Messrs J.K. BROTHERS (PVT.) LTD., FAISALABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2007 P T D 2014
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
Messrs J.K. BROTHERS (PVT.) LTD., FAISALABAD
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No. 1610 of 2003, decided on 12/08/2004.
(a) Sales Tax Act (VII of 1990)---
----Ss. 10, 66 & 34A---S.R.O. 308(I)/2000 dated 6-6-2000---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Excess amount to be carried forward or refunded---Refund to be claimed within one year---Exemption from penalty and additional tax---Sales tax was paid on sale of old vehicles on audit objection by availing the amnesty under S.R.O. 308(I)/2000 dated 6-6-2000--Subsequently, refund of such amount was claimed on the basis of superior court's decision that sales tax was not chargeable on old vehicles---Department contended that tax had been deposited voluntarily to avail the benefit of the amnesty scheme---Subsequent decisions of High Court and Appellate Tribunal in some other cases did not automatically entitle the complainant to refund of sales tax deposited voluntarily and that such refund could only be based on an order-in-original or order-in -appeal---Validity---In the light of judgment of High Court no sales tax was payable---Amount deposited by complainant was neither sales tax nor due from it---Applying the principles of judgment of Supreme Court the refund became due and payable, however, it would lie subject to the disposal of show-cause notice---Maladministration was established in not following the binding judgment of High Court and unnecessarily delaying the disposal of proceedings pursuant to show cause notice---Federal Tax Ombudsman recommended that the proceedings initiated through the Deputy Collector (Adjudication's) show-cause notice be finalized expeditiously and the claim for repayment/refund of amount deposited as sales tax be finalized.
(b) Precedent---
----Superior court's judgments---Applicability---For applying the law laid down by a superior court it is not necessary that person relying upon should be a party to that case.
(c) Precedent----
---Superior Court's judgments---Applicability---Where neither the judgment has been suspended by way of stay order nor the said judgment has been set aside by the Supreme Court, said judgment holds the field and it is the duty of every authority, department or person to follow it.
Mirza Muhammad Wasim, Adviser.
Saeed N. Cheema for the Complainant.
Muhammad Tahir, Deputy Collector, Sales Tax, Faisalabad for Respondent.
FINDINGS/DECISION
JUSTICE (RETD.) SALEEM AKFITAR (FEDERAL TAX OMBUDSMAN).---The complaint contains the following main points---
(i) The complainant company is a manufacturer and exporter of textile fabrics and yarn.
(ii) During the course of sales lax audit for July, 1996 to June, 199, the auditors pointed out that the complainant had sold out some old vehicles which were allegedly liable to sales tax.
(iii) The complainant clarified before the auditors that sales tax was not payable on old vehicles but the auditors pressurized the complainant to deposit the amount of sales tax. The complainant had thus no choice but to deposit Rs.321,038 on 30-6-2000 by availing the amnesty under S.R.O. 308(I)/2000.
(iv) Subsequently the matter of chargeability of sales tax on old vehicles was decided by the Sindh High Court anal the Sales Tax Appellate Tribunal, Lahore and it was held that sales tax was not chargeable on old vehicles.
(v) The complainant consequently requested the Department to refund the sales tax erroneously got deposited by the complainant.
(vi) The Deputy Collector (Refund-I), Sales Tax, Faisalabad vide his letter dared 7-7-2003 asked the complainant to provide documents/information regarding the said claim which was accordingly supplied by the, complainant through a subsequent letter.
(vii) Despite all efforts by the complainant and the furnishing of requisite documents the respondent has tailed to refund the sales tax which had been charged and deposited under a wrong assumption.
(viii) The Sindh High Court and the Appellate Tribunal have already held that it is not just and fair to charge sales tax on sale of vehicles which are not admissible for input deduction.
(ix) The complainant, company is being deprived of his lawful claim due to the maladministration of the respondent:
It has been prayed that the matter may be investigated and the respondent directed to refund the amount of sides tax to the complainant.
2. The respondent's reply contains the following main points---
(i) The audit of the complainant company was conducted by Messrs Saeed Kamran Patel & Co., Chartered Accountants.
(ii) The audit showed various amounts recoverable from the complainant including sales tax of Rs.212,684 on sale of old vehicles.
(iii) The complainant deposited Rs.321,038 (principal amount and additional tax) on his own by availing of amnesty scheme under S.R.O.308(I)/2000.
