Messrs THAL JUTE MILLS LTD., KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2585 (2002)

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

‑‑‑‑S.2(3)(i)‑‑‑Maladministration‑‑‑Processing and dealing with the claim of refund in very casual and irresponsible manner by the officers of the Department amounted to maladministration and delinquent officials deserve to be reprimanded.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Sched. I‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Pre‑shipment inspection fee‑‑ Claim and refund of‑‑‑Levy of service charges @ 2% on all goods specified in Sched. I of the Customs Act, 1969 was declared unlawful by the Supreme Court and complainant‑company claimed refund of such amount paid as pre‑shipment inspection fee‑Department informed the complainant that only those importers were entitled to the refund who had not passed on the incidence of 2% service charge to their clients‑‑‑Complainant‑company furnished a certificate issued by a Chartered Accountant that complainant‑company had not passed the incidence of payment of 2% pre‑shipment inspection service charges to others/public‑‑‑Department, during the pendency of complaint, rejected the claim of refund, without considering such certificate, by stating that complainant had failed to furnish proof in respect of 2% pre‑shipment service charges‑‑‑Validity, ‑‑Officer representing the Department had promised to furnish documents but nothing was supplied instead the order was passed in haste, ignoring the documents which had been received by the Department‑‑ Document in question was a certificate from a Chartered Accountant certifying that 2% pre‑shipment inspection charges had not been passed on to its customers or anybody else‑‑‑In the face of such 'certificate there was` no occasion to reject the claim of refund‑‑‑Only two possibilities existed either the Deputy Collector of Customs did not examine the certificate of the Chartered Accountant or he completely ignored it as he had already resolved to reject the claim‑‑ Delay in the disposal of the claim seemed to be motivated and mala fide otherwise the grounds stated in the order were available to Deputy Collector from the very beginning and he could have passed this order much earlier‑‑‑Delay in making the order was also an attempt to forestall the present complaint‑‑‑Order in the face of the certificate by the Chartered Accountant was mala fide illegal and contrary to law and facts‑‑‑Officer responsible for deciding cases where rights of the parties were involved was expected to be fair, just and free from mala fides and bias‑‑‑Delay in deciding the case was not based on any reasonable or just ground‑‑‑Such delay caused complaints of serious nature and motives were attributed which in many cases turned out to be correct‑‑‑If the Department had to build image of a credible institution in which persons dealing with it should have faith then they must work hard, to show their honesty and integrity even in small and routine matters not to talk of huge claims‑‑‑Federal Tax Ombudsman recommended that the order passed by the Deputy Collector of Customs (Appraisement) be cancelled; refund be allowed to the complainant after examining the certificate issued by the Chartered Accountant and Deputy Collector of Customs (Appraisement) reprimanded for the manner in which the case was dealt with and decided by him.

Qamar Abbas, Manager. Finance and Khalid Mahmood Siddiqui.

Dr. Nasir Khan, D.C Custom Appraisement Customs House, Karachi.

DECISION/FINDING

1. The complainant Messrs Thal Jute Mills Ltd. is a company listed on the Stock Exchange. It is engaged in the manufacture of jute goods and has a Division which is making car air‑conditioners. It is stated in the complaint that in 1996 the CBR introduced the system of pre‑shipment inspection of the goods specified in Schedule‑I to the Customs Act, 1969 and levied a service charge of 2% on all such goods as specified in the said Schedule Messrs Cotecna and SGS were appointed as the Authorized Agents.

2. The levy of pre‑shipment inspection fee (PSI) was subsequently declared unlawful by the Hon'ble Supreme Court of Pakistan vide judgment dated 24‑2‑1999. The complainant‑company paid Pre‑shipment Inspection Fee @2% amounting to Rs.21,75,399 and Rs.927,612 on imports for jute and Engineering Division respectively during the period from 27‑10‑1996 to 14‑4‑1997.

