2012 PLP (Trib (PTD)

AMJAD IKRAM ALI, MEMBER (ACCOUNTANT).

Titled appeal has been preferred at the behest of the registered person against the Order-in-Appeal No.85/ST/2008 dated 11-10-2008 passed by the Collector Customs, Sales Tax and Federal Excise (Appeals), Lahore.

2. Relevant facts of the case are that the difference in sale of sugar price on the same date was discovered during audit for the period 7 of 2005 to 6 of 2007 and sales tax demand for violation of sections 2, 3, 6, 7, 11 and 26 of the Sales Tax Act, 1990 which was found recoverable under section 36(1) read with sections 34 and 35 of the Act. In first appeal before the Collector Customs, the jurisdiction of DRRA to conduct audit was challenged. The first appellate authority narrated the argument of the learned DR that the Hon'ble Ombudsman had in the case Tatara Enterprises v. Secretary Revenue Division had settled the matter by holding that the plea of the complainant that DRRA had no authority to audit the accounts of the complainant as without force. Besides challenging the merits of the sales tax demand raised, the learned AR has emphasized that the order-in-original is not tenable as is based on audit conducted by DRRA and that the collector has erred in not holding that the order based on audit by DRRA is without legal force.

3. Learned AR in support of his contention that DRRA is quorum-non-judice has cited the judgment of Hon'ble Peshawar High Court wherein it was held in the case reported as 2010 PTD 1355 as under:-- "It becomes clear from the perusal of above notification that the President of Pakistan has required the Auditor General of Pakistan to audit the receipt of Federal Government and not the record of the private/industrial units licensed/registered under the Sales Tax/Central Excise Laws. Thus the whole exercise conducted by the DRRA in the particular case is quorum-non judice. In the result, this Reference being devoid of any merit is dismissed. However, the Federal Excise and Sales Tax Department may conduct fresh audit of the respondent/unit, if so advised and permissible under the law. In case, any contravention is detected, the respondent/unit may be proceeded against in accordance with law".

4. Learned AR further argued that the Department had filed Civil Petition No. 1580 of 2008 wherein the Hon'ble Supreme Court held as under:-- "This petition is directed against the judgment dated 18-9-2008 vide which learned Division Bench of the Peshawar High Court while dismissing the reference filed by the petitioner (Collector Sale Tax and Central Excise, Peshawar) directed as under:-- 'However, the Federal Excise and Sales Tax Department may conduct fresh audit of the respondent-unit, if so advised and permissible under the law. In case, any contravention is detected, the respondent-unit may be proceeded against in, accordance with law' Learned counsel argued the case at some length but when contracted with the import of the impugned judgment, operative part of which has been reproduced in the preceding paragraph, opted not to press this petition so as to ask the competent authority to decide the matter within 30 days. In view of the fair stand taken by the learned counsel for the petitioner, this petition is disposed of as not pressed."

5. Learned DR defended the order but could not produce any justification for empowering the DRRA with the power to audit the registered person.

6. We have considered the matter and hold the same view that DRRA is quorum-non-judice and the show-cause notice as well as order issued thereunder was without necessary legal validity, therefore, the order as well as show cause notice issued by the authorities below are set aside. Confirming to the Hon'ble High Court's view that the Sales Tax Department may conduct fresh audit of the respondent-unit if so permissible under the law, we also hold that the Sales Tax Department may conduct fresh audit of the respondent-unit if so permissible under the law. In case any contravention is detected, the respondent unit may be proceeded against in accordance with law. H.B.T./27/Tax(Trib.) Order accordingly.