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Indirect Tax Case Laws

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  • 21 Sep 23 3(1A), SRO 648(I)/2013 LHC Fatima Fertilizer SRO 648 further tax
    Certain categories of products including fertilizer excluded from the purview of further tax through SRO 648/2013. The exempted rate mentioned in SRO was 1% upto June 2016. Whereas rate of further tax was increased through Finance Act 2015 at 2%. Department ordered for payment of difference of rate mentioned in Section 3(1A) and SRO 648 during period July 2015 to June 2016. Hon'ble LHC held that this was a fallacy on the part of the department and since merely the rate was enhanced, the primary declaration in SRO 648 would remain in the field and by which fertilizer was declared not liable to further tax. Departmental reference dismissed.
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  • 13 Jun 23 2(46)(e), 3 TRIB ST Int order on assumptions 2 46e
    The authorities cannot be allowed to exercise discretion at their whims, sweet will or in an arbitrary manner; rather they are bound to act fairly, evenly and justly. Relied Cases of Abid Hussain v. PIAC [2005 PLC (CS) 1117], Abu Bakar Siddique v. Collector of Customs (2006 SCMR 705), Walayat ,Ali v. PIAC (1995 SCMR 650). In the case of Sharp v. Wakefield [1891 AC 173]. It is to be, not arbitrary, vague, and fanciful, but legal and regular. And it must be exercised within the limit, to which an honest man competent to discharge of his office ought to confine himself. The said case was relied upon by Indian Supreme Court in the case of Union of India v. Kuldeep Singh [2004(2) sec 590]. In the cases of State of U.P. v. Mohammad Noah (AIR 1958 SC 86), Pratap Singh v. State of Punjab (AIR 1964 SC 72) and Fashih Chaudhary v. D.G. Doordarshan [(1989) I sec 189].
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  • 03 Jun 23 26, 33, 34 TRIB ST Int Sales Tax Penalty and Further Tax mens rea
    It is admitted fact that period of default in appeal l-e July 2019 to May 2021 relates to world-wide lock down due to Covid- 19 pandemic. The maximum period of late filing of sales tax return and payment of due tax is 37 days which relates to March 2020 which due date as per Section 26 of the sales Tax Act, 1990 was 15 of April 2020 and that was first month of Covid-19 emergency in Pakistan. There is no denying the fact that the provisions contain in section 33 of the Act are not charging provisions and are not provided for the purpose of generating revenue rather the purpose is to ensure compliance of different provisions given in the tax statutes. Penalty and default surcharge ought not be imposed in a perfunctory manner and may only be warranted upon proper adjudication as to willful default and the presence of mens rea. In Tianshi International Pakistan vs. CIR reported as 2018 PTD 900 held that section 34 of the Sales Tax Act 1990 was materially not different in scope from sections 161 / 205 of the Income Tax Ordinance 2001, relating to default and willful default.
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  • 27 May 23 21, Rule 12 TRIB Taunsa Tyre blacklisting six months non filer
    The suspension of registration can be done based on particular facts of the case, thereby not following at all the pre-requisites of the order/judgment as set out in Section 2(9) read with Order XX, Rule 4 and Order XLI, Rule 31 of Civil Procedure Code 1908 and Section 24A of the General Clauses Act, 1956, such a violative and sketchy order cannot become legally maintainable. It is patently correct that rules cannot extend the scope of the main section 21 of the Act, 1990 and also cannot override the main section, so non-filing of monthly sales tax returns from June 2016 to November 2016 cannot result into suspension and blacklisting, which is illegal being beyond the scope of section 21 of the Sales Tax Act, 1990 especially in absence of tax fraud, findings of the CIR that non-filing of return for consecutive 6 times is ground for blacklistinq. It is not so. It cannot be presumed that non-filing of six consecutive monthly sales tax returns is tax fraud. The respondent/ tax department is directed to restore the registration number of the appellant to its original number (STR).
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  • 11 May 23 21 TRIB M Taj Blacklisting is flawed and directed for restoration
    Mechanical actions of issuance of combined suspension order for 37 parties including the registered person is invalid. If procedure is flawed, the order placed thereupon is not sustainable. The CIR is directed to restore the registration status of the appellant immediately.
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  • 10 Apr 23 21, Rule 12(a)(i)(A) (B) (C) TRIB Ittehad Packages Blacklisting
    STA No.224(LB)2020 ATIR Multan Camp Show cause notice, suspension order and order of blacklisting contained different set of allegation. It is held by the ATIR thatdeviation from the specific charges is palpably illegal and without lawful authority and the same is not sustainable under the law.
    Order of penal in nature specially blacklisting of registration status requires legal and factual strong evidential backing.
