ADAM SUGAR MILLS LIMITED, BAHAWALNAGAR VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2007 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2615 (2007)

(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

---S. 9(2) (a)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Argument that Federal Tax Ombudsman .could not investigate a complaint, which was sub judice, was not sustainable because the complaint was filed before Federal Tax Ombudsman on 15-1-2007 whereas the appeal before Collector (Appeals) was filed on 25-1-2007 later than filing the complaint---On the day the complaint was filed the subject cases were not sub judice before the appellate authority.

(b) Sales Tax Act (VII of 1990)---

----Ss. 38, 40 & 40A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Authorized officers to have access to premises, stocks, accounts and records---Show cause notice----Complainant submitted that since he had filed petition for leave to appeal before the Supreme Court against Court order, the proceedings be held in abeyance but if the Department still wanted to proceed with the matter, copies of entire records/materials on the basis of which show-cause notice was issued be provided to prepare and file comprehensive replies---Request was verbally accepted to adjourn the cases and to provide materials that formed the basis of show-cause notices but neither the cases were adjourned providing another opportunity of hearing nor did relevant materials were supplied to prepare the defence and arbitrarily orders were passed confirming the allegations framed in show-cause notices---Validity---Operative portion of Order-in-Original gave the impression that Adjudicating Officer decided the cases hurriedly without properly dealing with each of the charges framed in the show-cause notices and without hearing the complainant on the charges 'so framed---Department's claim that cases were decided on the basis of available records on merit was not sustainable because non-speaking and sketchy Order-in-Original was passed at the. back of the complainant without providing the complainant the opportunity of rebutting the charges framed in the show-cause notices---Allegations levelled in the show-cause notices were not sustainable because the first hearing fixed in the case was adjourned and the case was kept pending till decision by the High Court and at the second hearing complainant pleaded for supply for material farming the basis of show-cause notices, which plea was not accepted and the cases were decided rather hurriedly---Maladministration was observed on the part of Department for passing non-speaking Order- in-Original without enlisting the viewpoint of the complainant the specific charges framed in the show-cause notices---Federal Tax Ombudsman recommended that Revenue Division should direct the competent authority to set aside Orders-in-Original under S.45A of the Sales Tax Act, 1990 and decide each case afresh on its merits in accordance with the provisions of law after providing the complainant the opportunity of both written and oral defence as agreed during complaint proceedings.

Muhammad Akbar (Advisor) Dealing Officer.

Mian Abdul Ghaffar for the Complainant.

Abdul Malik Additional Collector for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHAIKH, FEDERAL TAX OMBUDSMAN.---The sales tax audit authorities conducted audit of the complainant company for the period 199$-99 and 1999-2000 and issued proper audit report. Subsequently, the audit team completed audit for the year, 2000-2001 on 24-4-2002 but no formal audit report was provided to the complainant. Again, A.C., Sales Tax vide notice, dated 5-4-2004 asked the complainant to provide records for conducting audit for the period April, 1998 to June, 2003. Since audit for the years, 1998-99; 1999-2000 and 2000-2001 had already been conducted, there was no justification to call for records. Since complainant's factory was closed due to off-season it informed the respondent that the staff would resume duty on 31-5-2004 and the department could then depute its staff for conducting audit. The department did not respond. On 23-6-200 the A.C., Sales Tax, Bahawalpur, along with a contingent of staff, armed with fire-arms, raided the complainant's factory, broke opened the doors, almirahs and impounded entire records. They also maltreated and harassed the officers and staff of the company. Notice under sections 38 and 40A of the Sales Tax Act, 1990 was prepared by the A.C. after completion of raid and seizure of records. He delivered a copy thereof along with copy of unsigned recovery memo to the staff while leaving the premises. The raid was conducted in violation of the provisions of sections 38 and 40A of Sales Tax Act, 1990. The complainant filed Writ Petition No.2540 of 2004 in the Lahore High Court, Bahawalpur Bench, which was dismissed vide Court order, dated 8-9-2004. Aggrieved by this order, the complainant filed. Intra-Court Appeal. (ICA) No: 60 of 2004 in the High Court, which was admitted for regular hearing. While admitting the petition, the Division Bench directed to maintain the status quo. Despite restraining order, dated 29-3-2005 passed by the Court the respondent issued three show-cause notices. Although show-cause notices were not withdrawn the proceedings were held in abeyance. The ICA filed by the complainant was dismissed by the Division Bench vide order, dated 4-12-2006. The adjudicating authority fixed- the cases for hearing on 27-12-2006. The complainant submitted written applications, dated 26-12-2006 that. since the complainant had filed C.P.L.A. against Court order, dated 4-12-2006 in the Supreme Court of Pakistan, the show cause proceedings be held in abeyance till decision of the C.P.L.A. but, if the respondent wanted to proceed to in the matter, copies of entire records/material on the basis of which show cause notices were issued be provided to the complainant enabling it to prepare and file reply to the show cause notices. Accepting complainant's verbal request the Adjudicating Officer promised to provide the requisite materials before the next date of hearing yet the Adjudicating Officer decided all three cases vide Orders-in-Original Nos. 664/06, 665/06 and 666/06 all, .dated 27-12-2006 against the complainant. In the C.P.L.A. filed by the complainant the leave to appeal was granted by the Supreme Court of Pakistan vide order, dated 3-1-2007. After adjourning the cases verbally the Adjudicating Officer passed the impugned orders without hearing the complainant and without dealing with any of the charges mentioned in the show cause notices and without considering the merits of the case, which amounted to `maladministration'. The complainant's case before the Adjudicating Authority and the High Court was that raid, search and seizure were illegal and, therefore, subsequent proceedings were also illegal. The impugned orders did not deal with any such issue, which showed the mala fides of the Adjudicating Officer who passed a biased order. The .complainant was deprived of its right to explain its position. Had it been provided the requisite material it would have rebutted the charges. No hearing was granted except the one fixed for 27-12-2006. The impugned orders-in-original may be cancelled and the department be directed to decide all three cases afresh after affording proper opportunity of hearing to the complainant. Suitable action may be taken against the Adjudicating Officer for committing `maladministration'. Any other relief deemed fit may be given.

