Messrs PAKISTAN PETROLEUM LIMITED., KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2004 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1455 (2003)

Central Excise Rules, 1944‑‑‑

‑‑‑‑Rr. 11 & 210‑‑‑Central Excises Act (1 of 1944), S.3B‑-‑Central Excise General Order No.6 of 1987‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S.2(3)‑‑‑Refund‑‑‑No refund of charges erroneously levied or paid, unless claimed within one year‑‑‑Additional duty under S.3B of the Central Excises Act, 1944 and penalty under R.210 of the Central Excise Rules, 1944 was remitted by the Appellate Tribunal‑‑‑‑Application for refund of amount unlawfully adjusted towards additional duty and penalties‑‑‑Department did not take any action to refund the amount even after Tribunal's decision despite complainant's effort‑‑‑Transfer of record by the Collectorate to Large Taxpayers Units‑‑‑Refund application and other correspondence were not available on Large Taxpayers Unit record ‑‑‑Validity‑‑‑Maladministration on the part of the officers dealing with the matter in Collectorate prior to transfer of jurisdiction to Large Taxpayers Unit was proved‑‑‑Said officers not‑only did not take due action on the applications but also did not take pare of the relevant record‑‑‑Further maladministration on their part was proved for transferring incomplete record to Large Taxpayers Unit ‑‑‑Maladministration was also proved on the part of Officers dealing with the notice of Office at Large Taxpayers Unit for failure to approach the Collectorate concerned seeking the records relating to refund applications instead of requiring the complainant to .file duplicate copies of the record again‑‑‑Such was a matter of serious concern that no action was contemplated under the rules even against those officers/officials who were proved delinquent‑‑‑Federal Tax Ombudsman recommended that the Director‑General Large Taxpayers Unit ensures payment of refund to the complainant by September 30, 2003, that the member, Central Excise, Central Board of Revenue should direct the concerned Collector to identify the officers/officials responsible for the maladministration and proceed against them under the Rules.

Taha Ali Zia and Aurangzaib Amir for the Complainant.

S.M. Shoaib, Deputy Collector for Respondent.

DECISION/FINDINGS

Maladministration is alleged in the instant complaint on the part of the Collectorate of Central Excise, Gulshan‑e‑Iqbal, Karachi for deliberately delaying refund amounting to Rs.55,420,459 duly adjudicated by the Tribunal in respect of the period from November, 1996 till January, 1999.

2. Facts, briefly, are that the complainant is a body Corporate registered under the Companies Ordinance, 1984. The complainant produces natural Gas from its Wells at the Sui and Kandhkot gas fields and its entire production is bought by three entitles namely, the Water and Power Development Authority (WAPDA), Sui Northerin Gas Company 'Pakistan Limited (SNGPL) and Sui Southern Gas Company Limited (SSGC). The complainant, therefore, is entirely dependent on these three entities for the off‑take of the said gas and for payment of the central excise duty (CED) payable thereon together with the amount of gas bought by them.

3. The practice of the complainant to deposit CED after receiving payments from its three customers, is based on the facts that the price charged by the complainant for the production of natural gas from these customers was fixed by the Government of Pakistan, hereinafter called GOP, under the Gas Price Formula laid down in the Sui Gas Well Head Price Agreement, dated 28th July, 1982, entered into between GOP and the complainant. Accordingly, the complainant can only pay the applicable CED on the gas provided to WAPDA, SNGPL and SSGC after it receives payment together with the applicable CED from each of the said entities. Any delay, therefore, in the payments of the complainant's invoices by the aforesaid three entities has a direct nexus to the resultant delay in the payment of CED by the complainant.

4. All three customers of the complainant delayed/defaulted in meeting their payment obligations to the complainant for natural gas supplied to them during the period from November, 1996 till January, 1999. At the same time, the complainant was not allowed to stop or even suspend applies of natural gas to those customers as the highest authorities deemed it to be in the Vital national interest that such supplies continued uninterrupted.

