Lahore High Court (LHC) in a remarkable judgement appears to have blocked all the manipulative ways used by tax evaders to avoid sales tax payments under Sales Tax Act, 1990. Sources told Business Recorder here on Sunday that as a result of a latest LHC judgement, now any person filing false or incorrect declarations are open to recovery processing without formal issuance of show cause notices. The normal legal proceedings and remedies are available for the compliant taxpayers and not to the fraudsters. This judgement was delivered in a W.P.No.29138/2013 in which the petitioners have challenged the recovery proceedings without issuance of notices. However, the tax department was represented by Shafqat Mehammad, Chief Commissioner RTO Lahore and his team appeared in personal and explained to the court that it is necessary for the taxpayers to file the true and correct declarations. When it is found that the taxpayer has falsified the facts and figures, then on the basis of evidence available on record or with the Annexures of the returns, the recovery proceedings can be initiated against the person who has filed such return. It has left the department with no excuse not to go after the persons filing the incorrect declarations for the purpose of evading sales tax, sources added. In the judgement, the LHC has declared that the tax department has the legal authority to recover the short-paid amount of sales tax from the petitioner under section 11-A of the Sales Tax Act, 1990 on the basis of monthly sales tax returns filed. The petitioner in W.P.No.29138/2013 is the Lahore Electric Supply Company Limited (Lesco). The case of the Petitioner is that the Lesco has been filing its monthly sales tax returns as required under Section 26 of the Act of 1990. The returns are being filed electronically through the E-portal. The tax department issued three separate notices in which it has alleged that the petitioner has short paid the sales tax with respect to steel melters and re-rollers and hence the short paid amount has been made recoverable under Section 11-A of the Act of 1990. According to the judgement of the LHC dated January 16, 2014, the section 11-A of the Act of 1990 enables the tax department to collect short paid amounts without giving any show cause notice and without prejudice to any action prescribed under Section 48 of the Act of 1990. The purpose of this section is to enable the tax department to recover the amount of less paid tax from the tax due as indicated in the returns without recourse to the person. The tax due is determined from the returns filed by a person and the information contained in the returns. The default become apparent from the return filed and no further information/document is needed. The return filed by the tax payer is the evidence which proves the default and renders the person liable for short paid amount under Section 11-A of the Act of 1990. In the instant petitions, notices were issued to the Lesco to pay the short paid amount along with default surcharge and penalty within seven days. Since the taxpayers did not make the payment, in W.P.No.30678/2013 notice under Section 48 (1) (b) of the Act of 1990 was issued by the tax department for direct recovery from the accounts of the Petitioner. Hence the taxpayers were given a notice of the intended action of the tax department. It is also noted that the taxpayers have only challenged the information relied upon for the purposes of determining short paid tax. Furthermore, the argument of the taxpayers that there is a dispute with respect to the sales tax payable by the Petitioners and such dispute is subject to due process under Section 11 of the Act of 1990 is without merit. The LHC find that there is no dispute with respect to the assessment of tax. The dispute pertains to collection of sales tax by the Petitioners under the Special Procedure Rules, 2007 prescribed for steel melters and re-rollers and the collection of extra tax and further tax on the billed amount. In these cases the Petitioners are merely collection agents wherein they recover the extra tax, further tax on the billed amount and sales tax at the rate of Rs.4 per unit consumed through the electricity bills and deposit the same in the government treasury. Incorrect disclosure of units consumed or tax collected does not give rise to an assessment dispute. In fact, it suggests that the Petitioners have deliberately evaded their obligation of depositing the necessary tax, sales tax, extra tax or further tax. The learned counsel for the Petitioners was unable to explain why there was a discrepancy in the units of electricity consumed in Annexure-C. His emphasis was on the fact that due process under Section 11 of the Act of 1990 must be followed to assess the tax due from the Petitioners, if any. In the same way there is no explanation for the incorrect disclosure of the tax collected (extra tax and further tax). The Petitioners have also argued in their petitions that the tax collected is their output tax. It is the grievance of the Petitioner that this fact should have been considered before acting under Section 11-A of the Act of 1990. Again this argument is misconceived as this point has already been agitated and decided by this Court in STR No.105 and 106 of 2011. Therefore, in view of the aforesaid for the purposes of Section 11-A of the Act of 1990 the electricity bills relied upon form part of the returns filed and the action initiated under Section 11-A of the Act of 1990 is based on the information provided in the returns of the Petitioners, LHC added.
Posted on: Wed, 22 Jan 2014 08:42:03 +0000
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