(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S. 9(2)(b) & 2(3)‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman ‑‑‑Maladministration‑‑‑Discovery of maladministration on investigation‑‑‑Bar on jurisdiction of Federal Tax Ombudsman‑‑ Scope‑‑‑Objection by the Department as respects the bar on jurisdiction as per S.9(2) of Establishment of Office of Federal Tax Ombudsman 2000 had been so frequently and so inappropriately taken that consistent and authoritative decisions over ruling same had rendered the objection obsolete more so, because question whether "maladministra tion" had (or had not) occurred could only be discovered on investigation.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S. 2(3)‑‑‑Maladministration‑‑‑Disregard of the verdict of superior Courts‑‑‑Inappropriateness‑‑‑Insistence of the Department to treat the sale of Spares and Fixed assets subject to sales tax in disregard of the verdict of superior Courts amounted to "maladministration" cognizable by Federal Tax Ombudsman.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 3, 26 & 45A‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Complainant/ assessee's business was to provide Secured Cash Transportation Service‑‑‑Use of Seals, Bags & Lock‑‑‑Tax functionaries treated the consumption of such seals, bags and lock as transaction of sale‑‑‑Charge of tax‑‑‑Validity‑‑‑Demonstration of procedure and nature of Seals left no room for doubt that these were `consumed' and not sold‑‑‑Said items did not change hands, but the `seals' were destroyed after having been examined by the Receipt Casher as `intact', the bags were carried back for reuse when emptied of the contents‑‑‑Insistence that these represented sales, was a conduct `unreasonable, unjust' and `oppressive' falling in the realm of 'maladministration' as defined in S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue to re‑open Order‑in‑Original No.019 of 2003, dated 28‑2‑2003 under section 45A of the Sales Tax Act, 1990 and cancel the same.

1999 PTD 1892 and 2000 PTD 976 rel.

Aminuddin Ansari for the Complainant.

Saeed Khan Jadoon, D.C.C.S.T. for Respondent.

FINDINGS/DECISION

This complaint has been filed by a Company alleging "maladministration" and harassment by way of levy of Sales Tax by misinterpreting the word "Services" as understood in common parlance.

2. Brief facts are that the complainant provides Secured Cash Transportation, Service, which is not liable to Sales Tax. They have been filing returns, as required by section 26 of the Sales Tax Act, since their `registration' under the Sales Tax Act in July, 1998. The complainants were then known as Brinks Pakistan (Pvt.) Ltd. For the period July, 1998 to September, 2001 the Collector of Sales Tax (Adj.) Karachi has vide his Order‑in‑Original No.019 of 2003, dated 28‑2‑2003, held them liable to Sales tax for:

Thus, on aggregated Sales of Rs.115,388,654, Sales 'fax liability of, Rs.17,468,715 and Additional Tax liability at Rs.12,559,965 has been created which is the cause of grievance.

3. The Respondents have forwarded parawise comment's by Collector of Custom, Sales Tax and Central Excise, (Adjudication), Karachi‑III which deny "maladmistration". The levy has been justified contending that:

Complainant is not the "end user" of taxable goods like Seals/Bags which were supplied to the clients by adding the value of these items in the Bills.

Complainant violate section 26 of Sales Tax by not reflecting all sales in the Monthly Returns.

It is stressed that the huge amount of tax should not be allowed to go down the drain just for the salute of entertaining the flimsy grounds put forth by the Complainant in his appeal/complaint."

