2003 PLP 2891 (PTD)

13. The Assistant Collector of Sales Tax (Registration and De Registration) attended the hearing on, 30‑6‑2003. On the basis of his statement and replies to the queries, the position emerged as follows:‑‑ (1) The de-registration application initially remained pending for about two years without action because of acute shortage of auditors. (2) The senior officers placed greater emphasis and high priority on the audit of the registered persons and to check the increasing number of fake/flying invoices. (3) A.C. could not explain whether the complainants contention that they were not required to be registered when dealing with the exempted goods was correct or not. (4) There was, nothing on record to show whether the reply to the audit observation had been examined. (5) The instructions regarding audit and de‑registration contained in Standing Order, 1/2002 were not complied with. (6) In response to the notice under section 37 of the Sales Tax the complainants had replied to the queries but the mattes did not progress. (7) Mr. Farrukh Sajjad, Assistant Collector, had asked the counsel for the complainants to furnish copies of the documents as the file was not traceable which was found with Mr. Zahidul Bari, senior auditor of I&P Branch: (8) Only one audit observation dated 2‑11‑2001 was issued and the demand of sales tax Rs.36 million and additional tax Rs.94.9 million, total Rs.132 million, had been worked out. No action was taken on the reply of the complainants dated 27‑11‑2001 till 18‑12‑2002 when a contravention report was sent to the Collector (Adjudication). (9) The show‑cause notice has not yet been issued by the officer of competent jurisdiction.

14. Mr. Jamshed Talpur, Assistant Collector, requested that opportunity‑for hearing be given to Mr. Zahid‑ud‑Bari, senior auditor, to submit explanation regarding the audit proceedings and the de registration process of the complainant. They attended this office on 10‑7‑2003. Mr. Zahid-ur‑Bari stated that the complainants did not reply to the audit observation issued on 24‑7‑2001. When a notice under section 37 was issued on 11‑10‑2002, they submitted a reply in December 2002. Since the reply was not satisfactory, a contravention report was formulated in February, 2003 and‑sent for adjudication.

15. The submissions made in the complaint and the arguments put forward by the learned Consultant as well as the reply of the Department and the arguments advanced by the Assistant Collector of Sales Tax have been examined. It has been established that (i) no action was taken on the application for de‑registration for about two years; (ii) the Complainants reply to the audit observation dated 2‑11‑2001 was not examined for more than a year; (iii) the contention of the complainants that they were not required to be registered when dealing with the exempted goods was not examined; (iv) the complainants were asked to furnish copies of the documents again and again while their reportedly missing file was available with the I&P Branch; (v) more than three years after filing of the de‑registration application, a contravention report was formulated but intimation about it was not given to the complainants; and (vi) show cause notice has not yet .been issued to them.

16. The audit has dragged on for a long time and the complainants have been kept in dark about the outcome of audit or the result of explanation etc given by them. The demand of Rs. 132 million seems to have been calculated by the auditor and the complainants have given explanations in this regard but have not been informed of the outcome of this procedure. It is a clear case of harassment on the part of the sales tax authorities. It seems that the senior officers have left the entire initiative with the auditors who conduct the process of audit by fits and starts at their convenience. Maladministration is established.

17. The C.B.R. should take serious view of this kind of maladministration which renders the taxpayers hostage to the whims of the sales tax officials and leaves them at their mercy.

18. It is recommended that (i) C.B.R. to devise clear parameters for the auditors to comply with and senior officers should be made responsible to ensure that the prescribed time frame is strictly followed. (ii) When the taxpayers offer explanation or reply to the audit observation, the sales tax authorities should give their clear response within specified period. (iii) Where a contravention case is instituted against a taxpayer, the sales tax authorities should intimate him of the nature of contravention and the action proposed to be taken. (iv) C.B.R. consider to specify a time frame for issue of a show cause notice and completion of adjudication proceedings. (v) Institute an inquiry to identify the reasons for the inordinate, delay at various stages of the audit, consequent on the de registration application, spanning a period of about three and half years from August, 1999 to December, 2002 and take suitable action against the officials responsible for the delay and for repeatedly demanding copies of the documents from the complainants; (vi) Direct the Collector (Adjudication) to ensure that show‑cause notice be issued to the complainants within thirty days; and (vii) Adjudication proceedings be finalized within a reasonable period of time. (viii) Decision regarding the application for de‑registration be given within fifteen days of the issue of the adjudication order. (ix) Compliance be reported within two months. C.M.A./896/FTO Order accordingly.