2020 SLD 837 Equiv.

Citation: 2020 PTD 810 = 2020 PTCL 616 = =

LAHORE HIGH COURT

S.T.R. No. 220 of 2016, decided on 13th March, 2019.

PRESENT:
MUHAMMAD SAJID SETHI, JUSTICE
MUZAMIL AKHTAR SHABIR, JUSTICE

PETITIONER(S): COMMISSIONER INLAND REVENUE

VS
RESPONDENT(S): MESSRS IRFAN INDUSTRIES (PVT.) LTD.

Ch. Shakeel Ahmad, Advocate Vice Sarfraz Ahmad Cheema for Applicant-
department.
Nemo for Respondent-taxpayer.

Law: Sales Tax Act (VII of 1990)

Sections: 11, 11(5), 32(3), 47

ORDER

Through instant Reference Application under Section 47 of the Sales Tax Act, 1990 (“the
Act of 1990”), order dated 20.11.2015, passed by Appellate Tribunal Inland Revenue,
Lahore Bench, Lahore (“Appellate Tribunal”) has been assailed.

2. At the very outset, learned counsel for applicant-department was confronted that show-
cause notice (“SCN”), having been passed after lapse of statutory period of five years, was
barred by limitation as provided in Section 11 of the Act of .1990, hence, rightly annulled,
by learned Appellate Tribunal and even the order-in-original was also passed beyond the
limitation of 120 days in, violation of law laid down in The Collector of Sales Tax,
Gujranwala and others v. Messrs Super Asia Mohammad Din and Sons and others (2017
PTD 1756 = PTCL 2017 CL. 736). Learned counsel for applicant-department, arguing the
case at some length, could not give any satisfactory reply.

3. Arguments heard. Available record perused.

4. The operative part of impugned order reads as under.-

“6. We have heard the arguments put forth by the learned representatives of both the
sides and have carefully gone through the available record. We deem it more appropriate
to first discuss legal contentions raised by the learned AR. As regards the first legal
objection regarding time barred show-cause notice, it is observed that as per section 11(5)
of the Sales Tax Act, 1990, the assessing authority was under legal obligation to issue
show-cause notice for a period upto five years. It is an admitted fact in this case that
show-cause notice C.No.811 was issued on 28.04.2014. In terms of the above referred
legal provisions, a show-cause notice issued on 28.04.2014 could cover the period only
upto 29.04.2009 whereas the impugned notice includes the period of more than five years
and the demand was raised for the period upto July 2007. Thus the period from July 2007
to April 2009 was barred by the statutory period of limitation and entire proceedings
emanating from this show-cause notice stand extinguished” as held in the judgment

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 reported as 2010 PTD 251.

7. Proviso to sub-section (5) to section 11 of the Sales Tax Act, 1990 prescribes that “an
order under this section shall be made within one hundred and twenty days of issuance of
show- cause notice or within such extended period as the Commissioner may for reasons
to be recorded in writing fix provided that such extended period shall in no case exceed
ninety days.” In the case under reference show-cause notice was issued on 28.04.2014
and the Officer of Inland Revenue was legally bound to pass the assessment order within
120 days from the date of issuance of show-cause notice or till such extended time as
permissible under the law. On perusal of record it reveals that the assessing authority had
failed to comply with the provisions of section 11(5) while passing the impugned
assessment order. It has been held by the Honourable Courts in the judgments reported as
2009 PTD 762 and 2009 PTD 2004 that any order passed beyond the period specified in
“totally without junction”. Since in the case under reference the impugned order was
passed on 24.11.2014, it was obviously barred by time especially when ii has not been
mentioned anywhere in the order that an extension had been granted by the
Commissioner under the first proviso to subsection (5) of section 11 of the Sales Tax Act,
1990.

5. The above reproduced part of impugned order shows that learned Appellate Tribunal
noticed that the SCN was issued beyond the prescribed limitation under section 11(5) of
the Act of 1990, hence, the appeal of respondent-taxpayer was accepted and orders of
lower fora were vacated.

6. It has been held by the Hon’ble Supreme Court of Pakistan in Federation of Pakistan
through Secretary, Finance, Islamabad and others v. Messrs Ibrahim Textile Mills Ltd, and
others (1992 SCMR 1898) that if a law prescribes period of time for recovery of money,
after its lapse, recovery is not enforceable through Courts. In the said case, Hon’ble Apex
Court, while considering the issue of limitation, after expiry of time prescribed for issuance
of recovery notice, held as under:-

“4. Due consideration was given as to whether the respondents should not pay the short-
levied duty and whether the State should suffer in public finance. But the cardinal principle
of law is that all are equal before law, whether citizen or State. Secondly if - a law
prescribes period of time for recovery of money, after its lapse recovery is not enforceable
through Courts. Thirdly, while construing a financial statute, its terms are strictly to be
followed. Keeping in view these principles, for short-levied duties on account “of
inadvertence, error or misconstruction”, section 32(3) of the Customs Act, 1969 provides
that for recovery notice shall be served ‘within six months’. If that not done, like “a suit for
recovery of money after lapse of time prescribed by law of limitation, the recovery
becomes unenforceable....”

7. SCN in the present case, having been issued after the prescribed period, is barred by
limitation thus, is without lawful authority and of no legal effect. Reference can be made to
Collector of Customs, Sales Tax (West), Karachi v, Messrs K&A Industries, Karachi (2006
PTD 537), XEN Shahpur Division v. Collector Sales Tax (Appeals) Collectorate of Customs
Federal Excise and Sales Tax, Faisalabad and 2 others (2008 PTD 1973), Messrs Gulistan
Textiles Mills Ltd,, Karachi v. Collector (Appeals) Customs Sales Tax and Federal Excise,
Karachi and another (2010 PTD 251), Messrs Rose Colour Laboratories Nayab No. 1 (Pvt.)
Ltd. v. Chairman, C.B.R. and others (2003 PTD 1047), Abdul Sattar v. Federation of
Pakistan through Secretary, Revenue Division/Chairman, Central Board of Revenue,
Islamabad and others (2006 PTD 1171)

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 In view of above discussion, instant Reference Application is against the applicant-
department and in favour of the respondent- taxpayer.

10. Office shall send a copy of this order unto Act 1990, the Appellate Tribunal as per
Section 47(5) of the Sales Tax Act, 1990.

SD/-
MUHAMMAD SAJID SETHI
JUSTICE

SD/-
MUZAMIL AKHTAR SHABIR
JUSTICE

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