AWAN CNG, REFILLING CO. (PVT.) LIMITED, RAWALPINDI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1143 (2004)

Sales Tax Act (III of 1951)---

----S.10---S.R.O. 38(I)/98 dated 21-1-1998---Customs Act (IV of 1969), S.18---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Exemption---Goods dutiable---Mal administration---Interpretation--- Complainant alleged mal-administration on the refusal to issue refund of Customs Duty and Sales Tax paid under protest on import of Spare parts of compressed Natural Gas (CNG) Kits---Exemption from payment of Sales Tax and Customs Duty were claimed within the meaning of S.R.O. 38(I)/98 dated 21-1-1998---Appeal to the Customs, Sales Tax and Central Excise Tribunal---Tribunal found that imported goods were covered under the said SRO and were exempt from the payment of Customs Duty and Sales Tax---After the decision of the Tribunal the complainant filed a refund claim Which was denied by the Department--.Validity---Decision of Central Board of Revenue declaring that the compressed Natural Gas spare parts were not eligible for the exemption under the said S.R.O. did not give any reason as to why it differed from the views of Ministry of Petroleum and Natural Resources especially when the certification of said Ministry was made the basis for the grant of exemption---Customs Department had not gone into appeal against the order of the Tribunal---Fiscal provision of statute was to be construed liberally in favour of taxpayer---Federal Tax Ombudsman recommended that the benefit of exemption under the said S.R.O. be extended to the Compressed Natural Gas spare parts and Customs Duty and Sales Tax be refunded to the complainant.

Commissioner of 'Sales Tax, Central Zone-B, Karachi v. Pakistan Machinery Tools Factory Limited, Karachi GST 2003 CL 123 quoted.

Shamim Ahmad, Advisor, (Dealing Officer).

Shaukat Ali for the Complainant.

Zamir Hassan Zaidi for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complaint under consideration alleged maladministration on the refusal of refund of customs duty and sales tax paid under protest by the complainant on the import of spare parts of Compressed Natural Gas (C.N.G.) kits.

2. The brief facts of the case are 'that the complainant company imported spares of C.N.G. kits vide Bill of Entry dated 4-7-2000. Exemption from payment of sales tax and customs duty was claimed within the meaning of S.R.O. 38(I)/98 dated 21-1-1998. However, the. Customs Department refuse to extend the benefit of the claimed exemption due to allegedly wrong interpretation of the S.R.O. and insisted that the duty and sales tax be paid. To get the consignment released, the complainant paid Rs.174,220 under protest.

2.1 The complainant went into appeal to the Customs, Sales Tax and Central Excise Tribunal. The Tribunal in its judgment dated 7-2-2002 held that the spares were covered by the said S.R.O. and exempt from the payment of customs duty and sales tax.

2.2 Armed with this decision, the complainant filed a refund claim on 15-5-2002 but the same was denied by the respondent.

3. In reply, the respondent stated that the said S.R.O. provided the exemption to C.N.G. machinery, equipment and conversion kits excluding those manufactured locally. However, "the S.R.O. is silent about the exemption of customs duty and other taxes on the import of spare parts" it was added. As admittedly the consignment consisted of spare parts, therefore, "the same are not exempt under the S.R.O. 38(I)/98", it was argued.

3.1 Regarding the decision of the Tribunal, the respondent contended that it was against the spirit of S.R.O., which did not include the spare parts in the scope of exemption.

4. The A.R. and D.R. were heard at length and the matter was considered threadbare. The A.R. contended that the very first condition of the S.R.O. was that only such machinery and equipment shall be entitled to the exemption which are certified by the Ministry of Petroleum and Natural Resources. The said Ministry considered the import of the spares by the complainant exempt vide their letter dated 3-7-2000, it was submitted. For the sake of convenience of reference, the said condition is reproduced as follows:

"(1) Only such machinery, equipment, conversion kits and cylinders shall be entitled to the exemption under this notification as are certified by the relevant Regularity Authority i.e. Ministry of Petroleum and Natural Resources to be C.N.G. machinery, equipment, conversion kits and cylinders from time to time."

4.1 The AR produced the O.M. of the Ministry of Petroleum and Natural Resources dated 3-7-2000 addressed to the Collector of Customs (Appraisement), Islamabad Airport, Islamabad which recommended that the C.N.G. spare parts being imported by the complainant may be exempted from the duties.

4.2 The AR also emphasized the findings of the Customs, Sales Tax & Central Excise Tribunal in the judgment quoted in para 2.1 supra which, after considering the contents of the said S.R.O. and the decision of the C.B.R. in stating that the spare parts are not covered by the terms of the said S.R.O., arrived at the conclusion that the said spare parts were exempt from the payment of the customs duty and sales tax.

5. The DR, on the other hand, relied on the contents of the C.B.R's. letter C.No.3(9)Mach./97 dated 12-4-2000 which stated that the spares were not eligible for the benefit of the said S.R.O. and hence taxable. On a query, the DR submitted that no appeal to High Court has been filed against the order of the Tribunal.

6. The rival arguments and the facts of the case were considered. The decision of the C.B.R. declaring that the C.N.G. spare parts are not eligible for the exemption under the said S.R.O. was perused. It did not give any reason for arriving at the conclusion. Notably it did not state why it differed from the views of Ministry of Petroleum and Natural Resources especially when the certification of the said ministry was made the basis for the grant of the exemption within the terms of the said S.R.O., relevant portion of which was quoted in para. 4 above. Secondly, the Customs Department has not gone into appeal against the order of the Tribunal. The implication is clear that they have accepted its decision. Thirdly, the reply of the respondent as quoted in para. 3 above stated that the said S.R.O. was silent about the said exemption on the import of the spare parts. In other words, it did not deny the benefit on such imports. In this connection the AR placed on record a case quoted as Commissioner of Sales Tax, Central Zone-H, Karachi v. Pakistan Machinery Tools Factory Limited, Karachi cited as GST 2003 CL 123. In the case the Honourable High Court held:---

"A fiscal provision of statute is to be construed liberally in favour of taxpayer. There can be no cavil to the proposition, that, while interpreting/applying provision of fiscal statute, levying any tax or creating any financial burden or liability on a subject/citizen, the law is to be interpreted liberally in favour of the subject/taxpayer. A tax is to be levied by a clear and unambiguous legislation and any doubt or ambiguity in the matter of the levy of tax is to be resolved in favour of a citizen/subject/taxpayer."

7. In view of the above discussion, it is recommended that:

(a) The benefit of exemption under the said S.R.O. be extended to the C.N.G. spare parts imported by the complainant.

(b) The Customs Duty and Sales Tax paid by the complainant be refunded.

(c) Compliance of the above mentioned recommendations be reported within 45 days of the receipts of this order.

M.I./345/F.T.O.Order accordingly.