Muhammad Alamgir VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1901 (2004)

Income Tax Ordinance (XLIX of 2001)---

----S. 148---S.R.O. 593(I)/91 dated 30-6-1991---Establishment of Office of Federal Tax Ombudsman (XXXV of 2000), S.2(3)---Benefit of exemption of Income Tax---Tax. levied on imported raw materials---Customs Authorities assessment---Exemption certificate---Income Tax charged by Customs Authorities---Protest in writing-Despite presentation of a valid certificate of exemption, the Deputy Collector Customs, exceeding her powers, had charged income tax from the complainant--Telephonic and written requests for clarification in the matter were not responded---Complainant requested redress and suitable action against the Deputy Collector if her action was proved wrong--Collector of Customs had submitted that bill of entry was filed on 19-9-2003---Appraising staff assessed it on 26-9-2003---Exemption Certificate was produced on 27-9-2003---Income Tax therefore was charged since no certificate was produced at the time of assessment--Validity-Photocopy of the bill of the relevant entry (on record) did not clearly indicate as to when the assessment was completed---Duties and taxes were deposited on 27-9-2003 the same day as when the exemption certificate was produced---During hearing, applicant's representative had not contradicted plea taken by department's representative---Complainant or its agent had not protested in writing against payment of income tax to the Customs Department---Complainant had wanted clarification to overcome ambiguity and confusion; its communication addressed to the department suffered from "inattention"---Such indifference and failure to issue necessary clarification tantamount to "maladministration"---Departmental Representative had admitted and undertook to issue necessary clarification and offered to hold a meeting with complainant's representative to streamline the procedure for processing similar bills of entry in future without any obstacle---Refund of tax could be paid by the Income Tax Department as the law does not authorize the Collector Customs to refund the amount paid in excess---Complaint was disposed of accordingly.

Muhammad Akbar, Adviser (Dealing Officer).

Muhammad Alamgir, Sales and Marketing Director for the Complainant.

S. Fawad Shah, D.C. Customs for Respondents.

DECISION/FINDINGS

JUSTICE (RETD.) SALEEM AKHTAR, (FEDERAL TAX OMBUDSMAN).---Facts of the complaint, as explained by the complainant, are that, being a manufacturer-cum-exporter of surgical instruments etc., it qualifies to enjoy the benefit of exemption of income tax levied on imports under section 148 of the Income Tax Ordinance, 2001 through S.R.O. 593(I)/91 dated 30-6-1991. Vide Bill of Entry No.10914 dated 19-9-2003, it had imported raw materials for use in the production of its goods and provided to the Customs Authority Income Tax exemption certificate issued by the competent tax authority to claim benefit of the aforesaid S.R.O. Despite presentation of a valid certificate of exemption, the D.C. Customs, exceeding her powers, charged income tax from the complainant. The complainant contacted the D.C. telephonically to seek clarification in the matter but could not get any suitable reply. It then vide letter dated 29-9-2003, followed by a reminder dated 6-10-2003, asked the authority to disclose the grounds on the basis of which income tax was collected but to no avail. Subsequently, it addressed a letter to the Collector of Customs on 15-10-2003 inquiring whether the complainant was liable to tax or not and if not, what the remedy was, but did not get any response. It is pleaded that suitable instructions may be issued to the respondents to clarify the position. Apart from redressing the complainant's grievance action may be taken against the D.C. if her action is proved wrong.

2. In reply, the Collector of Customs, Lahore has submitted that the subject Bill of Entry No.10914 was filed on 19-9-2003. It was assessed by the concerned appraising staff on 26-9-2003. The importer produced income tax exemption certificate dated 27-9-2003 after completion of assessment. In terms of section 30 of the Customs Act, 1969, duties and taxes are to be charged on the imported goods as are applicable at the time of filling of bill of entry. In the instant case the bill of entry was filed on 19-9-2003 whereas the certificate of exemption was produced on 27-9-2003. Income tax was charged on the impugned consignment as no exemption from payment of income tax was available when the bill of entry was filed by the importer or when the consignment was assessed. If the complainant feels that the amount of income tax paid by it at the import stage is refundable, it may approach the relevant. Income Tax Authority for refund/adjustment. The complaint may be rejected as the Customs Authority acted according to law.