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  • 27 Mar 23 11(5), 40 TRIB AK Ind ST Section 40 CPC Section 96 to 105 A3
    TRIB Allah Khair Industries
    STA No.136/MB/2022 dated 15.07.2022
    ATIR held that under section 11(5), time frame for passing order is mandatory and extension can only be granted before expiration of limitation. After expiry of time frame, permission by CIR will termed as condonation and there is no scope to condone the time in section 11(5). Extension should be based on reasons and such reasons have to mentioned for extending the time to pass an order. (2019 SCMR 1989).
    Secondly, on issue of raid u/s 40, the Court held that search shall be made in accordance with the provisions of Section 96 to 105 of CrPC, 1898. (2015 PTD 1520)
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  • 26 Aug 22 21, Rule 12(a)(i)(E) TRIB Paradise Blacklisting Consolidated Joint Order
    CIR blacklisted the registered person through a single order to a list of 676 persons, Hon'ble Tribunal held that:
    1) Suspension of registration through omnibus type consolidated order is illegal;
    2) Rules cannot extend the scope of main section 21, so non-filing of monthly sales tax returns cannot result into suspension and blacklasting;
    3) Suspension order without show cause notice is illegal. 2018 PTD 1042.
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  • 31 May 21 3, 2(35), 2(41) 2021LHC1858 goods consumed in the course of execution of construction
    The taxable activity defined in the Act meant any activity involving in whole or in part, the supply of goods to any other person. It is held that supply of material consumed in the course of execution of construction was not made in furtherance of a taxable activity, therefore, taxpayer cannot be held liable to pay sales tax.
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  • 16 Mar 21 45B, 46(1)(b), 10, 11, 25, 36, 66 ATIR Tribunal Order is binding on lower authorities
    Commissioner (Appeals) is bound to obey the law declared by Appellate Tribunal Inland Revenue If a subordinate Tribunal refuses to carry out directions given to it by a superior Tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice.
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  • 04 Jun 18 SRO 188/2015, Chapter XV of Sales Tax Special Procedure Rules, 2007 CIR Multan clarification SRO 188 after Section 74A
    Clarification of Commissioner Multan Zone, RTO, Multan in which it is categorically stated that SRO 188 is effective after insertion of Section 74A through Finance Act, 2017.
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  • 04 Jun 18 SRO 188/2015, Chapter XV of Sales Tax Special Procedure Rules, 2007 Supreme Court judgement on SRO 188 of 2015
    Civil Petition No.1028 to 1121, 1433 To 1458 and 2550 to 2553 of 2017 filed by the FBR dismissed by the Honorable Supreme Court of Pakistan through Order in which held that there does not seem to be any approval of the Cabinet with regard to the issuance of the notification in question. This is clear violation of the law laid down by this Court in the judgment reported as M/s Mustafa Impex PLD 2016 SC 808. Dismissed accordingly.
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  • 08 May 18 7, 11(2), 11(4A), SRO 98/2013 ATIR Failure of Sales Tax Withholding
    The registered person profile was showing a surplus activity "exporter" in addition to its principal activity "wholesaler" and he didn't export any single assignment. The department being unsatisfied ordered u/s 11(2) for recovery of withholding tax under Sales Tax Special Procedure (withholding) Rules, 2007 vide SRO 98/2013. Held that the mischief is "person registered as exporter". The intention of legislator is to bring in the ambit of withholding agents the real exporters to safe guard the fake and non genuine refunds.
    It is furhter held that mens rea on the part of the respondent taxpayer is missing as he applied and removed the exporter activity before the finalization of final order.
    It is also held that the registered persons whose tax was to be withheld has already submitted their respective sales tax returns and appellant department failed to show any loss of revenue therefore department appeal failed on this score.
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  • 20 Apr 18 11, 14, 2nd Schedule of Punjab Sales Tax on Services Act, 2012 LHC Sales Tax on Toll manufacturing FBR VS PRA
    The business being conducted by the petitioner is services provided in respect of manufacturing or processing on toll against processing on conversion charges of the nature of services being rendered and is covered by Sr. No.37 of the Second Schedule to the Punjab Sales Tax on Services Act, 2012. FBR issued notice u/s 14 of Sales Tax Act, 1990 to petitioner for registration. It is held that issue relates to FBR and PRA and hence directed to FBR to have the matter resolved with PRA within a reasonable period of time. Meanwhile impugned notice are held in abeyance.
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  • 15 Mar 18 Audit Policy 2016 LHC Treet Corporation Audit Policy 2016 declare unconstitutional
    The mere framing of the Audit Policy, 2016 is insufficient until it is supported by clearly defined risk parameters. The notices with regard to selection of audit are hereby set aside along with declare that Policy as unconstitutional. The policy cannot be put into effect until FBR frames risk parameters.