3. In the light of the decision of the Hon'ble Supreme Court referred above, the complainant made an application to the Assistant Collector of Customs, Group‑IV on 24‑8‑1999 requesting for the refund of Rs.21,75,399 and a similar application was also made to the AC Customs Group IX on the same date for issuing refund of Rs.927,612. The bills of entry were enclosed with both the applications. It is alleged that the Customs Authorities concerned did not make any response to its aforesaid applications and, therefore, they were reminded vide company's Letters Nos. 277 and 278 dated 12‑6‑2001.

4. It is further alleged that after a long gap of about two years, the Assistant Collector of Customs Appraisement Group IX responded for the first time on 4‑7‑2001 and informed the complainant that only those importers were entitled to the refund who had not passed on 2% service charge to their clients. The company in its newly dated 25‑7‑2001 contended that the judgment of the Hon'ble Supreme Court was unconditional and it was entitled to the refund which may be issued without further delay.

5. Parawise comments have been furnished on behalf of the respondent by ACs of Customs Appraisement Group VIII and Group IV. The case has also been discussed by the representatives of the complainant as well as the respondent.

6. It is stated in the parawise comments filed by AC of Customs Group VIII that the CBR issued instruction vide letter dated 16‑2‑2000 after obtaining the opinion of Law, Justice and Human Rights Division that only those importers are entitled to the payment of refund who have not passed the incidence of payment of 2% PSI service charges to the others/public.

7. It is further contended that the complainant was provided opportunity to produce evidence that 2% service charges were not passed on the client vide letter dated 4‑7‑2001, 27‑7‑2001 and 8‑8‑2001 and the case was finally fixed for 29‑9‑2001 and since nobody appeared on behalf of the complainant, the claim was rejected on 1‑10‑2001 and the Order‑in‑Original is under issue.

8. The complainant's representatives have vehemently challenged the aforesaid observation of the Department and have contended that the so‑called Order‑in‑Original dated 1‑10‑2001 has neither been issued nor served on them till 31‑12‑2001 i.e. last date of hearing in this case. The departmental representative, Dr. Nasir Khan has not been able to produce copy of Order‑in‑Original dated 1‑10‑2001.

9. The copy of the relevant order sheet has been filed on 31‑12‑2001 by Mr. S.A. Sajjad Rizvi, AC Customs Appraisement. The order sheet entry dated 1‑8‑2001 shows that the case was fixed for hearing on 8‑8‑2001: The AC Customs made an entry on 8‑8‑2001 as under:

"Mr. Muhammad Ilyas, Senior Assistant of the Company appeared and submitted that the order of the Hon'ble Supreme Court does not require the claimant to produce any proof whatsoever. Hence they are not required to present any proof. Their claim is hereby rejected for non‑presentation to proof as required vide O.M. of Ministry of Law and Justice and communicated by CBR vide their C.No. 9(20)/99 dated 16‑2-2000 in respect of bearing the incidence of 2 % PSI service charges.

Please put up Order in Original."

10. It is pertinent to note that the aforesaid directions have been corrected and the 'Order in Original' has been replaced by the word "SCN".

11. The Department issued a show‑cause notice subsequently on 19‑9‑2001 whereby the hearing of the case was fixed on 29‑9‑2001. The order‑sheet entry dated 1‑10‑2001 is as under:‑‑

"Their claim has already been rejected and orders have been issued. To put up O.in.0 Please comply."

12. The departmental representative was asked to clarify as to why a show‑cause notice was issued on 19‑9‑2001 when the alleged Order‑in‑Original had already been passed on 8‑8‑2001. He could not explain the discrepancy and that the show‑cause notice dated 19‑9‑2001 was erroneously issued.

13. The above facts clearly show that the complainant's claim of refund has been processed and dealt with in a very casual and' irresponsible manner by the officers of Group VIII. This amounts to maladministration and delinquent officials deserve to be reprimanded.

