PAKISTAN MOBILE COMMUNICATION, ISLAMABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2003 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 296 (2002)

Customs Act (XV of 1969)‑‑‑

--‑S.19‑‑‑Sales Tax Act (VII of 1990), Ss.3(3A)(6), (8)(1)(b), 13(2)(9) & 71‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑S.R.O. 390(I)/2001, dated 18‑1‑2001‑‑‑General power to exempt from custom duties ‑‑‑Assessee, a cellular company‑Notification No.390(I)/2001 dated 18‑1‑2001 was issued exempting same from customs duty and sales tax on the condition that importer shall bring the sets free of duty and tax at import stage but pay such tax at the stage of activation‑‑‑Complainant did not want to avail such exemption as he was not an importer and pleaded that importer could be charged with liability to pay duty at the time of import but under the notification the liability to pay and collection had been shifted to the cellular company whether they have imported or not‑‑‑Department was contended to be directed not to force the complainant to avail exemption under the said notification and allow them to pay duty and tax under the normal regime of the Customs Act, 1969 and Sales Tax Act, 1990‑‑‑Department pleaded that Government had not encroached upon the right of the complainant as it had only changed the mode of collection for this particular sector, in view of its special nature‑‑ Validity‑‑‑Contention that the S.R.O. 390(I)/2001, dated 18‑1‑2001 way, in violation of the provision of law did not seem to be justified‑‑‑Said notification was issued under S.19 of the Customs Act, 1969 and Ss.(3A)(6), 8(I)(b), 3(2)(a) & S.71 of the Sales Tax Act, 1990‑‑‑By this notification the exemption in sales tax and customs duty was allowed on certain conditions‑‑‑Under S.19 of the Customs Act exemption could be granted subject to such conditions, limitations or restrictions as the Federal Government thinks fit to impose; similar was the case under the sales Tax Act, 1990‑‑‑Section 71 of the Sales Tax Act, 1990 further provides that the Federal Government may by notification prescribe the special procedure for payment of tax‑‑‑Impugned notification while granting the exemption had imposed eight conditions one of which was that no customs duty and sales tax shall be collected on cellular telephone sets at the time of import or at the time of supply but it will be charged collected and paid by the cellular company operator at the times the sets were presented to the Company operator for activation or energizations Such amount shall be charged and collected from the customer require energization and activation, therefore, the cellular company was only collecting agent and special procedure provided by the said S.R.O, was legal and proper ‑‑‑S.R.O. having been issued under a delegated authority could be challenged on the ground that it was in contravention of the provision of law‑‑‑No such illegality had been found as shifting of recovery of customs duty and sales tax was not contrary to the provisions of law‑‑‑If a law provides levy of tax or exemption from tax or duty, it was not left to the option of any party to accept it or not to accept it‑‑ Where law was validly made its obedience was not optional maladministration having been established in implementing the said S.R.O. the case was closed by, the Federal Tax Ombudsman.

Ayaz Shoukat Asif Saeed Khan and Mumtaz Ali for the Complainant.

Ashfaq Ahmed Tunio, Secretary, Sales Tax, C.B.R., Dr. Zulfiqar Ahmad Malik, Secretary Customs, C.B.R. for Respondent.

DECISION/FINDINGS

The complainant is a cellular company providing cellular mobile telecommunication services. The Government issued a Notifica tion 390(I)/2001 dated 18‑1‑2001 exempting customs duty and sales tax above Rs.2,000 on the condition that importer shall bring the sets free of duty and tax at import stage but pay Rs.2,000 at the stage of activation The complainant allege that they informed verbally the Collector of customs that they do not want to avail this exemption and the sets by charged to normal duty and taxes but he did not agree. It has been pleaded that the Government cannot force any person to avail exemption allowed under the Customs Act and Sales Tax Act on notified conditions. It has further been pleaded that under the Customs Act importer can be charged with liability to pay duty at the time of import but under the notification the liability to pay and collect has been shifted to the cellular company whether they have imported or not. It has been alleged that notification is contrary to Customs Act and Sales Tax Act as it has fixed the consolidated amount of Customs duty and Sales Tax, which is not in accordance with law. It has been prayed that the Collectorate may he directed not to force the complainant to avail exemption under the aforestated notification and allow them to pay duty and tax under the normal regime of the Customs Act and Sales Tax Act. Further that the notification may be restricted to those who intend to avail benefit under it and not to force implementation of the notification to pay Rs.2,000 on each activation.

