AL-GHAZI TRACTORS LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2019 (2001)

(a) Establishment of Office of Federal Tax OmbudsmanOrdinance (XXXV of 2000)---

‑‑‑S.2(3)‑‑‑Maladministration‑‑‑Delay in adjudication and issuing refund‑‑‑Stereotyped and hackneyed explanation that delay was caused due to frequent transfer of officers and regrouping were hardly convincing and deserved to be rejected straightaway‑‑‑No reasonable explanation existed for neglect and wilful delays in the disposal of the claim of about six years which made it a clear case of maladministration requiring proper investigation of delay which seemed to be deliberate and wilful.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. l3‑‑‑Ministry of Production Letter O.M. No. 19(3)/PACO/88/Pt. dated 16‑3‑1988‑‑‑Ministry of Industries Letter C.No.10(13)/1/85‑P/IV, dated 5‑5‑1988‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Exemption‑‑‑Custom duty and sales tax was paid with the understanding that the same would subsequently be refunded as the matter of granting exemption was in process‑‑‑Claim of refund had become due and the same was not released despite lengthy and protracted correspondence and lapse of nearly 12 years‑‑‑Department stated that claim was time‑barred while the claimant insisted that the claim was filed immediately after special exemption from duty/taxes was allowed to it‑‑‑Validity‑‑‑Exemption from duty/taxes had been allowed and even the Ministry of Production and Industries had allowed refund which the Central Board of Revenue forwarded to the Collector to implement and it was the duty of the Collector to have implemented same instead of investigating the claimants' entitlement to refund‑‑ Objection regarding limitation was raised and instead of deciding same it was referred to Central Board of Revenue‑‑‑Issue was simple and a person holding post of Collector being senior in position was expected to have the ability and knowledge to decide such routine minor issue‑Intention seemed to be to delay the refund due to lack of confidence which could not be attributed to a senior official besides there were sufficient grounds to condone the delay‑‑‑Once exemption had been granted recovery or withholding of exempted duty/taxes paid in peculiar circumstances was illegal and refund of such claim could not be barred by limitation‑‑‑Government Treasury could not be filled by the collecting or withholding illegal recoveries‑‑‑Federal Tax Ombudsman recommended that the Collector of Customs, should calculate the refundable amount and pass order for refund of the same before specified date.

S.A. Naseer Dealing Officer.

Inam Muhammad, D.C. of Customs (Appraisement).

DECISION/FINDINGS

1. The complainant Messrs Al‑Ghazi Tractors Ltd., Karachi has pleaded that it is a recognized local manufacturer of Agricultural FIAT Tractors and it conducts its assembling activity in accordance with the Deletion Programme duly approved by Ministry of Industries and Central Board of Revenue. In the year 1997 the complainant had placed orders for the supply of certain components with Pakistan Machine Tool Factory (PMTF), Karachi, but this organization expressed its inability to develop the components as per desired specifications. In order to find a way out, meeting was held in June, 1997 which was attended by the Chairman, PACO, SEC Managing Director of PMTF and the Managing Director of the complainant's company. In the said meeting it was decided to seek permission of import of 5,000 pieces of each item (14 components).

2. The Ministry of Production vide O. M. No. 19(3)/PACO/88/Pt, dated 16‑3‑1988 recommended to the Ministry of Industries as under:‑‑

(i) To allow the complainant to import remaining components without payment of Duty and Sales Tax.

(ii) To pass necessary orders to refund the duty already paid on 1,000 sets which have already been imported (copy of Ministry of Production O.M., dated 16‑3‑1988 is on record.)

3. The Ministry of Industries vide C. No. 10(13)/ 1 /85‑P/IV, dated 5‑5‑1988 forwarded to the Ministry of Production's O.M., dated 16‑3‑1988 to Central Board of Revenue with the request that import of components of FIAT tractors may be allowed to Messrs Al‑Ghazi Tractors Ltd., in the, light of the Deletion Programme. While the case of the complainant to allow exemption of import of 15 items from custom duty and sales tax was under process in the relevant Government departments and permission had yet not been received. A quantity of 1,000 sets landed in January, 1988 in order to get the assembly going. To avoid demurrage Messrs Al‑Ghazi Tractors Ltd. got these components cleared from Custom Authorities after payment of Custom Duty and Sales Tax. This was done on the understanding that the Custom Duty and Sales Tax would subsequently be refunded ‑as the matter of granting exemption was already in process. The complainant has alleged that another 6 consignments of the same nature were released without payment of Duty and taxes. However, the components imported Bills of Entry No.2063, dated 31‑1‑1988, No.626 and No. 627 both, dated 11‑7‑1988 were cleared from Custom authorities after payment of Custom Duty and Sales Tax. In this manner a claim of refund to the tune of Rs.1,839,029 has become due and this amount of refund has not been released by the Custom Authorities despite very protracted correspondences and lapse of nearly 12 years. The claim in other words is lying unattended to for want of proper and necessary action on the part of the Authorities concerned.

4. In reply the department submitted that the complainant was manufacturing under a deletion programme approved by the C.B.R. The goods which were not covered by the deletion programme or are imported after the specified period are not entitled to the concessionary rate of duty. Deletion programme specifies items on which exemption would be admissible. The disputed consignments were not imported after the approval of deletion programme nor retrospective exemption was obtained by the complainant. It has been pleaded that the C.B.R. by its letter, dated 1‑2‑1995 (Exh. C) advised the Collectorate to decide the cases at its own but it remained pending due to frequent transfer of Adjudicating Authority and repeated shifting of record while restructuring the groups. The final hearing was fixed on 16‑8‑2001 but the complainant refused to proceed as it has filed this complaint.

