2007 PLP 1099 (PTD)

(9) The adjudication order comprised the text of the SCN, the reply to the SCN, the comments by the Department, but did not refer to and examine the submissions made by the Consultant. (10) Since the Adjudicating Officer did not consider the submissions of the unit, the "act of adjudication tantamount to be illegal, illogical, mala fide, deliberate ignorance in order to safeguard the mala fide proceedings of the Department". (11) During the proceedings, the Departmental Representative (DR) repeatedly stated that they had in their custody all evidence and records but the same etc. were not produced. (12) DR or the Adjudication Officer did not provide him the opportunity to reconcile the data before the issuance of SCN or the adjudication order. (13) The grim fact was that the Collector did not at all apply his judicial mind before issuing the order which was not basic speaking order. Without considering and analyzing without proving any charge, without considering and paying attention to any of the arguments, advanced by the Complainants and the factual and legal position of the case, the Adjudication Officer whimsically, without applying his judicial mind, upheld the charges framed in the show-cause notice. (14) The impugned adjudication order was not sustainable under law and of no legal value and it should be vacated.

5. The Collector (Adjudication) replied to the complaint that the case was adjudicated on the basis of a contravention report submitted by the Executive Collectorate. In fact two separate contravention reports were submitted and the first order covered the period 1-7-1999 to 30-10-2000 and the second order covered the period from August, 2000 to December, 2001. The first contravention report was made on the basis of record resumed in the first instance. Later, some more record was recovered which was included in the second case. He stated that the order covered all the points put forward by the complainants as well as the Department and the allegation of non-speaking order was baseless. He stated that the complainants had, instead of preferring appeal to the Appellate Tribunal under section 46 of the Sales Tax Act, submitted a complaint to the Federal Tax Ombudsman which was barred by law., Therefore, they be directed to first exhaust departmental remedies.

6. The Assistant Collector of Sales Tax, Sales Tax House, Karachi, also submitted parawise comments on the complaint and reiterated the arguments that the complainants should have filed an appeal before the Appellate Tribunal instead of filing a complaint in this office. He stated that information against the complainants was received through National Accountability Bureau which proved correct on investigation. The Deputy Collector who conducted the search with the subordinate staff served notice to the party under section 36 of the Act and conducted search under section 40-A in accordance with law. He stated that the private record was obtained under section 38, the diary and the note sheets were properly shown to the Adjudicating Authority and the reply to SCN and the comments of the Department were thoroughly probed by him. He stated that the complaint had no legal basis and it had been made only to avoid payment of the amounts adjudged against the complainants. He stated that they be directed to pay the amounts outstanding against them.

7. AR submitted a brief resume of the contents of the complaint and "vehemently denied" the allegations of unrecorded purchases and sales and contended that all records of actual purchases and sales were available with the Department in the income tax and sales tax records. He "fervently denied" the (validity of) handwritten papers provided by the unknown suppliers. He stated that allegations of clandestine removal and huge supplies could not be established on the basic assumptions and presumptions, the Department did not possess any private record for the relevant period and the figures relied upon by the Department could not be substantiated. He stated that copies of diary, attendance register of workers, electricity, gas and telephone bills provided to the complainants did not belong to them.

8. During the hearing of the complainant, AR reiterated that since the search of the premises and seizure of records was ab inito without lawful authority, all subsequent proceedings were also unlawful. He contended that during the hearing by the Adjudication Officer, the seized records were not produced, the allegations contained in the SCN were not established, he was not given the opportunity to examine the record, compare the same with the specific allegations in SCN and rebut the same. When it was pointed out by the Departmental Representative (DR) that hearings were conducted on nine dates, AR stated that on all occasions only papers were exchanged and only on the last date of hearing, arguments were allowed but without production of records and the opportunity of scrutiny and rebuttal was denied.

9. DR responded that AR did not discuss or rebut the charges mentioned in SCN either in its reply or at the time of hearing; he had only raised objections and pointed out errors and mistakes but did not bring out any concrete evidence contradicting the allegations or substantiating his own stand.

10. The Deputy Superintendent stated in his separate submission that massive evasion of sales tax was computed on the basis of (1) the information received from the Director NAB and (2) the private record resumed during the raid showing labour charges, electricity bills, diesel expenses etc. He stated that the overhead charges revealed from the private accounts of the manufacturer were not consonant with the recorded production. When the information communicated through the NAB was examined, it was found that the overhead charges were commensurate with the new statistics made available. All the evidential record was produced before the Adjudicating Officer and was also provided to the complainants after issuance of SCN.

11. AR responded that it was admitted by the Collector in his order No.1 of 2003 that private records for 13 months were not found at the premises of the complainants. He stated that private record was neither available with the prosecution nor was it made available to him and his requests and applications in respect of the queries made by him in the reply to SCN were ignored by the Adjudicating Officer.

12. AR stated that the questions raised during the course of hearing were not replied to by the Adjudicating Officer or the Department. While the period from 1-7-1999 to 20-10-2000 was allegedly the period of default in SCN, the same period had already been covered in another case. The Collector had admitted this contention and allowed to delete the period from August, 1999 to October, 2000 but the amount of principal sales tax mentioned in the order (related to the period up to 30-9-2003, which) was inclusive of the deleted period. Thus an amount of Rs.1,013,148 was overcharged through the impugned order. The prosecution had applied a wrong formula for calculation of gross profit but the impugned order was silent about it.

