Messrs PACE INTERNATIONAL, RAWALPINDI vs SECRETARY, REVENUE DIVISION, ISLAMABAD

FINDINGS/DECISION ' JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---Brief facts of the case are that the complainant derives income from import of surgical instruments and appliances and is registered under the Sales. Tax Act, 1990. The unit was allegedly put to audit for a number of times. The complainant received a show-cause notice on 10-6-2002 stating that an amount of Rs,264,687 was recoverable from the unit along with additional tax and penalty on account of wrong claim of input tax amounting to Rs,196,325, suppressed sales of Rs,68,362 and late filing of return for August, 1998. The date for personal hearing and submission of explanation was fixed on 22-1-2002. The complainant states to have attended the office on the appointed date but the officer concerned was not available and the complainant filed his explanation in the office. The complainant received ex parte order-in-original, dated 13-5-2003 on 16-5-2003 demanding the amount stated in the show-cause notice as lawfully recovering from the complainant along with penalty. The grievance of the complainant are that no reasonable time was given for audit and no checklist of documents required for audit purposes was provided. Frequent visits of the auditors resulted in business loss.

The input tax charged related to different period and the order-in-original was time-barred. The complainant prays for redressal of his grievances.

2. The respondent in his reply has stated that the complaint is unwarranted and uncalled for as the order-in-original was appealable before the Collector of Sales Tax (Appeals) and since the complainant had not exhausted the channels available as per law, the complain at this stage was premature. It is further stated that a contravention case was framed against the complainant for claiming of wrong input and suppression of sales and was sent to the Deputy Collector (Adjudication), Rawalpindi who issued a show-cause notice to the unit on 10-6-2002 and the case was decided ex parte vide order-in-original dated 13-5-2003 on the basis of comments of the detecting officer since nobody had appeared on behalf of the complainant. It is also stated that the audit letter was dispatched on 5th May, 2001 and the date scheduled for audit was 10th May, 2001 but on the complainant's request it was extended to 17th May, 2001 and audit was finally conducted on 18th May, 2001. The requisite record for audit purpose was statedly discussed with the representative of the complainant at the time of visit and he was informed about the documents to be produced for audit. The unit was visited only twice by the Senior Auditor, once on 10th May, 2001 and the second time on 18th May, 2001. It is further stated that since the registered person refused to accept any of the audit findings, a contravention case was framed. As regards complainant's contention that order-in-original was hit by time limitation the reply of the respondent is silent and it is simply stated that concerned Collector who passed the order would be in a better position to comment.

3. The representatives of the both sides were heard and relevant record was examined. The contention of the complainant that he was not given sufficient time before audit and was not intimated about the record required to be produced for audit was not found correct. Initially the audit was scheduled to be conducted on 10-5-2001 which was extended to 18-5-2001 and as such sufficient time was provided to the complainant. The record to be maintained by a unit is enlisted in section 22 of the Sales Tax Act, and it is generally required to be produced for audit. The contention of the complainant that order-in-original, dated 13-5-2003 passed by the Deputy Collector (Adjudication), Rawalpindi was barred by time is, however, correct and tenable. As provided in section 11 of the Sales Tax Act where a person fails to file a return or pays an amount of tax which is less than the tax actually payable or has not paid tax due on supplies made by him or has claimed input tax credit or refund which is not admissible, an officer of Sales Tax shall make assessm ent of sales tax actually payable by him after giving a show-cause notice to the person in default. It is further provided that such order shall be made within 45 days of the issuance of show- cause notice or within an extended period not exceeding 90 days. In the instant case show-cause notice was issued on 16-6-2002 and order-in-original was passed on 13-5-2003 after about 11 months of the issuance of the notice which is clearly hit by time limitation as provided in law.

Maladministration is therefore, established. It is recommended that:

(i) The competent authority to cancel the order-in-original, dated 13-5-2003.

(ii) Compliance be reported within 30 days.

(Incompelete)