14. The AC Customs, Dr. Nasir Khan during the course of hearing pointed out that in Complaint No.703‑L/2001, the complainant's claim of refund on account of payment of 2% service charges has been rejected by this Organization. He has furnished a copy of the decision/findings in this behalf. The reliance of the departmental representative in the aforesaid complaint is quite misplaced as in that case the complainant neither produced accounts books maintained for sales tax purposes nor furnished Certificate from the‑Chartered Accountant stating that the burden of 2% was not passed on to the customers. Here in the instant case the complainant's representatives have contended that requisite documents alongwith the certificate of Messrs Hyder Ali Bhimjee & Co., Chartered Accountants have already been filed with the Custom Department in support of their claim of refund.

15. In the parawise comments filed by the AC Customs Incharge Group IV it is stated that the representatives of the complainant last appeared on 12‑11‑2001 and requested for a period of 15 days for producing the required documents. The complainant's representatives have stated that the required documents alongwith the Certificate of Chartered Accountant have already been filed in the office of the Collectorate Group IV.

16. After the final hearing and before the decision in this complaint was delivered the complainant by its letter dated 10th January, 2002 submitted a copy of the order of the Deputy Collector of Customs (Appraisement) Group 8, rejecting the claim for refund of the PSI charges. The main ground for rejection is that the complainant has failed to furnish proof that the burden of 2% PSI service charges have not been passed on to the consumers and public. It was further stated that although opportunity was given to the complainant by letter, dated 14‑7‑2001 and 31‑7‑2001 to provide proof it failed to do so.

17. From the perusal of the facts discussed above it seems that the claim for refund was pending with the Customs Authorities from August, 1999 which was continuously perused by the claimant. The manner in which case has been dealt with by the relevant officer shows that no serious application of mind was made and pretext was sought to delay and ultimately to reject the claim. The most amazing part is that the Department time and again stated that the claimant had failed to provide any proof but the claimant's assertion is otherwise which is borne out from the record. On 27th October, 2001 notice was issued to the respondent and by that time no decision had been made by the Deputy Collector of Customs. After the arguments had been completed in this complaint the officer representing the Department had promised to furnish documents but nothing was supplied instead the order was passed in haste, ignoring the documents which had been received by the Department on 1‑1‑2002. The document was a certificate from Haider Bheemjee & Co. Chartered Accountant ,certifying that 2% PSI charges had not been passed on to its customers or anybody else. In the face of this certificate there was no occasion to pass order dated 7‑1‑2001 rejecting the claim. There are only two possibilities either the Deputy Collector of Customs did not examine the certificate of the Chartered Accountant or he completely ignored it as he had predetermined his mind to reject the claim. The delay in the disposal of the claim seems to be 'motivated and mala fide otherwise the grounds stated in the order dated 7‑1‑2002 were available to the Deputy Collector from the very beginning and he could have passed this order much before. The delay in making the order is also an attempt to forestall the present complaint. The order on the face of the certificate of the Chartered Accountant is mala fide, illegal and contrary to law and facts.

18. The officer responsible for deciding cases where rights of the parties are adjudicated is expected to be fair, just and free from mala fide and bias. The delay in deciding the case is not based on any reasonable or just ground. Such delay causes complaints of serious nature and motives are attributed which in many cases turn out to be correct. If the Customs Department has to build image of a credible institution on which persons dealing with it should have faith then they must work hard to show their honesty and integrity even in small and routine matters not to talk of huge claims.

19. In view of the above it is recommended:

(i) The order dated 7‑1‑2002 passed by the Deputy Collector of Customs (Appraisement) Group 8 be cancelled.

(ii) Refund be allowed to the complainant after examining the certificate issued by Haider Bheemjee & Co. Chartered Accountant.

(iii) Mr. Imran Khan, Deputy Collector of Customs (Appraisement) Group VIII be reprimanded for the manner in which the case was dealt with and decided by him.

(iv) Compliance be reported within 30 days

C.M.A./M.A.K./377/FTO

Order accordingly.