2. In reply, the Collector of Customs, Sales Tax and Federal Excise, Multan has forwarded the comments of Mr. Abdul Malik, Additional Collector, who' adjudicated the three cases. He has submitted that while audit was conducted by the DRRA for the period 1997-98, 1998-1999 and 1999-2000, audit for the period 2000-2001 could not be completed due to non-production of complete records by the complainant. The mill management provided only purchase invoices and tax returns. The respondent had asked for the relevant record in writing but the complainant did not provide it on one pretext or other. Complainant's letter, dated 28-5-2004, said to have been written by it was fake as it was never received by the respondents. The complainant and its counsel had been making contradictory statements 'about production of record. Since the complainant had failed to produce the relevant records, the A.C. exercised his powers under sections 38 and 40A of the Sales Tax Act, 1990 and seized the records after fulfilling all the requirements of the aforesaid sections. Recovery memo was also served on the management. The complainant filed writ petition in the Lahore High Court, Bahawalpur Bench. The Lahore High Court in its order, dated 29-3-2005 passed in ICA No.60 of 2004 granted stay order, which was not presented by the complainant to the then Adjudicating Authority. Being unaware of the stay the Adjudicating Officer issued show-cause notices. Later when the stay order was brought to the notice of the authority, further proceedings were stopped till decision of the ICA. However, the ICA No. 60/04 filed by the complainant in the High Court was also dismissed. On dismissal of ICA, the complainant filed C.P.L.A. in the Supreme Court of Pakistan. The Supreme Court granted to leave to appeal on 3-1-2007 whereas the Adjudicating Officer decided the cases on 27-12-2006. The adjudication officers were directed by the C.B.R. to adjudicate all pending cases by 31-12-2006. The decisions could not be delayed as the adjudication officer was bound to act upon Board's advice. The cases were decided on merits. The counsel of the complainant did not challenge the facts of cases during a period of 1-1/2 year, which meant that it had nothing to contest. The complainant was merely using delaying tactics. It 'was given a reasonable time to defend its case. No 'maladministration' was committed. The complainant had also filed appeal before Collector, Customs, Sales Tax and Federal Excise, Multan on 22-1-2007. The F.T.O in Complaint No. 1117/2006 had ruled that it could not investigate a case, which was sub judice before a Court of competent jurisdiction. The President of Pakistan had also decided in Complaint No.89-K/04 that where the complainant had filed departmental appeal, the F.T.O's jurisdiction must give way to judicial jurisdiction and the President of Pakistan set aside the F.T.O's recommendations. The complainant should defend its case before the appellate forum. The allegations levelled were baseless. The complaint may be dismissed.

