(a) Establishment of Office, of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑--

‑‑S.9‑‑‑Jurisdiction of Federal Tax Ombudsman ‑‑‑Maladministration‑‑ If any "matter is sub judice before any authority and allegations of maladministration are made Which are ‑not directly raised in the proceedings before that Authority, the Federal Tax Ombudsman will have jurisdiction to entertain and decide the complaint.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑---

‑‑‑‑Ss.2(3)(ii) &.9‑‑‑Maladministratioh‑‑-Delay in deciding the issue‑ in spite of the judgment passed by the High Court directing the Central Board of Revenue to decide the case in terms of the judgment of the Supreme Court‑‑‑Directions of the Supreme Court were yet to be carried out‑‑‑Inaction and delay without sufficient cause could not be made a ground for not implementing the order of the High Court‑‑‑Central Board of 'Revenue had committed maladministration‑ in terms of Cl. (ii) of. subsection (3) of S.2 of the Establishment of the Office of the Federal Tax Ombudsman Ordinance; 2000 which‑ was established insofar as neglect inattention and delay in discharge of duties and responsibilities' was concerned‑‑‑Federal Tax Ombudsman .recommended that Central Board of Revenue, after hearing the complainant and the. Department,, record its findings in terms of remand order passed by the High Court on or before specified date.

Ghulam Ahmad Khan for the Complainant.

Zaheer Ahmad Khan representing 'G.A. Khan & Co.' for Petitioner.

Mumtaz Ali Khoso, Deputy Collector, Customs; Sales Tax and Central Excise, Hyderabad for Respondent.

Muhammad. Aslam Khan, Deputy Superintendent.

FINDINGS/DECISION

The complaint relates to the

issue of refund of. sales tax paid in cash and .return of six bank guarantees (for a total .amount of Rs.8,868,596', in the light of the Supreme Court's decision on appeals filed against recovery of sales tax not passed on to the consumers.

2. The complainant, a bottler of aerated water, has alleged maladministration on the part of Central Board of Revenue as well as, the Collector Sales Tax and Central Excise, Hyderabad for unwarranted and inordinate delay in issuing refund of sales tax paid in cash, conditionally as well as in releasing the six bank guarantees for a sum aggregating Rs.8,868,596 despite two decisions pronounced by the Sindh High Court in favour of the complainant‑‑‑the later being on a decision of the Supreme Court of Pakistan.

3. Facts emerging out of the allegations in the complaint, the, written reply to such allegations submitted by the Collector, Sales Tax and Central Excise, Hyderabad and personal hearing allowed to Mr. Ghulam Ahmad Khan, counsel of the complainant and Mr. Mumtaz Ali Khoso, the Deputy Collector, Sales Tax and Central Excise, Hyderabad are that the aerated waters manufactured by the complainant are and have been subject, at all relevant times, to Central Excise Duty under the Central Excises Act, 1944 and sales tax under the Sales Tax Act, 195: (hereinafter called the Act). The Government, acting in pursuance of the Finance Act, 1990 promulgated the "Excise Duty on Production Capacity (Aerated Water) Rules, 1990" (hereinafter called 'the 1990‑Rules'), in exercise of powers conferred by subsection (4) of section 3 of the Act, read with section 37 thereof. By the said 1990 Rules, the Beverage Industry was brought under what has popularly come to be known as `capacity duty' on those who elect for it in accordance with sub‑rule (3) of rule 1 of the 1990 Rules.

4. Consequently, two notifications were issued simultaneously on 7‑6‑1990 viz. S.R.O. No.507(1)/90 under the Central Excises and Salt Act, 1944 (Act I of 1944) and S.R.O. No.598(1)/90 under the Sales Tax Act, 1951. The former S.R.O. notified a new higher rate of excise duty on beverages in consequence of exemption from sales tax and the later S.R.O. notified exemption to the products of beverage industry from sales tax.

