax Rules, 2006, reached the conclusion that the recipients were to be considered as "retailers" and applicant was required to collect 0.5% tax under S. 236H of the Ordinance, 2001---Word "wholesale" has specific commercial meaning of buying goods and selling them in large quantities to traders who then sell the goods in smaller quantities---Even otherwise, a plain reading of provisions under Ss. 2(47) & 2(28 ) of the Sales Tax Act, 1990, as well as R. 4 of the Sales Tax Rules, 2006, reflects that legislature envisaged "wholesalers" and "retailers" as two distinct persons depending on their characteristics of business and quantity of the commodities they deal with as well as the category of the recipients of such supplies---"Retailer" as per the then S.2(28) of the Act, 1990, is a person supplying goods to general public for consumption purposes or end-consumers; the proviso to the same further clarified the position even if someone combines the business of retail with some other nature of business---The consequences, if any person fails to register himself as "wholesaler" or "retailer", as the case may be, were given in the Ordinance, 2001 at the relevant time, which were also ignored by the assessing officer---Supplies to a person having "wholesaler" status when it failed to register had result of collection at higher rate of 0.2% as provided in Division XIV, Pt. IV of Sched. I of the Ordinance, 2001---Treating a person as "retailer" merely on account of non-registration as "wholesaler", without first assuming an exercise of ascertaining his actual status is unsafe---Thus, the proposed questions were answered in affirmative and in favour of the applicant and against the Department---High Court set-aside the impugned orders passed by the Appellate Tribunal Inland Revenue, and the case was remanded to the assessing officer to ascertain the actual position or status of the recipients---Reference Application, filed by Sugar Mill (Manufacturer), was disposed of accordingly. Olympia Industries (Pvt.) Ltd., Lahore v. Assistant Collector, Central Excise and Sales Tax, Sheikhupura Division, Lahore and 2 others 2002 PTD 776 ref. Salman Zaheer Khan for Applicant. Barrister Muhammad Saram Israr for Respondents Nos.2 to 4.

Summary: Sindh Sales Tax on Services Act (XII of 2011)--- ----Ss. 2(74), 2(79) & 3---Sales Tax Act (VII of 1990), S. 3---Constitution of Pakistan, Art.70(4) & Fourth Schedule, Federal Legislative List, Pt. I, Entry 49, [as amended through the 18th Amendment to the Constitution]---Letter dated 04.03.2009 issued by the Federal Board of Revenue---Sales tax on services---Food and beverage business (hotels / restaurants) , services rendered by---Federal subject or Provincial one---“Restaurant”, definition of---Scope---Plaintiff (the proprietor of a hotel chain of food and beverage business) sought determination as to whether the levy of sales tax on the business of hotels and restaurants is a subject that falls within the Federal or Provincial domain, and whether the supplies made during the course of such business are taxable under the Sales Tax Act, 1990 (‘Federal Statute’)or the Sindh Sales Tax on Services Act, 2011 (‘Provincial Statute’)---Held: By virtue of Entry 49 of the Federal Legislative List, Part I in the Fourth Schedule to the Constitution of Pakistan, as amended through the 18th Amendment by the addition of the words "except sales tax on service", the subject of levy of a sales tax on any service falls squarely within the Provincial domain and the Provincial Statute having been promulgated accordingly---Section 2(79) of the Provincial Statute defines the term “service” while the term “restaurant” is defined under S. 2(74) of the Provincial Statute and the services provided or rendered by restaurants have been classified under Tariff Heading 9801.2000 in the First Schedule of the Provincial Statute---Thus, from said definitions and classification (under Tariff Heading) it is manifest that the Provincial Statute treats the business of restaurants to be a service---Even otherwise, through the cumulative effect of number of letters by Federal Board of Revenue (i.e. letter dated 04.03.2009 issued by the Second Secretary (FE), Inland Revenue Wing, letter C. No. 1(3)FED/2007, dated 25.07.2009, letter bearing No. SRB-STM-3-4/48 addressed by the Member (L&C) to the Member (Inland Revenue) is that the services provided by the hotels and restaurants do not come in the definition of goods produced or manufactured---Even, the Sindh Revenue Board (SRB) also issued a clarification on 22.02.2012 in respect of restaurants that the same are "taxable services" liable under in terms of S. 3 of Sindh Sales Tax on Services Act, 2011---Thus, it is apparent that the supply of food and beverages by the Plaintiff through its restaurants constitutes a service in terms of the Provincial Statue, chargeable with sales tax thereunder, and falls beyond the pale of the Federal Statute and purview of the FBR, with the main issue framed for determination being answered in such terms---Suit, filed by the proprietor of hotel chain of the food and beverage business, was decreed accordingly. Pakistan International Freight of Forwarders Association through General Secretary v. Province of Sindh through Secretary and another 2017 PTD 1; Faaborg-Gelting Linien A/S v. Finanzamt Flensburg (Case C-231/94) [1996] ECR 1-2395, 2411-2412; Indian Hotels Company Ltd. and others v. The Income Tax Officer, Mumbai and others AIR 2000 SC 2645; The State of Punjab v. Associated Hotels of India Ltd. MANU/SC/0570/1972 and Commissioner of Income Tax v. S.P. Jaiswal Estates (P.) Ltd. MANU/WB/0147/1992 ref. Umair Ahmed Qazi for Plaintiff. Waqar Memon for Defendants Nos.2, 3 and 5. Javed Ali Sangi for Defendant No.4. Dates of hearing: 9th, 22nd February, 15th April and 7th October, 2024.

