M.N.H. EXPORTS VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1719 (2005)

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S.9(2)(a)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Sales Tax appeal against Collector (Appeals)' order was filed and complaint in Federal Tax Ombudsman's Secretariat too was filed on the same day but earlier in time during the day---Validity---Admittedly appeal was filed before Appellate Tribunal---Fact was that Deputy Collector and the Collector (Appeals) decided the complainant's case after following the due process of law---No `maladministration' was observed---Federal Tax Ombudsman advised that the complainant should pursue its appeal pending before the appellate Tribunal, which was competent to sort out both points of law and fact---Complaint was disposed of accordingly by the Federal Tax Ombudsman.

1997 SCMR 503 ref.

Muhammad Akbar (Advisor) Dealing Officer.

Muhammad Ashraf, Consultant, for the Complainant.

Munir Sarwar D.C. Sales Tax, Lahore, for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHEIKH, (FEDERAL TAX OMBUDSMAN).-Facts of the complaint are that the complainant had purchased textile fabrics from Messrs Aysha Textiles, a person registered with the Sales Tax Department, during the month of June 2003 involving sales tax of Rs.537210. Subsequently, it exported ready-made garments and claimed sales tax refund. The concerned D.C. issued show-cause notice dated 24-3-2004 to the complainant for rejection of sales tax refund due to some suspicion about the supplier. The complainant contested the charges but the D.C., Sales Tax (Refund) without going into the merits of the case or considering the arguments put forth by the complainant rejected the claim and imposed penalty of 30% of the rejected amount. Against that order, the complainant appealed before Collector (Appeals). The Collector upheld the order passed by the D.C. The impugned Order-in-Appeal based on `maladministration' was liable to be set aside on the grounds that the complainant had made purchases from Messrs Ayesha Textiles when the said unit was not suspended/ blacklisted nor was it declared a negative unit. Proviso to section 21(4) of the Sales Tax Act, 1990, conferring blacklisting powers on the Collector, was added in the Sales Tax Act on 1-7-2003. As such, inclusion of the supplier's name in the list of suspicious units before 1-7-2003 was without jurisdiction and of no legal effect. The Supreme Court of Pakistan in case cited as 1997 SCMR 503 held that the law could not be operated retrospectively to the disadvantage of affected party. The purchaser could not be punished, it was for the supplier to deposit the amount of tax. The complainant transacted business with the supplier because it was registered with the Sales Tax Department. The respondents should take action against the supplier for recovery of sales tax. They may be directed to cancel the impugned Order-in-Appeal No.265 of 2005 dated 28-6-2005.

2. In reply, the Collector of Sales Tax, Lahore has submitted that the D.C. had rightly rejected the refund claim and imposed penalty. The case was decided after due consideration of complainant's arguments. The Collector (Appeal) had also passed a lawful order. To begin with, hearing before the Collector was scheduled for 23-6-2005. As no one appeared on that date another hearing notice dated 24-6-2005 was issued for hearing on 28-6-2005. The complainant did not, attend on that date either. Accordingly, Order-in-Appeal was issued on 8-7-2005. Proviso of section 21(4) of the Sales Tax Act, 1990 had been included on 6-6-2003 instead of 1-7-2003. The CBR had ruled vide letter dated 1-1-2002 that if a refund claimed was largely supported by tax invoices issued by suspicious units a show-cause .notice be issued to the claimant and he be heard before deciding the admissibility of claim under law. Audit of Messrs Aysha Textiles was also completed and discrepancies were communicated to it. The provisions of section 3(3) of the Act could not be invoked in the instant case. The complaint was devoid of merit and may be dismissed.

3. During the hearing, the AR reiterated the arguments as advanced in the written complaint. He emphasized that at the time that the complainant made purchases the supplier was not blacklisted. The AR disclosed that the complainant had appealed against Collector (Appeals)' order on 9-9-2005, adding that the complaint in FTO Secretariat too was filed on 9-9-2005 but earlier in time during the day. The complainant received the notice of hearing issued by the Collector (Appeals) for 28-6-2005 on 5-7-2005 through OPSS. The complainant could not attend the hearing. When the complainant contacted the office of the Collector it came to learn that the Collector (Appeals) had already decided the case on 28-6-2005. The complainant was, therefore, condemned unheard. Since then name of the supplier had already been removed from the list of suspected units, the complaint may be accepted.

4. The DR submitted that the case was decided "after extending opportunity of hearing to the complainant. The complainant did not avail the opportunity of hearing for it did not attend any of the two hearings and the Collector passed a speaking order. The hearing was first fixed for 23-6-2005. As no one appeared it was re-fixed for 28-6-2005 through call notice dated 24-6-2005. The call notice was issued under OPSS, which should have normally taken just one' day to reach the complainant. The complainant was, therefore, in a position to attend the hearing on 28-6-2005. The DR submitted that total claim was for Rs.2.78 Million out of which Rs.893000 had been paid to the complainant. Only claim for Rs.537000 was rejected and the rest of the amount of Rs.750127 was under a separate show-cause notice. He further added that once again the proceedings were under way to blacklist the supplier. The complainant, he emphasized, should appeal to the appellate tribunal.

5. The arguments of the two sides and record of the case have been considered and examined. It is observed that the Deputy Collector rejected complainant's refund claim after issuing a proper show-cause notice and after considering complainant's arguments. He passed an appealable order. The complainant has already availed itself of the remedy of appeal before Collector of Appeals. Collector of Appeals' decision dated 28-6-2005 (issue on 8-7-2005) shows that he had extended two opportunities of hearing (23-6-2005 and 28-6-2005) to the complainant. It appears that the complainant did not avail any. Even if notice dated 24-6-2005 for hearing on 28.-6-2005 was received late by the complainant, as alleged---though the DR contended that being same station delivery it should have reached the complainant the same day---the record shows that the complainant also did not avail itself of the opportunity of first hearing on 23-6-2005. While upholding D.C's. order, the Collector (Appeals) has also passed an appealable order against which the complainant has admittedly filed appeal in the appellate Tribunal (the complaint before the FTO and appeal before the appellate Tribunal were filed by the complainant on the same date i.e. 9-9-2005). The fact is that the D.C. and the Collector (Appeals) decided the complainant's case after following the due process of law. No `maladministration' is observed. In view of the foregoing position, it is advisable that the complainant should pursue its appeal pending before the appellate, tribunal, which is competent to sort out both points of law and fact.

6. The complaint is disposed of with observations made above.

C.M.A./4/FTOOrder accordingly.