5. In the present case in relation to payments to the Karachi Collectorate, the complainant used to pay the applicable CED on the gas provided to WAPDA after receiving payment together with the applicable CED from the said entity. However, the Karachi Collectorate issued five show‑cause notices from 19‑2‑1998 up to 5‑5‑1998 demanding payment of Rs. 514,408, Rs.2,558,949, Rs.976,967, Rs.21,411,070 and Rs. 8,453,458 respectively as additional duty.

6. The Central Board of Revenue together with the Hyderabad, Quetta and Karachi Collecorates, at the same time and simultaneously, recovered directly from WAPDA a sum of Rs.623,819,000 through a book adjustment, in a purported exercise of the powers conferred under section 11 of the Act: The amount was allegedly due from the complainant to the Hyderabad Collectorate towards CED levied on natural gas supplies and services rendered by the complainant during the subject period. The above actions/proceedings were taken/conducted in the last week of June, 1998 while the matters were sub judice. The said book adjustment, in relation to the Karachi Collectorate, was made after issuance of only a Demand Notice, dated 16‑6‑1998 in which it was, stated that a sum of Rs.261,179,000 was outstanding for the months of November, 1997 to April, 1998. That the respondent No.1 confirmed the aforesaid book adjustment to the complainant in terms of its Letter C. No. 14(31) Tech/96/1287, dated 21‑7‑1998.

7. A sum of Rs.261,179,000 out of the total sum of Rs.623,819,000 recovered through a book adjustment exercise as aforesaid was applied by the respondent No. 1, to clear the CED outstanding up to April,, 1998. It included a sum of Rs.92,420,459 towards `additional duty' (Rs. 55,420,459) and penalties (Rs.37,000,000) imposed up to that point in. time. The penalty amounting to Rs. 31,000,000 was subsequently remitted vide Orders, dated 10‑8‑1998 in Appeals Nos. 524 of 1998 and 525 of 1998.

8. It is allege y that the purported exercise of powers under section 11 of the Act on the part of the concerned authorities and subsequent applying of the sum of Rs.55,420,459 towards levy of `additional duty' and penalty was clearly erroneous and a misconstruction of the law. Even otherwise the said action was in flagrant disregard of the law inasmuch as the book adjustment was made without providing the complainant any opportunity of being heard being ex facie violative of the principles of natural justice.

9. The complainant has submitted that the first show‑cause notice ibid was withdrawn by the Collectorate as there was some duplication of the amount claimed thereunder. As regards the second Show‑Cause Notice, representatives of the complainant attended a hearing in the matter but no order was passed nor did the complainant receive intimation of any order in relation to same.

10. It is submitted with regard to the last three show‑cause notices that orders were passed in favour of the Karachi Collectorate by the Additional Collector, Karachi vide Orders‑in‑Original No.76 of 1997 dated 17‑12‑1997; No. 41 of 1998, dated 25‑5‑1998 and No. 35 of 1998 dated 20‑5‑1998 respectively.

11. The complainant, thereafter, filed Appeals against the said Orders‑in‑Original with the Collector Appeals which were all rejected vide Collector Appeals Orders No. 115 of 1998, dated 16‑3‑1998, Nos.524 of 1998 and 525 of 1998 both, dated 10‑8‑1998. However, in terms of the Orders, dated 10‑8‑1998 in Appeals Nos. 524 of 1998 and 525 of 1998, the penalty amounting to Rs.37,000,000 was remitted to the complainant.

12. The complainant filed an Application under rule 11 of Rules ("Application") for refund on March 3, 1999. However, the respondent Collectorate did not issue any response. Respondent Collectorate, according to the counsel should have followed the procedure prescribed in Central Excise General Order No.6 of 1987 but neither a show‑cause notice rejecting the claim for refund nor an; hearing was filed in the matter.

