AUDIT, RECOVERY AUDIT, RECOVERY PROCEDURES & PROCEDURES &

PENALTIES UNDER SALES PENALTIES UNDER SALES TAX ACT, 1990 AND TAX ACT, 1990 AND

FEDERAL EXCISE ACT 2005FEDERAL EXCISE ACT 2005

BY MUNIR QURESHI BY MUNIR QURESHI CHIEF COLLECTOR OF CUSTOMS CHIEF COLLECTOR OF CUSTOMS

(SOUTH)(SOUTH)

TYPES OF AUDIT

AUDIT BY SALES TAX

DEPARTMENTAUDIT BY DRRA

AUDIT BY CA FIRMS & COST ACCOUNTANTS

LEGAL PROVISIONS FOR AUDIT LEGAL PROVISIONS FOR AUDIT Section 25 (1) of Sales Tax Act, 1990 & Section 46 of Federal Section 25 (1) of Sales Tax Act, 1990 & Section 46 of Federal

Excise Act, 2005 empower officer of sales tax & Federal Excise Excise Act, 2005 empower officer of sales tax & Federal Excise to conduct audit of sales tax records of a registered person to conduct audit of sales tax records of a registered person once in a year;once in a year;

Section 25 (2)*: Officer of the department is empowered to re-Section 25 (2)*: Officer of the department is empowered to re-conduct audit of sales tax records of a registered person even conduct audit of sales tax records of a registered person even if the same are already audited by the auditors of DRRA;if the same are already audited by the auditors of DRRA;

Section 32 (A): Special Audit under may be conducted by Section 32 (A): Special Audit under may be conducted by Chartered Accountants and Cost and Management Chartered Accountants and Cost and Management Accountants; Accountants;

Section 8(B): requires a registered person subject to audit Section 8(B): requires a registered person subject to audit under the Companies Ordinance 1984 to submit annual under the Companies Ordinance 1984 to submit annual audited accounts duly verified by the Chartered Accountants, audited accounts duly verified by the Chartered Accountants, showing value addition of less than 10% in case he wishes to showing value addition of less than 10% in case he wishes to claim adjustment/ refund of tax paid by him.claim adjustment/ refund of tax paid by him.

*Added vide Finance Act 2008-09*Added vide Finance Act 2008-09

AUDIT SELECTION CRITERIAAUDIT SELECTION CRITERIA A registered person may be selected for audit on A registered person may be selected for audit on

the following basis:-the following basis:-

Selection by FBR on the basis of abnormality of sales tax Selection by FBR on the basis of abnormality of sales tax profile of a registered personprofile of a registered person

Selection by the Collectorate on the basis of obvious Selection by the Collectorate on the basis of obvious variation in the Purchase or Sales figures of a registered variation in the Purchase or Sales figures of a registered person;person;

Collector may order for audit on the basis of information Collector may order for audit on the basis of information from reliable sources or on the request of registered from reliable sources or on the request of registered person himself;person himself;

Post refund audits Post refund audits

AUDIT PROCEDUREAUDIT PROCEDURE Audits to be completed within three to four days, however, Audits to be completed within three to four days, however,

under special circumstances the above said period could be under special circumstances the above said period could be extended;extended;

Currently auditors are authorized to conduct desk audits Currently auditors are authorized to conduct desk audits only;only;

Audit reports to be signed by Auditors or Senior Auditors duly Audit reports to be signed by Auditors or Senior Auditors duly approved by Assistant/ Deputy Collector needs to be approved by Assistant/ Deputy Collector needs to be submitted within 14 days to Additional Collector;submitted within 14 days to Additional Collector;

Audits by Special Auditors under section 32 A to be Audits by Special Auditors under section 32 A to be monitored by the Collectorate and audit reports to be monitored by the Collectorate and audit reports to be submitted to Additional Collector/ Collector accordingly;submitted to Additional Collector/ Collector accordingly;

The audit reports which detects recovery of more than one The audit reports which detects recovery of more than one million rupees or points out toward serious procedural lapse million rupees or points out toward serious procedural lapse invariably needs to be forwarded to Board;invariably needs to be forwarded to Board;

The Board shall also critically evaluate the audit report. The Board shall also critically evaluate the audit report.

PENALTIES UNDER SECTION 33 PENALTIES UNDER SECTION 33 OF THE SALES TAX ACT, 1990OF THE SALES TAX ACT, 1990

OFFENCEOFFENCE

1. Where any person 1. Where any person fails to furnish a return fails to furnish a return within the due date.within the due date.

