LION BOX FACTORY, KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2008 P T D 13
[Federal Tax Ombudsman]
Before Justice (Retd.) Munir A. Shaikh, Federal Tax Ombudsman
Messrs LION BOX FACTORY, KARACHI
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No. C-533-K of 2007, decided on 04/08/2007.
Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---
----S. 2(3)-Sales Tax Act (VII of 1990), Ss.14 & 26(5)---Deregistration---Complaint against---Factory which was registered as manufacturer with the Sales Tax Department about two decades ago lodged a complaint that Department vide its letter deregistered the factory with retrospective effect on the grounds that factory's turn-over during 2003-2004, was below Rs.5 million---Department, in accordance with the C.B.R's. directive in the budget measures of 2004-2005, correctly, but unilaterally deregistered complainant's unit as no intimation to that effect was given to it---Complainant's unit which continued to be a registered unit and kept on filing monthly sales tax returns regularly and submitted summaries of invoices under S.26(5) of Sales Tax Act, 1990, remained under impression that it continued to be a registered unit---Present was clearly a case of maladministration on the part of the department because the complainant all the time presumed that it was a registered unit and was keen to remain so, but the Department did not take appropriate action even when the turnover exceeded the ceiling---Such was also an act of maladministration that under C.B.R's. Order the unit was deregistered, but complainant was not informed, though it might have published news in one particular newspaper as told---Ombudsman recommended that C.B.R. should restore registration of complainant factory and concerned Departments would ensure that representatives of the Department attended hearing punctually and regularly---Compliance of order be reported within forty five days.
Abbas Bhojani for the Complainant.
Dr. Ahsan Khan, Asstt. Collector of Sales Tax.
Dr. Ali Raza, Asstt. Collector of Sales Tax.
FINDINGS/DECISION
Messrs Lion Box Factory, Karachi, registered as manufacturer with the Sales Tax Department about two decades ago lodged a complaint that the Department vide letter, dated 23-3-2007 de-registered them with retrospective effect from 1-7-2004 on the grounds that their turn-over during 2003-2004 was below Rs.5 million and advised them to apply to fresh registration.
2. Mr. Abbas Bhojani, Proprietor of the Factory admitted that their turn-over amount during the above said period was correctly mentioned in the Department's letter. But he stated that he was first informed about de-registration vide Department's letter, dated 23-3-2007 intimating that they stood de-registered from 1-7-2004. He added that he had been submitting the Sales Tax returns regularly on monthly basis along with the summary under section 26(5) of the Sales Tax Act, 1990 and obtained acknowledgements. He further stated that sales turn-over during the year 2005-2006 was above Rs.5 million i.e. Rs.7.213 million while during the current financial year, 2006-2007 (upto 7-2-2007), sales have reached Rs.3.249 million. Further, Department has withheld Factory's supplies/customers heavy refunds and as such supplies made the Factory to suffer a big financial loss of about Rs.19 lacs.
3. Department stated in its comments that Complainant was de-registered by virtue of Federal Government's Policy announced in budgetary measures 2004-2005 with regard to sales tax payers having turn over of less that Rs.5 million during the period 2003-2004. It was stated that Federal Government abolished the Turn Over Tax/Enrollment Scheme and rationalized the exemption threshold by raising the ceiling to Rs.5 million for both manufacturers and retailers vide C.B.R. letter, dated 30-6-2004. Accordingly all the manufacturers and retailers enrolled under section 14 of the Sales Tax Act, 1990 whose annual turn over of during the last 12 months was below Rs.5 million stood de-registered with effect from 1-7-2004. It was stated that in the comments that annual turnover of complainant during financial years, 2003-2004, 2004-2005, 2005-2006 and 2006-2007 was Rs.3.7 million, Rs.2.560 million, Rs.7.213 million and Rs.3.249 million respectively. Complainant lost the registration due to turn-over of Rs.3.7 million which was less than the required amount of Rs.5 million during the period 2003-2004.
4. Department further stated that complainant submitted an application for restoration of registration which was forwarded to the Central Registration Officer, C.B.R., Islamabad on 10-1-2007 but it was not acceded to vide C.B.R's. letter, dated 12-3-2007. Complainant was accordingly intimated and advised to apply for fresh registration. Hence, no mal-administration was committed by the department and requested to file the complaint.
5. During hearing, Complainant reiterated the points stated above and prayed for restoration of registration with retrospective effect. Complainant stated that some other units were not deregistered although they did not fulfil the above said requirements. He added that he shall suffer unbearable big financial loss of Rs.19 lac and would be in deep troubles to run the factory if not allowed restoration at, least from the year, 2005-2006. He was particularly perturbed for the Department failed to forward his last application, dated 12-3-2007 for restoration seeking benefit on the basis of performance during the year, 2005-2006 (Rs.7.213 million).
6. When asked about pendency of the above said application, Assistant Collector promised to take up the case now with C.B.R. forwarding the request duly recommended within two days and endorse its copy to this office. He preferred to remain silent when inquired about the refused cases.
7. Assistant Collector did not forward copy of letter to C.B.R as mentioned in the foregoing paragraph although he was reminded over phone twice. Later he did not attend the hearings on 28-6-2007 and 3-7-2007 being on leave as stated by Dr. Ali Raza, Asst. Collector who attended and requested for adjournment. He, however, submitted copies of two letters including the letter sent by the Collector, Sales Tax to C.B.R. for restoration of Registration from 1-7-2005. Adjournment being the last chance was granted for 12-7-2007 but no one appeared from Department on this date.
8. Meanwhile Department sent a letter, dated 13-7-2007 for re-fixing of hearing on the ground that last hearing was not attended as the notice was received late. On the above request of the Department, hearing was fixed on 28-7-2007 but it was also not attended by their any representative.
9. From the facts stated above it has been established that the' department, in accordance with the C.B.R.'s directive in the budget measures of 2004-2005, correctly but unilaterally deregistered the complainant's unit as no intimation to this effect was given to them. The unit remained under impression that it continued to be a registered unit and kept on filing monthly sales tax returns regularly and also submitted summaries of invoices under section 26(5) of the Sales Tax Act. On the Complainant's part it remained registered because there was no negative response on receipt of monthly returns. After a gap of three years, intimation was given vide letter, dated 23-3-2007 that the unit had been deregistered w.e.f. 1-7-2004. It was admitted by the Department that it was in its knowledge that during the year, 2005-2006 the annual turnover had exceeded the ceiling of Rs.5 million and the turnover was Rs.7.213 million but it did not restore the registration or ask the Complainant to apply for and obtain registration w.e.f. 1-7-2005.
10. This is clearly a case of maladministration on the part of the Department because the Complainant all the time presumed that it was a registered unit and was keen to remain so but the Department did not take appropriate action even when the turnover exceeded the ceiling. It was also an act of maladministration that under C.B.R's. order the unit was deregistered but Complainant was not informed, although it might have published news in one particular newspaper as told. It has also been noticed that Departmental representatives attending hearing were neither fully conversant with the facts of the case nor they did fulfil the promises made before this office. They also sought several adjournments. Their attendance was not punctual and regular and when they did attend hearing they did not report any progress as promised by them.
11. It is, therefore, recommended that C.B.R.
(a) restore registration of Messrs Lion Box Factory with effect from 1-7-2005;
(b) direct the concerned Departments to ensure that representatives of the Department attend hearings with punctuality and regularly.
(c) Compliance be reported to this office within forty five days.
H.B.T./141/F.T.O.Order accordingly.