IN THE HIGH COURT OF SINDH AT KARACHI

Spl. S.T.R.A. No.739 of 2022

[The Commissioner Inland Revenue (Legal) v. M/s. Al-Haj Faw Motors Pvt Ltd.]

PRESENT:

Mr. Justice Arshad Hussain Khan

Mr. Justice Amjad Ali Sahito

*****

Applicant : Through Mr. Faheem Ali Memon, Advocate

Respondent : Nemo

Date of hearing : 22.10.2026

Date of order : 22.10.2026

JUDGMENT

ARSHAD HUSSAIN KHAN J; Through the instant Sales Tax Reference Application filed under Section 47 of the Sales Tax Act, 1990 ("the Act"), the Applicant/Department has called in question the legality of the order dated 29.07.2022 passed by the Appellate Tribunal Inland Revenue, Karachi Bench ("ATIR"), in M.A. (Rect) No.75/KB/2021, arising out of STA No.507/KB/2017 for the tax periods from June 2016 to April 2017. By the impugned order, the learned ATIR, while exercising its rectification jurisdiction under Section 57 of the Act, set aside its earlier judgment dated 07.01.2021 as well as the Order-in-Original and the first appellate order, thereby deleting the default surcharge and penalties imposed upon the Respondent-taxpayer.

2. The essential facts giving rise to the instant reference are that the Respondent-taxpayer was required to file monthly Sales Tax and Excise Returns under Section 26 of the Act read with Rule 18 of the Sales Tax Rules, 2006 by due date as prescribed in the said statutes. During scrutiny of its return profile, the Assessing Officer observed that the taxpayer had failed to e-file its sales tax and federal excise returns for the tax periods from June 2016 to April 2017 within the due dates, thereby violating Sections 2(9), 6, 7, and 26 of the Act. Consequently, proceedings were initiated resulting in Order-in-Original No.09/54/2016-17 dated 17.06.2017, whereby default surcharge under Section 34 and penalties under Section 33(1) and 33(5) of the Act were levied. Aggrieved, the Respondent preferred an appeal before the Commissioner Inland Revenue (Appeals), Karachi ["CIR(A)"], who vide order dated 25.10.2017 confirmed the action of the DCIR. The Department’s action/order was initially upheld by the learned ATIR in STA No.507/KB/2017. Thereafter, the Respondent-taxpayer filed a rectification application under Section 57 of the Act, seeking rectification/recall of the said judgment. By the impugned order dated 29.07.2022, the learned ATIR allowed the application, reviewed its earlier stance, and set aside the orders of the lower forums, deleting the default surcharge and penalties. Aggrieved by the aforesaid order, the Department has filed the present Reference Application under Section 47 of the Act.

3. From the record, it appears that the instant Sales Tax Reference Application was admitted on 21.05.2026 for consideration of the following question of law:

“Whether the learned Appellate Tribunal Inland Revenue, having passed and announced its judgment, was competent to overturn the same while exercising rectification jurisdiction on a miscellaneous application?”

4. Learned counsel for the Applicant-Department, while assailing the impugned order, contended that the learned ATIR, under the guise of rectification, effectively exercised the power of review, which is not conferred upon it under Section 57 of the Act. He submitted that the controversy had already been adjudicated upon on merits through the earlier judgment dated 07.01.2021 and, having rendered its decision, the learned ATIR had become functus officio and could not subsequently reopen or reverse its findings through rectification proceedings. According to learned counsel, the jurisdiction under Section 57 of the Act is confined to correcting a mistake apparent from the record and does not extend to reconsideration of issues already decided on merits or substitution of one possible view with another. He maintained that, by recalling its earlier judgment and setting aside the orders of the authorities below, the learned ATIR exceeded its statutory jurisdiction, rendering the impugned order dated 29.07.2022 legally unsustainable. In support of his submissions, learned counsel placed reliance upon the judgment of the Apex Court in Chaudhary Steel Furnace v. Commissioner Inland Revenue (2025 SCMR 1505).

5. The record reflects that notices of the instant Reference Application were issued to the Respondent through all prescribed modes, including publication. However, despite such notices, none appeared on its behalf. Consequently, vide order dated 21.09.2026, service upon the Respondent was held good, and the matter was adjourned to the present date of hearing with a clear caution that, in the event of continued non-appearance on behalf of the Respondent, the Reference Application would be decided with the assistance of the counsel present and on the basis of the material available on record, without affording any further opportunity.

6. We have heard learned counsel for the Applicant-Department and examined the material available on record in the light of the relevant statutory provisions and applicable judicial precedents. The controversy requiring determination is whether the learned ATIR, in exercise of its jurisdiction under Section 57 of the Act, could recall its earlier judgment rendered on merits and substitute it with a contrary decision. Section 57 confers a limited power to rectify a mistake apparent from the record. Such a mistake must be patent, manifest and self-evident, requiring no elaborate reasoning, reappraisal of evidence or reconsideration of an issue already adjudicated upon. The distinction between rectification and review is well recognized: whereas the former permits correction of an apparent mistake, the latter involves reconsideration of the merits of a concluded adjudication, which cannot be undertaken in the absence of express statutory authority.

7. The scope of rectification jurisdiction under Section 57 of the Act has been authoritatively settled by the Apex Court in Messrs Chaudhary Steel Furnace (supra), wherein it was held that the power of rectification does not extend to rendering an altogether different decision upon reconsideration of the merits. Where the Tribunal re-adjudicates an issue already decided and reverses its earlier conclusion, it effectively assumes appellate jurisdiction over its own judgment, which is impermissible in law. Applying this principle to the present case, we find that the learned ATIR, having already upheld the imposition of default surcharge and penalties through its judgment dated 07.01.2021, subsequently reversed that decision upon a miscellaneous rectification application filed by the Respondent-taxpayer. The impugned order did not merely correct an apparent mistake but substituted the earlier adjudication with a contrary conclusion on merits. Such an exercise clearly travelled beyond the limited jurisdiction conferred under Section 57 of the Act and amounted, in substance, to an impermissible review of its own judgment. If the Respondent-taxpayer was aggrieved by the original decision on any question of law, the appropriate statutory remedy was to invoke the reference jurisdiction of this Court under Section 47 of the Act.

8. In view of the foregoing discussion and following the dictum laid down by the Apex Court in Messrs Chaudhary Steel Furnace (supra), we hold that the learned ATIR exceeded its jurisdiction under Section 57 of the Act by recalling its earlier judgment and substituting the findings recorded therein with a contrary decision on merits. Accordingly, the question of law on which the instant Reference Application was admitted is answered in the negative, in favour of the Applicant-Department and against the Respondent-taxpayer. Consequently, the instant Sales Tax Reference Application is allowed, and the impugned order dated 29.07.2022 passed by the learned ATIR in M.A. (Rect.) No.75/KB/2021 is set aside. As a result, the earlier judgment dated 07.01.2021 passed by the learned ATIR in STA No.507/KB/2017 stands restored.

9. The foregoing determination is confined to the legality of the exercise of rectification jurisdiction under Section 57 of the Act, without any independent adjudication upon the merits of the underlying tax liability.

A copy of this judgment shall be sent to the Appellate Tribunal Inland Revenue under the seal of this Court, as required under Section 47(5) of the Sales Tax Act, 1990.

JUDGE

Naveed PA