2007 PLP (Trib (PTD)

MUHAMMAD WALI KHAN (MEMBER TECHNICAL).

This judgment disposes of Appeal No.121/ST/IB/2004 filed by Messrs Attock Petroleum Limited, Islamabad (hereinafter called the appellants) against the Order-in-Original No.16/2004, dated 19-10-2004 passed by the Collector of Customs, Sales Tax and Central Excise (Adjudication), PNCA Building, Liaqat Road, Rawalpindi (hereinafter called the Adjudicating Officer).

2. Briefly, facts leading to this appeal are that during the audit of records of the appellants for the period from July, 1999 to June, 2000 by Chartered Accountants of Messrs Muniff Ziauddin and Company, Chartered Accountants, the appellants were found to have violated the provisions of the Sales Tax Act, 1990 (hereinafter called the Act) in the following manner:

(i) The appellants neither charged nor deposited further tax amounting to Rs. 1,341,206.00 on supply of Bitumen in violation of sections 3 and 3(1A) of the Act which was recoverable from them along with additional tax and penalty. Detailed working of the liability is as under:

Months of Value of Value of Total sale Rate of Amount of Supply Bitumen supplied in bulk Bitumen supplied in packed form value before sales tax further tax further tax not paid July, 1999 35,076,018 1,390,034 36,466,052 3 % 1,093,982 1-8-1998 to 8,026,956 213,841 8,240,797 3 % 247,224 15-8-1999 Total 43,102,947 1,603,875 44,706,849 1,341,206 (ii) During the period under audit the appellants deferred payment of sales tax amounting to Rs.10,648,675.00 on advances received against taxable supplies in violation of section 2(44) of the Act which was recoverable from the appellants along with additional tax and penalty. (iii) In the month of February and March, 2000, the appellants carried forward sales tax refund amounting to Rs.2,082,501.00 in violation of sections 10 and 66 of the Act which was recoverable from the appellants along with additional tax and penalty. Thus the appellants failed to make payment of sales tax amounting to Rs. 14,072,382.00 and contravened the provisions of sections 2(44), 3, 3(1A), 10 and 66 of the Act.

3. Accordingly, vide Show-Cause Notice C. No.ST/Coll/Adj/14/2002/12795, dated 14-10-2002 issued by the Adjudicating Officer, the appellants were called upon to show cause within 10 days of the issuance of the said notice as to why they should not pay the evaded amount of sales tax of Rs. 14,072,382.00 along with additional tax due under section 34 of the Act and as to why they should also not be penalized under section 33 thereof for violation of the provisions of the Act given in para. 2 above.

4. The case was subsequently heard by the Adjudicating Officer who, on the basis of arguments of both sides allowed partial relief to the appellants in respect of supply of Bitumen but in respect of other charges he came to the conclusion that non-payment of the sales tax shown in the show-cause notice in respect of the other charges was fully established. He accordingly ordered that the evaded amount of the tax as adjudged by him shall be recovered from the appellants along with additional tax as payable under section 34 of the Act. He also imposed a penalty equal to 3% of the amount involved under section 33 of the Act on the appellants. Aggrieved of the decision of the Adjudicating Officer, appellants assailed the impugned order in this Tribunal.

5. Mr. Farukh Jawad Panni, Advocate for the appellants argued the case. He mainly focused his arguments on the following points: (i) The supply of Bitumen was made to CDA, FWO, KRL, NLC etc., who being end consumers i.e. persons not liable to be registered under section