Such person shall pay a penalty of five Such person shall pay a penalty of five thousand rupees:thousand rupees:

Provided that in case a person files a Provided that in case a person files a return within fifteen days of the due date, return within fifteen days of the due date, he shall pay a penalty of one hundred he shall pay a penalty of one hundred rupees for each day of default.rupees for each day of default.

PENALTIESPENALTIES

OFFENCEOFFENCE

2. Any person who fails to 2. Any person who fails to issue an invoice when issue an invoice when required under this Actrequired under this Act

PENALTYPENALTY

Such person shall pay a penalty of five thousand Such person shall pay a penalty of five thousand rupees or three rupees or three per centper cent of the amount of the tax of the amount of the tax involved, whichever is higher.involved, whichever is higher.

OFFENCEOFFENCE

3. Any person who un-3. Any person who un-authorizedly issues an invoice authorizedly issues an invoice in which an amount of tax is in which an amount of tax is specified.specified.

PENALTYPENALTY

Such person shall pay a penalty of ten Such person shall pay a penalty of ten thousand rupees or five thousand rupees or five per centper cent of the of the amount of the tax involved, whichever is amount of the tax involved, whichever is higher.higher.

OFFENCEOFFENCE

4. Any person who fails to 4. Any person who fails to notify the changes of notify the changes of material nature in the material nature in the particulars of registration particulars of registration of taxable activity.of taxable activity. ..

PENALTYPENALTY

Such person shall pay a penalty of five Such person shall pay a penalty of five thousand rupeesthousand rupees

OFFENCEOFFENCE

5. Any person who fails to 5. Any person who fails to deposit the amount of tax deposit the amount of tax due or any part thereof in due or any part thereof in the time or manner laid the time or manner laid down under this Act or rules down under this Act or rules or orders made thereunderor orders made thereunder

PENALTYPENALTY

Such person shall pay a penalty of ten thousand Such person shall pay a penalty of ten thousand rupees or five rupees or five per centper cent of the amount of the tax of the amount of the tax involved, whichever is higher: and upto 3 years involved, whichever is higher: and upto 3 years imprisonment upon conviction by Special Judge if imprisonment upon conviction by Special Judge if the amount is not paid within 60 daysthe amount is not paid within 60 days

OFFENCEOFFENCE

7. Any person who is required to 7. Any person who is required to apply for registration under apply for registration under this Act fails to make an this Act fails to make an application for registration application for registration before making taxable before making taxable supplies.supplies.

PENALTYPENALTY

Such person shall pay a penalty of ten Such person shall pay a penalty of ten thousand rupees or five thousand rupees or five per centper cent of the of the amount of tax involved, whichever is higher: amount of tax involved, whichever is higher: and upto 3 years imprisonment upon and upto 3 years imprisonment upon conviction by Special Judge if not registered conviction by Special Judge if not registered within 60 days of start of taxable activitywithin 60 days of start of taxable activity

OFFENCEOFFENCE

8. Any person who fails to 8. Any person who fails to maintain records maintain records required under this Act or required under this Act or the rules made the rules made thereunderthereunder

PENALTYPENALTY

Such person shall pay a penalty of ten Such person shall pay a penalty of ten thousand rupees or five thousand rupees or five per centper cent of the of the amount of tax involved, whichever is higher.amount of tax involved, whichever is higher.

OFFENCEOFFENCE

9. Where a registered 9. Where a registered person who, without any person who, without any reasonable cause, in reasonable cause, in non compliance with the non compliance with the provisions of section 25,provisions of section 25,——

(a) fails to produce the (a) fails to produce the record on receipt of first record on receipt of first notice;notice;

(b) fails to produce the (b) fails to produce the record on receipt of record on receipt of second notice; andsecond notice; and

(c) fails to produce the (c) fails to produce the record on receipt of record on receipt of third notice. third notice. 

PENALTYPENALTY

such person shall pay such person shall pay a penalty of five a penalty of five thousand rupees;thousand rupees;

such person shall pay such person shall pay a penalty of ten a penalty of ten thousand rupees; andthousand rupees; and

such person shall pay such person shall pay a penalty of fifty a penalty of fifty thousand rupees.thousand rupees.

OFFENCEOFFENCE

10. Any person who fails to 10. Any person who fails to furnish the information furnish the information required by the Board required by the Board through a notification through a notification issued under sub-section issued under sub-section (5) of section 26(5) of section 26

PENALTYPENALTY

Such person shall pay a penalty of ten Such person shall pay a penalty of ten thousand rupees.thousand rupees.

