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. No. 529(I)88, dated 26‑6‑1988‑‑‑S. R. O. No.561(I)/94, dated 9‑6‑1994‑‑‑Exemption‑‑‑Exemption was available for 5 years to new industrial units set up to 30th June, 1996 provided letters of credit or firmed up financial arrangements with the banks or financial institutions were registered with Central Board of Revenue before 15th July, 1994‑‑‑Assessee informed the Department regarding commencement of trial production w.e.f. 6‑6‑1994 in compliance with prevailing rules and practice of Sales Tax Department ‑‑‑Application for registration under S.R.O. No. 561(I)/94 dated 9‑6‑1994 was made to Central Board of Revenue through the local Sales Tax Authorities as on 3‑7‑1994‑‑‑Secretary (STT) informed the assessee that its registration application under S.R.O. No.561(I)/94, dated 9‑6‑1994 was received late in Central Board of Revenue viz after the permissible period for registration which was up to 15‑7‑1994‑‑ Department demanded sales tax and additional tax due to non availability of Registration Certificate with the assessee/complainant‑‑ Validity‑‑‑Notification dated 9‑6‑1994 provided that the exemption which was originally allowable to the industrial units set up up to 30‑6‑1996 was now allowable to such units set up up to 30‑6‑1994‑‑‑In order to obviate hardship to intending investors who had already made arrangements. for setting up their units in accordance with the original date of 30‑6‑1996, proviso was added, however; to the said S.R.O. according to which if a letter of credit had been opened up to 20‑6‑1994 for import of machinery or firmed up financial arrangements had been made with banks or financial institutions for the new units to be set up up to 30‑6‑1995 the said letters of credit or firmed up financial arrangements were to be registered with the C.B.R. before 15th July, 1994 and the C.B.R. after verifying the facts would intimate in writing whether the applicant was entitled to exemption under the notification; it was thus obvious that the requirement of such registration with the C.B.R. was only for such units as had not

actually been set up by 30‑6 1994 but regarding which firmed up financial arrangements had been made; in such cases it was necessary for the C.B.R. to verify whether the financial arrangements were such as would entitle the applicant to exemption under the S.R.O. dated 9‑6‑1994, thus the requirement of registration with the C.B.R. did not apply in cases where the industrial units had already been set up up to 30‑6‑1994 as in the complainant's case‑‑‑Federal Tax Ombudsman concluded that (i) the complainant was not required to apply for registration with the C.B.R. under S.R.O. 516(I)/94 dated 9‑6‑1994; (ii) in any case the complainant had submitted an application for registration with the local Sales Tax Authorities for forwarding to C.B.R. on 3‑7‑1994 i.e. much before the cut off date of 15‑7‑1994, the complainant was, therefore, not responsible for the purported delay in the receipt of the‑application in the C.B.R. and recommended that and (iii) the order in original dated 26‑2‑2002 now passed by the Additional Collector (Adj.), be cancelled by the Competent Authority under S.45‑A of the Sales Tax Act and compliance be reported within 30 days.

Muhammad Nazir Ch., Chief Executive and Shafqat Mehmood Chauhan, A.R. for the Complainant.

M. Saleem, Deputy Collector for Respondent.

FINDINGS/DECISION

This is a complaint relating to sales tax exemption claimed by the complainant for a new unit set up by it in the Hattar Industrial Estate. The points contained in the complaint are as under:‑‑‑

(i)Hattar Industrial Estate District Haripur N.‑W.F.P. was a tax free area for the industries to be set up in this industrial estate in accordance with S.R.O. No.529(I)/88, dated 26‑6‑1988. Subsequently another S.R.O. No.561(I)/94, dated 9‑6‑1994 was issued according to which exemption was available for 5 years to new industrial units set up up to 30th June, 1996 provided letters of credit or firmed up financial arrangements with the banks or financial institutions were registered with C.B.R. before 15th July, 1994.

(ii)The complainant had purchased land from Sarhad Development Authority on 24‑1‑1993 and a loan was sanctioned by RDFC for the purchase of machinery and plant after which installation was commenced.

(iii)The complainant informed the Superintendent, Sales Tax Department, Haripur through letter, dated 6‑6‑1994 (received by the Superintendent on 22‑6‑1994 regarding commencement of trial production w.e.f. 6‑6‑1994 in compliance with prevailing rules and practice of Sales Tax Department.