5. After hearing the complainant request that a meeting be arranged with the C.B.R. which was granted. In the meeting the case heard and discussed and five questions were formulated on which parties submitted their reply. Question No.5 reads as follows:‑‑‑

"Is it the practice of C.B.R. to forward the decision of the Ministry of Industries to Collector of Customs which amounts to implementation of the decision of the Ministry of Industries."

6. According to the complainant it is the established practice that the decision of Ministry of Industries regarding deletion list and grant of exemption when forwarded by C.B.R. to Custom Authorities is implemented by them. The Department in reply to the above query submitted as follows:‑‑‑

"It .is the practice of Collectorate of Customs to implement the decisions forwarded by the C.B.R. which also includes the decision of the Ministry of Industries, if concerned by C.B.R. It is further classified that the field Officers/Collectorates implement these decisions according to the instruction thereof communicated by C. B. R."

7. A perusal of documents in the light of the above reply makes it clear that when Pakistan Machine Tool Factory certified that the items which were to be locally manufactured were not manufactured by it, the complainant applied for their import. The Ministry of Production by its letter, dated 16‑3‑1986 recommended to the Ministry of Industries to allow import` without payment of duty and pass necessary order to cover 100 sets already imported and the duty paid be refunded. Ministry of Industries by letter, dated 5‑5‑1988 to C.B.R. recommended import as suggested by Ministry of Production but did not agree to the refund. However, by O.M., dated 2‑6‑1988 the Ministry of Industries superseded its letter, dated 5‑5‑1988 and allowed import of 4,000 sets of 14 component of tractors in CKD condition free of duty. C.B.R. referred this O.M. (2‑6‑1988) to the Ministry of Industries for reconsideration but the latter reiterated its earlier decision. Therefore, C.B.R. asked the complainant to state the amount of refund to be involved if Board allowed the import of 4,000 sets of 14 items under the concessionary S.R.O. which stands deleted by 30‑6‑1988. The complainant supplied the requisite information demanded by C.B.R. By its letter, dated 21‑5‑1989, the C.B.R. forwarded, O.M. dated 2‑6‑1988 of Ministry of Industries alongwith O.M., dated 16‑3‑1988 of Ministry of Production and two O.Ms., dated 4‑9‑1988 to the Collector of Customs (App) for compliance. From these facts and the reply of the Department to the query referred above it is clear that the complainant became entitled to the import without payment of duty and refund as well.

8. The matter did not end here. In spite of clear direction the claim for refund was not decided and was kept pending. The Appraiser asked for triplicate copy of the Bill of Entry in original and coy of C.B.R.'s letter, dated 21‑5‑1989 which were supplied on 12‑7‑1989. The principal Appraiser Group IV required the complainant to furnish (1) Calculation Sheet of each B/E separately (i) Annexure II of each refund claim (3) refund order for duty etc. of each consignment and (4) catalogue. The complainant was required to submit consumption certificate which was submitted after the C.B.R. by letter, dated 18‑2‑1992 had extended its time period upto 31‑5‑1992. The Collector by his letter, dated 18‑2‑1993 after stating all the fact pointed out that the claim was time‑barred although the claimant insisted that as the claim was filed immediately after special exemption from duty/taxes was allowed to it by Board on 21‑5‑1989. The claim is within time. However, it was referred to the Board for advice on point of limitation. The Board vide letter, dated 1‑2‑1995 advised the Collector to decide the matter without referring it to C.B.R. as there was nothing extraordinary requiring its advice.

9. The claim remained undecided and ultimately the complainant filed the present complaint on 18‑8‑2001. Notice to C.B.R. was issued on 15‑8‑2001 and reply, dated 29‑8‑2001 was submitted. Thereafter, the Collector issued to the complainant a show‑cause notice, dated 27‑9‑2001 and fixed the hearing before him on 13‑10‑2001 but the complainant insisted not to proceed before his as it had filed the complaint. It is pertinent to note that after receipt of C.B.R's letter, dated 1‑2‑1995 no action seems to have been taken by the Collector. The stereotyped and hackenyed explanation was offered that the delay was caused due to frequent transfer of officers and regrouping. These explanations are hardly convincing and deserve to be rejected straight away. There is no reasonable explanation for neglect and wilful delays suiting to dispose of the claim for about six years. There is a clear case of maladministration requiring proper investigation of delay which seems to be deliberate and wilful.

10. Now coming to the merits of the case it seems clear that exemption from duty/taxes has been allowed and even the Ministry of Production and Industries had allowed refund which the C.B.R. forwarded to the Collector to implement. It was the duty of the Collector to have implemented it instead of investigating the claimants entitlement to refund. Further the objection regarding limitation was raised and instead of deciding it was referred to C.B.R. The issue was simple and a person holding post of Collector being senior in position is expected to have the ability and knowledge to decide such routine minor issue. The only intention seems to be to delay the refund due to lack of confidence which cannot be attributed to a senior official. Besides the above there were ‑sufficient grounds to condone the delay. Furthermore, once exemption has been granted recovery or withholding of exempted duty/taxes paid in peculiar circumstances it illegal and refund of such claim cannot barred by limitation. The Government treasury cannot be filled by collecting or withholding illegal recoveries.

11. It is, therefore, recommended that:

(i) The Collector of Customs calculate the refundable amount and pass order for refund of the amount found due.

(ii) The Collector of Customs pass order on or before 15‑1‑2002.

(iii) Compliance to be reported by 22‑1‑2002.

C.M.A./M.A.K./289/FTOOrder accordingly.