Messrs ALPHA VINYL (PVT.) LTD., SAWABI VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2004 P T D 1861
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
Messrs ALPHA VINYL (PVT.) LTD., SAWABI
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.203 of 2003, decided on /01/.
nd
July, 2003. Sales Tax Act (VII of 1990)‑‑‑--
‑‑‑‑S. 45A‑‑‑S.R.O. 392(1)/2001, dated 18‑6‑2001‑‑‑S.R.O. 1257(1)/97, dated 18‑12‑1997‑‑‑S.R.O. 1247(1)/97, dated 18‑12‑1997‑‑‑S.R.O. 580(1)/91, dated 27‑6‑1991‑‑‑General Order No.2 of 2001‑‑‑Simplified Sales Tax Rules, 1999‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Powers of the Central Board of Revenue and Collector to call for records‑‑‑Fixed Sales Tax Scheme‑‑‑Exemption‑‑‑Permission for payment of fixed tax was granted by the Assistant Collector‑‑‑Additional Collector questioned the legality of Assistant Collector's such permission and demanded sales tax at the standard rate>‑‑Appeal‑‑‑During pendency of appeal before Appellate Tribunal, Complainant/taxpayer .applied for the benefit of. S.R.O. 392(1)/2001, dated 18‑6‑2001 which was not decided by the Collector matter being sub judice before the Appellate Tribunal‑‑ Complainant/assessee contended that he was fully qualified for receiving benefit of S.R.O. 392(1)/2001, dated 18‑6‑2001, the Collector may be directed to give his decision irrespective of pendency of Complainant's appeals before Appellate Tribunal because said S.R.O. provided a fresh cause and the matter could be decided by the Collector ‑‑‑Validity‑‑ S.R.O. 392(1)/2001, dated 18‑6‑2001 exempts the whole amount of sales tax in excess of that liable to ‑be paid at the rates specified under my applicable fixed Sales Tax Rules up to.30th June, 1998, the Simplified Sales Tax Rules, 1999 or under any written instruction from the Central Board of Revenue on supplies made by the manufacturer up to 30th June, 2000 subject to fulfilment of other conditions laid down therein including the condition that such manufacturer was working in accordance with any of the aforesaid rules or instructions of the Central Board of Revenue and was regularly paying tax under the schemes or instructions up to 30th June, 2000‑‑‑Complainant was entitled to the benefit of S.R.O. 392(1)/2001, dated 18‑6‑2001 because it had been paying fixed tax under S.R.O. 1257(1)/97, dated 18‑12‑1997 read with S.R.O. 1247(1)/97, dated 18‑12‑1997 as allowed by the Assistant Collector‑‑‑Assistant Collector's order extending the facilities had, however, beer‑ reopened and recalled by the Collector as being unlawful‑‑Complainant had filed an appeal against the Collector's order recalling Assistant Collector's order before the Appellate Tribunal‑‑ Since Complainant's claim to the benefit of S.R.O. 392(1)/2001, dated 18‑6‑2001 was dependent on decision whether or not it was entitled to pay fixed tax under S.R.O. 1257(1)/97, dated 18‑12‑1997, which was matter, pending decision before the Appellate Tribunal, it was appropriate that the issue was decided by the Appellate Tribunal before which the appeal filed in the case was pending‑‑‑Complaint was closed by the Federal Tax Ombudsman.
Isaac Ali Qazi for the Complainant.
Ziaullah Shams, A.C. and Bakhat Dowran, Senior Auditor/Law Officer for Respondent.
DECISION/FINDINGS
This complaint alleging maladministration is directed against Collector Sales Tax, Peshawar for not deciding complainant's applica tion, dated 10‑8‑2001 filed under S.R.O., 392(1)/2001, dated 18‑6‑2001 and General Order No.2 of 2001 despite the fact that the committee appointed by the Collector to determine the complainant's entitlement under the aforesaid, S.R.O has given its recommendation in its favour. The facts of the complaint as briefly explained by the complainant are that it, being a manufacturer of., PVC Pipes, enjoyed exemption from sales tax under S.R.O. 580(1)/1991, dated 27‑6‑1991 which had granted five years, sales tax exemption to units located in N.‑W.F.P./Balochistan. The aforesaid exemption expired on .13‑12‑1997. A little later, S.R.O. 1257(1)/97, dated 18‑12‑1997 became operative. According to this S.R.O. the fixed tax rates were applicable for the year 1997‑98 to such registered persons to whom the fixed amount of sales tax for the financial year 1996‑97 was applicable.