5. The complainant elected to pay excise duty on capacity basis for financial years commencing from July, 1990. Rule 4 of 1990 Rules provided that the election shall remain in force for the relevant financial year and also beyond the year unless, fifteen days before the expiry of the financial year, the manufacture applies in writing to the collector to terminate the election on expiry of the year. That the said 1990 Rules were and have been so acted upon by the complainant and the Government. The complainant has regularly paid 'excise duty' till 30‑6‑1994 in terms thereof, which included an element in consideration of exemption from sales tax. The Government thus acknowledged the petitioner's option to pay the `excise duty' as worked out by the C.B.R under, rule 6 read with the rules 7, 7A and 8 of "the 1990‑Rules" (as amended). This was confirmed by the C.B.R, from time to time, and lastly, inter alia, by their letter, dated 10‑7‑1993, addressed to and determining the complainant's liability for the Financial Year 1993‑94. ending June 30, 1994, at a figure of Rs.14 million in advance. The complainant in terms of the said letter and as demanded on that basis furnished the required Bank guarantees in accordance with "the 1990 Rules" in particular rules 8 and 8A thereof. The guarantees covered the entire financial year and thus the `duty' in terms of 1990 package, stood paid on fortnightly basis according to the Rules and the guarantee up to 30‑6‑1994.

6. However, the complainant learnt for the first time on or about 7th July, 1994 on receipt of a letter from the office of the Collector Sales Tax and Central Excise, Hyderabad, that the Government "surreptitiously" and "without prior notice to the petitioner" and while "keeping it in the dark" appear to have issued another S.R.O.257(I)/94. dated 30th March, 1994 in purported exercise of the powers, conferred by section 13 of the Sales Tax Act, 1990 omitting thereby item 20 "relating to Aerated Waters" whereby exemption from payment of sales tax, which was earlier granted to all manufactures of aerated water, who elected to pay Central Excise Duty (C. E. D.) under S. R.O. 507(I)/90, dated 7th June, 1990 was withdrawn and that sales tax on beverages was to be charged from March, 1994. The complainant had earlier filed Constitutional Petition No.811 of 1994 challenging the Notification dated 22‑3‑1994 by which the earlier Notification bearing No.S.R.O. 507(I)/90, dated 7th June, 1990 was purportedly rescinded by the Government.

7. The Division Bench of the Sindh High Court vide order dated 7‑4‑1994 granted stay of the rescission of the production capacity (Aerated Water) Rules, 1990 and further stayed the operation of Notification, dated 22‑3‑1994 till 30th June, 1994 on condition of the petitioner furnishing the required Bank guarantees as stated in the said order. The complainant complied with the said order of the Honourable Court and furnished the required Bank guarantees. Both the petitioner and respondents accepted the said order, dated 7‑4‑1994. While agreeing to clear the goods of petitioner prior to 30‑6‑1994 the respondents did not raise any demand for payment of sales tax nor raised any plea regarding petitioner's liability to pay sales tax before clearance of the goods up to 30th June, 1994.

8. Later the complainant received a show‑cause notice, dated 25‑9‑1994 for the first time from Collector, Sales Tax and Central Excise. Hyderabad alleging that it had been found that the aerated water valued at Rs.34,248,354 were supplied by the complainant without any tax invoices and v6thout payment of sales tax amounting to Rs.5,137,23 as detailed in the Annexure to the show‑cause notice. The complainant approached the Deputy Collector of Sales Tax and Central Excise, Hyderabad and filed a written statement before him on 24‑1,0‑1994 explaining his position for withdrawal of demand of sales tax from 1‑4‑1994 to 30‑6‑1994. The petitioner also filed the order of Sindh High Court in C .P. No.811 of 1994. However, the Deputy Collector Sales Tax and Central, Hyderabad vide his order, dated 7‑3‑1995 dismissed the plea. The complainant deposited the principal amount of Rs.5.1 million on account of sales tax on 14‑7‑1998 by availing benefit of S.R.0.757(1)/98, dated 4‑7‑1998 but he had already filed Constitutional Petition No.560 of 1995 impugning the levy before the Sindh High Court on 29‑3‑1995. The petition was decided on 3‑6‑1999 by the Sindh High Court following their own decisions in C.P.D‑559 of 1995, C.P.D‑2167 of 1995 and C.P.D‑736 of 1995. The Sindh High Court had remanded the case in C. P. D‑559 to the Central Board of Revenue for determining the question as to whether the above appellants had recovered any sales tax on the aerated waters after the withdrawal of the exemption from the purchasers /consumers. If the answer was in the affirmative, the amount so recovered would be passed on to the Federation in terms of para: 19 of the decision of the Supreme Court of Pakistan dated 11‑3‑1999 in Civil Appeals Nos.870 to 881 of 1994 and Nos.299, 230, 1221 and 1222 of 1995 in the cases of Riaz Bottlers (Pvt.) Ltd., Lahore, and others.