(iv)The complainant also informed Secretary (Sales Tax Wing), C.B.R., Islamabad. vide letter, dated 22‑6‑1994 through Superintendent Incharge Sales Tax Haripur for Sales Tax exemption under S.R.O. 561(I)/94 and an application for registration under S.R.O. 561(I)/94 was also made to C.B.R. through ‑ the local sales tax authorities vide Letter No.PCL/NZR/HO/122, dated 28‑6‑1994 accompanied with all necessary documents. The Deputy Superintendent, Sales Tax, Hattar acknowledged the application on 3‑7‑1994. The application was on prescribed application form provided by Incharge, Hattar Circle during his visit to complainant's factory.

(v)The complainant later received a Letter Reference No.1/53 -STI/95, dated 2‑1‑1996 from Secretary (STT) that its registration application under S.R.O. 561(I)/94 was received late in C.B.R. viz. after the permissible period for registration which was up to 15‑7‑1994.

(vi)The complainant clarified to the Secretary (STT), C.B.R. that it had applied well in time for registration and had handed over the required documents to Incharge, Sales Tax Department, Hattar on 3‑7‑1994 and that he had duly signed and stamped the documents for onward forwarding to C.B.R. with his recommendations. It was clarified that the complainant was not at fault as it had submitted the documents well in time (i.e. 12 days before the closing date) and it was the duty of the concerned Officer Incharge at Hattar to forward the application to the relevant officers in C.B.R.

(vii)The complainant statedly appealed to the Member, C.B.R. and Chairman, C.B.R. regarding this maladministration but nobody was willing to listen or to help the complainant.

(viii)Now, after 5 years the complainant has received a show‑cause notice from Additional Collector, (Adj.), dated 5‑12‑2001 demanding sales tax of Rs.3,507,757 as principal amount and additional tax of Rs.7,063,839 due to non‑availability of Registration Certificate with the complainant.

(ix)The complainant has a very small unit with total value of a few lakhs of rupees and is unable to bear the harassment and mal administration of the Sales Tax Department.

(x)It is pointed out that Income‑tax Department, Industries Department and Local Government Department have all given exemption to the complainant but now the Sales Tax Department 'to cover up their mistake are illegally harassing the complainant.

It has been prayed that the C.B.R. may be directed to issue registration certificate under S.R.O. 561(I)/94, dated 9‑6‑1994 as the complainant applied for it well in time and the Additional Collector (Adj.) and all other concerned officers of Sales Tax Department be directed not to harass the complainant or to issue any show‑cause notice pertaining to the case till the decision on the complaint.

2. The, respondent's reply has been received and the representatives of the complainant and the respondent have attended and have been heard. The main points in the respondent's reply are as under:‑‑‑

(i)Under S.R.O. 561(I)/94, dated 9‑6‑1994, the complainant was required to submit the application for registration to the C.B.R.. not to the Superintendent, Sales Tax. Haripur.

(ii)The complainant was required to get himself registered with C.B.R. by 15th July, 1994 and since this was not done, registration was rightly refused by the C.B.R. vide letter, dated 2‑1‑1996.

(iii)As the complainant's request for registration had been rejected, it was required to act in accordance with the provisions of the Sales Tax Act. As the complainant did not have a Registration Certificate as required by S.R.O. 561(I)/94 a case of non payment of sales tax was framed and was decided against the complainant by the Additional Collector, Sales Tax (Adj.) vide order, dated 19‑2‑2002.

(iv)The complainant can file an appeal before the Appellate Tribunal but sales tax is at present payable in accordance with the order- in‑original unless stay is granted by the proper forum.

3. During the hearing the complainant again stated that an application for registration was sent to the C.B.R. through local sales tax authorities on the advice of the latter and that since the application and relevant documents were admittedly received by the sales tax authorities on 3‑7‑1994 viz. much before the cutoff, date of 15‑7‑1994 given in S.R.O. 561(I)/94 there was no reason for the C.B.R. to reject the application for the stated reason that it had not been received in time. There is definite merit in the complainant's contention and furthermore while examining the contents of the relevant S.R.O. during the hearing it was also observed that the requirement of registration with C.B.R. did not apparently apply in the complainant's case. In this connection the original S.R.O. 580(I)/94, dated 27‑6‑1991 granting sales tax exemption for industries set up in N.‑W.F.P. and Balochistan is reproduced as under:

"S.R.O. 580(I)/91, dated 27‑6‑1991.‑‑‑In exercise of the powers conferred by subsection (1) of section 13 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that all goods produced or manufactured by such industries which are set up in the North‑West Frontier Province and Winder Industrial Estate, Province of Balochistan except Hub‑Chowki Area, District Lasbela, Balochistan between the 1st July, 1991, and the 30th June, 1996, shall be exempt from the tax payable under the said Act for a period of five years from the date the industry is set up.

