(On appeal from the judgment of Lahore High Court, Lahore dated 2-5-2001 passed in Writ Petition No. 6677 of 2001).

(a) Sales Tax Act (VII of 1990)---

----S. 32-A [as inserted by Finance Act (III of 1998) and Finance Act (IV of 1999)]---Contention of the petitioner was that the authorities lacked jurisdiction. in the matter inasmuch as S.32-A was inserted in Sales Tax Act, 1990 by Finance Act, 1998 and was further amended by Finance Act, 1999 and audit being done pertained to the period prior to insertion of S.32-A in the Sales Tax Act. 1990---Leave to appeal was granted by Supreme Court to consider the contention.

(b) Sales Tax Act (VII of 1990)---

----S. 32-A---Constitution of Pakistan (1973), Art. 185(3)- Special audit by Chartered Accountants---Period under audit prior to insertion of S.32-A in Sales Tax Act, 1990---Audit was conducted by the Authorities and liability was fixed for deposit of sales tax with penalty---Plea raised by the assessee-Company was that the period of liability fixed by the Authorities was prior to the insertion of S.32-A in Sales Tax Act, 1990--Validity---Authorities failed to show any provision in the Sales Tax Act, 1990 (except S.32-A) under which the Sales Tax Authorities were empowered to re-open and re-determine the tax liability of a registered person in respect of the transaction for which such liability had already been determined---Supreme Court set aside the judgment passed by the High Court on the ground that the matter required determination, firstly of the question whether the purpose of the provisions relating to requirement of maintaining the record for five years and its examination by the Sales Tax Authorities was to re-determine the tax liability of a registered person and secondly, whether upon insertion of S.32-A(2) in Sales Tax Act, 1990, the process of special audit could be made applicable to the period prior to making of S.32-A as part of the statute and whether Collector of Sales Tax was empowered to pass an order of special audit under said section for the period of which the tax liability of a registered person had already been determined and discharged--- Appeal was allowed and the case was remanded to High Court for decision afresh---.

(c) Interpretation of statutes----

---- Retrospective effect of statute---Principle---In absence of any express provision, retrospectivity of a statute cannot be inferred by reference' or implication.

Malik Muhammad Qayyum, Advocate Supreme Court, Shoukat Ali Mehr, Advocate Supreme Court and Mahmood A. Qureshi, Advocate-on- Record (absent) for Appellant.

K.M. Virk, Advocate Supreme Court and Mian Attaur Rehman, Advocate-on-Record (absent) for Respondent No1.

Date of hearing: 25th June, 2002.

JUDGMENT

MUHAMMAD NAWAZ ABBASI, J.---This appeal by the leave of the Court under. Article 185(3) of the Constitution of Islamic Republic of Pakistan, 1973, has been filed against an order dated 2-5-2001 passed by a learned Single Judge of Lahore High Court, Lahore, in a Constitution petition through which show-cause notice, dated 13-1-2001 issued by the Collector of Sales Tax, Faisalabad, was challenged:

The appellant namely, Messrs Ihsan Yousaf Textiles (Pvt.) Limited, is a company incorporated under Companies Ordinance, 1984 and a registered person under the Sales Tax Act, 1990. The Central Board of Revenue, respondent No.3 herein, vide letter, dated 26-9-1998 approved the list of Chartered Accountants for special audit of record of registered person and vide letter, dated 23-7-1999 directed Messrs Rahim Jan and Company, Chartered Accountant firm for conducting special audit of the appellant-Company for the period 1996-97 and 1997-98. The above named Chartered Accountant firm after having undertaken the exercise of examination of record submitted report and the Collector of Sales Tax, Faisalabad, on the basis of said report, issued show cause notice, dated 13-1-2001 fixing the liability of the appellant-Company for deposit of sale tax with penalty for the period from 1996 to 1998. The appellant after submitting the reply to the show-cause notice filed a Writ Petition bearing No.6677 of 2001 in the Lahore High Court, Lahore, wherein the legality of order of special audit and the issuance of show-cause notice were challenged. The writ petition was disposed of by a learned Judge of the High Court with the following observations:-------

"Learned counsel for the petitioner has inter alia argued that it was not open to the respondent No. 1 to appoint a firm of Chartered Accoun tants to audit the record of the petitioner-Company. Other grounds have also been, taken to assail such appointment aid the subsequent issuance of show-cause notice based on the report submitted by the firm so appointed. All of the issues being raised by the petitioner in the present petition, can be urged by it and pressed into service by way of defence in the show-cause proceedings which are already pending before respondent No. 1. I do not find this to be a fit case in which tire administrative proceedings should be short-circuited. It has also to be noted that in the event any adverse order is passed against the petitioner by respondent No.1, the petitioner will have the right to prefer an appeal against such order before the Customs, Excises and Sales fax Appellate Tribunal." .

Leave was granted in this appeal to consider the question relating to. the exercise of jurisdiction by the respondents under section 32-A of the Sales fax Act, 1990. The leave granting order, is read as under:---

"This petition for leave to appeal has arisen from the judgment, date 2-5-2001 of a learned Judge in Chambers of the Lahore High Court, Lahore whereby the petitioner's writ petition, bearing No.6677 of 2001 was dismissed on the sole ground that, proceedings pursuant to the show-cause notice were- pending adjudication before the Collector.