Summary: (Appeal against the judgment dated 27.04.2016 passed by the Lahore High Court, Multan Bench, Multan in Writ Petition No. 8153 of 2002). Industrial Relations Ordinance (XXIII of 1969) [since repealed]--- ----Ss. 25-A & 65-B---Grievance petition, filing of---Limitation---Grievance petition filed after a lapse of 22 years---Under Section 25A of the Industrial Relations Ordinance, 1969 ("IRO 1969"), there is a specific timeframe for lodging the grievance in writing which cannot be stretched over an unlimited period of time---Law does not envisage that after expiry of the limitation period, if the employer gives a response to any time-barred grievance notice, it will amount to an extension in the period of limitation provided to invoke the jurisdiction of the Court for redress of individual grievances---No cause of action subsists merely for the reason that one letter was replied after the lapse of the limitation period by the employer's management, which could not extend the starting point of limitation provided under the law for a workman to lodge his grievance before instituting the grievance petition in the Labour Court---No proper justification had been shown in the Order of the Labour Court and/or the impugned judgment of the High Court as to how, against the dismissal order on 25.05.1976, a grievance notice dated 26.04.1997 was found to be within time---Even for condonation of delay, nothing was mentioned by the respondent/workman before the Labour Court or the High Court---Act of sending a grievance notice and filing a grievance petition in the Labour Court or Commission has not been left open-ended but it is linked with the time constraint for initiating legal action for the redress of an individual grievance---Under the mandate of law an employee is supposed to deliver the grievance notice to his employer within the specified time, then wait only for the statutory period provided to the employer for the response, and after the lapse of this period, whether the notice was responded to or not by the employer, approach the Court immediately rather than spoiling or obliterating the period of limitation---It is a fundamental duty of the Court to examine the question of limitation vis-a-vis the statutory provisions envisioned under special or general law, requiring compliance of an act within a specific timeline---In the present case both the Labour Court and the High Court failed to advert to the crucial question of limitation provided for transmitting the grievance notice as provided in the repealed IRO 1969, and without appreciating the law and evidence led in the case, rendered the impugned judgments, which were not sustainable and were liable to be set aside, while the judgment of the Punjab Appellate Tribunal was based on the correct exposition of law---Petition was converted into an appeal and allowed; as a consequence thereof, the judgment of the High Court and the Labour Court were set-aside and the judgment passed by the Punjab Labour Appellate Tribunal was restored. Farooq Zaman Qureshi, Advocate Supreme Court for Petitioners. M.Yafis Naveed Hashmi, Advocate Supreme Court for LRs of Respondent No. 3. Date of hearing: 24th September, 2024. (a) by the workman if the order or decision in his favour is not implemented within the period specified therein, or (b) by the Labour Court or Tribunal, if an order or decision thereof is not complied with.

