DIAMOND CLOTHING INDUSTRIES (PVT.) LTD. Versus COMMISSIONER INLAND REVENUE, RTO, FAISALABAD
ORDER
1. ZAHID SIKANDAR, MEMBER.--- The instant appeal has been filed by the registered person challenging the selection of audit under section 25 read with section 38 of Sales Tax Act, 1990 (hereinafter referred as 'STA') qua intimation C.No.314 dated unknown of the month August 2025 whereby the learned Commissioner Inland Revenue has required the appellant to provide requisite record for the period July 2023 to June 2024 in accordance with the provisions of Section 25(1) of the STA. The titled appeal is accompanied by miscellaneous applications for condonation of delay in filing this appeal as well as grant of stay against the impugned proceedings. The main appeal as well as both the applications are decided through this single common order.
2. Brief facts as culled out from record are that the department scrutinized the relevant record in the case of M/s Diamond Clothing Industries (Pvt.) Ltd./appellant, registered as a manufacturer, exporter, and retailer w.e.f. 12.05.2023. During scrutiny of Sales Tax Returns data for tax year 2024, it was observed that the appellant has been involved in serious violations/tax evasions. The taxpayer was required to furnish the requisite record as mentioned in the impugned notice for the period July 2023 to June 2024 to the concerned DCIR within fifteen days. The appellant registered person having grievance against the audit selection/notice has instituted instant appeal before this Tribunal challenging the veracity as well as legality of the notice with the following prayer:-
2. In view of the above premises, it is most respectfully prayed that the impugned notice for audit is false, unfounded, illegal, void ab initio and ultra vires may therefore; be set aside and cancelled on merits to meet the ends of justice. Any other lawful relief which this Hon'ble office may deem fit and appropriate for fair dispense of justice and on emanated circumstances of the case, may also be granted to the appellant
3. Before proceeding with the matter it is necessary to replicate the notice challenged by the appellant as under:-
3. Office of the Commissioner-IR,
4. Corporate Zone
5. Regional Tax Office, Faisalabad
6. C.No. Date: -.08.2025
7. M/s. Diamond Clothing Industries (Pvt.) Ltd.
8. 5-KM Jaranwala Road,
9. Faisalabad
10. SUBJECT: SELECTION UNDER SECTION 25 READ WITH SECTION 38 OF THE SALES TAX ACT, 1990 FOR AUDIT FOR THE TAX PERIOD JULY, 2023 TO JUNE 2024-INTIMATION REGARDING;-
11. This Office scrutinized the relevant record in the case of M/s Diamond Clothing Industries (Pvt.) Ltd. 5-km Jaranwala Road, Faisalabad, having sales tax registration No.3277876306498, registered as a manufacturer, exporter, and retailer. w.e.f 12.05.2023. During scrutiny of the sales tax returns data for the TY 2024, it has been observed that the aforesaid registered person has been involved in serious violations/tax evasion as mentioned below:
(i) You M/s Diamond Clothing Industries (Pvt.), Faisalabad made taxable supplies though point of sales (POS) with effect from Dec-2023, the detail of which is as under:
12. Tax period
13. Domestic sale
14. Sales through POS
15. % of POS sale against total supplies
16. 2023-07
17. 4,600,001/-
18. -
19. 0%
20. 2023-08
21. 96,280,341/-
22. -
23. 0%
24. 2023-09
25. 206,129,830/-
26. -
27. 0%
28. 2023-10
29. 25,066,700/-
30. -
31. 0%
32. 2023-11
33. 20,019,910/-
34. -
35. 0%
36. 2023-12
37. 184,396,114/-
38. 90,897,607/-
39. 49%
40. 2024-01
41. 485,131,998/-
42. 385,131,703/-
43. 79%
44. 2024-02
45. 605,528,111/-
46. 589,973,096/-
47. 97%
48. 2024-03
49. 582,918,845/-
50. 567,421,700/-
51. 97%
52. 2024-04
53. 660,470,415/-
54. 660,301,797/-
55. 100%
56. 2024-05
57. 726,929,398/-
58. 719,912,479/-
59. 99%
60. 2024-06
61. 1,268,576,300/-
62. 1,194,299,073/-
63. 94%
64. 4,866,047,963/-
65. 4,207,937,455/-
66. 86.47%
67. The perusal of the above sale profile clearly indicates that you being a manufacturer have avoided the payment of due tax by declaring 86.47% of total taxable supplies through POS which is practically not possible in the case of a manufacturer of taxable supplies.
