Sales tax officials misusing Section 38

ISLAMABAD (August 30 2003) : By misusing Section 38 of the Sales Tax Act, 1990, the sales tax officials conduct illegal raids in the name of documents verification, which is seriously hampering business activity in the country, sources said here on Friday.

Surprisingly, the Central Board of Revenue (CBR) has no monitoring mechanism to effectively check the unlimited powers of subordinate staff carrying out raids without conducting prior audit of the unit or taking into confidence the competent authority.

The CBR is making arrangements to involve representatives of business community while conducting raids to clear apprehensions of the businessmen.

Furthermore, verification of documents under Section 38 could not be termed raids, the sources added.

The “authorised officers access to premises, stocks, accounts and records” under the law is practically used as a tool of harassment, which causes serious damage to the reputation of the unit.

The strange part of the story is that the concerned unit is kept totally in dark during the raid and has not been given any justification for conducting raids.

A leading distributor of Islamabad-Rawalpindi, who became victim of the law told Business Recorder that Section 38 should be termed black law because sales tax officials used to raid the business units without any clearance of the CBR or submission of any authorisation letter.

Even if they were empowered to take into custody any record, statement, diskettes, etc, of the suspected unit, they were bound under Section 38 to take such record against a signed receipt.

However, in a recent incident, an assistant collector of sales tax Rawalpindi raided the business premises of a dealer and took away all the record without giving any receipt.

Instead, they forced one of the employees to come with the raiding party and later gave a signed document that the sales tax officials have legally taken the record.

The concerned unit has started business only last year and faced serious setback owing to the raid on the unit.

Under Section 38, the sales tax officials have free access to the business or manufacturing premises, registered offices or any other place where any stock, business record or document are maintained by the unit.

Similarly, the officials could take original or copy of the document/record if required.

On the other hand, such officials invade the business premises of the unit and take away each and everything, including cartons or boxes of different goods by saying that these would be used as evidence.

The raiding party usually does not inform the unit about the authorisation or reason of raid, but they simply take away any record they require.

The distributor said that time and again he visited the collectorate of sales tax, Rawalpindi to find out the reasons for conducting raids, but either the concerned assistant collector, who ordered raid has been transferred to Lahore or the auditors themselves were unclear about the whole situation.

The astonishing part of the story is that even after assurance of the CBR officials and directives issued to the collectorates, the regional authorities did not bother to implement such decisions.

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