Law: Sales Tax Act, 1990

Section: 33(25)

  Brief Facts   1.    Background of the Appeal The Commissioner Inland Revenue, LTO, Lahore (Department) filed a sales tax appeal (STA No. 1434/LB/2021) against the appellate order dated 31.05.2021 passed by the Commissioner Inland Revenue (Appeals-V), Lahore. The CIR(A) had set aside a penalty of Rs. 1,000,000/- imposed under Section 33(25) of the Sales Tax Act, 1990, and directed review after 60 days from the issuance of the work/purchase order. 2. Initial Allegations and Assessment Under SRO 889(I)/2020 dated 21.09.2020, sugar mills were required to install a Video Analytics System (VAS) by the extended deadline of 31.01.2021. The registered person (M/s Hunza Sugar Mills (Pvt) Ltd.) allegedly failed to issue the work order to a pre-qualified vendor by 20.01.2021 and did not complete installation. After show cause notice, the Assessing Officer imposed a penalty of Rs. 1,000,000/- under Section 33(25) vide order dated 10.02.2021. 3. Taxpayer’s Defense The taxpayer contended that a work order had been issued on 22.01.2021 along with advance payment to the vendor. The CIR(A) treated the penalty as premature and directed the Assessing Officer to review the matter after 60 days from the purchase order date. 4. Tribunal Proceedings Heard on 11.06.2026. The Authorized Representative submitted that the VAS had since been supplied, installed, and tested by M/s CNS Engineering in compliance with the SRO. The Department challenged the setting aside of the penalty. 5. Tribunal’s Findings Considerable time had elapsed since the first appellate order. The taxpayer claimed full compliance through installation of the system. Physical verification of the installation at the mill premises was necessary before any final determination on the penalty. 6. Final Decision The departmental appeal was disposed of with the following directions: The Assessing Officer shall physically verify the installation of the Video Analytics System at the respondent’s premises. If the system is found installed, the penalty shall remain deleted. If installation is not verified, the penalty of Rs. 1,000,000/- shall stand restored and be recoverable from…