4. Mr. Aminuddin Ansari (Advocate) appearing for the Complainant explained that controversy concerns levy of Sales Tax on (i) alleged sale of Seals and age, (ii) Sale of scraps, and (iii) disposal of discarded assets. Of these according to learned counsel, the principal issue relates to the first time of Sales and Bags. The learned counsel admitted that complainant's own principal Auditors, for purpose of accounting, though it prudent to mention on the Invoices (issued to the customers) the break‑up, of items consumed in the process of providing the Service for Transportation of Cash from the point of dispatch to the point of delivery. This according to the AR, may have been either a mistake of procedure as respects recording the consumption of consumable stores, but it clearly was not the Complainant's intention (or practice) to make sales of consumable store to the client. Therefore, the tax functionaries, labouring with undue enthusiasm treated the consumption of Seals and Bags as transactions of sale. The counsel was at pains to explain that when delivery is taken from the dispatch point, a memo is prepared recording of denominations and value of currency, which are then placed in a Bag to be sealed in the presence of the Cashier who notes down on the Memo the engraved serial number of the Seal. At the delivery point the' receiving Cashier checks that the Seal of the same number is secure and properly locked. The seal is then broken to open the bag, and contents tallied with the details on the Memo. The "seal" thus became waste but the lock and the Bag is retained by the Complainant. The bags and locks are repeatedly, used till these become worn out. Thus for the Seals/Bags/Locks, the Complaint is the "end user" and hence (these were not liable to Sales Tax especially when undeniably the service provided by the Complainant is not a taxable activity. As respects the sale of Scrap, the stand by the learned counsel was that levy was uncalled for as sale of Scrap was not the principal source of business hence, not liable to Sales Tax. Similar position was adopted with respect to the sale of discarded Asses. For these assertions, the learned counsel relied on decisions reported as 1999 PTD 1892 and 2000 PTD 976.

5. Mr. Saeed Khan Jadoon (DC Sales Tax) submitted that there was no 'maladministration' and hence the complaint is not competent for admission. He explained that the complainant admits that their own Auditors (by mistake or otherwise) separately mentioned the price charged for Seals from the clients. The before, a genuine doubt arose about the Complainants being an "end‑use" of these items. The Auditor of the Sales Tax Department then convey d a Contravention Report to the Collector (Adjudication) who, in consequence, issued a show-cause notice to the Complainant extending opportunity of hearing whereafter he passed a speaking order hence the matter purely relates to assessment and interpretation of law as per sections 35 and 36 of the Sales Tax Act. The DR insisted that law provides that the order by the Collector be contested in appeal. Therefore, there being no "maladmtnastration", an appeal should have been preferred more so when section 9(2)(b) of Federal Tax Ombudsman Ordinance, stands in the way of entertaining the Complaint.

6. The objection by the Department as respects the bar on jurisdiction as per section 9(2) of the FTO Ordinance has been so frequently and so inappropriately taken that consistent and authoritative decisions over‑ruling it have rendered the objection obsolete more so, because "ether "maladministration" had (or had not) occurred can only be discovered on investigation.

7. Corning to the facts of the case it is found that the decisions relied upon by the Complainant's counsel do have relevance to the issue of sale of Scrap and of Fixed Assets. As per the verdict in re: Attock Cement Pakistan Ltd. 1999 PTD 1892 (a) "the accessories and spare parts have rot been included in section 8(2) of the Sales Tax Act" and (b) "The accessories and spare part far the maintenance and running of a plant cannot be termed as Stock‑in‑trade". In re: NOVARTIS Pakistan Ltd., = 2002 PTD 976 the learned Judges ruled:‑-

"----------Since the respondents are not engaged in ire business, trading or manufacturing of the commodities that they have sold i.e. fixed assets would not constitute `taxable activity' and hence would not qualify to be taxed under section 3 of the Act, 1990."

The above authoritative pronouncements clearly rule out the possibility of treating the transaction 'as `sale' of such Spares and of Fixed Assets and insistence of the Department to treat these as subject to Sales Tax in disregard of the verdict of superior Courts amounts to 'maladministration' cognizable by the FTO.

8. Turning now to the most vital issue concerning Plastic Seals and Bags, the demonstration of the procedure and the nature of the Seals leaves on room for doubt that these are `consumed' and not Sold. These do not change hands, but whereas the `Seals' are destroyed by the Complainant after having been examined by the Receipt Casher as `intact' the Bags are carried back for reuse when', emptied of the contents. The insistence that these represented sales, is a conduct `unreasonable, unjust' and `oppressive' falling iris, the realm of 'maladministration' as defined in clause (3) of section 2 of the FTO Ordinance. It is RECOMMENDED that:‑‑

C.B.R. re‑open Order‑in‑Original No. 019 of 2003, dated 28‑2‑2003, under section 45A of the Sales Tax Act, 1990 and cancel the same.

9. Compliance be reported within 30 days of the receipt of this Order.

C.M.A./1033/FTO Order accordingly.