ISLAMABAD: The Supreme Court upheld the Lahore High Court (LHC)’s verdict for the constitution of Valuation Committee to determine the value of the concentrate, used by PEPSI Cola International, on which the duty under the Act, 1990 is to be assessed.
A two-judge bench, headed by Justice Qazi Faez Isa and comprising Justice Aminud Din Khan heard the appeal of Commissioner Inland Revenue, Lahore, against the LHC’s judgment dated 19th December 2016. The bench said that the impugned judgment was in accordance with the law and one which had preserved the interest of both sides.
Deputy Commissioner (IR), Large Taxpayers Unit, Lahore on August 31, 2012 issued two show-cause notices to PEPSI Cola International, Lahore, (respondent) under section 11 of the Sales Tax Act, 1990 read with section 12(1) of the Federal Excise Act, 2005 and the Central Excise General Order 53 of 1967, while another three show-cause notices were issued to the respondent by the Additional Commissioner Inland Revenue (Audit), Zone-II, Large Taxpayers Unit, Lahore under section 122 of the Income Tax Ordinance, 2001.
The respondent challenged the notices through writ petitions before the LHC, which through one common judgment decided the matter in its favour. The LHC ordered that the Commissioner shall, by proceeding under section 2(46)(e) of the Act, 1990, set up a Valuation Committee within a period of two months from the receipt of the order of this Court. The Valuation Committee shall make a determination of the value of the Concentrate, on which, the duty under the Act, 1990 is to be assessed.
Upon the assessment of the duty and taxes, as aforesaid, the respondent-department shall proceed on the show-cause notices, accordingly. It is made clear that the first and second show-cause notices shall be held in abeyance till the time the Valuation Committee returns its findings and thereafter, the proceedings shall be dependent on the valuation so made by the Committee.
Notwithstanding the above, the first show-cause notice with regard to the allegation of evasion of excise duty only may be proceeded with by the officer concerned and Pepsi may take all objections available to it in reply to the show cause notice, which will be considered on its own merits by the concerned officer.
The income tax notices shall also be held in abeyance till the determination by the Valuation Committee and thereafter, shall take their own course in terms of the conclusion drawn by the Valuation Committee, or the officer adjudicating the first show cause notice, as the case may be.
The FBR approached the Supreme Court against the LHC’s verdict with the contention that the High Court should not have sent the matter for the determination of the Valuation Committee, particularly, since the case of the respondent No 1 came under clause (a) sub-section (46) of section 2 of the Sales Tax Act.
The apex court declared that when the law had provided for determination by a Valuation Committee in cases such as the present when value/ price could not be easily ascertained.
However, the petitioners had arbitrarily determined value, without recourse to the Valuation Committee, and the High Court exercised its constitutional jurisdiction to ensure that the law was followed, and did so by referring the matter for determining value/ price to the statutory Valuation Committee. The show-cause notices issued under the Sales Tax Act, the Excise Act, and the Ordinance were dependent on the correct ascertainment of value/price; the LHC judge had deferred action, if any, thereon till after the matter had been determined by the Valuation Committee.
The show-cause notices had conjectured on the value/ price of the concentrate used by the respondent No 1. The value was derived on conjectural basis and the High Court held that this did not accord with the law, which envisaged a Valuation Committee under clause (e) of sub-section (46) of section 2 of the Sales Tax Act, and that such Valuation Committee should have determined it. The High Court was correct in holding that clause (a) of sub-section (46) of section 2 of the Sales Tax Act did not apply. It is also not correct to state that the High Court had decided a factual controversy.
However, the respondent lawyer submitted that the department could not possibly have any grievance, when it constituted a five-member Valuation Committee comprising Additional Commissioner (IR) Legal, Zone-II, LTU Lahore, as its chairman. Deputy Commissioner (IR), (Audit-08), Zone-II, LTU, Lahore and Deputy Commissioner (IR), (Audit-09), Zone-II, LTU, Lahore and the two members were the nominees of the Lahore Chamber of Commerce and Industry.
Copyright Business Recorder, 2022
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