14. Therefore, demand of further tax was not tenable at law. (ii) The amount of Rs.10,648,675.00 has wrongly been adjudged against his clients as recoverable from them. On the contrary, this amount, was paid at the time of supply. At the most the sales tax authorities could treat it a deferred payment for imposition of additional tax and penalty but in no case its demand as principal amount is justified. He further stated that pleas of appellants in this regard were not considered at all by the Adjudicating Officer and through a non-speaking order he held that the appellants were liable to pay the said amount as principal amount of tax by simply holding that the said amount was not paid by due date. He also claimed that receipts in question could not be termed as "Advances" being `Bailment of Money' as till the time of receipt no contract had come into existence as no specific item, price and quantity stood determined as in the case of supply of "cement" which factum formed the basis of the decisions of the Supreme Court of Pakistan in the case of D.G. Khan Cement reported as 2004 SCMR 456 and also cases decided by the Tribunal reported as 2003 PTD (Trib.) 2165, 2002 PTD 2440, 2002 PTD 2771. (iii) Without prejudice to above and as held by the Supreme Court of Pakistan in 2004 SCMR 456 and followed by the Tribunal in 2004 PTD 2771, in cases of advance only additional tax could be charged but as the matter in hand involved interpretation of law and there being no mens rea (guilty mind) it is not lawful even to charge additional tax/penalty in such like cases. (iv) Carry forward of sales tax refund of Rs.2,082,501.00 in sales tax return of March, 2000 was actually belated adjustment of input tax of the tax period 12/1998 to 11/1999 which was shown as brought forward input tax credit admittedly with the consent of the sales tax department. The situation has been taken care of in the First Proviso to section 66 by the Finance Ordinance, 2000 to mitigate such hardships. (v) Appointment of special auditor (Messrs Muniff Ziauddin & Co.) was not made in accordance with the provisions of rule 4 of the Special Audit Rules, 1998. Therefore any tax recovery proceedings based on such audit report is not maintainable. He placed reliance in this regard on the judgments of this Tribunal in Appeal No.444/IB of 2002, 2002 PTD 387 and judgment of the Honourable High Court in W.P. No. 1391 of 2000.

6. Controverting the arguments advanced by the learned counsel for' the appellants learned D.R. made the following submissions:

(i) In terms of section 3(1A) of the Act the supplies of retailers to end consumers are exempt from further tax while in the instant case appellants are registered as importers, distributors and wholesalers. Their claim that the goods were sold to end users is incorrect as the end users in the instant case are Messrs National Highway Authority but the invoices were not issued in the name of National Highway Authority because the buyer of bitumen were construction companies. Therefore their claim of exemption of further tax in this respect is also not established. (ii) Sales tax on advances is to be paid as confirmed by Honourable Supreme Court .in Appeal No. 1866 of 1996 etc. dated 11-11-2003. Therefore demand of sales tax on advancers is lawful and justified. (iii) The appellants are neither exporters nor new investors. They were entitled to carry forward the excess input tax but the refund claim lodged for this case was ab initio illegal. Further the permission was conditional and subject to audit. (iv) Imposition of penalty and additional tax on the appellants by the Adjudicating Officer is justified. The Honourable High Court in Tax Appeal No.4 of 2003 has held that "Thus the scheme of law as envisaged by the legislature appears to be that imposition of penalty under section 33 and levy of additional tax under section 34 was made mandatory and discretion of Adjudicating Officer was taken away but in order to grant relief in appropriate cases jurisdiction was conferred on the Central Board of Revenue under the substituted section 34A. The penalty of 3% has been levied under section 33(2)(cc), (7) of Sales Tax Act, 1990". (v) The appointment of special auditors was in accordance with the law and the said special auditors were appointed under section 32A of the Act and notified vide S.R.O. 579(I)/99, dated 17-5-1999 and the term of reference conveyed by C.B.R. are enclosed herewith. The issue of appointment of the special auditors under section 32A of the Act has been discussed in detail Order-in-Original No.16 of 2004, at para. 5(i)(ii), 7(i), 9(i) and paras 16(a)(b). It is further added that appointment of special auditors cannot be challenged at this stage. Appellants should have challenged the appointment of special auditors at the time of their appointment at the competent forum that in the Court of law. This issue cannot be raised at the forum of adjudication or Appellate Tribunal as the jurisdiction of the adjudication is limited and it cannot examine the vires of S.R.O's. reliance is placed on the judgment of Honourable Lahore High Court in Appeal No.185 of 2001, dated 21-11-2001 and held that:

"We therefore, do not find any difficulty in holding that the Tribunal as forum of appeal possesses the powers, which are exercisable by the Collector, and sales tax officer exercising their jurisdiction under sections 36 and 11(2) of the Sales Tax Act, 1990. A close analysis to the provisions of sections 36 and 11(2) read with section 46(4) of the Sales Tax Act, 1990 shows that the powers of the Tribunal are limited and these powers confined, as an appellate powers, in respect of matters falling within the parameters of sections 36 and 11(2) of the Act. These powers inter alia do not include the powers of judicial reviews as are available to the Civil Court in exercise of their plenary jurisdiction and the High Court or Supreme Court in exercise of their Constitutional jurisdiction. We therefore accordingly held that powers of judicial review as available to the superior Courts under the Constitution and Civil Courts under the plenary jurisdiction are not available to the Tribunal. In the parameters of their limited jurisdiction as Appellate Tribunal they could not examine the vires of S.R.O. 207(I)/98 and S.R.O. 751(I)/2000. Both the S.R.Os. were issued by the Central Board of Revenue in exercise of the, jurisdiction vested in them under section 2(46) of the Sales Tax Act, 1990. The Tribunal was not vested with any power to call into question the vires of these S.R.Os. and strike down the same being ultra vires, hence we find that the Tribunal exceeds its jurisdiction in deciding the question of vires of the relevant S.R.Os. on this score, the judgment of the Tribunal: is therefore not sustainable in the eyes of law and we accordingly, hold as such." In the light of above the learned D.R. prayed that the appeal may be dismissed as it does not merit consideration.

7. After having heard both the parties and having examined record of the appeal carefully we have come to the following conclusions:

(1) On imposition of further tax under section 3(1A) of the Act on supply of Bitumen the claim of the appellants is that the supply was made to end users like CDA, FWO, KRL, NLC etc. who being end users are not liable to be registered and as such further tax was not chargeable. The respondents' claim is that supplies were made to the contractors. From perusal of the impugned order we find that the learned Adjudicating Officer has not bothered to determine in whose names invoices for the supplies of Bitumen were issued by the appellants and whether those supplies were made on the basis of agreement with Government agencies who were end users and whether the consideration for those supplies were made by the Government agencies not liable to registration or the recipients themselves. Both parties have also failed to substantiate their rival claims before us with evidence documentary or otherwise. Facts whether supplies were actually made to Government organizations as end users or to the contractors need to be verified to determine whether further tax was chargeable or not. Therefore the order of the Adjudicating Officer on this count is set aside and the case is remanded to him for de novo decision after ascertaining as to whom the supplies of Bitumen in dispute were made i.e. whether to Government organizations or other persons, if any, not liable to registration, as contended by the appellants, or to contractors or other persons who were liable to registration as claimed by the sales tax authorities and then decide the case on merit and according to law after affording both the parties adequate opportunity of hearing and enabling them to lead evidence in support of their claims. (2) On non-payment of advances the appellants claim that it could at the most be a case of deferred payment of sales tax on which the Adjudicating Officer could have considered imposition of penalty and additional tax and demand of principal amount along with penalty and additional tax is not justified. The respondents claim that principal amount was not paid therefore the Adjudicating Officer has rightly ordered the recovery thereof along with penalty and additional tax. Perusal of the impugned B orders shows that the Adjudicating Officer has not bothered to determine whether it was late payment of sales tax on advances received by the appellants or non-payment of sales tax on such advances at all. Even both the parties have not been able to assist us in determination of this fact with relevant documentary evidence. This leaves no option with us but to remand the case to the Adjudicating officer for determination of this fact first. Accordingly, his order on this account is set aside and the case is remanded to him with the direction to first assertain whether it was a case of delayed payment of sales tax on advances received by the appellants and, if so whether demand of the said tax gain was justified or it was a case of non-payment of sales tax on advances justifying recovery thereof along with additional tax and penalty and then decide the case on merit and according to law after affording adequate opportunity of hearing to both the parties and enabling them t produce evidence in support of their claims. (3) So far as the demand of Rs.2,082,501.00 alleged to have unlawfully been carried forward as input tax adjustment, there is no dispute that the appellants filed two refund claims i.e. one on 4-12-1999 under section 10 of the Act for the refund of Rs.1,991,604.00 which they had paid as input tax on plant and machinery and the other on 2-2-2000 for the refund of sales tax amounting to Rs.90,807.00 under section 66 of the Act. It is also an admitted fact that both these requests were allowed by the Assistant Collector (Refund) with the direction that the same amount shall be carried forward by the appellants as input tax deduction in the subsequent tax period. However, the sales tax authorities claim that if the amount of input tax paid by a registered person in a tax period is greater than the amount of output tax due' from him in that period carry forward of the excess amount of input tax to the next period can be allowed under section 10 of the Act in the following two situations only:

(a) If the input tax is incurred in connection with zero-rated supplies. (b) If the input tax is paid on acquisition of plant 'and machinery by new investor who at the time of taking delivery of plant and machinery is not making taxable supplies. They further claim that refund of sales tax under section 66 of the Act can be made if it was paid due to inadvertence, error or misconstruction or due to the fact that it was not deducted as input tax in the tax period by the registered person from the output tax due from him in that period. According to them the refund claims of the appellants were not based on the aforesaid factors. Therefore, the refund allowed by the Assistant Collector (Refund) neither being admissible under section 10 nor under section 66 of the Act was not justified. We have no hesitation in holding that the stand taken by the sales tax authorities is not based on legal footing for the following reasons:

(a) The Assistant Collector (Refund), according to their own admission, had allowed the two amounts indicated above to be refunded to the appellants respectively under sections 10 and 66 of the Act but instead of directing the sales tax authorities for payment of the amount to the appellants he allowed the appellants to carry forward the said amounts as input tax adjustment towards their future tax liabilities that will become due in the subsequent tax periods. If the sales tax authorities were of the view that the legality and propriety of the order of the Assistant Collector, Sales Tax (Refund) was questionable on their aforesaid grounds then the legal course left with them was to get the decision of the Assistant Collector reopened by the Collector, Sales Tax under section 45A of the Act or they should have filed an appeal with the Collector (Appeals) against the decision of the said Assistant Collector. None of the two courses of actions was adopted with the result that order of the Assistant Collector (Refund) attained finality. lay questioning the order of the said officer by instituting the present case they have not only indulged in illegality but have also made mockery of a lawful order of their own officer which was not expected of the sales tax authorities. (b) A plain reading of section 10 of the Act makes it abundantly clear that, subject to subsection (2) thereof, if the total deduction of input tax paid by a registered person in a tax period exceeds the output tax due from him in that period, .he being an importer, a manufacturer, a wholesaler or a retailer shall carry forward the excess amount to the next tax period. A reference to subsection (2) of the Act in subsection (1) thereof has a limited relevance to the general rule as envisaged in section