Explanation. ‑‑For the purpose of this Notification, the expression `set up' shall mean the date on which the industry goes into production including trial production, which date shall be intimated, in writing, by an intending manufacturer to the Assistant Collector of Sales Tax having jurisdiction in the area at least fifteen days before commencing such production but shall not include the date of expansion, balancing, modernization or replacement of such industry. "

Vide a subsequent S.R.O. 561(I)/94, dated 9‑6‑1994 the period up to which the industrial unit could be set up was curtailed from 30‑6-1996 to 30‑6‑1994. The Notification, dated 9‑6‑1994 read as under:‑‑‑

"S.R.O. 561(I)/94, dated 9‑6‑1994.‑‑‑In exercise of the powers conferred by subsection (1) of section 13 of the Sales Tax Act, 1990, and in suppression of this Ministry's Notification No.S.R.O. 580(I)/91, dated the 27th June, 1991, the Federal Government is pleased to direct that all supplies made by manufacturers or producers of Industrial units which are set up in the North‑West Frontier Province and the Province of Balochistan (exception Hub Chowki Area) between the 1st July, 1991 and the 30th June, 1994, shall be exempt from the tax payable under the said Act for a period of five years from the date the industry is set tip:

Provided that this exemption shall also be available to such units which have opened letters of credit before the 30th June, 1994, for import of machinery or have firmed up financial arrangement with the banks or financial institutions before the said date for the new unit to be set up up to the 30th June, 1995:

Provided further that these letters of credit of firmed up financial arrangements with the banks or financial institutions are registered with the Central Board of Revenue before the 15th July, 1994 by such units and the Board, after verifying the facts, will intimate to the applicant in writing whether he is entitled to enjoy exemption under this notification or otherwise.

The Explanation to the S.R.O. remained the same as for the S.R.O., dated 27‑6‑1991.

4. It is evident from the Notification, dated 9‑6‑1994 that the exemption which was originally allowable to the industrial units set up up to 30‑6‑1996 was now allowable to such units set up up to 30‑(‑1994. In order to obviate hardship to intending investors who had already made arrangements for setting up their units in accordance with the original date of 30‑6‑1996 a proviso was added, however, to the S,R.O. according to which if a letter of credit had been opened up to 30‑6‑1994 for import of machinery or firmed up financial arrangements had been A made with banks or financial institutions for the new units to be set up up to 30‑6‑1995 the said letters, of credit or firmed up financial arrangements were to be registered with the C.B.R. before 15th July, 494 and the C.B.R. after verifying the facts would intimate in writing whether the applicant was entitled to exemption under the notification. It thus obvious that the requirement of such registration with the C.B.R. was only for such units as had not actually been set up by 30‑6‑1994 but regarding which firmed up financial arrangements had been made. It is obviously in such cases that it was necessary for the C.B.R. to verify whether the financial arrangements were such as would entitle the applicant to exemption under the S.R.O., dated 9‑6‑1994. Thus the requirement of registration with the C.B.R. did not obviously apply in cases where the industrial units had already been set up up to 30‑6‑1994 as in the complainant's case. In the light of the foregoing, the respondent's representative was given an opportunity to explain the respondent's position and an adjournment was allowed.

5. On the next date of hearing, the respondent's representative has attended and has stated that the observations made during the hearing were correct and in confirmation of this he produced a copy of the. Letter No. 1/52‑STT/96, dated 12th December, 1996‑from the C. B. R. to a party in Lahore which is reproduced as under:‑‑‑

"Subject: Sales Tax Exemption.

Please refer to your Letter No.SFL/ACC/505/96, dated 8th December, 1996 on the subject cited above. From the examination of enclosed documents it appears that you had started your production before 30th June, 1994. Therefore, you are not required to get yourself registered under the second proviso to S.R.O. 561(I)/94 with the C. B. R.

(2)However, you ‑are advised to approach the Collectorate of Sales Tax, Peshawar for the benefit .under the main body of S.R.O. 561(I)/94."

A copy of the, above letter had been endorsed to the Collector of Sales Tax, Peshawar.

6.In the light of the above, it is concluded that:‑‑

(i)The complainant was not required to apply for registration with the C.B.R. under S.R.O. 516(I)/94, dated 9‑6‑1994.

(ii)In any case the complainant had submitted an application for registration with the local sales tax authorities for forwarding to C.B.R. on 3‑7‑1994 i.e. much before the cut off date of 15‑7‑1994. The complainant was, therefore, not responsible ‑for the purported delay in the receipt of the application in the C. B. R.

7.In the light of the above, it is recommended that:‑‑

(i)The order in original, dated 26‑2‑2002 now passed by the Additional Collector (Adj.),. Peshawar be cancelled by the competent Authority under section 45‑A of the Sales Tax Act.

(ii)Compliance be reported within 30 days,

C.M.A./460/FTOOrder accordingly.