Messrs NOON SUGAR MILLS LTD., LAHORE VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2004 P T D 2246
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
Messrs NOON SUGAR MILLS LTD., LAHORE
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No. 1082 of 2003, decided on /01/.
th
April, 2004. Sales Tax Act (VII of 1990)‑‑‑
‑‑‑‑Ss. 3(1A), 66 & 7‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Scope of tax‑‑ Further tax‑‑‑One percent further tax was declared ultra vires by the Supreme Court of Pakistan‑‑‑Department neither allowed the complainant to adjust such tax paid against the out put tax nor such amount was refunded on the ground that complainant did not furnish documentary evidence to prove that the incidence of tax was not passed on to the consumer‑‑‑Validity‑‑‑Judgment of Supreme Court was binding on the Department and to criticize the said judgment by the Department was uncalled for, improper and indiscreet‑‑‑Judgment of Supreme Court on point of law was binding on every one and to express such criticism may' amount to disobeying and ridiculing the ,judgment which may entails penalty Department had fully disobeyed the judgment of the' Supreme Court and the Tribunal and had intentionally‑ delayed and avoided the payment of refund‑‑‑Department's action was contrary to law, lacked bona fides And was arbitrary in nature ‑‑‑Maladministration having been established Federal Tax Ombudsman recommended that the respondents should refund Rs.4,923,113 to the complainant.
Javed Hassan for the Complainant.
Moin‑ud‑Din A. Wani, A.C. Sales Tax for Respondent.
FINDINGS/DECISION
The complainant has alleged maladministration on the part of the respondents for deliberately withholding and non‑payment of tax refund allowed and determined by the competent authority.
2. The brief facts of the case as stated by the Custom Excise and Sales Tax Tribunal are as follows:‑‑
"That the appellants total payable output sales tax for the tax period of February 2002 was Rs.95,16,080. The appellants deposited an amount of Rs.45,91,967 on their monthly: sales tax return filed during March, 2002 and adjusted an amount of Rs.49,23,113. The basis of adjustment was that the appellants claimed to have paid one percent further tax during the year, 1998‑99 at rate of one percent and subsequently Hon'ble A Supreme Court of Pakistan declared the said levy of one percent further tax vide Finance Act, 1998 as ultra vires. A show‑cause notice was issued to the appellants on 4‑4‑2002. The appellants contested the charges framed in the show‑cause notice but also deposited the short paid amount of Rs.49,23,114 during the adjudication proceedings and hence the Adjudicating Officer ordered them only to pay additional tax and penalty."
3. The complainant filed an appeal against order‑in‑original which was disposed of by the judgment, dated 6‑8‑2002 as follows:‑‑
"Admittedly, one percent further tax imposed under sec tion 3(1A) vide Finance Act, 1998 was declared ultra vires by the Hon'ble Supreme Court of Pakistan. The amount of one percent further tax so paid by the appellants was refundable to them. Action of the appellants by way of having adjusted the amount paid by one percent further tax from their payable output tax for the tax period of February, 2002 was not in accordance with the provision, of section 7 of Sales Tax Act, 1990. The Adjudicating Officer has himself admitted in the impugned order that the appellants should have claimed refund under section 66 of Sales Tax Act, 1990 instead of adjusting the amount as input tax. The appellants have already paid the short paid amount Therefore, the appellants are directed to submit their refund claim under section 66 of the. Sales Tax Act, 1990 alongwith supportive documents to the Collector Sales Tax, Faisalabad wl:c shall sanction their refund claim within 30 days from the date of submission of the refund application alongwith complete supportive documents. In view of the circumstances of the case the order for payment of additional tax and imposition of penalty is set aside.
The appeal stands disposed of as above."
4. On 28th August, 2002 the complainant filed an application under section 66 of the Sales Tax Act before respondent No.2 for refund of Rs.49,23,113. On 3rd September, 2002, the respondent No.3, Senior Auditor Sales Tax (Refund) asked for certain documents which were supplied on 10‑9‑2002. As no reply was received nor any hearing was fixed the complainant wrote a letter on 23rd October, 2002 claiming the said refund. It has been pleaded that the respondents by letter, dated 8‑3‑2003 with a view to delay the refund informed that they have filed appeal against the judgment of the Tribunal in the High Court. As the matter is sub judice the claim can be considered after the appeal is decided. The complainant by letter, dated 18‑3‑2003 informed the respondents that the Supreme Court in their case by judgment, dated 19‑5‑2000 has upheld that imposition of 1% further tax has been declared ultra vires, and the Review Petition filed by C.B.R. was dismissed on 22‑10‑2001 copy of which had been already provided to the Department. It was further stated that the Tribunal had set aside imposition of penalty against which C.B.R. has filed appeal. The question of 1 % tax stands decided by the Supreme Court and the chapter stands closed. The respondents by their letter, dated 29‑4‑2003 asked to produce documentary evidence that the incidence of 1 % further tax collected by the complainant against supplies made during the year, 1988‑89 has not been passed on to the consumers. The complainant by letter, dated 3‑6‑2003 refuted the notice and informed that the Customs Sales Tax and Excise Appellate Tribunal in Tandilanwala Sugar Mills Ltd. 2002 CLC 69 has held that amount of further tax is refundable as section 3B of the Central Excise Act is not applicable to such claim. A copy of this judgment was furnished to the respondents.
5. The Dy. Collector (Refund) has filed reply objecting to jurisdiction pleading bar under section 9(2)(a) of the FTO Ordinance, 2000. On merits it has been pleaded that "the superior Courts have basically erred in applying the case regarding beverage to sugar cases". It has been pleaded that section 3B is applicable to the present case. The complainant did not furnish documentary evidence to prove that the incidence of tax was not passed on to consumers.
6. The learned counsel for the complainant and learned representative for the department have reiterated what has been stated above. As regards the question of sub judice it is clear that the Tribunal had set aside imposition of penalty against which appeal has been filed. So far the imposition of 1 % additional tax is concerned the Supreme Court in the matter filed by the complainant 'has upheld the imposition, of additional tax void and ultra vires. This judgment is binding on the department which was a party to it. To criticize the judgment of the Supreme Court in the manner the Dy. Collector has stated is uncalled for, improper and indiscreet. The respondent had filed review application which was dismissed by the Supreme Court. The judgment of the Supreme Court on point of law is binding on every one and to express such criticism may amount to disobeying and ridiculing the judgment which may entails penalty.
7. The next question is about complying with the requirement of section 3B by the complainant. In view of the judgment of the Tribunal in Tandlianwala Sugar Mill which is binding on the respondents, section 3B is not applicable to this case. The respondents have not been able to meet this contention. It is thus established that the respondents have disobeyed the judgment of the Supreme Court and the Tribunal and have intentionally delayed and avoided the payment of refund. The respondents action is contrary to law, Lacks bona fide and arbitrary. Maladministration is establishes.
8. It is therefore, recommended that:‑‑
(i) The respondents refund Rs.4,923,113 to the complainant.
(ii) Compliance be reported within 30 days.
C.M.A./141/FTO Order accordingly.