13. From the submissions made by both the sides, it has been brought out that the Department has taken the position that (i) the search carried out by the sales tax staff was legal which led to the recovery of private record supporting allegations of clandestine removal of production and consequent evasion of sales tax, (ii) the handwritten pieces of paper were relied upon as valid evidence of supply of raw material to the complainants, (iii) the evidence of purchase of diesel and payment of salary/charges to labour also revealed the concealment of production, (iv) all records were produced during the adjudication proceedings and full opportunity was provided to the complainants/AR to examine the same and submit defence arguments.

14. AR has (i) argued against the legality of the search without due process of law, (ii) denied recovery of any private records, (iii) the period of default had already been covered in another case, (iv) the Collector admitted this contention and allowed deletion of the period which was not done, (v) during the period mentioned in SCN, diesel was not purchased for the generator but the Adjudication Officer did not take this point into account, (vi) the prosecution ignored EOBI and SESSI documents as valid evidence about the number of employees etc. which nullified the prosecution case, (vii) the arguments advanced in reply to SCN were not examined by the Collector (Adjudication), (viii) all the points raised in defence and inquiries made by AR, the calculation of sales tax and the additional tax etc. were not examined and discussed in the adjudication order. The learned AR also emphasized that the time limitation for issue of adjudication order as prescribed under subsection (3) of section 36 of the Sales Tax Act was of mandatory nature and the Adjudicating Officer was under legal obligation to decide the case not beyond the period of 90 days of the issue of show-cause notice.

15. In the 11-Page adjudication order, the Collector has reproduced the charges against the complainants, almost the entire reply to the SCN in five pages, and the Department's (Auditor's) comments in more than three pages. The complainants had made certain significant observations about the gaps in SCN, they had raised several queries, asked for some information and clarifications such as the calculation of dues etc., put forward arguments against the rate of profit, pointed out the contradiction about the period in sub-paragraph (vii), they did not accept the labour charges and the calculation of miscellaneous expenses and additional tax, and raised their major objection against reliance on the written pieces of paper. They had mentioned that the records had not been provided, and the gas bills, telephone bills and electricity bills relied upon by the Department did not belong to them.

16. A perusal of the impugned order reveals that none of the arguments advanced by the AR, whether factual or legal, have been fairly and properly examined by the Adjudicating Officer. He has not discussed the issues raised by AR, he has not examined the evidence issue-wise, he has not discussed the questions involved and raised. He has not given any attention or consideration to the facts of the case, the charged levelled in SCN, the basis of the charged, the validity of the defence arguments, whether the observations of the Departmental officials were substantive or otherwise etc. Ignoring all the objections and arguments of AR, he has summarily decided the case, in one paragraph in a general manner, entirely on the basis of the report sent to him by the reporting officer.

17. The charges levelled by the AR against the Adjudicating Officer of not applying his mind and not issuing a speaking order is established. He seems to have ignored all the norms of legal fairness in a decision which is perverse, arbitrary, unjust and unreasonable; it betrays inattention, incompetence and inefficiency which amounts to a, very serious case of maladministration as defined in subsection (3) of section 2 of the Ordinance No. XXXV of 2000 and fall within the jurisdiction of this office.

18. This office has taken cognizance of this adjudication order for another significant reason. Such arbitrary and haphazard decisions strike at the foundation of quasi-judicial structure provided for in the tax laws and administered by officers up to the level of Collector under the Revenue Division. The Adjudicating Officers should apply their independent minds and, after weighing the facts brought out in the proceedings and the arguments put forward by both the sides, decide the tax liability and issue a speaking order based on the principles of natural justice and tax laws. It is strongly felt that the Revenue Division should monitor the adjudicating orders issued by its officers with a view to protecting the revenue and ensuring that these orders should be able to stand the test of judicial scrutiny at the higher forums. In order to maintain the sanctity of both quasi-judicial and administrative proceedings, it is necessary to maintain oversight on the performance of the Adjudicating Officers whose orders should not be entirely dependent on the opinions and comments of the reporting officers. It is necessary to monitor the adjudication orders at the level of the C.B.R., perhaps by the Director-General of Inspection, who should examine and report to the Chairman about the validity of the orders and the suitability of the officers appointed to deliver departmental justice to the taxpayers.

19. It is recommended that C.B.R. (i) set aside the order passed by the Collector (Adjudication) vide Order-in-Original No.63 of 2003, dated 30-9-2003; (ii) entrust this case to another officer of competence to examine the contravention report, issue an appropriate show-cause notice, allow the complainants to present their defence arguments in writing and during personal hearing, decide the tax liability of the complainants on merits, and issue a reasoned speaking order by applying his judicious mind, within thirty days; and (iii) issue necessary instructions (to D.G. Inspection) to examine the quasi-judicial orders passed by officers under the Revenue Division and furnish periodical reports to the Division about the quality of the orders and competence of officer occupying the adjudication posts, identifying the procedural mistakes and lapses, illegalities and improprieties, flaws etc., if any, with a view to maintaining a fair degree of judicial propriety and justice. (iv) Compliance be reported within forty-five days. M.I./271/FTO Order accordingly.