1. ' SALEEM AKHTAR, J.-The applicants are manufacturer of A.B. Brand biscuits. In respect of assessm ent years 1968-69, 1969-70 and 1970-71 the Sales Tax Officer framed assessment and granted exemption on sale of loose biscuits. This concession was granted in view of item No,61 of Notification No,9 dated 277-1951 under which all biscuits except those packed and sold in tins, cardboards, paper containers or cartons were exempted from Sales Tax. The applicants had declared substantial part of their sale as being sale of loose biscuits and obtained the exemption.
2. The Inspecting Assistant Commissioner noticed that the exemption was wrongly claimed and served a notice under section 28-A of the Sales Tax Act dated 19-6-1976 intimating the applicants of the proposed action u/s 28-A. The applicants were asked to file any objection to the proposed action. In reply the Managing Director of the applicants filed objection against the proposed action and discussed the case with the Inspecting Assistant Commissioner. The hearing was adjourned to 6-6-1976. Again on 15-7-1976 the applicants requested for stay of the proceeding till such time their Advocate who had gone abroad returns back. The request was granted by letter dated 17-7-1976 and the applicants were asked to produce the books of accounts and documentary evidence to justify the exemption upto 23-7-1976. The applicants by letter dated 22-7-1976 informed that the accounts and invoices etc for back years were not preserved. As in spite of reminder the applicants did not produce any document, the Inspecting Assistant Commissioner set aside the assessment order framed by the Sales Tax Officer and directed him to make fresh assessment in which applicant's claim relating to exemption and sales of biscuits in loose condition be examined and exemption may be allowed an such sales should strictly fall within the ambit of the Notification. The applicants filed appeals in respect of each year against the order of the Inspecting Assistant Commissioner. During the pendency of these appeals the Sales Tax Officer framed the assessm ents on 30-11-1976 which were set aside by the Appellate Assistant Commissioner on 19-7- 1977 on the ground that they were framed after the expiry of three years from the end of the year in which the sales were made and were thus hit by section 10 (7) of the Sales Tax Act. The enquiries by the Tribunal revealed that this order of the Appellate Assistant Commissioner had not been challenged in appeal by the Department. Therefore, the appeal filed by the applicants against the order of the Inspecting Assistant Commissioner was treated as in-fructuous and was dismissed.
3. The applicants however discovered that the Department had filed an appeal and a miscellenous application for restoration of their appeals was filed. The dismissal order was therefore recalled and the appeals were heard and decided on merits. The applicants filed an application under section 17 (1) of the Sales Tax Act, but it was dismissed. The applicants have now filed application under section 17 (4) for referring the following questions for consideration:
(i) Whether the learned Tribunal had any material on record to warrant the observation that the inspecting Assistant Commissioner of Sales-tax had vacated the orders of the Sales-tax Officer on the basis of some information.
(ii) WHETHER on the facts and in the circumstances of the case the learned Tribunal had any material or evidence on record to affirm the order of the Inspecting Assistant Commissioner of Sales-tax whereby he had vacated the assessment order as being erroneous?
(iii) WHETHER the learned Tribunal was right in holding that the Inspecting Assistant Commissioner of Sales-tax was justified in invoking section 28-A of the Sales-tax Act, 1951. "
4. ' We have heard Mr. Iqbal Naim Pasha and Mr. Shaikh Haider. The Tribunal had dismissed the application u/s 17 (1) holding that only question of fact was decided and no question of law arose from its order. However from the first two questions sought to be raised it seems that the applicants have challenged the finding of fact on the ground that there was no material on record to support it. This is purely a question of law and arises from the order of Tribunal. Question No,3 in the face of questions No,1 and 2 is completely redundant and vague. We therefore now proceed to consider questions Nos.1 and 2.
5. ' The starting point in this case is issuance of notice under section 28-A of the Sales Tax Act by the Inspecting Assistant Commissioner. Section 28-A reads as follows: "28-A. Power of Inspecting Assistant Commissioner to revise sales tax assessment order,- (1) The Inspecting Assistant Commissioner may call for and examine the record of any proceedings under this Act and if he considers that any order passed therein by Sales Tax Officer is erroneous in so far as it is prejudicial to the interest of revenue, he may, after giving the assessee an opportunity of being heard and after making, or causing to be made, such enquiry as he deems necessary, make such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessm ent, or cancelling the assessment directing a fresh assessment to be made.
(2) No order shall be made under sub-section (1) after the expiry of five years from the date of the order sought to be revised."
