JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER).--Through this appeal the appellant has objected against the Order-inOriginal No. 643 of 2005 dated 15-6-2005 on the following grounds:-- "(a) That respondent No. 1 was not competent to conduct raid carry out search and make seizure of record without fulfilling the mandatory requirement of section 40 of the Sales Tax Act, 1990. Even otherwise respondent No.1 was neither authorized by respondent No. 3 nor Central Board of Revenue nor he obtained search warrant for carrying out search of the business premises of the appL'1ant.
(b) That no search warrant was obtained by respondent No. 1 for carrying out ,earch from Magistrate having territorial jurisdiction over the business premises of the appellant nor he complied with the relevant provisions of code of criminal procedure nor associated independent witnesses in the raid proceedings. The contention of the respondent department that the raid was conducted under sections 38 and 40-A of the Sales Tax Act, 1990 was baseless and frivolous.
(c) That the requirement of section 38 and 40-A of Sales Tax Act, 1990 cannot be fulfilled merely ti' mentioning that the raid was conducted under these provision 'f law. For the ease of this hon'ble Court, subsections (1) an,' 2) of section 40-A are reproduced below:- "40-A (1) Search without warrant-- ) Notwithstanding the provisions of section 40, where any officer of Sales Tax not below the ran!: of an Assistant Collector of Sales Tax has reasons to believe that any documents or things which, in his opinion, may useful for or relevant to, any proceeding under this Act are concealed or kept in any place and that there is a danger that they may be removed before a search can be effected under section 40, be may, after preparing a statement in writing of the grounds of his belief for which search is to be made, search or cause search to be made for such documents or things in that place.
(2) Any officer or person who makes a search or causes a search made under subsection (1) shall leave a signed copy of the statement referred to in that section in or about the place searched and shall, at the time the search is made or as soon as is practicable thereafter, deliver a signed copy of such statement to the occupier of the place at his last known address.
(d) That it is condition precedent under section 40-A of the Sales Tax Act, 1990 that where any officer of Sales Tax not below the, rank of Assistant Collector has reasons to believe that any documents or things are concealed or kept in any place and there-is a danger that they may be removed before a search can be effected under section 40, he may after preparing a statement in writing, of the ground of his belief for which search is to be made , search or cause search to be made for such documents or things.
It is submitted that neither search warrant under section 40 was obtained nor statement under section 40-A showing grounds of belief that there was any danger of removal of record by the petitioner if raid is conducted under section 40 of the Sales Tax Act, 1990. No such statement was prepared and served upon the appellant .
(e) That provisions of section 38 of Sales Tax Act, 1990 are not by itself enabling provisions for carrying out search and seizure and as such these, therefore, must give way to the two specific provisions of sections 40 and 40-A of Sales Tax Act, 1990. For carrying out search under section 40- A it is condition precedent, that grounds of belief prepared for conducting search must* contained reasons for belief that information has been received that party, concerned had taken steps or was about to take steps for removal of goods and if search warrant was obtained, same would consume time or Magistrate was not available and as such there was no such other way but to go for search without warrant. These are the safe guards provided by legislature against India fide interference with the rights of citizens in respect of property and against violation of rights of property and privacy: Since the requirement of section 40-A of the Sales Tax Act, 1990 was not met, thus, the raid, search and seizure would be illegal void, without lawful authority and of no legal effect as held by Hon'ble Supreme Court of Pakistan in case Collector of Customs (Preventive) and 2 others v. Muhammad Mehfooz (PLD 1991 SC 630), it was held by their lordship that:-- "Perusal of the statement of grounds reproduced above clearly shows that grounds for belief in support of danger as such were not mentioned specifically as is required under section 163 of the Customs Act. This is a statutory requirement and there is legislative wisdom behind it which is to the effect that ordinarily a place is to be searched only after search-warrant is obtained from the Magistrate as is contemplated under the preceding section of the Customs Act and only in extraordinary cases this section can be dispensed with as is permissible under section 163 of the Customs Act but then grounds are to be stated by the Customs Officer who is allowed this facility for his belief and decision in not obtaining the search warrant. He must state the grounds which justify apprehension of danger of removal of goods. For example information is received from such and such person that the party concerned has taken steps or is about to take steps for removal of goods and if search warrant is obtained the same will consume time or the Magistrate is not available hence there is no other way but to go for the such without warrant. By providing such statutory requirement the intention legislature is to provide safeguard against mala fide interference with rights of citizens in respect of property and against violation of right of privacy. In the instant case in the statement of grounds reproduced above, reasons are not stated as to why and what danger was apprehended for removal of goods and it is not enough simply to say that "it is not expedient to obtain search warrant". We are therefore, in agreement with the finding of the High Court on the, ground that search and seizure were defective and improper on account of non-compliance with the provisions of sections 162 and 163 of the Customs Act.
