This consolidated judgment is directed to dispose of above titled writ petition as well as Writ Petition Nos, 410/2012, 552/2012, 850/2012, 1889/2012, 1922/2012, 990/2012, 1936/2012, 1938/2012, 1943/2012, 2081/2012, 2111/2012, 2114/2012, 2204/2012, 1344/2012, 1923/2012, 3042/2012, as common questions of law and facts are involved in all these writ petitions.
2. Brief facts of the case are that the petitioners were issued notices for audit of sales tax under Section 25 of the Sales Tax Act, 1990 and Section 46 of the Federal Excise Act, 2005. These notices were issued by the Commissioner Inland Revenue. The petitioners challenged these notices mainly on the ground that after insertion of Section 72-B in Sales Tax Act, 1990 and Section 42-B in the Federal Excise Act, 2005, the Commissioner can only start audit proceedings when the Federal Board of Revenue had selected the case for audit, as empowered through S. 72-B and 42-B. Since in cases of petitioners, no selection was made by the Board, as such any proceedings by the Commissioner or Additional Commissioner were illegal and notices issued were illegal and against the provisions of law. The petitioners, therefore, prayed that the notices issued to them, may be declared illegal and without jurisdiction and further proceedings initiated in consequence to the said notices, may also be declared as illegal.
3. It is also to be kept in view that in Writ Petition Nos, 1938, 1943, 2114, 2081, 1889, 2111 and 1922 of 2012, no notices were issued, rather simple letters were sent to provide record and documents, however, in these cases, the contention of petitioners is that the record has been requisitioned for the purpose of conducting audit and the letters are to be treated as notices. In W.P. No, 3042/2012, audit had already been conducted. The contention of the petitioner is that notices issued were illegal and void, and therefore, the audit conducted would have no value.
4. Similar writ petitions were filed before Lahore High Court, Lahore. During pendency of present writ petitions, those writ petitions were decided and accepted vide judgment reported in case "Chenone Stores Ltd. Vs. The Federal Board of Revenue, etc. (2012) 106 Tax 109 (H.C. Lah.). The above said judgment, however, was set aside by the Hon'ble Supreme Court of Pakistan, however, appeals were sent to Division Bench for the purpose of deciding them in Intra Court Appeals after issuing notice to the learned Attorney General.
5. Learned counsel for the petitioners submitted that the present writ petitions be decided in accordance with the said judgment. It was held in the said judgment that:-- "51. Section 25(2) of STA, taken independently, empowers the Commissioner to pick and choose from taxpayers whose record has been called under Section 25(1). The said provision vesting the Commissioner with the power to pick and choose a taxpayer for audit, without any objective criteria, is ex-facie discriminatory. Additionally, the scope of selection for audit is further restricted, as Section 25(2) selects the taxpayers from amongst those taxpayers whose record has been earlier called under Section 25(1). This alone is inconsistent with the concept of audit Section 25(2) provides for unguided and uncanalised power to conduct audit which, is ex facie discriminatory and hence unconstitutional and illegal.
52. The constitutionality of Section 25(1) of STA can be saved if it is read down, and read in tandem with Section 72-B of the STA. Hence, Section 25(1) provides the machinery provision for conducting of audit of the tax affairs of a taxpayer, after it has been selected for audit by the FBR under Section 72-B.
53. It is clarified that rest of Section 25, including sub-section (1) remain intact and is not dependent on Section 72-B, Impugned Notice dated 14-12-2011 issued under Section 25 of the STA by the. Commissioner Inland Revenue (Zone-II) is therefore, declared to be unconstitutional and illegal and hence set aside.
54. As a conclusion, for the above reasons, Section 46(1) of FEA and Section 25(2) of STA are read down and shall provide the machinery provision to conduct audit after the taxpayer is selected for audit of its tax affairs by the FBR through computer ballot which may be random or parametric."
6. On the other hand, learned counsel for respondents submitted that Section 46 as well as Section 42-B of the Federal Excise Act, 2005, are independent sections of law and one cannot be interpreted in the light of other section. Section 25 as well as Section 72-B of the Sales Tax Act, 1990 are, also two independent sections. Under Section 46 of the Federal Excise Act, the officer of Inland Revenue authorized by the Board or the Commissioner can conduct audit of record and documents of any person. Similarly, under Section 25 of the Sales Tax Act, the Commissioner has the similar powers. Section 72-B of Sales Tax Act and 42-B of Federal Excise Act are totally independent provisions, by virtue of which the Board has the authority to conduct audit of a person selected through computer ballot. Learned counsel further submitted that object of Sections 42-B and 72-B is to check the whole tax system and for that purpose, the Board will have to select a person/taxpayer.