6. Under this provision the Inspecting Assistant Commissioner is empowered to call for the record of any proceeding under this Act and to examine them with a view to find out the correctness and legality of the order passed by the Sales Tax Officer. He is also empowered to scrutinize whether the order passed is erroneous causing prejudice to the interest of revenue. It is not every erroneous order which calls for an action under section 28-A but the erroneous order should be of such a nature that it adversely affects the revenue. When the Inspecting Assistant Commissioner is satisfied that the order passed is erroneous and prejudicial to the interest of revenue he may after notice to the assessee and effording him proper opportunity to explain, enhance or modify the assessm ent or cancel the same and direct a fresh assessment to be made. Such power can be exercised within five years from the date of order sought to be revised.
7. ' Considering the language employed in section 28-A the Inspecting Assistant Commissioner can pass order if by examining the record he comes to the conclusion that the order is erroneous and adversely affects the revenue. It is not necessary that such order should be passed on certain information which could be derived by the Inspecting Assistant Commissioner from any foreign agency. The Inspecting Assistant Commissioner has to form his opinion which can be made even by reading the assessm ent order. In the present case it has been observed by the Tribunal that a large quantity of biscuits were alleged to have been sold under loose condition, and on 25-2-1975 the applicants agreed to certain additions to the disclosed taxable sales for three years under consideration. These additions were made over and above the book result. This agreement could provide a reason to suspect the correctness of the statement of account particularly in view of the fact that large quantity of biscuits were claimed to have been sold in loose condition. It is not in every case that from such agreement adverse inference should be drawn against an assessee but in case where the Inspecting Assistant Commissioner after examining the record considers that erroneous order prejudicial to revenue has been passed, he may invoke section 28 A. Although the applicants have not filed order of the Tribunal dated 30-5-1978 passed in Sales Tax Appeal No,41 of 1977 and 78 filed by the applicants against these assessment orders, it is available in S T C 35/79. In that order the Tribunal has observed that complaint from the Union had been received that the exemption claimed by the applicants was not legal and proper as loose biscuits were never sold by them. Coupled with the facts noticed by the Inspecting Assistant Commissioner this could be an additional ground for taking action under Section 28-A.
8. ' After the notice had been issued the applicants were entitled to explain the Inspecting Assistant Commissioner that the facts do not justify action u/s 28A. The applicants had ample opportunity to disprove the grounds under which proposed action under section 28-A was to be initiated. This opportunity was provided to the applicants but they refused to produce the account books relating to the relevant years and in spite of several reminders they remained adamant.
9. ' They had taken the stand that they have not preserved it after expiry of four years as provided by Section 19. In this regard it would be advantageous to produce section 19 (1) and (2) as follows:-
19. Records and books to be kept. --(1) Every manufacturer (.....) and every licensed wholesaler and every exporter shall keep records and books of account in such form and containing such information as will enable the amount of tax that should have been paid to be determined.
10. (1-A) The books of account kept under subsection (1) shall state separately the amount of tax stated in the invoice issued in pursuance of Section 20.
(2) Every person required by sub-section (1) to keep records or books of account shall, unless written permission to dispose of them is granted by the Sales Tax Officer, keep every such record of books of account and every document or voucher necessary for the verification of the information in any such record of books of account, for the period up to which assessment or re-assessment for the year to which the record, books of account, document of voucher relates can be made under Section 28.
11. ' It is pertinent to note that by Finance Ordinance 1970 subsection (2) of section 19 was amended and the words "the period upto which assessment or reassessment for the year to which the record books of account, document or voucher relates can be made under section 28" were substituted for the words " a period of four years from the end of the year to which the record books of account, document of vouchers." relates". Therefore before the amendment made by Finance Ordinance, 1970 the position operating under law was that an assessee was required to keep the books of account, documents, vouchers, and records for a period of four years from the end of the year to which it related. It could however be disposed of earlier with the written permission of Sales Tax Officer. After the amendment the position has completely changed. Now the records are to be kept upto the period assessm ent under section 28 can be made. Under Section 28 (1) (a) if the return has not been filed notice to the assessee can be issued at any time and the assessment has to be made within two years from the end of the year in which such notice was issued. But in other cases notice must be issued within 3 years from the end of the year when assessment was first made, or excessive relief allowed or order for refund was passed and reassessment should be made within two years from the end of the year when such notice was served. In this manner period for re- assessm ent can extend at least five years from the end of the year when first assessment was made. As provided by section 19 the record should be preserved for a minimum period of five years from the end of the year when assessment was made. The respondents were not justified in destroying the record within four years of the date of assessment. For the aforestated reasons we answer the questions Nos.1 and 2 in the affirmative.