Inland Revenue Tribunal strikes down revenue demand against SEPCO

KARACHI: Judical Member Inland Revenue Appellate Tribunal Muhammad Javed Zakaria has struck down the order-in-original served on M/s Sukkur Electric Power Company (SEPCO) demanding payment of Rs12.246 billion outstanding against the power distributor.

SEPCO approached Commissioner Appeals, who upheld the assessment order and noted that the order-in-original rightly pointed out and established the outstanding payable amount of sales tax from the audited annual accounts of the appellant, which are considered the most authentic records.

The company approached Appellate Tribunal and submitted that the demanded amount of Rs12.246 billion had already been deposited by SEPCO/HESCO in the state exchequer but not paid by the consumers of electricity.

The pattern of accounting showing the sales tax deposited in the State exchequer but not paid by the electricity consumers in the Column “Sales Tax not yet realized”, has been prescribed by WAPDA and is being followed in all the distribution companies (DISCOs).

The subject case is unlawfully based on presumptions, intendment and misinterpreted entries in accounts and hence untenable.
Company’s counsel Hussain Ahmed Shirazi argued had argued that the subject case relates also to tax liability linked with the period beyond the 5 years limitation prescribed under Section 11 of the Sales Tax Act, 1990 and is void.

SEPCO is not liable to pay default surcharge and penalty as there is no evasion of sales tax and no loss of revenue is involved. The company counsel prayed that the show cause notice, assessment order and oprder-in-appeal may be set aside.

On the contrary, the department has not been able to rebut the same despite the fact that ample opportunities were granted.
After detailed deliberation of the case, Member Judicial Javed Zakaria granted the appeal and struck down the show cause notice, assessment order and order-in-appeal.

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