The impugned notices have been issued to verify the tax paid by the ' petitioners and therefore, Section 25 of the Sales Tax Act and 46 of the Federal Excise Act cannot be declared as discriminatory or violative of any article of the Constitution.
7. I have heard learned counsel for the parties and have also perused the record.
8. In the present case, Sections 46 and 42-B of the Federal Excise Act, 2005 as well as Section 25 and Section 72-B of Sales Tax Act, 1990 have been disputed, so for the sake of convenience, these sections are reproduced herein below:-- 42-B. Selection for audit by the Board.--(1) The Board may select persons or classes of persons for audit of record and documents through computer ballot which may be random or parametric as the Board may deem fit.
(2) Audit of such persons selected under sub-section (1) shall be conducted as per procedure given in Section 46 and all the provisions of the Act shall apply.
(3) For the removal of doubt, it is hereby declared that Board shall be deemed always to have had the power to select any persons or classes of persons for audit.
46. Departmental Audit.--(1) The [officer of Inland Revenue] authorized by the Board by designation may, once in a year, after giving advance notice in writing, conduct audit of the records and documents of any person registered under this Act.
(2) In case the (Commissioner) has information or sufficient evidence showing that such registered person is involved in fraud or evasion of duty, he may authorize a [officer of Inland Revenue], not below the rank of [Assistant Commissioner], to conduct audit at any time in a year.
[(2A) After completion of the audit under this section or any other provision of law, the officer of inland Revenue may, if considers necessary, after obtaining the registered person's explanation on all the issues raised in the audit, shall pass an order under Section 14, imposing the correct amount of duty, charging default surcharge, imposing penalty and recovery of any amount erroneously refunded.]
(3) Notwithstanding the penalties prescribed in Section 19, if a registered person wishes to deposit the amount of duty not paid, short paid or the amount of duty evaded along with default surcharge voluntarily, whenever it comes to his notice, before commencement of audit, no penalty shall be recovered from him: Provided that if a registered person wishes to deposit the amount of duty not paid, short paid or amount of duty evaded along with default surcharge during or after the audit but before the conclusion of original adjudication proceedings, he may deposit such amount alongwith twenty five per cent of the amount of penalty prescribed under this Act or the rules made thereunder and in such case, further proceedings in the case shall abate.
(4) The Board may appoint in a Chartered Accountant or a Cost and Management Accountant or a firm of such accountants to conduct audit of a person liable to pay duties under this Act in such manner and subject to such conditions it may specify.
(5) The audit of the registered person shall generally be a composite audit covering all duties and taxes to which his business or activity is liable under the laws administered by the Board.
Section 25 of the Sales Tax Act, 1990:-- Access to record documents, etc.--(1) A person who is required to maintain any record or documents under this Act [or any other law] shall, as and when required by [Commissioner], produce record or documents which are in his possession or control or in the possession or control of his agent; and where such record or documents have been kept on electronic data, he shall allow access to [the officer of Inland Revenue authorized by the Commissioner] and use of any machine on which such data is kept.
(2) The officer of Inland Revenue authorized by' the Commissioner, on the basis of the record, obtained under subsection (1), may, once in a year, conduct audit: Provided that in case the Commissioner has information or sufficient evidence showing that such registered person is involved in tax fraud or evasion of tax, he may authorize an officer of Inland Revenue, not below the rank of Assistant Commissioner, to conduct an inquiry or investigation under Section 38: Provided further that nothing in this sub-section shall bar the officer of inland Revenue from conducting audit of the records of the registered person if the same were earlier audited by the office of the Auditor-General of Pakistan;
(3) After completion of the audit under this section or any other provision of this Act, the officer of Inland Revenue may, after obtaining the registered person's explanation on all the issues raised in the audit pass an order under Section 11 or Section 36, as the case maybe.
