DEMAND BY SALES TAX AUTHORITIES TO MAKE PAYMENT WITHOUT PASSING AN ORDER

DEMAND BY SALES TAX AUTHORITIES TO MAKE PAYMENT WITHOUT PASSING AN ORDER <!--[if gte mso 10]> DEMAND BY SALES TAX AUTHORITIES TO MAKE PAYMENT WITHOUT PASSING AN ORDER By Akhtar Javed, Advocate, Lahore It has become a normal practice that sales tax authorities require the taxpayers to make payments on the basis of audit reports. In certain cases, neither a copy of audit report is furnished to the taxpayer nor an opportunity is provided to point out flaws and lacunae in the audit reports. In a number of cases, the amount demanded by the tax authorities on the strength of audit report is not even payable by the taxpayer. 2. In one such incident, the sales tax auditors audited the sales tax record of Messrs Bisma Textile Mills Ltd. and the taxpayer was communicated by Mr. Omer Farooq, the then Collector Sales Tax that the company should pay Rs.3.8 million otherwise a criminal case would be registered. Without consulting any legal counsel, the company paid an amount of Rs.1.5 million on 12-6-2001 under protest whereas the management of the company promised to pay the balance amount on the condition that the audit report which had formed the basis of demand would be provided to the company. However, the Collector never furnished the report to the company and stressed the management to make the balance payment. 3. Having no other option, the company filed writ petition in Lahore High Court, Lahore contending that the audit report itself cannot constitute a determination of the company's liability for payment of sales tax. The learned counsel for the petitioner contended that there is a proper course of adjudication in which the taxpayer has to be given a proper opportunity of hearing to .defend the charges against him and point out the flaws in the report. 4. While allowing the petition, the Honourable Lahore High Court, Lahore has observed that the petitioner cannot be burdened with liability merely on the basis of an audit report with which the petitioner has not been confronted. The Honourable Court has advised the Sales Tax Department to proceed against the company strictly in accordance with the law, the matter should be adjudicated after issuance of show-cause notice and giving the petitioner a reasonable and an adequate opportunity of hearing. 5. The above-referred judgment of Lahore High Court, Lahore is a guideline for the Sales Tax Department as it had become normal practice that the Assistant/Deputy Collectors supervising the audit pressurize the taxpayers to pay certain amounts on the basis of audit findings and the taxpayers are advised not to 'consult any lawyer. It has been observed in certain cases that the sales tax officers threaten the taxpayers that they will be burdened with huge amounts and will be required to face criminal proceedings if they fail to pay the amounts point out by the auditors. 6. The taxpayers are advised not to bow down against the illegal demands made by 'sales tax officers. The taxpayers have every right to consult legal counsel and seek expert opinion on the observations raised by the auditors. It has been observed that in a number of cases, the observations raised by the auditors suffers from legal infirmities and do not stand the test of judicial scrutiny. Such observations are not upheld in the courts of law.