9. The C.B.R. in pursuance of the decision of the Supreme Court (ibid) constituted a committee vide C. No.9(35)‑CE. Revision/92, dated 27‑8‑1999, comprising Collectors, Central Excise and Sales Tax, Faisalabad, Lahore and Multan to ascertain the facts regarding the remanded issue. The Committee found vide report dated 12‑11‑1999 that Riaz Bottlers (Pvt.) Ltd. had passed on the incidence of Central Excise Duty to customers. The Member, C.B.R. ordered vide C. No.9(35)CE -Rev/92, dated 21‑7‑2000 recovery of such duty and tax from Riaz Bottlers (Pvt.) Limited.

10. The recovery order of the Member was again challenged in Lahore High Court vide Writ Petition No.14810/(1) of 2000 on the ground of violation of principles of natural justice by denying the right of hearing. The plea was allowed and the case was again remanded to C.B.R. vide order, dated 13‑11‑2000. The other cases too, in similar circumstances, were remanded to the Member, Central Excise, Central Board of Revenue, Islamabad, who accordingly fixed the same for hearing on 13‑2‑2000 but no decision in the matter had been taken till the hearing of instant complain. However, the Collector of Sales Tax, Lahore vide Letter C.No.IV.CE/Bev/PC/218/93/94/750, dated 7‑2‑2001, had requested the Sales Tax Wing to take necessary decision in respect of sales tax involved.

11. It has been submitted in the written reply of the Collector Sales and Central Excise, Hyderabad that the decision of the .Member is still awaited and that the issue of refund of sales tax and release of bank guarantees raised by the complainant is not an isolated case to be decided by the Collectorate but a component of the major issue that has to he decided by the Central Board of Revenue in the light of directives of Honourable Supreme Court of Pakistan'. Further, it is submitted during the hearing that complainant's case is sub judice as it has been remanded by the Sindh High Court to C.B.R.; hence jurisdiction of this office is barred.

12. The counsel of the complainant has stated, on the other hand, that the incidence of Excise Duty/Sales Tax has not been passed on to the consumers and no sales tax has been recovered from them during the quarter in question. Product has been marketed on the basis of price applicable under capacity Rules, 1990. He has further stated that the C.B.R: has not taken any action in pursuance of the remand in complainant's case; neither any record has been called for nor any inspection is conducted during the last two and a half years. The Sales Tax Staff has visited once only after‑ filing the complaint in this office and the complainant has provided them with the required documents and records on 15‑8‑2001.

13. From the facts and contentions stated above, it is clear that in spite of the judgment of the Supreme Court of Pakistan, C.B.R. did not take any action. No valid reasons have been given for not complying with the judgment of the High Court. In fact, machinery started moving after the complaint had been filed in this Secretariat. The Department has raised objection to the jurisdiction to‑ entertain the complaint. It may be clarified that if any matter is sub judice before any authority and allegations of maladministration are made which are not directly raised to the proceeding before that authority, the Federal Tax Ombudsman will have jurisdiction to entertain and decide the complaint. In the present case, complaint of maladministration has been made against C.B.R. It is established from the record that in spite of the judgment passed by the High Court on 3‑6‑1999 directing the C.B.R. to decide the case in terms B of the judgment of the Supreme Court hardly any progress has been made in the complainant's case. In its reply, C.B.R. has referred to the case of Riaz Bottlers in Which under the judgment of the Supreme Court, a committee was constituted by C.B.R. to determine whether or not incidence was passed on to the consumers. Admittedly, the directions of the Supreme Court are yet to be carried out in those cases as well This inaction and delay without any sufficient cause cannot be made a ground for not implementing the order of the High Court, dated 3‑6‑1999. This shows C.B.R. has committed maladministration to terms of clause (11) of subsection (3) of section 2 of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000, which is established insofar B as neglect, inattention and delay in discharge of duties and responsibilities is concerned.

14. It is recommended that:

(i)C.B.R. after hearing the complainant and the Department, record its findings in terms of remand order, dated 3‑6‑1999, passed by the High Court on or before 24‑12‑2001.

(ii)Compliance be reported by 31‑12‑2001.

C. M. A./M.A.K./281/FTO Order accordingly.