68. Tax evaded through POS
69. Further tax @4% on supplies to Un- registered wholesalers (Amount in Rs.)
70. 5% less tax paid being a POS retailer under section 8B of the Sales Tax Act, 1990 (Amount in Rs.)
71. 168,317,498/-
72. 46,730,776/-
(ii) You M/s Diamond Clothing Industries (Pvt.), Faisalabad have declared huge closing stocks of Rs.795,144,348/- as on 30.06.2025 in sales tax returns;‑
(iii) You M/s Diamond Clothing Industries (Pvt.) Ltd., Faisalabad being a manufacturer and retailer declared only 15% value addition which is very low, the detail of which is as under:-
73. Tax year
74. Total supplies
75. Total purchases
76. Opening stock
77. Closing stock
78. Cost of supplies
79. GP
80. Value %
81. 2024
82. 4,866, 047, 963/-
83. 5,002, 153, 752/-
84. 6,303, 859/-
85. 795,144,348/-
86. 4,213, 313, 263/-
87. 652,734,700/-
88. 15%
2. In view of above and in accordance with the provisions of section 25(1) o the Sales Tax Act, 1990 you are required to provide the following records maintained by you under the provisions of the Sales Tax Act, 1990 or any other law for the period July-2023 to Jun-2024 to the Deputy Commissioner-IR(Unit-01) Corporate Zone, Regional Tax Office, Faisalabad within fifteen days from the receipt of this letter:- i. Supply Register and output tax invoices;. ii. Purchase register and input tax invoices; iii. Inventory of raw material value and quantity of opening and closing stocks; iv. Copies of proofs of payment along with bank statements under section 73 of the Sales Tax Act, 1990; v. Sales Tax Returns for the aforesaid tax periods; vi. Copies of bills of entry/Import documents (if any); vii. Lease agreement/ownership document regarding business premises; viii. Income Tax Returns for the relevant tax year; ix. Financial Accounts for relevant financial year; x. Last Sales Tax Audit Report (If any); xi. List of machinery and detail of addition/deletion in machinery, if applicable; xii. Copies of utilities bills (i.e electricity, gas and alternate energy used by the registered person); and xiii. Any other document required by the aforesaid officer during the course of audit.
89. (IHSANULLAH)
90. Commissioner Inland Revenue
4. The learned counsel appearing on behalf of the appellant argued that the issuance of the said notice qua selection of audit is not in accordance with law, out of jurisdiction and consequently void ab initio. The learned counsel reiterated that the impugned audit selection is founded solely on internal presumptions and without bringing any evidence or material on record which could justify the audit selection. The learned AR also relied upon an earlier decision of the ATIR in the case of M/s Big Birds Foods (Pvt.) Ltd. given in STA No.794/LB/2019 to establish the maintainability of this appeal before this tribunal whereby statedly similar issue was decided in favour of the taxpayer on merits. Conversely, the learned DR representing FBR department opposed the taxpayer's appeal on the touchstone of maintainability of this appeal before the tribunal. It is submitted that selection of audit qua intimation notice does not fall in the ambit of 'order' amenable before the tribunal. The learned DR sought dismissal of the appeal on the grounds that the instant appeal before this Tribunal is not maintainable in as much as no order as envisaged under the law has been passed against the registered person after adjudication' hence the appeal merits to be dismissed.
5. Arguments heard.
6. While adverting to the arguments of the learned counsel for the taxpayer that issuance of impugned notice under section 25 qua selection of audit is in violation of the law we have assiduously examined the matter and found that upon scrutiny of taxpayer's sales tax record certain discrepancies have been identified which triggered the audit proceedings for detailed investigation/adjudication whereby through impugned notice the learned officer has only requisitioned certain documents to hold inquiry against the accusations for final adjudication. However, in order to ascertain whether the impugned notice qua selection of audit under section 25 is assailable before this Tribunal we shall have to examine section 46 of the STA which is reproduced herein as under:-
46. Appeals to Appellant Tribunal.- Any person including an officer of Inland Revenue not below the rank of an Additional Commissioner aggrieved by the order of the Commissioner (Appeals) under this Act or the rules made thereunder; or any person other than SOE aggrieved by an order passed by officer of inland revenue when second proviso to section 45B applies, may within 30 days of the receipt of such order, prefer an appeal to the Appellate Tribunal:
91. Provided that where subsection (11) of section 134A of Income Tax Ordinance, 2001 (XLIX of 2001) shall apply, an SOE may prefer an appeal under this subsection.
