Law: Sales Tax Act, 1990

Section: 47(5), 11,11C, 2(43A), 3(9A), 40C, 33

Law: Constitution of Pakistan, 1973

Section: 10A

        (a)   Sales Tax Act (VII of 1990)---

----Ss.2(43A), 3(9A), 40(c) & 11---Failure of registered person to integrate a retail outlet fully or partially with the FBR's Computerized System for real-time reporting, offence of---Provision for recovery of tax shortfalls under S. 11 of the Act, 1990, applicability of---Imposition of penalty for violations exclusively covered under other specific provisions of Sales Tax Act, 1990---Whether penalties and default surcharge for non-integration can be imposed under S. 11 of the Sales Tax Act, 1990, or must be confined to the specific penal mechanism under S. 33 of the Act, 1990?---The Commissioner Inland Revenue(the CIR) sought to impose penalties and default surcharge on Tier-1 retailers for failing to fully integrate their retail outlets with the FBR's computerized POS system---The Department relied on S. 11 of the Sales Tax Act, 1990 as the jurisdictional basis to issue show-cause notices and recover such penalties---The Registered Persons challenged this and the Appellate Tribunal set aside the penalty orders---High Court was then called upon to decide as to "whether S. 11 (a machinery provision dealing with recovery of tax shortfalls) could legally be invoked to impose penalties for regulatory breaches under Ss. 2(43A), 3(9A), 40C read with Serial Nos. 24 and 25 of S. 33 (which specifically prescribed penalties for non-integration)?"---Held: While S. 33 of the Act, 1990 governed the creation of liability for specified offences, it did not itself supply the procedural means for recovering such penalty from the Registered Person, if there was no simultaneous tax shortfall---Any proceedings for penalty under serial No.24 or 25 was to be rooted in the express penalty provisions, and the recovery was to follow the adjudication process prescribed by the Act, 1990 or other relevant enabling provisions, but could not default to S. 11 of the Act, 1990 in the absence of a short levied tax---Although S. 33 of the Act, 1990, prescribed various offences and their corresponding penalties, it did not itself provide any independent procedural mechanism for the issuance, adjudication, or recovery of such penalties---Therefore, in the absence of such procedure, reliance could not be placed on a general provision like S. 11 of the Act 1990, which was confined to tax assessment and recovery, to fill that gap by implication---In the present case, the respondents' alleged failure to fully or partially integrate their retail outlet did not, ipso facto, result in a quantifiable shortfall of sales tax that could be brought within the ambit of S. 11 of the Act, 1990---Instead, this default constituted an independent regulatory offence for which a specific penalty was prescribed under Serial Nos.24 and 25 of S. 33 of the Act, 1990---Reliance on S. 11 of the Act, 1990 as the sole jurisdictional basis for issuing a show cause notice to impose penalty and default surcharge for partial or complete non-integration under Ss.2(43A), 3(9A), and 40C of the Act, 1990 was misconceived in law and contrary to the statutory framework---Such action was ultra vires the express scheme of the Act, 1990, which required that the prescribed penalty for these specific regulatory breaches be imposed strictly under the enabling provisions of S. 33 of the Act, 1990, following due process and in accordance with the procedure established by law---Accordingly, the show-cause notice and the consequential order passed pursuant thereto had rightly been set-aside to the extent that they sought to impose penalty and default surcharge solely by invoking S. 11 of the Act, 1990 for violations that were required to be prosecuted exclusively under the specific penal provisions of S. 33 of the Act, 1990---Consequently, the order of the Appellate Tribunal Inland Revenue was upheld to this extent having correctly appreciated the statutory distinction and the limits of jurisdiction prescribed under the Act, 1990--Present reference applications were decided against the applicant department.

(b)   Sales Tax Act (VII of 1990)---