AMIN SOAP AND OIL INDUSTRIES (PVT.) LTD., SWABI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2006 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1688 (2004)

Sales Tax Act (VII of 1990)---

----Ss. 7 & 13---S.R.O. 517(I)/89, dated 3-6-1989---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Determination of tax liability---Refund---Exemption---Compensation relating to exemption from customs duty and sales tax on raw materials was allowed and subsequently quota was enhanced but it was stated in the memo. that concession would not be available for purposes of sales tax--Constitutional petition was filed and High Court granted interim relief and allowed to tile bank guarantees---File was misplaced by the High Court office---Interim relief had expired and bank guarantees were enforced by the department---File was reconstructed and Constitutional petition was decided in favour of the complainant---Refund became due to the complainant and application for refund was moved with the Collector Customs--No intimation in this regard was given by the department in spite of the fact that complainant approached the concerned authorities from time to time---Department contended that uncertified and unauthenticated judgment of High Court was furnished by the complainant which did not bear the, seal of Court or signatures of Judge and claim was also not supported by mandatory documents---In absence of a verified copy of judgment and relevant supporting documents the refund claimed could not be processed---Validity---Certified copy of High Court judgment was furnished to the officer concerned which fact was duly acknowledged by the department---Department had encashed the bank guarantees and its plea that it had not been informed of the amount of refund was without any force---Documents mentioned in R.401 of the Treasury Rules including Form TR 41 were to be prepared by the authority issuing the refund and not by the recipient of the refund--No reason existed to further delay the refund of the tax recovered through encashment of bank guarantees which had to be furnished because of the totally untenable directions of the Central Board of Revenue that sales tax would be payable by the complainant in connection with the enhanced 25% quota of raw material allowed to it----Federal Tax Ombudsman recommended that the sales tax refund due to the complainant be properly worked out and issued to the complainant without further delay.

Safdar Amin Khawaja, Chief Executive for Complainant.

Amjad-ur-Rehman, Dy. Collector (Customs) for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR, FEDERAL TAX OMBUDSMAN.---The main points in the complaint are as under:--

(i) The complainant is a private limited company having a factory for manufacture of laundry soap, detergent powder etc. in Gadoon Amazai Industrial Estate and using imported raw material.

(ii) One of the main concessions offered to the units in Gadoon Amazai was the exemption from customs duty and sales tax on raw material as contained in S.R.O. 517(I)/89, dated 3-6-1989. The S.R.O. was rescinded on 9-5-1991 but subsequently 25% compensation on raw material was allowed in respect of customs duty and sales tax.

(iii) The complainant company accepted the offer of 25% compensation relating to exemption from customs duty and sales tax on raw material and an order, dated 12-4-1995 was passed by the C.B.R. in this context.

(iv) Subsequently vide Memo, dated 9-10-1996 the quota was enhanced but at the end of the Memo. it was stated that the concession would not be available for purposes of sales tax.

(v) All the other units in Gadoon Amazai had been allowed sales tax exemption as well as customs duty exemption in respect of the 25% compensation and, therefore, a writ petition was filed before the Peshawar High Court who granted interim relief and allowed the complainant to file bank guarantees pending a final decision as a result of the hearing fixed in April, 1997.????? .

(vi) Unfortunately the High Court file got misplaced and the case could not be fixed for hearing by April, 1997. The interim relief thus expired and the Assistant Collector, Customs and Sales Tax, Gadoon Amazai enforced all the bank guarantees.

(v) After a prolonged delay the complainant's file was reconstructed in the Peshawar High Court who decided the writ petition in the complainant's favour vide the judgment, dated 12-9-2002.

(viii) After the High Court decision a huge amount of refund has become due to the complainant and an application for refund was, therefore, moved with the Collector, Customs, Peshawar on 19-5-2003.

(ix) No intimation in this regard has, however, been received from the department so far despite the fact that the complainant has approached the concerned authorities from time to time.

(x) The complainant had paid a huge amount in the shape of encashed bank guarantees and has also paid a large mark-up to the bank.

It has been prayed that the bank guarantees enforced by the customs authorities may be directed to be refunded to the complainant in the light of the decision of the Peshawar High Court and compensation for delay be also allowed.

2. In the respondent's reply it is stated that only an uncertified and unauthenticated judgment of the High Court was furnished by the complainant which did not bear the seal of the Court or the signatures of any Honourable Judge. The date of issuance of the judgment was also statedly not indicated. It is also stated in the reply, that the complainant has no where mentioned the amount of refund and the claim is also not supported by mandatory documents such as bill of refund required under rule 401 of the Treasury Rules, import bills of entry and relevant treasury challans etc. It has been stated that in the absence of a verified copy of the Court judgment and the relevant supporting documents the refund claim could not be processed but another large claim of the same unit had been sanctioned as it was supported by an authenticated order of the Court and was supported by required documents. It has been prayed that the complaint may be dismissed and the unit be advised to file the refund claim supported by duly authenticated documents.

3. During the hearing it was stated by the Chief Executive of the complainant company that a certified copy of the Peshawar High Court judgment had now been furnished to the officer concerned which fact was duly acknowledged by the representative of the respondent. It was also stated on behalf of the complainant that it was the department which had encashed the bank guarantees and thus its plea that it had not been informed of the amount of refund was without any force. This contention of the complainant is quite valid and it was also agreed by the respondent's representative during the hearing that there would be no difficulty in quantifying the amount of refund due to the complainant. As regards the department's contention relating to rule 401 of the Treasury Rules it is evident that the documents mentioned in the said rule including form TR41 are to be prepared by the authority issuing the refund and not by the recipient of the refund. The respondent's contentions in this regard are thus quite baseless. In the light of the foregoing there is no longer any reason to further delay the refund of the tax recovered through encashment of bank guarantees which had. to be furnished because of the totally untenable directions of the C.B.R. that sales tax would be payable by the complainant in connection with the enhanced 25% quota of raw material allowed to it.???????

4. In the light of the above, it is recommended that

(i) The sales tax refund due to the complainant be properly worked out and issued to the complainant without further delay.

(ii) Compliance be reported within 30 days.

C.M.A./270/FTO???????????????????????????????????????????????????????????????????????????????? Order accordingly.