92. [(2) The Appellate Tribunal may admit, hear and dispose of the appeal as per procedure laid down in sections 131 and 132 of the Income Tax Ordinance, 2001 (XLIX of 2001)], and rules made thereunder.
7. Since the above section also provides right of appeal before the ATIR to any person aggrieved by an order passed by OIR when second proviso to section 45B applies therefore it is also necessary to examine the provisions of section 45B of STA which reads as under:
93. 45B. Appeals. - (1) Any person, other than a State Owned Enterprises (SOE), aggrieved by any decision or order passed under sections 10, 11A, 11D, 11E, 11F, 21, 33, 34 and 66 of the Act, by an officer of Inland Revenue may, within thirty days of the date of receipt of such decision or order prefer appeal to the Commissioner Inland Revenue (Appeals):
94. Provided that an appeal preferred after the expiry of thirty days may be admitted by the Commissioner Inland Revenue (Appeals) if he is satisfied that the appellant has sufficient cause for not preferring the appeal within the specified period:
95. Provided further that registered person shall have an option to directly file an appeal before Appellate Tribunal Inland Revenue without availing right of Appeal under this section.
8. When both the above quoted sections are read in juxtaposition, it is unambiguously clear that a person, other than SOE (as provided), has been given the right of appeal before the ATIR in second appeal against an order of the CIR (Appeals) or by directly filing the first appeal before the ATIR aggrieved by any decision or order passed under sections 10, 11A, 11D, 11E, 11F, 21, 33, 34 and 66 of STA by an officer of inland revenue without availing the right of appeal before the CIR(A). Quite visibly the impugned notice qua selection of audit is neither an order passed by the CIR(A) nor an order passed by the OIR under any of the given sections appealable under section 45B. The learned counsel while arguing the maintainability of the instant appeal under section 46 vehemently relied on second proviso of section 45B allowing the taxpayers to file appeal directly before the ATIR against orders passed by the OIR however when confronted by this bench as to how the impugned notice can be characterized as an 'order', the learned AR could not satisfy us with any plausible answer rather emphasized the contentions on the basis of an earlier decision of the tribunal in Big Birds case ibid. Both the provisions i.e. sections 46 and 45B have used the word 'order' and nowhere it provides the right of appeal against selection of audit or notice in consequence for requisition of record. The interpretation offered by the learned counsel of the registered person cannot be entertained and be treated as in accordance with the provisions of the Act as section 25 of the Act only caters powers of the commissioner to direct the OIR (not below the rank of Assistant Commissioner) to conduct audit and issue necessary audit notices and by any stretch of interpretation cannot be deemed or construed as an 'order' giving cause to the RP/aggrieved person to assail the same before this Tribunal under section 46 of the Act. The interpretation offered by the learned counsel if taken as agreed will clearly render the authorized officer dis-functional as through impugned notice only requisite record has been summoned with no conclusive and determined conclusion adverse to the interest of the appellant in any manner. The pre-emptive challenge to the exercise of power by the authorized officer in discharge/dispensation of his lawful authority only requiring documents to conduct audit cannot be appreciated at this preliminary stage. The case in hand calls in question selection of audit and notice under section 25 which neither can be equated with the 'order' assailable before the ATIR in both the sections nor relates to any of the sections mentioned in section 45B for the purpose of appeal. Even the taxpayer's grounds and prayer ibid, characterized the impugned letter as a notice and not order which is a necessary corollary to file appeals. There cannot be an appeal before the ATIR without an order.
9. It is a settled law that right of appeal is neither inherent nor vested rather it exists only where specifically conferred by statute. The legislature has expressly identified those orders and actions under section 45B against which first appeal lies either before the CIR(A) or before this tribunal. Where particular provisions have been specifically enumerated as appealable, all other matters stand excluded. In this regard, the well-recognized principle of statutory interpretation "Expressio unius est exclusion alterius" i.e. mention of one thing implies the exclusion of the others, squarely applies to the matter in hand. Since the Sales Tax Act does not provide an appeal against a mere selection of audit or a notice for production of record, no appellate remedy can be inferred by implication. It is also of importance to highlight that previously in section 45B appeal against any decision or order under section 25 was provided however vide Finance Act, 2025, section 45B was substituted and a new section altogether was introduced whereby appeal against any decision or order under section 25 was omitted. When the legislature consciously deletes a provision, remedy, right, or forum that previously existed in the statute, the omission must be presumed to be intentional and meaningful. The courts are bound to give effect to such deletion and cannot restore the omitted remedy through interpretation. The deliberate omission of a statutory remedy by the legislature is the clearest manifestation of legislative intent that such remedy should no longer be available. The tribunal cannot, under the guise of interpretation, revive a right of appeal which the legislature has consciously withdrawn. Any such exercise would amount to judicial legislation, which is impermissible.