3. On the first date of hearing, the complainant's AR asked for an adjournment due to his preoccupation in the Lahore High Court. At the next date of hearing, the complainant's AR objected that parawise comments on the complaint were filed by A.C. whereas the Adjudicating Officer should have filed them and that he should also be asked to be present at the next date of hearing. The C.B.R. was advised accordingly. At the next date of hearing, the AR asked for a copy of parawise comments submitted by Adjudicating Officer, which was supplied to him. The AR sought a short adjournment to prepare his defence. At the last hearing, the AR explained that the complainant had filed its complaint in the F.T.O Secretariat on 15-1-2007 whereas appeal against the impugned Order-in-Original was filed before Collector (Appeals) on 25-1-2007; hence respondent's objection that the case was sub judice on the day the complaint was filed was not sustainable. The raiding party raided the complainant's unit on 23-6-2004 without complying with the provisions, of sections 38, 40 and 40A. The Honourable Court admitted I.C.A. No. 60/04 and ordered to maintain status quo vide its order, dated 29-3-2005, yet the respondent issued three show-cause notices in May, 2005. The complainant's AR appeared before the Adjudicating Authority and it was decided to hold the proceedings in abeyance. No notice of hearing was ever received except one notice for 27-12-2006. When the I.C.A. No.60/04 was dismissed on 4-12, 2006 the complainant filed C.P.L.A. in the Supreme Court of Pakistan, which was not yet fixed for hearing. The complainant's AR had at one stage submitted three applications, dated 26-12-2006 requesting the competent authority either to hold the cases in abeyance, or, alternately, to supply to the complainant the materials on the basis of which show-cause notices were issued to enable him to prepare complainant's defence. The Adjudicating Officer promised to adjourn the cases and supply the materials but on 27-12-2006 he passed the impugned orders at the back of the complainant. The AR refuted Adjudicating Officer's observation made in the impugned orders-in-Original that enough hearings had been given by saying that just one hearing was given on 27-12-2006 on which date too the Adjudicating Officer promised to adjourn the cases and provide materials for the complainant's AR to contest the complainant's case, which was not done. Winding up his arguments, the AR submitted that the impugned orders may be set aside and the respondent maybe directed to decide the cases afresh after providing the complainant the opportunity of filing its defence.

4. The DR submitted that earlier also a hearing was notified for 17-5-2005. Asked as to what happened on that date, the DR explained that the case was kept pending in view of the stay granted by the Honourable Court in I.C.A. No.60/04. He added that the decision in the complainant's cases could not be delayed as the cases had to be decided before 31-12-2006 as directed by the C.B.R. otherwise time limitation as provided in section 36 of the Sales Tax Act, 1990 would have come into play. The AR submitted that if the cases were now remanded by this forum to the competent authority for de novo consideration for passing fresh orders, the limitation as provided in section 36 of the Sales Tax Act, 1990 would not come into play as it would not apply to the remanded cases. The DR submitted that he would have no objection in deciding the cases afresh after providing the complainant the proper opportunity of defence and of being heard. He, however, submitted that of the three appeals filed by the complainant against various orders the Collector (Appeals) had vide Order-in-Appeal No. 68 of 2006, dated 31-3-2007 set aside the Order-in-Original No.665 of 2006 in favour of the complainant. In support of his contention he placed on record a copy of the aforesaid Order-in-Appeal. The AR stated that he had not received any such appellate order.

5. In the ensuing discussion, it was agreed between the AR and DR that, while the complainant would provide all the relevant records to the Adjudicating Officer, the officer shall pass a speaking order on the merits of the case, in accordance with the provisions of law after providing the complainant the opportunity to defend itself.

6. The arguments of the two sides and records of the case have been considered and examined. The case records reveal that the Assistant Collector, Sales Tax along with his staff raided the complainant's unit on 23-6-2004 and seized the relevant records. The complainant filed Writ Petition No. 2540 of 2004 in the Lahore High Court, Bahawalpur Bench, challenging the raid, search and seizure as illegal and unlawful, and demanded return of records. The Lahore High Court dismissed the writ petition vide order, dated 8-9-2004. Aggrieved by the aforesaid order, the complainant filed ICA No. 60/04, which was admitted to regular hearing with the direction that status quo be maintained vide order, dated 29-3-2005. Later, the I.C.A. was also dismissed vide Honourable Court's order dated 4-12-2006 against which the complainant filed C. P.L.A. in the Supreme Court of Pakistan, which was till pending decision.

7. The respondent's argument that this forum could not investigate a complaint, which was sub judice, is not sustainable because the instant complaint was filed in this forum on 15-1-2007 whereas the appeal before Collector (Appeals) was filed by the complainant on 25-1-2007 later than filing the complaint. Thus on the day the complaint was filed the subject cases were not sub judice before the appellate authority. The respondent has also contended that in cases where appeal has been filed administrative process should give way to judicial process, as held by the President of Pakistan in Complaint No.89-K of 2004. With due deference to the Presidential decision, this is to point out that according to the provisions of F.T.O Ordinance; 2000, the F.T.O is competent to diagnose, investigate, redress and rectify any injustice done to a person through `maladministration' by functionaries administering tax laws. The only condition is that on the date of filing of complaint, the matter should not be sub judice before a competent Court of jurisdiction or tribunal or authority etc.