10. The limited relevance of subsection (2) to subsection (1) of section 10 of the Act is that the input tax incurred in connection with a zero-rated supply shall be refunded not later than thirty days of filing of the return. No such condition is linked with other refunds/adjustments of input tax incurred in connection with supplies other than zero-rated supplies. Nowhere in section 10 it has been laid down that if input tax of a registered person incurred in connection with supply other than zero-rated supply or on plant and machinery other than the plant and machinery of new investor shall not be carried forward to the next tax period if the input tax paid in that period exceeds his output tax liabilities in that period. It therefore follows that subsection (2) has a limned nexus to subsection (1) of section 10 of the Act and that too for the expeditious refund of input tax incurred on zero-rated supply (export) without any reference to the amount of input tax or its ratio to the output tax liabilities of the registered person for that tax period i.e. even if the output tax liability of the registered person in that tax period is less than the amount of input tax incurred by him in respect of zero-rated supply full amount of input tax so paid shall be refunded to him. Similarly, the second proviso to subsection (1) of section 10 of the Act takes care of new investors who have yet to make taxable supplies after installation of plant and machinery on which they paid input tax. According to this proviso and in the manner provided for therein they are also entitled to carry forward the input tax paid on the plant and machinery to subsequent tax period for its adjustment from the output tax of that period. The word "also" used in this proviso itself negates the stand taken by the sales tax authorities and goes to prove that there are other situations where input tax shall be carried forward to the next tax period. This being the legal position we fail to understand where the Assistant Collector Sales Tax (Refund) committed illegality, as claimed by the sales tax authorities, in making refund of the input tax paid by the appellants on plant and machinery and authorizing them to carry forward the same amount to the subsequent tax period. The sales tax authorities have misinterpreted subsection (2) of section 10 of the Act and the second proviso to subsection (1) thereof by claiming that under subsection (1) of section 10 read with subsection (2) thereof refund or carry forward of input tax to subsequent tax period can be allowed only if it is incurred in respect of zero rated supplies or in respect of plant and machinery by new investors. This interpretation of section 10 of the Act is without any material and legal substance and cannot be allowed to hold the ground. The provisos to subsection (1) of section 10 emanate from the main clause i.e. subsection (1) thereof and therefore do not have overriding effect on the main clause. Similarly, superior Courts have laid down the principle that in case of doubt the benefit should go to subject. It has also been held that if two interpretations of a statutory provision could be possible the one favourable to the subject should be preferred. We cite below a few guidelines given by the superior Courts which support the appellant's case. (i) The provisos are often added to allay fears. In no circumstances can any proviso be construed in such a manner as to obliterate and swallow up the main provision to which it is a proviso. A proviso is inserted to guard against the particular case of which a particular person is apprehensive, although the enactment was never intended to apply to his case or to any other similar case at all. (1973) 89 ITR 45 (SC). (ii) A proviso cannot be costumed without attributing to it that effect. Further, if language of the enacting part of the statute is plain and unambiguous and does not contain the provisions which are said to occur in it, one cannot derive those provisions by implication from a proviso. 1998 PTD 1945, (1980) 122 ITR 545). (iii) That proviso to any parent provision has to be read very cautiously and the intended whittling effect therefore cannot be extended so as to defeat the provision itself inasmuch as it is not to be presumed that the legislature intended to take away by one hand through a proviso what it has basically conferred through the other hand by parent provision. PLD 1990 Lah. 1. (iv) If the object of a statute is defeated by treating the provision as mandatory it must be construed as director specially when non-compliance with the proviso is not vested by any penalty. PLD 1990 Lah. 461. (v) There is no cavil about the settled principle of interpretation that taxing provisions should be strictly interpreted and the benefit or ambiguity, if any, should go to the subject. 1994 PTD 716. (vi) Where two equally reasonable constructions are possible, one strict and other beneficial to the assessee, letter should be preferred in taxing statutes. PLD 1977 Lah. 292. (vii) The cardinal principles of interpretation of a fiscal statute seem to be that all charges upon the subject are to be imposed by clear and unambiguous words. There is no room for any intendment, nor there is any equity or presumption as to a tax. A fiscal provision of a statute is to be constructed liberally in favour of the taxpayer and in case of any substantial doubt, the same is to be resolved in favour of the citizen. PLD 1992 SC 980 and 1993 SCMR 274 = 1993 PTD 69. (viii) It was observed that according to the well-accepted principles of interpretation the doubt has to be resolved in favour of the citizen. In these circumstances, the law-makers could clarify its intention by adding an explanation which cannot be legitimately objected to. 1996 PTD 489. (ix) According to us, if two interpretations are possible then any interpretation which favours the assessee has to be preferred. 1991 PTD 783. (x) It is well-recognized principle of interpretation that if a fiscal statute is capable of two reasonable interpretations then the one which is favourable to the subject be adopted. (1985) 51 Tax 79 (HC Kar.). (c) Section 7(1) of the Act entitles a registered person to deduct the input tax paid on supplies received by him in a tax period from the output tax due from him on the supplies made or to be made by him in that period. The word "entitled" means "to give right to". Thus subsection (1) of section 7 of the Act gives right to the registered person to adjust the input tax towards his output tax liabilities. This right cannot be denied to him for procedural lapses, if any, of not claiming the same within tax period or not filing of refund claim under section 66 of the Act because such a denial would amount to double taxation which is not allowed under the value added, taxation system under the Act.

