COMMISSIONER INLAND REVENUE Versus NORTHERN POWER GENERATION COMPANY

MALIK JAVID IQBAL WAINS, J.--- This consolidated judgment shall decide instant reference application along with S.T.R.No.3681 of 2026 ( The Commissioner Inland Revenue v. Messrs Fatima Fertilizer Company Limited, Lahore ), as common question of law and facts are involved in both these reference applications.

2.These reference applications were heard and decided in favour of the applicant-Department and against the respondent-taxpayer on 27.01.2026. The decision was announced in open Court. The reasons for the decision on these reference applications are recorded hereunder.

3.This Larger Bench has been constituted to answer the questions referred by the learned Division Bench of this Court vide order dated 09.10.2025 due to the divergent views of two Division Benches of this Court in the following manners :--

2. After hearing learned counsel for the parties, we are of the considered view that the divergent views of two Division Benches of this Court necessitates constitution of a Larger Bench. Therefore, Office is directed to place the matter before the Hon'ble Chief Justice for appropriate orders. Both sides have pleaded urgency in the matter as the issue has far reaching implications for the exchequer on the one hand and the taxpayers on the other hand. This request of learned counsel for the parties be also placed before the Hon ble Chief Justice.

4.Through this reference application filed under Section 57 of the Sales Tax Act, 1990 (The Act), following questions of law, asserted to have arisen out of the impugned order dated 20.05.2022, passed by the Appellate Tribunal Inland Revenue, Multan (The Tribunal), have been proposed for opinion:-

III. Whether the judgment of the Appellate Tribunal is contrary to the judgments of the Hon'ble Supreme Court reported as 1992 SCMR 687 and 2008 PTD 253 wherein it has been ruled that scope of rectification is restricted to mistakes which are floating on the surface of the order and must not involve elaborate discussion?"

5.The brief facts of the case as gathered from the record of this reference application ( S.T.R.No.71554 of 2025 ) are that the respondent-registered person during the period 2012-2013 sold scrap for a consideration of Rs.1,411,062/-, however, did not pay sales tax amounting to Rs.239,881/- in violation of Section 3(1) read with Sections 2(35), 6, 7, 23 and 26 of the Act. On the basis thereof, the respondent was called upon to show-cause as to why the evaded amount of sales tax along with penalty and default surcharge be not recovered for violating the aforesaid provisions of law. The record further revealed that the respondent responded to the show cause notice. The Deputy Commissioner Inland Revenue, being not satisfied with the respondent s reply, finalized the proceedings while passing the sales tax order in original dated 25.04.2016, whereby the respondent was directed to deposit sales tax amounting to Rs.239,881/- along with default surcharge under Section 34 of the Act and penalty amounting to Rs.11,994/- under Section 33 of the Act.

6.Dissatisfied with the afore-mentioned order-in-original, the respondent preferred an appeal before the Commissioner Inland Revenue (Appeals), but the same was dismissed vide order dated 10.11.2016. This order was assailed by the respondent before the Tribunal through Appeal (S.T.A.No.1326/LB/2016), which was also dismissed by the Tribunal in terms of order dated 10.02.2022.

7.It is pertinent to mention here that the respondent filed a miscellaneous application MA (Rectification) No.28/MB/2022 seeking rectification of Tribunal s order dated 10.02.2022, which after contest, was allowed in terms of order dated 20.05.2022.

8.In S.T.R.No.3681 of 2026 , facts of the case are that the concerned authorities noted that the respondent during the period June 2014 to September 2014 had suppressed the supplies of taxable goods i.e. Urea, Calcium Ammonium Nitrate, Nitro Phosphate and concealed the production, as such, the respondent was charged with the violation of Sections 2(9), 2(27), 2(29), 2(37), 2(39), 2(40), 2(41), 2(44), 2(46), 3(2)(a), 6, 7, 23 and 26 of the Act and on the basis of above violation, show-cause notice in terms of Section 11(3) and Section 11(2) of the Act was issued. Consequently, adjudication proceedings were culminated in passing order-in-original dated 03.01.2015, whereby the registered person/respondent was directed to deposit the sales tax amounting to Rs.628,715,343/- along with default surcharge under Section 34 and penalty under Section 33 of the Act. The respondent being aggrieved of aforesaid order, preferred an appeal before Commissioner Inland Revenue (Appeals), Multan, but the same could not succeed and resultantly was dismissed vide order dated 08.04.2015.