That neither independent witnesses were associated in raid proceedings nor signed copy of any statement containing grounds of belief referred to in subsection (1) of section 40-A ibid nor signed copy of recovery memo./Inventory were delivered to the appellant nor same were sent subsequently to the appellant at his last known address and as such raid, search and seizure were patently illegal and void.
(g) That this Hon'able Lahore High Court Lahore in identical case "Messrs Ehsan Yousaf Textile Mills (Pvt.) Ltd. Faisalabad v. Federation of Pakistan through Ministry of Finance Islamabad and 4 others"
(2003 PTD 2037) .Declared similar raid, search and seizure illegal and without lawful authority, it was held by his Lordship that:-- "Provision of S. 38 of Sales Tax Act, 1990 were mere enabling provisions and had nothing to do with regular search and seizure which could only be done under S. 40 and in emergent case under S.40A of Sales Tax Act, 1990. General provisions of S.38 of Sales Tax Act, 1990 could not be made to circumvent or override Constitutional guarantees of an individual particularly under Art. 14(1) of the Constitution Provisions of Ss. 40 and 40-A of Sales Tax Act, 1990 gave specific procedure and contained specific conditions for conduct of search and seizure, while S.38 thereof contained no such limitations Amendments made in Ss.38 & 40-A of Sales Tax Act, 1990 did allow extraordinary powers to Sales Tax Officers, but same were 'definitely subject to Constitutional guarantees and their interpretation must conform to limits prescribed therein only possible and practical conclusion after reading all such three provisions together would be that provisions of S. 38 were not by itself search and seizure provisions, which must give way to two specific provisions of Ss. 40 & 40-A of Sales Tax Act, 1990. (h) That while declaring raid, search and seizure illegal in the aforesaid case his lordship was further kind enough to direct that none of the material records, books of accounts and articles, directly or in-directly be used in adjudication proceedings against respondents or for creating demand based upon in any other manner vide para-19 of the aforesaid judgment. It was held by his Lordship as under:-- "19. Accordingly for the aforesaid reasons both raids are declared to be against the provisions of section 38 and therefore, illegal and void ab initio. All evidence, material, documents records or accounts taken into custody in the process shall be returned to the petitioners. Also none of these materials, records, books of accounts and articles etc. Shall directly or indirectly be used in adjudication proceedings against the respondents or to create demand based thereupon in any other manner. In case of second petitioner, the impugned notice dated 30-9-2002 admittedly having been issued on the basis of the material collected in the said illegal raid, dated 26-6-2002 also suffers from another illegality inasmuch as no exceptional circumstances were brought home to order conduct of re-audit as contemplated in STGO No.9 of 1999, dated 2nd September, 1999."
(i) That in similar situation Hon'ble Lahore High Court, Lahore was kind enough to declare the raid, search and seizure and subsequent acts and actions including show-cause notice, F.I.R., prosecution illegal and direct return of record to the owners of places searched in cases Messrs Food Consults (Pvt.) Ltd. Lahore and another v. Collector Central Excise and Sales Tax Lahore and 2 others (2004 PTD 1731). It was concluded by his lordship:-- "In view of the above discussion, it is held that in both the cases the purported visit or access by the concerned officers were raids designed at search and seizure of the records and assets which for the above recorded reasons are declared to be without lawful authority and of no legal effect. The proceedings and actions taken in consequent of such raids, searches and seizure including the issuance of any show-cause notice, registration of an F.I.R., the complaint, prosecution or recovery proceedings, are also adjudged to be illegal, unlawful and without lawful authority. The respondents shall in both cases (Food Consults and Diplex) return to the petitioners within a period of 30 days, the records, accounts, papers or the other property seized during ' such raids and searches. The respondents are further restrained from using the seized material or records etc. In any manner whatsoever in any proceedings or actions against the petitioners."
(j) That recently this Hon'ble Lahore High Court, Lahore while allowing Writ Petitions Nos.12309 of 2003, 13339 of 2003 and 10510 of 2003 vide un-reported judgment dated 12-7-2004 passed in Writ Petition No. 12309 of 2003 held identical raid, search and seizure illegal and direct return of record and not to use the same against the petitioners. It was held by his lordship in above cases as under:-- "Therefore, the first five petitions are accepted and following the ratio settled in re: Messrs Ihsan Yousaf Textile Mills (Pvt.) Ltd. (Supra) I will direct that all evidence, material documents, record and accounts books taken into custody in the aforesaid raids, which are found to be illegal and void ab-initio, shall be returned to the petitioners. Also none of these material, records books of account and articles etc. Shall directly or indirectly be used in adjudication proceedings against the respondents or to create a demand based there upon in any manner."
