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

----Ss. 45B(3), 45(2a) & 45---S.R.O. 417(I)/2002, dated 20-6-2002-- Refund---Appeal--- Remand---Opportunity of hearing---Remand of case to Deputy Collector by the Collector (Appeals) instead of deciding the same himself---Validity---Section 45B(3) of the Sales Tax Act, 1990 provided that in deciding appeal, the Collector of Sales Tax (Appeals) may make such further inquiry as may be necessary provided that he shall not remand the case for de novo consideration---Collector had remanded the case for fresh decision .after giving proper opportunity of hearing to the Complainant---Such course was not permissible under law and amounted to maladministration ---Collector (Appeals) conceded the point and undertook to recall order to be passed after necessary enquiry in accordance with law---Federal Tax Ombudsman recommended that Collector Sales Tax (Appeals) to recall the impugned order and after making necessary enquiry and affording opportunity of hearing to the Complainant pass a speaking order in accordance with law.

Nadeem Ahmed Mirza, Consultant alongwith Anwar Yasir for the Complainant.

Zulfiqar Kazi; Additional Collector (Sales Tax) and Samiullah, Deputy, collector (Sales Tax) for Respondent.

DECISION/FINDINGS

The complainants are commercial exporter of textile goods (fabric and textile made ups), with no in-house facility/capacity for manufacture of goods. They are duly registered as exporters under the Sales Tax Act, 1990 since November 7, 2001 with the Collector of Customs, Sales Tax and Central Excise, Quetta vide Registration No.6-01-9999-769-73.

2. The complainant received orders from Rukhiya Trading Company, Deira Dubai; U.A.E. for supply of various items to be shipped positively by 23rd January, 2002. They placed orders on credit basis for supply of the contracted goods to be delivered in export packing at Karachi through Messrs Fatima Enterprises, Flat No. 103-B, Mian Manzil, 1st Floor, Affandi Colony, Chowk Sadiqabad Road, Rawalpindi, who delivered the same to the petitioner at his godown in export packing at Karachi alongwith Sales Tax Invoices Nos. 17, dated 4-1-2002, 18 dated 4-1-2002, 61 dated 15-1-2002, 62 dated 15-1-2002 and 63 dated 1,5-1-2002 respectively amounting to Rs.13,651,657 inclusive of payable Sales Tax amounting to Rs.1,780,652.

3. The complainant prepared export invoices and got verified Forms `E' dated 10th and 23rd January, 2002 from Prime Commercial Bank, Karachi in accordance with the Foreign Exchange Regulations. The documents so prepared were delivered to the clearing agent Messrs Mehran Agencies and Pakistan Agencies, Karachi alongwith zero rated sales tax invoices for effecting the shipment.

4. The clearing agents accordingly prepared the bills of export and submitted those with the Collectorate of Export for registration/verification. The official of the Collectorate after necessary verification allotted Bill of Export Nos. 7334, dated 10-1-2002 and 78207, dated 24-1-2002 and allowed export of the invoiced goods after physical verification. The examining official of Export Collectorate found the goods in accordance with the declaration. Hence shipments were allowed without any observation/adverse remarks and zero rated invoices were signed accordingly.

5. The complainant prepared monthly Sales Tax Return-Cum -Payment. Challan for January 2002 in terms of section 26 of the Sales Tax Act, 1990 and submitted the same with the National Bank of Pakistan, Hub Chowki Branch, District Lasbella on 8-2-2002 showing export sales (zero rated supplies) amounting to Rs.12,292,016 and taxable purchases amounting to Rs.11,871,005 on which input tax amounted to Rs.1,780,650. As the entire sales of the complainant were zero rated, the complainant claimed refund of the aforesaid amount of input tax in the Sales Tax Return-cum-Payment Challan for period January, 2002.

6. The complainant, in accordance with the provisions of Refund Rules Notified Vide No.S.R.O. 417(I)/2002, dated 20-6-2002, deposited the, requisite documents for claiming refund of input tax alongwith original bills of export and photocopies to Deputy Collector (Refund Sales Tax, Hub for verification of zero rating of the locally procured goods and for retaining photocopies of the bill of export after necessary, verification and attestation. The Deputy Collector (Refund) verified contents of the exported goods mentioned on the bill of export accordance with the refund rules, after cross checking the same with purchase and sale invoices submitted by the petitioner for claiming refund of input tax.

7. The Deputy Collector Sales Tax (Refund), is required under the Rules issued vide Notification No.S.R.O. 417(I)/2002, dated 20-6-2002 to sanction the refund only to the .extent of input tax involved in goods actually exported by a commercial exporter and pay within one month of the submission of supportive documents in terms of rule Contrary to the clear directives, the Deputy Collector (Refund) kept refund of the petitioner unprocessed for the month of January 2002 without any valid reason despite getting the bills of export re-verifies from the Collectorate of Export; several visits of the complainant proved in vain. Ultimately, the DCST sanctioned the refund Rs.1,780,650 after obtaining an undertaking, dated 12th March, 2002 from the complainant that they shall discharge all liabilities imposed upon them if the invoices were found unverifiable.