OFFENCEOFFENCE

11. Any person who,—11. Any person who,—(a) submits a false or forged (a) submits a false or forged

document to any officer of document to any officer of sales tax; orsales tax; or

(b) destroys, alters, mutilates or (b) destroys, alters, mutilates or falsifies the records including falsifies the records including a sales tax invoice; ora sales tax invoice; or

(c) Knowingly or fraudulently (c) Knowingly or fraudulently makes false statement, false makes false statement, false declaration, false declaration, false representation, false representation, false personification, gives any false personification, gives any false information or issues or uses a information or issues or uses a document which is forged or document which is forged or false.false.

PENALTYPENALTY

Such person shall pay a Such person shall pay a penalty of twenty five penalty of twenty five thousand rupees or one thousand rupees or one hundred hundred per centper cent of the of the amount of tax involved, amount of tax involved, whichever is higher. He whichever is higher. He shall, further be liable, shall, further be liable, upon conviction by a upon conviction by a Special Judge, to Special Judge, to imprisonment for a term imprisonment for a term which may extend to five which may extend to five years, or with fine which years, or with fine which may extend to an amount may extend to an amount equal to the loss of tax equal to the loss of tax involved, or with both..involved, or with both..

OFFENCEOFFENCE

12. Any person who 12. Any person who denies or obstructs denies or obstructs the access of an the access of an authorized officer to authorized officer to the business the business premises, registered premises, registered office or to any other office or to any other place where records place where records are kept, or are kept, or otherwise refuses otherwise refuses access to the stocks, access to the stocks, accounts or records accounts or records or fails to present the or fails to present the same when required same when required under section 25, 38 under section 25, 38 or 38A.or 38A.

PENALTYPENALTY Such person shall pay a Such person shall pay a

penalty of twenty five penalty of twenty five thousand rupees or one thousand rupees or one hundred per cent of the hundred per cent of the amount of tax involved, amount of tax involved, whichever is higher. He whichever is higher. He shall, further be liable, shall, further be liable, upon conviction by a upon conviction by a Special Judge, to Special Judge, to imprisonment for a imprisonment for a term which may extend term which may extend to three years, or with to three years, or with fine which may extend fine which may extend to an amount equal to to an amount equal to the amount of tax the amount of tax involved, or with both.involved, or with both.

OFFENCEOFFENCE

13. Any person who 13. Any person who commits, causes to commits, causes to commit or attempts commit or attempts to commit the tax to commit the tax fraud, or abets or fraud, or abets or connives in connives in commissioning of commissioning of tax fraud.tax fraud.

PENALTYPENALTY Such person shall pay a Such person shall pay a

penalty of twenty five penalty of twenty five thousand rupees or one thousand rupees or one hundred hundred per centper cent of the of the amount of tax involved, amount of tax involved, whichever is higher. He whichever is higher. He shall, further be liable, shall, further be liable, upon conviction by a upon conviction by a Special Judge, to Special Judge, to imprisonment for a imprisonment for a term which may extend term which may extend to five years, or with to five years, or with fine which may extend fine which may extend to an amount equal to to an amount equal to the loss of tax involved, the loss of tax involved, or with both.or with both.

OFFENCEOFFENCE

16. Any person who fails to 16. Any person who fails to make payment in the make payment in the manner prescribed under manner prescribed under section 73 of this Act. .section 73 of this Act. .

PENALTYPENALTY

Such person shall pay a penalty of five thousand Such person shall pay a penalty of five thousand rupees or three rupees or three per centper cent of the amount of tax of the amount of tax involved, whichever is higher.involved, whichever is higher.

OFFENCEOFFENCE

18. Where any officer of Sales 18. Where any officer of Sales Tax authorized to act under Tax authorized to act under this Act, acts or omits or this Act, acts or omits or attempts to act or omit in a attempts to act or omit in a manner causing loss to the manner causing loss to the sales tax revenue or sales tax revenue or otherwise abets or otherwise abets or connives in any such act.connives in any such act.

PENALTYPENALTY

Such officer of Sales Tax shall be liable, upon Such officer of Sales Tax shall be liable, upon conviction by a Special Judge, to imprisonment conviction by a Special Judge, to imprisonment for a term which may extend to three years, or for a term which may extend to three years, or with fine which may extend to amount equal to with fine which may extend to amount equal to the amount of tax involved, or with both.the amount of tax involved, or with both.

