AMEER-E-HAMZA IMPEX, KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1106 (2003)

Sales Tax Refund Rules, 2000---

----Rr. 4, 5 & 6---C.B.R. Circular No. C-2(F)-STP/99/PT, dated 1-1-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Deferring refund claim till deletion of supplier's name from suspected list---Validity---Rejection of refund claim would not be justified, where few invoices were found to be fake or issued by suspected supplier---Appropriate course in such cases would be to disallow refund claim, where invoices were found to be fake and sanction amount of genuine invoices without regard to the fact that particular supplier was placed on suspected list---Where purchaser had genuinely paid invoice value inclusive of sales tax through appropriate banking channel, then responsibility of payment of sales tax to Government would lie with registered supplier---Action should be taken against registered supplier in case of his failure to deposit sales tax---Not fair on part of department to demand re-submission of old cases in accordance with Refund Claim Processing System---Department had refused to exercise jurisdiction and deferred claim on irrelevant and baseless grounds---Such unreasonable and unjust action would prove motivated and predetermined mind, which would amount to maladministration---Federal Tax Ombudsman recommended to Revenue to decide such claim after verifying transfer of goods from supplier to purchaser from transport documents, dispatch notes, receipt notes, entry in purchaser's books of accounts, verifying genuiness of payment of cost of goods inclusive of sales tax through banking channels and confirming shipment of goods to foreign buyers.

M. Mubeen Ahsan, Advisor (Dealing Officer).

Ameer Hamza, Proprietor.

Dr. Mubashir Baig, Deputy Collector of Sales Tax.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN)---The complaint has been filed against the Sales Tax Department for non-payment of sales tax refund. The complainants have stated in the complaint that they entered the export business in August, 2001 and have exported textiles and other value-added materials to foreign buyers worth 1 million dollars. All payments for the purchases inclusive of sales tax were made to the suppliers through banks strictly in accordance with the sales tax law. However, the sales tax refund of Rs.54,76,303 for the months of August, September and October, 2001 and January, June and July, 2002 have not been paid. When they approached the Chairman C.B.R., Assistant Collector of Sales Tax, Karachi, Mr. Zahid Habib informed them that the refund claims have been deferred.

2. The complainants stated that they have been knocking at the doors of the higher authorities for the last 24 months but without result. Mr. Ameer Hamza, the Proprietor of the Firm, stated that he jumped into the export business after doing his B.B.A. but he has been thoroughly disappointed due to the red tapism of the Sales Tax Department and his career in this field has already been eclipsed even before taking off. He requested that his grievance be redressed.

3. The complainants have, submitted photocopies of the invoices, the cheques issued in the name of the suppliers, and the bank statement in respect of each refund claim, in support of the contention that the goods were genuinely purchased and payments inclusive of sales tax made through the banking channels and no illegalities were involved.

4. The Deputy Collector of Sales Tax (Refund) replied to the complaint that during the scrutiny of the supportive documents, the suppliers of taxable goods were found to be suspected of issuing fake/ flying invoices. Therefore, the claims were deferred till the deletion of the suppliers' name from the suspected list. He stated that it was the duty of the registered persons to make payment against taxable purchases through the banking channel. But the amount of tax paid to the suppliers was not subsequently deposited in the Government exchequer and, therefore, the refund could not be sanctioned.

5. He stated that the refund claims have been deferred and not rejected and when the names of suppliers were deleted from the suspected list, the claims would be processed. He added that as per C.B.R. orders the claims should be filed according to the Refund Claim Proceeding System (R.C.P.S.) and refund would be sanctioned only after verification from the STARR. He stated under C.B.R. directive R.C.P.S. was applicable to all old and new claims to be sanctioned after 6-2-2003.. He requested that the complainants be ordered to submit claims through R.C.P.S.; their claims would be sanctioned according to the refund rules.

6. Mr. Ameer Hamza, proprietor of the complainant firm reiterated during the hearing the complaint about the non-payment of huge refund of for Rs.54,76,303. He stated that for a few months no information was forthcoming from the department about the decision regarding the refund claims and his persistent efforts to persuade the authorities for early payment of refund did not succeed. Subsequently he was verbally informed by the sales tax officials that the suppliers were on the suspected list whose audit was being carried out and the claims would be decided after completion of audit. He approached the Assistant Collector Mr. Zahid Habib several times and protested against the inordinate delay in payment of the refund claims. He repeated that the audit of the suspected suppliers was in hand and unless they were cleared by the auditors, the refund would not be paid.

7. Mr. Ameer Hamza stated that recently he met the Additional Collector of Sales Tax who got the pending refund cases checked from the files and informed him that the invoices have been verified by the Collectorates from where supplies were made and assured him that his cases would soon be disposed of. But no decision has been taken. He emphasized the point that the names of the suppliers were placed on the suspected list several months after the supplies were genuinely and legally made to his firm.

8. The submission of both the sides have been examined. The complainants had submitted complete sets of documents in respect of each claim with the complaint and a copy thereof has been forwarded to the department. In this regard department's contention to wait till suppliers name is deleted from the suspect list, the ruling of C.B.R. is crucially important. In letter C.2(7)-STP/99 PT dated 1-1-2002, C.B.R. has appropriately laid down that it would not be justified to reject a refund claim just because a few invoices were found to be fake or issued by the suspected units. The appropriate course in such cases would be to disallow the refund claim where the invoices have been found to be fake and sanction the amount of genuine invoices without regard to the fact that the particular supplier/suppliers were placed on the suspected list.

9. It is well-settled that a purchaser who has genuinely paid the invoices value inclusive of sales tax through appropriate banking channel, has fulfilled his obligation and responsibility of payment of sales tax to Government lies with the registered supplier. There is no justification to deny admissible refund to a genuine purchaser. If a registered supplier has failed to deposit the sales tax, action should be taken against him. It is also unfair on the part of the Department to demand that the old deferred claims should be re-submitted in accordance with the new procedure i.e. R.C.P.S. The department has refused to exercise jurisdiction and deferred the claim for refund on irrelevant and baseless grounds. Such unreasonable and unjust action prove motivated and predetermined mind which amounts to maladministration.

10. It is recommended that C.B.R. direct the Collector of Sales Tax to

(i) verify the transfer of goods from the suppliers to the purchaser from the transport documents, the dispatch notes, the receipt notes, entry in the purchasers' books of accounts;

(ii) verify the genuineness of the payment of cost of goods inclusive C of sales tax through the banking channels;

(iii) confirm the shipment of the goods to the foreign buyers; and

(iv) decide the deferred refund claims of the complainants within thirty days.

(v) Compliance be reported within forty-five days.

S.A.K./201/F.T.O.Order accordingly.