That recently the learned Divisional Bench of Hon'ble High Court Sindh at Karachi in case N.P. Water Proof Textile (Pvt.) Limited v. Federation of Pakistan and others (2004 PTD 2952) declared identical raid search and seizure and all subsequent proceedings illegal and of no legal consequences because the sales tax authorities failed to fulfill mandatory requirement of sections 40 and 40-A of Sales Tax, 1990. It was held by their lordships in the said case as under "Failure of tax officials to place any material before the Court to establish that there were sufficient reasons and grounds for bypassing normal course of action specified in S.40, Sales Tax Act, 1990 and resorting to provisions contained in S. 40-A of the Act---Action under S. 40A, in circumstances was not sustainable in law and consequently, the search and seizure was illegal and of no legal consequence---All subsequent proceedings held in pursuance of such illegal search' were also void ab initio and all proceedings actions taken were ordered to be quashed--- Concerned officials were directed to return all the documents to the petitioner if they were still lying with the departments, as the documents illegally procured could not be used for any action against the petitioner being inadmissible in evidence."
(1) That similarly Hon'ble Supreme Court of Pakistan in case of Federation of Pakistan through Secretary Ministry of Finance Islamabad and 4 others v. Master Enterprises (Pvt.) Ltd. (2003 PTD 1034) held that Sales Tax authorities can only scrutinize the record resumed through a notice under section 38 of Sales Tax Act, 1990 that they are not authorized to conduct raid and make seizure, of record. By conducting raid, making search and seizure Sales Tax Department shall be deemed to have travelled beyond its scope which was in clear violation of law. The raid, search and seizure were declared without lawful authority and of no legal effect. It was held by their Lordships as under.-- "6. We are in full agreement with the contentions raised at the bar by the learned counsel for the respondent. Admittedly, the provisions of sections 40 and 40-A of the Act have not been complied with by the petitioners while conducting raid and seizing the documents. It is expressly stipulated in the above provisions that all searches made under Act or the Rules shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1898 (Act V of 1998) (hereinafter referred to as the Code). Procedure regarding search has been laid down in sections 96, 98, 99-A and 100 of the Code whereby firstly, a search warrant is to be obtained from the Illaqa Magistrate when search of the premises is to be made. In view of section 103 of the Code, it is mandatory to join two or more respectable inhabitants of the locality in which the place to be searched is situated to attend and witness the search and a list of all articles taken into possession shall be.
Prepared and a copy thereof shall be delivered there and then. Tough repeatedly called upon learned counsel for the petitioners failed to show from record that the above provisions of law were strictly followed while seizing the record and sealing the premises of the respondent-company. As such, we do not find any cogent reason to interfere with the impugned judgment which is unexceptionable."
(m) That respondent No. 1 and his staff on the basis of illegal raid, search and seizure are un- necessary creating harassm ent for the appellant on the basis of impugned order which was passed on the record seized in un-lawful manner. It is submitted that record or any thing else seized in illegal raid and search cannot be made basis for creating demand nor same can .Be used against appellant as held by the superior courts in the cases referred above . Respondent No. 1 and his staff have to return the record to appellant. The denial on their part of returning the record and passing impugned order by respondent No.4 are illegal and without lawful jurisdiction.
(n) That besides above, the appellant was never made any supply without payment of sales tax.
The only element of further tax was involved in the case of the appellant who is ready to pay the same as also decided by respondents Nos. 2 and 3 while closing the case against the appellant.
(o) That it also not understood as to how and why the show-cause notice was issued to the appellant on the basis of audit report which was reconciled and the matter was decided by respondents Nos. 2 and 3 that the appellant was only liable to pay further tax. In fact respondent No. 1 and his staff by violating the orders of their senior officers got the show cause issued to the appellant from respondent No. 4 due to mala fide on their part. It is submitted that the show-cause notice and impugned order are even against the record of the department according to which the appellant was only liable to pay further tax."
2. Subsequently the appellant filed additional grounds which are reproduced here under:-- ADDITIONAL GROUNDS: "(1) That the proceedings by the department, the show-cause notice and the order-in-original being passed on the basis of record documents and articles taken into possession by the department officials during illegal raid under sections 38, 40-A are illegal and without lawful authority and of no legal effect whatsoever.
(2) That the appellant is not liable to pay any further tax as section 3-A has already been omitted from the statute.
(3) That the impugned order being passed in violation of the provisions of law is liable to be set aside.
(4) That the appellant pray to modify to amend and to reframe the grounds of appeal at the time of hearing.
(5) That the appellant craves permission to and, alter, amend or withdraw any ground before or at the time of hearing."