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(5) Notwithstanding the penalties prescribed in Section 33, if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with 1[default surcharge] voluntarily, whenever it comes to his notice, before receipt of notice of audit, no penalty shall be recovered from him: Provided if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with 1[default surcharge] during the audit, or at any time before issuance of show- cause notice 2[ ], he may deposit the evaded amount of tax, '[default surcharge] under Section 34, and twenty five per cent of the penalty payable under Section 33: Provided further that if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with 1[default surcharge] after issuance of show-cause notice, he shall deposit the evaded amount of tax, 1[default surcharge] under Section 34, and full amount of penalty payable under Section 33 and thereafter, - the show-cause notice, shall stand abated.] Section 72-B of the Sales Tax Act, 1990:-: Selection for audit by the Board.--The Board may select persons or classes of persons for audit of tax affairs through computer ballot, which may be random or parametric as the Board may deem fit.
(2) Audit of tax affairs of persons selected under sub-section (1) shall be conducted as per procedure given in Section 25 and all the provisions of this Act shall apply accordingly.
(3) For the removal of doubt, it is hereby declared that the Board shall be deemed always to have had, the power to select any persons or clauses of persons for audit of tax affairs under this section.]
9. Section 42-B of Federal Excise Act and Section 72-B of Sales Tax Act were introduced through Finance Act, 2010. Contention of the petitioners is that Section 25 of the Sales Tax Act is subservient to Section 72-B of the Sales Tax Act and Section 46 is subservient to Section 42-B of the Federal Excise Act. In other words, the Board has first to select a person for audit and then the audit can be conducted by the Commissioner.
10. Perusal of Section 46 of the Federal Excise Act as well as Section 25 of the Sales Tax Act clearly shows that there is no ambiguity in these sections. In a taxing statute, there should be no departure from the general rule that words used in a statute must first be given their ordinary and natural meaning. It is only when such an ordinary meaning does not make sense, then resort can be made to discovering other appropriate meanings. While construing and interpreting fiscal statutes one must look to the words of the statute and interpret them in the light of what is clearly expressed and nothing can be implied which is not expressed. In this 'respect, I have sought guidance from PLD 1990 SC 68.
11. As far as word "audit" is concerned, the same has been defined in Black's Law Dictionary, which means "a formal examination of an individual's or organization's accounting records, financial situation, or compliance with some other set of standards. "Tax Audit" means "the review of a taxpayer's' return by the IRS, including an examination of the taxpayer's books, vouchers, and records supporting the return."
12. In Section 25 of the Sales Tax Act and in Section 46 of the Federal Excise Act, the same powers of audit have been given to the Commissioner. These two sections do not suggest that prior to conducting audit, the case of taxpayer is to be selected or for that purpose, the objective criteria is required.
13. It is also incorrect that if the Commissioner has the powers to select and conduct audit that would be discriminatory, as the Commissioner might select the taxpayer on the basis of his own whims. There is a marked distinction between a provision of a statute, which may be expressly discriminatory and the provision, which may be capable of being used in discriminatory manner. In the present case Section 25 of the Sales Tax Act and 46 of the Federal Excise Act are not discriminatory, however, it can be said that these two sections can be used in discriminatory manner. Had it been discriminatory, the same could be struck down being violative of Article 25 of the Constitution, but if it is held that it can be used in discriminatory manner, then any act done under this provision in discriminatory manner, can be struck down. Simply because of the fear of being used in discriminatory manner, a provision cannot be struck down. Reference for the sake of guidance may be made to the case "Federation of Pakistan and Others Vs. Shaukat Ali Mian. and Others" reported as PLD 1999 Supreme Court 1026.
14. It would also be incorrect to hold that because of this provision the object and purpose of self- assessm ent would be nullified. Infect, the process of self-assessment is always required to be verified by the tax authorities and if the assessment filed by the taxpayer is checked and verified by the tax authorities, the same cannot be considered as violative of any article of the Constitution.
15. As far as Section 72-B of Sales Tax Act and 42-B of Federal Excise Act are concerned, these were introduced through Finance Act, 2010. Even prior to these two sections, Section 25 of the Sales Tax Act and 46 of the Federal Excise Act were available in the statute. By virtue of these two new sections, .an additional power has been given to the Board and the object of the same is administrative in nature to check the tax system as a whole. Obviously, for this purpose, some taxpayers are required to be selected and in order to avoid any discrimination, the legislator has suggested that selection may be made through computer ballot. This power to the Board has been given in order to keep an eye on the taxpayer as well as the taxation officer. As such, the object arid purpose of these two sections is totally different.
16. In the above said circumstances, I hold that Sections 25 and 72-B of the Sales Tax Act are independent sections. Similarly, Sections 46 and 42-B of Federal Excise Act are two independent sections. The Commissioner can exercise his authority independently and no prior selection is required. Accordingly, all these writ petitions are dismissed.