(2)It was contended by the learned counsel for the petitioner With vehemence that the respondent lacked jurisdiction in the matter inasmuch as section 32-A was inserted in the Sales Tax Act by the Finance Act, 1998 and was further amended by Finance Act, 1999 and the audit being done pertains to the period prior to insertion of section 32-A in the Sales Tax Act.

Leave is granted to consider the above contention."

Section 32-A of the Sales Tax Act, 1990 was inserted through the Finance Act, 1998 promulgated on 1-7-1998 which provided that the Central Board of Revenue may by notification in, the. official Gazette, appoint a Chartered Accountant ,for special audit as defined under the Charter Accountants Ordinance, 1961. The Central Board of Revenue in exercise of the above said power, vide notification, dated 17-5-1999 appointed a number of firms of Chartered Accountants for conduct of special audit of register persons. The appellant-Company being aggrieved of the order of special audit and issue of the show-cause notice, challenged the same on the ground fat section 32-A of the Sales Tax Act, 1990 having no retrospective effect would not be applicable to the cases relating to the period prior to the promulgation of Finance Act, 1998, therefore, the order of the Collector for conducting special audit of the appellant by a firm of Chartered Accountants namely Messrs Rahim Jan and Company for the period prior to 1-7-1998 was without lawful authority.

The learned counsel for the appellant has contended that the learned Judge in the High Court without going into the question relating to the legality of the order impugned in the writ petition and the retrospectivity of section 32-A of Sales Tax Act, 1990, dismissed the writ petition in a slipshod manner with the observation that all such points should be taken before the adjudicating authority. The learned counsel has submitted that the Departmental Authorities in their limited jurisdiction cannot go into the question of vires of the statutes under which the said authorities perform their functions.

Learned counsel representing the respondents on the other hand has submitted that the departmental authorities while discharging their functions under Sales Tax Act, 1990 are empowered to inspect the record of a registered person for the purpose of, ascertaining the correct amount of sales tax payable by him and if it comes to the notice of said authorities that any amount of sales tax payable for a period during the last five years was not paid, the provisions of section 32-A of Sales Tax Act, 1990 can unhesitantly be invoked for ascertaining the actual liability of such person, therefore, the conduct of special audit through the firm of Chartered Accountants and issue of show-cause notice to the appellant was not questionable. The learned counsel argued that in any case, since no final order has been passed by the Adjudicating Officer, therefore, it would be premature for the High Court and this Court to dilute upon the objections raised on behalf of the appellant to the show-cause notice which can conveniently be dealt with by the Adjudicating Officer.

The sole question for determination in the present case would be as to whether the notification issued by the C.B.R. under section 32-A of the Sales Tax Act, 1990 would be given effect retrospectively or it would operate prospectively and the Collector of. Sales Tax was competent to direct for the special audit of the. appellant-Company for the period prior to the promulgation of Finance Act, 1998 by virtue of which section 32-A of the Sales Tax Act, 1990 was inserted and was further amended: by Finance Act, 1999. The said section provides as under:--

"32A. Special Audit by Chartered Accountants or Cost Accountants.-(1) The Board may, by notification in the official Gazette, appoint a Chartered Accountant as defined under Chartered Accountants Ordinance, 1961 (X of 1961) or a firm of Chartered Accountants or a Cost and Management Accountant within the. meaning of the Cost and Management Accountants Act, 1966 (XIV of 1966) or a firm of Cost and Management Accountants, for conducting special audit of records of registered person.

(2)Notwithstanding that records. of a registered person have been audited by an officer appointed under section 30, the Board or a Collector may direct an auditor appointed under subsection (1) to audit the records of any registered person.

(3)An auditor appointed under subsection (1), shall have the powers of an officer of sales tax under sections 25, 37 and 38."

Learned counsel for the respondents has not been able to show us any provision in the Sales Tax Act, 1990 (except section 32-A) under which the Sales Tax Authorities are empowered to re-open and re-determine the tax liability of a registered person in respect of the transaction for which such liability has already been determined, therefore, firstly the question whether the purpose of the provisions relating to the requirement of ,maintaining the record for five years and its examination by the Sales Tax Authorities is to re-determine the tax liability of a registered person: and secondly, upon insertion of sub section (2) of. section 32-A of the Sales Tax Act, 1990 the process of special audit can be. made applicable to the period prior to the making of said section as part of the statute and that the Collector of Sales Tax was empowered to pass an order of special audit under said section for the period for which the tax liability of a registered person has already been determined and discharged, would need

proper determination in the light of accepted principle of interpretation of the statutes that in absence of any express provision retrospectivity of a statute cannot be inferred by reference or implication. The contention that the Adjudicating Officer in his limited jurisdiction cannot go into the legal question raised on behalf of the appellant before High Court relating to the power of departmental authorities under section 32-A of Sales Tax .Act, 1990 and the legality of adjudicating proceeding is not without force, therefore, we without expressing ourselves on the above question in either way, deem it proper to send the matter back to the High Court for decision of above questions on merits and disposal of writ petition afresh. The appeal is accordingly allowed, the impugned judgment is set aside and case. is remanded back to the High Court for decision of questions raised before us on merits. There will be no order as to costs.

M.H./I-62/SAppeal allowed.