9.Dissatisfied with the afore-mentioned order, the respondent filed appeal (S.T.A.No.491/LB/2015) before the Appellate Tribunal Inland Revenue which was also dismissed by the Tribunal in terms of order dated 23.11.2016.

10.The respondent filed a miscellaneous application (M.A.No.199/LB/2019) seeking rectification of Tribunal s order dated 23.11.2016, which was allowed by way of order dated 11.02.2020 with the observation that the tax demand created in this regard is deleted and consequential orders passed by the authorities below are cancelled. Being aggrieved, the applicant-Department challenged the said order before this Court through S.T.R.No.04 of 2020, which was allowed vide order dated 17.11.2022 with the result that order dated 11.02.2020 is set-aside and respondent s rectification application shall be deemed pending before the tribunal.

11.In post-remand proceedings, the Tribunal proceeded to again accept the rectification application and resultantly orders of the authorities below were cancelled and the tax demand raised was deleted by way of order dated 20.01.2025, hence the applicant-Department has now challenged the vires of order dated 20.05.2022 and 20.01.2025 through these reference applications.

12.We have heard learned counsel for the applicant-Department as well as learned counsel for the respondent and have carefully examined the record.

13.Since the controversy in the present matter pertains to the exercise of jurisdiction by the learned Appellate Tribunal under Section 57 of the Sales Tax Act, 1990 (The Act), it would be appropriate, for the sake of convenience and ready reference, to reproduce the relevant statutory provision hereunder:--

From perusal of Section 57(1) of the Act, it is revealed that the same confers upon the Appellate Tribunal the authority to rectify mistakes in its orders, where such mistakes are apparent on the face of the record. This power may be exercised either suo motu by the Learned Tribunal itself or upon the application of a taxpayer, or also at the instance of the Commissioner.

14.From the perusal of the impugned order dated 20.05.2022, passed by the learned Appellate Tribunal in the case of M/s Northern Power Generation Co. (the respondent), it transpires that the appeal filed by the respondent before the learned Tribunal was dismissed on merits vide order dated 10.02.2022. Thereafter, instead of filing a Reference Application under Section 47 of the Sales Tax Act, 1990 (the Act) before this Court against the said order, the respondent preferred a Rectification Application under Section 57 of the Act before the learned Appellate Tribunal. While deciding the said rectification application, the learned Tribunal observed that paragraph 5 of the order dated 10.02.2022 lacked coherence and correlation with the preceding paragraphs and, therefore, held that the application for rectification was maintainable on the ground that the mistake had occurred due to omission or inadvertent skipping of the arguments of the appellant, which, according to the Tribunal, were available on the record. Consequently, the learned Tribunal ordered that certain paragraphs be read in place of paragraph 5 of the original order dated 10.02.2022, and proceeded to insert paragraphs 4, 5, 6, 7, and 8 in substitution thereof. By doing so, the learned Tribunal ultimately allowed the appeal and annulled the orders passed by the authorities below. While deciding the rectification application, the Tribunal held that the proceedings were initiated by the Assessing Officer on the basis of a report issued by the Director General Revenue Receipt Audit (DGRRA). The Tribunal observed that an officer of the DGRRA is not defined as an officer under the Sales Tax Act, 1990; therefore, the audit conducted by the officer of DGRRA was without lawful authority and was void ab initio . In reaching this conclusion, reliance was placed upon the judgment of the Peshawar High Court reported as Collector of Sales Tax and Central Excise, Peshawar v. M/s. Makk Beverages (Pvt.) Ltd., Peshawar (PTCL 2010 CL. 393) . The Tribunal further held that the sale of standing trees is exempted from the levy of sales tax under Serial No. 20 of Table-I of the Sixth Schedule to the Sales Tax Act, 1990. Upon examining the documentary evidence produced by the respondent-taxpayer, the Tribunal concluded that the Department had illegally levied sales tax on the amount received from the sale of trees, which is exempted from the charge of sales tax under the aforesaid provision of the Act. The Tribunal also observed that the Department has failed to bring on record any evidence regarding the alleged sale of scrap and was unable to establish, through legally admissible evidence. Consequently, it was held that the amount referred to in the Order-in-Original as well as in the appellate order for the tax period 2012-2013 pertains to the sale of trees, on which no sales tax is chargeable. Accordingly, both the orders passed by the authorities below were annulled .

