JUDGMENT SHEET
IN THE HIGH COURT OF SINDH, KARACHI
Present:
Mr. Justice Ahmed Ali M. Sheikh
Mr. Justice Syed Muhammad Farooq Shah,
C.P. Nos. D-692,D- 617,D- 998, D-1070,D- 1035,
D-1037, D-1036, D-996, D-995, D-997, D-1081,D- 1264 of 2013.
Petitioners: through Mr. Ahmed Ali Ghumro
Advocate and Faiz H. Shah, Advocate
Respondents : through Noor Muhammad Dayo, DPG NAB and Waleed Ansari, D.A.G.
Dates of hearing : 27.03.2014 & 08.04.2014
Date of Judgment :_____________________
J U D G M E N T
SYED MUHAMMAD FAROOQ SHAH, J:- By this common judgment, we would like to dispose of the captioned petitions arising from common question regarding issuance of letters/notices by NAB authority under Section 19 of National Accountability Ordinance, 1999, whereby the Petitioners were required to provide certain documents, though the Sales Tax record and Income Tax documents can only be requisitioned by the Sales Tax department/Income Tax department (now “Inland Revenue”) or the Federal Board of Revenue, as the case may be.
2. Petitioners averred that the said letters/notices are vague in the sense as the NAB authority failed to mention that as to what inquiry and investigation is pending against the Petitioners, in respect of which the said documents were summoned, which is in violation of the dictum as laid down in the case of Ghulam Hussain Baloch and another v/s Chairman NAB, Islamabad and others reported as PLD 2007 Karachi 469, maintained by the Apex court, in the case of Dr. Irslan Iftikhar v/s Malik Riaz Hussain and others reported as PLD 2012 Supreme Court 903, wherein the Hon'ble Court has observed that before summoning a person, NAB authorities are duty bound to identify and particularize information sought from any witness and to state the nexus between such information and the subject of the inquiry/ investigation conducted by the NAB. It is further submitted that there is no mention, whatsoever about any inquiry/investigation, pending against the petitioners, therefore, the said letters/notices issued by the NAB are uncalled for and not sustainable under the law. Through titled petitions, the petitioners have also averred that they are registered with the Federal Board of Revenue, who issued National Tax Number and are regularly filing the Annual Income Tax Returns and monthly statements of withholding statements of taxes and their tax audit are being carried out on a random basis. They are also registered under the Sales Tax Act, 1990 and entitled to claim input sales Tax paid on purchases and services and the Petitioners are also entitled to charge output sales Tax to their customers and recover it on behalf of the Federal Board of Revenue and any payment arises after deducting input Sales Tax from output sales tax are deposited in treasury within prescribed time on regularly basis and such record is being maintained by the Sales Tax Authority under Section 25 of the Sales Tax Act, 1990. It is further averred that the Petitioners are being harassed by NAB authority (Respondent) by exercising the powers beyond the jurisdiction of National Accountability Ordinance, 1999, therefore, Petitioners invoked the extra ordinary jurisdiction of this Court under Article 199 of the Constitution of Pakistan. Petitioners have prayed that the impugned letters/notices are illegal, unlawful, void ab-initio without jurisdiction, under the garb of section 19 of National Accountability Ordinance, 1999, as such illegal letters/notices are issued to provide sales tax record in violation of sales tax Act, 1990, just to harass the Petitioners. Hence, they have sought the suspension of such letters/notices.
