Rs 400 million FED liability raised against cellular firm challenged

News Paper: Business Reorder

 

ISLAMABAD (July 25 2010): A huge amount of tax liability of Federal Excise Duty (FED) under Sales Tax mode, raised against a leading cellular company by Large Taxpayer Unit (LTU) Islamabad, has been challenged where provisions of section 36 of the Sales tax Act 1990 have been invoked to create a demand of over Rs 400 million against the company.

Sources told Business Recorder here on Saturday that the section 36 of the Sales Tax Act is related to assessment of tax in case any unusual thing has been detected during audit proceedings under Sales Tax Act 1990. In this case, the order passed by the LTU Islamabad under section 36 of the Sales Tax Act is time barred for over 100 days. The FBR has to explain as to how they can extend the limitation under section 74 of the Sales Tax Act when original limitation under section 36 has been expired.

Details revealed that in the case of leading cellular company, the LTU Islamabad has passed an order on a show cause notice issued in 2007 in sheer disregard to the limitations prescribed under section 36 (1) of the Sales Tax Act, 1990 (Act) and thereby creating a demand of over and above Rs 400 million.

It has been learnt from reliable sources that a show cause notice was issued in May 2007 by the then Additional Collector of Sales Tax of the Collectorate of Rawalpindi; however, no order was passed within the prescribed limitation u/s 36(3) of the Act ie, within 180 days from the date of issuance of the show cause notice.

The Large Tax Payers' unit Islamabad reinitiated the proceedings on the cellular company in March 2010 after obtaining alleged condonation u/s 74 of the Act from the Federal Board of Revenue. It was argued by the cellular company that the proceedings were barred by limitation but the Additional Commissioner without adhering to the legal provisions passed the order on June 30, 2010 and created a demand against the company to be paid instantly.

The Order in Original was challenged in writ jurisdiction before the Lahore High Court, Rawalpindi bench on July 23, 2010. The petition was heard by Justice Asad Munir; who after hearing at length issued notice to the tax department for a date in August for filing the Para wise comments; however, in the meantime the operation of the order in original was suspended.

It was argued before the learned judge that no order u/s 36 (1) & (2) of the Sales Tax Act can be passed after the lapse of 90 days of the issuance of the show cause notice or within the extended time of 90 days by the Collector/Commissioner after giving reasons in writing. No such extension was allowed. It was further argued that the limitation is to be extended before the expiry of the statutory period of limitation and not after the expiry of the limitation as this had created a vested right with the petitioner to not to be assessed beyond the limitation.

The learned counsel further argued the power of condonation with the FBR u/s 74 of the Act can also not be exercised arbitrarily. The FBR has to record reasons for extension in time and that to well before the expiry of the original limitation period. The judge noted that no reason for extension in time of 1055 days after the expiration of original limitation was given, therefore, the FBR must explain the position to have exercised the powers u/s 74 of the Act, sources added
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