Messrs LATIF FIBERS, KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2007 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1271 (2006)

Sales Tax Act (VII of 1990)---

----S.66---Establishment of Office of Federal Tax Ombudsman (XXXV of 2000), Ss.2(3) & 22---S.R.O. 578(I)/98, dated 12-6-1998---Refund---Deferment of refund without proper show-cause notice---Validity---No action was taken on the refund application---Admissible amount was adjusted against the demand of Multan Collectorate which had abated and the Deputy Superintendent sent an Objection Memo. for the remaining amount to the complainants which did not seem to have reached them--Collectorate at Karachi was very keen to deny the admissible claim and to help the Collectorate at Multan in recovery proceedings of a notice whose copy had not been submitted to the Federal Tax Ombudsman---Additional Collector (Adjudication), Multan, on the other hand had already vacated the recovery case against the complainants---Federal Tax Ombudsman recommended that Central Board of Revenue direct the Collector Sales Tax (Enforcement) to refund the sanctioned amount of Rs.184,456 to the complainants within fifteen days and decide the claim for refund of the remaining deferred amount of Rs.124,555 (whose objection memo. was sent by Deputy Superintendent on 21-9-2006 but had not reached them) after obtaining explanation and hearing their submissions within thirty days.

Imran Iqbal for the Complainant.

Amin Dangra, Manager.

Shafique Ahmad, Deputy Collector of Sales Tax.

FINDINGS/DECISION

The complaint has been filed on account of inattention, delay and neglect in not refunding sales tax amounting to Rs.309,001 for which an application was filed with the Sales Tax Department on 2-1-2004. It has been alleged that under section 2 of the Federal Tax Ombudsman Ordinance, 2000, maladministration includes a decision, process, recommendation, act of omission or commission contrary to law, rules or regulation, perverse, arbitrary or unreasonable, unjust, biased, oppressive and' discriminatory, neglect, delay, incompetence, inefficiency in the administration of discharge of duties and responsibilities.

2. The complainants stated that the claim filed on 2-1-2004 has not yet been paid despite their final notice dated 28-3-2006 and their representations and personal visits to the Respondent's office. No reason has been given for delaying the refund through a formal order. The respondent, it was stated, were under a legal obligation to issue the refund applied through computer generated process and delay in refund amounted to maladministration under the FTO Ordinance. Complainants stated they had approached this office to .seek the remedy for not refunding Rs.309,001 without reason or formal order and not responding to their letter dated 28-3-2006. It was requested that the respondent be directed to refund the amount along with compensation under section 22 of the Federal Tax Ombudsman Ordinance, 2000 and they may be allowed to add, modify and submit further grounds during the proceedings of the complainant.

3. The Deputy Collector of Sales Tax replied to the complaint that the claim was delayed as it was under scrutiny and now it has been finalized. The admissible claim of Rs.184,456 was sanctioned and adjusted against the recovery of Rs.5,792,179 of Multan Collectorate. The remaining amount of Rs.124,555 was found inadmissible which was deferred and legal proceedings would be initiated in accordance with the sales tax law. It was stated that since the amount of Rs.5,792,179 was recoverable from the Complainants and adjustment of admissible refund had been made, the Complainants have to make payment of Rs.5,607,723. He requested that the complaint be rejected as the admissible amount of refund has been sanctioned already and the remaining amount found inadmissible under S.R.O. 578(1)/98 was deferred.

4. During the hearing of the complaint, the learned Advocate representing the Complainants submitted a rejoinder to the reply of the Department and stated that as regards the recovery of Rs.5,792,179 of Multan Collectorate, the recovery notice had already been vacated through an Order-in-Original No.233 of 2005 dated 28-11-2005 passed by the Additional Collector (Adjudication). In view of this decision there was no justification for adjustment of amount of Rs.184,456 by the respondent. With regard to the remaining amount of Rs.124,555 it was stated that no memorandum or show-cause notice was served on the Complainants about the deferment of this amount. The learned Advocate stated that the deferment of Rs.124,555 without a proper show-cause notice was wrong and amounted to maladministration.

5. The Deputy Collector replied that copy of the order-in-original dated 31-12-2005 passed by the Additional Collector Multan was not endorsed to the Karachi Collectorate. In their eagerness to dispose of the matter before investigation by the Federal Tax Ombudsman, a sum of Rs.184,456 was sanctioned vide Sales Tax Refund Payment Order No.41551/2006 dated 7-10-2006 and endorsed to Collector, Multan. (Complainants have not received the order). He stated that in respect of the remaining amount an Objection Memo. dated 21-9-2006 was sent to the Complainants by Deputy Superintendent of Sales Tax but the Manager of the company denied having received any such Memo.

6. The learned Advocate stated that he would like to bring on record that after filing of the complaint in the office of the Federal Tax Ombudsman, Complainants received a letter dated 9-9-2006 from the Department to submit duplicate copy of the refund claim which was supplied on 12-9-2006. The process of unjustified and illegal adjustment of a part of the amount for the Multan Collectorate and deferment of the remaining amount was done, most probably, on the duplicate copy which revealed that the original claim was not traceable in the Collectorate.

7. The submissions of both the sides have been examined. It is clear from the facts of the case stated above that no action was taken by the Department on the refund application filed on January, 2004 and on receipt of complaint from this office a duplicate copy was obtained from the Complainants, the admissible amount was adjusted against the demand of Multan Collectorate which had already abated and the Deputy Superintendent of the Department sent an Objection Memo. for the remaining amount to the Complainants which does not seem to have reached them. It seems that the Karachi Collectorate was very keen to deny the admissible claim to the Complainants and to help the Multan Collectorate in recovery proceedings of a notice whose copy has not been submitted to this office. The Additional Collector (Adjudication), Multan, on the other hand had already vacated the recovery case against the Complainants vide order dated 28-12-2005.

8. It is significant to note that:---

(i) Copy of the adjudication order of the Additional Collector (Adjudication), Multan, has not been endorsed to the Collector of Sales Tax, Karachi.

(ii) Karachi Collectorate have gone out their way to sanction refund of Rs.184,456 on 7-10-2006 and send its cheque to the Multan Collectorate.

(iii) Collectorate of Multan received the cheque, but forgot that the recovery against the Complainants had been vacated more than 10 months ago.

(iv) Copy of the Refund Payment Order was not endorsed to the Complainants who remained unaware of the loss caused to them without their knowledge.

The above scenario presents a dark picture of maladministration mainly on the part of the Collector of Sales Tax, Karachi, but a large share of this maladministration is also apportionable to the collectorate of Multan as both the Collectorates have displayed lack of responsibility.

9. It is recommended that C.B.R.:---

(i) direct the Collector of Sales Tax (Enforcement) to refund the sanctioned amount of Rs.184,456 to the Complainants within fifteen days;

(ii) decide the claim for refund of the remaining deferred amount of Rs.124,555, (whose objection memo. was sent by Deputy Superintendent on 21-9-2006 but has not reached them) after obtaining explanation and hearing their submissions within thirty days; and

(iii) compliance by reported to this office within forty-five days.

C.M.A./205/FTOOrder accordingly.