3. Learned Counsel for the Petitioners submits that identical question was earlier raised in about 485 Constitution Petitions and the learned bench of this Court delivered judgments in C.P. No. 2273 of 2011 and others on jurisdictional point as to the proceedings in respect of offences and penalties under Sales Tax Act, 1990, in relation to tax fraud or any other act by way of departmental proceedings. Learned Counsel submits that according to Section 25 of the Sales Tax Act, 1990, only authorize officer of Sales Tax Department could conduct the audit which has repeatedly been done by FBR and the proceedings, if any, in respect of Section 37 in relation to the Registration of FIRs and subsequent investigations after issuance of notices in relation to tax fraud or any other act by way of departmental proceedings may be initiated in accordance with law as held in the recent judgment of this Court delivered in C.P. No. D-2273 of 2011 and in 484 connected Constitutional Petitions, pronounced on 07.05.2013. VAT is charged at each stage in the supply chain as the goods moves from the point of origin to the ultimate destination by taking the Sales Tax charged by the supplier for the goods sold by him and such output tax, substracting from it, sales tax paid by him for the goods purchased by him and if the difference i.e. output tax is more than input tax, then the supplier is to pay the difference to the state and if output tax is less than input tax then the supplier is entitled to a refund of his amount or its adjustment in the next tax periods and such mechanism of VAT is the domain of officers of Inland Revenue.
4. Conversely, Mr. Noor Muhammad Dayo, learned Deputy Prosecutor General, NAB stated that in parawise comments the NAB has clarified that the Petitioners’ firms and others are involved in massive tax evasion by suppression of sales and minimize Tax liability by using fake sales tax invoices of dummy/fake units, without actual purchase of goods and without using the mandatory requirement of banking channel, which has not been used to claim input tax against actual purchases of goods as per Section 37 of Sales Tax Act, 1990, hence in view of overriding effect, NAO 1999 is attracting and the delegated officer, duly authorized, can probe into the matter and bring truth on record. Learned Prosecutor next submitted that the Petitioners are found involve in tax fraud whereby they caused loss to the Government Exchequer under the garb of their business. According to Mr. Dayo, learned Deputy Prosecutor General, the power of NAB authority to call information is un-equivocally stated in Section 19 OF NAO, 1999, therefore, letters/notices issued to the Petitioner in consonance of Section 19 of NAO 1999, has correctly been adopted by initiating inquiry against the petitioners with the orders of competent authority. Learned Prosecutor further stated that in comments the answering respondent has admitted that Petitioners are registered under Sales Tax Act, 1999 and have been allocated Sales Tax Registration Number and were found purchased fake invoices as the suppliers did not have any input at back stage, in order to inflate the input tax and reduce net payment of tax in government treasury. It is submitted that routine audit under section 25 of Sales Tax Act, 1990, referred by the Petitioner is not a detailed audit and is in fact sampling audit; that in any case, the Petitioner on such basis cannot permitted to evade his legal obligations under law and the audit of petitioners’ firm by Inland Revenue authorities does not preclude the NAB Authority from conducting in respect of tax fraud committed by them; that the letters/notices are issued in accordance with law and in the circumstances of the cases in hand, it is vivid that the Petitioners are avoiding the supply of necessary information against their units/firms etc. Lastly, it is submitted that Petitioners are not entitled for relief so claimed and petition merits dismissal alongwith listed applications.
5. We have considered the arguments advanced from both sides and carefully perused the material available on record in light of dicta as laid down in the case of Dr. Arsalan Iftikhar(as supra) by the Apex Court and in the case of Ghulam Hussain Baloch and others( as supra) by this Court.
6. There is nothing on the record which could demonstrate that while claiming refund, fake documents were utilized or forgery of any kind was committed, therefore, the case cannot be construed as tax fraud or a case of illegal sanction of refund under Section 33 of the Sales Tax Act. It need not to iterate that if a person submits a false and forged documents to any officer of Sales Tax (now officers of Inland Revenue), knowingly or fraudulently makes false statement, false declaration, false representation, false personification, gives any false information or issues or uses a document which is forged or false, such person shall pay a penalty and liable upon conviction by a Special Judge to imprisonment, which may extend to three years or with fine, equal to the amount of tax involved, or with both. It has further been enunciated in the aforesaid provision that any person, who commits, causes to commit or attempts to commit the tax fraud, or abates or connivance in commissioning of tax fraud, such person shall pay a penalty and further be liable to imprisonment for a term which may extend to 5 years or with fine, upon conviction by a Special Judge (section 33(i), 11&13). Apparently, the impugned letters/notices issued to the Petitioners does not depict that petitioners have knowingly and fraudulently makes false statement, false declaration, false representation, false personification, gives any false information or issues or uses false document which is forged or false. The proceedings of NAB under Section 19 of National Accountability Ordinance 1999, in oppressive manner, is against fundamental right of “registered persons” as guaranteed under the Constitution of Pakistan and such misuse of powers cannot be overlooked or ignored by this Court being custodian of the Constitution as this Court is under legal duty to defend, preserve and enforce rights of people and their constitutional guarantees. NAB authorities under the Accountability Ordinance, 1999 in respect of their function, use of power by them in unbridled manner for prosecution of innocent registered persons in disregard to their constitutional guarantees rights, liabilities and duties may not be allowed such oppressive use of penal law through such demonstration.
