FAUZIA INDUSTRIES (PVT.) LIMITED VS SECRETARY, REVENUE DIVISION, GOVERNMENT OF PAKISTAN, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 163 (2007)

Sales Tax Act (VII of 1990)---

----S. 10---Sales Tax Rules, 2005, R. 29---Sales Tax Rules, 2606, R.39(4)---C.B.R. Letter C. No. 2(1)ST-ST-L&P/2000(Pt) dated 25-11-2006---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund of input tax-- Tax period dune, 2005---Refund claim was not processed on the ground that refund claim had not been filed on Refund Claim Preparation Software (ACT'S) as required by Refund Rules---Validity---Under the Sales Tax. Rules, 2005, there was neither any requirement of RCPS (though the data was required to be submitted in electronic format) nor any time limit had been prescribed for filing of the supportive documents---Board's letter intended to allow a period of six months from the date of promulgation of Sales Tax Rules, 2006 for filing of the relevant documents but the letter was issued on 25-11-2006 and required the filing of all documents by 31-12-2006---Virtually only one month's time had been given to the taxpayers for compliance which was not reasonable and tantamounted to maladministration---No evidence had been brought on record to prove that it was widely circulated---Most of the taxpayers failed to :sail such amnesty since the matter slid not come to their knowledge- Federal Tax Ombudsman recommended that Federal Board of revenue withdraw the-id letter dated 14-7-2007 addressed to the complainant and direct the concerned Collector to obtain the relevant supportive documents from the complainant and thereafter process and settle the claim within 60 days of the receipt of this order in accordance with law and farts of the case after providing a reasonable opportunity of hearing to the complainant.

Asad Arif, Advisor, Dealing Officer.

Messrs Afzal Awan, Imran Javed and Imran Iqbal for the Complainant.

S.A. Sajjad Rizvi, Deputy Collector, Sales Tax for Respondent.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHAIKH, FEDERAL TAX OMBUDSMAN.---The complainant, a private limited company registered with Sales Tax Department as a manufacturer-cum-exporter, is aggrieved by non-issuance of refund by the Sales Tax Department.

2. Brief facts of the case are that the complainant filed its sales tax return on 12-7-2005 for the period June, 2005 claiming a refund of Rs.647,112. Since the refund claim was not processed, therefore, vide letter dated 4-7-2007, the complainant requested the respondent to allow the refund due but the respondent informed that since the refund claim has not been filed on Refund Claim Preparation Software (RCPS) as required by relevant Refund Rules, therefore,' the claim cannot be processed. In response thereto, the learned A.R. of the complainant, vide letter dated 10-7-2007, clarified that since the sales tax return relates to the period of June, 2005, therefore, for the purpose of refund in the case, the Refund Rules-2005 may be applied in which there is no concept of RCPS. It was further urged that under the Sales Tax Act, 1990 (hereinafter referred as the Act) read with the relevant Rules, there is no limitation period fore the purpose of filing of sales tax refund. It is contended that the amount of refund was clearly shown in the relevant column of the sales tax return which, by virtue of Rule 29, is itself deemed to be a refund claim. The complainant also sent a copy of this letter to the Member (Sales Tax) for allowing condonotion of time limit without prejudice to their contention that no such extension is required under the law. A separate application dated 11-7-2007 was also sent directly to the Member (Sales Tax) C.B.R, Islamabad for allowing the refund and condonation of time limit, if any, but the C.B.R. conveyed their inability to accede to this request and hence the resent complaint.

3. The learned A.R. of the complainant has contended that the complainant has complied with all the legal provisions of the Act at the time of filing of refund claim in the Refund Section which was duly acknowledged by the respondent without any reservations or objections. It is contended that the respondent's contention that the refund claim should have been filed on RCPS is without any sanctity of the Act as at the time of filing of the refund claim, there was no law in vogue which required the filing of such claims on RCPS.