8. In view of the above the adjustment of input tax carried forward to the next tax period by the appellants under a valid order cannot be questioned. The appeal on this account succeeds and we allow it accordingly and remit the additional tax and penalty imposed on the appellants on this account.

9. Coming to the legality or otherwise of the audit of record of-the appellants under section 32A of the Act by the Chartered Accountants of Messrs Muniff Ziauddin and Company, Chartered Accountants, the appellants are of the view that appointment of the special auditors was not made in accordance with the provisions of rule 4 of the Special Audit Rules, 1998. To substantiate this view they have relied upon the judgment of this Tribunal in Appeal No.444/18/2002, 2002 PTD 387 and the judgment of the Honourable High Court in Writ Petition No.13917/2000 and have claimed that the audit conducted by the special auditors is illegal and ultra vires the law. Therefore they have contended that the show-cause notice and the impugned order of the Adjudicating Officer based on such audit report are also illegal and need to be struck down. The respondents, on the other hand, have supported the audit report and the impugned order of the Adjudicating Officer and have claimed that the legality of the order passed by the Adjudicating Officer cannot be-questioned.

10. Before we discuss the merits of the rival arguments on this issue it will be appropriate to reproduce below section 32A of the Act, S.R.O. 579(I)/99, dated 17-5-1999 and rule 4 of the Special Audit Rules, 1998 notified vide S.R.O. 1001(I)/98, dated 23-9-1998 to have a clear picture of the legal position with reference to auditing of records of registered persons through special auditors:

"32A. Special Audit by Chartered Accountants or Cost Accoun?tants.

(1) The Board may, by notification in the official Gazette, appoint a "Chartered Accountant as defined under Chartered Accountants Ordinance, 1961 (X of 1961) or a firm of Chartered Accountants or a Cost and Management Accountant within the meaning of the Cost and Management Accounts Act, 1966 (XIV of 1966) or a firm of Cost and Management Accountants, for conducting audit of records of registered person. (2) Notwithstanding that records of a registered person have been audited by an officer appointed under section 30, the Board or a Collector may direct an auditor appointed under subsection (1) to audit the records of any registered person. (3) An auditor appointed under subsection (1), shall have the powers of an officer of sales tax under sections 25, 37 and 38." Section 32A was enacted vide Finance Act, 1998 (III of 1998) and the present subsection (1) thereof was substituted vide Finance Act, 1999 (IV of 1999). Before its substitution as aforesaid subsection (1) as originally enacted vide Finance Act, 1998 read as under:

"(1) The Board may, by notification in the official Gazette, appoint an auditor who is a Chartered Accountant within the meaning of Chartered Accountants Ordinance, 1961 (X of 1961) or a Cost and Management Accountant within the meaning of the Cost and Management Accountants Act (XIV of 1966), for conducting special audit of records of registered person. In pursuance to the unamended subsection (1) of section 32A of the Act G.B.R. issued Notification No.S.R.O. 579(1)/99, dated 17-5-1999. The said notification is reproduced below:

"Notification No. S.R.O. 579(I)/99, dated 17th May, 1999.

In exercise of the powers conferred by section 32A of the Sales Tax Act, 1990, the Central Board of Revenue is pleased to appoint the chartered accountants of the following chartered accountants firms and their branch offices anywhere in Pakistan to be the auditors for conducting special audit of the records of registered persons, as may be assigned to them by the respective Collectors from time to time:

(1) Messrs Ferguson & Co. Chartered Accountants, Karachi. (2) Messrs Anjum Asim Shahid & Co. Chartered Accountant, Karachi. (3) Messrs Avis Hyder Zaman, Chartered Accountant, Karachi. (4) Messrs Coopers & Lybrand, Chartered Accountants, Karachi. (5) Messrs Ford, Rhoodes, Roboson, Marrow, Chartered Accountants, Karachi. (6) Messrs Hameed Chaudhry & Co., Chartered Accountants, Lahore. (7) Messrs Hyder Bhimji & Co., Chartered Accountants, Karachi. (8) Messrs Ibrahim Shaikh & Co., Chartered Accountants, Karachi. (9) Messrs Ilyas Saeed & Co., Chartered Accountants, Lahore. (10) Messrs Khalid Majeed Hussain Rehman, Chartered Accountants, Islamabad. (11) Messrs M. Yousaf Saleem & Co., Chartered Accountants, Karachi. (12) Messrs Muniff Zia-ud-Din & Co., "chartered Accountants, ' Karachi. (13) Messrs Rahim Iqbal Rafiq & Co., Chartered Accountants, Karachi. (14) Messrs Rahim Jan & Co., Chartered Accountants, Lahore. (15) Messrs Riaz Ahmed & Co., Chartered Accountants, Lahore. (16) Messrs Saeed Kamran Patel & Co., Chartered Accountants, Islamabad. (17) Messrs Sandhu & Co., Chartered Accountants, Karachi. (18) Messrs Sidat Hyder Qamar Maqbool & Co., Chartered Accountants, Karachi. (19) Messrs Tariq Ayub Anwar & Co., Chartered Accountants, Lahore. (20) Messrs Taseer Hadi Khalid & Co., Chartered Accountants, Karachi. Rule 4 of Special Audit Rules, 1998:

"

4. Scope of special audit.

The scope of the special audit shall be the expression of professional opinion with respect to the following namely:-- (a) whether the records, tax invoices and monthly returns have been maintained, issued or furnished correctly by the registered person; and (b) whether the monthly returns furnished by the registered person correctly reflect that (i) all taxable supplies in the tax period as revealed by the records and tax invoices; and (ii) all input tax, output tax and the net amount of sales tax payable or refundable, as the case may be are in accordance with the provisions of the Act and are duly substantiated by the records required to be maintained for the purpose."

11. From the plain reading of section 32A as it existed when S.R.O. 579(I)/99, dated 17-5-1999 was issued it is abundantly clear that this law authorized C.B.R. to appoint a Chartered Accountants or a Cost and Management Accountant for conducting special audit of records of registered person. While conducting audit such auditor exercised powers of officer of sales tax under sections 25, 37 and 38 of the Act. Similarly, a glance through S.R.O. 579(I)/99, dated 17-5-1999 clearly shows that C.B.R. in exercise of the aforesaid authorization, appointed the Chartered Accountants of the Chartered Accountants' firms listed in the said S.R.O. including Chartered Accountants of the branch offices of the said firms to be auditors for conducting special audit of records of registered persons. The name of Messrs Muniff Zia-ud-Din and Company, Chartered Accountants appears at Serial No.12 of the said notification meaning thereby that the Chartered Accountants of this firm including the Chartered Accountants of its branch offices are appointed auditors by C.B.R. for conducting special audit of records of registered persons and in doing so they are officers of sales tax within the meaning E of subsection (3) of section 32A of the Act to exercise powers of an officer of sales tax under sections 25, 37 and 38 thereof. Rule 4 of the Special Audit Rules, 1998 gives the scope of special audit. It is neither the requirement of section 32A nor that of S.R.O. 579(I)/99, dated 17-5-1999 or Special Audit Rules, 1998 to notify the terms of reference of the special auditors. The C.B.R. vide its letter C. No.CA/ST/32A/16713-14, dated 18-7-2000 addressed to the appellants with a copy thereof to the above named Chartered Accountants firm informed the appellants that auditors of the above-mentioned firm will conduct audit of their record for the period from 1-7-1998 to 30-6-2000 as officers of sales tax within the meaning of sections 25, 37 and 38 of the Act. The audit will commence on 24-7-2000. The appellants were advised in the said letter to provide to the auditors record so that audit could be completed in minimum possible time. Rule 4 of Special Audit Rules, 1998 requires the auditors to express their professional opinion in respect of the matters with reference to the record being audited by them. In the instant case they have expressed their professional opinion with reference to the record of the appellants pertaining to the period of July, 1998 to June, 2000 the flaws noticed in the record of the appellants by the audit authority were made the basis of the show-cause notice and the impugned order of the Adjudicating Officer. This is the financial position borne out from the record. It is therefore crystal clear that the Chartered Accountant of Messrs Muniff Zia-ud-Din and Co., Chartered Accountants were appointed auditors for conducting special audit of records of the appellants for a given period. They conducted audit of record of the appellants only for that period and expressed their professional opinion with reference to that period only, which culminated in the passing of the impugned order by the Adjudicating Officer. We therefore see no illegality in conducting audit of records of the appellants for the period specified in C.B.R. letter by the chartered accountants of Messrs Muniff Zia-ud-Din and Co., Chartered Accountants.