15.From perusal of the impugned order dated 20.05.2022, it reveals that the learned Appellate Tribunal, while deciding the rectification application, has in fact re-adjudicated the matter on merits and substantially altered the findings recorded in the final order dated 10.02.2022 . Such an exercise clearly travels beyond the limited scope of rectification as contemplated under Section 57 of the Act and is in violation of the settled principles laid down by the Hon ble Apex Court of the country, which restrict the rectification jurisdiction to correction of mistakes apparent on the face of the record and do not permit review or reappraisal of the case on merits.

16.From perusal of record in the case of the respondent, M/s Fatima Fertilizer Company Limited, has filed an appeal before the Appellate Tribunal against the order dated 08.04.2015 passed by the Commissioner (Appeals). The said appeal was dismissed by the learned Appellate Tribunal vide order dated 23.11.2016. Subsequently, the respondent filed an application for rectification under section 57 of the Sales Tax Act, 1990 before the learned Appellate Tribunal, which was allowed vide order dated 11.02.2020 on the ground that grounds of Appeals Nos.4, 5 and 6 were allegedly not considered and that the verbal submissions made by the appellant were neither addressed nor adjudicated upon. While allowing the rectification application, the learned Tribunal deleted the tax demand created by the department and consequently set aside the orders passed by the authorities below. The said order was challenged by the applicant-Department before this Court through a Reference Application under section 47 of the Act. The Reference Application was allowed vide judgment dated 17.11.2022 and the matter was decided against the respondent. While deciding the reference, reliance was placed upon the judgment of this Court reported as Commissioner Inland Revenue v. Messrs Lahore Rubber Store (2023 PTD 182) , which in turn relied upon the judgment of the Hon ble Supreme Court of Pakistan reported as Commissioner of Income Tax Company s II, Karachi v. Messrs National Food Labortories (1992 PTD 570) . Consequently, the matter was remanded to the learned Appellate Tribunal and the rectification application filed by the respondent was deemed to be pending before the Tribunal with directions to decide the same strictly in accordance with the guidelines laid down by the Hon ble Supreme Court in National Food Laboratory case regarding the exercise of rectification jurisdiction. However, after remand, the learned Appellate Tribunal, while passing the impugned order dated 20.01.2025, again allowed the rectification application filed by the respondent. The said order has now been challenged before this Court by the applicant department through the instant Reference Application.

17.From perusal of the impugned order, it reveals that despite clear directions issued by this Court to decide the rectification application strictly in accordance with the principles laid down in Messrs National Food Labortories (referred supra), learned Tribunal instead relied upon another judgment of this Court reported as Commissioner Inland Revenue v. Messrs Mehran Business International (Pvt.) Ltd. (PTCL 2024 CL 406/2023 PTD 1687) and concluded that there existed mistakes of fact in its earlier order. The Tribunal observed that certain grounds of appeal relating to alleged under-declaration of production of Nitrogen Phosphate had not been adjudicated upon and that there was also an incorrect observation in the earlier order to the effect that no record had been submitted by the registered person before the assessing officer, whereas, the proceedings had allegedly been initiated and concluded on the basis of data submitted by the registered person. On the basis of these observations, the learned Tribunal held that mistakes of fact existed, which could be rectified under section 57 of the Act and, after re-adjudicating the matter on the aforesaid grounds, set aside the orders passed by the authorities below and deleted the tax demand.