3. The brief facts of the case giving rise to this appeal as mentioned in the impugned order and contended by the Learned representatives of appellant and the respondent department are that the business premises of the appellant was raided on 28-2-2002 by a team of department headed by the Assistant Collector (I & P) Central Excise and Sales Tax Multan. According to the learned counsel of the appellant the entire premises was searched by breaking the locks of the almirahs, draws etc. And the record and certain other things were seized and taken away by the respondent. Subsequently, the appellant was informed vide letter dated 1-1-2003 by the department that the raid was conducted under sections 38 and 40-A of the Sales Tax Act, 1990. All of the record as per contention of the appellant was taken into custody and the appellant was asked to furnish more record as mentioned in the above said letter dated 11-1-2003. Subsequently audit report was formulated by the department in which it was alleged that the appellant supplied taxable goods without payment of Sales Tax during 1-1-2001 to 30-6-2001, 1-7-2001 to 30-6-2002 and 1-7-2002 to 28-12-2002 to 62 different buyers and, thus, evaded Sales Tax. The appellant furnished detailed reply vide his letter dated 15- 7-2003 wherein it was explained that the entire supply was made on payment of sales tax and that no tax was evaded. The appellant through another letter dated 22-7-2003 also complained all the facts of the case. According to the learned counsel after submission of the replies of the appellant the matter was resolved and it was specifically informed to the appellant by the department through Letter dated 13-9-2003, 16-9-2003 and 19-9-2003. It has been contended that the appellant again received Letter on 16-7-2004 regarding the approval accorded for carrying out investigative audit of the appellant for the period 7/99 to 12/2000 and 1/2003 to 6/2004. The appellant approached the Collector and inform him regarding the earlier decision and the approval in this respect was subsequently withdrawn vide order dated, 16-8-2004. It is contended by the learned counsel of the appellant that in spite of the above said withdrawal of approval it was astonished for the appellant that again a show-cause notice dated 26-8-2004 was issued on the same allegations as indicated in the earlier audit report. He has contended that once the matter was directed to be closed by the Collector on 16-8-2004 there was no justification for again issuing a show-cause notice however, the appellant submitted reply to show-cause notice praying therein that the show-cause notice may please be withdrawn. But the respondent without taking into consideration the decision taken at the earlier stage has passed the impugned order dated 16-6-2005 holding therein that the appellant has made supply without payment of Sales Tax and further tax and is liable to pay the same along with additional tax. The learned counsel has contended that the entire action of conducting raid, carrying out search seizure of record, using the same against the appellant and all subsequent proceedings were illegal and void and the impugned order has been passed without taking into account, the reconciliation carried out and closure of the case of the appellant. According to the leaned counsel the impugned order is liable to be struck down.
4. On the other hand the learned DR is supporting the impugned order of the officer below. He has contended that during the scrutiny Checking of the party ledger, purchase register and other relevant record of the case it has been established that the appellant sold/supplied taxable goods without payment of Sales Tax and has evaded Sales Tax, therefore, it has rightly been directed through the impugned order to pay the tax along with further tax and additional tax along with penalty in accordance with law.
5. I have heard the learned representatives from both the sides and have also perused the relevant provisions of law, the case-law referred, the impugned Order-in-Original No. 643 of 2003 passed by the Additional Collector (Adjudication) dated 15-6-2005, the show-cause notice dated 26-7-2004, reply to show-cause dated 17-3-2005 and various letters sent by the department officials and their replies by the appellant.
The appeal has been filed by the appellant directly before this Tribunal in accordance- with provision of section 46 of the Sales Tax Act, 1990 (as were at the time of filing the appeal) and the Adjudicating authority has specifically mentioned in order-in-original that:-- "any person or an officer of Sales Tax aggrieved by this order may appeal against it before the Appellate Tribunal within sixty days of the receipt of this order as per provisions of section 46 of the Sales Tax Act, 1990."
Likewise the matter has been fixed before this single bench in accordance with the honourable Chairperson Circular dated 22-2-2010 in partial modification of the office circular dated 12-12-2009 in exercise of powers vested under section 130 (8-AA) of the Income Tax Ordinance, 2001 authorizing all the single benches constituted in the Appellate Tribunal Inland Revenue to hear and dispose of the cases where assessed income does not exceed to Ten Million rupees.
Now coming to the facts of the case it is contended on behalf of the appellant that the business premises was raided by the team of the department on 28-12-2002 and the record including personal records, files; books of account, registers diaries and other articles were seized without any prior notice as required under the law. It is contended that all these seized documents records and articles were taken away by the department team and as per the letter C. No.11/02/I&P/13 dated 16-4-2003 issued by the department the raid has been conducted under sections 38 and 40-A of the Sales Tax Act, 1990 but placing reliance on the decisions on the honourable Higher Courts, it has been contended that action of the department is not in accordant with law. In this respect the case of Messrs Ahsan Yousaf Textile Mills (Pvt.) Ltd. v. Assistant Commissioner in Writ Petition No. 19482 of 2002 order dated 21-5-2003 reported as GST 2003 CL 338 (Lahore HC) has been referred. Wherein it has been held that all evidence, material documents and record of accounts taken into custody in the process of raid under section 38 of the Sales Tax Act shall be returned and no case shall be made on the basis of the aforesaid material. It is further held that section 38 when read with these of the following provisions of sections 40. And 40A contemplate a routine visit by an officer in a jurisdiction. It is only on such visit, without previous planning or without having the intention of taking into custody any particular material or documents that the officer finds some books of accounts, stocks record, documents or other information which may be required for any "inquiry or investigation in any tax fraud committed by him or his agent or any other person...." that he may take them into his custody. It has been held by the honourable Court that the provisions of section 38 are mere enabling provisions and have nothing to do with regular search or seizure which can only be done in accordance with the provisions of section 40 and in emergent cases under section 40-A. The general provision of section 38 according to honourable High Court as held in this case cannot be made to circumvent or over-ride the constitutional guarantees of an individual.