OFFENCEOFFENCE

20. Where any person 20. Where any person repeats an offence for repeats an offence for which a penalty is provided which a penalty is provided under this Act under this Act

PENALTYPENALTY

Such person shall pay twice the amount of Such person shall pay twice the amount of penalty provided under the Act for the said penalty provided under the Act for the said offence offence

RECOVERY PROCEDURES FOR SALES TAX & RECOVERY PROCEDURES FOR SALES TAX & FEDERAL EXCISE (SECTION 48 OF THE SALES FEDERAL EXCISE (SECTION 48 OF THE SALES TAX ACT & RULE 60 OF THE FEDERAL EXCISE TAX ACT & RULE 60 OF THE FEDERAL EXCISE

RULESRULES Issuance of demand Issuance of demand

Deduction of recoverable amount from any payable Deduction of recoverable amount from any payable refund refund

Stoppage of clearance Stoppage of clearance

Sealing of business premisesSealing of business premises

Attachment of propertyAttachment of property

Sale of propertySale of propertyPage Cont.Page Cont.

OFFENCES, PENALTIES, FINES AND ALLIED MATTERS OFFENCES, PENALTIES, FINES AND ALLIED MATTERS UNDER SECTION 19 OF THE FEDERAL EXCISE ACT, UNDER SECTION 19 OF THE FEDERAL EXCISE ACT,

20052005

Who fails to file or files an incorrect returnWho fails to file or files an incorrect return

Five thousand Rupees in case of Non Filing of Return Five thousand Rupees in case of Non Filing of Return and Ten Thousand Rupees or Five Per cent of the duty and Ten Thousand Rupees or Five Per cent of the duty involved, which ever is higher in case of non or short involved, which ever is higher in case of non or short payment of duty due, in addition to the amount of payment of duty due, in addition to the amount of duty due from him.duty due from him.

Provided that in case a person files a return Provided that in case a person files a return within fifteen days of the due date, he shall pay a within fifteen days of the due date, he shall pay a penalty of one hundred rupees for each day of defaultpenalty of one hundred rupees for each day of default

OFFENCEOFFENCE

PENALTYPENALTY

Untrue or Incorrect statement or document Untrue or Incorrect statement or document or failure to give or produce any information or failure to give or produce any information or documentsor documents

Twenty thousand rupees and in case of counterfeit and Twenty thousand rupees and in case of counterfeit and falsifies the fine may extend to one hundred thousand falsifies the fine may extend to one hundred thousand rupees and also punishable with imprisonment for a rupees and also punishable with imprisonment for a term which may extend to five years or with both.term which may extend to five years or with both.

OFFENCEOFFENCE

PENALTYPENALTY

Illegally removes, stores, keeps, withdraws, Illegally removes, stores, keeps, withdraws, fraudulent evasion, claims, takes or avails fraudulent evasion, claims, takes or avails adjustment of duties not admissible under adjustment of duties not admissible under The Federal Excise Act, 2005.The Federal Excise Act, 2005.

Five thousand rupees or five times of the duty Five thousand rupees or five times of the duty involved, whichever is higher and to punishment involved, whichever is higher and to punishment with imprisonment which may extend to five with imprisonment which may extend to five years or both.years or both.

OFFENCEOFFENCE

PENALTYPENALTY

OFFENCEOFFENCE

Manipulation of data Manipulation of data without the approval without the approval of Collectorof Collector

Claim of illegal Claim of illegal refund or duty refund or duty drawbackdrawback

PENALTYPENALTY Seventy five thousand Seventy five thousand

Rupees or ten times of the Rupees or ten times of the duty involved, whichever is duty involved, whichever is higher and to punishment higher and to punishment with imprisonment which with imprisonment which may extend to five years or may extend to five years or bothboth

One hundred thousand One hundred thousand Rupees or five times of the Rupees or five times of the duty involved, whichever is duty involved, whichever is higher and to punishment higher and to punishment with imprisonment which with imprisonment which may extend to five years or may extend to five years or bothboth

OFFENCEOFFENCE

Obstructing Federal Obstructing Federal Excise Officer for the Excise Officer for the prevention of prevention of offences under this offences under this Act.Act.

PENALTYPENALTY

Five thousand Rupees or Five thousand Rupees or five times of the duty five times of the duty involved, whichever is involved, whichever is higher and to higher and to punishment with punishment with imprisonment which imprisonment which may extend to three may extend to three years or bothyears or both