Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 13, 3(1‑A), 3‑B & Sixth Sched., Items 2, 66‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Exemption‑‑‑Auction of standing trees‑‑‑Recovery of sales tax from complainant/purchaser‑‑‑Complainant was non‑registered person.‑‑ Department refused to refund such amount charged on exempted goods on the presumption that the incident will be passed on to the consumer‑‑ Validity‑‑‑Tax had been collected on behalf of the Central Board of Revenue in terms of S.3‑B(3) of the Sales Tax Act, 1990‑‑‑Bur,len of proof that the incidence of tax had been passed on to the consumer was on Central Board of Revenue‑‑‑Nothing was available on record to show that the incidence of tax had been passed to the consumer‑‑‑In absence of any record the petitioner could not be deprived of the amount, which had been recovered from him which was not chargeable from him‑‑ Recovery of sales tax in the face of legal provision was illegal, without jurisdiction and contrary to law‑‑‑Such illegal recovery made by the Government Departments was liable to be refunded‑‑‑Federal Tax Ombudsman recommended that Rs.1,07,444 be refunded to the petitioner.

Shafqat‑ur‑Rehman for the Complainant.

Asif Yousaf, D.C. (Refund) for the Department.

DECISION/FINDINGS

The petitioner purchased standing trees in auction from Government Elementary School, Lala-moosa. The principal in spite of protest by the petitioner recovered Rs.1,07,444 as sales tax, which was deposited in Bank on 13‑4‑2002. The petitioner had filed Complaint No.808 of 2002 earlier asking for refund but as he had not filed any application for refund the case was closed. The petitioner not being a registered person filed an application, dated 30‑11‑2002 demanding refund of the said amount. The Deputy Collector (Refund) refused to refund by his communication, dated 23‑11‑2002 in the following manner:‑‑

"It is to inform you that you are not entitled to claim any refund on purchase as you are neither registered person under Sales Tax Act, 1990 nor you have any tax invoice/Bill of Entry under section 7(1) and specially subsection 2 of section 7 and under subsection 3 of section 8 in which clearly mentioned that no person other than registered person shall be made any deduction or reclaim input tax in respect of taxable supplies made or to be made by him".

3. The petitioner then filed the present petition for refund of Rs.1,07,444 which according to him was illegally recovered as sales tax.

4. In reply the department has not disputed the facts. It has been pleaded that the case was examined by the Deputy Collector who after due consideration issued the above quoted letter. It was further stated that no action at the end of the Collectorate is warranted and that the petition may be dismissed. It was further pleaded that tax erroneously charged is to be paid to the Government Treasury in terms of section 3‑B of the Sales Tax Act.

5. Mr. Shafqat‑ur‑Rehman, ITP contended that no sales tax chargeable on the standing trees auctioned by the school. Mr. Yousaf, Deputy Commissioner (Refund) on the other hand that in view of section 3(1‑A) of the Sales Tax Act it was rightly charged and recovered. The learned ITP referred to the C.B.R.'s letter, dated 23‑11‑1998 addressed to Collector, Peshawar Cantt. in which it was endorsed that raw wood in the shape of unprocessed round logs is exempted from sales tax, however, timber in the shape of semi‑processed sleeper for use in furniture, door, window etc. is liable to tax. It also endorsed the views of the Collector that in view of section 3‑B of Sales Tax Act, 1990 sales tax already charged cannot be refunded. There is no dispute about the issuance of this letter by the C.B.R. on which reliance has been placed by the department.

6. It is an admitted position that the raw wood like the standing tree is exempt from sales tax under section 13, Sixth Schedule to the Sales Tax Act items 2 of which provides as follows:‑‑

"Agriculture product of Pakistan not subject to any further process of manufacture".

7. The department has relied on section 313 of the Sales Tax Act which provides that any person who has collected or collects any tax or charge, whether under misapprehension of any provision of this act or otherwise, which was not payable as tax or charge or which is in excess of the tax or charge actually payable and the incidence of which has beer passed on to the consumer, shall pay the aunt of tax or charge so collected to the Federal Government. Subsection (2) provides that any amount payable to the Federal Government under subsection (1) shall be deemed to be an arrears of tax or charge payable under this Act and shall be recoverable accordingly and no claim for refund in respect of such amount shall be admissible. Subsection (3) further provides that the burden of proof of the incidence of tax or charge referred in sub section (1) has been or has not been passed to the consumer shall be on the person collecting the tax or charge. According to the subsection (1) any amount on account of sales tax, which is not payable, is recovered under misapprehension of any provision of Act and incidence of which has been passed on consumer shall be deposited with the Federal Government. These two conditions should be fulfilled before applying this provision. Therefore, it has to be seen whether the incidence has been passed on the consumer or not. In this case Elementary Government Training College had collected the tax as agent of the C.B.R. therefore, in terms of subsection (3) of section 3‑B the burden of proof that the incidence of tax has been passed to the consumer is on C.B.R. There is nothing on the record to show that the incidence of tax has been passed to the consumer. In the absence of anything on record the petitioner cannot be deprived of the amount, which has been recovered from him, which was not chargeable from him. The recovery of sales tax in the face of legal provision was illegal without jurisdiction and contrary to law. Such illegal recovery made by the Government departments is liable to be refunded.

8. It is therefore, recommended that;‑‑

(i)Rs.1,07,444 be refunded to the petitioner.

(ii)Compliance be reported within 30 days.

C.M.A./807/FTOOrder accordingly.