(iv) There was no pressure or coercion on the part of the Sales Tax Department.
(v) Subsequently the complainant approached the Collector for refund of Rs.321,038 in the light of the decisions of the High Court and Appellate Tribunal (in some other cases).
(vi) The complainant was requested vide letter dated 7-7-2003 to provide certain documents in support of the claim but no copy of order-in-original/order-in-appeal was provided.
(vii) Vide a letter dated 19-72003 the complainant was again asked to furnish the documents but there has been no response.
(viii) The complainant was not a party in the cases decided by the Sindh High Court and the Sales Tax Appellate. Tribunal and the refund could not be allowed without the 1untishitig of an order- in-original/order-in-appeal in the complainant's favour.
(ix) The matter is in Part still sub judice before the competent adjudicating authority and the refund eau only be considered after issuance of order-in-original as the claim Palls neither under the purview of section 10 or 66 of the Sales Tax Act.
(x) As the matter is still subjudice before the adjudicating authority it is outside the jurisdiction of the Federal Tax Ombudsman;
It has been prayed that in the light of the above, the complaint be rejected.
3. During the complaint proceedings the complainant failed to appear on the first two dates of hearing though adjournment was requested on telephone on the second date. The representative, of the respondent, however, attended on both dates and reiterated the contentions in the respondent's reply. It was pointed .out by the respondent's representative that there was no coercion whatsoever for the recovery of the sales tax and that the tax had been deposited voluntarily to avail the benefit of the' amnesty scheme. It was also stated that the subsequent decisions of the High Court and Tribunal in some other cases did riot automatically entitle the complainant to the refund of sales tax deposited voluntarily and that such a refund could only be based on an order-in-original or an order-in-appeal. It was stated that a show-cause notice was issued by the Deputy Collector (Adjudication) in the matter on 11-12,-2000 while the Sindh High Court judgment was dated 25-9-2001. It was further stated that an appeal was also understood to have been filed before the Supreme Court against the judgment of the Sindh Nigh Court. It was thus contended that the complaint merited rejection.
4. On the side of the complaint the AR took .the plea that the refund claim fell within the purview of section 66 of the Sales Tax Act. This plea does not, however, appear to be tenable because there was no proof that claim had been riled within the period specified in the said section. Another aspect of the matter, however, is that the complainant's alleged failure to pay sales tax on used vehicles was also pointed out in a show-cause notice dated 11-12-2000 issued by the Deputy Collector (Adjudication), Faisalabad. The representative of the respondent had been unable to show what the final outcome of the adjudication proceedings was. As stated by the Department itself, the issue could be considered as finally settled when an order-in-original/appeal order regarding the matter was made available. Since the matter is statedly still pending with the concerned adjudicating authority, it has to be decided by him without further delay.
5. It may be clarified that the claim for refund is based on the law laid down by the Sindh High Court in Sales Tax Appeal No.52 of 2001 (Collector Central- Excise and Sales Tax Karachi (West) v. Novartis Pakistan Ltd.) in which Department's appeal against the judgment of the Tribunal was dismissed holding that "there can be no Sales Tax on the disposal of fixed assets". This ruling is binding on all authorities, departments and courts. For applying the law laid down by a superior court it is not necessary that person relying upon should be a party to that case. The Department has filed appeal in the Honourable Supreme Court but no stay order has been produced to show that the impugned judgment has been suspended. In these circumstances so long the said judgment has not been set aside by the Supreme Court it rules the field and it is the duty of every authority, Department or person to follow it.
6. As regards filing of claim for refund it may be pointed out that din the light of judgment of the High Court no sales tax was payable, hence the amount deposited by the complainant was neither sales tax nor due from it. Applying the principle of judgment of the Supreme Court in Pfizer's case the refund became due and payable. However, it will be subject to the disposal of show-cause notice dated 11-12-2000. The maladministration is established not following the binding judgment of the High Court and unnecessarily delaying the disposal of proceedings F pursuant to show-cause notice dated 11-12-2000.
7. In the light of the above, it is recommended that---
(i) The proceedings ii7itiatcd through the Deputy Collector (Adjudications)'s show-cause notice dated 11-12-2000 be finalized expeditiously.
(ii) The claim for repayment/refund of amount deposited as sales tax be finalized.
(iii) Compliance report be furnished within 45 days.
C.M.A./310/FTOOrder accordingly.