ZAHEER & CO. vs COMMISSIONER APPEALS-I, SINDH REVENUE BOARD, KARACHI Ss

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ZAHEER & CO. VS COMMISSIONER APPEALS-I, SINDH REVENUE BOARD, KARACHI Ss. 23 , 43, & 44---Payment of principle amount prior to passing of Original-in-Order---Scope---Penalty and default surcharge, imposing of---Scope---Penalty deleted by Appellate Authority but default surcharge maintained---Propriety---Non-compliance of provision(s) of law---Whether Existence of mens rea?---Assessing Officer, powers / responsibility of---There is no cavil to the proposition that “mens rea” is the basic ingredient to impose any of the penalties prescribed under the law and it refers to the element of deliberate negligence or willful default with something more than mere non-compliance of statutory provisions---Words “said officer shall take into consideration the representation made by such person” used in subsection (2) of S. 23 of the Sindh Sales Tax on Services Act, 2011 ('the Act 2011') require the assessing officer to consider in detail the plea taken up by the taxpayer in response to the show-cause notice so that he may assess the existence or non-existence of mens rea behind non-compliance of subject provision(s) of law, which is the necessary ingredient to determine liability on the taxpayer---To establish mens rea Department must bring on record that non-compliance of provision is based on mala fide intentions and same can statutory only be measured from taxpayer's conduct in response to the show-cause notice---The Act, 2011 was promulgated with the sole purpose of collection of tax on services, therefore; it does not approve straight away fixation of liability like other statutes, such as lodging of FIR, rather it requires, under S. 23 of the Act, 2011, issuance of show-cause notice prior to determination of any liability upon taxpayer---Wisdom behind insertion of such provision is to provide the taxpayer an opportunity to comply with law---In case the taxpayer responds to such show-cause notice positively and shows his good gesture by complying with law, the case must be closed---Liability upon taxpayer should be fixed in case he shows his reluctance and deliberate negligence (mes rea) towards compliance of law---Words “the officer shall mean make an assessment of sales tax actually payable” require the Assessing Officer to assess the amount of tax due before determining the liability---In case there remains no tax payable at the time of passing the Original Order, the appellant must not be charged with any of the provision of the Act, 2011 rather the show-cause notice would be vacated---In the present case, the entire principal amount had been paid prior to passing the Original Order---Appellant's conduct in response to the show-cause notice seemed to be of compliant nature and apparently there seemed to be no intention on the part of appellant to evade the tax---Arguments advanced by the Department did not sound convincing that words "shall" and "whether willfully or otherwise" used in S. 44 of the Act, 2011 make the taxpayer liable to pay default surcharge in case he does not pay tax due or any part thereof in time or in the prescribed manner and seemingly the Department had gone through the relevant section in isolation instead of in continuation---Provision of S. 44 of the Act, 2011 shows that in case a tax payer does not pay the tax due or any part thereof in time or in the prescribed manner, whether willfully or otherwise, he shall pay default surcharge in addition to the tax due and any penalty under S. 43 of the Act, 2011 at the rate mentioned in its clause (a) or (b)---Words "in addition to the tax due and any penalty under S. 43, pay default surcharge at the rate mentioned below" used in S. 44 of the Act, 2011 categorically denote that liability of default surcharge will be coupled with (in addition to) the liability of tax due and any penalty imposed under S. 43 of the Act, 2011---It was a matter of record that at the time of passing "the Original Order" the assessing officer found no liability of tax due---Furthermore, the Commissioner Appeals found non-existence of mens rea behind late payment of tax, therefore, he preferred to waive penalty imposed in terms of Serial No.3 of the Table under S. 43 of the Act, 2011---At the time of passing "the Original Order" there existed no liability of tax due, therefore, there remained no justification in imposing the penalty of "default surcharge"---Thus, the imposition of default surcharge under S. 44 of the Act, 2011 was unjustified ; hence, the relevant point was answered in negative---Appellate Tribunal Sindh Revenue Board set-aside imposition of default surcharge vide "the Original Order" and its confirmation vide "the first Appellate Order"---Appeal, filed by taxpayer, was allowed accordingly.

ZAHEER & CO. vs COMMISSIONER APPEALS-I, SINDH REVENUE BOARD, KARACHI Ss — 2026 PTD 961 BOARD-OF-REVENUE-SINDH-APPELLATE-TRIBUNAL

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