The complainant applied for fixed tax scheme under the aforesaid S.R.O. The Assistant Collector allowed it the permission to avail the scheme vide his letter No.255, dated 19‑2‑1958. Later, the Additional Collector Sales Tax Peshawar, questioning the legality of Assistant Collector's permission, dated 19‑2‑1998, issued a show‑cause notice, dated 10‑6‑1999 demanding sales tax at the standard rate of 12.5% for the period January to Jane, 1998. The complainant had continued paying:, fixed tax before the respondents objected to it. Another show‑cause notice, dated 25‑10‑1999 was issued demanding tax under normal regime for the period July, 1998 to June, 1999. Then again, the Collector issued another show‑cause notice, dated I3‑1‑2000 to the complainant under section 45A of the Sales Tax Act 1990 and passed Order‑in -Original No.1 of 2000 directing the complainant to, pay tax under the normal scheme. The Additional Collector also passed Order‑In‑Original No. 27 of 2000 with reference to the show‑cause notice issued by him. The complainant filed appeals against these adjudication orders. The appeals arc pending disposal before the Appellate Tribunal. In the budget 2600‑2001, S.R.O. 392(I)/2001, dated 18‑6‑2001 was issued exempting sales tax in excess of that liable to be paid at the rates specified under any applicable fixed sales tax scheme up to the 30th June, 1998 and simplified Sales Tax Rules, 1999 or‑under any written instructions issued by the C.B.R. on supplies made by a manufacturer up to 30 June, 2000 subject to fulfillment of certain conditions. The complainant submitted an application; complete with documents, to the Collector for exemption under the aforesaid S.R.O. as he fulfilled the requisite conditions of the S.R.O. His case for exemption was also endorsed by the PVC Manufacturers Association. The Collector, instead of exercising his own powers vested in him under the S.R.O, referred the matter to the C.B.R. vide his‑letter, dated 30‑8‑2001 for advice. The C.B.R. vide its letter, dated 2‑10‑2001 advised the Collector to decide the case on its merit. In spite of C.B.R's direction the Collector did not take any decision on his application. As a result; the complainant had to file a writ petition in the High Court Peshawar. Subsequently, the Collector showed his willingness to deal with the case under S.R.O. 392(I)/2001, dated 18‑6‑2001. The writ petition was, therefore, not pursued. The Collector constituted a committee to examine the case. The committee recommended the case in its favour as it found that the complainant qualified for exemption. The Collector, however, is not finalizing the matter, despite reminders. On the one hand, the Collector is guilty of inaction at his own end, he seeks, on the other, adjournments from the Appellate Tribunal where the appeals are pending on grounds of pendency of complainant's application with him under S.R.O. 392(I)/2001, dated 18‑6‑2001. Since the complainant is fully qualified for receiving benefit of S.R.O. 392(I)/2001, dated 18‑6‑2001 the Collector may be directed to give his decision irrespective of pendency of complainant's appeals before Appellate Tribunal because the S.R.O. provides a fresh cause and the matter can be decided by they Collector. The denial of relief is an act of maladministration.
2. In their written reply, the department has stated that the fixed amount of sales tax notified under S.R.O. 1257(I)/97, dated 18‑12‑1997 was applicable for the year 1997‑98 to such registered persons to whom the system of fixed amount of sales tax was applicable in the year 1996‑97. The complainant applied for fixed tax regime, which was wrongly permitted by the then Assistant Collector vide his letter, dated 19‑2‑1998. The complainant had, in fact, started paying fixed tax w.e.f. January, 1998 and not prior to that. It was, therefore, not entitled to the benefit of S.R.O. 1257(I)/97, dated 18‑12‑1997. AC's illegal order giving the permission was reopened by the Collector under section 45A of the Sales Tax Act, 1990 and was recalled vide Collector's Order‑in- Original No.1 of 2000, dated 27‑3‑2000 directing the complainant to pay sales tax under the normal regime because the complainant was not entitled to the benefit of S.R.O. 1257(I)/97, dated 18‑12‑1997. A show cause notice, dated 10‑6‑1999 was also issued by the Additional Collector Sales Tax for recovery of amounts involved. Against the aforesaid orders of Collector and Additional Collector the complainant has filed appeals before the Appellate Tribunal (Customs Excise and Sales Tax) and, therefore, the issues involved are subjudice before the Tribunal of competent jurisdiction. During the pendency of the appeals before the Appellate Tribunal the complainant had approached the Collectorate for facility under S.R.O. 392(I)/2001, dated 18‑6‑2001 read with sales tax General Order No.2 of 2001. A committee was set up by the then Collector, which recommended the exemption to the complainant under S.R.O. 392(I)/2001, read with General Order No. 2 of 2001. Subsequently, on 11‑9‑2002 the Collector nominated Additional Collector, Peshawar to re‑examine the complainant's case for benefit of S.R.O. as the subject notification did not envisage appointment of a committee to decide the issue. Para. 7 of respondents' reply states