Z & J HYGIENIC PRODUCTS (PVT.) LTD. VS COLLECTOR SALES TAX
2011 PTD 697
[Lahore High Court]
Before Tariq Javaid, J
Messrs Z & J HYGIENIC PRODUCTS (PVT.) LTD.
Versus
COLLECTOR SALES TAX
Writ Petition No.10370 of 2003, decided on 11/11/2010.
Sales Tax Act (VII of 1990)---
----Ss. 38, 38-A, 40 & 40-A---Criminal Procedure Code (V of 1898), Ss.96, 98, 99-A, 100 & 103---Constitution of Pakistan, Art.199---Constitutional petition---Illegal evading the payment of Sales and Excise Duty---Raiding the premises and seizure of sales tax record---, Petitioner, a manufacturer and a registered person, had alleged that functionary of the department, without any reasonable cause raided the premises of the petitioner and illegally seized the sales tax record---Counsel for the authorities had maintained that they had credible information and reasonable belief that the petitioner was illegally evading the payment of sales tax; and the record of sales tax was being removed; it was also alleged that the petitioner's group was involved in huge evasion of sales tax and excise duty---Where the departmental officer had a reasonable belief and serious apprehension of mischief at the hands of the registered person, such as removal of goods or removal of sales tax record, the requirements of warrant under Ss.96, 98, 99-A, 100 & 103, Cr. P. C., could be dispensed with and under Ss.38, 38-A, 40 & 40-A of the Sales Tax Act, 1990 the departmental officer could not be denied access to the records of the registered person---Sales Tax Officer had to incorporate in his notice under S.38 of Sales Tax Act, 1990 the grounds of his belief with regard to danger he apprehended that the goods or sales tax record, were likely to be removed before search could be made---Assistant Collector in the impugned notice had specified two things; that he had credible information; and that he had sufficient reasons to believe that the petitioner had kept/concealed documents; and there was a danger of removal thereof---Said reasons, ordinarily could not be sufficient as there was no disclosure of "credible information" nor reasons to entertain a belief that the records were being removed---Failure to give reasons in the search warrant, had rendered the whole exercise illegal---Very fact in the case that a demand in the sum of Rs.34,294,663 had been raised on the basis of the seized record, had amply shown that the apprehension of the authorities while raiding the premises of the petitioner, could not be said to be without any reasonable belief and apprehension---However, the fact whether said demand was justifiable or not, could only be ascertained after recording of evidence to be produced by both the parties---Such exercise could not be-made in the constitutional jurisdiction of High Court---Petitioner had an alternate remedy as under the law a forum for adjudication of factual dispute was provided---Parties could contest their grievances before the Adjudicating Officer---Constitutional petition was disposed accordingly.
Messrs Food Consults (Pvt.) Ltd. Lahore and others v. Collector (Central Excise and Sales Tax), Lahore and 2 other 2004 PTD 1731; N.P. Water Proof Textile Mills (Pvt.) Ltd. Through Director, Karachi v. Federation of Pakistan through Secretary, Revenue Division/Chairman, Central Board of Revenue, Islamabad and another 2004 PTD (DB) 2952; Messrs Zikeria Enterprises v. Muhammad Musharaf and 7 others 2005 PTD 1200; A.R.K. Textiles through Proprietor v. Federation of Pakistan through Ministry of Finance, Islamabad and 4 others 2006 PTD 494; Messrs Haq Cotton Mills (Pvt.) Ltd. v. Chairman Central Board of Revenue and 2 others 2006 PTD 1884; Collector of Sales Tax and others v. Messrs Food Consults (Pvt.) and Messrs Diplex Beauty Clinic and others 2007 PTD 2356; Chairman C.B.R. and others v. Haq Cotton Mills (Pvt.) Ltd. 2007 PTD 1351; Collector of Customs (Preventive) and 2 others PLD 1991 SC 630; Federation of Pakistan through Secretary, Ministry of Finance, Federal Secretariat, Islamabad and 4 others 2003 PTD 1034; Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another 2005 SCMR 37; Collector of Sales Tax and Central Excise (Enforcement) another v. Messrs MEGA TECH (Pvt.) Ltd. 2005 PTD 1993 and Messrs Punjab Bevarage Co. (Pvt.) Ltd. v. C.B.R. and 4 others 2001 PTD 3929 ref.
Mian Abdul Ghaffar for Petitioner.
Ms. Kausar Parveen for Respondents.