4. Replying to the allegations in the complaint, the Deputy Collector in his written report has stated that the C.B.R., vide C.No.2(1) ST-ST-L&P/2000(Pt) dated 25-11-2006, publicly announced that all refunds pertaining to the tax period June, 2006 and earlier whose supporting documents have not yet been submitted by the refund claimants, may be furnished upto 31st December, 2006 and that in case of default no claims will be entertained/received after the prescribed date of 31-12-2006. It is contended that this time period was given consequent to the repealing of Refund Rules, 2002 and 2005 and promulgation of new Refund Rules which became effective from 1-7-2006. It is stated that the RCPS is a prescribed electronic format in which the data of supportive documents is fed by the claimants for their refund claims for computerized processing. It is stated that it is not denied that the monthly return is the refund claim but such claims cannot be entertained unless the claimant furnishes all the supportive documents along with soft copy of RCPS. The D.R. stated that it is incorrect to suggest that the sales tax return claiming refund was filed in the Refund Section. In fact, this return was filed on the counter meant to receive returns of sales tax. The D.R. has further contended that for claims of refund for the period prior to 1-7-2006 (on which new refund Rules became effective), the Board had, vide letter dated 25-11-2006, allowed time for submission of relevant documents upto 31-12-2006 and since the complainant failed to submit the claim on RCPS along with other supportive documents even upto this date, the request of the complainant for condoning the delay was rightly turned down by the C.B.R. and, therefore, the claim of the complainant cannot be processed.

5. Responding to the above, the learned A.R. of the complainant has stated that Board's above letter dated 25-11-2006 was not in the knowledge of the complainant as it does not appear to have been widely circulated and that, in any case, under the Sales Tax Act, 1990 the refund was filed in time and the Act being a substantive law, no orders or letters can override the provisions of such substantive law. It is, therefore, prayed that the respondent be directed to refund the amount immediately.

6. Parties have been heard and the record produced has been examined.

7. Rule 39(4) of Sales Tax Rules 2006 specifically provides that the admissible refund claims received with supportive documents upto the date of commencement of these Rules shall be sanctioned and paid in accordance with the provisions of Sales Tax Refund Rules 2002 or Chapter-V of Sales Tax Rules 2005, whichever is applicable. Since the claim of the complainant relates to the period 2005, therefore, as per the above provisions, the matter will be governed by the Sales Tax Rules, 2005 which were in vogue at that time. Rule 29 of Sales Tax Rules, 2005 prescribes that in case of a manufacture-cum-exporter or commercial exporter, the monthly sales tax return filed in the prescribed manner by the complainant shall be treated as refund claim once all the supportive documents as prescribed in sub-rules (1) or (2) of Rule 30 including the requisite date in electronic format have been received in the Refund Division. Thus, under the Sales Tax Rules, 2005, there is neither any requirement of RCPS (though the data is required to be submitted in electronic format) nor any time limit has been prescribed for filing of the supportive documents. Even if the Board's above letter is taken into consideration, it is observed that this letter intended to allow a period of six moths from the date of promulgation of the new 'Rules of 2006 for filing of the relevant documents but the letter is issued on 25-11-2006 and required the filing of all documents by 31-12-2006. Thus, virtually only one month's time has been given to the taxpayers for compliance which is not reasonable and tantamounts to maladministration. It is further noticed that although a copy of this letter has been marked to Federation of Pakistan Chamber of Commerce and Industry (FPCCI), Chamber of Commerce and Industry of Karachi and Lahore and only six taxpayers by name but has not been property publicized for general public and no evidence has been brought on record to prove that it was widely circulated. It, therefore, appears that most of the taxpayers failed to avail the amnesty since the matter did not come to their knowledge. This case, therefore, appears to be one of hardship and in the circumstances, it is recommended that:---

(i) FBR to withdraw their letter dated 14-7-2007 addressed to the complainant and;

(ii) direct the concerned Collector to obtain the relevant supportive documents from the complainant and thereafter process and settle the claim within 60 days of the receipt of this order in accordance with law and facts of the case after providing a reasonable opportunity of hearing to the complainant.

(iii) Compliance be reported within 07 days after doing the needful in terms of (i) & (ii) above.

C.M.A./169/FTOOrder accordingly.