that the Additional Collector examined the matter and noted that since the exemption of sales tax was granted in excess of that liable to be paid at the rates specified under any Applicable fixed sales tax rules up to the 30‑6‑1998‑‑‑and whereas fixed sales tax under S.R.O. 1257(I)/97, dated 18‑12‑1997 was not applicable to the complainant as had been decided by the Collector vide Order‑in‑Original No. 1 of 2000 and in view of the fact the matter of the applicability of S.R.O. 1257(1)/97, dated 18‑12‑1997 was also sub judice before the Tribunal, any action under S.R.O. 392(I)/2001, dated 18‑6‑2001 would be anticipatory and might create legal infirmity. The Tribunal has been holding regular hearings. The application before the Collector and the appeals before the Tribunal are being pursued simultaneously. The Tribunal observed during the hearing proceedings that relief may either be sought from the Collectorate or from the Tribunal. In case the complainant intends to seek relief from the Collectorate, it should first withdraw the appeals from the Tribunal. It is expedient to keep the case pending till decision of the Tribunal with regard to the applicability of S.R.O. 1257(I)/97, dated 18‑12‑1997. Since the Collector has, already decided the question of applicability of S.R.O. 1257(I)/97, dated 18‑12‑1997 to the complainant vide his order, dated 27‑3‑2002 against which the complainant has filed appeal before the learned Tribunal, the matter is subjudice and the complaint as such does not fall within the jurisdiction of the Honourable FTO in terms of section 9(2)(a) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000.
3. During the hearing the counsel for the complainant stated that the Collector is using evasive tactics by not finalizing action on his application for exemption. The complainant was allowed the benefit of S.R.O. 1257(I)/97, dated 18‑12‑1997 by the A.C. and, accordingly; it kept on availing the fixed tax scheme till 30‑6‑1999. Another S.R.O. was issued i.e. 458(I)/99, dated 6‑4‑1999 launching simplified tax Rules. However, the Collector passed Order‑in‑Original No.1 of 2000, dated 27‑3‑2003 revoking the Assistant Collector authorization. The Additional Collector also passed an Order‑In‑Original No. 27 of 2000, dated 10‑4‑2000 deciding the case involving two show‑cause notices issued by him. The complainant has filed appeals ‑against these orders before the Appellate Tribunal, which are still pending disposal. Attention is also invited to General Order No.2 of 2001 for background of the situation and to know‑how the cases of the taxpayer paying tax under fixed scheme were to be dealt with under S.R.O. 392(I)/2001 read with S.R.O. 393(I)/2001, dated 18‑6‑2001. The earlier condition of a turnover of Rs. One million imposed vide notification S.R.O. 458 of 1999 had also been waived and, therefore, the complainant was entitled to exemption. According to Para. 6 (guideline (iv)) of General Order No.2 of 2001, dated 30‑6‑2001, the Collector was the competent authority to finalise the action on the application or he could delegate his powers to the Additional Collector. General Order No.2 of 2001 also requires the department to maintain a register containing relevant information. Column 15 of the register requires the Collector to post information regarding disposal of the applications and also to update the records. The department has failed to perform these duties. The complainant continued writing to the Collector for ,exemption but with no result. It then filed a Writ Petition No.25 of 2002 in the Peshawar High Court, which is no more pending because the same has been dismissed, for non‑prosecution. Instead, it approached the Collector for dispensation who constituted a committee to deal with his application. The committee made recommendation in his favour. Yet the decision in the case has not been finalized. The complainant had been pleading the case before the Appellate Tribunal requesting them to pend decision as it was awaiting Collector's decision on his application. The Appellate Tribunal vide note sheet order, dated 28‑2‑2003 asked the representative of the Collectorate to produce a copy of Collector's order on the complainant's application for decision under S.R.O. 392(I)/2001. The merit of the appeals before the Appellate Tribunal is different from the application pending before the Collectorate. Asked as to whether the period and liabilities involved in the appeals pending before the Appellate Tribunal and in the application pending disposal before the Collectorate are the same, the Advocate of the complainant confirmed that the period involved was the same, i.e. January, 1998 to June, 1998 and July, 1998 to June, 1999 and that the liabilities involved were also the same. He also produced Assistant Collector Peshawar's letter, dated 2‑4‑2003 addressed to the Appellate Tribunal (on record) intimating to the Tribunal that the matter was discussed with Member C.B.R. who was of the view "that the appellants may withdraw their appeals if they were desirous of seeking relief from the Collector Sales Tax. Since the appellants have not withdrawn their appeal, the Appellate Tribunal may decide the case on merit". The complainant's view is that the case before the Collector should be decided independently.