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  • 25 Sep 17 2(37), 21(2) ATIR Sales Tax Suspension conditional to tax fraud
    Non-apportionment of input tax related to exempt supplies don't fall under the definition of "tax fraud". Section 21(2) can't be invoked in the case as better and legal course available with the department to initiate proceedings u/s 11(2). Order of CIR is vacated by way of restoration of the registration of registered person.
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  • 01 Sep 17 11, 45B(3) ATIR vacated the direction of remand by CIR Appeals
    CIR(Appeals) exceeded his jurisdiction in remanding the case for denovo consideration. Remand for denovo consideration is prohibited under section 45B(3) and also nullify provisions providing limitation.
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  • 20 Mar 17 38 LHC Notice 38 of Sales Tax without reasons declared ultra vires
    Reasons are not provided in notice/authority letter u/s 38 of the Sales Tax Act is declared ultra vires and set aside by the Court.
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  • 10 Mar 17 33, 47 2017 LHC 467 Penalty shall base on quantum of default
    There is no cavil with the proposition that penalty has to be imposed in compliance with the provisions of law and the quantum must be proportionate to the gravity of default committed by a person.
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  • 06 Mar 17 Section 3(1A), 11(2), SRO 648/2013 ATIR further tax is not applicable to sale to end consumer
    Order-in-Appeal is based on misreading of S.No.5 of SRO 648(I)/2013 as it has wrongly assumed by Assessing officer that only taxable supplies of food and beverages, fertilizers and vehicles directly made to end consumers are entitled for non-levy of further tax.< /br> It is held that order passed by the DCIR against the norms of justice and thereafter the confirmation made by the learned CIR(Appeals) is not maintainable in the eye of law and hence cancelled.
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  • 06 Mar 17 13, SRO 188/2015, Chapter XV of Sales Tax Special Procedure Rules, 2007 SRO 188 LHC Multan Bench Judgment
    Lahore High Court Multan Bench Judgment on SRO 188 of Sales Tax Act, 1990 in which it is held that:
    "The Notification SRO 188(I)/2015 is declared to be ultra vires and having been incompetently issued."
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  • 27 Jun 16 3, 7, SRO 188/2015, Chapter XV of Sales Tax Special Procedure Rules, 2007 SRO 188 Sindh High Court Judgment
    CPD-8007 of 2015 (and others)
    a. SRO 188(I)/2015 dated 05.03.2015 is declared to be ultra vires the 1990 Act;
    b. Any Sales Tax collected or paid on the supply of cottonseed is unlawfully demanded/claimed;
    c. Department are restrained from making any claim or demand for payment of sales tax in terms of Chapter XV and any pending proceeding pending or initiated in this regard or any order made are quashed and set aside;
    d. The petitioners shall be entitled to the refund of any sales tax paid in terms of or under Chapter XV; any such refund claim can be made within 90 days of this judgment.
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  • 25 Jun 16 2(37), 11(2), 36(1), 33(11)(c), 33(13), 34 ATIR 100 Percent Penalty is harsh
    Registered person committed tax fraud in terms of u/s 2(37) of Sales Tax Act, 1990 and deposited the principal amount voluntarily; hence any harsh penalty would be an additional burden upon. ATIR confirmed the reduced penalty from 100% to 25%.
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  • 25 Apr 16 37 LHC Department cant summon an advocate for call information
    Lahore High Court Citation No.2016LHC1143
    Advocate could neither be summoned to tender evidence nor could he be required to produce any document unless he personally involved in the commission of an offence cognizable under the Act. He enjoys immunity from appearance before the said officer.
    If the learned Members of the Bar are compelled to disclose about any fact, which otherwise from part of privileged communication, the entire legal system will collapse.
    Intra court appeal filed by the Director of Intelligence & Investigation dismissed.
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  • 22 Apr 16 7, 8B, Article 23 HC Section 8B is under the rational nexus of Act
    2016LHC1045
    Section 8B of the Act therefore has a rational nexus with the purpose of Act and with the scheme of the Act which requires adjustment of input tax to determine the tax liability and a refund of excessive amounts to the registered person.
    Petitioners have challenged the vires of Section 8B of the Act on the ground that it deprives them of their fundamental right to property under Article 23 of the Constitution, they have failed to show what property they have beeen deprived of by way of Section 8B of the Act.
    The legislature in its wisdom legislated Section 8B of the Act for the efficacious fulfilment of the objects and purposes of the Act.
    Petition dismissed.
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  • 21 Apr 16 48 ATIR Recovery Proceedings is not justified before independent judicial forum
    The appeal of the applicant/registered person assailing the treatment meted out by Revenue Authorities is pending for decision before this Tribunal. Initiation of recovery proceedings by the Revenue Authorities without going through this appeal the scrutiny by an independent judicial forum is not justified.
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  • 21 Jan 16 11, 25, 38 ATIR Sales tax under section 38 on electricity consumption
    ATIR held that conduction of audit and scrutiny can only be made in a way and procedure given under section 25 read with General Order No.3 of 2004. Exercise of audit carried out under the garb of section 38 of the Act is illegal, ab initio void and without jurisdiction.