12. So far as the decision of the Honourable High Court in Writ Petition No.13917 of 2000 and the decision of the Tribunal in Appeals Nos.93 of 2002 and 101 of 2002 relied upon by the appellants are concerned, the decision of the Honourable High court finds a mention in the decision of the Tribunal in Appeals Nos. 93 of 2002 and 101 of 2002 of the same appellants. The same is reproduced below for facility of ready reference:-- "This order shall dispose of W.Ps. Nos.13917 of 2000 and No.13918 of 2000. In these writ petitions the petitioners have questioned the proposed audit of their establishment by special auditors inter alia on the ground that the auditors had not been appointed in accordance with the provisions of Sales Tax Act, 1990 and that their terms of reference also do not stand clearly defined. Learned counsel has placed on record a judgment dated 1-11-2001 of a learned Division Bench of this Court in C.A. No.295 of 2001, whereby a similar question has been resolved after hearing all 'concerned including the departmental representatives. Learned counsel prays that the instant writ petitions be also disposed of in terms of the said judgment." In Customs Appeal No.295 of 2001 reported as Messrs Brother Sugar Mills Limited v. Appellate Tribunal Sales Tax, Custom House, Lahore and 2 others 2002 PTD 387 to which a reference has been made in the judgment of the Honourable High court referred, to above the Honourable Lahore High Court has observed as follows:

"After hearing learned counsel for the parties we are inclined to dispose of this appeal with the following directions: (1) The auditors shall be appointed by the C.B.R. through the prescribed notification spelling out the terms and conditions of their employment as professional auditors. (2) These terms of reference should not go beyond the scope of their functions as special auditors as given in Sales Tax Special Order, 1998 read with General Order No.1 1999, Sales Tax General Order No.9 of 1999 issued on 22-9-1999 and S.R.O. . No.206(I)/2001, dated 2-4-2001. (3) The special auditors before taking upon the assignment will serve the appellant with notice and will not only restrict their investigation in accordance with the parameters settled in the above instructions/rules by also observing the time limit as contemplated therein. (4) Appeal disposed of."

13. Having considered the rival arguments of both the parties. and having perused record of the case, the legal provisions of the Act and the rules made thereunder relating to special audit and the decisions of the Tribunal and of the Honourable High Court relied upon by the appellants we hold that the appellants have failed to convince us where the special auditors went beyond their mandate either in terms of section 32A or under S.R.O. 579(I)/99 dated 17-5-1999 or under rule 4 of Special Audit Rules, 1998 or in terms of C.B.R. letter of 18-7-2000 while auditing their record for the period of July, 1998 to June, 2000. They have also failed to prove how the decision of the Honourable High Court under reference could be construed to have been violated by the special F auditors or the Adjudicating Officer. In the absence of any material evidence on record to this effect the contention of the appellants cannot be accepted. We find no illegality in the .audit report, the show-cause notice and the impugned order passed by the Adjudicating Officer on this account and conclude that there was no illegality in the audit report of the special auditors. Resultantly, we do not find any legal infirmity in the show-cause notice and the impugned order of the Adjudicating Officer on the basis of the audit report of the special auditors.

14. The appeal is accordingly disposed of in terms of paras. 7, 8 and 13 above.

15. Announced.

16. Parties may be informed accordingly. C.M.A./178/Tax(Trib.)???????????????????????????????????????????????????????????? Order accordingly.