Particularly those ensured to a person under Article 4(1) of the Constitution. No one can input motive to legislature but the amendments made in these provisions do allow extra ordinary powers to the Sales Tax Officers. These are however, definitely subject to the constitutional guarantees and their interpretation must conform to the limits prescribed therein. It is trite law that where general and a specific provision on a particular subject is available then resort to general provision cannot be made to do or sustain the act. As generally it so happens in cases of amending an existing provision the over all scheme and the comparable provisions are often over looked. If the stand point of the department viz-a-viz section 38 is accepted than no one can give the picture of a situation in which section 40 or 40A would be invokable. In other words if the interpretation of the provision as being made by the revenue is accepted correct then neither section 38 is superfluous or vice versa, both sections 40 and 40A are reduced to be a mere duplication. The correct approach therefore would be to make a cumulative reading of all the these provisions. When it is not done, one reaches the only possible and practical conclusion that the provisions of section 38 are not by itself search and seizure provisions and these, therefore, must give way to the specific provisions of sections 40 and 40-A. A "free access" to any property of the citizen does not mean search and seizure for the purpose of collecting evidence against him. That object can only be achieved on observing the codal formalities under sections 40 and 40-A which ensure respect for the rights of the subject. A search and seizure by state functionaries is the hardest hit on the Person. Property and (self) respect of a citizen. It cannot be assessed to have been granted as a matter of course . Mere allegation of some tax evasion, here and there cannot be allowed to be extended to justify a "storming" of business houses and factories. The free access contemplated in section 38, as observed above does not mean a storming of the part of an unexpecting enemy to pill and plunder at the fancy of the victorious prince overjoyed with the satisfaction of his having trampled the enemy. A visit by a state functionary to the person or property of a citizen should not have the colour and countenance of the royal wrath against of defiant adversary. The state has all the legal and moral justification to collect revenue. The Caesar must have what is due to him.
However the state, the revenue acting through its functionaries should never lose sight of the hard fact that a tax in the final analysis is a forceful exaction of money from the subject. Referring the decision of honourable Karachi High Court the honourable Judge in the above referred case has observed that as rightly remarked by the Learned Division Bench of the Karachi High Court the acts deeds and things required to be done should be done in accordance with law or should not be done at all. The honourable High Court has further held that every evidence collected through an illegal means, howsoever incriminating, partakes the colour of a confession extracted through torture. It is not admissible in evidence in any legal tradition/jurisdiction of the world. It needs to be discarded through and through. The honourable High Court has finally concluded that accordingly for the aforesaid reasons both raids are declared to be against the provisions of section 38 and therefore, illegal and void ab initio. All evidence, material, documents records, and accounts taken into custody in the process shall be returned to the petitioner. Also none of these materials, record books of accounts and articles etc. Shall directly or indirectly be used in adjudication proceedings against the respondents or to crate demand based upon these documents in any other manner.
6. In another decision referred by the learned counsel of the appellant which is in the case of Messrs N.P. 'Water Proof Textile Mills v. Federation of Pakistan reported as 2004 PTD 2952 the honourable Karachi High Court has observed that "Failure of tax officials to place any material before the Court to establish that there were sufficient reasons and grounds for bypassing normal course of action specified in section 40, Sales Tax Act, 1990 and resorting to provisions contained in section 40-A of the Act---Action under S. 40-A, in circumstances, was not sustainable in law and consequently, the search and seizure was illegal and of no legal consequence---all subsequent proceedings held in pursuance of such illegal search were also void ab initio and all proceedings/actions taken ordered to be ,quashed---Concerned officials were directed to return all the documents to the petitioner if they were still lying with the department, as the documents illegally procured could not be used for any action against the petitioner being inadmissible in evidence---High Court observed that since the illegal action was taken by the department on the advice of the Member, Board of Revenue, it was expected that in future the Members CBR shall demonstrate more responsibility and strict adherence to the provision of law failing which the CBR would be loser in terms of the recovery of the genuine tax revenue and confidence and credibility in the eyes of citizens---Tax Official and the CBR were no doubt empowered under the law and were duty bound to check the evasion of tax but it was always to be kept in mind that the evasion of taxes and duties was a contravention of law, which could not be eradicated by commission of another illegallity and contravention of law by tax Officials---Illegality could be checked by adherence to the dictates and requirements of law only---Violations of law could be controlled and checked by following the rule of law and not by commission of counter illegalities, only causing ultimate loss to the State revenue and the legal System---High Court hoped that Central Board of Revenue shall take serious and immediate measures to ensure that the actions taken by the tax officers were strictly in accordance with law and then only the evasion of taxes could be controlled." In this case it has further been observed that "It is provided in section 38 of the Sales Tax Act, 1990 that any, Officer authorized in this behalf by the Board or Collector shall have free access to business or manufacturing premises etc. The words are very clear to the effect that the officer taking action under section 38 should be authorized in this behalf by the Board or Collector.