    The assessment on the basis of consumption of electricity can hardly be considered a yardstick to assess the production even industry notes exist.< br/> Honorable ATIR reject the plea of department that registered person evaded Sales Tax for the period prior to insertion of SRO 213/2013 dated 15-06-2013 read with Sr. No.2 of Eight Schedule on the ground and finding that Sales Tax can not be levied on presumption on his presumption which based on industry notes.
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  • 24 Nov 15 72-B, 25(1), 25(2), 26,25,50,2(43), 38 Nestle Pakistan Limited WP 32597 of 2015
    Writ Petition No.32597 of 2015 against selection of cases for Audit under section 72B of Sales Tax Act, 1990 by Board for Tax Year 2014.
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  • 09 May 15 2(9), 2(17), 2(20), 2(33), 2(37), 3, 6, 7, 8, 8A, 22, 23, 26, 33, 7S 111 TAX 389 HC Kar on DG I and I
    [(2015) 111 Tax 389 (H.C.Kar)]
    Personnel of Directorate General I & I, IR raided house of petitioner, arrested him and seized various documents. FIR lodged against petitioner who secured bail from special Judge (Customs and Taxation) subject to his furnishing solvent surety.
    It is held that before the raid at the premises of the petitioner was neither issued any show cause nor any opportunity was neither issued any show cause nor any opportunity has been provided by the respondents to the petitioner to explain his position with regard to the allegations as contained in the FIR lodged by the I&I.
    The respondents are directed to immediately de-seal the properties of the petitioner and handover the seized goods, documents and relevant record as well as the cheques obtained from the petitioner while he was in their custody.
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  • 06 Apr 15 Sales Tax Special Procedure Rules, 2007 SRO 188 Stay Order Makkah Industries
    Stay order granted by Lahore High Court, Multan Bench against alleged recovery of under SRO 188/2015 of Sales Tax Act, 1990.
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  • 04 Apr 15 37, 38, 21, Rule 12 Sales Tax Suspension without audi alteram partem
    Sales Tax suspended on report of Director of Intelligence and Investigation FBR due to fake invoices. Hon'ble Tribunal remand the case to the Commissioner for passing a speaking order after passing reasonable opportunity of hearing.
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  • 17 Nov 14 2(46), 3(1)(a), 47, 73 LHC ST furtherance of business Section 3(1)(a)
    The applicant/department filed Reference before the HC Lhr mainly on the issue that Appellate Tribunal has wrongly interpreted the definition of “supply” and “value of supply” to hold that payment of freight, loading and unloading charges, in addition to price of cement was not taxable under the law
    “Findings by taxation officer that payments of freight, loading and unloading charges are admittedly paid by respondent No.1, therefore, it amounted to value addition, were rightly discarded by Appellate Tribunal. It may be observed that before construing any transaction as taxable activity; value addition or taxable supply; the department had to arrive at true nature of the transaction based on correct determination of facts.
    Under Section 3(1)(a) of the Act of 1990 (charging section), sales tax is levied on the value of taxable supply made by a registered person in the course or furtherance of any activity carried out by him. As found (ibid), payment of freight, loading and unloading charges, made occasionally and recovered from the consumer/customer could not be termed as a taxable activity, hence was not taxable.
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  • 15 Nov 14 21, Rule 11, 12, STGO 35/2012 FTO Complaint No. 882 of 2013.
    Important order of Hon'ble FTO, in which senior member MTBA Mr. Liaqat Hussain, Advocate applied with the concerned Commissioner for de-registration of sales tax registration of the manufacturing unit due to losses occurred by the fire. But the department failed to proceed for statutory requirement of audit which was destroyed in fire and kept audit proceedings pending. After four years, the department suspended the manufacturing unit and afterwards, blacklisted due to non filing of sales tax returns. The Hon'ble FTO in findings stated that department was slept during this period and the client of Mr. Liaqat Hussain Advocate can't be penalized on the act which was not committed by it. The plea that the record was not produced was factious as it is a matter of record that it was destroyed in the fire.
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  • 14 Nov 14 21, Rule 11, 12, STGO 35/2012 STGO 35 is not notified in gazette Islam Engineering (Pvt) Ltd
    As per Section 21, Commissioner may blacklist or suspend registration in accordance with such procedure as the Board may, by notification in the official Gazette. STGO 35 of 2012 has not yet been notified in official gazette so far and hon’ble Tribunal has ordered for restoration of suspension and blacklisting of sales tax suspension of registration of registered person due to the reason that procedure laid down in STGO 35/2012 not accordance with law and hence no legal effect.
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  • 23 Sep 14 0 SalesTaxCaseEmail1292014MsWaqarUsmanAutosSTAno734lb2013
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