2. The Collector of Customs, Rawalpindi in his reply stated that by issuing S.R.O. the Government has not encroached upon the right of the complainant as it has only changed the mode of collection for this particular sector, in view of its special nature. The S.R.O. has been issued by the Government in exercise of the statutory powers vested in it under section 19 of the Customs Act and sections 3, 8, 13 and 71 of the Sales Tax Act. The activation charges are, however, collected by the Collectorate of Sales Tax and Central Excise. The claim made by the claimant has been denied. The Sales Tax Department did not submit any reply.

3. During hearing the representative for the complainant reiterated all the averments made in the complaint. 'In reply the representatives of the department also insisted on the comments submitted by the Customs Department. The main contention, of the complainant is that it is not an importer and, therefore, cannot be charged with the customs duty. Under S. R.O. 390(I)/2001 it is provided that no Customs duty and Sales tax shall be collected on cellular telephone sets at the time of import or, as the case may be, at the time of supply, but the said amount will be charged, collected and paid by the cellular company operator at the time the sets are presented to the cellular company operator for activation or energization. The said amount shall be charged, collected and paid on every activation or energization done by the cellular company operator, irrespective of any earlier activation or energization, change of number or any other reason including change of package, etc. By this notification the levy of Sales Tax and Custom duty shall be Rs.2,000 per set subject to the conditions mentioned above. Amorist other which are not relevant for the purposes of this case the liability to charge, collect and pay the said amount has been cast upon the cellular company operator which has thus to collect the duty and sales tax and deposit through a monthly tax return in terms of section 26 of the Sales Tax Act. The point of charging duty and sales tax has been shifted to the point of activation, therefore, this amount charged is not a levy on the chip but duty and sales tax to be recovered at a particular specified time by the specified person.

4. The contention that the S.R.O. is in violation of the provision of law does not seem to be justified. The impugned notification was issued under section 19 of the Customs Act, 1969 and subsections (3A) and (6) of section 3, clause (b) of subsection (1) of section 8, clause (a) of sub section (2) of section 13 and section 71 of the Sales Tax Act, 1990. By this notification the exemption in sales tax and customs duty was allowed on certain conditions. It may be noted that the S.R.O. is issued under delegated authority conferred under law. Under, section 19 of the Customs Act exemption can be granted subject to such conditions, limitations or restrictions as the Federal Government thinks fit to impose. Similar is the case under the Sales Tax Act. Section 71 of the Sales Tax Act further provides that the Federal Government may by notification prescribe the special procedure for payment of tax. The impugned notification while granting the exemption has imposed eight conditions one of which is that no customs duty and sales tax shall be collected on cellular telephone sets at the. time of import or at the time of supply but it will be charged, collected and paid by the cellular company operator at the time the sets are presented to the company operator for activation or energization. Such amount shall be charged and collected from the customer requiring energization and activation. .Therefore, the cellular company is only a collecting agent and not that they have to pay the customs duty or sales tax. This special procedure provided by the impugned S.R.O. is legal and proper. S.R.O. being issued under a delegated authority can be challenged on the ground that it is in contravention of the provision of law. In the present case no such illegality has been found as shifting of recovery of customs duty and sales tax is not contrary to the provisions of law.

5. The next contention is that the complainant may not be forced to avail this exemption but should be allowed to be governed under the normal regime of Customs Act and Sales Tax Act. If a law provides levy of tax or exemption from tax or duty, it is not left to the option of any party to accept it or not to accept. Where law is validly made is obedience is not optional.

6. As no maladministration has been established in implementing the impugned S.R.O. the case is closed.

C.M.A./470/FTO Order accordingly.