3. During the hearing the A.R. stated that though the exemption certificate dated 26-9-2003 was presented to the Customs on 27-9-2003 the exemption was unduly denied. He added that although the amount of refund involved in the case is meagre i.e. approximately Rs.30,000 the respondents should have replied to its letters dated 19-9-2003, 6-10-2003 and issued the clarification sought by it. Section 30 of the Customs Act, 1969 only stipulates that the rate of duty etc. would be the rate applicable on the date of filing of bill of entry but does not deal with the question of income tax exemption. He also submitted that prior to the bill of entry in dispute the department in the case of two other Bills of Entry namely No.28497 and No.35941, which were filed on 22-3-2003 and 13-5-2003 respectively prior to the issuance of exemption certificate dated 21-5-2003 (also on record), had accepted the aforesaid certificate.

4. The DR submitted that previously income tax exemption was allowed on production of exemption certificate at the time of assessment. In the present case exemption certificate was produced on 27-9-2003 after completion of assessment on 26-9-2003. As such exemption certificate was not available in the present case at the time of assessment. Complainant itself deposited duty and taxes on 27-9-2003. He added that other bills of entry referred to by the complainant were processed on the strength of exemption certificate made available at the time of assessment. The AR, however, contended that the respondents should have clarified the position and guided it in response to its letters, which was not done. Asked as to what procedure was being currently followed, the AR stated that currently the complainant is providing exemption certificates before filing bills of entry and was not facing any problem. Asked to react to AR's assertion, the DR acknowledged that the department should have replied to complainant's letters to clarify the position. He undertook to send a clarificatory reply to the complainant and also offered to hold a meeting with complainant's representative to streamline the procedure in order to avoid any bottlenecks in future.

5. The arguments of the parties and the record of the case have been considered and examined. In the instant case the Bill of Entry No.10914/3-4 was filed on 19-9-2003 assessment is claimed to have been completed on 26-9-2003. The certificate of exemption (on record) dated 26-9-2003 was admittedly produced by the complainant's representative to the Dry-port authority on 27-9-2003. The photocopy of the bill of the relevant entry (on record) does not clearly indicate as to when exactly the assessment was completed (appraiser's signature on the bill of entry not legible). It, however, shows that duty and taxes were deposited on 27-9-2003 the same day as the exemption certificate was produced. However, during the hearing the AR did not contradict DR's contention that the assessment in the case had been made on 26-9-2003. While there is no doubt that the 'exemption certificate was submitted on 27-9-2003, there is nothing on record to show whether the complainant or its agent had protested in writing against payment of income tax to the Customs Department. However, the complainant did claim that he produced the certificate to the concerned authority which could have been admitted before payment of duty and taxes as was done in the previous cases. It is observed that in the earlier cases also despite the filing of bills of entry prior to the issuance of exemption certificate the exemption was allowed on production of exemption certificate. The only difference between treatment of earlier bills of entry and the entry involved in the present complaint, as argued by the respondents, is that earlier exemption certificate was produced at the time of assessment whereas the certificate in the case in dispute was presented after completion of assessment. However, after making payment of duty and taxes, including income tax, the complainant addressed communications to the Department seeking clarification in the matter with a view to finding out whether it had made any procedural mistake so as to avoid it in future. The respondents could have explained the position to the complainant but, as it is, the letters remained un-replied. All that the complainant wanted was a clarification from the respondents to overcome ambiguity and confusion. Its communications addressed to the department suffered from `inattention' as none was replied to by the department. This indifference and the Department's failure to issue the necessary clarification sought by the complainant is tantamount to misadministration as defined in section 2(3) of the Establishment of Office of the Federal Tax Ombudsman Ordinance, 2000.

6. The record does not indicate whether the complainant asked for refund of the amount of income tax paid. If, however, the complainant is interested in its repayment it may address the appropriate income tax authority for decision on merit as it has been clarified vide C.B.R. Circular (on record) that under the provisions of subsection (5) of section 50 of the income Tax Ordinance, 1979. The Collector of Customs is required to collect tax at the time of import of goods however, the refund of tax can be paid by the Income Tax Department as the law does not authorize the Collector of Customs to refund the amount paid in excess.

7. Presently the complainant is submitting the income tax exemption certificates before filing the bills of entry and is perhaps not facing any problem. It is appreciated that the DR representing the Department acknowledged that a proper clarification as sought by the complainant ought to have been issued and gracefully undertook to do the same. He also offered to hold a meeting with complainant's representative to streamline the procedure for processing similar bills of entry in future without any obstacle. While misadministration identified in para. 5 supra is observed, DR's assurance to clarify the position to the complainant in response to its letters and also to hold a meeting to further streamline the procedure is a step in the right direction. The Customs Department should, therefore, issue the requisite clarification to the complainant and also hold a meeting with its representative to streamline the procedure as promised in order to avoid any problem in future.

8. The compliant is disposed of with observation made above.

C.M.A./257/FTOOrder accordingly