Summary: (a) Sindh Sales Tax on Services Act (XII of 2011)--- ----Ss. 57 & 59(7)---Original order, assailing of---Appeal before Commissioner (Appeals), filing of---Statutory period to pass first Appellate Order, non-observance of---Effect---Such pending Appeal to be transferred to the Appellate Tribunal Sindh Revenue Board---Scope---Record revealed that appellant filed appeal before Commissioner (Appeals) within time which was disposed of after 1,918 (one thousand, nine hundred and eighteen) days of expiry of statutory period i.e. 120 days---Commissioner (Appeals) failed to provide any substantial justification for passing "the first Appellate Order" after the statutory deadline---In the absence of evidence or valid reasoning for such delay, it could not be attributed to the appellant---Section 59 (7) of the Sindh Sales Tax on Services Act, 2011 (‘the Act, 2011 ‘ ) mandates that the Commissioner (Appeals) must transfer any undecided appeal to the Appellate Tribunal Sindh Revenue Board (‘Tribunal’) if it is not resolved within the statutory period---There is no documentation explaining why the Commissioner (Appeals) continued the proceedings beyond said period---Department mentioned that there was a significant backlog of appeals before the Commissioner (Appeals) and it was practically impossible to resolve them within the statutory timeframe, however, such arguments lacked legal validity, as the law already provides a remedy for such situation by requiring the transfer of undecided appeals to the Tribunal---The word "as" used in S. 59(7) of the Act 2011 creates a deeming effect, indicating that if an undecided appeal is transferred the Appellate Tribunal, it is considered as if it was filed against the order of the Commissioner (Appeals)---After the expiration of the statutory period, the office of the Commissioner (Appeals) effectively becomes coram non judice, meaning it had no authority to continue legal proceedings; which implies that any actions taken beyond the said period lack legal standing, reinforcing necessity for adherence to established timelines in the appellate process---Therefore, in accordance with the fundamental principle of providing legal protection to the appellant, it is deemed appropriate to declare all proceedings initiated by the Commissioner (Appeals) beyond the expiry of the statutory period as "null" and "void", including "the first Appellate Order"---Consequently, instant appeal will be treated as if it has been transferred to this Tribunal under S. 59 (7) of the Act 2011; relevant issue was answered accordingly---Since regarding matter-in-hand (Workers Welfare Fund/WWF) the decision of the Council of Common Interest that WWF would remain with FBR was in field, the assessing officer was not justified in levying WWF upon Appellant ; hence; relevant point was answered in negative i.e. in favour of Appellant and against the Department---Appellate Tribunal Sindh Revenue Board set-aside the impugned Original Order---Appeal was allowed. (b) Sindh Sales Tax on Services Act (XII of 2011)--- ----S. 59(7)---Original order, assailing of---Appeal before Commissioner (Appeals), filing of---Passing of first Appellate Order beyond statutory period---Effect---Original order---Legality---Appellant prayed for setting-aside "the first Appellate Order" as the same was void---Validity---In case "the first Appellate Order" be declared void then "the Original Order", passed against the appellant, would come in filed and the appellant would gain nothing---Although law provides the Appellate Tribunal Sindh Revenue Board (Tribunal) as a recourse when the Commissioner (Appeals) fails to decide an appeal within the prescribed statutory period, but it does not explicitly address the validity of orders passed by the Commissioner (Appeals) after said period has lapsed---It is a widely recognized fact that it is impractical to create legal provisions for every potential scenario or unforeseen circumstance---Therefore, the courts, as protectors of the fundamental rights of all citizens, must seek to implement or adopt more effective solutions in situations; said approach ensures that they do not overlook the illegalities or irregularities committed by subordinate forums---Since regarding matter-in-hand (Workers Welfare Fund/WWF) the decision of the Council of Common Interest that WWF would remain with FBR was in field, the assessing officer was not justified in levying WWF upon Appellant ; hence; relevant point was answered in negative i.e. in favour of Appellant and against the Department---Appellate Tribunal Sindh Revenue Board set-aside the Original Order---Appeal was allowed. (c) Sindh Workers Welfare Fund Act, 2014 ( XXXIII of 2015 )--- ----S.5(1)---Circular dated 25.05.2021 issued by the Federal Board of Revenue---Prospective effect Workers Welfare Fund (WWF), collection of---Adjustment of WWF against tax liability---Contention of the Appellant