18.The Hon ble Supreme Court of Pakistan, in a recent judgment reported as Messrs Chaudhary Steel Furnace v. Commissioner Inland Revenue, Sialkot Zone, Regional Tax Office, Sialkot (2025 SCMR 1505), has conclusively held that the Appellate Tribunal has no jurisdiction under section 57 of the Sales Tax Act, 1990, to re-adjudicate issues, which were left undecided while exercising its original jurisdiction under section 46 of the Act. The scope of section 57 of the Act is confined only to the rectification of mistakes apparent on the face of the record and cannot be invoked to reopen or re-decide substantive issues already determined or omitted in the original order. The relevant paragraph from the aforesaid judgment is reproduced hereunder.

6. We have heard the learned counsel and perused the material available on record. We do not find any ambiguity in the order of the Division Bench of the High Court passed in S.T.R. No. 11/2014 as it is not a remand order nor did it revive the appeal decided by the Tribunal in the first round of litigation. One of the questions remained unanswered by Tribunal which consequently was not answered by the court exercising reference jurisdiction. Neither any request was made in a reference filed by the respondent-department nor at the time of withdrawal of the C.P.L.A. No. 3717/2017 before this Court. The petitioner on its own moved an application for fixation of the appeal which appeal was never in existence, as it was disposed of vide order dated 28.05.2018 in its totality. When the application for fixation of appeal was filed we failed to understand that there was no lis pending and nothing could have been fixed for any leftover issue and hence the only way the Tribunal conceived it is by way of rectification application. Even the newly inserted (June, 2013) section 57 of the Sales Tax Act, 1990 ('the Act') has its limitation in terms of the rectification sought. It is to be noticed that its retrospective effect was not questioned before the Tribunal and hence we would not comment. Indeed, a rectification of mistake could be amended/ rectified by an order passed by the Tribunal which mistake is apparent on the face of the record, however, it does not enlarge the scope of the Tribunal to render a complete and altogether different decision, independent of the earlier "view" as expressed. For the sake of convenience, section 57 of the Act is reproduced as under:

Although it was an application for fixation of the appeal, but essentially it seeks further adjudication in the shape of rectification of an unanswered question which is not even remotely within the contours of section 57 of the Act. The Tribunal acted as an appellate forum of its own order, which is not sustainable in law.

(emphasis added)

19.Accordingly, in response to answer the referral question to this Larger Bench, and in light of the aforementioned principle of law, which is binding upon the Appellate Tribunal as well as this Court and has been conclusively settled by the Hon ble Supreme Court of Pakistan, we hold that the Appellate Tribunal had no jurisdiction, under the garb of rectification under section 57 of the Sales Tax Act, 1990, to adjudicate upon questions, which had remained unanswered while exercising its original jurisdiction under section 46 of the Act, vide order dated 23.11.2016.

20.Furthermore, the learned Tribunal, while passing the impugned judgment, has violated the specific directions issued by this Court in the post-remand proceedings. Instead of following the principle enunciated by the Hon ble Supreme Court of Pakistan in Messrs NATIONAL FOOD LABORTORIES case, the Tribunal chose to follow the judgment of this Court reported as Messrs Mehran Business case (referred supra), despite the fact that the Tribunal was bound to comply with the specific directions of this Court contained in order dated 17.11.2022. By doing so, the Tribunal clearly travelled beyond the scope of the remand order passed by this Court.

21.It is well settled that the scope of Section 57 of the Sales Tax Act, 1990 is confined to the rectification of mistakes, which are apparent on the face of the record. Although the Tribunal may amend or rectify an order to correct such mistakes, the said provision does not enlarge the jurisdiction of the Tribunal so as to enable it to render an altogether fresh or different decision independent of the earlier view expressed in the main order. The relevant paragraph from Messrs NATIONAL FOOD LABORTORIES case, is reproduced hereunder.