It nowhere provides that the action taken without authorization can be subsequently confirmed.
There is no provision for ex-post facto confirmation. The authorization envisaged under section 38 should precede the action and not vice versa. This provision has also been made with a view to protect the interest of the citizens and, therefore, any tax official who' claims to be authorized by the Board or Collector, under section 38 of the Sales Tax Act, is bound to show the authorization to the person who is asked to make the compliance of the requirements made by such officer. In all matters where a public officer is supposed to pass an order which can be exposed to the scrutiny of Appellate Courts/Superior Courts in exercise of judicial review of administrative actions the orders must always be in writing. The public functionaries have to pass all orders in writing. It is necessary for the purpose of record and responsibility and to judge their validity. Since it is specifically provided in section 38 that the action specified therein can be taken by any Officer authorized in this behalf by the Board or Collector, therefore, such authorization should precede the action and shall always be in writing failing which all the actions taken under section 38 shall be treated as illegal and void."
7. In another decision referred by the learned A.R. In the case of Messrs Zikaria Enterprises v. Muhammad Musharaf and others reported as 2005 PTD 1200 the honourable High Court in a case where Revenue officials purporting to act under sections 38/40-A conducted raids at the premises of the petitioners to search for some documents which in fact were seized and taken into possession, has held that search was conducted and documents were removed in clear violation of said provisions of Sales Tax Act and the proceedings of raid and search and seizure of record from the premises were declared illegal and without lawful authority and of no legal effect whatsoever. The respondent department in that case was directed to immediately return the said record and other articles so seized. It was further directed that the documents or their copies shall not be used against the petitioner in any proceedings.
8. The learned counsel in this respect has also referred the decision of the honourable Supreme Court of Pakistan in the case of Collector of Sales Tax v. Messrs Mega Tech (Pvt.) Ltd. Reported as 2005 SCM R 1166 wherein after a detailed discussion it has been held at para 10 that the "Learned Judges of the High Court, after a threadbare and in-depth examination and analysis of the record have recorded a finding of fact that the only course available to the Department was, as contemplated under section 40 of the Act, and thus, bypassing of such course and direct invocation of powers under section 40-A in the garb of access to the office premises of the respondent in terms of section 38 of the Act was not warranted by law. On careful consideration of the record and analyzing the submissions of the learned counsel for the parties, we are in complete agreement with the view taken by the High Court as, apparently, action taken by the Petitioner-Department smacks of lack of bona fides and acting on personal whims." In this case honourable Supreme Court has further observed that "Every word used by the Legislature must be given its true meaning and the provisions construed together in a harmonious manner. To our mind it would not be legal and proper to apply one provision of law in isolation from the other provision as no surplusages or redundancy can be attributed to the legislative organ of the State."
9. On the other hand while considering the submissions of the Learned D.R. Defending the actions of the department officials I have found that the version of the department is in pursuance of a secret information, action under section 38 was taken, some record was taken into possession and proper receipt was issued. But the Learned DR was unable to produce any evidence that the record has been given back. It is contended that the appellant had handed over the record willingly for further investigation against proper receipt. It has been argued that the appellant unit was involved in gross evasion of Sales Tax and further tax as the supplies of taxable goods shown in the party ledgers were not entered in the supply registers. Regarding letter dated 19-9-2003 issued by the Additional Collector the contention of the department that it relates to only further tax for the period 1-1-2001 to 28-12-2002 and has no concern with the Sales Tax subject matter of this appeal.
But no rebuttal of the above referred case-law has been given by the department.
10. After considering the submission made from both the sides, perusal of case-law referred, the relevant provisions of law and other facts of case as per the available record I have found that in this case the department officials have conducted raid, carry out search and make seizure of record and other articles without fulfilling the mandatory requirement of law. The learned D.R.. Is unable to produce evidence that the raiding party in this case was authorized by the Collector or Federal Board of Revenue nor any search warrant for carrying out search of the business premises of the appellant was obtained. I therefore keeping in view the above referred decisions of the honourable Supreme Court and High Courts have found that raid conducted by the department official was without any justification, in clear violation of the relevant provisions of law. It is therefore held that the search and seizure of record from the premises are illegal and without lawful authority and of no legal effect whatsoever. Consequently the subsequent proceedings in this respect are also illegal including the order-in-original. I have found that the adjudicating authority without keeping in view the fact that case against the appellant have been made on the basis of illegal raid under sections 38/40-A has passed the order on following three issues:- "(i) Whether there was any consensus among the tax payer and the sales tax department on the final payment.
