2002 PLP 2237 (PTD)

4. In the second part, t e complainant has questioned the jurisdiction of the Audit Officer. According to him under section 25 of the Sales Tax Act only Sales Tax Officer can ask to produce records and documents. The appointment of the officer is made under section 30 of the Sales Tax Act where there is no indication for appointment of DGRRA's Auditor as a Sales Tax Officer. The Circular No.9‑S dated 2‑8‑1997 issued by the CBR is not a part of the Act. SRO 800(1)/87 referred to in the circular too has been superseded by SRO 1195(1)/90 which provides. for the audit of the Government Departments. It authorises the Auditor‑General of Pakistan to audit the receipts of the Central Government and DGRA staff has no legal authority to visit the offices of sales taxpayers and audit their records. The complainant requested to call for and examine the record of the case, set aside the impugned order, and grant relief.

5. The Collector (Adjudication), responding to the complaint stated that the case was reported by the staff of Revenue Receipts Audit and submitted to the Collectorate of Sales Tax. Show‑cause notice was issued on 4‑8‑1999 and hearings were fixed for 12‑8‑1999, 23‑12‑1999 and 19-1-2002 but the case was not decided. Consequent on the establishment of Adjudication Collectorate effective from 1‑7‑2000, the case file was transferred to the Adjudicating Officer who fixed hearings on 22-8-2000 and 8‑9‑2000 but no one appeared from the Revenue receipt audit and the Collectorate side to represent the case. The adjudicating Officer decided the case according to the provisions of law. Under section 46 of the Sales Tax Act the complainant had the option to appeal before the Appellate Tribunal for redress of grievance.

6. The complaint was also referred to the Collector of Sales Tax for comments. She replied that 8iere was no provision in sales tax law to dl goods as sample without payment of tax. Thus the complainant contravened the provisions of sections 3, 6 and 7 of the Sales Tax Act.

7. During the hearing of the complaint Mr. Khushnood A. Khan, the authorised representative of the complainant, reiterated the arguments Cat forward in the complaint and emphasized that DGRRA official was not authorized to enter the premises, visit offices of sales taxpayers and audit their record. The audit staff lacked jurisdiction and acted beyond his authority. The audit officials were authorised to audit of the record of offices of federal Taxes only.

8. With regard to the facts of the case, he stated, a sample tank was erected and temporary installed for six months in the premises of Messrs Caltex. There was no prescribed procedure for temporary installation of a manufactured item in the Sales Tax Act. However, for transparency sake the complainant prepared an invoice dated 30‑4‑1998 Clearly describing the fact that it was a sample not for sale. No other document or system was prescribed. The sample was rejected and the deal with not finalised. The storage tank being a unique item could not be shifted immediately and another buyer was not readily available. It took one year before the buyer could be persuaded to purchase the tank at less than cost price. The same took place on 1‑12‑1999 and an invoice prepared the same day and sales tax was paid.

9. On the basis of audit observation, dated 17‑9‑1998, demand notice was issued on 16‑4‑1999 for Rs.80,000 without determining the slue and calculating the tax While the show‑cause notice was issued on 13‑1999. He 4rgued that the Adjudicating Officer did not take into consideration the facts that the Sale Tax Officials acted against law, he did not examine the payment nor the period prescribed for decision and Voted for3 7 months before taking a decision. He added that sales tax was livable on sale and not for sample not for sale. The final sale was in fact a distress sale. The intention of the complainant was entirely bona, fide and documents were prepared both at the time of installation of the sample as well as the final sale. The valuation of the tank by the officials was without any basis. On one of the hearings before the Adjudication Officer, computerised calculation sheet was submitted. The actual cost incurred was 8.3,89,000, but the distress sale price was Rs.2,72,000 on which sales tax of Rs.40,000 had been paid.

10. This is a unique case where the manufacturer, developed a storage tank designed to store chemicals. The storage tanks are not manufactured on the assembly line or in mass production. These are specially designed for storage of specific chemicals. In this case there was not even a proper order or contract for supply of storage tank. It was a first time venture required to be tested before approval and sale.. It could not be manufactured and then shifted to premises for testing for a period of 6 months. It must have been assembled and erected in the premises of Caltex. The manufacturer prepared an invoice dated 13‑4‑1998 for a sample not for sale for the sake of' transparency. Eventually Caltex did not approve it and the sale did not materialise. It was subsequently sold to another party as a distress sale at a low price.

11. On the basis of this invoice the Revenue Receipt Audit reported against the complainant and eventually a show‑cause notice was issued. Clearly the sale of tank within the meaning of taxable supply of the storage tank under the Sales Tax Act took place when the storage tank was supplied on 1‑12‑1999 and sales tax amounting to the sum of Rs.40,800 was paid.. There is no justification to charge sales tax at value higher than the actual price or to demand additional tax and penalty as the tax was paid on the day of sale and the delays in the adjudication process are neither relevant nor attributable to the complainant.

12. The order passed by the Deputy Collector (Adjudication‑III) is arbitrary, unjust, based on irrelevant grounds and has no legal validity. It is recommended that:‑‑ (i) CBR set aside order passed by the Deputy Collector (Adjudication‑III) and (ii) direct the Collector of Sales Tax to finalise the assessment on the basis of transaction value of the storage tank on 1‑12‑1999 when the taxable supply actually took place. C. M. A. /M‑. A. K. /337/FTO Order accordingly.