The abolition of separate and independent adjudication system under the Sales Tax Act 1990 has created problems for the registered persons in obtaining impartial assessment orders pertaining to sales tax liability and disputed matters of sales tax and federal excise.
Tax experts told Business Recorder here on Saturday that the trust deficit has mounted under the existing procedure for determination of tax liability by the officers who are responsible to select, initiate and conduct audit under section 25 of the Sales Tax Act 1990 and then to finalise and determine the tax liability, reflecting a classical example of discretionary powers enjoyed by the taxation officer. It shows major legal lacuna in the modified sales tax law due to totally revised adjudication system.
They said that under the previous adjudication procedure the sales tax officers have to send contravention report and adjudication was solely done by a separate office through issuance of show cause notice to finalisation of Order-in-Original after adopting proper method of legal modalities. The taxation/audit officer was not empowered to operate beyond the limitations of the contravention report. The adjudication and audit process were kept separate under the previous law to give level playing filed and fair application of law. Later, this procedure was abolished and adjudication has been done on the pattern of income tax. Now, an officer of Inland Revenue can pass an assessment order after audit, giving discretionary powers to a single officer.
Under the tax reforms adopted by the board in line with the best international practice, the executive and adjudication were two separate forums. The authority exercising executive powers can not exercise adjudication powers. However, situation was changed altogether after omission of section 45 of the Sales Tax Act, 1990, the person who will conduct audit will also been empowered now for determining its final tax liability. In this way, one authority has both the powers for detection of cases through audit and its adjudication. This existing scenario is against the basic maxim of law that no one can be a judge of his own cause, they observed.
Experts opined that the taxpayers have going to loss trust on the existing system and were feel left on the mercy of audit officer in the absence of appropriate check and balance system. For example, there might be instances where the audit officers can simply threat the taxpayers to settle the audit findings with them out of the law or otherwise be prepared to face tax liability straight away.
The section 45 was inducted in the Sales Tax Act., in the year 2000. The rationale behind inducing this section at that point of time was to create the separate office for adjudication and detach this authority form executive office, in order to bring more transparency in the tax system and to bring confidence of the taxpayer, however the section was omitted last year and now powers of the adjudication rested with the same officer who issue the contravention report against the taxpayers, meaning by taxpayers are now left on the mercy of the audit officers.
The tax experts further informed that irony of the fact is that while determining the tax liability even pecuniary limits prescribed under notification 551(I)/96 was not followed after omission of section 45 of the Sales Tax Act. There was specific pecuniary limit given for adjudication of the cases, the superintendent was authorised to pass orders for recovery involves Rs 10000, Assistant Collector can decide cases exceed Rs 10000/ upto one million, the Deputy Collector can decide cases exceed Rs one million upto 2.5 million, whereas an additional commissioner can decide the cases without any restriction. After omission of the section 45, the officers of the Inland Revenue has begun passing assessment orders without any specified pecuniary limits in the absence of section 45 of the Sale Tax Act. Despite of the fact that notification 555(I)/96 is still operating under the law having same pecuniary limits for creating demands under section 11 and section 36 of the Sales Tax Act, 1990. Hence all the cases decided in recent past by the officers of the Inland Revenue seemed to be in violation of the pecuniary limit and hence becomes null and void.
Under the prevailing situation the independent tax experts, highly recommends application of proper check and balance on the findings of the field officers to restrict the high risk of their abuse of powers. It is pertinent to mention that FBR in past was compel to halt all their audit programmes due to such rising complaints in year 2004. The arena seems to be emerged back and if it was not timely checked and controlled the government would loss integrity and faith of the genuine taxpayers which is in-fact is one of the major issue in widening up of the tax culture.
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