4. The representative of the respondents stated that S.R.O. 1257(I)/97 was applicable to those to whom fixed tax scheme applied during the year 1996‑97 up to 31st December, 1997. The complainant was availing exemption under S.R.O. 580(I)/91, and, as such it did not pay any tax, leave alone paying any fixed tax. Therefore, the complainant did not qualify for exemption under S.R.O. 392(I)/2001, dated 18‑6‑2001. The Notification S.R.O. 392(I)/2001, does not provide for appointment of any committee to examine the complainant's case. The committee's recommendations are not in conformity with S.R.O. 392(I)/2001, which was applicable only to those units that fell within the ambit of S.R.O. 1257(I)/97. The Assistant Collector's order allowing the benefit of S.R.O. 1257(I)/97, to the complainant was reopened as being illegal and was set aside by the Collector because the complainant did not qualify for fixed duty scheme under the S.R.O. It had not paid any tax under any fixed tax scheme except under AC's illegal permission because of which it paid fixed tax during the period January, 1998 to June, 1999 but then the Collector quashed the AC's orders as being illegal. The cases pending before the Tribunal and the application pending before the Collector involve the same issue. The complainant has raised both legal and factual issues in the appeals filed by him before the Appellate Tribunal. The Collectorate is not in a position to decide the case involving same issues, same period and same liabilities, which is already the subject‑matter of appeals pending disposal in the Appellate Tribunal. That is why a‑letter was addressed to the Appellate Tribunal that the department would be willing to deal with the application of the complainant pending before the Collector if the complainant withdrew the appeals from the Appellate Tribunal, failing which the Tribunal could decide the appeals on merit.
5. The complainant, however, stated that sales tax, being an indirect tax, is passed on to the consumers. The collectorate had allowed it the facility of paying fixed tax, which tax was collected and deposited. It has lost the right to collect sales tax a 15%. Both show cause notices were issued after the expiry of fixed tax schemes. In S.R.O. 1257(I)/97, the word "applicable" occurring in para. 2 thereof cannot be read as "availed". The complainant had been working according to the fixed tax schemes within the meaning of clause (I) of S.R.O. 392(1)/2001 and fulfilled all conditions thereof qualifying for benefit.
6. The arguments of the parties to the dispute and the record of the case have been examined. S.R.O. 392(I)/01, dated 18‑6‑2001 exempts the whole amount of sales tax in excess of that liable to be paid at the rates specified under any applicable fixed sales tax rules up to 30th June, 1998, the Simplified Sales Tax Rules, 1999 or under any written instruction from the C.B.R. on supplies made by the manufacturer up to 30th June, 2000 subject to fulfillment of other conditions laid down therein including the condition that such manufacturer was working in accordance with any of the aforesaid rules or instructions of the C.B..R and was regularly paying tax under such schemes or instructions up to 30th ‑June, 2000. The complainant's case is that it is entitled to the benefit of the aforesaid notification because it had been paying fixed tax under S.R.O. 1257(I)/97, dated 18‑12‑1997 read with S.R.O. B 1247(I)/97, dated ‑18‑12‑1997 as allowed by the A.C. vide his order C. No. 255, dated‑ 19‑2‑1998. The A.C.'s order extending the facilities has, however, been already reopened and recalled by the Collector as being unlawful vide his Order‑in‑Original No.1 of 2000, dated 27‑3‑2000. The complainant has filed an appeal against the Collector's order recalling A.C.'s order before the Appellate Tribunal. Since the complainant's claim to the benefit of S.R.O. 392(I)/2001, dated 18‑6 2001 is dependent on decision whether or not it was entitled to pay fixed tax under S.R.O. 1257(I)/97, dated 18‑12‑1997, which is a matter pending decision before the Appellate Tribunal, it is appropriate that the issue is decided by the Appellate Tribunal before which the appeal filed in the case is pending. The case is closed‑
C.M.A./898/FTOOrder accordingly.???