(a) Sales Tax Act (VII of 1990)---

----S. 13(2)(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---S.R.O. 392(I)/01, dated 18-6-2001-- Simplified Sales Tax Rules, 1999---Exemption---S.R.O. 392(I)/01, dated 18-6-2001 exempts whole amount of sales tax in excess of what was liable to be paid at the rates specified under any applicable fixed Sales Tax Rules up to 30-6-1998, the simplified Sales Tax Rules, 1999 or under any written instructions from Central Board of Revenue or supplies made by a manufacturer up to 30-6-2000 subject to conditions stipulated in the notification.

(b) Sales Tax Act (VII of 1990)---

----S. 13(2)(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---S.R.O. 392(I)/01, dated 18-6-2001-- Simplified Sales Tax Rules, 1999---Exemption---S.R.O. 392(I)/01, dated 18-6-2001 may not be in the nature of fixed tax but it did exempt tax in excess of what was paid under fixed sales tax schemes or simplified rules or other instructions.

(c) Sales Tax, Act (VII of 1990)---

----S. 13(2)(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---S.R.O. 392(I)/01, dated 18-6-2001--Sales Tax General Order No.2 of 2001, dated 30-6-2001---Simplified 'Sales Tax Rules, 1999---Exemption---Fixed sales tax---Facility of payment of sales tax under S.R.O. 392(I)/O1, dated 18-6-2001 for the period from July, 1999 to 30-6-2000 despite submission of application for availing the rates notified under the said notification---Validity---Best course of action would be to decide on merit the application of the complainant/assessee for relief under S. R.O. 392(I)/01, dated 18-6-2001, and if the relief under the said notification was found to be due it should be given for the period covered under S.R.O. 392(I)/01, dated 18-6 -2001---No action was taken to dispose of the complainant/assessee's application for availing the facility of- S.R.O. 392(I)/01, dated 18-6 -2001---Department proceeded to issue a show-cause notice asking for payments of tax, which the complainant/assessee's claim was in excess of that payable under S.R.O. 392(I)/01, dated 18-6-2001---Just and fair action was that the complainant's application for paying tax under the S.R.O. 392(I)/01 dated 18-6-2001 was considered and decided by the Department in line with the spirit of the Sales Tax General Order No.2 of 2001, dated 30-6-2001 issued by the Central Board of Revenue which the Department failed to do---Maladministration in circumstances was established-Federal Tax Ombudsman recommended that Revenue Division should direct the Collector Sales Tax, Faisalabad to take a decision on the complainant/assessee s application, dated 8-12-2001 in the light of the provisions of the Notification S.R.O. 392(I)/01, dated 18-6-2001 and in keeping with the spirit of the Sales Tax General Order No.2 of 2001, dated 30-6-2001 after giving the complainant/assessee the opportunity of being heard.

Anwar Bhatti for the Complainant.

Muhammad Tahir, A.C., Sales Tax for Respondent.

FINDINGS/ORDERS

Messrs Karim P.V.C. Pipe Factory, Faisalabad has alleged maladministration on the part of the Collectorate of Sales Tax, Faisalabad for denying them the facility of payment of Sales Tax under S.R.O. 392(I)/01, dated 18-6-2001 for the period from July, 1999 to 30-6-2000 despite submission of application, dated 8-12-2001 for availing the rates notified under the aforesaid notification. The relevant facts briefly stated are as under:---

(i) They had been paying Sales Tax under the fixed tax schemes since July, 1995 complying with all the conditions laid in notifications issued from time to time.

(ii) They applied vide application, dated 8-12-2001 for availing the tax scheme of Notification.No.392(I)/01, dated 18-6-2001, but the audit asked for production of some record/information, which too was supplied, informing the Auditor that they wished to avail fixed tax scheme upto 30-6-2000 as they had shifted to General Sales Tax w.e.f. 1-7-2000. He did not allow them to avail the facility and booked them to pay General Sales Tax up to 30-6-2000, holding that the fixed schemes had been abolished w.e.f. 1-7-1999. The Audit created a tax liability of Rs.13,03,374 plus additional duty alleging that the complainant had not produced the record although the audit had worked out the value of closing stock/sales from their own record. His contention that fixed tax had been abolished does not hold good in the face of S.R.O. 392(I)/01, dated 18-6-2001.