7. A perusal of the record transpires that the proceedings have been initiated by the Respondent/ NAB under section 19 of the National Accountability Ordinance, letters issued to the Petitioners were drafted in the following manner:-
“Subject: Provision of Information under Section 19 of National Accountability Ordinance
Please refer to the subject cited above. You are requested to provide the detail of sale/supply which you have made to M/s Memon Motors (Pvt) Ltd. (STR # 0101871100273), in the period from July-2006 to January-2013 in the following format alongwith sale/supply register, sale invoices, copy of cheques, transportation documents i.e. gate pass, delivery note/ order, bility etc. purchase order, bank statement, inventory/stock register.
|
Date |
Sales Tax Invoice |
Description |
Quantity |
Ex-value |
Sales Tax Amount |
Mode of Receipt/ payment with cheque # and date |
Account number through which payment has been made |
Amount |
The above mentioned information and documents is required under Section 19 of National Accountability Ordinance 1999 and may be provided to this Bureau by 19th February 2013 on priority as the matter is most urgent.
Deputy Director (Coord)
Financial Crimes Investigation Wing
(Shahnawaz Khan Rajpar)”
One of the extract of “call up notice” as drafted by the concerned of NAB, reads in the following words:-
“Subject: Call Up Notice
1. In connection with an inquiry under process at this bureau regarding SRO 1125(1)/2011 for violation of sales tax.
2. In view, therefore, you are directed to appear before Mr. Faheem Khalid Niazi, Investigation Officer, at NAB (Sindh) Barracks No. 35-36, opposite Passport Office Saddar Karachi on 11 March 2013 at 1100 Hrs.
3. Whereas, it is reminded that failing to comply with this notice, shall fall under the provision of Section 19 of NAO 1999.
Deputy Director (Coord)
Financial Crimes Investigation Wing
(Shahnawaz Khan Rajpar)”
9. As regards the powers under Section 19 of the National Accountability Ordinance, 1999, it will be advantageous to reproduce the relevant Section 19 of the said Ordinance as under:-
“19. Power to call for information:- The Chairman NAB or [an officer of the NAB duly authorized by him] may, during the course of an inquiry or investigation of an offence under this ordinance or any rule or order made thereunder:-
a) Call for information from any person for the purpose of satisfying himself whether there has been any contravention of the provisions of this Ordinance or any rule or order made thereunder;
b) Require any person to produce or deliver any document or thing useful or relevant to the inquiry or investigation;
c) Examine any person acquainted with the facts and circumstances of the case;
d) Require any bank or financial institution, notwithstanding anything contained in any other law for the time being in force, to provide any bank’s or a financial institution’s books such as ledgers, day books, cash books and all other books including record of information and transactions saved in electronic and digital form, and the keepers of such books or record shall be obliged to certify the copies in accordance with law.
e) Where there is reasonable suspicion that any person is involved in or is privy to an offence under this Ordinance, the Chairman NAB may, with the prior approval in writing of the High Court concerned, direct that surveillance of that person may be carried out through such means as may be necessary in the facts and circumstances of the case and the Chairman NAB, may in this regard seek the aid and assistance of any {Governmental} agency and the information so collected may be used as evidence in the trial under the Ordinance”.