ORDER
TARIQ JAVAID, J.---This order shall dispose of the instant petition as well as Writ Petition No.9453 of 2003 (3.M Textile 7-A, II1 Model Town, Lahore, through Mueen Malik, Sole Proprietor v. Collector Sales Tax etc.), Writ Petition No.38 of 2004 (Messrs Z&J Hygienic Product (Pvt.) Limited v. Collector of Sales Tax etc., and Writ petition No.12191 of 2003 ((Messrs Z&J Hygienic Product (Pvt.) Limited v. Assistant Commissioner of (Income and Wealth Tax etc.) of Sales Tax etc.), as common question of law and facts involved therein.
2. The petitioner is a manufacturer of baby diapers and a registered person under the Sales Tax Act, 1990. According to the learned counsel for the petitioner the audit was conducted by the respondents periodically and no discrepancies were detected. It is alleged that respondent No.3 without any reasonable cause raided the premises of the petitioner along with the staff members and illegally seized the sales tax record. Allegedly the respondent No.3 was asked to show the warrant on which it was maintained that under C.G.O. No.1 of 1999 the respondent No.3 was empowered to raid the premises where a suspicion with regard to the sales tax evasion was raised. According to the learned counsel for the petitioner the record was seized and transported to the offices of the respondents. According to the learned counsel for the petitioner if the respondents intended to carry out further audit then it should have been carried out lawfully and the raiding of the premises along with staff members of the respondent No.3 was unwarranted, therefore, he is entitled to the return of the sales tax record. It is further maintained that an F.I.R. has been registered against the petitioner for the alleged sales tax evasion, which is illegal. The learned counsel for the petitioner has placed reliance on Collector of Customs (Preventive) and 2 others v. Muhammad Mahfooz (PLD 1991 SC 630), Federation of Pakistan through Ministry of Finance Islamabad v. Master Enterprises (Pvt.) Ltd. and 4 others (2003 PTD (SC) 1034), Messrs Food Consults (Pvt.) Ltd. Lahore and others v. Collector (Central Excise and Sales Tax), Lahore and 2 others (2004 PTD 1731), N.P. Water Proof Textile Mills (Pvt.) Ltd. through Director, Karachi v. Federation of Pakistan through Secretary, Revenue Division/Chairman, Central Board of Revenue, Islamabad and another (2004 PTD (DB) 2952), Messrs Zikeria Enterprises v. Muhammad Musharaf and 7 others (2005 PTD 1200), Collector of Customs Lahore and another v. Universal Gateway Trading Corporation and another (2005 SCMR 37), A.R.K. Textiles through Proprietor v. Federation of Pakistan through Ministry of Finance, Islamabad and 4 others (2006 TD 494), Messrs Haq Cotton Mills (Pvt.) Ltd. v. Chairman Central Board of Revenue and 2 others (2006 PTD 1884), Collector of Sales Tax and others v. Messrs Food. Consults (Pvt.) and Messrs Diplex Beauty Clinic and others 2007 PTD 2356 and Chairman C.B.R. and others v. Haq Cotton Mills (Pvt.) Ltd. (2007 PTD (SC) 1351).
3. On the other hand, learned counsel for the respondents has maintained that the respondents had credible information and reasonable belief that the petitioner was illegally evading the payment of sales tax and the record of sales tax were being removed. It is also alleged that the petitioner's group was involved in huge evasion of sales tax and excise duty; that previously criminal cases were registered against the Directors; that after the arrest of Directors under the above said F.I.R. various confessional statements were also made and vary huge amount of federal excise duty was recovered. After seizure of sales tax record it was audited and huge amount of sales tax, i.e. Rs.34,294,663 was found to have been evaded. A contravention report was prepared on the basis whereof a show-cause notice has already been issued, however due to interlocutory orders passed by this Court the proceedings in the said show-cause notice are stayed. Therefore, according to the learned counsel for the respondents the petitioner may contest the issuance of show-cause notice by joining the proceedings before the Adjudicating Officer. The learned counsel for the respondents argued that the petition is not maintainable and has relied on Collector of Customs (Preventive) and 2 others (PLD 1991 Supreme Court 630), Federation of Pakistan through Secretary, Ministry of Finance, Federal Secretariat, Islamabad and 4 others (2003 PTD 1034), Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another (2005 SCMR 37) and Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs MEGA TECH (Pvt.) Ltd. (2005 PTD 1993).
