HONG KONG CHINESE RESTAURANT, PESHAWAR VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1109 (2003)

Sales Tax Act (VII of 1990)---

----Ss. 6, 7 & 33(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Erroneous adjustment of input tax resulting in short payment of sales tax---Imposition of penalty for such short payment---Validity---Complainant inadvertently miscalculated input tax of Rs.7173 as Rs.7143---Imposition of penalty in such situation would not be warranted under S.33(2) of Sales Tax Act, 1990, whereunder no penalty could be imposed, if miscalculation was made for the first time during a year---Department had not alleged that such miscalculation had not been made for first time---Impugned order was arbitrary, perverse, unreasonable, contrary to law and having been made without application of mind---Federal Tax Ombudsman recommended to Revenue to issue direction for cancellation of impugned order.

Shahida Taj, Director (Dealing Officer).

Abdul Malik Khan, AR for the Complainant.

Imtiaz Ahmad, DC (Sales Tax) for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainant is running a Restaurant under the name & style of Hong Kong Chinese Restaurant on Mall, Peshawar Cantt. registered with the Sales Tax Department alleged mal administration against the. Assistant Collector (Adjudication) Sales Tax Department, Peshawar.

2. It is submitted by the complainant that the sales was declared at Rs.271,786 for the month of September, 2002 and the total tax payable is Rs.40,768. After adjustment of input tax of Rs.7173 it paid Rs.33,600 as balance but due to oversight the total import tax was shown as Rs.7143 instead of 7173 in the challan. On the basis of the challan the Assistant Collector detected short payment of Rs.25 (40,768 - 7143) and imposed penalty of Rs.5000 which is nothing but an harassment.

3. It is pleaded that the Revenue Division may kindly be recommended to vacate the order passed by the Assistant Collector (Adjudication) Sales Tax Peshawar.

4. The respondent in his reply admitted that the return was filed showing an amount of Rs.40,768 as output tax and Rs.7143 as input tax. The difference between input and output tax is Rs.33,625 which is payable in terms of sections 6 and 7 of the Sales Tax Act, 1990. The complainant on the contrary deposited Rs.33,660 creating difference of Rs.25. It is stated that when the complainant filed to explain his position in response to show cause notice, an order-in-original was passed to deposit the short payment along with additional charge and penalty of Rs.5000. It is contended that the complainant failed to associate himself with the proceedings before the adjudicating authority to explain his position.

5. From the perusal of records and challan produced it appears that the complainant has paid input tax of Rs.7173 which was inadvertently miscalculated as Rs.7143. In such a situation imposition of penalty is not warranted as section 33(2) of the Sales Tax Act, provides that no penalty shall be imposed when any miscalculation is made for the first time during a year. It is not the case of the department that it was not the first time that miscalculation was made. In the present case the order-in- original made by the Assistant Collector (Adjudication) is therefore arbitrary, perverse, unreasonable, contrary to law, made without application of mind.

6. It is recommended that:-.

(i) The C.B.R. to issue direction to the Assistant Collector (Adjudication) to cancel the order.

(ii) Compliance report be submitted within 30 days.

S.A.K./200/F.T.O.Order accordingly.