Law: Sales Tax Act, 1990

Section: 33(25), 2(43A)

  Brief Facts   1.    Background of the Appeal The Commissioner Inland Revenue, Enforcement-I, CTO, Lahore (Department) filed a sales tax appeal (STA No. 1105/LB/2021) before the Appellate Tribunal Inland Revenue, Lahore Bench, against the order dated 05.05.2021 passed by the Commissioner Inland Revenue (Appeals-II), Lahore. The appeal challenged the deletion of penalty imposed under Section 33(25) of the Sales Tax Act, 1990. 2. Initial Allegations and Order The registered person (M/s. C-Mart (Pvt) Ltd.), a Tier-1 retailer under Section 2(43A), was required to integrate its business with the FBR Point of Sale (POS) system. A show cause notice dated 19.11.2020 was issued. On unsatisfactory reply, the Assessing Officer imposed a penalty of Rs. 1,000,000/- vide Order-in-Original dated 19.02.2021 for failure to integrate. 3. Taxpayer’s Defense The taxpayer contended before the CIR(A) that integration work was in progress, difficulties were communicated to the department, and the POS system was eventually integrated. It was argued that there was no revenue loss to the exchequer, hence the penalty was not sustainable. 4. CIR(A) Proceedings and Decision The CIR(A) deleted the penalty, observing that the taxpayer had integrated the POS system (after updating software) and started issuing invoices. No revenue loss occurred due to the delay, and penalty is not warranted where compliance is eventually achieved. 5. Tribunal Proceedings The appeal was heard on 11.05.2026. The Departmental Representative argued that the CIR(A) deleted the penalty without legal justification despite non-compliance with the show cause notice. The Authorized Representative supported the CIR(A)’s order and submitted evidence of eventual integration and issuance of invoices. 6. Tribunal’s Findings The Tribunal held that: The taxpayer had informed the department about the progress of integration. The POS system was duly installed before or around the time of the penalty order. There was no revenue loss to the department. Penalty proceedings require proper appreciation of facts; they are not to be imposed mechanically where eventual compliance is…