was that the WWF liability was adjusted against relevant income tax refund regarding financial year 2017---Plea of the Department, citing a Circular dated 25.05.2021 issued by the Federal Board of Revenue (FBR), was that the adjustment of WWF against tax liabilities was restricted and the Appellant was unable to benefit from said Circular (dated 25.05.2021)---Validity---There is no dispute regarding the legal principle that in financial matters, all introduced rules, notifications, and circulars are applied prospectively---Effect of the Circular dated 25.05.2021 is also prospective---Appellate Tribunal Sindh Revenue Board set-aside the Original Order---Appeal was allowed. OBS Pakistan (Pvt.) Ltd. through Manager Legal v. Federation of Pakistan through Secretary Revenue Ex-Officio Chairman Federal Board of Revenue and 2 others 2022 PTD 290 ref. (d) Sindh Workers Welfare Fund Act, 2014 ( XXXIII of 2015 )--- ----S.5(1)---Workers Welfare Fund Ordinance (XXXVI of 1971), S.4(1)---Constitution of Pakistan, Arts. 153 & 154(7)---Sindh Sales Tax on Services Act (XII of 2011), Preamble---Workers Welfare Fund (WWF), collection of---Whether Federal or Provincial Department?---Contention of the Appellant was that the WWF liability was adjusted against relevant income tax refund regarding financial year 2017---Validity---Notably, the WWF was previously a federal subject which was being collected under the Workers Welfare Fund Ordinance, 1971 (‘the Ordinance, 1971’)---However, following the 18th Amendment, WWF became a provincial subject, leading to the enactment of the Sindh Workers Welfare Fund Act, 2014 by the province of Sindh; said Act has since become functional---Due to the fact that most Provinces had not established a viable mechanism for addressing the collection and distribution of WWF, they continued to manage their affairs concerning WWF in accordance with the Ordinance 1971 within their respective jurisdictions ; which reasons / scenario prompted the referral of the matter to the Council of Common Interests (‘the CCI’)---During the 41st Meeting of the CCI, the issue was discussed, leading to the development of a mutually agreed mechanism ; and the consensus reached was that WWF would continue to be managed by the Federal Government and remain governed by the Ordinance, 1971---Pertinently, the respondent side (Department) had not challenged the decision of the CCI before the Parliament, mandated under Art. 154(7) of the Constitution---Since the decision of the CCI that "WWF shall remain with FBR" was in field, the assessing officer was not justified in levying WWE amounting Rs.4,234,000/-; hence; relevant point was answered in negative---Appellate Tribunal Sindh Revenue Board set-aside the Original Order---Appeal was allowed. (e) Constitution of Pakistan--- ----Arts. 153 & 154 (7) & Fourth Sched., Federal Legislative List , Part II---Council of Common Interests---Functions and authority---Council of Common Interests (CCI) was established under Art.153 of the Constitutions to resolve disputes between the Federation and the Provinces or among the Provinces themselves, thereby promoting inter-provincial harmony---The CCI is composed of the Prime Minister as the Chairman, the Chief Ministers of all Provinces, and three members from the Federal Government who are nominated by the Prime Minister as needed---The CCI occupies a crucial role within the constitutional framework, with responsibilities that extend beyond mere discussions; it is tasked with formulating and regulating policies concerning matters specified in Part II of the Federal Legislative List ("the FLL") of the Constitution and exercising supervision and control over related institutions---The constitutional provisions governing the CCI's functions are mandatory, meaning that no other individual, body, or authority can assume these responsibilities---Furthermore, the CCI does not hold unrestricted power, as it is accountable to the Parliament---In case of disagreement with the CCI's decisions, either the Federal Provincial Government may refer the issue to the Parliament, which can issue binding directions to the CCI---Therefore, the CCI serves as an essential constitutional institution that effectively addresses differences, problems, and irritants between the provinces and the Federation, as well as among the Provinces themselves---Ignoring the decisions made by the CCI effectively renders it dysfunctional, leading to a clear violation of the constitutional mandates and commands---Bypassing such an important constitutional body would mean making the provisions of the Constitution ineffective and redundant, which cannot be permitted. Privatization Commission through Secretary and others v. Aftab Hussain and others PLD 201 SC 267 ref. Syed Hamza Ahmed Hashmi for Appellant. Manzoor Ahmed, AC (Unit-37). Javed Akhtar, Departmental Representative. Dates of hearing: 30th July and 13th August, 2024.