5. As regards the first question the learned Judges after referring to several authorities of our Supreme Court as well as from the Indian Jurisdiction concluded as follows:---

Section 35 of the repealed Income-Tax Act, 1922, hereinafter referred to as The Act confers a power to rectify any mistake in the order which is apparent from the record. Such power can be exercised Suo Motu or if it is brought to the notice by an assessee. Therefore, essential condition for exercise of such power is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading the order it may immediately strike on the face of it: Where an officer exercising power under section 35 enters into the controversy, investigates into the matter, reassesses the evidence or takes into consideration additional evidence and on that basis interpretes the provision of law and forms an opinion different from the order, then it will not amount to rectification of the order. Any mistake which is not patent and obvious on the record, cannot be termed to be an order which can be corrected by exercising power under section 35.11 this regard reference can be made to Shaikh Muhammad Iftikharul Haq v. Income-Tax Officer, Bahawalpur, PLD 1956 SC 524 and Pakistan River. Steamer Limited v. Commissioner of Income-Tax, 1971 PTD 204. In the present case the mistake pointed out by the petitioner was not of a nature to attract section 35 and, therefore, the High Court has correctly answered the first question in the negative.

22.The law in this regard has been clearly settled by the Hon ble Supreme Court of Pakistan in Messrs NATIONAL FOOD LABORTORIES case, wherein it has been held that the power of rectification can only be exercised where the mistake is obvious, patent and floating on the surface of the record and does not require elaborate arguments, re-appreciation of evidence or reinterpretation of the law. If the authority enters into a controversy, reassesses the evidence, or forms a different opinion through reasoning and argument, such exercise would not fall within the ambit of rectification jurisdiction.

23.In the present case, the issues relied upon by the learned Tribunal required reconsideration of facts, appreciation of material on record and fresh adjudication of the grounds raised in appeal. Such an exercise clearly travels beyond the limited scope of rectification envisaged under section 57 of the Act. The Tribunal, in fact, acted as an appellate forum against its own earlier order, which is not permissible under the law.

24.Viewed in the above legal and factual background, it is evident that the Tribunal had passed its original order after due application of mind and by assigning plausible reasons. Therefore, the findings recorded therein cannot be termed as inadvertent mistakes or errors apparent on the face of the record so as to justify rectification under section 57 of the Act.

25.Rectification under Section 57 of the Act is permissible only, where the error is self-evident, obvious and can be corrected without undertaking a detailed inquiry or engaging in prolonged arguments involving appreciation of facts or interpretation of law. In the present case, no such error apparent on the face of the record was identified.

26.Consequently, the learned Tribunal ought to have declined to exercise jurisdiction under section 57 of the Act. Instead, by re-examining the matter and setting aside the orders of the authorities below, the Tribunal exceeded its lawful jurisdiction. The respondent, by filing the rectification application, in fact attempted to circumvent the law and avoid filing a reference before this Court against the main order of the Tribunal.

27.When confronted with the aforesaid legal position, the learned counsel for the respondent, M/s. Fatima Fertilizer Company Limited, candidly conceded that a Reference Application had indeed been filed by the respondent before this Court against the original order passed by the learned Appellate Tribunal. However, he fairly admitted that the said Reference Application was subsequently withdrawn on the ground that the respondent had obtained relief through the rectification proceedings before the Tribunal. Such an approach adopted by the respondent is wholly misconceived and devoid of legal justification. Once the Tribunal had decided the appeal in exercise of its original appellate jurisdiction under Section 46 of the Sales Tax Act, 1990, it had become functus officio, and the legality or propriety of such order could only be assailed before this Court through a Reference Application under section 47 of the Act .