8. Later, intimation was received from the two Collectorates of Sales Tax At Lahore as well as Rawalpindi that they had blacklisted alongwith a large number of other firms, the two namely Messrs Aneeza Hasir Export; Lahore and Messrs Fatima Enterprises, Rawalpindi vide their letter C. No. 781, dated 11-3-2002 and No. 225 of 2002, dated 18-4-2002 respectively for suspicion of issuing fake invoices.

9. The complainant were informed accordingly and they were required vide letter, dated 29-4-2002 to provide the proof of payment of sales tax against purchases from the alleged unit for necessary verification. The petitioner in compliance of requisition letter submitted before the Deputy Collector Sales Tax (Refund), HUB the photocopies of following cheques issued in the names of Aneeza Hasir Exports and Fatima Enterprises respectively:

Aneeza Hasir Exports

1.Cheque No. 3162986Rs. 6,497,191

2.Cheque No.3162087Rs. 6,500,000

Total:Rs.12,997,191

Fatima Enterprises

1.Cheque No.3992501Rs. 7,781,490

2.Cheque No.3992505Rs. 5,870,167

3.Cheque No.3992511Rs. 8,025,716

4.Cheque No.3992510Rs. 8,000,000

5.Cheque No.3992509Rs. 8,000,000

Total: Rs.37,677,373

10. However, the Deputy Collector, Refund, Sales Tax, Hub, while sanctioning the refund of sales tax for the tax period of March, 2002 and May, 2002 amounting to Rs.793,381 and Rs.1,526,329 respectively, proceeded to pass an order for adjustment of Rs.1,780,650. The said amount was alleged to have been unduly refunded and the refund adjustment order, against the refunds sanctioned for the tax periods March and May, 2002, was passed without issuing the mandatory show cause notice.

11. It has, been pleaded that the complainant filed an appeal in terms of section 45(1) of the Sales Tax Act, 1990 with the Collector of Customs (Appeals), Quetta on 16-10-2002. The hearing was fixed for 3-4-2003. During the hearing it was contended that Refund Adjustment Order was passed contrary to law because the Deputy Collector had failed to provide the complainants the material on record and a reasonable opportunity of being heard by issuing the mandatory show cause notice prior to passing/issuing Refund Adjustment Order.

12. It has further been submitted that Collector of Customs (Appeals), instead of confirming, varying, altering, setting aside or annulling the impugned decision in terms of subsection (2) of section 45 of the Sales Tax Act, 1990 (prior to substitution by Finance Ordinance, 2001, proceeded to remand the order for fresh proceedings which is contrary to the provisions of subsection (2A) of section 45. The Collector (Appeals) was supposed to pass such speaking order as he thought fit, instead of remanding the issue to the Deputy Collector. Most of the grounds on which the order was impugned have not been considered in the order in appeal. According to the complainant the order in appeal, therefore, is contrary to law as well as suffers from mistakes apparent from record and warrants recall by the learned Collector for rectifying the mistakes of commission and omission that have inadvertently crept into the said order.

13. The respondent submitted in response to notice under section 10(4) of Ordinance XXXV of 2000 that prior to receiving the letter of Rawalpindi Collectorate the complainant had already obtained a refund claim of Rs.17,80,650 on submitting an undertaking vide his letter, dated 12-3-2002, wherein it was submitted "that in case if the invoices were not verified we (the complainant) undertake all liabilities that may be imposed on us". Accordingly, refund already sanctioned to the complainant for the tax period January, 2002 amounting to Rs.11,80,650 has been recovered from the refund claims filed by the unit for the tax periods March, 2002 and May, 2002 after receiving the intimation that the claim was based on allegedly fake/flying invoices issued by the supplier, Messrs Fatima Enterprises which has been blacklisted due to alleged involvement in issuance of flying invoices.

14. The complainant has contended that the Collector should have decided the appeal himself instead of remanding the case to the Deputy Collector. He has relied on section 45 (2-A). This section 45 was substituted by the Finance Ordinance 2000, which abolished the office of Collector (Appeals). Later by Finance Ordinance 2002 the Office of Collector of (Appeals) has been revived by inserting section 4513. At the time appeal was filed section 4513 was the operation therefore reliance cannot be placed on section 45 (2-A)) The complainant is under misapprehension that appeal was filed under section 45(1). It was filed under section 4513, which held the field. It is pertinent to point out that subsection (3) of section 4513 of the Said Tax Act provides that in deciding the appeal, the Collector of Sales Tax (Appeals) may make such further inquiry as may be necessary provided that he shall not remand the case for de novo consideration. The Collector has remanded tire case for fresh decision after giving proper opportunity of hearing to the complainant. This is not permissible under law. The order is contrary to law and amounts to mal-administration.

15. The Collector (Appeals) who was present conceded the point and undertook to recall his order to be passed after necessary enquiry in accordance with law.

16. It is recommended that:--

(i) The Collector Sales Tax (Appeals) Quetta to recall the impugned order and after making necessary enquiry and affording' opportunity of hearing to the complainant pass a speaking order in accordance with law.

(ii) Compliance be reported within 45 days

C.M.A./1035/FTOOrder accordingly