2. On the basis of the above arguments the complainant pleads that (i) the Assistant Collector be directed to follow the aforesaid S.R.O. (ii) Disciplinary action may be initiated against the staff for their illegal action.

3. In their reply the Department has made the following points:

(i) The

complaint is against, audit detection amounting to Rs.1960926 which is sub judice before the Deputy Collector, Faisalabad with reference the show-cause notice, dated 3-5-2000 already issued.

(ii) The audit was conducted on test basis to verify the tax compliance. The complainant submitted the application for relief under S.R.O. 392(I)/01, dated 18-6-2001 without requisite documents. The complainant did not fulfil the conditions of S.R.O. 392(I)/01, dated 18-6-2001. Due tax had not been paid for 6/96, 8/96 and 9/96 and was short paid from 3-97, 5/97 and 7-98 to 11-97 (based on computer generated record). The unpaid amounts were due to be paid by 31-12-2011. The complainant could not provide any proof of such payments. The complainant also violated conditions of the S.R.O., requiring payment of Sales Tax under subsection (1) of section 3 of the Sales Tax Act from 1-7-2000 because he kept on paying fixed sales tax even after 1-7-2000. He also failed to provide verified list of machinery.

(iii) The complainant confuses the routine audit with his application under S.R.O.392(I)/01, dated 18-6-2001. The audit detected the liability for the period 1-93 to 12/2001 whereas the complainant applied for relief for a period of one year i.e. from 1-7-1999 to 30-6-2000.

(iv) If the complainant is found entitled to relief under the said S.R.O, the Collector of competence will certainly grant relief to the registered person for that period. If the Adjudicating Officer decides the case earlier than the finalization of decision on their application for opting Notification S.R.O. 392(I)/01, dated under their S.R.O. The respondents referred to another adjudication order made in a similar case in respect of Messrs New Zeeshan Textile Industries, Faisalabad.

(v) All the fixed tax schemes were abolished vide the Finance Bill 1999. The liability in this case was assessed on the basis of average supplies which the registered person himself declared during GST period.

4. The case was heard. At the hearing the parties reiterated the same pointes as were made in the complaint and respondent's reply. However, the complainant added that an audit was held on 12-12-2001 for the tax period January, 1993 to December, 2001. Since they had discharged their liability for the period January, 1993 to 30th June, 1999 there was no dispute with the department. As regards the period 'from 1-7-1999 to 30-6-2000, they had fulfilled all the conditions for qualifying under the fixed tax scheme and had paid duty @ Rs.19,260 per month (Rs.2,32,620 in all) but the Department was asking for differential amount of Rs.887580 plus additional tax Rs.557857 illegally. The period from 1-7-2000 to March, 2001 (9 months) was not under fixed tax. The chart prepared by the audit tallies with complainant's` own register. No Sales were suppressed as alleged by the Department.

5. The respondent stated that the complainant submitted the application for seeking benefit of scheme under S.R.O. 392(I)/01, dated 18-6-2001. There are about 8 applications of similar nature pending decision. They should approach the Collector who can take a decision on their application in his capacity as Executive Officer. The adjudication has to be done by the Adjudicating Officer separately with reference to the show-cause notice already issued.

6. The arguments of the parties and the record of the case have been examined. It is found that S.R.O. 392(I)/01, dated 18-6-2001 exempts the whole amount of Sales Tax in excess of that, liable to be paid at the rates specified under any applicable fixed Sales Tax Rules up to 30-6-1998 the Simplified Sales Tax Rules, 1999 or under any written instructions from C.B.R. on supplies made by a manufacturer upto 30-6-2000 subject to conditions stipulated in the notification.

7. It is not understood why the complainant's application for, availing the scheme under the aforesaid S.R.O. has not been decided. While S.R.O. 392(I)/01, dated 18-6-2001 may not be in the nature of a fixed tax but it did exempt tax in excess of what was paid under fixed sales tax schemes or simplified rules or other instructions. As to the auditor's contention that fixed sales tax scheme had been abolished w.e.f 1-7-1999 vide Finance Bill 1999, yet the complainant continued to deposit sales tax under, fixed sales tax scheme upto 31st March, 2001, it is observed that the auditor did not appreciate the actual scheme of the subject S.R.O. nor did he peruse the contents of General Order No.2/2001, dated 30-6-2001 under which the Board had, with reference to various notifications, including S.R.O. 392(I)/01, dated 18-6-2001, had issued instructions for removal of long outstanding difficulties of taxpayer during the period of transition from fixed/simplified tax schemes to VAT mode. The main features of the aforesaid general order are briefly reproduced below,:--