28.The provisions of Section 57 of the Act, which confer a limited power of rectification upon the Tribunal, cannot be invoked as a substitute for the statutory remedy of reference before the High Court. The jurisdiction under section 57 is confined only to the correction of mistakes apparent on the face of the record and does not permit the Tribunal to revisit the merits of the case or to adjudicate upon issues allegedly left undecided in the original order. Therefore, the attempt of the respondent to obtain substantive relief through rectification proceedings, without securing appropriate relief through the Reference Application filed before this Court, is legally misconceived and does not carry any legal sanctity in the eyes of law.

29.It is a well-settled principle of law that the Tribunal cannot sit in appeal over its own judgment. The scope of rectification jurisdiction is strictly confined to the correction of a mistake apparent on the face of the record, which must be patent, obvious, and self-evident. In the absence of such an error, the Tribunal cannot revisit or reconsider the merits of its earlier decision under the guise of rectification. Reliance is placed on case reported as Commissioner of Income Tax, Karachi v. Abdul Ghani (2007 PTD 967), wherein it has been held as under:-

After examining the record and facts, the Tribunal gave its findings that out of the amount of Rs.8,500,000 an amount of Rs.5,900,000 was income of the assessee from undisclosed source as such concealed income directing it addition to the income of the respondent. Thereafter, the application under section 156 of the Ordinance was submitted by the respondent before the Tribunal for rectifying its earlier order.

7. It may be noted that as per the contents of the application, the respondent, while making reference to the earlier order/judgment of the Tribunal, contended that the same was not sustainable and was rightly rectified. As observed above, no error on the face of the judgment was identified in the order of the Tribunal dated 12th January, 1999, therefore, in absence of any error apparent on the record, with regard to the impugned order/judgment, the Tribunal ought to have refused to exercise jurisdiction under section 156 of the Ordinance as in exercise of such jurisdiction only a mistake apparent on the record can be rectified but Tribunal in fact had acted as Appellate Forum against its own order, which is not sustainable in law. Learned High Court vide impugned judgment failed to apply the correct law and dismissed the appeal without providing any legal justification. It failed to appreciate that the appellant by filing the application under section 156 of the Ordinance tried to circumvent the law by avoiding to file appeal/reference application before the High Court against the earlier order/judgment dated 12th January, 1999. The Learned High Court also lost sight of the fact that the Tribunal under the law could not sit on its own judgment/order unless an error apparent or floating on the record could be pointed out. The High Court while holding that no prejudice would be caused and in view of the earlier judgments of the Courts/Tribunals, the assessee was entitled for the benefit had committed grave and serious error/mistake, which cannot be sustained. Therefore, following the doctrine laid down in the case of Commissioner of Income Tax v. National Food Lab. (1992 SCMR 687), Islamuddin v. Income Tax Officer (2000 PTD 306) and Baqar v. Muhammad Rafique (2003 SCMR 1401), we are inclined to hold that the Tribunal had crossed its jurisdiction by rectifying its judgment being free from any error in terms of section 156 of the Ordinance. If at all the respondents were aggrieved by the order, they could have approached the relevant forum, in accordance with law. Thus for the foregoing reasons, appeals are allowed with cost and the impugned judgment dated 24th October, 2001 passed by the High Court of Sindh as well as the judgment dated 22nd October, 1999 passed by the Income Tax Appellate Tribunal are set aside.

30.In view of the above, the respondents taxpayers, instead of availing the statutory remedy against the main order passed by the learned Tribunal before this Court under Section 47 of the Act, have chosen to invoke the rectification jurisdiction. This course was adopted without lawful justification despite the fact that the said order had been passed by the learned Tribunal in the exercise of its original jurisdiction, based on the material available on record. No mistake apparent on the face of the record has been demonstrated in the said order. In these circumstances, the assumption and exercise of rectification jurisdiction by the Tribunal was wholly unwarranted and clearly beyond the scope and ambit of Section 57 of the Act.

31.For the foregoing reasons, the reference applications are allowed in the above terms.

32.Office to transmit copy of this judgment under the seal of the Court to the Appellate Tribunal in terms of Section 47(2) of the Sales Tax Act, 1990.

MH/C-1/L Applications allowed.