G.M.H. TRADERS AND MANUFACTURERS through Proprietor/Chief Executive VS DEPUTY DIRECTOR/INVESTIGATING OFFICER DIRECTORATE OF INTELLIGENCE/INVESTIGATION, LAHORE, 2009 PTD-LAHORE-HIGH-COURT-LAHORE 1894 (2009)

Sales Tax Act (VII of 1990)---

----S. 8B---Constitution of Pakistan (1973), Art.199---Constitutional petition---Allegation of adjustment of input tax on the basis of fake invoices against the petitioner---Department pressed the petitioner to pay Rupees one million in order to save himself by showing muscles of the Revenue---Validity---Matter involved, in the present case, was of criminal nature, the invoices the petitioner had used for the purposes of availing input tax being fake, the Revenue had the tight to probe into the matter and finally find out the culprit behind---High Court, however, observed that nobody could be asked to pay taxes before completing adjudication proceedings---Demand/collection of tax, in circumstances, was totally illegal, being without an adjudication order---Direction was issued to the department by the High Court to complete the inquiry with regard to the fake invoices and illegal adjustment of input tax etc., expeditiously, strictly as per law and rules and no harassment be caused to the petitioner.

Waqar Azeem for Appellant.

Muhammad Nawaz Cheema for Respondent.

Date of hearing: 17th June, 2009.

JUDGMENT

KHAWAJA FAROOQ SAEED, J.---This judgment will dispose of Writ Petition No. 8323 and Writ Petition No. 8049 of 2009 as the common questions of law and facts are involved in both the writ petitions.

2. The brief facts of the case are that the petitioner company was -registered in the Sales Tax Department on 24-11-2004 as manufacturer -cum-importer and exporter. The business was carried on till 12-11-2008 and during the period substantial amount of sales tax was paid by him. Due to international economic crisis the petitioner decided to de-register itself and made an application to the Federal Board of Revenue for the purpose. A thorough audit was conducted by the Regional Tax Office, Gujranwala, and the report was submitted to the Federal Board of Revenue vide letter dated 12-11-2008. The petitioner was de-registered as a result of said audit.

3. On 20-11-2008 the petitioner was raided by the respondents. He was orally informed of adjustment by him of some input tax which in their opinion was on the basis of fake advices. The petitioner challenged the same. However, he was pressed to pay rupees one million in order to save himself by showing muscles of the Revenue. The action is challenged inter alia on the basis of following arguments:

(i) that the petitioner has been de-registered itself, hence is not keeping the earlier record in full;

(ii) that without adjudication or final determination as to whether the petitioner has committed any irregularity or not, demand cannot be raised.

(iii) that no one can be asked to pay tax which has not yet been created against him. The petitioner's reliance in support of his arguments is on sections 8-A, 36 and 45 of the Sales Tax Act.

4. When confronted learned Legal Advisor of the department readily conceded that a demand cannot be created without finalizing adjudication proceedings. However, since the matter involved in this case is of criminal nature, the invoices the petitioner has used for the purpose of availing input tax being fake, the revenue have the right to probe into the matter and finally find out as to the culprit behind.

5. This Court obviously supports the action of the department of finding out the people behind the fraudulent preparation of the invoices and illegal adjustment of input tax from the output. However, this Court cannot support that before completing adjudication proceedings any body can be asked to pay taxes.

6. It has further been informed that the officers of the Sales Tax department called the Director to the office and then kept him waiting for the whole day and also used such other tactics to harass him. Later the Director was asked to leave without even meeting. Further, obviously the petitioner would never become hindrance in adjudication process and will co-operate in all legal proceedings. He has been doing his work in good faith and there is no mala fide attached to his record.

7. While this Court holds the collection of tax to be as totally illegal, being without an adjudication order, direction is issued to complete the inquiry with regard to the fake invoices and illegal adjustment of input tax etc. expeditiously, strictly as per law and rules.

8. Further, no illegal harassment shall be caused to the petitioner.

9. Disposed of.

M.B.A./G-87/LOrder accordingly.