10. A bare reading of aforesaid provision reveals that if the inquiry/investigation in respect of offence punishable under the said ordinance is required by the NAB authorities, including chairman, there should be specific mention of required information, in respect of offence alleged or any matter which can suggest that the provision of ordinance/rule or order made thereunder have been contravened and how is it possible that due to his ignorance of allegations or offence or fact on which information is to be provided that such person would be in a position to fulfill the demand of authority. This Court in the case of Ghulam Hussain Baloch (as supra) dilated the aforementioned issue in the following manner:-
If there was no foundation of any allegation of commission of offence under the Ordinance then the superstructure made on such foundation was bound to collapse without any further action. Simple mention in the comments that the Chairman NAB had ordered for inquiry or investigation by itself was not sufficient to order for inquiry unless it was mentioned that inquiry or investigation was required to be conducted in an offence, which was punishable under the Ordinance. None of the notices issued by the Investigating Officer to the petitioners and other persons had disclosed the nature and commission of any offence and the same were also silent on the subject. Said notices were vogue as no specific offence or specific charge against the accused had been mentioned in them, no required or specified information, particulars of documents or things required to be produced before the Investigating Officer had been mentioned therein. All the notices, thus, suffered from material irregularity and illegality and they could not be termed as legal notices within the meaning of S. 19 of the National Accountability Ordinance, 1999. Said notices were consequently declared as illegal by the High Court. If the Investigating Officer wanted any information, document, thing or to examine any person, then he could issue fresh notices keeping in view the observations of High Court in respect of exercise of such powers. Constitutional petition was disposed of accordingly.
Penultimate paragraph of aforesaid judgment reads as under:-
“We have examined the notices issued to the Petitioners, their children and relatives starting from 02.12.2005 till 05.03.2007 and found that these notices are vague, no specific offence has been mentioned in them, no specific charge against the accused has also been mentioned in them, no required or specified information, particulars of documents or things which were required to be produced before the Investigating Officer have been mentioned, as such, all the notices suffer from material irregularity and illegality, because they cannot be termed as legal notices within the meaning of section 19 of the Ordinance. The learned DPG has also admitted that necessary points are missing from the notices, therefore, they are required to be improved. Thus, the said notices are hereby declared as illegal. If the Investigating Officer wants any information, document, thing or examine any person then he can issue fresh notices keeping in view the above observation of this Court in respect of exercise of such powers.
11. It is not out of context to mention here that in the case titled Ghulam Hussain Baloch and others, referred to above, the guidelines contained therein, reiterated in subsequent cases of M. Yousuf Arain v/s Chairman NAB and another (2008 MLD 1431), Niaz Ahmed Baloch v/s Chairman NAB and 4 others (2008 MLD 1451) & Raja M. Zarat Khan and another v/s Federation of Pakistan through Secretary Ministry of Cabinet Division and two others (PLD 2007 Karachi 597) and verdict of Hon'ble Apex Court in the case of Dr. Arsalan Iftikhar (PLD 2012 Supreme Court 903) have not been followed by the NAB, which raises serious question, prima facie, as to the affairs, competence and professionalism of the members of JIT. In the case of Dr. Arsalan Iftikhar, as supra, the Hon’ble Apex Court has further been pleased to observe that in the given circumstances noted above any inquiry by NAB in the matter will not be free from perception of partiality or bias or lack of competence to ensure the fair, impartial, honest and competent inquiry.
12. Suffice is to say that the purported initiation of action under Section 19 of National Accountability Ordinance 1999 is a series of moves initiated by NAB to pressurize the petitioners over their legal rights, which can be invoked and settled through Inland Revenue Authorities. In such view of the matter, no legal sanctity is attached to such letters/notices as the petitioners cannot compelled to produce record of Sales Tax/ Income Tax, under the garb of Section 19 of the Ordinance, consequently, the impugned letters/notices are quashed being corum non-judice.
Captioned Petitions are decided in the terms and manner indicated above.
JUDGE
JUDGE
Faisal Mumtaz/PA