(ii) If so whether the taxpayer complied with consensus.
(i.e) Whether it is correct that the registered person's brokers and buyers are different and the department has erred in calculating the actual sales from the record of the tax payer so resumed."
"The respondents have vehemently passed this point that there was an agreement between the two parties that there is nothing payable as sales tax and only further tax Rs.814,912 is payable. In support they have not produced any documentary evidence except copy of a letter issued by the Additional Collector, Sales Tax, Multan C. No.366/Rec/Misc/C&E 10670 dated 19-9-2003 with the subject of "Final Tax Liability Regarding Audit report NOC No./1102/1 & P/ST/6461 dated 16-6- 2003 para-2 thereof read as under:-- "However it is without prejudice to any action to be taken by the department if any fact contrary to above is available to the department."
The above language clearly indicates that the amount so directed to be paid was due to the acceptance and undertaking of the registered person for payment and the same in no way was the total and final liability by as claimed by the respondents. Had this been the case the Collectorate would not have sent the contravention of evaded sales tax amount along with the further tax amount alleged to have been agreed by the department.
(ii) The version of the respondent's claim in the regard is also negated from the fact that they did not pay any amount of further tax or additional tax leviable on the same, as agreed by the respondents, as per their on claim. This fact is clearly indicative of their mala fide intent. They are trying to take refuge behind the statement that the had applied for installment, since they department did not respond positively so the did not deposit the agreed amount of further tax. This amount but a lame excuse. Had they been serious enough, uptill now, they would have deposited the amount by parts, instead of waiting for the show-cause notice.
(i.e) As for as the claim of having brokers and buyers different, is concerned the respondent pleaded' that brokers book the sales and the same are supplied to the actual buyers and in this way the department has taken the same supply two times. The respondent's consultant was directed during hearing on 30-5-2005 to show the record to the departmental representative and get the figure reconciled, if they have any truth in their statement. However, during next hearing on 9-6-2005 the respondent's counsel stated that he has prepared the list/figure work but could not show it to the departmental representative. He was cautioned and finally directed to get the figure reconciled before the next date which was fixed for 14-4-2005. On this date it was again observed that respondent's counsel failed to get it reconciled on the excuses which were not reasonable acceptable. This was a clear indication that the respondents have nothing concrete which could rebut the claim for the prosecution."
12. On the basis of the above conclusions, the evasion of sales and further tax stands established.
Accordingly the respondents are directed to pay total evaded amount of sales tax Rs.6,397,621 and total further tax Rs.994,108 along with the additional tax (to be calculated at the time of payment).
A penalty of Rs.2,21,750 is also imposed under section 32(2)(cc) of the Sales Tax Act, 1990."
12. I have found that the demand has been created against the appellant on the basis of illegal raid, search and seizure and as per the contention of the appellant the record has not still .Be returned back.
On behalf of the appellant it is contended that the appellant has never made any supply without payment of Sales Tax. It is contended that the appellant has agreed to pay further tax to save from harassm ent of the department despite the fact that no such demand is justifiable. Even otherwise according to the learned counsel the section 3(1A) of the Sales Tax which was regarding levy of further tax in respect of Taxable supplies to a person other than a registered person has already been omitted from the statute through Finance Act, 2004 and therefore no further tax can be charged.
13. I have noted that the Assistant Collector has issued a letter C.No.11/02/I&P/13 dated 1-1-2003 wherein it has been admitted that the premises of the appellant was visited on 28-12-2002 under sections 38 and 40-A of the Sales Tax Act and some record was taken into custody. The Additional Collector through Letter No.11/02/I&P/ST 4461 dated 16-6-2003 has sent Audit Report to the appellant wherein it has been mentioned that the raid on the premises of the appellant was conducted by Mr. Usman Bajwa, Assistant Collector along with other official of the department on the directions of the Additional Commissioner. I have noted that the department is unable to show that any authorization in this respect was from Collector or the FBR which is requirement of law as has been held by The honourable High Courts in the above referred decisions. The audit report has been prepared on the basis of record and documents which were taken into possession through above referred raid by the department officials and has been prepared by the raiding party consisting of Mr. Usman Bajwa Assistant Collector, Mr. Rana Shabbir Ahmed, Assistant Collector, Mr. Muhammad Munir Ahmed Senior Auditor and Mr. M.Gul Sher Auditor. Even otherwise the appellant through his reply dated 15-7-2003 and 22-7-2003 has rebutted all the allegations made by the department officials in the audit report which has not been considered by the adjudicating authority.
14.
14. The Additional Collector after the rebuttal of the appellant in respect of audit report has sent to the appellant a fetter which is reproduced hereunder:-- "C No. 386/Rec/Miss/C&F/10670 Dated: 19-9-2003 To Messrs Ahmed & Co Water Works Road, Multan.