Summary: Summary pending

Summary: Sales Tax Act (VII of 1990)--- ----Ss. 13 &2 (46)(i), Explanation [added vide Finance Act, 2022]---Electricity Distribution Companies (DISCOs)---Subsidy---Chargeability to tax---Retrospective effect---Scope---Department filed Reference Application against order passed by Appellate Tribunal Inland Revenue (Tribunal) in favour of DISCOs---Validity---Explanation added in sub-clause (i) of Clause (46) of S. 2 of the Sales Tax Act, 1990 (Explanation-in-question) contemplated an unequivocal clarification that the subsidy was not chargeable to the tax under Sales Tax Act, 1990, (the Act, 1990) in case of DISCOs---Explanation-in-question stated that "It is clarified that the value of supply does not include the amount of subsidy provided by the federal government or provincial governments to the electricity consumers and has never been chargeable to tax under the Act"---Pertinently, the explanation-in-question was inserted through the Finance Act, 2022, after the passing of order(s) by the Tribunal, and the matter was decided against Department by the Tribunal while observing that there was no clarification in the law regarding the identity of the obligator---Notwithstanding subsequent introduction of the explanation-in-question, scope and applicability of the explanation was clear---Thus, the proposed questions were decided in favour of the respondents and against the applicant-department---Reference applications were dismissed. Commissioner Inland Revenue v. M/s GEPCO Limited (S.T.R No.77467/2022) and Commissioner Inland Revenue v. M/s Faisalabad Electricity Supply Co. Ltd. (S.T.R No.113/2014) ref. Commissioner Inland Revenue, LTO, Lahore v. Messrs Gujranwala Electric Power Co. (GEPCO) 2024 PTD 440 distinguished. Muhammad Suleman Bhatti for Applicant. Ch. Mumtaz-ul-Hassan for Respondent. Date of hearing: 12th September, 2024.

Summary: Background: The case involves a dispute between the tax authority and electric supply companies regarding the applicability of sales tax on the Tariff Differential Subsidy (TDS) received by the companies from the Federal Government. The tax authority argued that TDS should be included in the value of supply and thus be subject to sales tax. The companies, on the other hand, argued that the subsidy provided by the government is not chargeable to sales tax. The Appellate Tribunal ruled in favor of the electric companies, prompting the tax authority to file a reference under Section 47 of the Sales Tax Act, 1990. -----Issues: 1- Is the Tariff Differential Subsidy (TDS) provided by the Federal Government subject to sales tax under the Sales Tax Act, 1990? ----2- Does the explanation added to Section 2(46) of the Sales Tax Act in 2022 apply retroactively, clarifying that government subsidies to electricity consumers are not subject to tax? -----Holding/Reasoning/Outcome: The Lahore High Court ruled that the explanation added to Section 2(46) of the Sales Tax Act in 2022 clarified that government subsidies, including the TDS, have never been subject to sales tax. The court rejected the argument by the tax authority that the amendment should not apply retroactively, stating that the clarification provided in the law makes the question of retrospective effect irrelevant. As a result, the reference application was dismissed, and the Tribunal's decision in favor of the electric companies (DISCOs) was upheld. -----Citations/Precedents: Commissioner Inland Revenue, LTO, Lahore v. M/s Gujranwala Electric Power Co. (GEPCO) (2024 PTD 440) Commissioner Inland Revenue v. M/s GEPCO Limited (S.T.R No. 77467/2022), Lahore High Court, Judgment dated 25.05.2023 Commissioner Inland Revenue v. M/s Faisalabad Electricity Supply Co. Ltd. (S.T.R No. 113/2014), Lahore High Court, Order dated 06.02.2024

Summary: (a) Sales Tax Act (VII of 1990)--- ----Ss. 11(2) & 74---Condonation of time limit by the Federal Board of Revenue---Petitioner/company filed constitutional petition against action under S. 11(2) of the Sales Tax Act, 1990 ('the Act, 1990') whereby it was alleged that it had claimed a refund which was not admissible under the Act, 1990---Case of the petitioner/company was that the Show-Cause Notice, issued by the Department /Respondent , envisaged the same dispute which had already been decided by the courts up to the Supreme Court of Pakistan--- Department/Respondents, relying on certain documents, contended that impugned-action had been taken after approval from FBR for condonation of time limit under S. 74 of the Act, 1990 after due process/communication commencing from a letter addressed by the Assistant Commissioner Inland Revenue on 26.04.2022 and culminating into approval letter dated 01-07-2022 by the FBR with certain terms ('FBR Approval Letter)---Validity---Federal Board of Revenue Approval Letter revealed that the time limit was condoned up to 29.08.2022 and obviously the proceedings in the Show-Cause Notice which was issued on 22.08.2022 were not finalized by that/said date--- Hence, proceedings beyond the condonation of time limit up to 29.08.2022 were ultra vires and beyond the jurisdiction of the officer issuing the Show-Cause Notice---The very basis on which Show-Cause Notice had been triggered was the exercise of power conferred under S.74 of the Act, 1990 by FBR whereby time limit was condoned up to 29.08.2022 for