13. Since the Collector Appeals had remitted only the penalty, the complainant filed further Appeals before the Customs, Excise and Sales Tax Appellate Tribunal, Karachi Bench (Tribunal). The Tribunal by a common Order, dated 2‑3‑2000 held. "In the circumstances of the present case we are satisfied that there was no wilful failure on the part of the appellant in depositing the applicable Duty. Therefore, we hold that on the facts and in circumstances of the case it would not be just and fair to inflict additional duty under section 3B of the Act as well as penalty under rule 210 of the Rules. Accordingly, the additional duty and penalty as imposed in the impugned order is remitted "

14. The respondent Collectorate, however, did not take any action to refund the amount even after Tribunal's decision despite complainant's efforts. The complainant through its Counsel again wrote to the respondent Collectorate in November, 2000 to decide application filed under rule 11 requesting refund of the unlawfully recovered amount. However, no response was ever received to that letter. Reminders, dated 23‑7‑2001 and 18‑8‑2001 too remained un-responded.

15. The complainant sent another Notice, dated 6‑2‑2002 through its Counsel to the respondent Collectorate. However, despite the lapse of the two weeks period mentioned‑ in the notice, the respondent Collectorate in blatant disregard of the law have once again failed to even respond to let alone take action in the matter.

16. The complainant, therefore, filed Constitutional Petition No. 1685 of 2002 in the High Court of Sindh. However, based on the experience of the complainant as regards the expeditious disposal of cases before the Federal Tax Ombudsman, the complainant withdrew the said Petition with the permission of the Hon'ble High Court of Sindh (as evidenced by the Order, dated 22‑5‑2003), in order to file the instant complaint:

17. It was further submitted on behalf of the complainant that in a similar case of the complainant (Complaint No. 394‑K of 2002), the FTO vide Order, dated 20‑9‑2002 directed that the refund application attached by the respondent under section 11 of the Central Excises Act, 1944 be considered by the competent officer and decide the same following the prescribed refund procedure.

18. The complainant prayed for a recommendation to the respondents to forthwith effect the refund to the complainant of Rs.55,420,459 on account of its unlawful adjustment towards "additional duty" and penalties with interest and costs and grant any other or further relief which might be deemed fit and proper in the circumstances of the case.

19. Responding to the notice served under section 10(4) of Ordinance XXXV of 2000, Mr. Nisar Muhammad Collector, LTU, Karachi submitted that no such claim of refund of excise duty was pending with LTU. However, the complainant was being approached to provide the documents in relation to their claim so that it could be processed. A copy of the letter, dated 21^st July, 2003 addressed to the complainant was enclosed with respondents comments.

20. Representatives of the two sides were heard. The Deputy Collector submitted that the Applications for refund and other correspondence in that respect referred to in the complaint were not available on 'the records received by the LTU from the Collectorate. He undertook that the claim would be processed and settled in LTU as, soon as copies of relevant documents were furnished.

21. Maladministration alleged on the part of officers dealing with the matter in the Collectorate prior to transfer of jurisdiction to LTU is proved. They not only did not take due action on the applications but also did not take care of the relevant record. Further maladministration on their part is proved for transferring incomplete record to LTU.

Maladministration is also proved on the part of Officers dealing with the notice of this Office at LTU for failure to approach the Collectorate concerned seeking the records relating to refund applications instead of requiring the complainant to file duplicate copies of the record again. It is a matter of serious concern that no action is contemplated under the rules even against those officers/officials who are proved delinquent

22. It is recommended that:‑‑

(a) The Director General (DG) LTU ensures payment of refund to the complainant by September 30, 2003.

(b) The Member Central Excise, C.B.R. directs the concerned Collector to identify the offices/officials responsible for the maladministration found supra and proceed against them under the rules.

(c) Compliance of recommendation (a) is reported by DG, LTU within 30 days.

(d) Compliance of recommendation (b) is reported by Member, Central Excise, C.B.R within 60 days.

C.M.A/1052/FTOOrder accordingly.