10. The audit merely selects the appellant for audit and calls for production of record. It neither determines the tax liability nor adjudicates any right of the taxpayer. No demand has been created, no adverse finding has been recorded, and no civil consequence has yet ensued. The audit proceedings are merely investigatory in nature and constitute a preliminary stage of fact-finding. Therefore, the audit action lacks the characteristics of a judicial or quasi-judicial determination capable of being challenged before an appellate forum. If every Audit-selection Notice, Information Notice or Record Requisition was treated as appealable, the entire Audit and Verification mechanism envisaged by the Sales Tax Act would become unworkable. The statutory authorities would be prevented from even examining the affairs of a taxpayer before completion of proceedings. Such an interpretation would frustrate the legislative intent and render the audit provisions largely redundant. The settled judicial approach is therefore to permit statutory process to run its course and to relegate the taxpayer to the remedies specifically provided by law against any eventual adverse order. The superior courts have consistently held that the proceedings initiated through notices or show-cause notices are ordinarily not amenable to appellate or constitutional interferences unless the notice is wholly without jurisdiction. The rationale is obvious: a person receiving a notice has an adequate opportunity to submit a reply and raise all legal and factual objections before the competent authority. Interference at the threshold would unnecessarily obstruct statutory proceedings and render administrative functions unworkable. The same principle applies with greater force to an audit selection notice, which is merely a preliminary step in the statutory process. Reliance may be placed on 2022 PTD 424, 2022 PTD 19, 2022 PTD 1464 and 2021 PTD 80.
11. The learned AR for the appellant heavily relied upon a decision of the tribunal given in Big Bird Food case in STA No.794/LB/2019. After examination we found that the earlier referred decision of the tribunal given in M/s Big Bird Food case has not even touched upon the question of maintainability of appeal against intimation letter rather the merits of the case have been discussed. It has also not been discussed as to whether the impugned intimation letter could be characterized as an 'order' as contemplated under the provisions of sections 46 and 45B rather by simply agreeing with the grounds of taxpayer in respect of the merits of the case decided the appeal. There is not even a single observation on the maintainability of the appeal against audit selection qua intimation letter consequence thereto in the order and since there is no discussion about this primary aspect of the scheme of law, therefore, the same cannot be set to be a binding precedence. Some of the factors to be considered while contending that a decision is not a binding precedent and should not be followed or be ignored are summarized hereunder but not limited:
96. I. A decision where the point in issue is not argued or considered by the court or decision rendered without an answer to the argument, without reference to the crucial words of the rules/provisions.
97. II. If a judgment is delivered in ignorance of scheme of law to demonstrate the real intent of legislature will also be recited per incuriam.
98. Legislature's real intent should never be left behind or overshadowed by a judgment. A careful study of the entire scheme of law would lead us to conclude that vital questions escaped adjudication by the earlier bench and has become a case of sub-silentio. Hence, the binding effect of the judgment is defeated and diluted as the ratio in consideration of the scheme of law pertaining to maintainability of appeal against selection of audit before the ATIR is not settled in the earlier referred judgment. The principles of sub-silentio are exceptions to the doctrine of precedent and permit the court to overrule the ratio decidendi of the incorrect decision or to ignore the same. Reliance is placed on PLD 2023 SC 539.
12. For the foregoing reasons we hold that: a) Selection of audit under section 25 read with section 38 of the Sales Tax Act, 1990 is not appealable; b) The consequential notice/intimation requiring production of record is likewise not appealable; c) The present appeal is therefore incompetent and not maintainable under the law before the ATIR.
99. Consequently, the instant taxpayer's appeal is dismissed in limine having not being maintainable. Since main appeal is not maintainable therefore accompanied miscellaneous applications for condonation of delay and grand of stay are also not maintainable and are hereby dismissed. We order accordingly.
100. MQ/1/Tax(Trib) ????