8. The complainant 'argues that despite Court orders, dated 29-3-2005 passed in ICA No.60/04 that status quo be maintained the respondent issued three show-cause notices, framing charges that ranged from suppression of sales tax to illegal adjustments of input tax on various counts. The complainant asked the respondent to withdraw the show-cause notices in view of Court's injunction to maintain status quo but the respondent did not do so. The first hearing was notified for 17-5 2005. On that date the Adjudication Officer, in view of the intimation given by the complainant that the Honourable Court had given a Stay order and in view of the complainant's plea that the case be kept pending till decision of the Honourable Court, the Adjudicating Officer pended the proceedings as is evident from paragraph 5 of the relevant note sheet of office file (on record). The second hearing was notified form 17-12-2006. On 26-12-2006, the complainant filed three applications before the competent authority submitting that since it had filed C. P. L. A. against Court order, dated 4-12-2006, the proceedings be held in abeyance but if the respondent still wanted to proceed with the matter, copies of entire records/materials on the basis of which show-cause notices were issued be provided to the complainant enabling it to prepare and file comprehensive replies to the show-cause notices. This plea of the complainant is reflected in the impugned Orders-in-Original. The AR contends that the Adjudicating Officer verbally accepted complainant's request to adjourn the cases and to provide. materials that formed the basis of show-cause notices but he neither adjourned the cases providing another opportunity of hearing nor did he supply the relevant materials to the complainant to enable it to prepare its defence and arbitrarily passed three Orders-in-Original Nos. 64 of 2006, 65 of 2006 and 665 of 2006 all, dated 27-12-2006 confirming the allegations framed in the show-cause notices at the back of the complaint.

9. It is observed that the complainant did not submit detailed replies to the show-cause notices, rebutting the charges framed therein, for it kept on pursuing its cases before the High Court seeking orders on the legality or otherwise raid, search and seizure. The operative portion of the impugned Orders-in-Original passed by the Adjudicating Officer give the impression as if he decided the cases hurriedly without properly dealing with each of the charges framed in the show-cause notices and without hearing the complainant on the charges so framed. The respondent's claim that the cases were decided on the basis of available records on merit is not sustainable because he passed non-speaking and sketchy Orders-in-Original at the back of the complainant without providing the complainant the opportunity of rebutting the charges framed in the show-cause notices. The respondent's contention that since issuance of show-cause notices enough hearings had been given to the complainant to comment upon the allegations levelled in the impugned show-cause notices is not sustainable because the first hearing fixed in the case was adjourned and the case was kept pending till decision by the High Court and at the second hearing the complainant pleaded for supply of materials forming the basis of show-cause notices to enable it to prepare and file replies to the show-cause notices, which plea was not accepted and the cases were decided rather hurriedly. Clearly, `maladministration' is observed on the part of the respondent in that he passed non-speaking Orders-in-Original without enlisting the view point of the complainant on the specific charges framed in the, relevant show-cause notices.

10. However, in view of the agreement between the two sides as mentioned in paragraph 5 supra, it is observed that ends of justice would he met if all the three cases were decided de novo by the competent authority after providing the complainant the opportunity of written and verbal defence. In the course of complaint proceedings, the respondent intimated that of the three orders passed by the Adjudicating Officer, the appeal filed by the complainant against Order-in-Original No. 665/06 before Collector (Appeals) has since been decided by the appellate authority in favour of the complainant. A perusal of the Order-in-Appeal No.68/06, dated. 31-3-2007 placed by the DR (on record) reveals that it is not the Order-in-Original No. 665 of 2006; which has been set aside but another Order-in-Original No. 596 of 2006, dated 30-11-2006, was set aside being duplicate of Order-in-Original No. 665 of 2006. This means that none of the orders that are subject of this complaint has been set aside and as such all the three cases need to be decided afresh on the merits of each case. Accordingly, it is recommended that the Revenue Division direct the competent authority to:-

(i) Set aside Orders-in-Original Nos. 664 of 2006, 665 of 2006 and 666 of 2006 all dated 27-12-2006 under section 45A of the Sales Tax Act, 1990 and decide them afresh on the merits of each case in accordance with the provisions of law after providing the complainant the opportunity of both written and oral defence, as agreed during complaint proceedings.

(ii) Compliance be reported within 30 days of the receipt of this order.

C.M.A./120/FTOOrder accordingly.