finalization of assessment proceedings---High Court struck down / quashed the Impugned Show-Cause Notices directing the Respondents / Department to process the refund claims of the petitioner/company within the next three months---Constitutional petition was allowed, in circumstances. (b) Sales Tax Act (VII of 1990)--- ----Ss. 11(2) & 74---Constitution of Pakistan, Art. 199---Constitution petition---Assessment / recovery of tax not levied/ short levied---Condonation of time limit by the Federal Board of Revenue--- Scope --- Petitioner/company filed constitutional petition against action under S.11(2) of the Sales Tax Act, 1990 ('the Act, 1990') whereby it was alleged that it had claimed a refund which was not admissible under the Act 1990---Case of the petitioner/company was that the Show-Cause Notice, issued by the Department /Respondent, envisaged the same dispute which had already been decided by the courts up to the Supreme Court of Pakistan--- Department /Respondents, relaying on certain documents, contended that impugned-action had been taken after approval from FBR for condonation of time limit under S. 74 of the Act, 1990 after due process/communication commencing from a letter addressed by the Assistant Commissioner Inland Revenue on 26.04.2022 and culminating into approval letter dated 01-07-2022 by the FBR with certain terms ('FBR Approval Letter)---Validity--- Section 74 of the Act, 1990 grants power to the Board to permit an act or thing to be done within such period or time as it may be considered appropriate---This condonation applies where any time or period has been specified under any provision of the Act or rules within which any application is to be made or any of the act or thing is to be done--- The condonation may under peculiar circumstances permit such act or thing to be done within an extended period of time--- Quite clearly, this provision does not apply to an action being taken under S. 11 (now repealed) which relates to assessment of tax and recovery of tax not levied or short levied or erroneously refunded---The action against the petitioner/company was being taken under S.11(2) of the Act, 1990 and alleged that the petitioner-company had claimed a refund which was not admissible under the Act---There have to be reasonable and rational grounds which should compel the Board to make an order in the nature of the one envisaged by S. 74 of the Act, 1990---No guidelines or parameters have been mentioned in S.74 of the Act, 1990 and the least that FBR should do is to provide reasons for extending the limitation period---There cannot be unbridled reversal of statutory period of limitation as legal rights have come to accrue in the registered person---There were no reasonable grounds mentioned in the letter of condonation by FBR which would give power to the officer to issue a Show-Cause Notice after almost 15 years--- High Court struck down / quashed the Impugned Show-Cause Notices directing the Respondents/ Department to process the refund claims of the petitioner/company within the next three months---Constitutional petition was allowed, in circumstances. Federal Board of Revenue through Chairman, Islamabad and others v. Abdul Ghani and another 2021 SCMR 1154 ref. (c) Sales Tax Act (VII of 1990)--- ----S.74--- Condonation of time-limit--- Powers---Under S. 74 of the Sales Tax Act, 1990 exercise of power or a request made by an officer of Inland Revenue is not automatic---Reasonable cause has to be spelt out both in the application as well as in the permission granted on that application---It is not enough for FBR to simply condone the time limit and this must be supported by reasons and on the basis of documents which would show that there were circumstances beyond the control of officers of Inland Revenue at the relevant time which constrained them from taking action under the normal time limit. (d) Sales Tax Act (VII of 1990)--- ----Ss. 11(2) & 74---Condonation of time limit by the Federal Board of Revenue--- Scope--- Petitioner/company filed constitutional petition against action under S.11(2) of the Sales Tax Act, 1990 ('the Act, 1990') whereby it was alleged that it had claimed a refund which was not admissible under the Act, 1990---Case of the petitioner/company was that the Show-Cause Notice, issued by the Department /Respondent, envisaged the same dispute which had already been decided by the courts up to the Supreme Court of Pakistan--- Validity--- Record revealed that there were no reasonable grounds mentioned in the letter of condonation by FBR which would give power to the officer to issue a Show-Cause Notice after almost 15 years---In the meantime, rights had come to vest in the petitioner/company which could not be upset by issuance of Show-Cause Notice---Issuance of show cause notice clearly smacked of mala fide as refund claim of the petitioner / company had been delayed and instead of doing so, petitioner/company had been served with a frivolous and vicious Show-Cause Notice---High Court struck down / quashed the Impugned Show-Cause Notices directing the Respondents/ Department to process the refund claims of the petitioner/company within the next three months---Constitutional petition is allowed, in circumstances. M. Sohail Iqbal Bhatti for Petitioner. Mohammad Sulaman Bhatti for Respondent-Department. Date of hearing: 11th September, 2024.