4. In case of Collector of Customs (Preventive) and 2 others v. Muhammad Mahfooz (PLD 1991 Supreme Court 630) with regard to their search warrant their lordships observed at page 635 as follow:
"Now so far powers under section 163 of the Customs Act, 1969 are concerned, they are to be read along with section 162 of the Customs Act. Requirement of section 162 of the Customs Act is that on application by the gazetted officer of Customs, in which grounds are stated, search warrant is to be obtained from the Magistrate having local jurisdiction and such warrant shall be executed in the same way and will have the same effect as is provided under the Code of Criminal Procedure, 1898. This requirement of issue of search warrant by the Magistrate can be dispensed with under section 163 of the Customs Act, which empowers Assistant Collector of Customs or any other officer of like rank to make search without warrant if he is satisfied that there is danger of removal of goods if search warrant is obtained and further he has to record such reasons."
5. In case of Federation of Pakistan through Secretary, Ministry of Finance, Federal Secretariat, Islamabad and 4 others v. Master Enterprises (Pvt.) Ltd. (2003 PTD 1034) their Lordship observed 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 petitioner while conducting raid and seizing tine 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 1898) (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. Though 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."
6. In case of Collector of Customs, Lahore and others v. Universal Gateway Trading Corporation and another (2005 SCMR 37) their lordships observed that:--
"No doubt that under ordinary circumstances, the provisions as contained in section 162 of the Customs Act, 1969, must be implemented but in urgent and emergent situation, search can be conducted without having search warrant subject to conditions as enumerated in section 163."
7. In case of Collector of Sales Tax and Central Excise (Enforcement) and another v. Messrs MEGA TECH (Pvt.) (2005 PTD 1933) their lordships observed as under:--
"(9) Reasonable belief of an officer must have direct nexus and material bearing on the strong circumstances for formation of such opinion. Indeed the legislature has used the expression 'reasonable belief' and not a mere suspicion in the mind of an authority with a view to authorize the search of premises without obtaining a search warrant from a Magistrate. Sections 40 and 40-A of the Act in our opinion appear to be neither overlapping nor in conflict with each other. While section 40 caters for search where a sales tax officer has reason to believe that any documents or things, which may be useful or relevant to any proceedings, he may enter the place and cause a search after obtaining search warrant from the Magistrate, section 40-A was enacted to meet an emergent situation where a sales tax officer has reason to believe that documents or things useful for or relevant to any proceedings under the Act, kept at any place are apprehended to be removed, he may proceed to make a search without obtaining any warrant. It would, however, appear 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."
8. The resume of recent judgments show that where the departmental officer has a reasonable belief and serious apprehension of mischief at the hands of the registered person, such as removal of goods or removal of sales tax records, the requirements of warrant under sections 96, 98, 99-A, 100 and 103 of the Cr.P.C., can be dispensed with and under sections 38 to 40-A of the Sales Tax Act the departmental officer could not be denied access to the records of the registered person. Another aspect to be noted is that the Sales Tax Officer has to incorporate, in his notice under section 38 of Sales Tax Act the grounds of his belief with regard to danger he apprehends, that the goods or sales tax record, as the case may be, are likely to be removed before search can be made. The Assistant Collector in the impugned notice had specified two things viz. that he had credible information and that he had sufficient reasons to believe that the petitioner had kept/concealed documents and there was a danger of removal thereof. Ordinarily the said reasons may not be sufficient as there was no disclosure of "credible information" nor reasons to entertain a belief that the records were being removed. The failure to give reasons in the search warrant renders the whole exercise illegal.
9. But in this case, the very fact that a demand in the sum of Rs.34,294,663 has been raised on the basis of the seized record amply shows that the apprehension of the respondent No.1 while raiding the premises cannot be said to be without any reasonable belief and apprehension. However, the fact whether the said demand is justifiable or not can only be ascertained after recording of evidence to be produced by both the parties. This exercise cannot be made in the constitutional jurisdiction of this Court. The petitioner has an alternate remedy. Under the law" a forum for adjudication of such factual disputes is provided. Admittedly, show-cause notice, has been issued. In Messrs Punjab Bevarage Co. (Pvt.) Ltd. v. C.B.R. and 4 others (2001 PTD 3929), the Hon'ble Supreme Court held that in cases of evasion of revenue and consequent show-cause notices the superior Courts are not the forum to adjudicate, upon the questions of fact by making thorough investigations. Therefore, the parties may contest their grievance before the Adjudicating Officer. With above observations this petition is disposed of with no order for costs.
H.B.T./Z-1/L??????????????????????????????????????????????????????????????????????????????????????? Order accordingly.