(i) Para 2 of the General Order clearly stated that a large number of taxpayers worked under the fixed tax schemes during the financial years 1995-96, 1996-97 and 1997-98 and were subsequently covered under the Simplified Sales Tax Rules, 1999 during the year 1998-99. After expiry of the last of the fixed or simplified tax scheme on 10-6-1999, many of such taxpayers continued to discharge their tax liability in the same manner and the same rate as in the past but did not switch over to VAT system. This happened, according to the general order, because such taxpayers had expected the Government to revive the fixed tax scheme in due course and they gradually started converting to VAT system.

(ii) Under S.R.O. 392(I)/01, slated 18-6-2001, those amongst such taxpayers, who converted to VAT system by 30-6-2000 will get relief in respect of their past inadequate compliance provided that they fulfilled the conditions specified in the notification.

(iii) Para 6(xi) of the General Order said that to the extent of the period for which relief is admissible its these notifications the staff of Collectorate should not raise audit objection or make contraventions on account of the omissions condoned or condonable under these notifications.

8. Had the auditor kept the contents of the subject notification and the general order he would not have acted the way he did. The C.B.R. had issued clear instructions for removal of difficulties of taxpayers such as the complainant and had advised soft handling of even those cases where there has been inadequate compliance: Not only that, the C.B.R. had also instructed that the staff should not raise audit objections or make contravention on account of the omissions Condoned or condonable. The case, therefore, was not handled by the respondent in, keeping with the spirit in which the C.B.R. had issued the instruction.

9. As regards the case of Messrs New Zeeshan Textile Industries Faisalabad, cited by the respondent, it is found that in that case too the respondent had denied relief to the party under S.R.O. 392(I)/01, dated 18-6-2001 on the ground that if the case was decided in their favour by Collector of Sales Tax, they would enjoy relief under the said notification, and, it not, the tax would be recovered from them alongwith additional duty and penalty.

10. It is odd that instead of taking a decision on the application of the complainant for relief under S.R.O. 392(I)/01, dated 18-6-2001, the audit was carried out, a show-cause notice was issued with the intention to create a liability even for the period from 1-7-1999 to 30-6-2000. Had the complainant failed to provide the documents asked for, the Department could have taken plea that the complainant had delayed the case but the record shows that fie did submit the documents for processing his application for relief under the aforesaid notification: The record also does not show whether the discrepancies now being identified in para. 5 (1 & ii) of respondent's reply had ever been brought to the notice of the appellant at the time these took place. The so-called computer data referred to by the respondent is not a substitute for formal demands required to be made in terms of applicable provisions of law at appropriate times. The decision in the case of the other party, cited by the respondent, appears .to have been prescripted for recovering taxes on the basis of show-cause notice based on audit report without any regard to their application for availing the facility of the aforesaid S.R.O.

11. The best' course of action would be to decide on merit the application of the complainant for relief under S.R.O. 392(I)/01, dated 18-6-2001, and if the relief under the said notification is found to be due it should be given for the period covered under S.R.O. 392(I)/01, dated 18-6-2001.

12. In view of the foregoing facts and observations, it is established that it is case of maladministration. While no action was taken to dispose of the complainant's application for availing the facility of the S.R.O, the respondent proceeded to issuing a show-cause notice asking for payments of tax, which the complainant claims is in excess of that r payable under Notification No.392(I)/01, dated 8-6-2001. It is only just and -fair that the complainant's application for paying tax under the aforesaid S.R.O. is considered and decided by the Department in line with the spirit of the general order issued by the C.B.R.

13: Based on the above discussion, it is recommended that:--

The Revenue Division direct the Collector Sales Tax Faisalabad to take a decision on the complainant's application, dated 8-12-2001 in the light of the provisions of the Notification S.R.O. 392(I)/01, dated 18-6-2001 and in keeping with the spirit of the Sales Tax General Order No.2 of 2001, dated 30-6-2001 after giving the complainant the opportunity of being heard.

Compliance report to be submitted within 30 days of receipt of this order.

C.M.A./639/FTO Order accordingly.