Subject: FINAL TAX LIABILITY REGARDING AUDIT REPORT NO. C . NO . 11/02/I&P/ST6461, DATED 1.6-6-2003.
Reference the audit report above mentioned and your undertaking to pay further Tax 814,912 which was evaded, under paid during the period from 1-1-2001 to 28-12-2002. You are hereby required to pay further tax Rs.8,14,912 along with additional tax as agreed by you.
However, it is without prejudice to any action to be taken by the department if any fact contrary to above is available to the department.
The case is disposed of and closed.
Sd/- (ABDUL RAZZAQ) Additional Collector Sales Tax, Multan."
15. After the above referred letter issued by the department the appellant was once again sent a letter dated 16-7-2004 and 16-8-2004 by the Assistant Collectors which are reproduced hereunder.
"C. No: 50/40/Inv Audit/S. Tax/11522 Dated 16-7-2004 , To Messrs Ahmed & Co Water Works Road, Multan.
Subject:INVESTIGATIVE AUDIT FOR THE PERIOD 7/99 TO 12/2000 and 01/2003 TO 6/2004 OF MESSRS AHMAD AND CO. WATER.WORKS ROAD, MULTAN.
With the prior approval of worthy Collector (Customs Sales Tax and Central Excise Multan vide Order No. 118 of 2003 investigative/ST/11306 Investigative Audit for the period 7/99 to 12/2000 and 1/2003 to 6/2004 of the subject unit is scheduled on 26-7-2004.
An Audit Team consisting of Mr. Abdul Rauf, Auditor, Mr. Muhammad Amjad, Auditor and Mr. Khalid Raza, Auditor will conduct Investigative Audit.
You are requested to provide the record maintain under sections 22/25 and 38 of the Sales Tax Act, 1990 on the said date.
Sd/-.
(RANA SHABBIR AHMED) Assistant Collector (Investigative Audit)
Sales Tax Multan Phone No. 061-234859"
Subject: NOTICE FOR SALES TAX AUDIT UNDER SECTION 25 OF THE SALES TAX ACT, 1990.
Please refer to the subject cited above. "C. No.04/Audit/Prog/1st/QTR/ST/13191 To dated 16-8-2004 Messrs Ahmed & Co. Water Works Road, Multan.
Subject: NOTICE FOR SALES TAX AUDIT UNDER SECTION 25 OF THE SALES TAX ACT, 1990.
Please refer to the subject cited above.
You are required to produce the following Sales Tax record for the period up to June, 2004 under section 25 of the Sales Tax Act, 1990 read with section 22 of the Sales Tax Act, 1990, failure of which liable for penalty under section 33(6A) of the Sales Tax Act, 1990:--
(1) Sales Tax Returns Cum payment Challan for the said period.
(2) Sales Register along with Sales Tax Invoices for the said period.
(3) List of Bank statement for the said period.
(4) Party-were ledger advances received and cash book showing complete funds flow to the said period.
(5) Record for purchases along with purchase invoices for the said period.
(6) Stock register/inventory record for the said period.
(7) Income Tax Return along with balance sheet and trading profit and loss account.
(8) Payment proof from buyers and suppliers.
(9) Production record for the said period.,
(10) Any other record as required to the completion of audit.
(11) Previous audit report.
Mr. Mukhtar Hussain Auditor is scheduled to visit your unit on 20-8-2004. Presence of senior member of management accountant who can reply the queries regarding audit shall be appreciated.
Sd/- (Dr. Muhammad Mumtaz Ali Raza) Assistant Collector (Audit)
Sales Tax Multan"
16. After the above said letter finally the appellant was issued show-cause notice dated 26-7-2004 which is on the basis of the record and documents taken into possession during above referred illegal raid conducted by the department officials on 28-12-2002. I have noted that no other basis has been mentioned in the show-cause notice despite the fact that not only the raid conducted by the department officials was illegal being made without authorization from the Collector or the FBR but the Additional Commissioner through his letter dated 19-9-2003 has already disposed of and closed the case of the appellant. I have further noted that the appellant through his letter dated 17- 3-2005 has replied the show cause on each and every issue and there was no justification for further proceedings but the adjudication authority has also passed the order on the basis of illegal raid dated 28-12-2002 as has been mentioned in the first para of the order. As the search in this case by the department official dated 28-12-2002 was conducted and documents, record and other articles were taken into possession in clear violation of the provisions of Sales Tax Act, 1990, it is therefore declared that the proceedings 'of raid and search and seizure of record from the premises of the appellant are illegal, without lawful authority and of no legal effect whatsoever and subsequent proceedings including the orders made in this respect being illegal have no value. The department is directed to immediately return the said record and other articles taken into possession. The documents or their copies shall not be used against the appellant in any proceedings. The impugned order-in-original dated 15-6-2005 is set aside and the appeal is allowed. .